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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 Prisoner.

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Speaker 2: Markets in the Asia Pacific will be playing off a

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Speaker 2: mixed day for US equities. Of the eleven industry groups

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Speaker 2: within the S and P five hundred, only one was

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Speaker 2: positive information tech and that was due to news on

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Speaker 2: Nvidia and Advanced micro Devices resuming some chip sales to China.

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Speaker 2: We'll take a closer look at that story when we

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Speaker 2: catch up with Ray Wang at the Futureum Group, but

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Speaker 2: we begin with market action in the States. Joining me

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Speaker 2: now is Chuck Camillo. He is president and CEO at

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Speaker 2: Essex Financial Services. He's on the line from Essex, Connecticut. Chuck,

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Speaker 2: thank you so much for taking time to chat with me.

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Speaker 2: I'm curious as to what you're hearing from clients these

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Speaker 2: days in the current environment.

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Speaker 3: Sure teb Well, thank you so much for having me.

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Speaker 4: Yeah, I mean, we've just gone through a heck of

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Speaker 4: three months in change, all away from Liberation Day and

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Speaker 4: a twenty percent sell off in the market to where

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Speaker 4: we are now. Where Monday mark the sixty fifth trading

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Speaker 4: day from the below in April and the S and

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Speaker 4: P five hundreds of twenty six percent, So you know,

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Speaker 4: clients were a little bit whipsawed, but I would say

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Speaker 4: buy and large. They you know, stayed the course and

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Speaker 4: we did a lot of work, you know, a lot

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Speaker 4: of handholding and trying to explain things, and you know,

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Speaker 4: we made sure people tried to focus on the long term.

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Speaker 4: But people are generally, you know, in a good place

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Speaker 4: right now, certainly with positive moves in the market since

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Speaker 4: April obviously, but you know, this has been the most

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Speaker 4: you know, I'm trying to get right word that the

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Speaker 4: most extreme views based on someone's politics in terms of

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Speaker 4: the market. You know, people's politics always tend to drive

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Speaker 4: what they think, but it's never been more extreme than

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Speaker 4: we're seeing it right now, which I which I guess

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Speaker 4: is a reflection of the.

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Speaker 3: Country writ large.

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Speaker 4: But generally though people are doing well, stayed the course

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Speaker 4: and you know, are where seeing people updug just to

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Speaker 4: expect more volatility. You know, it's going to be a

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Speaker 4: bumpy ride, but there's a lot of challenges ahead and

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Speaker 4: there's all some good things add so we will see.

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Speaker 2: So we had this reading on consumer inflation this morning

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Speaker 2: for the month of June, relatively tame reading. But I

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Speaker 2: think the street is still worried about the potential inflationary

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Speaker 2: impacts of the tariffs. Is that something that you share

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Speaker 2: right now when you look at the tariff story.

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Speaker 4: Yeah, I think everybody's concerned about that because anecdotally, right,

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Speaker 4: I mean, a tariff is attacks, it obviously is inflationary.

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Speaker 3: However, you know, the more.

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Speaker 4: Time that goes by since April when these very high

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Speaker 4: tariffs were initially rolled out and then rolled back, you know,

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Speaker 4: companies have proven to be very nimble and sort of

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Speaker 4: getting their heads around how best to handle this. But

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Speaker 4: you know, inflation is one of the worst things that

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Speaker 4: can happen in an economy. It also drives so many

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Speaker 4: things regarding interest rates and the bigger picture that higher

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Speaker 4: rates versus lower rates have, and then throw in rates

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Speaker 4: with President Trump and Drome Powell and all the noise

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Speaker 4: that comes with that, and it just continues to cause

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Speaker 4: a cause uncertainty. Personally, I don't think we see inflation

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Speaker 4: skyrocketing by any stretch. I think even this past monthly number,

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Speaker 4: you had some things that were more terrorf sensitive, such

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Speaker 4: as a parel rise, but you had that offset by

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Speaker 4: reductions and car prices in airlines. So I think we're

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Speaker 4: just sort of going to bounce around here in this range.

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Speaker 4: But the bottom line, it was up. I don't think

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Speaker 4: anybody was surprised by that. It was in line with expectations.

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Speaker 4: But listen, higher inflation is a headwind in just about

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Speaker 4: every area. But you know, companies, the economy have been

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Speaker 4: extremely healthy, extremely resilient, and we're optimistic that at the

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Speaker 4: end of the day, you know, teriffstonetally help anybody. I

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Speaker 4: think we'll get hopefully to a more normalized place and

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Speaker 4: then we can continue to try to grow this market

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Speaker 4: and grow this economy.

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Speaker 2: So markets seem to be pricing in somewhat lower odds

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Speaker 2: of more than one rate cut this year. How do

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Speaker 2: you see the Fed proceeding between now in year's end.

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Speaker 4: Yeah, and they especially with this most recent inflation report.

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Speaker 4: I mean, they have certainly every reason to wait. There's

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Speaker 4: no clear direction in terms of what you know, Well, listen,

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Speaker 4: we're going to get PEPI tomorrow, which will be interesting,

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Speaker 4: but there's certainly no hard evidence for proof that we're

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Speaker 4: through this and that you know, the FED can say, okay, great,

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Speaker 4: all clear, We'll start cutting rates. They don't want to

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Speaker 4: make the same mistake, right, they made the big transitory

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Speaker 4: mistake coming out of COVID.

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Speaker 3: They absolutely don't.

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Speaker 4: Want to have to They don't want to make the

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Speaker 4: mistake of cutting rates and then all of a sudden

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Speaker 4: inflation just jumps and they got to vent raise rates.

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Speaker 3: That's the absolute nightmare scenario.

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Speaker 4: But at the same time, they can't just cut rates

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Speaker 4: for the sake of cutting rates. I mean, you got

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Speaker 4: to be careful what you asked for. Last year, the

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Speaker 4: Fed cut rates one hundred basis points right September November December,

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Speaker 4: and the ten year treasury went from three point six

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Speaker 4: percent to four point eight percent. So if the market does,

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Speaker 4: if the market doesn't agree that the move is the

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Speaker 4: right move, it's going to reject it. And I think

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Speaker 4: that's the big risks out there in terms of the

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Speaker 4: bond market, which again I think was one of the

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Speaker 4: big reasons why President Trump rolled back the tariffs that

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Speaker 4: he rolled out in the beginning of April.

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Speaker 2: So we had some bank earnings this morning, kind of

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Speaker 2: a mixed bag. JP Morgan Chase with a surprise gain

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Speaker 2: and investment banking income and if you look what what

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Speaker 2: City Group had to say, revenue from fixed income trading

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Speaker 2: was pretty robust wells Fargo, on the other hand, cut

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Speaker 2: its guidance for net interest income. How are you feeling

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Speaker 2: about the financials broadly?

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Speaker 4: I think broadly we feel really good about him. You know,

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Speaker 4: this type of environment generally abodes well for them. I

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Speaker 4: think I think your phrase mixed bag sums it up

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Speaker 4: perfectly right. JP Morgan's report is actually pretty good. They

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Speaker 4: dropped a little bit today. City has been such a

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Speaker 4: challenging mess for so many years. You know that the

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Speaker 4: stock buyback they announced as well was a big thing.

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Speaker 4: And I think the news with JP Morgan in terms

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Speaker 4: of about the better results coming out of investment banking

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Speaker 4: hopefull bodes well for the overall market in terms of

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Speaker 4: more deals and things being done, especially maybe with the

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Speaker 4: hope of some deregulation coming down the pike. So overall,

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Speaker 4: you know, we're we're bullish on financials, but as in

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Speaker 4: any sector, you're going to have some that outperform, and

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Speaker 4: you're gonna have some that you know, trip.

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Speaker 3: All over themselves.

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Speaker 4: But overall, financials should have done well this year, and

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Speaker 4: hopefully we'll continue to do so.

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Speaker 2: We had a lot of positivity when it came to

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Speaker 2: tech today, the big news was in Nvidia and AMD

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Speaker 2: saying that they're going to be able to resume some

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Speaker 2: chip sales to China. This is obviously all a part

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Speaker 2: of the AI theme. And at the same time today

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Speaker 2: we had President Trump in Pennsylvania talking about a big

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Speaker 2: project for AI and also energy development that would be

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Speaker 2: used to power those data centers. This is obviously a

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Speaker 2: trade that's still getting a lot of attention. I'm curious, Chuck,

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Speaker 2: as to how you're playing it.

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Speaker 3: Yeah, boy, it sure is getting some attention, right.

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Speaker 4: You think about where Nvidia was, you know, beginning of

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Speaker 4: April there, you know, traded you know, well below one

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Speaker 4: hundred dollar and it's a one seventy and one seventy.

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Speaker 4: I think you closed that today. You know I've mentioned

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Speaker 4: to you before. I think you you don't own tech

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Speaker 4: at your own peril. I mean, I think it is

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Speaker 4: an unbelievable time in you know, the country and in

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Speaker 4: the world's history in terms of whatever is about to

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Speaker 4: come with AI.

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Speaker 3: Uh, the level.

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Speaker 4: And the impact that will probably have on everybody's lives

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Speaker 4: over the next ten to fifteen years. You know, we

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Speaker 4: were having a discussion about you know, you never thought

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Speaker 4: about all the things that would change in your life

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Speaker 4: and to make things easier and better, and certainly the

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Speaker 4: rest of challenges. You know, when the iPhone came out

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Speaker 4: and the internet launched, right, I mean thinking about Google

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Speaker 4: Maps or you know, door Dash or pick any app

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Speaker 4: you choose, of how that's impacted every single person's life.

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Speaker 4: We're we seem to be on the cusp of that,

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Speaker 4: and so I think you're going to have volatility. I

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Speaker 4: think that volatility is an opportunity to buy. But these

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Speaker 4: these cutting edge leading, you know, American companies, you know,

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Speaker 4: I think it's something you certainly want to own.

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Speaker 2: Do you think think we're closer to some type of

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Speaker 2: resolution when it comes to these various trade deals? And

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Speaker 2: we had an announcement today from President Trump on a

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Speaker 2: trade deal with Indonesia. Obviously China when you look at Asia,

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Speaker 2: is the big wild card here. But I'm wondering whether

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Speaker 2: we're beginning to get a little bit of relief in markets.

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Speaker 4: Yeah, you know, boy, I wish I knew the answer

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Speaker 4: for that one, for sure. I think the safest thing

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Speaker 4: to say is we're closer to some sort of conclusion

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Speaker 4: than we were before, you know, and who knows in

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Speaker 4: terms of this agreement with Nvidia being allowed to sell

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Speaker 4: these chips to China, if that's part of a bigger picture,

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Speaker 4: bide into getting these rare earths out of China. I mean,

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Speaker 4: so the way that we view it is it's gotten

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Speaker 4: better now. You and I both know I could change

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Speaker 4: on a dime with a tweet or whatever it might be.

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Speaker 4: But I think the reason that the market has run

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Speaker 4: so much, and the reason there is this more optimistic

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Speaker 4: feeling is that we saw the worst. I don't think

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Speaker 4: back at being in April. I don't think we ever

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Speaker 4: go back to that. And I think it's also in

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Speaker 4: no one's best interest to have these tariffs that are

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Speaker 4: to bilititting to everybody. So hopefully, you know, there's negotiations

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Speaker 4: that occur to get us to a better place and

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Speaker 4: wrap this up. But it certainly seems like and I

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Speaker 4: think the news flow and some of the things that

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Speaker 4: have come out of this that do prove that out

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Speaker 4: that we're getting closer to it and then we can

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Speaker 4: get to a better place so that at least this

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Speaker 4: part of the volatility in the market tamps down and

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Speaker 4: you don't have to be on the edge of your

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Speaker 4: seat every day waiting for some sort of press release

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Speaker 4: or tweet or something on truth social.

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Speaker 2: Are you still primarily focused on looking for opportunity in

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Speaker 2: the US or are you more curious about things offshore

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Speaker 2: these days.

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Speaker 4: No, we've always you know, we've always had us leave

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Speaker 4: of client assets that we look to invest outside the US.

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Speaker 4: I mean, I think the average US investor has always

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Speaker 4: historically been underweight non US investments, and quite candidly performance

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Speaker 4: wise for good reason.

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Speaker 3: But look, if you look at.

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Speaker 4: The MSCI e FA Index over the past three years,

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Speaker 4: it's outperformed the Dow, It's outperformed the Russell two thousand,

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Speaker 4: and you know, it's still trailing obviously NASDAK and the

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Speaker 4: S and P. But it's combat very wrong. But no,

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Speaker 4: we're we constantly do look there, whether it's through mutual

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Speaker 4: funds with great managers or ETFs to play the non

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Speaker 4: US side of things, and that also includes emerging markets,

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Speaker 4: but to a to a smaller percentage for the average client.

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Speaker 2: What about the US bond market or US treasuries.

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Speaker 4: Yeah, listen, treasury bills are a great place to hide out.

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Speaker 4: I mean we've we've we've done a ton of them.

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Speaker 4: I mean that that's the million dollar question what happens

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Speaker 4: with rates, and I think there certainly is some concern

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Speaker 4: there that depending upon what happens with you know, you know,

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Speaker 4: hopefully there's not you know, we don't all of a

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Speaker 4: sudden wake up in President Trump's fire chair, Powell, but

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Speaker 4: no treasuries, you know, were born change on treasury bills

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Speaker 4: or a great place for clients to hide out. We

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Speaker 4: had a great municipal manager in the office today talking

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Speaker 4: to us about the municipal market. We think there's a

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Speaker 4: lot of opportunities there and the intermediate range of maturities,

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Speaker 4: so no, we think it is the right opportunity. But

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Speaker 4: you know, I think equities obviously a longer term give

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Speaker 4: you more volatility but a greater return. But for somebody

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Speaker 4: that's a little bit more conservative or looking for a hedge,

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Speaker 4: I think fixed income now with these rates and with

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Speaker 4: these coupons in this raid environment, do give you a

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Speaker 4: much more give you much more cushion than you got

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Speaker 4: years ago.

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Speaker 2: Chuck will leave it there. It's always a pleasure, Thank

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Speaker 2: you so very much. Chuck Camello there. He is president

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Speaker 2: also the CEO at Essex Financial Services. On the line

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Speaker 2: from Essex, Connecticut here on the Daybreak Asia Podcast. Welcome

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Speaker 2: back to the Daybreak Asia Podcast. I'm dek Krisner. Nvidia

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Speaker 2: and Advanced micro Devices are planning to resume sales of

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Speaker 2: some AI chips in China. These companies say they've been

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Speaker 2: given assurances from the Trump administration that such shipments will

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Speaker 2: be approved. The key issue here is the necessary licenses,

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Speaker 2: and in the case of Nvidia, it's the H twenty

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Speaker 2: artificial intelligence accelerator. This move, by the way, could add

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Speaker 2: billions of dollars to Nvidia's revenue this year. For a

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Speaker 2: closer look, we heard from Ray Wong. He is research

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Speaker 2: director at the few Terum Group. Ray spoke earlier with

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Speaker 2: Bloomberg's HEII Stroud Watts and Paul Allen.

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Speaker 5: Right, thanks so much for joining us. I just wonder

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Speaker 5: if you can explain fir US what you see as

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Speaker 5: being the impact on the video's bottom line considering this reversal.

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Speaker 5: I mean, previously it was selling about fifteen billion dollars

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Speaker 5: worth of chips to China. Can those sorts of numbers

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Speaker 5: be recaptured?

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Speaker 3: Hi boy, hey Gred morning.

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Speaker 6: Yeah, definitely, this is a huge news, not just for

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Speaker 6: MDIA and also for AMVA, potentially auto chip makers. Right

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Speaker 6: in April, there's a new informulator from BAS that restricted

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Speaker 6: H twenty five media and autoships that have similar capabilities

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Speaker 6: in terms of memory, bandwidth and networking speed.

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Speaker 3: This is huge for a.

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Speaker 6: Media because now they can re enter Chinese market with

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Speaker 6: their H twenty ships and also the upcoming P thirty

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Speaker 6: or RTX six thousand D ships they're going to China,

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Speaker 6: and this is significant offsites.

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Speaker 3: Here in Forturing we.

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Speaker 6: Model together between B thirty and also H twenty that

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Speaker 6: could bring potessional, potentially additional seven to eight billion revenue

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Speaker 6: a quarter for NBDIA and this is huge.

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Speaker 5: Well, if history shown us anything it's that the Trump

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Speaker 5: White House can be somewhat mercurial in terms of its

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Speaker 5: decision making. How much confidence can Nvidia have van imd

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Speaker 5: that this reversal is going to be permanent, that it

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Speaker 5: won't be reversed again.

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Speaker 6: Yeah, I see this policy shift is relatively permanent in

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Speaker 6: a way that this is number one, this is part

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Speaker 6: of the negotiation with US and China. And I see

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Speaker 6: there's a policy aliement between n media and also the

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Speaker 6: current strong administration because remember back into April, there's a

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Speaker 6: contentious intension between administration and media because they couldn't really

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Speaker 6: figure out the controversy around h twenty. But right now

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Speaker 6: after the policy ship, I see more policy aliment between media,

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Speaker 6: the Trump Minstration and also other airtion makers.

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Speaker 1: Right, you're seeing on our screens at the moment top

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Speaker 1: three percent of making up three percent of total global market.

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Speaker 3: Cup.

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Speaker 1: How much bigger can this company get given the presumed

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Speaker 1: presumption of business in this key market.

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Speaker 6: Yeah, I think there's a still significant upside right right now,

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Speaker 6: we'll talk about in a let's say, in Q three

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Speaker 6: and Q four, right, we'll talk about additional seven to

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Speaker 6: eight billion revenue coming off from China, and you know,

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Speaker 6: throughout the rest of the twenty twenty five we'll talk

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Speaker 6: about fifteen to twenty billion in the second half this

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Speaker 6: year and moving forward in twenty twenty six. I believe

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Speaker 6: there's your strong AI demand in terms of a training

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Speaker 6: AI inference coming on from China because we are seeing

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Speaker 6: significant and rapidly developments in Chinese AI landscape.

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Speaker 1: Another way I'm looking at it is just how big

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Speaker 1: video is when it comes to some very very big countries.

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Speaker 1: This start showing that video is larger than Canada. If

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Speaker 1: it adds another trillion in market cup it would be

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Speaker 1: contending with the size of India as well.

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Speaker 3: Pole sort of.

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Speaker 1: Talked about some of the you know, policy uncertainties from

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Speaker 1: the Trump administration. We know that, you know that is

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Speaker 1: a tendency for this administration, but how much of this

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Speaker 1: is really a watershed moment for Chinese policy makers. Does

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Speaker 1: the sort of argument that the White House is making

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Speaker 1: in terms of the advantages to the US make sense

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Speaker 1: to you?

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Speaker 6: I think it actually makes sense because this really complicates

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Speaker 6: two things. Number One, when you have more Amedia chips

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Speaker 6: right now, going back to China, it's actually marginalized. A

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Speaker 6: lot of Chinese domestic chip makers, including Huawei, can become

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Speaker 6: higen inframe. All those domestic air chimmakers, right they really marginalized,

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Speaker 6: marginalize their potential market in China. Right from a Beating's perspective,

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Speaker 6: this will make the self sufficiency self sufficiency pushed in

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Speaker 6: air chips even harder because right now there will be

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Speaker 6: still significant reliance on a media MD solutions in terms

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Speaker 6: of air hardware.

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Speaker 5: How long is that situation going to endure? Though, Because

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Speaker 5: while those curves were in place, we saw China becoming

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Speaker 5: very creative and not just finding ways to circumvent them,

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Speaker 5: but also nurturing its own homegrown version of this. Are

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Speaker 5: there any equivalents saw better than the Age twenty chip,

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Speaker 5: either in production and development in China?

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Speaker 6: Well, I think in terms of Age twenty given the

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Speaker 6: memory bandwidth importance for AI inference, I think for now

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Speaker 6: there's not much solutions right in China that is comparable

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Speaker 6: to n media. But this reflect to an media's sort

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Speaker 6: of media and long term concern, right, because essentially they

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Speaker 6: can only sell chips that under the new Asper control

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Speaker 6: thrashold right, So in the long term, I do think

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Speaker 6: there's a concern that there will be other competitors against ANBDIA.

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Speaker 6: But I think for now in China and media is

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Speaker 6: still well, you know, maintaining its technological and market leadership.

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Speaker 1: Is this a game changer for some of the homegrown

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Speaker 1: AI then the likes of deep.

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Speaker 6: Sick, Yeah, I think it's definitely. The ones for number

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Speaker 6: one did give them more computes, right, But this is

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Speaker 6: the the chips that is one at least one generation

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Speaker 6: behind blickwell, right, and you know, if you look at

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Speaker 6: a computational performance and mary bangweb is really not compare

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Speaker 6: comparable to the current ships that most of the US

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Speaker 6: companies are using. And I think another thing is this

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Speaker 6: really complicates a lot of domestic Chinese ship makers because

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Speaker 6: essentially they want to fulfill the market's share their lab media.

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Speaker 6: But right now Amedia coming back to the market, I

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Speaker 6: think that makes things a lot more difficult.

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Speaker 1: Right, Really great to have you with us, very well,

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Speaker 1: Research director for Semiconductor, Supply Chain and Emerging Tech at

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Speaker 1: the Food From Group.

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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 Kong to

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Speaker 2: Singapore and Australia. I'm Doug Prisoner and this is Bloomberg