1 00:00:02,480 --> 00:00:10,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the. 2 00:00:10,000 --> 00:00:13,440 Speaker 2: Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. You can join 3 00:00:13,480 --> 00:00:16,239 Speaker 2: Brian Curtis and myself for the stories, making news and 4 00:00:16,320 --> 00:00:19,439 Speaker 2: moving markets in the APAC region. You can subscribe to 5 00:00:19,480 --> 00:00:22,200 Speaker 2: the show anywhere you get your podcast and always on 6 00:00:22,239 --> 00:00:26,120 Speaker 2: Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app. 7 00:00:26,960 --> 00:00:27,120 Speaker 1: Well. 8 00:00:27,120 --> 00:00:29,240 Speaker 3: One of our top stories that we've been talking about 9 00:00:29,240 --> 00:00:32,919 Speaker 3: all morning, the Biden administration, according to our sources, will 10 00:00:33,000 --> 00:00:36,800 Speaker 3: raise tariffs on some Chinese goods this week after nearly 11 00:00:36,880 --> 00:00:40,320 Speaker 3: two years of review. We understand that Biden will target 12 00:00:40,479 --> 00:00:47,080 Speaker 3: sectors like electric vehicles, solar cells, batteries, and steel and aluminum. 13 00:00:47,280 --> 00:00:50,880 Speaker 3: Joining us now for some discussion of this is Steve Angel, 14 00:00:50,960 --> 00:00:52,680 Speaker 3: who has a title that's too long to get to, 15 00:00:52,840 --> 00:00:56,520 Speaker 3: but he's one of the top dogs on the TV side. 16 00:00:56,560 --> 00:00:58,120 Speaker 4: Friend of the show is my title? 17 00:00:58,200 --> 00:01:02,480 Speaker 3: Well, yeah, with the emphasis on dog anyway. Look, I 18 00:01:02,520 --> 00:01:05,039 Speaker 3: mean a lot of this looks symbolic. It looks like 19 00:01:05,120 --> 00:01:09,080 Speaker 3: it's a sort of political positioning and everything, because we 20 00:01:09,200 --> 00:01:13,039 Speaker 3: know that, for instance, with evs, they're really not China 21 00:01:13,160 --> 00:01:15,920 Speaker 3: is not really selling any evs in the United States. 22 00:01:16,080 --> 00:01:17,240 Speaker 3: So what's the point here? 23 00:01:17,520 --> 00:01:19,840 Speaker 4: I mean, the point is obviously something that the Bide 24 00:01:19,840 --> 00:01:22,360 Speaker 4: administration has been going on about, and that is the 25 00:01:22,400 --> 00:01:26,440 Speaker 4: overcapacity in China in the EV space, in solar space, 26 00:01:26,480 --> 00:01:29,520 Speaker 4: in the new three that she dimping has been touting 27 00:01:29,560 --> 00:01:33,520 Speaker 4: of course in green tech. And then that overcapacity has 28 00:01:33,560 --> 00:01:37,520 Speaker 4: to go somewhere abroad to Europe. You were already hearing 29 00:01:37,560 --> 00:01:41,320 Speaker 4: about tariffs. They're coming from the EC and Ursula Vandaleean 30 00:01:42,000 --> 00:01:44,800 Speaker 4: and you know, the United States. You're absolutely right, they 31 00:01:44,800 --> 00:01:48,840 Speaker 4: don't really have access for the Chinese evs, which you know, 32 00:01:48,880 --> 00:01:51,880 Speaker 4: some of these byds are sub ten thousand US dollars. 33 00:01:52,400 --> 00:01:57,000 Speaker 4: And the you know opponents mainly in the in Detroit, 34 00:01:57,360 --> 00:02:00,960 Speaker 4: in the auto making places in the United States. They're concerned, 35 00:02:01,000 --> 00:02:04,680 Speaker 4: obviously in this election year about jobs by administration definitely 36 00:02:04,720 --> 00:02:07,120 Speaker 4: worried about jobs. But keep in mind EV's right now. 37 00:02:07,120 --> 00:02:10,160 Speaker 4: According to Edmunds dot com, Brian make up just about 38 00:02:10,200 --> 00:02:14,040 Speaker 4: one percent of US cars on the road. Now, proponents 39 00:02:14,040 --> 00:02:16,640 Speaker 4: of allowing Chinese evs to come in and say, look, 40 00:02:16,680 --> 00:02:19,440 Speaker 4: this can help the US and it's it's climate change fight, 41 00:02:19,760 --> 00:02:24,560 Speaker 4: it will help inflation and give a cheaper access to 42 00:02:24,600 --> 00:02:27,680 Speaker 4: these kind of technology to the American consumer. But really 43 00:02:27,840 --> 00:02:30,960 Speaker 4: it's the politics that's driving this right now. So EV's well, 44 00:02:31,080 --> 00:02:33,280 Speaker 4: the terifs will rise to one hundred and two percent 45 00:02:33,520 --> 00:02:36,639 Speaker 4: from twenty seven and a half percent currently, increase of 46 00:02:36,680 --> 00:02:39,480 Speaker 4: two hundred and seventy two percent, so quad nearly quadruple. 47 00:02:40,160 --> 00:02:42,480 Speaker 2: It's kind of ironic too, isn't it, Steve? With the 48 00:02:42,600 --> 00:02:45,600 Speaker 2: Zeker IPO happening on Friday night, it's in that big gain. 49 00:02:45,680 --> 00:02:50,120 Speaker 2: I mean, you know, we are keeping products outside of 50 00:02:50,160 --> 00:02:52,799 Speaker 2: the American market for understandable reasons, but at the same 51 00:02:52,880 --> 00:02:56,960 Speaker 2: time allowing capital to be raised for those same Chinese companies. 52 00:02:57,440 --> 00:02:59,679 Speaker 4: Yeah, Zeker is an interesting One's kind of the high 53 00:02:59,800 --> 00:03:03,600 Speaker 4: end EV from the company Jujong Jeee, which of course 54 00:03:03,639 --> 00:03:06,520 Speaker 4: they owned Volvo and others. But Zeker is a complete 55 00:03:06,600 --> 00:03:10,400 Speaker 4: EV and made a lot of headlines and the buzz 56 00:03:10,400 --> 00:03:14,120 Speaker 4: at the Beijing Auto Show last month. But they raised, 57 00:03:14,360 --> 00:03:17,360 Speaker 4: you know, a lot of money in New York and 58 00:03:17,639 --> 00:03:21,000 Speaker 4: the shares on the first day rose thirty five percent. 59 00:03:21,280 --> 00:03:23,880 Speaker 4: The biggest Chinese IPO in the US by a Chinese 60 00:03:23,880 --> 00:03:25,959 Speaker 4: company since twenty twenty one. I think it was d 61 00:03:26,080 --> 00:03:29,320 Speaker 4: D Global was the last one. So yeah, it's a 62 00:03:29,360 --> 00:03:32,679 Speaker 4: bit ironic. As again, if you've read David Fickling's The 63 00:03:32,680 --> 00:03:36,840 Speaker 4: Bloomberg Opinion's latest call him, he's kind of saying, what's 64 00:03:36,880 --> 00:03:39,080 Speaker 4: going on with the EV push in the United States. 65 00:03:39,120 --> 00:03:44,560 Speaker 4: He calls it an astonishing loss of nerve in the US. Basically, 66 00:03:44,600 --> 00:03:49,200 Speaker 4: the country that developed the modern automobile industry is kind 67 00:03:49,200 --> 00:03:52,440 Speaker 4: of shying away because you know, EV sales just rose 68 00:03:52,480 --> 00:03:54,640 Speaker 4: two point six percent year over year in the first quarter. 69 00:03:54,680 --> 00:03:57,320 Speaker 4: That's after blistering growth a couple of years ago in 70 00:03:57,320 --> 00:03:57,960 Speaker 4: the same period. 71 00:03:58,440 --> 00:04:02,640 Speaker 3: Well, I suppose with the positioning on tariffs here, it 72 00:04:02,680 --> 00:04:04,720 Speaker 3: sends a strong message at the moment, and it also 73 00:04:05,320 --> 00:04:09,760 Speaker 3: will probably discourage, you know, the expansion down the road 74 00:04:09,960 --> 00:04:14,400 Speaker 3: of Chinese manufacturers into the United States at least until 75 00:04:14,400 --> 00:04:15,360 Speaker 3: the environment changes. 76 00:04:15,720 --> 00:04:17,919 Speaker 4: I absolutely would agree with that, and that's something that 77 00:04:17,960 --> 00:04:22,480 Speaker 4: Donald Trump seized on this morning. Essentially, he also said 78 00:04:22,520 --> 00:04:25,640 Speaker 4: Biden should have done this on EV's some four years ago. 79 00:04:25,680 --> 00:04:28,159 Speaker 4: But what he's also warning is that, look, the Chinese 80 00:04:28,160 --> 00:04:30,680 Speaker 4: are going to come and use their manufacturing bases in Mexico, 81 00:04:31,080 --> 00:04:35,640 Speaker 4: and then through the US Mexico Canada Agreement that Trump 82 00:04:35,640 --> 00:04:39,880 Speaker 4: did sign, they could potentially export from Mexico into the 83 00:04:39,960 --> 00:04:42,800 Speaker 4: United States those evs. But I'm sure there's some loopholes 84 00:04:42,800 --> 00:04:45,760 Speaker 4: that would be closed there as well. But he says, 85 00:04:45,839 --> 00:04:48,960 Speaker 4: you know, two hundred percent tariffs on Chinese cars made 86 00:04:49,040 --> 00:04:51,560 Speaker 4: in Mexico is what he would do on top of 87 00:04:51,600 --> 00:04:54,400 Speaker 4: course what he's already pledged on the campaign trail, sixty 88 00:04:54,400 --> 00:04:57,279 Speaker 4: percent tariffs across the board on all Chinese products. 89 00:04:57,400 --> 00:04:59,680 Speaker 2: So, Steve, how do you think this is being viewed 90 00:04:59,680 --> 00:05:02,040 Speaker 2: by aging at the moment? I mean, is are they 91 00:05:02,120 --> 00:05:06,080 Speaker 2: writing it off to just kind of election year politics? 92 00:05:06,120 --> 00:05:06,200 Speaker 1: Is? 93 00:05:06,320 --> 00:05:09,320 Speaker 2: Are there are there deeper concerns here about kind of 94 00:05:09,360 --> 00:05:11,839 Speaker 2: protectionism and a further I don't want to use the 95 00:05:11,920 --> 00:05:16,160 Speaker 2: term decoupling. I mean, but fred relations, let's let's put 96 00:05:16,200 --> 00:05:16,640 Speaker 2: it that way. 97 00:05:17,360 --> 00:05:19,599 Speaker 4: I think they're realistic about it. I think they know 98 00:05:19,880 --> 00:05:23,159 Speaker 4: as well as an election year. There's no secret why 99 00:05:23,240 --> 00:05:28,160 Speaker 4: Sijenping went to Hungary and Serbia in Europe. He found 100 00:05:28,240 --> 00:05:31,200 Speaker 4: a friendly economy there that is building out the EV 101 00:05:31,320 --> 00:05:34,680 Speaker 4: infrastructure in there at a time when Brussels is kind 102 00:05:34,720 --> 00:05:37,919 Speaker 4: of trumping or not trumpeting, I should say, actually talking 103 00:05:37,960 --> 00:05:41,600 Speaker 4: about you know, more protectionist measures, possible tariffs on those 104 00:05:41,680 --> 00:05:45,640 Speaker 4: Chinese evs, whereas the United States, it's just non existent 105 00:05:45,720 --> 00:05:47,960 Speaker 4: market for Chinese EV's right now and it will be 106 00:05:48,000 --> 00:05:50,000 Speaker 4: for quite some time. And I think they're realistic about that. 107 00:05:50,080 --> 00:05:52,840 Speaker 3: Across the board, generally, both Europe and the United States 108 00:05:52,839 --> 00:05:56,040 Speaker 3: are talking about overcapacity. They've kind of shied away from 109 00:05:56,120 --> 00:05:58,680 Speaker 3: subsidies because they themselves are offering subsidies. 110 00:05:58,760 --> 00:06:02,200 Speaker 4: Yeah, yeah, absolutely right, there's no question there is. Everyone 111 00:06:02,240 --> 00:06:04,520 Speaker 4: I talked to at the Beijing Auto Show said, look, 112 00:06:04,560 --> 00:06:07,560 Speaker 4: we've been to these factories. There's some factories that you know, 113 00:06:07,600 --> 00:06:10,839 Speaker 4: their capacity utilization rate is just you know, so low, 114 00:06:11,920 --> 00:06:14,120 Speaker 4: and there's over capacity everywhere, and they do need to 115 00:06:14,160 --> 00:06:14,840 Speaker 4: sell that somewhere. 116 00:06:14,880 --> 00:06:17,400 Speaker 2: Putin comes to China this week, right, Yeah, what do 117 00:06:17,400 --> 00:06:17,840 Speaker 2: you expect? 118 00:06:17,960 --> 00:06:20,240 Speaker 4: Right? Well, I think there's just going to be more 119 00:06:20,240 --> 00:06:22,839 Speaker 4: of the doubling down on their relationship. It will be 120 00:06:22,880 --> 00:06:25,960 Speaker 4: interesting to see what kind of word Shi Jinping uses, though, 121 00:06:26,000 --> 00:06:28,200 Speaker 4: as the war in Ukraine goes into a third year. 122 00:06:28,279 --> 00:06:31,640 Speaker 4: He did get an earfull in Europe from Macron, from 123 00:06:32,120 --> 00:06:36,159 Speaker 4: vander Layan as well on the nascent support if you will, 124 00:06:36,440 --> 00:06:39,080 Speaker 4: Moscow as a de facto support for the war and 125 00:06:39,120 --> 00:06:42,159 Speaker 4: the double use technologies that are sold into the Russian economy. 126 00:06:42,200 --> 00:06:44,640 Speaker 4: So hear how she words that? 127 00:06:44,880 --> 00:06:47,880 Speaker 3: All right, Steve, Thanks very much. Steven Engel, Bloomberg's chief 128 00:06:48,000 --> 00:06:58,680 Speaker 3: North Asia TV correspondent, joining us in our studios for 129 00:06:58,760 --> 00:07:02,560 Speaker 3: a closer Loogod Markets George Merris, Global Equity CIO and 130 00:07:02,720 --> 00:07:05,919 Speaker 3: principal Asset Management. George, thank you for coming into the 131 00:07:05,960 --> 00:07:08,800 Speaker 3: studios here. So for the S and P five hundred, 132 00:07:09,080 --> 00:07:11,400 Speaker 3: it's on track to post earnings growth in the first 133 00:07:11,480 --> 00:07:15,480 Speaker 3: quarter seven point one percent. That almost doubles the analyst 134 00:07:15,560 --> 00:07:19,000 Speaker 3: preseason estimates of three point eight percent. But the one 135 00:07:19,120 --> 00:07:23,440 Speaker 3: interesting factor is that traders have really punished companies that 136 00:07:23,520 --> 00:07:28,760 Speaker 3: delivered weaker than expected forecasts. So that's one thing to note. 137 00:07:28,800 --> 00:07:31,560 Speaker 3: But the other interesting thing to note is that some 138 00:07:31,600 --> 00:07:34,440 Speaker 3: of these companies like ARM and Meta that got drilled 139 00:07:34,720 --> 00:07:37,080 Speaker 3: on the day of their earnings, they've come back, They've 140 00:07:37,160 --> 00:07:39,960 Speaker 3: recouped all of the losses. So it's like the trader 141 00:07:40,080 --> 00:07:43,200 Speaker 3: slam them and then the true believers come back in. 142 00:07:43,520 --> 00:07:46,000 Speaker 3: So how are you approaching earnings that you've seen this 143 00:07:46,040 --> 00:07:46,640 Speaker 3: first quarter? 144 00:07:46,960 --> 00:07:49,200 Speaker 5: So I think that's an excellent way of phrasing it, 145 00:07:49,240 --> 00:07:51,120 Speaker 5: which is that there's a trading activity and there's a 146 00:07:51,160 --> 00:07:54,400 Speaker 5: longer term investment activity. And I think the trading activity 147 00:07:54,600 --> 00:07:56,600 Speaker 5: is part and parcel of a change where we've seen 148 00:07:56,720 --> 00:08:01,240 Speaker 5: much more retail and sys systematic activity markets much more 149 00:08:01,280 --> 00:08:07,480 Speaker 5: momentum oriented, very fast again headline and even quicker type 150 00:08:07,480 --> 00:08:10,560 Speaker 5: of activity. But I do think in areas, so for example, 151 00:08:10,600 --> 00:08:13,240 Speaker 5: with ARM and others in meta, there's this long term 152 00:08:13,280 --> 00:08:16,920 Speaker 5: secular wind that is at their backs, AI and other 153 00:08:17,600 --> 00:08:20,800 Speaker 5: high process computing developments that are going to continue to 154 00:08:20,840 --> 00:08:23,280 Speaker 5: be powerful, and you're going to see longer term investors 155 00:08:23,280 --> 00:08:27,360 Speaker 5: take advantage of volatility and continue to increase their stakes 156 00:08:27,360 --> 00:08:28,040 Speaker 5: in these companies. 157 00:08:28,440 --> 00:08:30,680 Speaker 2: When you look at what Warren Buffett did recently and 158 00:08:30,800 --> 00:08:33,480 Speaker 2: kind of lightening up on his position in Apple and 159 00:08:33,520 --> 00:08:37,120 Speaker 2: accumulating a bit more cash. Yes, he's a value investor 160 00:08:37,200 --> 00:08:39,720 Speaker 2: and he's got very high standards when it comes to 161 00:08:40,280 --> 00:08:42,280 Speaker 2: where to put money to work. But does he have 162 00:08:42,320 --> 00:08:45,520 Speaker 2: a point? Are there far fewer opportunities right now if 163 00:08:45,520 --> 00:08:50,960 Speaker 2: you're concerned about maybe stretched valuations, Far fewer opportunities where 164 00:08:51,000 --> 00:08:54,559 Speaker 2: to find you chances to really put good money to 165 00:08:54,600 --> 00:08:56,120 Speaker 2: work over a long period of time. 166 00:08:57,360 --> 00:08:59,520 Speaker 5: I think the number of opportunities that are out there 167 00:08:59,559 --> 00:09:01,559 Speaker 5: that we're out there, let's say this time last year, 168 00:09:01,559 --> 00:09:04,000 Speaker 5: I have shrunk. The market was a lot much lower 169 00:09:04,120 --> 00:09:05,800 Speaker 5: this time last year than it is now. We've had 170 00:09:05,840 --> 00:09:10,520 Speaker 5: a spectacular run, whether it's US domestic equities, whether it's abroad, 171 00:09:11,320 --> 00:09:14,360 Speaker 5: again a substantial move. At the same token, you can 172 00:09:14,360 --> 00:09:18,640 Speaker 5: get five percent holding cash, so your opportunity cost of 173 00:09:18,960 --> 00:09:21,160 Speaker 5: doing something is just that much higher. So why not, 174 00:09:21,520 --> 00:09:24,240 Speaker 5: you know, a really, why not just sit back, hold 175 00:09:24,280 --> 00:09:27,040 Speaker 5: some cash and wait for opportunities to arise, especially if 176 00:09:27,080 --> 00:09:29,320 Speaker 5: you think the volatility that's out there is going to 177 00:09:29,360 --> 00:09:30,760 Speaker 5: give you chances. Over the next year or two. 178 00:09:31,120 --> 00:09:34,760 Speaker 3: We have two massive events coming up, particularly the consumer 179 00:09:34,800 --> 00:09:39,160 Speaker 3: Price Index data this week, and then you know, retail 180 00:09:39,200 --> 00:09:42,599 Speaker 3: sales is also kind of interesting. The consumer is a 181 00:09:42,640 --> 00:09:45,160 Speaker 3: little bit in question. I think the next big one 182 00:09:45,160 --> 00:09:49,040 Speaker 3: after that is Nvidia's earnings on May twenty second, So 183 00:09:49,920 --> 00:09:53,079 Speaker 3: you could perhaps understand a little bit of caution over 184 00:09:53,120 --> 00:09:54,800 Speaker 3: these next two weeks with those things. 185 00:09:54,640 --> 00:09:58,480 Speaker 5: Looming for sure. Look right now, inflation is the key 186 00:09:58,520 --> 00:10:01,160 Speaker 5: factor not only driving markets, but striving politics, as we're 187 00:10:01,160 --> 00:10:04,959 Speaker 5: seeing in polls everywhere. The inflation data has been stickier 188 00:10:04,960 --> 00:10:09,120 Speaker 5: than we thought it has been. We've seen expectations of 189 00:10:09,120 --> 00:10:11,360 Speaker 5: FED rate cuts go from six to now a little 190 00:10:11,360 --> 00:10:13,959 Speaker 5: bit over one through the course of five months. So 191 00:10:14,040 --> 00:10:17,040 Speaker 5: clearly the market is on tenderhooks determining whether or not 192 00:10:17,559 --> 00:10:19,520 Speaker 5: what's going to happen with inflation, and then related to 193 00:10:19,559 --> 00:10:21,280 Speaker 5: that is what's happening with the state of the consumer. 194 00:10:21,320 --> 00:10:24,000 Speaker 5: The consumer has been carrying the global economy for a 195 00:10:24,000 --> 00:10:26,520 Speaker 5: long period of time. Are we seeing weakness, particularly within 196 00:10:26,559 --> 00:10:29,840 Speaker 5: the United States? If we do see that weakness, it's 197 00:10:29,880 --> 00:10:32,800 Speaker 5: going to create a much more difficult environment going forward. 198 00:10:32,800 --> 00:10:36,360 Speaker 5: So I think those results are critical. And I also 199 00:10:36,400 --> 00:10:39,559 Speaker 5: think in Nvidia again, AI is the secular power behind 200 00:10:39,559 --> 00:10:42,040 Speaker 5: the markets, so much activity not only on that first order, 201 00:10:42,080 --> 00:10:44,800 Speaker 5: but also in terms of investing behind AI. So people 202 00:10:44,880 --> 00:10:46,479 Speaker 5: want to see that that trend continues. 203 00:10:47,040 --> 00:10:48,920 Speaker 2: George, did the FED make a mistake at the end 204 00:10:48,960 --> 00:10:51,200 Speaker 2: of last year when it signaled it the all clear 205 00:10:51,679 --> 00:10:54,880 Speaker 2: in terms of further rate hikes? Maybe it should have 206 00:10:55,120 --> 00:10:57,880 Speaker 2: you adopted a different position. We can say this in 207 00:10:57,960 --> 00:11:01,520 Speaker 2: hindsight now given the stickiness of inflation, but perhaps there 208 00:11:01,559 --> 00:11:03,760 Speaker 2: was a bit of a policy error at that time. 209 00:11:05,400 --> 00:11:07,719 Speaker 5: Coyensien's always twenty twenty. If you were to look back 210 00:11:07,720 --> 00:11:09,719 Speaker 5: in time, they shouldn't have. They should have been much 211 00:11:09,720 --> 00:11:13,280 Speaker 5: more circumspect with respect to guidance in terms of the 212 00:11:13,360 --> 00:11:16,800 Speaker 5: all clear, I would tell you that that as I 213 00:11:16,840 --> 00:11:18,920 Speaker 5: look at you know, this is my own personal view, 214 00:11:19,040 --> 00:11:22,560 Speaker 5: the sticky elements of inflation continue apace. And if you 215 00:11:22,640 --> 00:11:26,480 Speaker 5: think about where the where the economy is, I worry 216 00:11:26,559 --> 00:11:28,959 Speaker 5: just about just as much about inflation as I am 217 00:11:29,000 --> 00:11:32,240 Speaker 5: about anything else. And when you consider the economies generally 218 00:11:32,320 --> 00:11:35,800 Speaker 5: humming along, and you know, unemployments sticking below four percent, 219 00:11:36,559 --> 00:11:38,480 Speaker 5: I didn't you know, it's hard to see and markets 220 00:11:38,480 --> 00:11:42,200 Speaker 5: were up strongly, hard to see what was driving a 221 00:11:42,320 --> 00:11:46,160 Speaker 5: rate cut, you know, moral for the FED. So I 222 00:11:46,200 --> 00:11:47,760 Speaker 5: do think it's probably overly aggressive. 223 00:11:48,679 --> 00:11:52,479 Speaker 3: We have actually seen some broadening out in the marketplace. 224 00:11:52,960 --> 00:11:55,360 Speaker 3: We've seen tech kind of level off. I think if 225 00:11:55,360 --> 00:11:57,240 Speaker 3: you look at the cues over the past three months, 226 00:11:57,520 --> 00:12:02,200 Speaker 3: basically flat. You've seen it in dust drills, sore materials, 227 00:12:02,240 --> 00:12:05,720 Speaker 3: soar finance is now soaring. I mean, the banks have 228 00:12:05,800 --> 00:12:10,280 Speaker 3: done very well here of late. You know, it does 229 00:12:10,440 --> 00:12:13,840 Speaker 3: almost beg the question, though, I mean, where else do 230 00:12:13,920 --> 00:12:16,160 Speaker 3: we turn out? Emerging markets are starting to move, and 231 00:12:16,160 --> 00:12:18,560 Speaker 3: we've seen China really pick up a little bit. Is 232 00:12:18,600 --> 00:12:20,520 Speaker 3: that the thing? Now? You kind of want to switch 233 00:12:20,559 --> 00:12:24,000 Speaker 3: to other areas? How are you approaching it. 234 00:12:24,280 --> 00:12:28,280 Speaker 5: I think that's right. Look, there's tremendous enthusiasm around not 235 00:12:28,360 --> 00:12:31,360 Speaker 5: just AI but also the Max seven. They posted phenomenal 236 00:12:31,400 --> 00:12:34,880 Speaker 5: earnings growth. We're seeing that broaden ow you talked about 237 00:12:34,880 --> 00:12:37,880 Speaker 5: seven percent earnings growth in Q one already, we're seeing 238 00:12:37,880 --> 00:12:41,720 Speaker 5: that continue to increase. Estimates are increasing as the year progresses, 239 00:12:41,760 --> 00:12:45,079 Speaker 5: and you're seeing sectors outside the mag seven do well 240 00:12:45,120 --> 00:12:49,040 Speaker 5: as well. Again, broadening out of opportunities, I think as 241 00:12:49,080 --> 00:12:52,520 Speaker 5: you get outside that Max seven, whether it's moving to 242 00:12:52,679 --> 00:12:56,000 Speaker 5: different sectors beyond just technology and communications, but also outside 243 00:12:56,040 --> 00:12:59,520 Speaker 5: the United States. We're seeing a substantial catchup in China 244 00:12:59,559 --> 00:13:04,000 Speaker 5: equity this year. We're seeing Japanese equities continue to power along. 245 00:13:04,000 --> 00:13:06,439 Speaker 5: We're seeing a rebound in European equities. There are all 246 00:13:06,520 --> 00:13:09,040 Speaker 5: many of those are coming off of very depressed levels, 247 00:13:09,440 --> 00:13:12,040 Speaker 5: and we're seeing a strengthening or at least a stabilizing 248 00:13:12,040 --> 00:13:14,720 Speaker 5: of the economy and gets a natural tendency to look 249 00:13:14,760 --> 00:13:18,720 Speaker 5: for other opportunities that have been probably you know, discarded 250 00:13:18,760 --> 00:13:19,720 Speaker 5: over the last year and a half. 251 00:13:19,840 --> 00:13:23,160 Speaker 2: So, George, your firm principal asset management, from what I understand, 252 00:13:23,240 --> 00:13:26,760 Speaker 2: has about a little over seven hundred billion under management 253 00:13:26,880 --> 00:13:29,200 Speaker 2: right now. I'm curious about the cash position. 254 00:13:30,320 --> 00:13:34,040 Speaker 5: So the firm is always again, we have substantial balance sheet, 255 00:13:35,200 --> 00:13:37,880 Speaker 5: you know, liabilities that we have to manage, so we're 256 00:13:37,920 --> 00:13:40,480 Speaker 5: we always take a very conservative, prudent view of that. 257 00:13:40,880 --> 00:13:42,480 Speaker 5: I think that continues to persist. 258 00:13:43,600 --> 00:13:47,240 Speaker 3: And you mentioned earlier that actually the consumer is doing okay, 259 00:13:47,280 --> 00:13:50,040 Speaker 3: it's fine, but you know, there are perhaps a few 260 00:13:50,520 --> 00:13:54,600 Speaker 3: warning signs when you when you know what what does 261 00:13:54,679 --> 00:13:57,480 Speaker 3: what does go bump in the night? For for for 262 00:13:57,559 --> 00:14:00,959 Speaker 3: the guy whose name or rhymes with rawd maris. 263 00:14:01,720 --> 00:14:04,280 Speaker 5: So again, a lot of things to be concerned about. 264 00:14:04,360 --> 00:14:07,760 Speaker 5: I do worry about the potential for stagflation in the 265 00:14:07,840 --> 00:14:12,240 Speaker 5: United States. Everybody cheered the weaker employment numbers last week. 266 00:14:12,720 --> 00:14:15,160 Speaker 5: Markets certainly rallied off of that. I'm not sure that's 267 00:14:15,200 --> 00:14:18,280 Speaker 5: such great news. I mean, seeing weaker employment and sticky 268 00:14:18,280 --> 00:14:21,840 Speaker 5: inflation is stagflationary. That is a very bad outcome. The 269 00:14:21,880 --> 00:14:24,960 Speaker 5: Fed's hands are a little bit tied to respond to that. 270 00:14:25,040 --> 00:14:28,240 Speaker 5: And I think you've seen a bifurcated economy in the 271 00:14:28,320 --> 00:14:30,680 Speaker 5: US with respect to consumers. You're starting to see the 272 00:14:30,720 --> 00:14:34,280 Speaker 5: lower end consumer struggle a bit more. Inflation is biting 273 00:14:34,280 --> 00:14:37,920 Speaker 5: them harder. The real person's cost index when you look 274 00:14:37,920 --> 00:14:41,080 Speaker 5: at food, when you look at petrol and gas, is 275 00:14:41,120 --> 00:14:43,240 Speaker 5: a lot higher than the aggregate numbers, and so those 276 00:14:43,280 --> 00:14:44,080 Speaker 5: folks are suffering. 277 00:14:44,160 --> 00:14:46,160 Speaker 2: So if that's your assessment, is it fair to say 278 00:14:46,200 --> 00:14:49,400 Speaker 2: that you skew away from fixed income and you're forced 279 00:14:49,440 --> 00:14:52,360 Speaker 2: to really look for opportunities solely in the equity space. 280 00:14:52,440 --> 00:14:53,760 Speaker 2: Or maybe I've got that wrong. 281 00:14:54,880 --> 00:14:58,160 Speaker 5: My fixed income colleagues will view this very differently. But 282 00:14:58,240 --> 00:15:01,520 Speaker 5: I find an environment where inflation is sticky and likely 283 00:15:01,560 --> 00:15:03,560 Speaker 5: to be stickier longer to be one where I want 284 00:15:03,560 --> 00:15:07,360 Speaker 5: to get exposed to more cyclical equities. Cyclical equities can 285 00:15:07,520 --> 00:15:10,080 Speaker 5: pass on the effects of inflation, they have the benefits 286 00:15:10,080 --> 00:15:12,760 Speaker 5: of operating leverage, and right now they're not priced for 287 00:15:12,840 --> 00:15:15,400 Speaker 5: that kind of growth. So I am geared towards more 288 00:15:15,400 --> 00:15:16,360 Speaker 5: cyclical equities. 289 00:15:16,640 --> 00:15:19,360 Speaker 3: So you know that brings in some of those sectors 290 00:15:19,800 --> 00:15:24,040 Speaker 3: I raised before. What about staples? Is that interesting then? 291 00:15:24,400 --> 00:15:27,440 Speaker 5: So I'm less convicted around staples, and staples have suffered 292 00:15:27,520 --> 00:15:29,960 Speaker 5: relative to other sectors over the last year and a 293 00:15:29,960 --> 00:15:32,720 Speaker 5: half two years, but it's worth knowing they had a 294 00:15:32,800 --> 00:15:35,720 Speaker 5: huge bull run over the last five years solely because 295 00:15:35,760 --> 00:15:38,320 Speaker 5: of zero and negative interest rate policies which put a 296 00:15:38,360 --> 00:15:42,200 Speaker 5: premium on stable like earnings. Again, they're essentially a proxy 297 00:15:42,240 --> 00:15:45,560 Speaker 5: for the bond market. I think that likely comes in 298 00:15:45,640 --> 00:15:47,840 Speaker 5: and continues to come in play. I think, frankly, a 299 00:15:47,880 --> 00:15:49,960 Speaker 5: more interesting play that gives you a lot of features 300 00:15:50,240 --> 00:15:53,960 Speaker 5: like consumer staples will be defense defense trades more cheaply 301 00:15:54,400 --> 00:15:56,600 Speaker 5: and right now, as we've all seen, the world is 302 00:15:56,680 --> 00:15:59,320 Speaker 5: under invested in defense and geopolitics are not exactly in 303 00:15:59,360 --> 00:15:59,880 Speaker 5: a good place. 304 00:16:00,120 --> 00:16:02,520 Speaker 3: So do you like the electrification? You know, sort of 305 00:16:03,000 --> 00:16:05,800 Speaker 3: a part of the utilities trade without question. 306 00:16:05,960 --> 00:16:08,960 Speaker 5: Not only is AI going to continue to drive electrification, 307 00:16:09,000 --> 00:16:11,480 Speaker 5: we're hearing about Microsoft looking at a one hundred billion 308 00:16:11,560 --> 00:16:14,360 Speaker 5: dollar data center, but I think that you're continuing to 309 00:16:14,360 --> 00:16:18,000 Speaker 5: see again infrastructure spend happened globally. 310 00:16:18,080 --> 00:16:21,000 Speaker 3: Yeah, all right, George, thank you, good session, Thanks for 311 00:16:21,000 --> 00:16:24,080 Speaker 3: coming into our studios. George Merris, Global Equity CIO at 312 00:16:24,080 --> 00:16:36,600 Speaker 3: Principal Asset Management. One year consumer inflation expectations rising to 313 00:16:36,680 --> 00:16:40,640 Speaker 3: three point five percent. That's the highest sense November. This 314 00:16:40,880 --> 00:16:43,840 Speaker 3: was very much front and center in markets late last week. 315 00:16:43,920 --> 00:16:46,480 Speaker 3: Joining us now for some discussion about markets is Anna 316 00:16:46,600 --> 00:16:52,680 Speaker 3: rothbun CIO at CBIZ Investment Advisory, services, So you have 317 00:16:53,160 --> 00:16:57,800 Speaker 3: inflation expectations rising there would you feel more comfortable on 318 00:16:58,080 --> 00:17:00,280 Speaker 3: if we got something from the Fed which who was 319 00:17:00,400 --> 00:17:02,680 Speaker 3: more or less like, we're not sure if the next 320 00:17:02,720 --> 00:17:03,560 Speaker 3: move is up or down. 321 00:17:05,640 --> 00:17:10,600 Speaker 1: Good evening evening here in Eastern time the United States. 322 00:17:11,040 --> 00:17:14,600 Speaker 1: I think the FED has been pretty clear that we 323 00:17:14,720 --> 00:17:17,560 Speaker 1: have to wait and see. There isn't any kind of 324 00:17:17,640 --> 00:17:21,639 Speaker 1: clear trajectory right now for the rates. And I believe 325 00:17:21,720 --> 00:17:24,080 Speaker 1: the last time the FED spoke to us, in the 326 00:17:24,080 --> 00:17:29,119 Speaker 1: form of FOMC meeting and the press conference afterwards, Powell 327 00:17:29,119 --> 00:17:33,600 Speaker 1: basically said a hike isn't really in the future. We 328 00:17:33,680 --> 00:17:37,639 Speaker 1: do believe it's going to be higher for longer. I 329 00:17:37,680 --> 00:17:40,399 Speaker 1: think the one year expectation of inflation there that you 330 00:17:40,480 --> 00:17:45,240 Speaker 1: talked about is probably more powerful than the CPI we're 331 00:17:45,280 --> 00:17:48,359 Speaker 1: going to get because it is backward looking, right. So 332 00:17:48,960 --> 00:17:51,880 Speaker 1: I wouldn't feel better necessarily one way or another what 333 00:17:51,920 --> 00:17:54,879 Speaker 1: the FED says. I do think that the FED will 334 00:17:55,040 --> 00:17:58,400 Speaker 1: ultimately be practicing higher for longer as we had thought 335 00:17:58,480 --> 00:17:59,880 Speaker 1: they would at the beginning of the year. 336 00:18:00,600 --> 00:18:03,119 Speaker 2: To what extent are you hearing the word or the 337 00:18:03,240 --> 00:18:07,560 Speaker 2: term stagflation enter the conversation that you've been having with clients. 338 00:18:09,560 --> 00:18:14,280 Speaker 1: More than we have before. So inflation it seems to 339 00:18:14,320 --> 00:18:17,159 Speaker 1: be settling a lot higher than where we would like 340 00:18:17,240 --> 00:18:19,479 Speaker 1: it to be or where the FED would like it 341 00:18:19,520 --> 00:18:23,040 Speaker 1: to be. But we are seeing slow down in the economy. 342 00:18:23,240 --> 00:18:26,800 Speaker 1: And look, a lot of our clients are small business owners, 343 00:18:27,280 --> 00:18:30,359 Speaker 1: mid sized business owners. They're seeing it before we do 344 00:18:30,560 --> 00:18:34,760 Speaker 1: in the aggregated aggregated data, so they are starting to 345 00:18:34,840 --> 00:18:38,400 Speaker 1: talk about potential stagflation what that may mean for their businesses. 346 00:18:39,880 --> 00:18:44,280 Speaker 3: What's interesting about playing all of this in the markets 347 00:18:44,400 --> 00:18:47,600 Speaker 3: is that even though we haven't seen a cut from 348 00:18:47,760 --> 00:18:49,920 Speaker 3: the FED, they've talked about it, but it's just talk. 349 00:18:51,240 --> 00:18:54,080 Speaker 3: You know, rates are high, and look at the earnings 350 00:18:54,200 --> 00:18:57,239 Speaker 3: estimates they've they've they've not only the earnings have not 351 00:18:57,280 --> 00:19:00,560 Speaker 3: only come in good, but the earnings asked are being 352 00:19:00,640 --> 00:19:04,080 Speaker 3: raised now at the fastest pace in two years. So 353 00:19:04,119 --> 00:19:05,960 Speaker 3: you kind of have to wonder whether or not a 354 00:19:06,000 --> 00:19:09,520 Speaker 3: little bit higher inflation, a little bit higher for longer 355 00:19:09,560 --> 00:19:14,360 Speaker 3: FED is really hurting earnings. It may be slowing the economy, 356 00:19:14,400 --> 00:19:16,040 Speaker 3: but is it hurting earnings in your view? 357 00:19:17,240 --> 00:19:21,119 Speaker 1: Well, I think depends on each company's cash flow profile 358 00:19:21,160 --> 00:19:23,719 Speaker 1: as well as their debt profile. Look a lot of 359 00:19:23,760 --> 00:19:28,639 Speaker 1: the earnings increases. In frankly, the spectacular earnings performance that 360 00:19:28,680 --> 00:19:31,679 Speaker 1: we've seen are in companies that are really flushed with 361 00:19:31,760 --> 00:19:34,199 Speaker 1: cash where the rates don't matter as much. If you 362 00:19:34,280 --> 00:19:39,000 Speaker 1: go down the well capitalization and go into small caps, 363 00:19:39,040 --> 00:19:41,520 Speaker 1: you have a different story there. So I think it 364 00:19:41,600 --> 00:19:44,600 Speaker 1: really depends on the company, and the longer we keep 365 00:19:44,760 --> 00:19:49,000 Speaker 1: rates high, the more difficult it will be. And I 366 00:19:49,040 --> 00:19:52,879 Speaker 1: think we're going to see some deterioration going forward. Large caps, 367 00:19:52,920 --> 00:19:56,480 Speaker 1: it's just going to be not as impacted as much 368 00:19:56,480 --> 00:19:57,520 Speaker 1: as small caps. 369 00:19:58,040 --> 00:20:00,880 Speaker 2: Is that the area that your most let's say focused 370 00:20:00,920 --> 00:20:04,520 Speaker 2: on these days mid caps small caps as opposed to 371 00:20:04,560 --> 00:20:07,080 Speaker 2: the you know, the big blue that we used to 372 00:20:07,119 --> 00:20:08,680 Speaker 2: say we're members of the Dow. 373 00:20:10,040 --> 00:20:13,399 Speaker 1: Well, the large caps have definitely performed a lot better, 374 00:20:14,000 --> 00:20:17,159 Speaker 1: both in terms of earnings in terms of prices. We 375 00:20:17,240 --> 00:20:20,080 Speaker 1: do not ignore large caps. Large caps are way too powerful. 376 00:20:20,119 --> 00:20:23,159 Speaker 1: The momentum there is too powerful. We had a little 377 00:20:23,200 --> 00:20:27,160 Speaker 1: blip in April and then now they're back up, which 378 00:20:27,200 --> 00:20:30,560 Speaker 1: is interesting because they're moving based on you know, these 379 00:20:30,640 --> 00:20:32,960 Speaker 1: macro data and what the FED might do, and it 380 00:20:33,080 --> 00:20:36,560 Speaker 1: really they're they're they're more immune to it than some 381 00:20:36,640 --> 00:20:40,440 Speaker 1: of the smaller companies. We do invest in smaller companies, 382 00:20:40,640 --> 00:20:42,800 Speaker 1: but the smaller companies we have to be a little 383 00:20:42,800 --> 00:20:45,479 Speaker 1: bit more careful because they are more rate sensitive. I mean, 384 00:20:45,480 --> 00:20:48,320 Speaker 1: if you look at the debt side of it, most 385 00:20:48,440 --> 00:20:50,880 Speaker 1: investment great companies are going to be large, and there's 386 00:20:50,920 --> 00:20:55,359 Speaker 1: definitely more comfort in the size, whereas a lot of 387 00:20:55,400 --> 00:20:58,120 Speaker 1: the small companies tend to be higher yield where they 388 00:20:58,160 --> 00:21:01,399 Speaker 1: have to pay for it with even a high credit spread. 389 00:21:02,920 --> 00:21:05,720 Speaker 3: Some of what we're talking about here is really cyclical 390 00:21:05,720 --> 00:21:10,440 Speaker 3: in nature. In terms of secular adjustments, you do have 391 00:21:10,800 --> 00:21:16,080 Speaker 3: the reindustrialization of the US economy, which which may augur 392 00:21:16,240 --> 00:21:20,560 Speaker 3: for accepting a little bit slower pace in consumer spending. 393 00:21:20,880 --> 00:21:23,679 Speaker 3: Do you agree or do you think that that's more hype. 394 00:21:25,920 --> 00:21:28,520 Speaker 1: Do you mean the reshoring or onshoring? 395 00:21:29,000 --> 00:21:32,679 Speaker 3: Yeah, the reshoring, the encouragement of companies to you know, 396 00:21:32,760 --> 00:21:35,920 Speaker 3: retain workers in the United States and to produce locally. 397 00:21:36,720 --> 00:21:39,120 Speaker 3: You know, you've got this big push really right across 398 00:21:39,160 --> 00:21:43,119 Speaker 3: the board. You've got a deglobalization process that is playing 399 00:21:43,119 --> 00:21:44,639 Speaker 3: out over over years. 400 00:21:46,040 --> 00:21:48,600 Speaker 1: Yeah, that's going to take a really long time. I mean, 401 00:21:48,640 --> 00:21:51,400 Speaker 1: we've been talking, what is it's twenty twenty four pandemic 402 00:21:51,480 --> 00:21:54,520 Speaker 1: started four years ago, and we've been talking about this 403 00:21:54,520 --> 00:21:58,520 Speaker 1: for a while. It is definitely happening, but it is very, 404 00:21:58,600 --> 00:22:03,360 Speaker 1: very slow. Do you see companies talk about capex plans 405 00:22:04,320 --> 00:22:10,000 Speaker 1: to reshure their production. I mean, we're talking about tariffs here. 406 00:22:10,359 --> 00:22:13,800 Speaker 1: I guess it's coming up this week to really strengthen 407 00:22:14,320 --> 00:22:17,240 Speaker 1: the American auto industry. So it's not just coming from 408 00:22:17,640 --> 00:22:21,200 Speaker 1: fears of supply chains. It's also coming from the government 409 00:22:21,280 --> 00:22:26,280 Speaker 1: as well. I do think that in order to stay competitive, 410 00:22:26,720 --> 00:22:31,640 Speaker 1: there is a labor market mismatch problem supply versus demand. 411 00:22:32,320 --> 00:22:35,320 Speaker 1: We're having a hard time even meeting the current demands 412 00:22:35,400 --> 00:22:38,160 Speaker 1: because the supply is just the supply that you need, 413 00:22:38,320 --> 00:22:40,800 Speaker 1: right The skilled labor isn't there. So I don't think 414 00:22:40,840 --> 00:22:43,520 Speaker 1: it's going to have an impact. I do think that 415 00:22:43,680 --> 00:22:46,720 Speaker 1: ultimately the companies will have to make a decision between 416 00:22:47,000 --> 00:22:51,679 Speaker 1: making these investments in the context of higher labor costs, 417 00:22:51,760 --> 00:22:55,800 Speaker 1: which means you have to really do whatever it takes 418 00:22:55,840 --> 00:22:56,959 Speaker 1: to maintain that margin. 419 00:22:57,240 --> 00:22:59,960 Speaker 2: Are you avoiding anything in the fixed income space. 420 00:22:59,720 --> 00:23:05,360 Speaker 1: These I am not avoiding anything. We like fixed and come, well. 421 00:23:05,200 --> 00:23:08,119 Speaker 3: If inflation's sticky, you know that's a concern for sure. 422 00:23:08,880 --> 00:23:12,040 Speaker 3: You might be getting four and a half percent on 423 00:23:12,080 --> 00:23:17,399 Speaker 3: your tenure. Thank you Anna rothbun Cio and CBIZ Investment 424 00:23:17,480 --> 00:23:18,720 Speaker 3: Advisory Services. 425 00:23:21,320 --> 00:23:24,240 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 426 00:23:24,320 --> 00:23:27,440 Speaker 2: the stories making news and moving markets in the Asia Pacific. 427 00:23:27,920 --> 00:23:31,040 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 428 00:23:31,080 --> 00:23:34,679 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 429 00:23:34,720 --> 00:23:38,520 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen 430 00:23:38,600 --> 00:23:41,720 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 431 00:23:41,720 --> 00:23:42,800 Speaker 2: Bloomberg Business App.