WEBVTT - US Imposes 25% Metals Tariffs; A Look at China's AI Sector

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. On

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<v Speaker 2>today's episode, we'll get an update on AI in China

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<v Speaker 2>with Taosha Wangshi's portfolio manager at Fidelity Investments. And later

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<v Speaker 2>we'll be taking a look at the broader market landscape

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<v Speaker 2>with Brian Crowitz. He is president at Scharf Investments. But

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<v Speaker 2>first to President Trump and the issue of tariffs. The

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<v Speaker 2>President late in the day on Monday in the US

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<v Speaker 2>issuing an executive order imposing twenty five percent tariffs on

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<v Speaker 2>all steel and aluminum imports to the US. Now over

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<v Speaker 2>the weekend he announced his intentions to do so, not

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<v Speaker 2>a big surprise. Joining me now for some reaction is Jode,

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<v Speaker 2>Metals and Mining reporter for Bloomberg News. Let's talk a

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<v Speaker 2>little bit about what's happening with the twenty five percent

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<v Speaker 2>tariffs on steel and aluminum. Thank you for making time.

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<v Speaker 2>I'm sure it's a bit for you. This really didn't

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<v Speaker 2>come as a surprise. Yesterday the President indicated that he

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<v Speaker 2>would be taking the section right.

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<v Speaker 1>Yeah, he said on Air Force One that he'd be

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<v Speaker 1>putting in twenty five percent teriffs on aluminum and steel.

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<v Speaker 1>I think that announcement came as a bit of a

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<v Speaker 1>surprise to the market. I don't think people thought he

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<v Speaker 1>would be moving so quickly. You got to remember last

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<v Speaker 1>week he said he was going to do across the

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<v Speaker 1>board tariffs on Mexico and Canada, And when he pulled

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<v Speaker 1>back on that, most people I talked to in the

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<v Speaker 1>steel and aluminum industries thought, Okay, great, that means we've

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<v Speaker 1>got till about March fourth before we have to worry

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<v Speaker 1>about tariffs again. So for him coming out and saying

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<v Speaker 1>steel aluminum specific over the weekend, right as he was

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<v Speaker 1>on his way to the Super Bowl, took a lot

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<v Speaker 1>of people off guard.

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<v Speaker 2>So we're talking about countries like Japan, South Korea, Taiwan, Vietnam.

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<v Speaker 2>Even to what extent does the US have steel making

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<v Speaker 2>capacity to make up for any reduction in flow coming

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<v Speaker 2>from foreign producers.

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<v Speaker 1>It's interesting. I was talking to an analyst today who

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<v Speaker 1>was kind of giving me back of the envelope numbers. Right,

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<v Speaker 1>if you assume maybe you were short to five to

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<v Speaker 1>six million tons, there are places that you can start

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<v Speaker 1>to make that up. You have some capacity that could

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<v Speaker 1>be coming online from restarted mills, you might also have

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<v Speaker 1>some capacity that you know, steel companies that exist right

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<v Speaker 1>now have in their back pocket as a possibility, but

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<v Speaker 1>haven't really discussed it because the idea would not be profitable.

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<v Speaker 1>Now this is something that could be profitable for them.

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<v Speaker 1>So it does seem you could make up the net short,

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<v Speaker 1>but it would also take a few years to get there,

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<v Speaker 1>so in the meantime you still need these imports.

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<v Speaker 2>The timing is very interesting because Japanese Prime Minister Issueba

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<v Speaker 2>was at the White House Friday. One of the many

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<v Speaker 2>things that was discussed Nepon Steel's proposed acquisition of US Steal.

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<v Speaker 2>We know that's pretty much done, and then news that

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<v Speaker 2>maybe Nipon would be making an investment in US Steel. Outright,

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<v Speaker 2>where are we on this?

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<v Speaker 1>Yeah, this one's a little bit weird and and people

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<v Speaker 1>are still trying to get more details about it, and

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<v Speaker 1>right now there aren't really any details. The President came

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<v Speaker 1>out alongside the Prime Minister and said, yeah, Nipon Steel

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<v Speaker 1>is going to be making an investment in US Steel.

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<v Speaker 1>There are no clear numbers out there as to what

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<v Speaker 1>those numbers are. The companies, neither US Steel or Nipon

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<v Speaker 1>Steel have come out and made any sort of official

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<v Speaker 1>comment about what they might be talking about. And honestly,

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<v Speaker 1>the investors in US Steel don't care about an investment.

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<v Speaker 1>They care about an outright purchase. Because of the purchase,

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<v Speaker 1>the merger agreement still exists, and that merger agreement says

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<v Speaker 1>each of those investors would get fifty five dollars a share.

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<v Speaker 1>Right now, the stock's trading between thirty five and forty.

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<v Speaker 1>So if you talk to these investors, when you hear, oh, well,

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<v Speaker 1>guess what you might get an investment from Nipon Steel,

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<v Speaker 1>they say, I don't care. That's not why I own

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<v Speaker 1>the stock. I own the stock because I want the deals.

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<v Speaker 2>Do you think this is going to get litigated successfully

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<v Speaker 2>or is it pretty much over?

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<v Speaker 1>The feeling is that the litigation that's out there right

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<v Speaker 1>now is a long shot. This sense is if there

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<v Speaker 1>is a chance of this deal getting done, it would

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<v Speaker 1>be by Donald Trump coming to some sort of a

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<v Speaker 1>deal or just overturning whatever the Biden administration had done

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<v Speaker 1>in terms of a block. So if Trump doesn't come

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<v Speaker 1>through and say, actually, I'm okay with this deal, the

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<v Speaker 1>sense by the market right now is that that is

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<v Speaker 1>kind of that was kind of the last hope.

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<v Speaker 2>So let's get back to the tariff story on steel

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<v Speaker 2>and aluminum. From what I learned, Trump is considering maybe

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<v Speaker 2>some exemptions from Australia unlike other companies, and this I

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<v Speaker 2>think a number of companies we're hoping for this. Maybe

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<v Speaker 2>Australia does get an exemption. Why would the US exempt Australia.

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<v Speaker 2>What's so special about Australia.

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<v Speaker 1>Well, it's a pretty great trade partnership, right, I mean,

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<v Speaker 1>the the US kind of looks at places like Australia

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<v Speaker 1>and Canada, you know, as you know the UK, as

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<v Speaker 1>these really important allies. And that's dating back to the

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<v Speaker 1>post World War two era era. As to why Australia

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<v Speaker 1>specifically might get an exemption, I'm not sure. I mean,

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<v Speaker 1>one of the things that was very clear from the

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<v Speaker 1>EEO sign today was we're doing these tariffs because way

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<v Speaker 1>too many exemptions were given by the Biden administration. Let's

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<v Speaker 1>remember that a lot of the exemptions given to the

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<v Speaker 1>tariffs were also given by the the first Trump administration, Canada, Mexico,

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<v Speaker 1>the EU, Japan. So I think what this might point

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<v Speaker 1>to is that the idea that they won't give anyone exemptions,

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<v Speaker 1>maybe that's not fully true with the idea that Australia

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<v Speaker 1>at least is saying that maybe they will get one. So,

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<v Speaker 1>like anything else with Trump, it does seem like maybe

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<v Speaker 1>a lot of this could end up being transactional.

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<v Speaker 2>Joe, thank you so much for being with us. Joe

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<v Speaker 2>do There, Metals and Mining reporter for Bloomberg News, joining

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<v Speaker 2>us here on the Daybreak Asia podcast. Let's change gears

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<v Speaker 2>here on the Daybreak Asia podcast and turn to artificial intelligence.

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<v Speaker 2>It was on Monday here in the US that the

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<v Speaker 2>head of Google Deep Mind, Demis Hassabis, addressed the recent

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<v Speaker 2>breakthrough in China's Deep Seek. Hassabis said the notion that

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<v Speaker 2>Deep Seeks spent under six million dollars to develop its

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<v Speaker 2>chatbot R one is exaggerated and a bit misleading. So

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<v Speaker 2>what's really happening with AI in China for some perspective.

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<v Speaker 2>I'm joined now by Tasha Wang, portfolio manager at Fidelity Investment.

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<v Speaker 2>Taosha joins us from our studios in Hong Kong. Thank

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<v Speaker 2>you for making time to chat with us. I know

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<v Speaker 2>you're well aware of the debate that's been happening here

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<v Speaker 2>in the States over how R one was developed and

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<v Speaker 2>whether or not that the chat bot from open Ai

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<v Speaker 2>chat shept was somehow used. There are also some investigations

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<v Speaker 2>here as to whether or not deep Seek had access

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<v Speaker 2>to some of those advanced computer chips that were under

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<v Speaker 2>US export controls. Can you help me understand where China

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<v Speaker 2>is in the race with the US over artificial intelligence?

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<v Speaker 3>Well, thanks for having me. Definitely, I think that the

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<v Speaker 3>recent debut of deep Sea has put China in a

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<v Speaker 3>very competitive spot with the US. Not that it wasn't before,

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<v Speaker 3>but certainly this has strong a lot of attention. You know,

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<v Speaker 3>there's controversy, but there's also a lot of excitement as

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<v Speaker 3>to you know, what has been accomplished not just by

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<v Speaker 3>you know, a in China, but by open source model

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<v Speaker 3>in the world collectively. So yeah, I think controversy, excitement,

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<v Speaker 3>a lot of actions, a lot of sentiments.

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<v Speaker 2>Can you help me understand whether there are more startups

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<v Speaker 2>like deep Seak in China working in artificial intelligence and

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<v Speaker 2>how many are there?

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<v Speaker 3>I believe so, I believe there are a lot of them.

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<v Speaker 3>I believe there are a lot of them as there's

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<v Speaker 3>a lot of effort at the major internet company is

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<v Speaker 3>the incumbents tech companies in China are making a lot

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<v Speaker 3>of efforts indust regard as well. And I think the

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<v Speaker 3>fact that deep Sick has made it more accessible, you know,

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<v Speaker 3>significantly lower in the cost of using AI has just

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<v Speaker 3>open the gate to allowing more people to participate and

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<v Speaker 3>contribute to AI research, to advancing the progress there. You

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<v Speaker 3>don't have to be backed by a deep pockets in

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<v Speaker 3>you know, Silicon Valley venture capital to essentially work on

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<v Speaker 3>this front, work in this very exciting area.

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<v Speaker 2>So with some of the established players, I'm thinking Ali Baba,

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<v Speaker 2>I'm thinking ten Cent, they have deep pockets. You mentioned

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<v Speaker 2>venture capital. To what extent is the government involved in

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<v Speaker 2>any of this?

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<v Speaker 3>As much as we know, Deep Sick wasn't you know,

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<v Speaker 3>it wasn't part of any of the government initiatives. It

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<v Speaker 3>wasn't affiliated with the big incumbent tents and Alibabas of

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<v Speaker 3>the world. It really shows that, you know, technological innovation

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<v Speaker 3>can be a bit of a spontaneous you know, where

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<v Speaker 3>exactly get breaks through exactly from who can be pretty spontaneous.

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<v Speaker 3>But obviously this is in the environment in the context

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<v Speaker 3>that a lot of people are making efforts towards the

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<v Speaker 3>same common goal.

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<v Speaker 2>I mentioned a moment ago that there is some concern

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<v Speaker 2>that perhaps the R one chatbot was developed using these

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<v Speaker 2>advanced chips. We know that the Nvidia chips are under

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<v Speaker 2>export controls. To what extent is China making advancements in

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<v Speaker 2>the semiconductor space.

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<v Speaker 3>Well, I think Nvidia has come out to say that

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<v Speaker 3>the chips that they use are export compliant, export restriction compliant.

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<v Speaker 3>So I mean that's the extent that outsiders like us know.

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<v Speaker 3>I think deep Seak represent mainly algorithmic improvement in how

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<v Speaker 3>to use the incumbent chips, rather than you know, coming

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<v Speaker 3>up with advanced chips that all of a sudden can't

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<v Speaker 3>do new and beautiful things. I think that efficiency game

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<v Speaker 3>is really the you know, the breakthrough here, and that

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<v Speaker 3>efficiency gang has been you know, shared by to the world,

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<v Speaker 3>and you know a lot of people are amaze those,

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<v Speaker 3>so to speak, by the significant algorithmic improvement.

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<v Speaker 2>No doubt about that. I guess I was asking whether

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<v Speaker 2>concurrent with that that there were also some advancements being

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<v Speaker 2>made in Chinese semiconductor manufacturing.

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<v Speaker 3>Do we know? I mean, I know it's necessarily I

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<v Speaker 3>don't think it's implied from the deep Sick advance Uh,

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<v Speaker 3>you know product Okay, so it's not not implied there.

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<v Speaker 3>But are they concurrently making progress. I'm sure they're trying.

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<v Speaker 2>I'm sure they are too, But there are export controls

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<v Speaker 2>when it comes to some of the lithography, some of

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<v Speaker 2>the machines that are manufactured in Europe that are used

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<v Speaker 2>to really produce some of these very sophisticated high end chips.

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<v Speaker 2>I know that. But talk to me a little bit

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<v Speaker 2>about your thesis on the overall technology industry in China.

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<v Speaker 2>Is this something that you're bullish on right now to

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<v Speaker 2>a great degree?

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<v Speaker 3>I think yes. I think the market is certainly short.

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<v Speaker 3>Answer to your question is yes, I think there's more

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<v Speaker 3>reason to be to be polish about the development there.

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<v Speaker 3>I think there are two sort of arguments to be

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<v Speaker 3>made there when evaluating, you know, the China tech in

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<v Speaker 3>the context of global tech with its relationship to the

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<v Speaker 3>US tech. Number one is, as in deep sequels have

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<v Speaker 3>to prompt a careful reassessment of the incumbent export uh

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<v Speaker 3>the US chip export restrictions. Certainly, the risk is that

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<v Speaker 3>if you continue to maintain such a strict restriction, the

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<v Speaker 3>risks than the US risk being cut off from you know,

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<v Speaker 3>the technological progress made in China which now proves to

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<v Speaker 3>be pretty significant. H And also there's the balance of

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<v Speaker 3>payment argument, so that is certainly I think the risk

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<v Speaker 3>of whether the arguments formed against the export chip uh

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<v Speaker 3>chip export restriction has become more balanced than than the

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<v Speaker 3>market is currently pricing. And the second part is just

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<v Speaker 3>that I think the US and Chinese tech communities are

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<v Speaker 3>finding their interests more aligned after deep Sick. So for example,

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<v Speaker 3>all the US major cloud providers have you know hosted

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<v Speaker 3>Deepsick on their cloud platform. And you know, the more

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<v Speaker 3>popular the model gets more cloud services revenue to get.

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<v Speaker 3>That's just you know, simple mass. But also there's you know,

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<v Speaker 3>we are in that with the significant job in model costs,

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<v Speaker 3>more value is going to be created from you know

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<v Speaker 3>AI applications, and US is abundant you know opportunities for

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<v Speaker 3>these value creations. So you know, cheaper model is like

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<v Speaker 3>lower raw material costs for you know AI application companies,

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<v Speaker 3>And that's just you know aligned interest right there. Also

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<v Speaker 3>there's a goal for you know, Agi et cetera. And

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<v Speaker 3>then the fact that TikTok is potentially becoming a JV

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<v Speaker 3>opens the door for you know, finding common ground despite

0:12:31.800 --> 0:12:33.480
<v Speaker 3>you know, tech rivalry between the two countries.

0:12:33.520 --> 0:12:35.640
<v Speaker 2>It's not just tech rivalry. I mean the threat of

0:12:35.720 --> 0:12:39.920
<v Speaker 2>tariffs now and from the Chinese side, antitrust investigations into

0:12:40.000 --> 0:12:42.840
<v Speaker 2>major tech players. There's a lot of tension here and

0:12:42.880 --> 0:12:45.760
<v Speaker 2>I'm wondering whether or not the Deep Seek is only

0:12:45.800 --> 0:12:47.720
<v Speaker 2>going to exacerbate that to some extent.

0:12:48.480 --> 0:12:50.480
<v Speaker 3>I don't. I mean, I think the two countries has

0:12:50.520 --> 0:12:54.520
<v Speaker 3>gone through, you know, a few years of decoupling, escalating tension.

0:12:55.120 --> 0:12:57.800
<v Speaker 3>It's not going to be sunshine overnight. But I think,

0:12:57.880 --> 0:13:01.000
<v Speaker 3>you know, through two several or but one step back

0:13:01.080 --> 0:13:04.640
<v Speaker 3>maybe I think that's just a possibility of striving for

0:13:04.720 --> 0:13:08.599
<v Speaker 3>a common ground is I think the possibility is a

0:13:08.600 --> 0:13:10.880
<v Speaker 3>little bit greater after the Deep Seak revelation.

0:13:11.080 --> 0:13:14.400
<v Speaker 2>Last question before you go, you mentioned TikTok. Do you

0:13:14.440 --> 0:13:16.360
<v Speaker 2>have a sense of how this is going to get resolved?

0:13:16.880 --> 0:13:20.400
<v Speaker 3>I have no idea, actually have not an insider, but

0:13:20.440 --> 0:13:23.280
<v Speaker 3>only to speculate. I think that you know, the simple

0:13:23.480 --> 0:13:26.520
<v Speaker 3>fact that a JV is being talked about and seriously

0:13:26.559 --> 0:13:30.320
<v Speaker 3>contemplated is you know it was unthinkable just months ago.

0:13:30.520 --> 0:13:32.800
<v Speaker 2>Yeah, joint venture between the US and China on the

0:13:32.840 --> 0:13:36.120
<v Speaker 2>tech front, specifically as it relates to TikTok, and we

0:13:36.240 --> 0:13:39.720
<v Speaker 2>know what a sensitive topic, that is for sure, especially

0:13:39.760 --> 0:13:42.160
<v Speaker 2>in the States. Taosha, thank you so much for joining us.

0:13:42.160 --> 0:13:46.520
<v Speaker 2>Tasha Wong, their portfolio manager at Fidelity International, joining us

0:13:46.520 --> 0:13:58.000
<v Speaker 2>here on the Daybreak Asia podcast. Welcome back to the

0:13:58.040 --> 0:14:02.000
<v Speaker 2>Daybreak Asia podcast. I'm Doug. Markets are now shifting their

0:14:02.080 --> 0:14:05.120
<v Speaker 2>focus to this week's eco data here in the US,

0:14:05.200 --> 0:14:08.760
<v Speaker 2>I mean, consumer prices and retail sales will also have

0:14:08.880 --> 0:14:12.439
<v Speaker 2>congressional testimony this week from Feedshair J. Powell for a

0:14:12.480 --> 0:14:15.600
<v Speaker 2>closer look. I'm joined now by Brian Craws. He is

0:14:15.679 --> 0:14:20.960
<v Speaker 2>the president at Sharp Investments, joining from Los Gatos, California. Brian,

0:14:21.040 --> 0:14:23.360
<v Speaker 2>thank you for making time. I'm curious to get your

0:14:23.400 --> 0:14:26.600
<v Speaker 2>take on where we stand with inflation. The markets may

0:14:26.640 --> 0:14:29.080
<v Speaker 2>have received a bit of a sigh of relief today

0:14:29.360 --> 0:14:32.600
<v Speaker 2>the New York Fed's estimate on inflation expectations for the

0:14:32.640 --> 0:14:36.120
<v Speaker 2>next year and the next three years we're both unchanged

0:14:36.160 --> 0:14:39.120
<v Speaker 2>in the month of January at around three percent. Where

0:14:39.120 --> 0:14:42.400
<v Speaker 2>do you think we are now in this inflation cycle?

0:14:43.200 --> 0:14:45.840
<v Speaker 4>I mean, thank you for having me. The inflation cycle

0:14:46.000 --> 0:14:48.840
<v Speaker 4>is interesting. You had a real big spike post COVID

0:14:49.480 --> 0:14:52.040
<v Speaker 4>that obviously was a big deal in the election. Even

0:14:52.080 --> 0:14:54.640
<v Speaker 4>though inflation had been coming down going into the election,

0:14:55.560 --> 0:14:59.720
<v Speaker 4>but unfortunately a lot of the kind of gains have

0:14:59.800 --> 0:15:02.960
<v Speaker 4>ourlready been seen and now we're sort of stuck at

0:15:03.000 --> 0:15:04.640
<v Speaker 4>a certain level. And then you throw in all this

0:15:04.720 --> 0:15:08.520
<v Speaker 4>Trump tariff volatility, and it's going to be tough for

0:15:08.560 --> 0:15:14.040
<v Speaker 4>the Fed potentially, as CPI may stay higher than they

0:15:14.040 --> 0:15:15.320
<v Speaker 4>would they would like to see.

0:15:15.600 --> 0:15:18.400
<v Speaker 2>It's interesting I was looking at data from Goldmunt Sachs

0:15:18.440 --> 0:15:22.360
<v Speaker 2>showing that hedge funds recently emerged as some big buyers

0:15:22.360 --> 0:15:25.800
<v Speaker 2>of US stocks in the most recent week. Is this

0:15:25.880 --> 0:15:27.520
<v Speaker 2>the time that you want to take a lot of

0:15:27.600 --> 0:15:28.000
<v Speaker 2>risk on?

0:15:29.240 --> 0:15:31.360
<v Speaker 4>We think you still want to be a little bit cautious. However,

0:15:31.600 --> 0:15:35.680
<v Speaker 4>I would say, you know, you can pick your spots.

0:15:36.000 --> 0:15:41.120
<v Speaker 4>You know what's really masked, The big tech is really masked.

0:15:41.120 --> 0:15:43.720
<v Speaker 4>There's some other values out there. So stocks are probably

0:15:43.840 --> 0:15:46.520
<v Speaker 4>still a good place to be, but you got to

0:15:46.520 --> 0:15:50.200
<v Speaker 4>be a little bit more cautious. And you know, they're

0:15:50.200 --> 0:15:52.160
<v Speaker 4>probably going to be a better place to be than bonds,

0:15:52.200 --> 0:15:55.200
<v Speaker 4>given our expectation that rates are going to be higher

0:15:55.240 --> 0:15:56.520
<v Speaker 4>than many investors are thinking.

0:15:56.600 --> 0:15:59.600
<v Speaker 2>We were talking a moment ago about the new tariffs

0:15:59.600 --> 0:16:04.280
<v Speaker 2>the Resident launched today twenty five percent on all imports

0:16:04.320 --> 0:16:07.600
<v Speaker 2>of steel and aluminum, and the metal producers were in

0:16:07.600 --> 0:16:10.400
<v Speaker 2>the spotlight in the equity market today. I think US

0:16:10.440 --> 0:16:12.320
<v Speaker 2>steel was up more than four and a half percent,

0:16:12.440 --> 0:16:15.120
<v Speaker 2>al CoA up more than two percent. Would you want

0:16:15.200 --> 0:16:18.760
<v Speaker 2>to be long material producers in this type of environment.

0:16:19.080 --> 0:16:22.880
<v Speaker 4>Well, I think you want to be diversified. Material producers

0:16:22.920 --> 0:16:26.040
<v Speaker 4>are certainly one area. One of the interesting things that

0:16:26.920 --> 0:16:29.640
<v Speaker 4>we've seen in our study is that if you look

0:16:29.640 --> 0:16:32.240
<v Speaker 4>at the ten year treasury, when it's above four percent,

0:16:32.840 --> 0:16:37.320
<v Speaker 4>value stocks tend to outperform, and things like steel is

0:16:37.320 --> 0:16:40.080
<v Speaker 4>certainly in the value camp. But when rates are below

0:16:40.120 --> 0:16:42.640
<v Speaker 4>four percent, you get growth out performing. And we've just

0:16:42.800 --> 0:16:46.280
<v Speaker 4>been through a good fifteen year period where rates were

0:16:46.280 --> 0:16:49.120
<v Speaker 4>below four percent almost the entire time. So investors have

0:16:49.160 --> 0:16:51.840
<v Speaker 4>really gotten used to, oh, I just buy tech and

0:16:51.920 --> 0:16:55.480
<v Speaker 4>forget about it. We think going forward, you know, investors

0:16:55.480 --> 0:16:57.000
<v Speaker 4>are going to want to look in all kinds of

0:16:57.000 --> 0:17:01.600
<v Speaker 4>other areas, not only like industrial and materials type companies,

0:17:01.640 --> 0:17:05.760
<v Speaker 4>but also other areas like financials and healthcare and energy.

0:17:05.800 --> 0:17:08.680
<v Speaker 4>We think are all good places to potentially be outside

0:17:08.680 --> 0:17:09.480
<v Speaker 4>of technology.

0:17:09.600 --> 0:17:12.520
<v Speaker 2>So on Tuesday, it will be the first of two

0:17:12.600 --> 0:17:16.480
<v Speaker 2>days of testimony from Fed sha J. Powell. He's expected

0:17:16.520 --> 0:17:19.080
<v Speaker 2>to say that the FED has time to assess the

0:17:19.200 --> 0:17:23.760
<v Speaker 2>impact of Trump's new tariff policy. Immigration is obviously a

0:17:23.800 --> 0:17:27.520
<v Speaker 2>factor on the economy right now, as are any type

0:17:27.560 --> 0:17:31.399
<v Speaker 2>of tax cut that we may see in the future. Here,

0:17:31.800 --> 0:17:34.320
<v Speaker 2>broadly speaking, how do you think Powell is going to

0:17:34.359 --> 0:17:35.760
<v Speaker 2>thread the needle so to speak?

0:17:36.280 --> 0:17:38.720
<v Speaker 4>Well, I don't have Powell's job. He has to thread

0:17:38.720 --> 0:17:41.200
<v Speaker 4>the needle among a number of things. First, he's got

0:17:41.200 --> 0:17:44.479
<v Speaker 4>investors to keep happy. Second of all, he's got to

0:17:44.960 --> 0:17:47.359
<v Speaker 4>pay attention to the new president, who's obviously going to

0:17:47.400 --> 0:17:49.439
<v Speaker 4>be watching what he says. I think what he's going

0:17:49.520 --> 0:17:52.280
<v Speaker 4>to do is he's going to thread the needle by saying, hey,

0:17:52.320 --> 0:17:56.320
<v Speaker 4>we're data dependent. We've made a lot of progress inflations

0:17:56.320 --> 0:17:57.960
<v Speaker 4>come down a lot from where it was a couple

0:17:58.000 --> 0:18:00.960
<v Speaker 4>of years ago, but we still don't know what we

0:18:01.000 --> 0:18:02.679
<v Speaker 4>don't know, and so we're going to have to just

0:18:02.720 --> 0:18:04.920
<v Speaker 4>sort of play it by the data. And I think

0:18:04.960 --> 0:18:08.000
<v Speaker 4>that's what he's going to do. Markets will probably be

0:18:08.040 --> 0:18:11.520
<v Speaker 4>okay with that. You know, six months ago they might

0:18:11.520 --> 0:18:13.919
<v Speaker 4>not have been, as investors are really expecting rates to

0:18:13.920 --> 0:18:16.320
<v Speaker 4>come down a lot. But I think many investors have

0:18:16.359 --> 0:18:18.679
<v Speaker 4>gotten comfortable with the fact that the Fed is not

0:18:18.720 --> 0:18:20.200
<v Speaker 4>going to do five or six cuts this year.

0:18:20.600 --> 0:18:21.960
<v Speaker 2>So if you had to give me a sense of

0:18:22.000 --> 0:18:24.880
<v Speaker 2>where the bond market may be headed in the next

0:18:24.920 --> 0:18:28.159
<v Speaker 2>ten months or so, am I looking closer to a

0:18:28.240 --> 0:18:29.760
<v Speaker 2>five percent yield on the tenure?

0:18:30.160 --> 0:18:33.040
<v Speaker 4>Yeah? We think so. You know, that's not obviously where

0:18:33.080 --> 0:18:35.280
<v Speaker 4>the tenure is today at around four and a half.

0:18:36.400 --> 0:18:40.560
<v Speaker 4>But we think ultimately it's not so much the tariffs themselves,

0:18:40.560 --> 0:18:46.280
<v Speaker 4>although those could cause inflation, it's really the volatility that

0:18:46.359 --> 0:18:50.240
<v Speaker 4>could spook investors a little bit, particularly if they don't

0:18:50.240 --> 0:18:52.639
<v Speaker 4>see CPI coming down. So we wouldn't be surprised to

0:18:52.680 --> 0:18:54.760
<v Speaker 4>see the ten year treasury closer to five or even

0:18:54.760 --> 0:18:59.959
<v Speaker 4>above five. And again we think that'll help value stocks.

0:19:00.080 --> 0:19:02.439
<v Speaker 4>Detriment to grow stocks doesn't mean stocks have to be

0:19:02.440 --> 0:19:05.120
<v Speaker 4>a bad place to be, but you know, we'd say

0:19:05.119 --> 0:19:08.840
<v Speaker 4>temporary expectations. We've just come off to twenty percent plus

0:19:08.920 --> 0:19:10.840
<v Speaker 4>years and so it's going to be tougher to get

0:19:10.880 --> 0:19:14.200
<v Speaker 4>that kind of return, but relative to bonds, we still

0:19:14.200 --> 0:19:15.639
<v Speaker 4>think stocks will be a good place to be.

0:19:15.920 --> 0:19:17.600
<v Speaker 2>Brian will leave it there, Thank you so much for

0:19:17.680 --> 0:19:21.560
<v Speaker 2>chatting with us. Brian kraw is their president at Scharf Investments.

0:19:21.680 --> 0:19:26.600
<v Speaker 2>Joining us here on the Daybreak Asia Podcast. Thanks for

0:19:26.680 --> 0:19:31.280
<v Speaker 2>listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

0:19:31.600 --> 0:19:34.760
<v Speaker 2>Each weekday, we look at the story shaping markets, finance,

0:19:35.080 --> 0:19:38.199
<v Speaker 2>and geopolitics in the Asia Pacific. You can find us

0:19:38.200 --> 0:19:42.440
<v Speaker 2>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:19:42.440 --> 0:19:45.520
<v Speaker 2>else you listen. Join us again tomorrow for insight on

0:19:45.560 --> 0:19:49.720
<v Speaker 2>the market moves from Hong Kong to Singapore and Australia.

0:19:50.160 --> 0:19:52.600
<v Speaker 2>I'm Doug Chrisner, and this is Bloomberg