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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: Global equities are expected to see more volatility today on

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Speaker 2: concerns over those looming US reciprocal tariffs. In the States,

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Speaker 2: Q one came to a close and the S and

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Speaker 2: P five hundred notched up its worst quarter compared to

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Speaker 2: the rest of the world since two thousand and nine.

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Speaker 2: In a moment, we'll hear from Efan Devitt, chief Global

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Speaker 2: market strategist at Moneta, but we begin here in the States.

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Speaker 2: Joining me now is Brad Bernstein. He is managing director

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Speaker 2: at UBS Private Wealth Management. Brad is on the line

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Speaker 2: from Philadelphia. Thank you so much for joining us. For me, Brad,

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Speaker 2: what was most impressive about the price action today was

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Speaker 2: how the market was able to rally off those session lows.

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Speaker 2: I mean the S and P had been down by

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Speaker 2: around one point seven percent. We close higher by six

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Speaker 2: ten one percent. Was this about short covering? How do

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Speaker 2: you make sense of the price section today?

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Speaker 3: I think coming off of off of last week, and

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Speaker 3: he looked at the levels that we got to this morning.

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Speaker 3: I think the SMP was about a little over ten

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Speaker 3: ten and a half percent off the highs, and we

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Speaker 3: saw money come in today and buy and come in

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Speaker 3: around around those levels late morning and just turn turn

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Speaker 3: markets around. I think people are, you know, are having

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Speaker 3: trouble figuring out how to position ahead of Wednesdays Liberty

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Speaker 3: Day April second, And there's a lot, a lot of

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Speaker 3: risk to the upside end of the dawnside because the

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Speaker 3: markets have been so bad come into the announcement that

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Speaker 3: I think there's a better than fifty percent chance we'll

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Speaker 3: see a rally on Wednesday or Thursday after the President's

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Speaker 3: you know, information about what the administration is going to

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Speaker 3: be doing with tariffs.

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Speaker 2: So given the uncertainty that you're describing, defensive stocks were

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Speaker 2: higher today. We had the S and P five hundred

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Speaker 2: consumer Staples Index, one example, up about one point six percent.

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Speaker 2: Do you want? I want to continue to be defensive

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Speaker 2: if you put new money to work.

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Speaker 3: We think it's a great time to be putting money

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Speaker 3: to work, especially when markets are ten percent from the highs.

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Speaker 3: What we're recommending to our clients is to continue to

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Speaker 3: be in diversified portfolios, which have held up far better

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Speaker 3: than the S and P five hundred has this year.

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Speaker 3: Obviously we've seen international markets outperform US markets, but we

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Speaker 3: actually think from here and at the end of the year,

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Speaker 3: US markets will outperform global markets over the back half

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Speaker 3: of the year and are more constructive for the second

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Speaker 3: half of the year.

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Speaker 2: Tariff policy is just one aspect of some of the

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Speaker 2: policy that we're getting out of the Trump administration. The

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Speaker 2: other has been related to a more efficient way of

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Speaker 2: operating the government and a shakeup of many departments that

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Speaker 2: I would include in that. The FDA. Today we had

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Speaker 2: shares in vaccine and biotech companies moving lower. Was after

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Speaker 2: Peter Marx resigned. He's a key figure in overseeing the

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Speaker 2: review and approval of vaccines and medications. Are you a

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Speaker 2: little worried about the way in which the administration is

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Speaker 2: approaching things on the regulatory side, particularly at the FDA.

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Speaker 3: We actually really like healthcare as a sector to be

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Speaker 3: investing in. It's hard for me to speak to you know,

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Speaker 3: what the administration is doing with the FDA. I know

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Speaker 3: that they're trying to look to reduce, you know, excess

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Speaker 3: spending and abuse of our of of the country's money. Obviously,

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Speaker 3: it's been controversial, obviously clunky on the delivery, and I

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Speaker 3: think they're learning as they go, but their goal is

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Speaker 3: to try to find ways to continue to cut obviously regulations,

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Speaker 3: but spending and wasteful spending as well. But we're actually

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Speaker 3: big fans of health care here, focusing on longevity, of

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Speaker 3: that theme of people living a lot longer and wanting

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Speaker 3: to look and feel health.

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Speaker 2: What areas of the market are you avoiding right now?

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Speaker 3: We're you know, avoiding. I would say, uh, you know,

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Speaker 3: with gold really on fire here, I wouldn't be adding

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Speaker 3: to that. Commodities here. I'm a little concerned because when

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Speaker 3: when markets turn, I think, you know, what's been doing

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Speaker 3: really really well will underperform, and I think what's been

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Speaker 3: doing the worst while outperform going forward. When when markets decide.

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Speaker 2: To turn, you don't from the sound of kind of

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Speaker 2: what you're sketching out here, you don't seem to be

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Speaker 2: fearing a recession. You you think that the equity market

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Speaker 2: is going to perform very well going forward. Is growth

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Speaker 2: going to hold up to the extent that we don't

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Speaker 2: have any problems?

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Speaker 3: Our base cases that we avoid a recession this year.

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Speaker 3: We see the US economy expanding this year around two percent.

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Speaker 3: It's a historical trend, right, So we we despite all

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Speaker 3: the noise and all the uncertain right now, you know,

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Speaker 3: and I know some of our peers on the street

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Speaker 3: of upping, the probability of a recession still low. For

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Speaker 3: you know, predicting recessions is clearly very difficult, as practically

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Speaker 3: every economist got it wrong a couple of years ago,

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Speaker 3: you know, around the time the FED was raising rates

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Speaker 3: five percent. But we don't see a recession this year.

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Speaker 2: Do you believe that the impact of these tariffs will

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Speaker 2: be inflationary and for that reason that the Fed is

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Speaker 2: going to keep rates on hold for quite some.

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Speaker 3: Time, you know, we we actually think we'll have two

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Speaker 3: or three rate cuts this year. We do see you know,

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Speaker 3: the potential for some taris here being deletarious for growth,

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Speaker 3: and we this week reduced our target on the SMP

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Speaker 3: from sixty six hundred to sixty four hundred. But we

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Speaker 3: still see meaningful upside from here. And now we don't

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Speaker 3: see a lot, you know, a huge impact on inflation

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Speaker 3: from what will probably end up being there was of

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Speaker 3: the tariffs.

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Speaker 2: So if the Fed, if you're right, and the fedword

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Speaker 2: to lower rates by a total of seventy five basis

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Speaker 2: points is that solely based on your assumption that we're

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Speaker 2: going to see a lot more softness in the labor market.

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Speaker 3: So we definitely think growth will slow from where it

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Speaker 3: was and still be around two percent around trend. We

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Speaker 3: think unemployment will will keep the economy from having a recession.

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Speaker 3: That being said, if we're wrong and you know, and

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Speaker 3: and unemployment and the economic data gets weaker from here,

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Speaker 3: the FED will be more aggressive on the cutting side,

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Speaker 3: and I think that'll help the markets. I think we

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Speaker 3: you know, I think we really believe still that there's

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Speaker 3: a FED put in the markets. We don't see inflation

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Speaker 3: and going meaningfully higher from here.

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Speaker 2: Brad, I'm curious as to whether you're inviting clients to

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Speaker 2: look at opportunities offshore, particularly in Europe.

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Speaker 3: Well, that's been an area that's outperformed this year. I

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Speaker 3: believe the Europeated markets are up about after the last

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Speaker 3: couple days priced allvel about fifteen percent this year. So

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Speaker 3: we think the easy money's been made there on the

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Speaker 3: back of, you know, more stimulus and more defense spending

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Speaker 3: because of our our administration's position on NATO, as they

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Speaker 3: made very clear. So as I mentioned earlier, we actually

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Speaker 3: think if from this point and from these levels, the

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Speaker 3: US markets for the rest of the year look more

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Speaker 3: attractive than the rest of the world.

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Speaker 2: We had bond prices up today, yields down across the curve.

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Speaker 2: Is it too late to participate in the bond market

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Speaker 2: right now? Has the good money or the easy money

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Speaker 2: been made?

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Speaker 3: I don't think so. You know, we saw a huge

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Speaker 3: move on Friday. The ten year dropped about eleven or

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Speaker 3: twelve basis points. On Friday, it was up. I think

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Speaker 3: it finished the day probably down on four or five

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Speaker 3: basis points today. You know, look, if economic data continues

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Speaker 3: to get worse and or the Feds cutting, and we

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Speaker 3: think they will be they you know, I think yields

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Speaker 3: can come down further. I know, you know, coming into

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Speaker 3: this year, there was a lot of people that thought

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Speaker 3: the tenure would be over five percent. Clearly that doesn't

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Speaker 3: look like the case this year. I think it's very

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Speaker 3: hard to predict. But I think if the Fed's cutting

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Speaker 3: rates in the second half of the year, two or

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Speaker 3: three cuts, I think they'll see the ten under four.

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Speaker 2: Brad will leave it there with a four percent yield

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Speaker 2: on the tenure. Brad Bernstein is managing director at Ubs

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Speaker 2: Private Wealth Management on the line from Philadelphia. Here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

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Speaker 2: I'm Doug Chrisner. Once touted by President Trump is his

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Speaker 2: favorite word. Tariffs remain the key driver of markets this week.

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Speaker 2: For more on their potential impact, we heard from Ethan Devitt.

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Speaker 2: She is the chief Global market strategist at Moneta Group

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Speaker 2: Investment Advisors. She spoke earlier with Bloomberg's Sherry On and

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Speaker 2: Heidi Stroud Watts.

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Speaker 1: Ethan, good to have you with us. I mean, how

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Speaker 1: much will the Wednesday tariffs really set the tone for

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Speaker 1: the markets for the next few months.

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Speaker 4: I'd say we can't really look out the next few months.

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Speaker 4: I think, as your previous guests have suggested, we are

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Speaker 4: really pulling in our prediction factor in terms of what

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Speaker 4: we can say to our clients, and we're working very

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Speaker 4: much in the short term. We know that the recent

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Speaker 4: tariff news and noise has been very much short term.

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Speaker 4: There have been reversals. I'd say there is a lot

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Speaker 4: of trepidation around this Liberation Day simply because we've actually

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Speaker 4: had already put a lot of bad news to digest,

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Speaker 4: and the automakers being the latest round of that. So

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Speaker 4: we are working with our clients. We're digesting a very

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Speaker 4: nasty first quarter in US equity markets, looking at what

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Speaker 4: that might mean for predictions going forward, and really just

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Speaker 4: looking to see what Wednesday has to bring us.

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Speaker 1: Does that mean that you're veering away from the US

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Speaker 1: right now?

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Speaker 4: What we're doing is we're reinforcing our global allocations, which

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Speaker 4: have always been in place, but have been over recent

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Speaker 4: years quite difficult to defend. Anything that was non US

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Speaker 4: exposure was a challenge for our clients. It wasn't performing well,

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Speaker 4: it was losing in terms of local currency, and it

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Speaker 4: was difficult to justify when all we could talk about

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Speaker 4: was American exceptionalism. We stood the course and we basically

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Speaker 4: stuck to our global diversification mantra, and but we were

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Speaker 4: still looking for whether that should be re underwritten. Now

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Speaker 4: we're glad that we did. We actually are reinforced in

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Speaker 4: our positive view on non US equities. We are encouraging

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Speaker 4: our clients to stay the course in terms of diversification there,

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Speaker 4: but also in terms of diversification across the cap spectrum.

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Speaker 4: Nobody was overly concentrated in the MAG seven anyway. But

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Speaker 4: now we're looking for where the pockets of value are

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Speaker 4: in the mid and small cap sectors.

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Speaker 1: When you say, non yous, are you veering more towards

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Speaker 1: emerging markets which already saw what the war're saying over

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Speaker 1: a month or so, given the risk of sentiment around

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Speaker 1: the world, they're more towards, say Europe, were the expectation

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Speaker 1: is for more rate cuts and for more spending as well.

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Speaker 4: Yes, we probably are looking more to develop markets less

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Speaker 4: than emerging markets. That has been as I mentioned, we've

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Speaker 4: had to have had to defend our non US holdings

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Speaker 4: over the last number of years. Emerging markets have been

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Speaker 4: particularly hard to defend. The risk reward really was not there,

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Speaker 4: and we did see the risk mounting. We very much

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Speaker 4: saw the risk mounting in terms of some of the

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Speaker 4: regulatory risks, some of the political risk, and geopolitical uncertainty.

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Speaker 4: So I would say you're at least for US investors.

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Speaker 4: European investors have a slightly more open minded approach I

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Speaker 4: think to emerging markets at this time. But US investors

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Speaker 4: have been somewhat leery of emerging markets. I don't see

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Speaker 4: that changing right now, especially as you noted, they seem

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Speaker 4: to be quite levered to this trade uncertainty and equally

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Speaker 4: the volatility that's coursing through all global.

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Speaker 1: Marketsin when you talk about smaller caps and when you

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Speaker 1: talk about perhaps some of those value names as well.

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Speaker 1: Are you concerned at all about the potential that the

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Speaker 1: US can actually perhaps not heading to a recession, but

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Speaker 1: see more consumption being hit.

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Speaker 4: Definitely, that's a huge Probably the biggest risk we think

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Speaker 4: right now is the consumer not feeling anywhere near as

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Speaker 4: optimistic as they have and we're talking about long term

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Speaker 4: and short term. Over the long term, the consumer sentiment

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Speaker 4: indicators where it was about twenty twenty, so it's not

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Speaker 4: as low as it has been in the past, but

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Speaker 4: when we look at a short term indicator, that's the

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Speaker 4: lowest it's been in twelve years. So looking at into

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Speaker 4: the short term in terms of income, in terms of

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Speaker 4: job security, the consumer is not at all sanguine, So

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Speaker 4: that could be a factor across all equity markets. What

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Speaker 4: we think though, is that SMID, and i'd say SMID

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Speaker 4: more than small caps. Small cap has a lot of

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Speaker 4: liquidity issues, It will have challenges from consumer demand. SMID

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Speaker 4: is a little bit more insulated from global trade, so

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Speaker 4: that gives it just that buffer against some of the

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Speaker 4: tariff implications. It doesn't have the currency effect equally, and

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Speaker 4: I would suggest that that's smid market, sort of steady

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Speaker 4: state industrial. Name some of the names that could be

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Speaker 4: open to M and A from the burgeoning private equity

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Speaker 4: interests that could all be of interest, But every sector

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Speaker 4: will be exposed to the consumer.

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Speaker 1: When it comes to value plays as China. Factoring that

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Speaker 1: all for you.

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Speaker 4: I wouldn't say for our US clients much at the moment.

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Speaker 4: We obviously are always looking at China. And it was

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Speaker 4: interesting to pick up President Trump's comment earlier that he's

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Speaker 4: not concer learned about China. I think forming alliances with

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Speaker 4: other trading partners. I think the fact that he's not

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Speaker 4: concerned doesn't mean that the market commentators should not be

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Speaker 4: concerned and should not be playing out the game theory

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Speaker 4: of what that might look like. I think we know,

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Speaker 4: certainly with looking again said the pan of a port steal,

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Speaker 4: that there's quite a bit of political interference and oversight

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Speaker 4: occurring across the board, across all geopolitical matters and trade

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Speaker 4: matters at the moment, and I'd say we need to

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Speaker 4: watch that very carefully. I wouldn't say we're looking at

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Speaker 4: China in terms of a value play necessarily out of

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Speaker 4: the US, but European clients do and have had longer

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Speaker 4: exposure to China. That has looked quite interesting recently, simply

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Speaker 4: because it was so over sold.

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Speaker 1: And where do you sound on treasurers and the broader

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Speaker 1: global bond markets which continue to rally at this point

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Speaker 1: because of these safe haven moves.

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Speaker 4: Yeah, I'd say we have not obviously, we don't expect

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Speaker 4: bonds to be where our clients will see most of

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Speaker 4: their growth going forward, although in terms of cash it's

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Speaker 4: been a very nice place to park. Cash has been meaningful,

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Speaker 4: inflation numbers somewhat subdued, so the returns on cash even

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Speaker 4: in real terms, look interesting today. But we are cautious

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Speaker 4: on bond markets. We've seen a lot of volatility there.

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Speaker 4: We know that the infrast rate movements are going to

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Speaker 4: be quite divergent around the world. We don't know what

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Speaker 4: the Fed has in store. We know they have some

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Speaker 4: arsenal to stimulate the economy. We know the ECB most

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Speaker 4: definitely does. So we are a bit conscious though that

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Speaker 4: fixed income markets have not been necessarily believing the spin

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Speaker 4: of central banks and have been very volatile recently, so

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Speaker 4: while the income is interesting, we want to be wary

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Speaker 4: of just the way that capital value moves around.

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Speaker 1: Ethan David, good to have you with us Chief Global Markets,

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Speaker 1: Franchis and Lenetta.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Sing

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Speaker 2: the Poor and Australia. I'm Doug Prisoner and this is

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Speaker 2: Bloomberg m