WEBVTT - Markets Fall as Global Tariff Turmoil Enters Second Week 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.560 --> 0:00:14.000 Welcome to the Bloomberg Daybreak Gasia podcast. I'm Doug Chrisner. 0:00:14.280 --> 0:00:18.880 The tariff inspired turmoil and financial markets is enduring. Certainly. 0:00:18.960 --> 0:00:22.200 Over the weekend, the Trump administration indicated those sweeping US 0:00:22.320 --> 0:00:25.720 tariffs would be kept in place. Coming up, we'll be 0:00:25.760 --> 0:00:28.760 talking with Adam Coons. He is the CIO at Winthrop 0:00:28.840 --> 0:00:32.760 Capital Management. But we begin this morning in the Asia Pacific, where, 0:00:32.960 --> 0:00:36.319 despite the holiday in China last Friday, the government did 0:00:36.320 --> 0:00:41.480 announce retaliatory measures against all US imports. Tariffs were imposed 0:00:41.640 --> 0:00:43.839 at a rate of thirty four percent, and they will 0:00:43.840 --> 0:00:46.879 take effect as of April tenth. Joining me now is 0:00:46.880 --> 0:00:51.080 Helen Jude, chief Investment Officer, also managing partner at NF Trinity. 0:00:51.440 --> 0:00:54.400 Helen joins us from our studios in Hong Kong. It's 0:00:54.440 --> 0:00:57.000 always a pleasure, Helen. Thank you so much for taking 0:00:57.000 --> 0:01:00.000 the time to chat with us. How surprised were you 0:01:00.080 --> 0:01:02.680 by the move from the Chinese government last Friday. 0:01:03.520 --> 0:01:06.479 I think it was always with an expectations that there 0:01:06.480 --> 0:01:11.160 would be some degree of retaliation. The exact magnitude, I 0:01:11.200 --> 0:01:15.319 think was somewhat of a hawkish surprise. Very similar to 0:01:15.319 --> 0:01:17.680 what had happened the day before on Liberation Day, when 0:01:17.720 --> 0:01:21.200 everybody was expecting tariffs to come in for sure, but 0:01:21.319 --> 0:01:25.039 the magnitude and extent of it was certainly more hawkish 0:01:25.040 --> 0:01:26.080 than expected as well. 0:01:26.200 --> 0:01:28.319 So let's get away from the macro for just a 0:01:28.400 --> 0:01:30.440 moment and talk a little bit about what you're seeing 0:01:30.480 --> 0:01:34.040 within the market right now. I'm curious about the extent 0:01:34.120 --> 0:01:39.240 to which this price action is revealing a level of leverage, 0:01:39.240 --> 0:01:42.680 maybe that we didn't really realize before. So you've taken 0:01:42.720 --> 0:01:45.920 a position, let's say, using a little bit of margin, 0:01:46.200 --> 0:01:50.760 the market goes against you. Uh oh, that weakness forces 0:01:50.760 --> 0:01:53.440 you to either add to the position or to liquidate. 0:01:53.600 --> 0:01:55.280 Is that a little bit of what's going on. 0:01:56.240 --> 0:01:58.440 I think that's part of it, but that's certainly not 0:01:58.600 --> 0:02:01.520 all of it. For example, if you actually look at 0:02:01.520 --> 0:02:04.280 retail participation in the US, that's been very important in 0:02:04.360 --> 0:02:07.800 terms of supporting the broader market. People generally buying on 0:02:07.880 --> 0:02:11.560 dips very you know, consistently, and a lot of that 0:02:11.639 --> 0:02:14.840 is not necessarily on leverage. It could just be cash, 0:02:14.960 --> 0:02:19.679 but the positioning was very concentrated. As in US, exceptionalism 0:02:19.760 --> 0:02:22.399 had rolled for a very long time, and people had 0:02:22.400 --> 0:02:26.200 no interest in diversifying into fixed income and diversifying into 0:02:26.320 --> 0:02:31.200 non US markets or holding you know, other hedges. So 0:02:31.480 --> 0:02:34.000 I think that the unwinding of that, with the loss 0:02:34.000 --> 0:02:37.680 of confidence, you know, starting Friday, I think that's actually 0:02:37.680 --> 0:02:42.160 what's been the key driver for the major onwine that 0:02:42.200 --> 0:02:42.560 we saw. 0:02:42.760 --> 0:02:45.840 So are you seeing order in these declines or are 0:02:45.880 --> 0:02:48.320 you seeing maybe a level of stress that would be 0:02:48.400 --> 0:02:52.160 concerning either to a central banker or a financial regulator, 0:02:52.160 --> 0:02:55.160 something that might imply a bit of financial instability. 0:02:56.520 --> 0:03:00.200 Certainly, the magnitude of the market drops has been and 0:03:00.240 --> 0:03:04.880 you know, a kein to COVID or GFC, So that's 0:03:05.080 --> 0:03:08.680 certainly a sign of financial instability, but it's not necessarily 0:03:08.760 --> 0:03:12.480 systematic risk in the equities markets. It's you know, we 0:03:12.560 --> 0:03:14.960 have to look more at the fixingcome markets, which is 0:03:15.120 --> 0:03:18.240 far more important. From that record. Now, credit spreads have 0:03:18.360 --> 0:03:21.120 really blown out over the last week, but on an 0:03:21.160 --> 0:03:25.280 absolute basis, they're not at you know, COVID levels or 0:03:25.360 --> 0:03:28.080 GFC levels. I think that's what we have to watch 0:03:28.200 --> 0:03:31.080 very very closely. But you know, if I was the FED, 0:03:31.160 --> 0:03:33.560 I would be thinking, gosh, even if I drop rates 0:03:33.600 --> 0:03:36.960 by fifty basis points, I'm not resolving the trade issue. 0:03:37.240 --> 0:03:39.960 In fact, you know, if interest rates were lower and 0:03:40.200 --> 0:03:43.520 market stabilized for a few days, that might actually delay 0:03:43.600 --> 0:03:47.560 any potential negotiations on the trade issue. So I would 0:03:47.600 --> 0:03:50.120 think that the FED would not want to be taking 0:03:50.160 --> 0:03:53.760 on the sole responsibility for stabilizing the markets when they're 0:03:53.800 --> 0:03:57.160 not the root cause of the market disarray. 0:03:57.400 --> 0:03:59.840 And in fact, the terriff situation may and gender a 0:03:59.840 --> 0:04:02.360 bit of inflation that would be troubling for the FED. 0:04:02.480 --> 0:04:05.360 Would you expect these tariffs to produce a higher level 0:04:05.400 --> 0:04:05.960 of inflation. 0:04:06.400 --> 0:04:08.840 They will, but I think it's a little bit different 0:04:08.920 --> 0:04:11.760 from what you would expect. First of all, it's mainly 0:04:11.800 --> 0:04:14.640 on goods, and historically the sticky inflation of the US 0:04:14.720 --> 0:04:17.360 or the past year or so has really been on services, 0:04:17.680 --> 0:04:20.960 which tariffs doesn't necessarily affect. And then the second thing 0:04:21.040 --> 0:04:22.680 is that you've got to think about the fact that 0:04:22.760 --> 0:04:25.320 these tariffs are going to be a one off impact 0:04:26.160 --> 0:04:29.200 on inflation and not necessarily sustaining over the medium to 0:04:29.279 --> 0:04:32.120 longer term if the teriff rate remains stable as a 0:04:32.160 --> 0:04:35.719 base effect resets. So I think maybe higher inflation will 0:04:35.760 --> 0:04:39.840 be one consideration for the FED, But you know, hiking 0:04:39.920 --> 0:04:43.919 rates meaningfully is not going to be a solution to 0:04:44.520 --> 0:04:47.880 fixing the tariffs, and therefore, you know, you should probably 0:04:47.920 --> 0:04:51.359 rethink the normal logic that hiking rates can fix inflation. 0:04:51.800 --> 0:04:54.800 Over the weekend, the Trump administration indicated that it had 0:04:54.880 --> 0:04:57.720 heard from no fewer than fifty countries trying and to 0:04:57.800 --> 0:05:02.080 negotiate new trade agreement. Is this part of the process 0:05:02.160 --> 0:05:05.160 right now that tariffs are in and of themselves kind 0:05:05.200 --> 0:05:07.680 of a bargaining chip, or is this something that is 0:05:07.839 --> 0:05:10.680 maybe a little bit more concerning in that, you know, 0:05:10.680 --> 0:05:12.520 if this is a line in the sand that has 0:05:12.560 --> 0:05:15.799 been drawn and that President Trump is adamant about taking 0:05:15.839 --> 0:05:18.880 this position to try to reduce trade deficits, that these 0:05:18.920 --> 0:05:21.120 tariffs may be with us for a while longer. 0:05:21.520 --> 0:05:23.640 I think tariffs will be with us a well longer, 0:05:23.680 --> 0:05:27.680 but that different countries will have different negotiations and different situations. 0:05:28.600 --> 0:05:31.200 You know. Scott Besson in the interview with Tucker Carlson 0:05:31.279 --> 0:05:33.840 over the weekend, he said, you know, tariffs are in 0:05:33.880 --> 0:05:36.119 for this reason and for that reason, but he also 0:05:36.160 --> 0:05:38.800 said that tariffs are a tool for negotiation. So I 0:05:38.839 --> 0:05:42.320 think that is the reality. But you know, if fifty 0:05:42.360 --> 0:05:45.040 parties contacted them for negotiation. I think we'll get fifty 0:05:45.080 --> 0:05:45.840 different outcomes. 0:05:46.080 --> 0:05:48.360 How are you viewing the macro right now in China? 0:05:48.400 --> 0:05:50.520 Given everything that we've been talking about. 0:05:50.440 --> 0:05:52.919 I think things were starting to head in the right direction. 0:05:53.640 --> 0:05:57.960 Infrastructure investment and local governments were starting to stabilize. We 0:05:58.000 --> 0:06:01.359 saw that the property sector had gone from a huge 0:06:01.480 --> 0:06:05.080 drag in terms of both volume and price to you know, 0:06:05.160 --> 0:06:08.039 price somewhat stabilizing or even starting to pick up in 0:06:08.120 --> 0:06:11.360 some top tier cities. And then we saw that consumption. 0:06:11.680 --> 0:06:14.040 You know, it's still not stellar, but it's not getting 0:06:14.040 --> 0:06:17.200 worse either, And actually the government has been more focused 0:06:17.240 --> 0:06:19.640 in terms of their efforts to try to stimulate and 0:06:19.680 --> 0:06:22.400 support consumption. So it was starting to come around the 0:06:22.400 --> 0:06:27.120 corner until this, but you know, this was somewhat expected 0:06:27.120 --> 0:06:30.800 as well, although worse versus the base case expectation on 0:06:30.839 --> 0:06:33.680 the tariffs, and I think the policy makers will have 0:06:33.960 --> 0:06:37.960 their own policy response to it, probably focusing more on 0:06:38.360 --> 0:06:40.320 domestic facing parts of the economy. 0:06:40.400 --> 0:06:42.600 What have you been hearing from clients generally? 0:06:43.520 --> 0:06:48.039 I think the market is panicking. I think that most 0:06:48.080 --> 0:06:52.599 people initially tried to be somewhat rational, you know, switching 0:06:52.640 --> 0:06:56.480 into defensives and you know, switching into fixed income and 0:06:56.520 --> 0:06:58.400 so on and so forth. But then I think very 0:06:58.480 --> 0:07:01.560 quickly people fell like they needed to sell and they 0:07:01.560 --> 0:07:03.200 needed to get out for some of the reasons that 0:07:03.240 --> 0:07:06.440 we've discussed, because this whole thing might last longer than 0:07:06.560 --> 0:07:10.040 originally anticipated. So that's what we've actually seen in the 0:07:10.120 --> 0:07:13.280 last couple of days. That's what we're seeing today. I 0:07:13.320 --> 0:07:17.560 actually personally think that the more you know, disorderly it 0:07:17.640 --> 0:07:20.640 is for two or three or four days, the more 0:07:20.680 --> 0:07:23.400 it's going to force the administration's hand in terms of 0:07:23.480 --> 0:07:26.480 coming out and saying something to stabilize market expectations. So 0:07:27.280 --> 0:07:28.640 bad is good to some extent. 0:07:28.760 --> 0:07:31.160 So now give me a strategy that you think would 0:07:31.160 --> 0:07:34.720 be worthwhile over the next six to nine months based 0:07:34.720 --> 0:07:36.920 on everything that you think you understand right now. 0:07:37.440 --> 0:07:39.840 Well, the faster the market drops and the more disorderly 0:07:39.880 --> 0:07:42.520 it is, the more interesting it is to jump in 0:07:42.600 --> 0:07:47.880 and start to buy some If actually things stabilize, you know, immediately, 0:07:48.200 --> 0:07:52.560 with valuation still above the historical median, with earnings expectations 0:07:52.600 --> 0:07:55.440 not yet revised down, then it's probably not interesting yet. 0:07:56.240 --> 0:07:59.840 I would say that the terriffs are imposed on a 0:08:00.240 --> 0:08:03.560 country basis, and each country will have its own deal. 0:08:03.960 --> 0:08:07.320 I think the countries that are US allies and countries 0:08:07.360 --> 0:08:11.560 that are manufacturing substitutes for China are likely to negotiate 0:08:11.600 --> 0:08:14.000 first and get the better deals, and whether their deals 0:08:14.080 --> 0:08:18.080 are affirmed up, then those particular markets will outperform others. 0:08:18.080 --> 0:08:19.840 So I think that's where some of the capital is 0:08:19.840 --> 0:08:23.360 going to flow. And that's what I would use as 0:08:23.360 --> 0:08:26.280 a general guideline for thinking about it. And if some 0:08:26.320 --> 0:08:29.160 of those countries get out of it, then the country 0:08:29.240 --> 0:08:32.679 the sectors like let's say, you know, US apparels that 0:08:32.800 --> 0:08:36.720 rely on the manufacturing and shipments from you know, countries 0:08:36.760 --> 0:08:39.720 like Vietnam, Cambodia and the rest of Asia. You know, 0:08:39.800 --> 0:08:43.480 then those companies could potentially rebound as well. Because currently 0:08:43.559 --> 0:08:47.040 right now people are just thinking recession hits demand and 0:08:47.200 --> 0:08:52.160 tariffs hits margins, and it's you know, it's basically getting 0:08:52.160 --> 0:08:54.439 squeeze between a rock and a hard place. So if 0:08:54.440 --> 0:08:57.880 you can have some resolution on their sourcing markets as well, 0:08:58.200 --> 0:09:00.640 that will benefit those types of sectors. 0:09:00.640 --> 0:09:03.319 Also, one of the big themes in China so far 0:09:03.400 --> 0:09:07.200 this year has been high technology, particularly as it relates 0:09:07.240 --> 0:09:10.360 to artificial intelligence. We know about the deep seek moment 0:09:10.960 --> 0:09:14.600 is that theme still intact right now, or is the 0:09:14.640 --> 0:09:16.960 stress that we're seeing right now in markets kind of 0:09:17.000 --> 0:09:18.439 threatening that in any way. 0:09:18.840 --> 0:09:21.800 I think China high tech has been up and coming 0:09:21.840 --> 0:09:25.600 for quite some time and there will certainly be meaningful breakthroughs, 0:09:25.640 --> 0:09:30.599 But the extent of the trade and related geopolitical tensions 0:09:30.760 --> 0:09:34.560 is actually negative for China tech, largely because one, it 0:09:34.640 --> 0:09:38.240 increases the chances of the US cutting off the supply 0:09:38.520 --> 0:09:42.320 of you know, Nvidia chips to China as well as 0:09:42.480 --> 0:09:45.080 the stuff that's actually you know, getting into China from 0:09:45.160 --> 0:09:50.880 other markets that Nvidia and others ship to. Secondly, looking forward, 0:09:51.760 --> 0:09:56.079 there is greater risk of future policy changes on containing 0:09:56.160 --> 0:10:01.800 China's AI you know, improvements and and innovation, for example, 0:10:01.920 --> 0:10:05.040 probably stopping some of the Chinese models from training overseas 0:10:05.280 --> 0:10:09.000 for example, you know, potentially cutting off equipment exports the China, 0:10:09.120 --> 0:10:11.640 not just chip exports. There are a variety of other 0:10:11.679 --> 0:10:15.120 things that could potentially happen if tensions should further intensify 0:10:15.360 --> 0:10:18.360 that are specifically a threat to China's high tech industry. 0:10:18.400 --> 0:10:20.800 So that's something that you know, one needs the balance 0:10:20.840 --> 0:10:21.760 and think about as well. 0:10:21.880 --> 0:10:24.280 Ellen will leave it there. Thank you so much, helenge 0:10:24.280 --> 0:10:28.559 you Chief Investment Officer also managing partner at NF Trinity. 0:10:28.679 --> 0:10:38.000 Joining us here on the Daybreak Asia podcast. Welcome back 0:10:38.040 --> 0:10:41.240 to the Daybreak Asia Podcast. I'm Doug Krisner. We are 0:10:41.240 --> 0:10:45.000 seeing dramatic moves in financial markets at this hour as 0:10:45.160 --> 0:10:48.720 risk assets are being sold. Much of this is tied 0:10:48.720 --> 0:10:53.480 to Beijing's announcement last Friday of retaliatory measures of tariffs 0:10:53.679 --> 0:10:57.000 on US imports a rate of thirty four percent as 0:10:57.040 --> 0:11:00.640 of April tenth. Now, this announcement came despite to holiday 0:11:00.760 --> 0:11:03.600 in China. Stateside, we had the S and P five 0:11:03.679 --> 0:11:07.240 hundred dropping six percent to its lowest level in eleven months, 0:11:07.600 --> 0:11:10.200 and over the prior to trading days in the US, 0:11:10.280 --> 0:11:13.600 the S and P has lost five point four trillion 0:11:13.679 --> 0:11:16.720 dollars in market value. For a bit of perspective, I'm 0:11:16.800 --> 0:11:19.800 joined now by Adam Koons. He is the co CIO 0:11:19.920 --> 0:11:23.560 at Winthrop Capital Management. Adam, the big question right now 0:11:23.600 --> 0:11:26.280 seems to be how much more downside we will see 0:11:26.320 --> 0:11:29.040 in markets? And I'm curious as to what you're prepared 0:11:29.080 --> 0:11:31.840 for in the Monday session. How bad do you think 0:11:31.840 --> 0:11:32.400 it will get? 0:11:32.880 --> 0:11:33.120 Well? 0:11:33.360 --> 0:11:35.680 I mean, yeah, Monday session is going to be another 0:11:36.400 --> 0:11:40.360 blood bath. Per se if you look at the future 0:11:40.400 --> 0:11:44.080 is and probably just the kind of concrete nature that 0:11:44.280 --> 0:11:50.199 it seems that the Trump administration's taking with these tariffs. 0:11:50.880 --> 0:11:53.000 It frankly, the market's got it wrong. 0:11:53.080 --> 0:11:58.360 I think the market was trying to anticipate that the 0:11:58.400 --> 0:12:02.800 Trump administration would come with a heavy handed narrative around 0:12:02.840 --> 0:12:05.960 the tariffs and then would back off. And it seems 0:12:06.040 --> 0:12:10.760 quite clear that they're going full tilt into this, you know, 0:12:11.480 --> 0:12:15.959 increased tariff regime, and for right now, the base case 0:12:15.960 --> 0:12:17.280 should be they're not going to back off. 0:12:17.440 --> 0:12:19.760 So if there is a level of market stress that 0:12:19.800 --> 0:12:22.560 were to develop that might alarm the FED, do you 0:12:22.720 --> 0:12:24.520 have a sense of what that might be. What is 0:12:24.520 --> 0:12:26.760 a key pressure point that you would be looking at? 0:12:27.080 --> 0:12:29.880 Well, I think for the FED, I mean obviously a 0:12:29.960 --> 0:12:32.960 lot of participants look at equity markets, but when it 0:12:33.000 --> 0:12:35.000 comes to the FED, I think what they're really looking 0:12:35.040 --> 0:12:38.440 at or credit spreads, and I think, you know, one 0:12:38.480 --> 0:12:41.440 of the bigger stories for me is that, you know, 0:12:41.440 --> 0:12:44.959 if you look at high yield spreads, levered loans, those 0:12:45.040 --> 0:12:49.760 kind of things, spreads on in those markets have gapped 0:12:49.800 --> 0:12:52.280 out almost two hundred basis points. 0:12:52.840 --> 0:12:54.240 If you look at high yield index. 0:12:55.160 --> 0:12:58.200 It was trading below three hundred and spread and now 0:12:58.240 --> 0:13:01.120 is approaching five hundred. So that, I think is what 0:13:01.160 --> 0:13:03.040 the Fed's going to be looking at more than anything. 0:13:03.120 --> 0:13:07.760 Our credit markets deteriorating. Are they shutting down? Are you refinance? 0:13:07.880 --> 0:13:10.960 Is going to be an issue because that's really where 0:13:10.960 --> 0:13:12.520 the FED would have to start stepping in. If we 0:13:12.559 --> 0:13:16.640 started to see the credit markets deteriorating, that's where we 0:13:16.720 --> 0:13:17.800 start to see this unwind. 0:13:18.160 --> 0:13:20.680 I mentioned a tweet that happened on Sunday from Bill 0:13:20.760 --> 0:13:23.960 Ackman over at Pershing Square, and he suggested that if 0:13:23.960 --> 0:13:26.520 by Monday there isn't an announcement on some sort of 0:13:26.640 --> 0:13:30.280 pause with respect to these coming tariffs, our recession will 0:13:30.400 --> 0:13:33.400 rapidly become the base case for the equity market. It 0:13:33.400 --> 0:13:35.200 seems like we're already there, does it not. 0:13:36.600 --> 0:13:39.199 Well, that's what the equity markets already pressed in undoubtedly, 0:13:39.840 --> 0:13:42.959 So I agree it's too late for that per se. 0:13:43.280 --> 0:13:46.160 I think the question is, you know, a recession can 0:13:46.200 --> 0:13:50.320 come simply on the perception that things are bad, and 0:13:50.360 --> 0:13:54.000 if consumers just cut back because they're just uncertain, that 0:13:54.120 --> 0:13:56.959 in itself would create the recession. So that seems to 0:13:57.040 --> 0:13:59.280 be what the equity markets are starting to you know, 0:13:59.360 --> 0:14:04.040 fully price in. It could be that we start pricing 0:14:04.040 --> 0:14:07.520 in a a very harsh recession. So there still is 0:14:07.679 --> 0:14:11.120 the downside potential of the equity markets if we start 0:14:11.160 --> 0:14:14.360 to see you know, further deterioration in the consumer and 0:14:14.400 --> 0:14:18.319 their behavior, if it rapidly, you know, kind of deteriorates. 0:14:18.640 --> 0:14:21.720 Makes it simply based off of narratives, because right now 0:14:22.320 --> 0:14:25.320 fundamentals haven't really changed. This is all based off of 0:14:25.400 --> 0:14:29.960 what could happen and how it might affect the economy. 0:14:30.400 --> 0:14:33.480 But as we know, that's how we act as humans. 0:14:33.480 --> 0:14:36.440 We react based off of what we think is going 0:14:36.480 --> 0:14:39.600 to happen, and so that right now, I think for 0:14:39.760 --> 0:14:41.320 us that is the base case, is that we're moving 0:14:41.320 --> 0:14:43.520 towards that. I don't think it doesn't really matter what 0:14:44.360 --> 0:14:47.200 the administration comes out on Monday. It says, I think 0:14:47.280 --> 0:14:48.560 enough damage is already done. 0:14:48.680 --> 0:14:51.480 At what point do risk assets become a bargain? Though, 0:14:51.520 --> 0:14:53.800 given the weakness that we have seen and imagining that 0:14:53.840 --> 0:14:56.920 we're going to see much more in the regular session Monday, 0:14:57.440 --> 0:15:00.120 is it possible that in near term there is going 0:15:00.120 --> 0:15:03.480 to be some sort of buying opportunity. 0:15:04.120 --> 0:15:08.080 Yeah, I think it's already approaching it obviously depends on 0:15:08.400 --> 0:15:12.280 how you entered the market this year. If you were 0:15:12.680 --> 0:15:14.840 kind of like us, we had already shifted towards more 0:15:14.880 --> 0:15:19.920 defensive stance. We were fully invested, but it was, like 0:15:19.920 --> 0:15:22.040 I said, it did have a defensive tilt and that 0:15:22.080 --> 0:15:25.440 has helped us whether this to a degree, but more importantly, 0:15:25.440 --> 0:15:27.040 it has given us a little bit of dry powder 0:15:27.480 --> 0:15:31.080 to add to names like Navidia, because we were quite 0:15:31.160 --> 0:15:34.280 underweighted that name, and so by no means are we 0:15:34.320 --> 0:15:37.200 neutral yet, but we're moving incrementally towards that as we 0:15:37.200 --> 0:15:38.240 see these kind of drops. 0:15:38.280 --> 0:15:40.760 So I think if you do have dry powder, you're 0:15:40.840 --> 0:15:41.960 not going to pick the bottom. 0:15:42.000 --> 0:15:44.200 And so you you know, you should still believe in 0:15:44.200 --> 0:15:48.160 your investment strategy those companies that you think are great 0:15:48.160 --> 0:15:52.280 companies and you know, are cash flow generators, like I said, 0:15:52.280 --> 0:15:57.320 like a Navidia, like a Google alphabet, Microsoft. With these 0:15:57.360 --> 0:15:59.720 kind of drops, I think you should be incrementally adding, 0:16:00.880 --> 0:16:03.120 like I said, because you're not going to guess the bottom. 0:16:03.440 --> 0:16:06.160 And this is going to be one of those markets 0:16:06.200 --> 0:16:08.480 where it's going to be very news driven and you 0:16:08.520 --> 0:16:10.200 don't know what the next headline is going to be. 0:16:10.840 --> 0:16:12.080 So we could see a further drop. 0:16:12.120 --> 0:16:13.640 But I think if you do like I said, if 0:16:13.640 --> 0:16:15.480 you have dry powder, you should be putting into work 0:16:15.600 --> 0:16:16.640 incrementally right now. 0:16:16.760 --> 0:16:19.280 So last Friday we heard from FED share J. Powell. 0:16:19.320 --> 0:16:21.680 He seemed to suggest that the damage of this trade 0:16:21.680 --> 0:16:23.920 war is going to be a lot greater than anticipated. 0:16:24.400 --> 0:16:26.840 Tonight here in New York, we heard from Bob Michael, 0:16:26.960 --> 0:16:29.960 the global head of fixed income at JP Morgan Asset Management. 0:16:30.440 --> 0:16:33.320 He thinks the FED should step in right now given 0:16:33.360 --> 0:16:35.800 a lot of the stress that we're seeing in markets. 0:16:36.040 --> 0:16:38.200 But if you listen to what Powell is saying, yes, 0:16:38.360 --> 0:16:41.400 growth probably will weaken as a result of what we're 0:16:41.400 --> 0:16:44.440 seeing right now in terms of kind of sentiment more 0:16:44.480 --> 0:16:47.880 than anything else at this point, before that soft data 0:16:47.960 --> 0:16:52.200 becomes hard data. But the inflationary impact of these tariffs 0:16:52.440 --> 0:16:54.840 would be even more troubling to the FED, would they not. 0:16:55.640 --> 0:16:57.480 Yeah, So I think that that's why the Fed's in 0:16:57.520 --> 0:16:59.920 a tough spot and why I don't really see how 0:17:00.000 --> 0:17:04.800 how easing monetary policy solves the current issue. Right So, 0:17:04.920 --> 0:17:08.600 what are lower interest rates going to do for higher 0:17:08.960 --> 0:17:11.199 import costs? They're not going to really do anything, so 0:17:11.440 --> 0:17:14.320 potentially make it worse because you can borrow. 0:17:14.040 --> 0:17:16.159 More to buy those more expensive goods. 0:17:16.880 --> 0:17:18.400 So I think in the near term, yeah, I think 0:17:18.400 --> 0:17:20.680 the Fed's a little bit stuck and it's going to 0:17:20.760 --> 0:17:23.040 have to kind of wade. 0:17:22.720 --> 0:17:23.480 Through this. 0:17:24.880 --> 0:17:28.840 Because the reality is the you know, the solve for 0:17:28.920 --> 0:17:32.480 high prices or high prices, and so likely what will happen. 0:17:32.520 --> 0:17:34.520 I think what the market's really seeing and pricing in 0:17:34.560 --> 0:17:39.119 here is that these higher costs due to the tariffs, 0:17:39.400 --> 0:17:44.159 they're not just going to increase inflation long term. You 0:17:44.240 --> 0:17:46.040 might see a short term blip, but all they're going 0:17:46.080 --> 0:17:47.879 to do is choke off the economy and then you're 0:17:47.920 --> 0:17:50.359 going to see a demand decline. 0:17:50.440 --> 0:17:52.760 So that's when the FED would need to step in. 0:17:52.840 --> 0:17:55.639 I think it's too soon right now, just like you 0:17:55.680 --> 0:17:59.679 said to because of the inflationary fears. Eventually, the increase 0:17:59.720 --> 0:18:03.119 in flo that's caused by tariffs will end up leading 0:18:03.160 --> 0:18:06.000 to a more disinflationary period and that's when the FED 0:18:06.000 --> 0:18:06.600 should step in. 0:18:06.960 --> 0:18:10.359 So that ten percent baseline tariffy on all US imports 0:18:10.800 --> 0:18:13.960 went into effect on Saturday, and I was given some 0:18:14.080 --> 0:18:17.600 news from the Port of Long Beach, California. The port 0:18:17.640 --> 0:18:20.720 is now projecting import volumes this week will drop by 0:18:20.840 --> 0:18:24.359 around fifteen percent. But if you have to put money 0:18:24.400 --> 0:18:27.200 to work right now, given everything that we're describing in 0:18:27.240 --> 0:18:30.159 the macro, what do you do? Do you seek the 0:18:30.200 --> 0:18:32.880 safety of US treasuries and call it today? Are there 0:18:32.960 --> 0:18:35.960 opportunities you mentioned in Nvidia. I'm curious as to whether 0:18:36.000 --> 0:18:38.600 you're seeing anything else in the equity tape. 0:18:38.960 --> 0:18:39.240 Yeah. 0:18:39.280 --> 0:18:41.440 I think when you look at the equities, you've got 0:18:41.440 --> 0:18:46.200 to look at what's hit the hardest but still has 0:18:46.440 --> 0:18:51.679 you know, a fundamental, fundamentally sound business model. And so 0:18:51.720 --> 0:18:54.320 when you look exaid, I still like your high quality 0:18:54.359 --> 0:18:57.080 tech names. I think you want to stay away from 0:18:57.080 --> 0:18:59.440 the low quality names right now. I don't think you 0:18:59.480 --> 0:19:02.840 want to chase uh, you know, companies that are just 0:19:03.040 --> 0:19:08.080 all about uh, you know, earnings growth or revenue growth. 0:19:08.600 --> 0:19:10.800 I think you want the companies that the business model 0:19:10.880 --> 0:19:12.040 is fairly sound. 0:19:12.080 --> 0:19:14.560 Your large cap domestic. 0:19:14.200 --> 0:19:17.080 Names that maybe aren't as I don't have all the 0:19:17.400 --> 0:19:21.240 sizzle that you might have in some smaller names. That's 0:19:21.280 --> 0:19:24.800 where you want to stay because, like I said, we 0:19:24.840 --> 0:19:26.760 don't have a crystal ball and you shouldn't be investing 0:19:26.840 --> 0:19:27.280 that way. 0:19:27.600 --> 0:19:30.080 So there could be more pain here. But you want 0:19:30.119 --> 0:19:31.800 to own companies that you think can. 0:19:31.840 --> 0:19:34.920 Overall weather this storm and then on the other side 0:19:34.960 --> 0:19:38.240 of it will outperform. So yeah, I think, like I said, 0:19:38.359 --> 0:19:41.000 looking at large cap tech in the healthcare space, we 0:19:41.080 --> 0:19:43.800 still like some names like Lily. Those really have weathered 0:19:43.800 --> 0:19:47.760 this fairly well. But still with the dips that we're seeing, 0:19:47.760 --> 0:19:49.200 and you know, names like am gin. 0:19:49.680 --> 0:19:53.000 Uh and and Lily will put money to work there. 0:19:53.760 --> 0:19:56.640 Outside of that, you know, when you're looking at Amazon 0:19:56.880 --> 0:19:59.439 or some of the consumer consumer discretionary names, those are 0:19:59.480 --> 0:20:01.240 obviously very very hard. 0:20:01.520 --> 0:20:03.439 So looking at names like VF Corp. 0:20:04.200 --> 0:20:07.040 That were down what nearly fifty percent in just the 0:20:07.080 --> 0:20:10.720 last two days, so there is value there. Those companies 0:20:10.840 --> 0:20:14.359 just didn't change overnight. There's a you know, a great 0:20:14.440 --> 0:20:16.919 cloud over them right now. But as we kind of 0:20:17.000 --> 0:20:19.840 emerge from this at some point, which we will, those 0:20:19.880 --> 0:20:21.280 companies will prosper again. 0:20:21.440 --> 0:20:24.000 And I'm wondering if you want to avoid companies like 0:20:24.119 --> 0:20:28.199 Apple and Tesla that have huge exposure to the Chinese market. 0:20:28.440 --> 0:20:30.280 Yeah, and that's that is where we're focusing. 0:20:30.400 --> 0:20:34.600 Is we're really doing that analysis to determine, Okay, if 0:20:34.640 --> 0:20:39.000 this persists, not only who is most exposed to China, 0:20:39.119 --> 0:20:42.399 but where the manufacturing shift if you did have to 0:20:42.440 --> 0:20:46.560 shift to back to the US would take a long time. 0:20:46.880 --> 0:20:49.960 And so shifting manufacturing of something like an iPhone or 0:20:50.200 --> 0:20:54.359 Tesla that takes quite a long time. So I think 0:20:55.400 --> 0:20:57.200 that those are the companies, Yeah, you want to stay 0:20:57.200 --> 0:20:59.879 away from. If it's something where there's you know, so 0:21:00.320 --> 0:21:04.640 agility around manufacturing and production, those are the companies really 0:21:04.680 --> 0:21:05.199 focused on. 0:21:05.560 --> 0:21:07.480 Adam, thank you so much for making time to chat 0:21:07.520 --> 0:21:11.040 with us. That's Adam Koons, co CIO at Winthrop Capital 0:21:11.080 --> 0:21:17.240 Management joining here on the Daybreak Asia Podcast. Thanks for 0:21:17.320 --> 0:21:21.919 listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. 0:21:22.240 --> 0:21:25.399