WEBVTT - The Yen’s Tumble to 1986 Low Boosts Intervention Risk 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.640 --> 0:00:12.840 This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories, 0:00:15.440 --> 0:00:18.520 making news and moving markets in the APAC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:26.080 Bloomberg Business App. 0:00:26.600 --> 0:00:30.280 The Japanese yen weakening to the lowest level against the 0:00:30.360 --> 0:00:33.520 dollars since way back in December of nineteen eighty six, 0:00:34.159 --> 0:00:37.080 it's raising the risk of intervention less than a couple 0:00:37.120 --> 0:00:39.599 of months after the boj stepped in to prop up 0:00:39.600 --> 0:00:44.400 the currency. Dominic Constam, head of Macro's strategy at Mizuho Americas, 0:00:44.479 --> 0:00:47.960 says the weekend is hurting Japanese consumers. 0:00:47.920 --> 0:00:52.159 When the currency is weakening. There's obviously terms of trade effect, 0:00:52.159 --> 0:00:55.600 which means the real income of the Japanese people in 0:00:55.640 --> 0:00:59.840 some sense will be less global terms, So there's definitely 0:00:59.880 --> 0:01:04.080 a depreciation from that side of things. But at the 0:01:04.120 --> 0:01:05.920 same time, I mean, at the end of the day, 0:01:06.319 --> 0:01:09.720 you know their potential growth is very low. There's a 0:01:09.720 --> 0:01:12.640 lot of damage has been done with very low negative 0:01:12.640 --> 0:01:13.880 inflation over the years. 0:01:14.880 --> 0:01:18.680 Dominant constem of Mizuho America is there. The Japanese currency 0:01:18.680 --> 0:01:21.000 at the moment is training or dollar yen is at 0:01:21.040 --> 0:01:24.960 one sixty fifty three. That blows past the figure when 0:01:25.040 --> 0:01:29.000 officials intervened Back in April, Japan's Vice Minister of Finance, 0:01:29.040 --> 0:01:32.360 Masanto Kanda said that officials are watching with a high 0:01:32.360 --> 0:01:35.080 degree of urgency, and he said that they would take 0:01:35.120 --> 0:01:38.560 appropriate steps as needed. We've got our guest coming up, 0:01:38.600 --> 0:01:42.520 Stephanie Lung, chief investment officer at Stashaway. Hopefully we'll get 0:01:42.520 --> 0:01:46.240 some broad discussion about all of these factors. Stephanie, thank 0:01:46.280 --> 0:01:48.360 you for coming into our studios with us. Let's start 0:01:48.400 --> 0:01:51.160 off with the end. Well, we mentioned the possibility of 0:01:52.040 --> 0:01:55.360 intervention by Japanese authorities, but we're running a piece that 0:01:55.480 --> 0:01:58.400 says it's kind of a grim reality that's setting in 0:01:58.440 --> 0:02:01.800 that the yen is not really going to stop weakening 0:02:01.880 --> 0:02:04.760 until the FED pulls the plug on the higher for 0:02:04.840 --> 0:02:07.760 Longer policy. I wonder if you see it that way, 0:02:08.160 --> 0:02:11.400 it seems like that angle means the boj has to 0:02:11.400 --> 0:02:13.200 stay patient even if the market is not. 0:02:13.800 --> 0:02:14.880 Yeah, absolutely, I think. 0:02:15.200 --> 0:02:18.239 I mean, we've seen some intervention in the Japanese and 0:02:18.320 --> 0:02:21.520 market by the BOJ. However, I think the force is 0:02:21.560 --> 0:02:26.600 that the overarching micro kind of reality is that US 0:02:26.639 --> 0:02:30.040 inflation or developed markets inflations are not coming down as 0:02:30.120 --> 0:02:33.680 quickly as expected. Therefore, would expect the Fed to have 0:02:33.760 --> 0:02:37.920 to kind of keep interest rates higher for longer. And obviously, 0:02:38.000 --> 0:02:41.560 I mean the last CPI number was quite encouraging in 0:02:41.600 --> 0:02:45.840 the direction that this inflation started seems to have started 0:02:45.880 --> 0:02:49.320 reaccelerating again. But again it's only one month of figure, 0:02:49.400 --> 0:02:51.520 and we all know that inflation data tends to be 0:02:51.560 --> 0:02:55.200 actually quite volatile, So a lot of attention now comes 0:02:55.200 --> 0:02:58.160 down to this Friday, Actually the PCE number will be 0:02:58.160 --> 0:03:02.160 coming out, and Pocket generally expects I mean PCE to 0:03:02.600 --> 0:03:06.200 be quite in line with the CPI. However, if I 0:03:06.240 --> 0:03:09.560 mean the CPI, the PCE actually comes out kind of 0:03:09.840 --> 0:03:13.280 stronger than what the market is looking for. That means 0:03:13.280 --> 0:03:15.519 that we may actually not get the turn or get 0:03:15.560 --> 0:03:18.840 the acceleration in this inflation as of yet, and that 0:03:18.919 --> 0:03:21.000 puts a lot more pressure on the end. 0:03:21.440 --> 0:03:24.280 Speaking of pressure, the BOJ has got to be feeling 0:03:24.440 --> 0:03:26.639 a little bit of it. We had a Bloomberg survey 0:03:26.720 --> 0:03:29.120 recently showing about a third of the economists that we 0:03:29.160 --> 0:03:32.640 spoke with believe the BOJ will raise interest rates in July, 0:03:32.720 --> 0:03:35.640 and they also expect the BOJ to unveil a roadmap 0:03:36.320 --> 0:03:41.040 for quantitative tightening, buying far fewer of those jgbs. 0:03:42.160 --> 0:03:42.840 What is your. 0:03:42.960 --> 0:03:44.840 Expectation right now? What are we going to get from 0:03:44.840 --> 0:03:47.320 the BOJ that is really going to convince the market 0:03:47.840 --> 0:03:51.640 that the era, the three decades really of easy money 0:03:51.680 --> 0:03:52.000 is over. 0:03:52.840 --> 0:03:53.400 Yeah, I think it. 0:03:54.080 --> 0:03:57.480 If you put yourself into a BOJ kind of official, 0:03:58.360 --> 0:04:01.080 you haven't had to do this kind of tightening before, right, 0:04:01.080 --> 0:04:04.160 because I think for the last three decades there was 0:04:04.200 --> 0:04:07.800 consistent perissure of deflation, and they were very very good 0:04:07.800 --> 0:04:11.520 at coming up with policies to actually flight fight deflation. 0:04:12.080 --> 0:04:14.880 Now the direction is kind of the other way, in 0:04:14.880 --> 0:04:18.360 the sense that they have this kind of early on 0:04:19.279 --> 0:04:23.000 inflation force that is setting in in the economy. 0:04:23.480 --> 0:04:26.160 Wavetrove is surprising on the webside. 0:04:26.480 --> 0:04:29.359 And more importantly, I think the overall kind of macro 0:04:29.520 --> 0:04:33.640 environment for the US and other develop markets support a 0:04:33.720 --> 0:04:39.039 high inflation environment for the Japan economy. And I think 0:04:39.480 --> 0:04:41.600 if you are a BOJ official, you will be very 0:04:41.640 --> 0:04:45.360 very careful in not trying to extinguish what they've actually 0:04:45.360 --> 0:04:47.960 hoped for the last three decades. So I think even 0:04:48.000 --> 0:04:52.120 though they are set to kind of start to tighten policy, 0:04:52.440 --> 0:04:54.880 they would do it actually in a very very cautious way. 0:04:55.360 --> 0:04:57.039 And I mean coming back to the end, right, the 0:04:57.120 --> 0:05:00.240 other consideration that they need to take into account, it's 0:05:00.320 --> 0:05:04.640 what's happening in the neighbor. Actually, the biggest neighbor was 0:05:04.680 --> 0:05:09.120 is China. Obviously, I think we all have seen some 0:05:09.240 --> 0:05:13.440 turning around of Chinese data. However, it's also been quite slow, right, 0:05:13.520 --> 0:05:17.240 so there's still somewhat of a deflation pressure going on 0:05:17.320 --> 0:05:20.160 in China, which pressures a currency, which of course translates 0:05:20.200 --> 0:05:22.159 into how to think about the Japanese zen as well. 0:05:22.240 --> 0:05:23.960 Yeah, I think a lot of investors think that the 0:05:23.960 --> 0:05:26.520 BOJ and the PBOC are kind of in the same 0:05:26.560 --> 0:05:29.120 spot that they're waiting for the for the FED to 0:05:29.160 --> 0:05:32.040 act first. So that probably takes July off the table. 0:05:32.080 --> 0:05:34.120 But I'm curious about the FED meeting in July whether 0:05:34.200 --> 0:05:36.520 or not. Well, let's back up and let's let's say, 0:05:36.800 --> 0:05:40.599 is it possible that the PCE this week is enough 0:05:41.720 --> 0:05:45.160 for the July meeting to become live. Many think no. 0:05:45.839 --> 0:05:48.279 But would it be enough maybe then to get the 0:05:48.320 --> 0:05:50.640 Fed speakers to change the forward guidance. 0:05:51.520 --> 0:05:55.080 I think, I mean, perhaps they could become a bit 0:05:55.200 --> 0:05:58.880 less less hawkish, because I mean the last policy meeting 0:05:59.080 --> 0:06:03.080 was actually quite hawkish in the direction of kind of 0:06:03.120 --> 0:06:06.320 the decision itself. Now, of course, Powell said during the 0:06:06.360 --> 0:06:10.640 press conference that the committee members actually had the chance 0:06:10.720 --> 0:06:14.560 to change their projections, given that they knew that the 0:06:14.600 --> 0:06:17.360 CPI number would have come out kind of below expectations. 0:06:18.040 --> 0:06:20.920 They chose not to. I think partly that's because it's 0:06:20.920 --> 0:06:23.000 only one month of data. And I mean when the 0:06:23.000 --> 0:06:26.280 Fed kind of make decisions typically, I mean they look 0:06:26.320 --> 0:06:28.680 at at least kind of a three month average. So 0:06:28.839 --> 0:06:31.120 if like committee members look at a three month average, 0:06:31.160 --> 0:06:35.279 things haven't like really turn so I think, unless I 0:06:35.320 --> 0:06:37.960 mean the pc number have surprised a lot of the downside, 0:06:37.960 --> 0:06:39.719 there's not a room for a lot of room for 0:06:39.800 --> 0:06:43.120 them to support a set of can change direction. However, 0:06:43.240 --> 0:06:46.000 some members could come out with kind of softer language. 0:06:46.160 --> 0:06:48.520 I think that's what Powell actually signaled as well. 0:06:48.600 --> 0:06:51.000 Right at at the press conference, he did say that 0:06:51.440 --> 0:06:54.160 everything is kind of up to the data and it's 0:06:54.240 --> 0:06:55.440 very very much data dependent. 0:06:55.680 --> 0:06:58.279 Stephanie, before we let you go, you are an expert 0:06:58.400 --> 0:07:01.960 in computer science, especially artificial intelligence, and I want you 0:07:02.040 --> 0:07:04.960 to weigh in on this phenomenon that's been happening right 0:07:05.040 --> 0:07:09.560 now across developed markets, mostly the US in particular, this 0:07:09.880 --> 0:07:14.200 enthusiasm around AI and the computing boom that we will 0:07:14.800 --> 0:07:16.760 derive as a result of it. I mean, where do 0:07:16.800 --> 0:07:19.240 you stand. How do you see this right now playing out? 0:07:20.120 --> 0:07:20.320 Yeah? 0:07:20.360 --> 0:07:24.320 I think it's As a computer scientist myself, it's actually 0:07:24.400 --> 0:07:28.560 very very exciting times. I would actually compare the impact 0:07:28.640 --> 0:07:32.000 to society or kind of everyday life and work with 0:07:32.240 --> 0:07:36.320 the invention or revolution of kind of popularization of the 0:07:36.440 --> 0:07:39.760 Internet during the two thousands. So what happened in the 0:07:39.800 --> 0:07:44.640 two thousands We had a real change, real improve intel technology. However, 0:07:44.760 --> 0:07:47.160 we also had the dot com bubble, so we're see 0:07:47.200 --> 0:07:50.040 a bit of that today right with names I and Vidiot. 0:07:50.200 --> 0:07:51.880 Arguably there's a bit of a bubble. 0:07:52.400 --> 0:07:55.080 When I saw Jensen Huang kind of being a pop 0:07:55.080 --> 0:07:57.600 starle on headlines and my mom started talking about it, 0:07:57.640 --> 0:08:00.560 I knew this is kind of history repeat ticket Solf. 0:08:00.640 --> 0:08:02.160 So there's a bit of bubble that. 0:08:02.360 --> 0:08:04.800 However, if you look kind of beyond that, I think 0:08:04.880 --> 0:08:08.080 I love the rest of my market actually looks quite reasonable, 0:08:08.440 --> 0:08:10.840 and you're seeing kind of rotation as well. Right names 0:08:10.840 --> 0:08:14.320 like Amazon, Google, which habit laggards, are starting to catch up. 0:08:14.360 --> 0:08:16.600 So there's definitely a lot more to play that. 0:08:17.120 --> 0:08:19.640 Yeah, in that same theme, I think it was really 0:08:20.080 --> 0:08:23.360 about the time that Nvidia became the most valuable company 0:08:23.400 --> 0:08:25.600 in the whole world that we saw that fifteen percent 0:08:25.640 --> 0:08:28.920 pullback in a matter of five days. So Stephanie, thank you. 0:08:29.000 --> 0:08:33.200 Stephanie Lung, chief investment officer at Stastaway formerly of Golden Self. 0:08:39.920 --> 0:08:43.240 Joining us on the program is Charo Shanana, Global market 0:08:43.280 --> 0:08:48.000 strategist and head of FX strategy at Sagzo. Charro, thank 0:08:48.040 --> 0:08:50.200 you so much for joining us. I'm going to find 0:08:50.240 --> 0:08:52.160 a way to blend the two hats that you wear 0:08:52.200 --> 0:08:55.560 as a general market strategist and then also the FX 0:08:56.200 --> 0:08:59.320 side of things by just asking you point blank, is 0:08:59.360 --> 0:09:02.600 the weakening year in killing the long the long equity 0:09:02.640 --> 0:09:03.440 story in Japan? 0:09:05.200 --> 0:09:08.480 Hi Goodmaning, thank you for having me. No, totally, I am, 0:09:08.559 --> 0:09:13.280 and I think for now it has been obviously seen 0:09:13.400 --> 0:09:17.200 that a weaker yen has been helping the Japanese exporters 0:09:17.840 --> 0:09:22.080 and those blue chip names continue to push the equity 0:09:22.160 --> 0:09:26.360 markets in Japan higher. And you know, in the case 0:09:26.559 --> 0:09:30.600 for Japanese equities is a very structural case. It's driven 0:09:30.720 --> 0:09:34.360 by corporate reforms that are happening in Japan. It's driven 0:09:34.400 --> 0:09:39.400 by that exit from deflationary trends in Japan. So I 0:09:39.440 --> 0:09:43.200 would I would not be worried about excessive weakness in 0:09:43.240 --> 0:09:45.360 the yen and how that can fuel a little bit 0:09:45.360 --> 0:09:49.600 of a pullback in probably consumption in the in the 0:09:49.640 --> 0:09:51.839 short term. Of course, the weakness in the yen is 0:09:51.880 --> 0:09:54.600 going to continue for now as it appears, you know, 0:09:54.600 --> 0:09:58.360 with the FED delaying it's rate cuts. But if you're 0:09:58.480 --> 0:10:02.600 in Japan markets, in japan equities, from a very structural perspective, 0:10:03.240 --> 0:10:06.319 this weakness in the end is potentially bound to turn 0:10:06.400 --> 0:10:10.560 around once we get to that, you know, the FED 0:10:10.640 --> 0:10:13.240 rate cut cycle. But it certainly is a point in 0:10:13.400 --> 0:10:16.040 time where we should be looking at our Japanese equity 0:10:16.040 --> 0:10:19.000 exposures and potentially turning a little bit more selective there. 0:10:19.720 --> 0:10:22.040 I mean, certainly there are some great dividend place in 0:10:22.080 --> 0:10:27.240 that market. Geopolitical risk has also obviously helped Japanese equities 0:10:27.280 --> 0:10:29.600 in some way or the other, as investors have been 0:10:29.600 --> 0:10:32.960 trying to diversify out of China. So I think those 0:10:33.600 --> 0:10:37.040 sections of the Japanese equity markets still remain quite attraction. 0:10:37.200 --> 0:10:40.280 So, Charu, how would you handicap the risk of intervention 0:10:40.360 --> 0:10:43.000 from the monetary authority in Japan right now? I mean 0:10:43.000 --> 0:10:45.760 you mentioned the FED, and we're waiting for that pivot. 0:10:46.440 --> 0:10:49.080 We haven't received it yet. The first rate cut may 0:10:49.120 --> 0:10:53.280 be likely to create a shockwave through the foreign exchange, 0:10:53.280 --> 0:10:56.880 But how are you assessing the risk of intervention from 0:10:56.880 --> 0:10:57.960 the monetary authority? 0:11:00.040 --> 0:11:05.320 Having seen how miserably this intervention potential intervention we saw 0:11:05.360 --> 0:11:08.280 in April has failed and we're back at these one 0:11:08.400 --> 0:11:14.120 sixty plus levers, I would think that Japanese authorities want 0:11:14.240 --> 0:11:17.720 to really see a strong case of intervention, and I 0:11:17.800 --> 0:11:21.240 don't see that right now. They certainly more worried about 0:11:21.280 --> 0:11:23.840 the base at which the end decline is not so 0:11:23.960 --> 0:11:27.800 much about the levels it's trading at. And what we've 0:11:27.880 --> 0:11:33.120 heard from the FX chief in Japan Kanda earlier is 0:11:33.200 --> 0:11:37.280 that they usually get worried when there is a move 0:11:37.320 --> 0:11:41.040 of about ten per US dollars within one month, or 0:11:41.280 --> 0:11:44.760 even a four percent depreciation in the end in two weeks, 0:11:44.880 --> 0:11:47.400 and none of those two conditions seem to have been 0:11:47.440 --> 0:11:50.280 met yet. So the pace of decline is something that 0:11:50.320 --> 0:11:55.800 would not be potentially worrying Japanese authorities. Now, we might 0:11:55.840 --> 0:11:59.400 obviously see some verbal job owning here and there, but 0:11:59.480 --> 0:12:02.679 I don't see any reason why they should be wasting 0:12:03.240 --> 0:12:07.440 tons of money again to really get them nowhere while 0:12:07.440 --> 0:12:09.600 they wait for those federate cuts to begin. 0:12:10.679 --> 0:12:13.480 Yeah, we we ran a story on the Bloomberg terminal 0:12:13.800 --> 0:12:17.800 getting just at that point that that the Japanese authorities 0:12:17.800 --> 0:12:20.640 will probably have to wait to see what happens with 0:12:20.720 --> 0:12:23.480 the PCE this week and then later with the FED 0:12:23.800 --> 0:12:26.480 at the July meeting. The reason I brought up stocks 0:12:26.559 --> 0:12:29.360 was that obviously, you know, the Japan market was one 0:12:29.400 --> 0:12:32.520 of the real favorites, so one of the real darlings 0:12:32.600 --> 0:12:35.520 for investors for a period of time. Now you have 0:12:35.559 --> 0:12:39.120 to go you know, since March, we've we've traded lower. 0:12:39.440 --> 0:12:41.600 So it's it's been you know a number of months 0:12:41.600 --> 0:12:43.840 now that we've traded lower, and I guess part of 0:12:43.840 --> 0:12:47.040 that could be the reaction to the rapid gains that 0:12:47.080 --> 0:12:51.280 we saw from December. Over those couple of months. So 0:12:51.400 --> 0:12:55.600 if we think that that story is intact, what's the 0:12:55.840 --> 0:12:57.800 what's the key component for it? 0:13:00.280 --> 0:13:02.800 Certainly, I mean, we've seen some amount of pullback, some 0:13:02.840 --> 0:13:06.160 amount of sideways trading in the Japanese equity markets, and 0:13:06.880 --> 0:13:11.440 that's obviously potentially coming from some of those investors who 0:13:11.480 --> 0:13:15.080 were more like tactical and short term investors, obviously locking 0:13:15.120 --> 0:13:17.760 in their games after the rapid run that we've seen 0:13:17.840 --> 0:13:20.920 in the last year or so. Uh But like I said, 0:13:20.960 --> 0:13:23.440 you know, I mean, for me, Japan is a story 0:13:23.520 --> 0:13:27.280 about exit from deflation. Japan is a story about corporate 0:13:27.360 --> 0:13:33.080 reforms and more dividend payouts, more buybacks. For me, Japan 0:13:33.160 --> 0:13:37.720 is a story about higher geopolitical risk in the global economy, 0:13:37.760 --> 0:13:41.240 which means japan equity has become a little bit of 0:13:41.280 --> 0:13:45.680 a safe hayn in that sense. Uh So, I'm still 0:13:45.720 --> 0:13:48.720 looking at it from a very selective lens. Of course, 0:13:48.760 --> 0:13:52.920 the pullback in uh, you know, the Japanese end has 0:13:53.000 --> 0:13:57.120 been helping once again in recent weeks. But if we 0:13:57.120 --> 0:13:59.679 were to continue to position for the strengthening of the 0:13:59.800 --> 0:14:03.200 year and the eventual start of the federate cut cycle, 0:14:04.000 --> 0:14:07.800 that means the index level can obviously see a deeper 0:14:07.840 --> 0:14:10.960 pullback as well, because you know, all those high market 0:14:11.000 --> 0:14:15.200 cap names are potentially those that are exporters and dependent 0:14:15.360 --> 0:14:18.400 on the weakness of the end to really continue to 0:14:18.400 --> 0:14:19.040 gain as well. 0:14:19.200 --> 0:14:22.160 Charro, very quickly thirty seconds. What would cause you to 0:14:22.280 --> 0:14:24.360 change your opinion on Japanese equities? 0:14:27.720 --> 0:14:30.280 I mean, on a very positive note, if we were 0:14:30.320 --> 0:14:33.560 to see geopolitical tensions and and US China on a 0:14:33.680 --> 0:14:38.760 very you know, coordial happy note, then I think Japan 0:14:39.120 --> 0:14:42.720 would face outflows as far as investors would rush back 0:14:42.760 --> 0:14:46.440 into the China markets. I think that would be one 0:14:46.480 --> 0:14:47.280 downside risk. 0:14:48.160 --> 0:14:51.200 Charo, thank you for joining us. Charo Chanana, global market 0:14:51.240 --> 0:15:01.800 strategist and head of X Strategy. Let's get to our guests. 0:15:01.880 --> 0:15:07.160 Terry Spath, founder and CIO at Zuma Wealth. Terry, one 0:15:07.200 --> 0:15:09.480 of the markers of what's been happening in the US 0:15:09.520 --> 0:15:12.720 equity market of late has been that you've had quite 0:15:12.720 --> 0:15:16.040 a lot of volatility in individual stocks, not so much 0:15:16.080 --> 0:15:19.560 at the index level. The indexes have managed to hold 0:15:19.600 --> 0:15:22.880 pretty close to all time highs, even with some pretty 0:15:23.240 --> 0:15:26.400 torred selling in even the high flyers, like in video 0:15:26.480 --> 0:15:28.760 last week, trading down thirteen to fifteen percent in the 0:15:28.840 --> 0:15:32.120 number of days, and yet the indexes were Okay, you 0:15:32.120 --> 0:15:34.600 think that continues or is that about to change? 0:15:35.520 --> 0:15:38.240 Yeah, Hi, Brian, I'm glad you brought that up. 0:15:38.760 --> 0:15:42.640 You know, it is an interesting divergence between individual stock 0:15:42.800 --> 0:15:48.160 volatility and the relative calm of the broader benchmarks, and 0:15:48.200 --> 0:15:49.520 that calm really strikes us. 0:15:49.560 --> 0:15:51.880 I mean, we were taking a look, it's been. 0:15:51.800 --> 0:15:54.320 Sixteen months since the S and P five hundred had 0:15:54.360 --> 0:15:58.600 a two percent down day. I've there were months during 0:15:58.600 --> 0:16:01.320 COVID where we had multiple five percent down dates, So 0:16:01.440 --> 0:16:04.320 that's you know, it's very calm. The max draw downs 0:16:04.320 --> 0:16:06.200 this year only five percent for the S and P 0:16:06.320 --> 0:16:10.520 five hundred, seven percent for the NASDACK. So our view 0:16:10.600 --> 0:16:14.600 and our recommendation is, you know, don't step in front 0:16:14.600 --> 0:16:17.240 of a strong market. We're in a Cinderella moment. It's 0:16:17.280 --> 0:16:19.960 not too hot, it's not too cold, and the trend 0:16:20.000 --> 0:16:23.400 is really your friend, so keep exposed to those broad benchmarks. 0:16:23.440 --> 0:16:25.600 At this stage, that said, if you had to put 0:16:25.640 --> 0:16:27.760 on a hedge, what would your strategy be. 0:16:29.720 --> 0:16:32.080 Heads for the US equity market down. 0:16:32.040 --> 0:16:34.840 To the downside. I mean putting in a put so 0:16:34.960 --> 0:16:37.680 to speak, so that you could protect everything that you've 0:16:37.760 --> 0:16:40.200 enjoyed so far this year, if there is some kind 0:16:40.240 --> 0:16:42.160 of corrective behavior. 0:16:42.400 --> 0:16:46.120 Yeah, I mean, I think you know, that's an interesting question. 0:16:46.240 --> 0:16:48.600 It's a two pronged answer that we would give for 0:16:48.680 --> 0:16:51.400 how do you protect the profits that you may have 0:16:51.520 --> 0:16:54.600 made over the past year, year and a half, because 0:16:54.600 --> 0:16:57.080 you do want to protect those, you know one the 0:16:57.120 --> 0:17:02.400 symbol one is that market have drawdowns and that happens, 0:17:02.400 --> 0:17:04.560 and timing exactly, you know, when you get out and 0:17:04.560 --> 0:17:06.920 when you get back in can be pretty tricky. In fact, 0:17:06.920 --> 0:17:08.639 if you tried to do that this year, you missed 0:17:08.640 --> 0:17:12.240 out on some potential profits. So just bearing in mind 0:17:12.280 --> 0:17:15.400 that you know there can be declines in the markets 0:17:15.400 --> 0:17:18.320 and just you know, don't get too panicky over that. 0:17:18.760 --> 0:17:20.480 And then on the flip side, what we also do 0:17:20.560 --> 0:17:21.840 as a barbell. 0:17:22.880 --> 0:17:26.280 To the equity markets is just plain old treasuries. We 0:17:26.520 --> 0:17:30.400 keep investing over and over again in treasuries earning five percent. 0:17:30.880 --> 0:17:32.560 It's a really nice, steady. 0:17:32.280 --> 0:17:36.040 Zero downside, you know, five plus percent upside. So that's 0:17:36.080 --> 0:17:37.119 that's our recommendation. 0:17:38.400 --> 0:17:40.439 One of the things that struck me last week with 0:17:40.600 --> 0:17:43.199 what happened with Nvidia and Broadcom and some of the 0:17:43.240 --> 0:17:47.320 other AI plays is that you know, you had in 0:17:47.400 --> 0:17:51.359 Nvidia down fifteen percent on no bad news. What happens 0:17:51.359 --> 0:17:53.480 when you actually get some bad news, you know that 0:17:53.640 --> 0:17:56.320 that's the thing. We haven't had a warning yet. We 0:17:56.400 --> 0:17:59.439 haven't really had anything that tells us that, oh, that's 0:17:59.480 --> 0:18:03.520 a setback when you get it, I don't know, you know. 0:18:03.640 --> 0:18:06.479 So that's one of the reasons why people probably are 0:18:06.520 --> 0:18:08.560 looking at hedges. And if you look at like the 0:18:08.600 --> 0:18:12.280 power producers and the HVAC companies and everything, they're not 0:18:12.280 --> 0:18:14.679 going to help you because they're training pretty much in 0:18:14.800 --> 0:18:15.560 lockstep with. 0:18:15.640 --> 0:18:17.840 Nvideo they are. 0:18:18.080 --> 0:18:20.080 And you know, and if we're talking about how do 0:18:20.119 --> 0:18:22.520 you put a hedge on Nvidium particular, you know, the 0:18:22.560 --> 0:18:25.280 answer issue is you buy a put for something like that. 0:18:25.600 --> 0:18:27.879 But we don't think you want to put like a 0:18:28.240 --> 0:18:31.679 big allocation of your portfolio into an individual stock, especially 0:18:31.720 --> 0:18:34.600 one that's had the type of, you know, really outsized 0:18:34.640 --> 0:18:37.960 performance in a very short period of time. We like 0:18:38.040 --> 0:18:40.480 the tech sector definitely, we think you want to keep 0:18:40.520 --> 0:18:43.320 exposure to that, but you can look to other sectors 0:18:43.320 --> 0:18:46.320 as well. Energy, for example, doesn't always move in the 0:18:46.359 --> 0:18:50.320 same lockstep with the tech sector, and energy stocks are 0:18:50.359 --> 0:18:53.080 doing really well due to high oil prices, they have 0:18:53.200 --> 0:18:57.400 really high quality earnings, they have good interest coverage ratios, 0:18:57.440 --> 0:18:58.600 they have great dividends. 0:18:58.920 --> 0:19:02.120 Still, like I said, earnings, and so making sure. 0:19:01.920 --> 0:19:05.520 That you have you know, some sector exposure that can 0:19:05.560 --> 0:19:07.840 be a little bit different than just you know, what 0:19:08.119 --> 0:19:11.480 is driving an individual stock is makes sense to us. 0:19:11.680 --> 0:19:13.879 So we're wrapping up the second quarter. If I was 0:19:14.080 --> 0:19:16.520 one of your clients and I had to maybe raise 0:19:16.560 --> 0:19:19.280 capital to pay estimated taxes based on the gains that 0:19:19.320 --> 0:19:22.439 I've had, you know in Q two, what would you 0:19:22.480 --> 0:19:24.640 tell me to do? How would I raise that money? 0:19:25.800 --> 0:19:28.600 Well, I mean that's going to be an individual as 0:19:28.640 --> 0:19:32.720 you know, an individual response to any particular. 0:19:33.800 --> 0:19:36.240 Person. But there are certain rules of thumb that you 0:19:36.280 --> 0:19:36.919 want to follow. 0:19:37.000 --> 0:19:39.600 You want to you know, you can definitely look at 0:19:39.600 --> 0:19:42.240 your portfolio and see where you have too much exposure. 0:19:42.280 --> 0:19:44.200 And if you are going to have a fifteen percent 0:19:44.240 --> 0:19:47.239 decline in an individual stock, you know, is that going 0:19:47.280 --> 0:19:48.920 to be too painful in your portfolio? 0:19:49.000 --> 0:19:51.679 So that would be something to trim. But you know, 0:19:51.760 --> 0:19:54.320 making sure that you've got a great allocation. 0:19:54.680 --> 0:19:57.000 And one again, we think it makes sense to have 0:19:57.359 --> 0:19:59.760 exposure to US stocks and to continue to hold that 0:19:59.840 --> 0:20:01.440 right now. So if you have a little bit of 0:20:01.480 --> 0:20:03.840 liquidity on your bond side or if you have some 0:20:03.920 --> 0:20:06.560 in cash, that's where we think you want to, you know, 0:20:06.600 --> 0:20:07.760 pay and pay those. 0:20:07.600 --> 0:20:09.320 Taxes so quickly. 0:20:09.359 --> 0:20:12.520 On the FED, we had a bad January in terms 0:20:12.560 --> 0:20:16.280 of inflation and then kind of warm in February March, 0:20:16.480 --> 0:20:17.919 and we've had a little bit of weakness in the 0:20:17.960 --> 0:20:21.040 coming months the last couple of months. Is it time 0:20:21.080 --> 0:20:23.760 for them to take a little uh, you know, to 0:20:23.760 --> 0:20:26.000 to maybe start hinting at cutting rates or do you 0:20:26.000 --> 0:20:27.520 think they just stay higher for longer? 0:20:28.359 --> 0:20:30.919 Yeah, I mean the FED has been really frustrating for 0:20:31.040 --> 0:20:32.920 us and probably for some other people too. I mean 0:20:33.520 --> 0:20:37.440 they've really gotten I think cold feed about cutting rates. Obviously, 0:20:37.480 --> 0:20:40.040 the market was over at skis earlier this year when 0:20:40.080 --> 0:20:42.720 they were, you know, cheering on six to seven cuts 0:20:42.720 --> 0:20:43.160 this year. 0:20:43.240 --> 0:20:44.680 I think the market and the FED are a little 0:20:44.720 --> 0:20:46.480 bit better aligned now than they were. 0:20:47.200 --> 0:20:49.600 But this, you know, this concept that the FED needs 0:20:49.640 --> 0:20:52.040 to be confident that they're going to see a two 0:20:52.080 --> 0:20:52.720 percent level. 0:20:52.760 --> 0:20:54.840 I don't know how you quonify something like that. 0:20:54.920 --> 0:20:57.680 So we're looking at things like Friday's core PCE number 0:20:57.680 --> 0:21:01.920 that's going to be coming out jobs, jobless claims. Those 0:21:01.920 --> 0:21:03.720 are the two big ones that I think we can 0:21:03.840 --> 0:21:08.160 closely watch. That core PCE inflation is expected to come 0:21:08.200 --> 0:21:11.080 down on Friday to its lowest level in a couple 0:21:11.119 --> 0:21:14.639 of years. That'll be good jobless claims, all right, or 0:21:14.680 --> 0:21:16.520 something we're watching as well, so we hope to see 0:21:16.520 --> 0:21:17.880 them pivot in the fall. 0:21:17.960 --> 0:21:21.160 Thanks Terry, Thanks so much, Terry Spath, Founder in CIO 0:21:21.320 --> 0:21:22.399 at Zuma Wealth. 0:21:24.160 --> 0:21:27.080 This has been the Bloomberg Daybreak Asia podcast, bringing you 0:21:27.160 --> 0:21:30.280 the stories making news and moving markets in the Asia Pacific. 0:21:30.760 --> 0:21:33.880