1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the APAC region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,080 Speaker 2: Bloomberg Business App. 8 00:00:26,600 --> 00:00:30,280 Speaker 3: The Japanese yen weakening to the lowest level against the 9 00:00:30,360 --> 00:00:33,520 Speaker 3: dollars since way back in December of nineteen eighty six, 10 00:00:34,159 --> 00:00:37,080 Speaker 3: it's raising the risk of intervention less than a couple 11 00:00:37,120 --> 00:00:39,599 Speaker 3: of months after the boj stepped in to prop up 12 00:00:39,600 --> 00:00:44,400 Speaker 3: the currency. Dominic Constam, head of Macro's strategy at Mizuho Americas, 13 00:00:44,479 --> 00:00:47,960 Speaker 3: says the weekend is hurting Japanese consumers. 14 00:00:47,920 --> 00:00:52,159 Speaker 4: When the currency is weakening. There's obviously terms of trade effect, 15 00:00:52,159 --> 00:00:55,600 Speaker 4: which means the real income of the Japanese people in 16 00:00:55,640 --> 00:00:59,840 Speaker 4: some sense will be less global terms, So there's definitely 17 00:00:59,880 --> 00:01:04,080 Speaker 4: a depreciation from that side of things. But at the 18 00:01:04,120 --> 00:01:05,920 Speaker 4: same time, I mean, at the end of the day, 19 00:01:06,319 --> 00:01:09,720 Speaker 4: you know their potential growth is very low. There's a 20 00:01:09,720 --> 00:01:12,640 Speaker 4: lot of damage has been done with very low negative 21 00:01:12,640 --> 00:01:13,880 Speaker 4: inflation over the years. 22 00:01:14,880 --> 00:01:18,680 Speaker 3: Dominant constem of Mizuho America is there. The Japanese currency 23 00:01:18,680 --> 00:01:21,000 Speaker 3: at the moment is training or dollar yen is at 24 00:01:21,040 --> 00:01:24,960 Speaker 3: one sixty fifty three. That blows past the figure when 25 00:01:25,040 --> 00:01:29,000 Speaker 3: officials intervened Back in April, Japan's Vice Minister of Finance, 26 00:01:29,040 --> 00:01:32,360 Speaker 3: Masanto Kanda said that officials are watching with a high 27 00:01:32,360 --> 00:01:35,080 Speaker 3: degree of urgency, and he said that they would take 28 00:01:35,120 --> 00:01:38,560 Speaker 3: appropriate steps as needed. We've got our guest coming up, 29 00:01:38,600 --> 00:01:42,520 Speaker 3: Stephanie Lung, chief investment officer at Stashaway. Hopefully we'll get 30 00:01:42,520 --> 00:01:46,240 Speaker 3: some broad discussion about all of these factors. Stephanie, thank 31 00:01:46,280 --> 00:01:48,360 Speaker 3: you for coming into our studios with us. Let's start 32 00:01:48,400 --> 00:01:51,160 Speaker 3: off with the end. Well, we mentioned the possibility of 33 00:01:52,040 --> 00:01:55,360 Speaker 3: intervention by Japanese authorities, but we're running a piece that 34 00:01:55,480 --> 00:01:58,400 Speaker 3: says it's kind of a grim reality that's setting in 35 00:01:58,440 --> 00:02:01,800 Speaker 3: that the yen is not really going to stop weakening 36 00:02:01,880 --> 00:02:04,760 Speaker 3: until the FED pulls the plug on the higher for 37 00:02:04,840 --> 00:02:07,760 Speaker 3: Longer policy. I wonder if you see it that way, 38 00:02:08,160 --> 00:02:11,400 Speaker 3: it seems like that angle means the boj has to 39 00:02:11,400 --> 00:02:13,200 Speaker 3: stay patient even if the market is not. 40 00:02:13,800 --> 00:02:14,880 Speaker 1: Yeah, absolutely, I think. 41 00:02:15,200 --> 00:02:18,239 Speaker 5: I mean, we've seen some intervention in the Japanese and 42 00:02:18,320 --> 00:02:21,520 Speaker 5: market by the BOJ. However, I think the force is 43 00:02:21,560 --> 00:02:26,600 Speaker 5: that the overarching micro kind of reality is that US 44 00:02:26,639 --> 00:02:30,040 Speaker 5: inflation or developed markets inflations are not coming down as 45 00:02:30,120 --> 00:02:33,680 Speaker 5: quickly as expected. Therefore, would expect the Fed to have 46 00:02:33,760 --> 00:02:37,920 Speaker 5: to kind of keep interest rates higher for longer. And obviously, 47 00:02:38,000 --> 00:02:41,560 Speaker 5: I mean the last CPI number was quite encouraging in 48 00:02:41,600 --> 00:02:45,840 Speaker 5: the direction that this inflation started seems to have started 49 00:02:45,880 --> 00:02:49,320 Speaker 5: reaccelerating again. But again it's only one month of figure, 50 00:02:49,400 --> 00:02:51,520 Speaker 5: and we all know that inflation data tends to be 51 00:02:51,560 --> 00:02:55,200 Speaker 5: actually quite volatile, So a lot of attention now comes 52 00:02:55,200 --> 00:02:58,160 Speaker 5: down to this Friday, Actually the PCE number will be 53 00:02:58,160 --> 00:03:02,160 Speaker 5: coming out, and Pocket generally expects I mean PCE to 54 00:03:02,600 --> 00:03:06,200 Speaker 5: be quite in line with the CPI. However, if I 55 00:03:06,240 --> 00:03:09,560 Speaker 5: mean the CPI, the PCE actually comes out kind of 56 00:03:09,840 --> 00:03:13,280 Speaker 5: stronger than what the market is looking for. That means 57 00:03:13,280 --> 00:03:15,519 Speaker 5: that we may actually not get the turn or get 58 00:03:15,560 --> 00:03:18,840 Speaker 5: the acceleration in this inflation as of yet, and that 59 00:03:18,919 --> 00:03:21,000 Speaker 5: puts a lot more pressure on the end. 60 00:03:21,440 --> 00:03:24,280 Speaker 2: Speaking of pressure, the BOJ has got to be feeling 61 00:03:24,440 --> 00:03:26,639 Speaker 2: a little bit of it. We had a Bloomberg survey 62 00:03:26,720 --> 00:03:29,120 Speaker 2: recently showing about a third of the economists that we 63 00:03:29,160 --> 00:03:32,640 Speaker 2: spoke with believe the BOJ will raise interest rates in July, 64 00:03:32,720 --> 00:03:35,640 Speaker 2: and they also expect the BOJ to unveil a roadmap 65 00:03:36,320 --> 00:03:41,040 Speaker 2: for quantitative tightening, buying far fewer of those jgbs. 66 00:03:42,160 --> 00:03:42,840 Speaker 5: What is your. 67 00:03:42,960 --> 00:03:44,840 Speaker 2: Expectation right now? What are we going to get from 68 00:03:44,840 --> 00:03:47,320 Speaker 2: the BOJ that is really going to convince the market 69 00:03:47,840 --> 00:03:51,640 Speaker 2: that the era, the three decades really of easy money 70 00:03:51,680 --> 00:03:52,000 Speaker 2: is over. 71 00:03:52,840 --> 00:03:53,400 Speaker 1: Yeah, I think it. 72 00:03:54,080 --> 00:03:57,480 Speaker 5: If you put yourself into a BOJ kind of official, 73 00:03:58,360 --> 00:04:01,080 Speaker 5: you haven't had to do this kind of tightening before, right, 74 00:04:01,080 --> 00:04:04,160 Speaker 5: because I think for the last three decades there was 75 00:04:04,200 --> 00:04:07,800 Speaker 5: consistent perissure of deflation, and they were very very good 76 00:04:07,800 --> 00:04:11,520 Speaker 5: at coming up with policies to actually flight fight deflation. 77 00:04:12,080 --> 00:04:14,880 Speaker 5: Now the direction is kind of the other way, in 78 00:04:14,880 --> 00:04:18,360 Speaker 5: the sense that they have this kind of early on 79 00:04:19,279 --> 00:04:23,000 Speaker 5: inflation force that is setting in in the economy. 80 00:04:23,480 --> 00:04:26,160 Speaker 1: Wavetrove is surprising on the webside. 81 00:04:26,480 --> 00:04:29,359 Speaker 5: And more importantly, I think the overall kind of macro 82 00:04:29,520 --> 00:04:33,640 Speaker 5: environment for the US and other develop markets support a 83 00:04:33,720 --> 00:04:39,039 Speaker 5: high inflation environment for the Japan economy. And I think 84 00:04:39,480 --> 00:04:41,600 Speaker 5: if you are a BOJ official, you will be very 85 00:04:41,640 --> 00:04:45,360 Speaker 5: very careful in not trying to extinguish what they've actually 86 00:04:45,360 --> 00:04:47,960 Speaker 5: hoped for the last three decades. So I think even 87 00:04:48,000 --> 00:04:52,120 Speaker 5: though they are set to kind of start to tighten policy, 88 00:04:52,440 --> 00:04:54,880 Speaker 5: they would do it actually in a very very cautious way. 89 00:04:55,360 --> 00:04:57,039 Speaker 5: And I mean coming back to the end, right, the 90 00:04:57,120 --> 00:05:00,240 Speaker 5: other consideration that they need to take into account, it's 91 00:05:00,320 --> 00:05:04,640 Speaker 5: what's happening in the neighbor. Actually, the biggest neighbor was 92 00:05:04,680 --> 00:05:09,120 Speaker 5: is China. Obviously, I think we all have seen some 93 00:05:09,240 --> 00:05:13,440 Speaker 5: turning around of Chinese data. However, it's also been quite slow, right, 94 00:05:13,520 --> 00:05:17,240 Speaker 5: so there's still somewhat of a deflation pressure going on 95 00:05:17,320 --> 00:05:20,160 Speaker 5: in China, which pressures a currency, which of course translates 96 00:05:20,200 --> 00:05:22,159 Speaker 5: into how to think about the Japanese zen as well. 97 00:05:22,240 --> 00:05:23,960 Speaker 3: Yeah, I think a lot of investors think that the 98 00:05:23,960 --> 00:05:26,520 Speaker 3: BOJ and the PBOC are kind of in the same 99 00:05:26,560 --> 00:05:29,120 Speaker 3: spot that they're waiting for the for the FED to 100 00:05:29,160 --> 00:05:32,040 Speaker 3: act first. So that probably takes July off the table. 101 00:05:32,080 --> 00:05:34,120 Speaker 3: But I'm curious about the FED meeting in July whether 102 00:05:34,200 --> 00:05:36,520 Speaker 3: or not. Well, let's back up and let's let's say, 103 00:05:36,800 --> 00:05:40,599 Speaker 3: is it possible that the PCE this week is enough 104 00:05:41,720 --> 00:05:45,160 Speaker 3: for the July meeting to become live. Many think no. 105 00:05:45,839 --> 00:05:48,279 Speaker 3: But would it be enough maybe then to get the 106 00:05:48,320 --> 00:05:50,640 Speaker 3: Fed speakers to change the forward guidance. 107 00:05:51,520 --> 00:05:55,080 Speaker 5: I think, I mean, perhaps they could become a bit 108 00:05:55,200 --> 00:05:58,880 Speaker 5: less less hawkish, because I mean the last policy meeting 109 00:05:59,080 --> 00:06:03,080 Speaker 5: was actually quite hawkish in the direction of kind of 110 00:06:03,120 --> 00:06:06,320 Speaker 5: the decision itself. Now, of course, Powell said during the 111 00:06:06,360 --> 00:06:10,640 Speaker 5: press conference that the committee members actually had the chance 112 00:06:10,720 --> 00:06:14,560 Speaker 5: to change their projections, given that they knew that the 113 00:06:14,600 --> 00:06:17,360 Speaker 5: CPI number would have come out kind of below expectations. 114 00:06:18,040 --> 00:06:20,920 Speaker 5: They chose not to. I think partly that's because it's 115 00:06:20,920 --> 00:06:23,000 Speaker 5: only one month of data. And I mean when the 116 00:06:23,000 --> 00:06:26,280 Speaker 5: Fed kind of make decisions typically, I mean they look 117 00:06:26,320 --> 00:06:28,680 Speaker 5: at at least kind of a three month average. So 118 00:06:28,839 --> 00:06:31,120 Speaker 5: if like committee members look at a three month average, 119 00:06:31,160 --> 00:06:35,279 Speaker 5: things haven't like really turn so I think, unless I 120 00:06:35,320 --> 00:06:37,960 Speaker 5: mean the pc number have surprised a lot of the downside, 121 00:06:37,960 --> 00:06:39,719 Speaker 5: there's not a room for a lot of room for 122 00:06:39,800 --> 00:06:43,120 Speaker 5: them to support a set of can change direction. However, 123 00:06:43,240 --> 00:06:46,000 Speaker 5: some members could come out with kind of softer language. 124 00:06:46,160 --> 00:06:48,520 Speaker 1: I think that's what Powell actually signaled as well. 125 00:06:48,600 --> 00:06:51,000 Speaker 5: Right at at the press conference, he did say that 126 00:06:51,440 --> 00:06:54,160 Speaker 5: everything is kind of up to the data and it's 127 00:06:54,240 --> 00:06:55,440 Speaker 5: very very much data dependent. 128 00:06:55,680 --> 00:06:58,279 Speaker 2: Stephanie, before we let you go, you are an expert 129 00:06:58,400 --> 00:07:01,960 Speaker 2: in computer science, especially artificial intelligence, and I want you 130 00:07:02,040 --> 00:07:04,960 Speaker 2: to weigh in on this phenomenon that's been happening right 131 00:07:05,040 --> 00:07:09,560 Speaker 2: now across developed markets, mostly the US in particular, this 132 00:07:09,880 --> 00:07:14,200 Speaker 2: enthusiasm around AI and the computing boom that we will 133 00:07:14,800 --> 00:07:16,760 Speaker 2: derive as a result of it. I mean, where do 134 00:07:16,800 --> 00:07:19,240 Speaker 2: you stand. How do you see this right now playing out? 135 00:07:20,120 --> 00:07:20,320 Speaker 4: Yeah? 136 00:07:20,360 --> 00:07:24,320 Speaker 5: I think it's As a computer scientist myself, it's actually 137 00:07:24,400 --> 00:07:28,560 Speaker 5: very very exciting times. I would actually compare the impact 138 00:07:28,640 --> 00:07:32,000 Speaker 5: to society or kind of everyday life and work with 139 00:07:32,240 --> 00:07:36,320 Speaker 5: the invention or revolution of kind of popularization of the 140 00:07:36,440 --> 00:07:39,760 Speaker 5: Internet during the two thousands. So what happened in the 141 00:07:39,800 --> 00:07:44,640 Speaker 5: two thousands We had a real change, real improve intel technology. However, 142 00:07:44,760 --> 00:07:47,160 Speaker 5: we also had the dot com bubble, so we're see 143 00:07:47,200 --> 00:07:50,040 Speaker 5: a bit of that today right with names I and Vidiot. 144 00:07:50,200 --> 00:07:51,880 Speaker 1: Arguably there's a bit of a bubble. 145 00:07:52,400 --> 00:07:55,080 Speaker 5: When I saw Jensen Huang kind of being a pop 146 00:07:55,080 --> 00:07:57,600 Speaker 5: starle on headlines and my mom started talking about it, 147 00:07:57,640 --> 00:08:00,560 Speaker 5: I knew this is kind of history repeat ticket Solf. 148 00:08:00,640 --> 00:08:02,160 Speaker 1: So there's a bit of bubble that. 149 00:08:02,360 --> 00:08:04,800 Speaker 5: However, if you look kind of beyond that, I think 150 00:08:04,880 --> 00:08:08,080 Speaker 5: I love the rest of my market actually looks quite reasonable, 151 00:08:08,440 --> 00:08:10,840 Speaker 5: and you're seeing kind of rotation as well. Right names 152 00:08:10,840 --> 00:08:14,320 Speaker 5: like Amazon, Google, which habit laggards, are starting to catch up. 153 00:08:14,360 --> 00:08:16,600 Speaker 5: So there's definitely a lot more to play that. 154 00:08:17,120 --> 00:08:19,640 Speaker 3: Yeah, in that same theme, I think it was really 155 00:08:20,080 --> 00:08:23,360 Speaker 3: about the time that Nvidia became the most valuable company 156 00:08:23,400 --> 00:08:25,600 Speaker 3: in the whole world that we saw that fifteen percent 157 00:08:25,640 --> 00:08:28,920 Speaker 3: pullback in a matter of five days. So Stephanie, thank you. 158 00:08:29,000 --> 00:08:33,200 Speaker 3: Stephanie Lung, chief investment officer at Stastaway formerly of Golden Self. 159 00:08:39,920 --> 00:08:43,240 Speaker 3: Joining us on the program is Charo Shanana, Global market 160 00:08:43,280 --> 00:08:48,000 Speaker 3: strategist and head of FX strategy at Sagzo. Charro, thank 161 00:08:48,040 --> 00:08:50,200 Speaker 3: you so much for joining us. I'm going to find 162 00:08:50,240 --> 00:08:52,160 Speaker 3: a way to blend the two hats that you wear 163 00:08:52,200 --> 00:08:55,560 Speaker 3: as a general market strategist and then also the FX 164 00:08:56,200 --> 00:08:59,320 Speaker 3: side of things by just asking you point blank, is 165 00:08:59,360 --> 00:09:02,600 Speaker 3: the weakening year in killing the long the long equity 166 00:09:02,640 --> 00:09:03,440 Speaker 3: story in Japan? 167 00:09:05,200 --> 00:09:08,480 Speaker 6: Hi Goodmaning, thank you for having me. No, totally, I am, 168 00:09:08,559 --> 00:09:13,280 Speaker 6: and I think for now it has been obviously seen 169 00:09:13,400 --> 00:09:17,200 Speaker 6: that a weaker yen has been helping the Japanese exporters 170 00:09:17,840 --> 00:09:22,080 Speaker 6: and those blue chip names continue to push the equity 171 00:09:22,160 --> 00:09:26,360 Speaker 6: markets in Japan higher. And you know, in the case 172 00:09:26,559 --> 00:09:30,600 Speaker 6: for Japanese equities is a very structural case. It's driven 173 00:09:30,720 --> 00:09:34,360 Speaker 6: by corporate reforms that are happening in Japan. It's driven 174 00:09:34,400 --> 00:09:39,400 Speaker 6: by that exit from deflationary trends in Japan. So I 175 00:09:39,440 --> 00:09:43,200 Speaker 6: would I would not be worried about excessive weakness in 176 00:09:43,240 --> 00:09:45,360 Speaker 6: the yen and how that can fuel a little bit 177 00:09:45,360 --> 00:09:49,600 Speaker 6: of a pullback in probably consumption in the in the 178 00:09:49,640 --> 00:09:51,839 Speaker 6: short term. Of course, the weakness in the yen is 179 00:09:51,880 --> 00:09:54,600 Speaker 6: going to continue for now as it appears, you know, 180 00:09:54,600 --> 00:09:58,360 Speaker 6: with the FED delaying it's rate cuts. But if you're 181 00:09:58,480 --> 00:10:02,600 Speaker 6: in Japan markets, in japan equities, from a very structural perspective, 182 00:10:03,240 --> 00:10:06,319 Speaker 6: this weakness in the end is potentially bound to turn 183 00:10:06,400 --> 00:10:10,560 Speaker 6: around once we get to that, you know, the FED 184 00:10:10,640 --> 00:10:13,240 Speaker 6: rate cut cycle. But it certainly is a point in 185 00:10:13,400 --> 00:10:16,040 Speaker 6: time where we should be looking at our Japanese equity 186 00:10:16,040 --> 00:10:19,000 Speaker 6: exposures and potentially turning a little bit more selective there. 187 00:10:19,720 --> 00:10:22,040 Speaker 6: I mean, certainly there are some great dividend place in 188 00:10:22,080 --> 00:10:27,240 Speaker 6: that market. Geopolitical risk has also obviously helped Japanese equities 189 00:10:27,280 --> 00:10:29,600 Speaker 6: in some way or the other, as investors have been 190 00:10:29,600 --> 00:10:32,960 Speaker 6: trying to diversify out of China. So I think those 191 00:10:33,600 --> 00:10:37,040 Speaker 6: sections of the Japanese equity markets still remain quite attraction. 192 00:10:37,200 --> 00:10:40,280 Speaker 2: So, Charu, how would you handicap the risk of intervention 193 00:10:40,360 --> 00:10:43,000 Speaker 2: from the monetary authority in Japan right now? I mean 194 00:10:43,000 --> 00:10:45,760 Speaker 2: you mentioned the FED, and we're waiting for that pivot. 195 00:10:46,440 --> 00:10:49,080 Speaker 2: We haven't received it yet. The first rate cut may 196 00:10:49,120 --> 00:10:53,280 Speaker 2: be likely to create a shockwave through the foreign exchange, 197 00:10:53,280 --> 00:10:56,880 Speaker 2: But how are you assessing the risk of intervention from 198 00:10:56,880 --> 00:10:57,960 Speaker 2: the monetary authority? 199 00:11:00,040 --> 00:11:05,320 Speaker 6: Having seen how miserably this intervention potential intervention we saw 200 00:11:05,360 --> 00:11:08,280 Speaker 6: in April has failed and we're back at these one 201 00:11:08,400 --> 00:11:14,120 Speaker 6: sixty plus levers, I would think that Japanese authorities want 202 00:11:14,240 --> 00:11:17,720 Speaker 6: to really see a strong case of intervention, and I 203 00:11:17,800 --> 00:11:21,240 Speaker 6: don't see that right now. They certainly more worried about 204 00:11:21,280 --> 00:11:23,840 Speaker 6: the base at which the end decline is not so 205 00:11:23,960 --> 00:11:27,800 Speaker 6: much about the levels it's trading at. And what we've 206 00:11:27,880 --> 00:11:33,120 Speaker 6: heard from the FX chief in Japan Kanda earlier is 207 00:11:33,200 --> 00:11:37,280 Speaker 6: that they usually get worried when there is a move 208 00:11:37,320 --> 00:11:41,040 Speaker 6: of about ten per US dollars within one month, or 209 00:11:41,280 --> 00:11:44,760 Speaker 6: even a four percent depreciation in the end in two weeks, 210 00:11:44,880 --> 00:11:47,400 Speaker 6: and none of those two conditions seem to have been 211 00:11:47,440 --> 00:11:50,280 Speaker 6: met yet. So the pace of decline is something that 212 00:11:50,320 --> 00:11:55,800 Speaker 6: would not be potentially worrying Japanese authorities. Now, we might 213 00:11:55,840 --> 00:11:59,400 Speaker 6: obviously see some verbal job owning here and there, but 214 00:11:59,480 --> 00:12:02,679 Speaker 6: I don't see any reason why they should be wasting 215 00:12:03,240 --> 00:12:07,440 Speaker 6: tons of money again to really get them nowhere while 216 00:12:07,440 --> 00:12:09,600 Speaker 6: they wait for those federate cuts to begin. 217 00:12:10,679 --> 00:12:13,480 Speaker 3: Yeah, we we ran a story on the Bloomberg terminal 218 00:12:13,800 --> 00:12:17,800 Speaker 3: getting just at that point that that the Japanese authorities 219 00:12:17,800 --> 00:12:20,640 Speaker 3: will probably have to wait to see what happens with 220 00:12:20,720 --> 00:12:23,480 Speaker 3: the PCE this week and then later with the FED 221 00:12:23,800 --> 00:12:26,480 Speaker 3: at the July meeting. The reason I brought up stocks 222 00:12:26,559 --> 00:12:29,360 Speaker 3: was that obviously, you know, the Japan market was one 223 00:12:29,400 --> 00:12:32,520 Speaker 3: of the real favorites, so one of the real darlings 224 00:12:32,600 --> 00:12:35,520 Speaker 3: for investors for a period of time. Now you have 225 00:12:35,559 --> 00:12:39,120 Speaker 3: to go you know, since March, we've we've traded lower. 226 00:12:39,440 --> 00:12:41,600 Speaker 3: So it's it's been you know a number of months 227 00:12:41,600 --> 00:12:43,840 Speaker 3: now that we've traded lower, and I guess part of 228 00:12:43,840 --> 00:12:47,040 Speaker 3: that could be the reaction to the rapid gains that 229 00:12:47,080 --> 00:12:51,280 Speaker 3: we saw from December. Over those couple of months. So 230 00:12:51,400 --> 00:12:55,600 Speaker 3: if we think that that story is intact, what's the 231 00:12:55,840 --> 00:12:57,800 Speaker 3: what's the key component for it? 232 00:13:00,280 --> 00:13:02,800 Speaker 6: Certainly, I mean, we've seen some amount of pullback, some 233 00:13:02,840 --> 00:13:06,160 Speaker 6: amount of sideways trading in the Japanese equity markets, and 234 00:13:06,880 --> 00:13:11,440 Speaker 6: that's obviously potentially coming from some of those investors who 235 00:13:11,480 --> 00:13:15,080 Speaker 6: were more like tactical and short term investors, obviously locking 236 00:13:15,120 --> 00:13:17,760 Speaker 6: in their games after the rapid run that we've seen 237 00:13:17,840 --> 00:13:20,920 Speaker 6: in the last year or so. Uh But like I said, 238 00:13:20,960 --> 00:13:23,440 Speaker 6: you know, I mean, for me, Japan is a story 239 00:13:23,520 --> 00:13:27,280 Speaker 6: about exit from deflation. Japan is a story about corporate 240 00:13:27,360 --> 00:13:33,080 Speaker 6: reforms and more dividend payouts, more buybacks. For me, Japan 241 00:13:33,160 --> 00:13:37,720 Speaker 6: is a story about higher geopolitical risk in the global economy, 242 00:13:37,760 --> 00:13:41,240 Speaker 6: which means japan equity has become a little bit of 243 00:13:41,280 --> 00:13:45,680 Speaker 6: a safe hayn in that sense. Uh So, I'm still 244 00:13:45,720 --> 00:13:48,720 Speaker 6: looking at it from a very selective lens. Of course, 245 00:13:48,760 --> 00:13:52,920 Speaker 6: the pullback in uh, you know, the Japanese end has 246 00:13:53,000 --> 00:13:57,120 Speaker 6: been helping once again in recent weeks. But if we 247 00:13:57,120 --> 00:13:59,679 Speaker 6: were to continue to position for the strengthening of the 248 00:13:59,800 --> 00:14:03,200 Speaker 6: year and the eventual start of the federate cut cycle, 249 00:14:04,000 --> 00:14:07,800 Speaker 6: that means the index level can obviously see a deeper 250 00:14:07,840 --> 00:14:10,960 Speaker 6: pullback as well, because you know, all those high market 251 00:14:11,000 --> 00:14:15,200 Speaker 6: cap names are potentially those that are exporters and dependent 252 00:14:15,360 --> 00:14:18,400 Speaker 6: on the weakness of the end to really continue to 253 00:14:18,400 --> 00:14:19,040 Speaker 6: gain as well. 254 00:14:19,200 --> 00:14:22,160 Speaker 2: Charro, very quickly thirty seconds. What would cause you to 255 00:14:22,280 --> 00:14:24,360 Speaker 2: change your opinion on Japanese equities? 256 00:14:27,720 --> 00:14:30,280 Speaker 6: I mean, on a very positive note, if we were 257 00:14:30,320 --> 00:14:33,560 Speaker 6: to see geopolitical tensions and and US China on a 258 00:14:33,680 --> 00:14:38,760 Speaker 6: very you know, coordial happy note, then I think Japan 259 00:14:39,120 --> 00:14:42,720 Speaker 6: would face outflows as far as investors would rush back 260 00:14:42,760 --> 00:14:46,440 Speaker 6: into the China markets. I think that would be one 261 00:14:46,480 --> 00:14:47,280 Speaker 6: downside risk. 262 00:14:48,160 --> 00:14:51,200 Speaker 3: Charo, thank you for joining us. Charo Chanana, global market 263 00:14:51,240 --> 00:15:01,800 Speaker 3: strategist and head of X Strategy. Let's get to our guests. 264 00:15:01,880 --> 00:15:07,160 Speaker 3: Terry Spath, founder and CIO at Zuma Wealth. Terry, one 265 00:15:07,200 --> 00:15:09,480 Speaker 3: of the markers of what's been happening in the US 266 00:15:09,520 --> 00:15:12,720 Speaker 3: equity market of late has been that you've had quite 267 00:15:12,720 --> 00:15:16,040 Speaker 3: a lot of volatility in individual stocks, not so much 268 00:15:16,080 --> 00:15:19,560 Speaker 3: at the index level. The indexes have managed to hold 269 00:15:19,600 --> 00:15:22,880 Speaker 3: pretty close to all time highs, even with some pretty 270 00:15:23,240 --> 00:15:26,400 Speaker 3: torred selling in even the high flyers, like in video 271 00:15:26,480 --> 00:15:28,760 Speaker 3: last week, trading down thirteen to fifteen percent in the 272 00:15:28,840 --> 00:15:32,120 Speaker 3: number of days, and yet the indexes were Okay, you 273 00:15:32,120 --> 00:15:34,600 Speaker 3: think that continues or is that about to change? 274 00:15:35,520 --> 00:15:38,240 Speaker 7: Yeah, Hi, Brian, I'm glad you brought that up. 275 00:15:38,760 --> 00:15:42,640 Speaker 8: You know, it is an interesting divergence between individual stock 276 00:15:42,800 --> 00:15:48,160 Speaker 8: volatility and the relative calm of the broader benchmarks, and 277 00:15:48,200 --> 00:15:49,520 Speaker 8: that calm really strikes us. 278 00:15:49,560 --> 00:15:51,880 Speaker 7: I mean, we were taking a look, it's been. 279 00:15:51,800 --> 00:15:54,320 Speaker 8: Sixteen months since the S and P five hundred had 280 00:15:54,360 --> 00:15:58,600 Speaker 8: a two percent down day. I've there were months during 281 00:15:58,600 --> 00:16:01,320 Speaker 8: COVID where we had multiple five percent down dates, So 282 00:16:01,440 --> 00:16:04,320 Speaker 8: that's you know, it's very calm. The max draw downs 283 00:16:04,320 --> 00:16:06,200 Speaker 8: this year only five percent for the S and P 284 00:16:06,320 --> 00:16:10,520 Speaker 8: five hundred, seven percent for the NASDACK. So our view 285 00:16:10,600 --> 00:16:14,600 Speaker 8: and our recommendation is, you know, don't step in front 286 00:16:14,600 --> 00:16:17,240 Speaker 8: of a strong market. We're in a Cinderella moment. It's 287 00:16:17,280 --> 00:16:19,960 Speaker 8: not too hot, it's not too cold, and the trend 288 00:16:20,000 --> 00:16:23,400 Speaker 8: is really your friend, so keep exposed to those broad benchmarks. 289 00:16:23,440 --> 00:16:25,600 Speaker 2: At this stage, that said, if you had to put 290 00:16:25,640 --> 00:16:27,760 Speaker 2: on a hedge, what would your strategy be. 291 00:16:29,720 --> 00:16:32,080 Speaker 7: Heads for the US equity market down. 292 00:16:32,040 --> 00:16:34,840 Speaker 2: To the downside. I mean putting in a put so 293 00:16:34,960 --> 00:16:37,680 Speaker 2: to speak, so that you could protect everything that you've 294 00:16:37,760 --> 00:16:40,200 Speaker 2: enjoyed so far this year, if there is some kind 295 00:16:40,240 --> 00:16:42,160 Speaker 2: of corrective behavior. 296 00:16:42,400 --> 00:16:46,120 Speaker 8: Yeah, I mean, I think you know, that's an interesting question. 297 00:16:46,240 --> 00:16:48,600 Speaker 8: It's a two pronged answer that we would give for 298 00:16:48,680 --> 00:16:51,400 Speaker 8: how do you protect the profits that you may have 299 00:16:51,520 --> 00:16:54,600 Speaker 8: made over the past year, year and a half, because 300 00:16:54,600 --> 00:16:57,080 Speaker 8: you do want to protect those, you know one the 301 00:16:57,120 --> 00:17:02,400 Speaker 8: symbol one is that market have drawdowns and that happens, 302 00:17:02,400 --> 00:17:04,560 Speaker 8: and timing exactly, you know, when you get out and 303 00:17:04,560 --> 00:17:06,920 Speaker 8: when you get back in can be pretty tricky. In fact, 304 00:17:06,920 --> 00:17:08,639 Speaker 8: if you tried to do that this year, you missed 305 00:17:08,640 --> 00:17:12,240 Speaker 8: out on some potential profits. So just bearing in mind 306 00:17:12,280 --> 00:17:15,400 Speaker 8: that you know there can be declines in the markets 307 00:17:15,400 --> 00:17:18,320 Speaker 8: and just you know, don't get too panicky over that. 308 00:17:18,760 --> 00:17:20,480 Speaker 7: And then on the flip side, what we also do 309 00:17:20,560 --> 00:17:21,840 Speaker 7: as a barbell. 310 00:17:22,880 --> 00:17:26,280 Speaker 8: To the equity markets is just plain old treasuries. We 311 00:17:26,520 --> 00:17:30,400 Speaker 8: keep investing over and over again in treasuries earning five percent. 312 00:17:30,880 --> 00:17:32,560 Speaker 7: It's a really nice, steady. 313 00:17:32,280 --> 00:17:36,040 Speaker 8: Zero downside, you know, five plus percent upside. So that's 314 00:17:36,080 --> 00:17:37,119 Speaker 8: that's our recommendation. 315 00:17:38,400 --> 00:17:40,439 Speaker 3: One of the things that struck me last week with 316 00:17:40,600 --> 00:17:43,199 Speaker 3: what happened with Nvidia and Broadcom and some of the 317 00:17:43,240 --> 00:17:47,320 Speaker 3: other AI plays is that you know, you had in 318 00:17:47,400 --> 00:17:51,359 Speaker 3: Nvidia down fifteen percent on no bad news. What happens 319 00:17:51,359 --> 00:17:53,480 Speaker 3: when you actually get some bad news, you know that 320 00:17:53,640 --> 00:17:56,320 Speaker 3: that's the thing. We haven't had a warning yet. We 321 00:17:56,400 --> 00:17:59,439 Speaker 3: haven't really had anything that tells us that, oh, that's 322 00:17:59,480 --> 00:18:03,520 Speaker 3: a setback when you get it, I don't know, you know. 323 00:18:03,640 --> 00:18:06,479 Speaker 3: So that's one of the reasons why people probably are 324 00:18:06,520 --> 00:18:08,560 Speaker 3: looking at hedges. And if you look at like the 325 00:18:08,600 --> 00:18:12,280 Speaker 3: power producers and the HVAC companies and everything, they're not 326 00:18:12,280 --> 00:18:14,679 Speaker 3: going to help you because they're training pretty much in 327 00:18:14,800 --> 00:18:15,560 Speaker 3: lockstep with. 328 00:18:15,640 --> 00:18:17,840 Speaker 7: Nvideo they are. 329 00:18:18,080 --> 00:18:20,080 Speaker 8: And you know, and if we're talking about how do 330 00:18:20,119 --> 00:18:22,520 Speaker 8: you put a hedge on Nvidium particular, you know, the 331 00:18:22,560 --> 00:18:25,280 Speaker 8: answer issue is you buy a put for something like that. 332 00:18:25,600 --> 00:18:27,879 Speaker 8: But we don't think you want to put like a 333 00:18:28,240 --> 00:18:31,679 Speaker 8: big allocation of your portfolio into an individual stock, especially 334 00:18:31,720 --> 00:18:34,600 Speaker 8: one that's had the type of, you know, really outsized 335 00:18:34,640 --> 00:18:37,960 Speaker 8: performance in a very short period of time. We like 336 00:18:38,040 --> 00:18:40,480 Speaker 8: the tech sector definitely, we think you want to keep 337 00:18:40,520 --> 00:18:43,320 Speaker 8: exposure to that, but you can look to other sectors 338 00:18:43,320 --> 00:18:46,320 Speaker 8: as well. Energy, for example, doesn't always move in the 339 00:18:46,359 --> 00:18:50,320 Speaker 8: same lockstep with the tech sector, and energy stocks are 340 00:18:50,359 --> 00:18:53,080 Speaker 8: doing really well due to high oil prices, they have 341 00:18:53,200 --> 00:18:57,400 Speaker 8: really high quality earnings, they have good interest coverage ratios, 342 00:18:57,440 --> 00:18:58,600 Speaker 8: they have great dividends. 343 00:18:58,920 --> 00:19:02,120 Speaker 7: Still, like I said, earnings, and so making sure. 344 00:19:01,920 --> 00:19:05,520 Speaker 8: That you have you know, some sector exposure that can 345 00:19:05,560 --> 00:19:07,840 Speaker 8: be a little bit different than just you know, what 346 00:19:08,119 --> 00:19:11,480 Speaker 8: is driving an individual stock is makes sense to us. 347 00:19:11,680 --> 00:19:13,879 Speaker 2: So we're wrapping up the second quarter. If I was 348 00:19:14,080 --> 00:19:16,520 Speaker 2: one of your clients and I had to maybe raise 349 00:19:16,560 --> 00:19:19,280 Speaker 2: capital to pay estimated taxes based on the gains that 350 00:19:19,320 --> 00:19:22,439 Speaker 2: I've had, you know in Q two, what would you 351 00:19:22,480 --> 00:19:24,640 Speaker 2: tell me to do? How would I raise that money? 352 00:19:25,800 --> 00:19:28,600 Speaker 8: Well, I mean that's going to be an individual as 353 00:19:28,640 --> 00:19:32,720 Speaker 8: you know, an individual response to any particular. 354 00:19:33,800 --> 00:19:36,240 Speaker 7: Person. But there are certain rules of thumb that you 355 00:19:36,280 --> 00:19:36,919 Speaker 7: want to follow. 356 00:19:37,000 --> 00:19:39,600 Speaker 8: You want to you know, you can definitely look at 357 00:19:39,600 --> 00:19:42,240 Speaker 8: your portfolio and see where you have too much exposure. 358 00:19:42,280 --> 00:19:44,200 Speaker 8: And if you are going to have a fifteen percent 359 00:19:44,240 --> 00:19:47,239 Speaker 8: decline in an individual stock, you know, is that going 360 00:19:47,280 --> 00:19:48,920 Speaker 8: to be too painful in your portfolio? 361 00:19:49,000 --> 00:19:51,679 Speaker 7: So that would be something to trim. But you know, 362 00:19:51,760 --> 00:19:54,320 Speaker 7: making sure that you've got a great allocation. 363 00:19:54,680 --> 00:19:57,000 Speaker 8: And one again, we think it makes sense to have 364 00:19:57,359 --> 00:19:59,760 Speaker 8: exposure to US stocks and to continue to hold that 365 00:19:59,840 --> 00:20:01,440 Speaker 8: right now. So if you have a little bit of 366 00:20:01,480 --> 00:20:03,840 Speaker 8: liquidity on your bond side or if you have some 367 00:20:03,920 --> 00:20:06,560 Speaker 8: in cash, that's where we think you want to, you know, 368 00:20:06,600 --> 00:20:07,760 Speaker 8: pay and pay those. 369 00:20:07,600 --> 00:20:09,320 Speaker 7: Taxes so quickly. 370 00:20:09,359 --> 00:20:12,520 Speaker 3: On the FED, we had a bad January in terms 371 00:20:12,560 --> 00:20:16,280 Speaker 3: of inflation and then kind of warm in February March, 372 00:20:16,480 --> 00:20:17,919 Speaker 3: and we've had a little bit of weakness in the 373 00:20:17,960 --> 00:20:21,040 Speaker 3: coming months the last couple of months. Is it time 374 00:20:21,080 --> 00:20:23,760 Speaker 3: for them to take a little uh, you know, to 375 00:20:23,760 --> 00:20:26,000 Speaker 3: to maybe start hinting at cutting rates or do you 376 00:20:26,000 --> 00:20:27,520 Speaker 3: think they just stay higher for longer? 377 00:20:28,359 --> 00:20:30,919 Speaker 8: Yeah, I mean the FED has been really frustrating for 378 00:20:31,040 --> 00:20:32,920 Speaker 8: us and probably for some other people too. I mean 379 00:20:33,520 --> 00:20:37,440 Speaker 8: they've really gotten I think cold feed about cutting rates. Obviously, 380 00:20:37,480 --> 00:20:40,040 Speaker 8: the market was over at skis earlier this year when 381 00:20:40,080 --> 00:20:42,720 Speaker 8: they were, you know, cheering on six to seven cuts 382 00:20:42,720 --> 00:20:43,160 Speaker 8: this year. 383 00:20:43,240 --> 00:20:44,680 Speaker 7: I think the market and the FED are a little 384 00:20:44,720 --> 00:20:46,480 Speaker 7: bit better aligned now than they were. 385 00:20:47,200 --> 00:20:49,600 Speaker 8: But this, you know, this concept that the FED needs 386 00:20:49,640 --> 00:20:52,040 Speaker 8: to be confident that they're going to see a two 387 00:20:52,080 --> 00:20:52,720 Speaker 8: percent level. 388 00:20:52,760 --> 00:20:54,840 Speaker 7: I don't know how you quonify something like that. 389 00:20:54,920 --> 00:20:57,680 Speaker 8: So we're looking at things like Friday's core PCE number 390 00:20:57,680 --> 00:21:01,920 Speaker 8: that's going to be coming out jobs, jobless claims. Those 391 00:21:01,920 --> 00:21:03,720 Speaker 8: are the two big ones that I think we can 392 00:21:03,840 --> 00:21:08,160 Speaker 8: closely watch. That core PCE inflation is expected to come 393 00:21:08,200 --> 00:21:11,080 Speaker 8: down on Friday to its lowest level in a couple 394 00:21:11,119 --> 00:21:14,639 Speaker 8: of years. That'll be good jobless claims, all right, or 395 00:21:14,680 --> 00:21:16,520 Speaker 8: something we're watching as well, so we hope to see 396 00:21:16,520 --> 00:21:17,880 Speaker 8: them pivot in the fall. 397 00:21:17,960 --> 00:21:21,160 Speaker 3: Thanks Terry, Thanks so much, Terry Spath, Founder in CIO 398 00:21:21,320 --> 00:21:22,399 Speaker 3: at Zuma Wealth. 399 00:21:24,160 --> 00:21:27,080 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 400 00:21:27,160 --> 00:21:30,280 Speaker 2: the stories making news and moving markets in the Asia Pacific. 401 00:21:30,760 --> 00:21:33,880 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 402 00:21:33,920 --> 00:21:37,520 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 403 00:21:37,560 --> 00:21:41,359 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen, 404 00:21:41,440 --> 00:21:44,520 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 405 00:21:44,560 --> 00:21:45,640 Speaker 2: Bloomberg Business App.