WEBVTT - Tracking the Catalysts for Asian Market Outflows

0:00:02.520 --> 0:00:07.040
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:10.240 --> 0:00:13.600
<v Speaker 2>Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

0:00:14.000 --> 0:00:17.920
<v Speaker 2>President Trump's tariffs on US imports of steel and aluminum

0:00:18.040 --> 0:00:21.840
<v Speaker 2>have sparked retaliation both from the European Union and Canada

0:00:21.920 --> 0:00:25.760
<v Speaker 2>as well. Markets are now bracing for those reciprocal tariffs

0:00:25.760 --> 0:00:28.640
<v Speaker 2>from the Trump administration. They are set to be announced

0:00:28.840 --> 0:00:32.800
<v Speaker 2>April to second. So how are em investors setting up

0:00:32.840 --> 0:00:36.080
<v Speaker 2>before then? Joining me now is vvck Supermanium. He is

0:00:36.120 --> 0:00:40.520
<v Speaker 2>founder also the CEO of th Global Capital. Joining us

0:00:40.640 --> 0:00:43.560
<v Speaker 2>from London. Vveck, thank you so much for making time

0:00:43.560 --> 0:00:46.920
<v Speaker 2>to chat with us. I think all major Asian markets

0:00:46.960 --> 0:00:51.919
<v Speaker 2>have seen outflows into the month of March. South Korea, Taiwan.

0:00:52.159 --> 0:00:55.680
<v Speaker 2>Outflows in those jurisdictions seem to have accelerated a bit

0:00:56.080 --> 0:00:59.200
<v Speaker 2>in recent weeks, and I'm wondering whether that's all about

0:00:59.240 --> 0:01:01.360
<v Speaker 2>tariffs or that there's something else afoot.

0:01:01.880 --> 0:01:05.080
<v Speaker 1>Look, I think clearly the developments over the last few

0:01:05.160 --> 0:01:09.000
<v Speaker 1>days have spooked markets, particularly the significant sell off in

0:01:09.400 --> 0:01:13.440
<v Speaker 1>the US. Our view is is that and of course

0:01:13.440 --> 0:01:18.319
<v Speaker 1>there also flows have within em have been interesting. You know,

0:01:18.680 --> 0:01:23.039
<v Speaker 1>last year everybody wrote wrote of China and then with

0:01:23.120 --> 0:01:27.160
<v Speaker 1>the rise of Deep Seek, lots of capital flowed into

0:01:27.240 --> 0:01:30.520
<v Speaker 1>China and out of India, and.

0:01:31.040 --> 0:01:32.959
<v Speaker 3>We think that in general, you know, this too, this

0:01:33.080 --> 0:01:33.759
<v Speaker 3>too will pass.

0:01:34.160 --> 0:01:38.000
<v Speaker 1>As far as uh, the impact of tariffs is concerned, yes,

0:01:38.040 --> 0:01:40.760
<v Speaker 1>we're in for a few months of months of pain,

0:01:41.360 --> 0:01:44.600
<v Speaker 1>but really, you know, what we are focused on is

0:01:44.600 --> 0:01:48.320
<v Speaker 1>is actually, you know, finding opportunity in in this this Spain,

0:01:49.280 --> 0:01:51.840
<v Speaker 1>because valuations are a lot more attractive.

0:01:52.000 --> 0:01:55.080
<v Speaker 2>I'm wondering whether the opportunities are in China. I mean,

0:01:55.120 --> 0:01:57.600
<v Speaker 2>you mentioned the deep Seek story, but we also have

0:01:57.680 --> 0:02:01.960
<v Speaker 2>to recognize the Annual Congress that just concluded, and it

0:02:02.040 --> 0:02:05.960
<v Speaker 2>seems as though leadership confirmed what people were hoping for

0:02:06.080 --> 0:02:09.400
<v Speaker 2>expansionary fiscal policy. Does that cause you to become a

0:02:09.440 --> 0:02:12.080
<v Speaker 2>little bit more bullish on the China story, Well.

0:02:11.880 --> 0:02:14.880
<v Speaker 1>Look, the Hangsang Tech Index has risen by thirty five

0:02:14.880 --> 0:02:16.799
<v Speaker 1>percent a year to date.

0:02:17.000 --> 0:02:19.359
<v Speaker 3>So those have been significant gains.

0:02:20.320 --> 0:02:22.320
<v Speaker 1>And you know, obviously the rise of Chinese e I

0:02:22.480 --> 0:02:27.560
<v Speaker 1>models have boosted market sentiment, as have presidencies engagement with

0:02:27.919 --> 0:02:33.560
<v Speaker 1>business leaders, including Jakmar, which have improved investor confidence. Continued

0:02:33.639 --> 0:02:37.919
<v Speaker 1>reforms and stimulus also are expected, and there have been

0:02:37.919 --> 0:02:42.320
<v Speaker 1>flows to China from other emerging markets. What we need

0:02:42.360 --> 0:02:45.920
<v Speaker 1>to see going forward is you know, first of all,

0:02:46.040 --> 0:02:50.320
<v Speaker 1>EI developments like Deep Seek haven't yet significantly impacted earnings,

0:02:51.360 --> 0:02:53.840
<v Speaker 1>and you know we now need to need.

0:02:53.720 --> 0:02:56.480
<v Speaker 3>To see but that positive impact.

0:02:56.840 --> 0:02:59.880
<v Speaker 1>And you know, actual numbers, the expectations really are just

0:03:00.000 --> 0:03:01.960
<v Speaker 1>two to three percent EPs upgrades.

0:03:02.639 --> 0:03:04.919
<v Speaker 3>And also you know, more confidence.

0:03:04.400 --> 0:03:08.440
<v Speaker 1>And charities needed on China's regulatory policy towards big tech

0:03:08.840 --> 0:03:11.160
<v Speaker 1>and the tech sector as a whole.

0:03:11.360 --> 0:03:13.600
<v Speaker 2>So next week we'll have the earnings from ten Cent.

0:03:13.680 --> 0:03:16.440
<v Speaker 2>How do you evaluate the larger companies, whether it's a

0:03:16.520 --> 0:03:20.040
<v Speaker 2>ten Cent or even Ali Bob, Are there opportunities there?

0:03:20.240 --> 0:03:23.320
<v Speaker 2>And I'm thinking as it relates to AI some of

0:03:23.360 --> 0:03:26.280
<v Speaker 2>the cloud computing that those companies are involved in.

0:03:26.840 --> 0:03:29.560
<v Speaker 1>Yeah, there are certainly opportunities, especially because you know a

0:03:29.639 --> 0:03:33.800
<v Speaker 1>lot of software in China is still on prem and

0:03:33.960 --> 0:03:38.040
<v Speaker 1>the migration to the cloud is a key opportunity and

0:03:38.240 --> 0:03:39.920
<v Speaker 1>that is essential for EI.

0:03:40.400 --> 0:03:41.600
<v Speaker 3>So in general, we.

0:03:41.880 --> 0:03:45.680
<v Speaker 1>Believe that you know, the easy money has been made

0:03:45.800 --> 0:03:50.000
<v Speaker 1>in China and obviously the developments are great for the

0:03:50.080 --> 0:03:54.000
<v Speaker 1>Chinese tech sector, but we'll need to actually see follow

0:03:54.080 --> 0:03:59.200
<v Speaker 1>through action over the next year based on the fundamentals.

0:03:58.600 --> 0:04:01.040
<v Speaker 2>You mentioned a moment ago that money was moving away

0:04:01.080 --> 0:04:04.040
<v Speaker 2>from India and back to China. How do you evaluate

0:04:04.120 --> 0:04:05.520
<v Speaker 2>the Indian market right now?

0:04:05.880 --> 0:04:09.160
<v Speaker 1>Right so, you know, India, we believe is one of

0:04:09.160 --> 0:04:13.720
<v Speaker 1>the most attractive em markets, if not the most attractive market.

0:04:14.440 --> 0:04:17.280
<v Speaker 1>We believe that it remains less exposed to trade risks

0:04:17.320 --> 0:04:22.359
<v Speaker 1>than smaller export heavy economies, given that it's it's quite insulated,

0:04:22.360 --> 0:04:26.520
<v Speaker 1>it's it's very domestic oriented. The economic outlook for India is,

0:04:26.800 --> 0:04:29.920
<v Speaker 1>you know, really the GDP growth forecast it was seven

0:04:29.920 --> 0:04:32.599
<v Speaker 1>point eight percent last year. It's it's expected to be

0:04:32.640 --> 0:04:35.920
<v Speaker 1>six point four percent in the current tier and then

0:04:35.960 --> 0:04:40.240
<v Speaker 1>gradually accelerating from next year to six point five percent.

0:04:40.960 --> 0:04:44.039
<v Speaker 1>It remains the fastest growing large economy, outperforming you know,

0:04:44.080 --> 0:04:46.400
<v Speaker 1>peers like the US which are growing at you know,

0:04:46.720 --> 0:04:49.880
<v Speaker 1>over two percent, and Eurozone in China which is growing

0:04:49.880 --> 0:04:51.760
<v Speaker 1>at for four and a half percent. A lot of

0:04:51.839 --> 0:04:56.800
<v Speaker 1>key indicators have picked up in India and we believe

0:04:56.880 --> 0:05:00.279
<v Speaker 1>that the worst is either behind us or will be

0:05:00.279 --> 0:05:02.920
<v Speaker 1>behind us in the next two to three months. The

0:05:03.040 --> 0:05:08.160
<v Speaker 1>Nifty index is roughly twenty to five hundred. You know,

0:05:08.560 --> 0:05:12.080
<v Speaker 1>there could be some downside to say twenty k or

0:05:12.160 --> 0:05:16.800
<v Speaker 1>nineteen five hundred. That's our technical view is that nineteen

0:05:16.880 --> 0:05:21.039
<v Speaker 1>five hundred is probably where the bottom is and we

0:05:21.120 --> 0:05:23.880
<v Speaker 1>expect that to be reached in the next you know,

0:05:23.880 --> 0:05:24.760
<v Speaker 1>two to three months.

0:05:25.080 --> 0:05:26.840
<v Speaker 3>Obviously, don't hold us to it.

0:05:27.080 --> 0:05:30.360
<v Speaker 1>Okay, hard to call the bottom, but we think that

0:05:30.400 --> 0:05:35.440
<v Speaker 1>we've got into an attractive zone in India where I

0:05:35.560 --> 0:05:40.480
<v Speaker 1>should start nibbling and perhaps loading up as the next

0:05:40.760 --> 0:05:41.520
<v Speaker 1>couple of months past.

0:05:41.640 --> 0:05:43.880
<v Speaker 2>So what are the industries in India that you want

0:05:43.920 --> 0:05:47.080
<v Speaker 2>to have exposure to right now? Is it the banking compoundent,

0:05:47.360 --> 0:05:51.120
<v Speaker 2>is it more tech related or focused on the consumer?

0:05:51.240 --> 0:05:51.760
<v Speaker 2>Which is it?

0:05:52.160 --> 0:05:54.599
<v Speaker 1>The key themes you know that we are focusing on

0:05:54.640 --> 0:05:58.160
<v Speaker 1>India are financials which should grow you know, higher than

0:05:58.279 --> 0:06:02.520
<v Speaker 1>GDP growth rates. And there's you know, there are a

0:06:02.520 --> 0:06:05.120
<v Speaker 1>lot of many attractive companies there. Obviously, you know, the

0:06:05.400 --> 0:06:09.000
<v Speaker 1>last couple of decades have produced some some stupendous winners

0:06:09.000 --> 0:06:12.120
<v Speaker 1>and financials in India, for example Bad Judge Finance, which

0:06:12.160 --> 0:06:15.640
<v Speaker 1>was one thousand, seven hundred bagger over that the last

0:06:15.720 --> 0:06:18.840
<v Speaker 1>you know, twenty odd years, and also stallwarts like ed

0:06:18.880 --> 0:06:22.760
<v Speaker 1>SDFC Bank, and we see that you know, in spaces

0:06:22.880 --> 0:06:29.080
<v Speaker 1>like housing finance, the non banking financial sector and selectively banks.

0:06:29.880 --> 0:06:33.200
<v Speaker 1>There are some some exciting companies out there. There's also

0:06:33.240 --> 0:06:37.400
<v Speaker 1>the digitization team. India is going through a massive phase

0:06:37.440 --> 0:06:41.080
<v Speaker 1>of digitization and there are plays around that and that

0:06:41.120 --> 0:06:44.560
<v Speaker 1>includes you know, payments and an e commerce adoption and

0:06:45.040 --> 0:06:47.479
<v Speaker 1>also selectively consumer discretionary FEVERC.

0:06:47.560 --> 0:06:49.640
<v Speaker 2>Before I let you go, I know you're in London there,

0:06:49.680 --> 0:06:52.440
<v Speaker 2>so I'd like to get your take on the movement

0:06:52.480 --> 0:06:57.360
<v Speaker 2>of money into European markets one and Two, how are

0:06:57.400 --> 0:07:00.480
<v Speaker 2>people in the UK feeling right now about it seems

0:07:00.480 --> 0:07:01.640
<v Speaker 2>to be a global trade war.

0:07:02.279 --> 0:07:05.599
<v Speaker 1>I think people in the UK are feeling feeling pretty

0:07:05.600 --> 0:07:10.000
<v Speaker 1>good about you know, Stama's recent visit to the US

0:07:10.240 --> 0:07:14.440
<v Speaker 1>and you know what seemed like a diplomatic win, and

0:07:14.680 --> 0:07:17.080
<v Speaker 1>we are feeling somewhat insulated.

0:07:17.000 --> 0:07:19.960
<v Speaker 3>You know, as a result. Also, of course, you know, Europe.

0:07:20.240 --> 0:07:24.040
<v Speaker 1>European markets seemed to have done decently in recent months,

0:07:24.680 --> 0:07:26.960
<v Speaker 1>so you know, certainly seems like a glimmer of hope

0:07:27.680 --> 0:07:32.080
<v Speaker 1>or more for Europe after a long phase of underperformance.

0:07:32.320 --> 0:07:34.960
<v Speaker 2>A long phase, I think that's an understatement. VVCK thank

0:07:35.000 --> 0:07:38.200
<v Speaker 2>you so much for joining us. VVAK Supermanium, founder CEO

0:07:38.360 --> 0:07:41.880
<v Speaker 2>of th H Global Capital, Joining from London here on

0:07:41.880 --> 0:07:53.640
<v Speaker 2>the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

0:07:53.680 --> 0:07:56.600
<v Speaker 2>I'm Doug Krisner. Most of the equity market gained ground

0:07:56.640 --> 0:08:00.000
<v Speaker 2>today after two days of heavy losses, and today's advance

0:08:00.320 --> 0:08:03.640
<v Speaker 2>followed a cool reading on consumer prices. Even so, I

0:08:03.640 --> 0:08:06.400
<v Speaker 2>think it's important to point out the risk of inflation

0:08:06.720 --> 0:08:09.720
<v Speaker 2>rearing back up. We have seen a series of tariffs

0:08:09.760 --> 0:08:12.720
<v Speaker 2>and as a result, prices are expected to rise on

0:08:12.760 --> 0:08:16.160
<v Speaker 2>a variety of goods that could test the resilience of

0:08:16.240 --> 0:08:19.920
<v Speaker 2>American consumers and, by extension, the broader economy for a

0:08:19.920 --> 0:08:22.560
<v Speaker 2>closer look. Joining me now is Burns McKinney. He is

0:08:22.600 --> 0:08:27.559
<v Speaker 2>Managing director also senior portfolio manager at NFJ Investment Group.

0:08:27.840 --> 0:08:30.680
<v Speaker 2>Burns on the line from Dallas, Texas. How are you

0:08:30.760 --> 0:08:33.840
<v Speaker 2>feeling about the price action over the last couple of days, Burns?

0:08:34.559 --> 0:08:36.200
<v Speaker 4>A lot of what we're seeing in the last couple

0:08:36.200 --> 0:08:38.560
<v Speaker 4>of days just really, I hate to say it, but

0:08:39.040 --> 0:08:42.360
<v Speaker 4>a lot of us getting back to policymakers. You know,

0:08:42.400 --> 0:08:45.000
<v Speaker 4>one way we like to think about the Trump presidency

0:08:45.160 --> 0:08:46.720
<v Speaker 4>is that you know, and this is going back to

0:08:46.880 --> 0:08:49.520
<v Speaker 4>the way it was twenty sixteen during Trump one point zero,

0:08:49.520 --> 0:08:52.880
<v Speaker 4>but you have sort of imagine the angels on the shoulders.

0:08:52.880 --> 0:08:55.360
<v Speaker 4>You have the good Trump and the bad Trump. On

0:08:55.360 --> 0:08:57.840
<v Speaker 4>one side, you have the things that the market likes,

0:08:57.840 --> 0:09:00.559
<v Speaker 4>like tax cuts and deregulation, and then on the other

0:09:00.600 --> 0:09:04.400
<v Speaker 4>side you have tariffs and trade wars. And you know, early,

0:09:04.520 --> 0:09:06.880
<v Speaker 4>I think, you know, shortly after the inauguration, investors were

0:09:06.920 --> 0:09:09.960
<v Speaker 4>focused a bit more on the potential for tax cuts,

0:09:10.000 --> 0:09:13.959
<v Speaker 4>But of late the narrative has really shifted to tariffs

0:09:14.040 --> 0:09:16.960
<v Speaker 4>as as well as just the uncertainty around those tariffs.

0:09:17.000 --> 0:09:18.400
<v Speaker 4>I think that one of the things that the.

0:09:18.360 --> 0:09:22.640
<v Speaker 5>Market doesn't like. It doesn't like uncertainty as much as anything.

0:09:22.840 --> 0:09:25.240
<v Speaker 4>And you know, if you have you know, tariff and

0:09:25.320 --> 0:09:27.760
<v Speaker 4>positions and then reprieved and tariff and reprieve.

0:09:28.240 --> 0:09:29.360
<v Speaker 5>Yeah, I've been kind of laughing.

0:09:29.520 --> 0:09:31.400
<v Speaker 4>I haven't seen a thing this on again off against

0:09:31.400 --> 0:09:35.320
<v Speaker 4>since Ross and Creacial on friends. But the markets definitely

0:09:35.960 --> 0:09:36.960
<v Speaker 4>don't like that a whole lot.

0:09:37.160 --> 0:09:39.160
<v Speaker 2>You know, after the election, I think many in the

0:09:39.200 --> 0:09:42.200
<v Speaker 2>market were of the view that the threat of tariffs

0:09:42.200 --> 0:09:45.400
<v Speaker 2>were nothing more than a negotiating strategy. But now it

0:09:45.520 --> 0:09:49.760
<v Speaker 2>seems like we're into something that's much more ideological. Does

0:09:49.800 --> 0:09:50.520
<v Speaker 2>that concern you?

0:09:51.760 --> 0:09:54.960
<v Speaker 4>It absolutely does I think that again, tariffs can be

0:09:55.080 --> 0:09:58.640
<v Speaker 4>useful as a as a tool or negotiating tactic, but

0:09:59.160 --> 0:10:01.079
<v Speaker 4>you know, it really is a means to an end

0:10:01.200 --> 0:10:04.880
<v Speaker 4>rather than an end in and of itself. And yeah,

0:10:04.880 --> 0:10:06.480
<v Speaker 4>I noted that. You know, one of the things that

0:10:06.600 --> 0:10:08.520
<v Speaker 4>you know, you think, well, what are the impacts? And

0:10:08.640 --> 0:10:11.120
<v Speaker 4>you know, one of the macro effects is that uncertainty

0:10:11.160 --> 0:10:14.120
<v Speaker 4>that I was just speaking of may lead companies to

0:10:14.160 --> 0:10:18.480
<v Speaker 4>pause capital investments and slow down acquisitions and slow down hiring.

0:10:18.960 --> 0:10:20.480
<v Speaker 5>And of course, you know, really.

0:10:20.240 --> 0:10:24.160
<v Speaker 4>The biggest factor is how does this impact FED policy?

0:10:24.400 --> 0:10:27.560
<v Speaker 4>And you know, the question that investors have is, you know,

0:10:27.600 --> 0:10:29.640
<v Speaker 4>whether the FED is focused a little bit more on

0:10:29.679 --> 0:10:33.680
<v Speaker 4>the inflationary impacts of the tariffs, which you might cause

0:10:33.720 --> 0:10:35.880
<v Speaker 4>it to pause interest rate cuts for longer, or whether

0:10:35.880 --> 0:10:39.920
<v Speaker 4>it's focused on the longer term impacts that may slow

0:10:40.000 --> 0:10:42.640
<v Speaker 4>future growth. I think that the FED is in weight

0:10:42.679 --> 0:10:44.920
<v Speaker 4>and see mode and trying to be data dependent, so

0:10:44.960 --> 0:10:48.120
<v Speaker 4>we don't necessarily expect a cut in the near term.

0:10:48.160 --> 0:10:50.680
<v Speaker 4>But that's really the place where investors should probably focus on,

0:10:50.800 --> 0:10:52.120
<v Speaker 4>is the impact on the FED.

0:10:52.400 --> 0:10:54.959
<v Speaker 2>That's interesting to me because I think markets right now

0:10:55.000 --> 0:10:57.600
<v Speaker 2>are still fully pricing in the first quarter point rate

0:10:57.679 --> 0:11:00.880
<v Speaker 2>cut in June, and I think you total, there's about

0:11:00.920 --> 0:11:04.120
<v Speaker 2>sixty seven basis points of easing that has been factored

0:11:04.160 --> 0:11:06.360
<v Speaker 2>in for all of this here. But you're of the

0:11:06.480 --> 0:11:08.360
<v Speaker 2>view that the Fed is still going to kind of

0:11:08.920 --> 0:11:11.080
<v Speaker 2>just drop back and adopt more of a wait and

0:11:11.120 --> 0:11:11.680
<v Speaker 2>see approach.

0:11:11.760 --> 0:11:12.160
<v Speaker 3>Is that it?

0:11:12.800 --> 0:11:15.600
<v Speaker 4>You know, we don't expect one in the near term,

0:11:15.640 --> 0:11:18.640
<v Speaker 4>but probably June is I think what is being priced in.

0:11:18.840 --> 0:11:20.600
<v Speaker 4>I think, you know, two to three cuts this year

0:11:20.640 --> 0:11:23.000
<v Speaker 4>is probably what would be expected. And that's a great

0:11:23.040 --> 0:11:25.680
<v Speaker 4>example of exactly how the market is viewing this, because

0:11:25.920 --> 0:11:28.080
<v Speaker 4>you know, as recently as a month ago, markets were

0:11:28.120 --> 0:11:31.560
<v Speaker 4>only pricing in one cut, and so now I think

0:11:31.600 --> 0:11:33.560
<v Speaker 4>that you know, what that is telling us is that

0:11:33.600 --> 0:11:38.559
<v Speaker 4>the markets are actually focusing a bit more on the

0:11:38.720 --> 0:11:42.079
<v Speaker 4>economic growth and the slowing of economic growth of tariffs,

0:11:42.840 --> 0:11:45.720
<v Speaker 4>more so than even the inflationary impacts. But you know,

0:11:45.800 --> 0:11:47.920
<v Speaker 4>in general, I think that you know, one investors can

0:11:47.960 --> 0:11:50.640
<v Speaker 4>look at is that tariffs, if you look at history,

0:11:50.840 --> 0:11:54.800
<v Speaker 4>they can be you know, stagflationary, and I think that

0:11:54.800 --> 0:11:56.480
<v Speaker 4>that's one of the ring you know, and the fact

0:11:56.480 --> 0:11:58.440
<v Speaker 4>that investors are starting to price in a little bit

0:11:58.480 --> 0:12:01.360
<v Speaker 4>higher likelihood of a recession. Now it's still less than

0:12:01.400 --> 0:12:06.000
<v Speaker 4>fifty percent, but you know, there's certainly a weight and

0:12:06.040 --> 0:12:10.160
<v Speaker 4>see mode and it's very very difficult to predict what's

0:12:10.200 --> 0:12:12.000
<v Speaker 4>going on. You could get a boost in the markets

0:12:12.040 --> 0:12:15.320
<v Speaker 4>if we you know, if the call it the Trump

0:12:15.440 --> 0:12:18.200
<v Speaker 4>put comes back into play, as the president maybe looks

0:12:18.240 --> 0:12:21.040
<v Speaker 4>at the stock market as a scoreboard to help influence

0:12:21.600 --> 0:12:22.440
<v Speaker 4>policy decisions.

0:12:22.520 --> 0:12:24.640
<v Speaker 2>So it seems though that the health of the labor

0:12:24.679 --> 0:12:28.079
<v Speaker 2>market is really the next great test for the growth story, right.

0:12:28.440 --> 0:12:30.640
<v Speaker 4>That is, and you know, at least the good news

0:12:30.679 --> 0:12:35.240
<v Speaker 4>there is that the labor market has stayed solid. You know,

0:12:35.280 --> 0:12:37.199
<v Speaker 4>you had you know what, one hundred and fifty thousand

0:12:37.320 --> 0:12:40.240
<v Speaker 4>jobs last month, is down a little bit from some

0:12:40.280 --> 0:12:42.960
<v Speaker 4>of the recent months. But yeah, nevertheless, I think one

0:12:42.960 --> 0:12:44.920
<v Speaker 4>of the things that the economy can can stand on

0:12:45.040 --> 0:12:46.600
<v Speaker 4>is the fact that, you know, you're still looking at

0:12:46.640 --> 0:12:50.320
<v Speaker 4>unemployment covering pretty close to four percent, and we saw

0:12:50.480 --> 0:12:53.720
<v Speaker 4>just yesterday that the number of job openings had crept up,

0:12:53.760 --> 0:12:55.920
<v Speaker 4>and so that we're at a place now where the

0:12:56.040 --> 0:13:00.040
<v Speaker 4>number of job openings is pretty close to equal to

0:13:00.280 --> 0:13:04.320
<v Speaker 4>the number of those seeking you know, filing unemployment, which

0:13:04.360 --> 0:13:07.240
<v Speaker 4>is again down from where it's been in recent years

0:13:07.280 --> 0:13:09.920
<v Speaker 4>in the post COVID surge, but it really puts us

0:13:09.920 --> 0:13:12.080
<v Speaker 4>in a place that we're probably even better off there

0:13:12.120 --> 0:13:12.600
<v Speaker 4>than we.

0:13:12.440 --> 0:13:15.240
<v Speaker 5>Were in twenty nineteen. And the consumer has certainly been

0:13:15.280 --> 0:13:15.959
<v Speaker 5>a workhorse.

0:13:16.400 --> 0:13:19.800
<v Speaker 2>So take everything that you've been saying and formulate and

0:13:19.960 --> 0:13:21.920
<v Speaker 2>investment strategy. What would it look like?

0:13:22.280 --> 0:13:25.160
<v Speaker 4>Well, the first thing when we start formulating an investment strategy,

0:13:25.280 --> 0:13:27.720
<v Speaker 4>especially for longer term investors, the first thing you have

0:13:27.760 --> 0:13:31.720
<v Speaker 4>to focus on is, you know, what are evaluations right now?

0:13:31.920 --> 0:13:34.920
<v Speaker 4>If you go back a year ago, markets were in

0:13:34.960 --> 0:13:37.280
<v Speaker 4>any way climbing a wall of work. You were afraid

0:13:37.280 --> 0:13:39.920
<v Speaker 4>of a recession with an inverted yield curve. We were

0:13:39.960 --> 0:13:44.600
<v Speaker 4>afraid of high inflation and uncertain certain election. And as

0:13:44.640 --> 0:13:47.079
<v Speaker 4>of opening this year, you have you had a lot

0:13:47.120 --> 0:13:51.120
<v Speaker 4>of multiple expansion, evaluation expansion that drove the markets up

0:13:51.160 --> 0:13:53.480
<v Speaker 4>to north of twenty percent last year. It's the second

0:13:53.480 --> 0:13:57.560
<v Speaker 4>big year in a row. Going forward, marks are still

0:13:57.600 --> 0:14:00.960
<v Speaker 4>probably priced a little bit for complacency. You have, valuation

0:14:01.720 --> 0:14:04.360
<v Speaker 4>metrics are high. You know, the way we're sort of

0:14:04.360 --> 0:14:06.920
<v Speaker 4>looking at this year is that if last year was

0:14:06.960 --> 0:14:08.679
<v Speaker 4>you know, think of a football game, you know, the

0:14:08.840 --> 0:14:11.720
<v Speaker 4>quarterback through the ball forty yards downfield. You saw the

0:14:11.720 --> 0:14:14.080
<v Speaker 4>same thing in twenty twenty three. This year and next

0:14:14.120 --> 0:14:16.520
<v Speaker 4>year might be because of those high evaluations. More like

0:14:16.559 --> 0:14:19.400
<v Speaker 4>the good old fashion. You know, run the darn ball

0:14:19.600 --> 0:14:20.760
<v Speaker 4>and you know, three.

0:14:20.680 --> 0:14:24.120
<v Speaker 5>Yards and a cloud of dust. I think investors, you certainly.

0:14:23.840 --> 0:14:25.960
<v Speaker 4>Don't want to fight an accommodative FED. You don't want

0:14:25.960 --> 0:14:29.320
<v Speaker 4>to fight tax cuts either, but investors should probably expect

0:14:29.840 --> 0:14:33.160
<v Speaker 4>more muted returns going forward, and so we wouldn't sell

0:14:33.200 --> 0:14:35.760
<v Speaker 4>the market, but maybe focus on some areas that might

0:14:35.800 --> 0:14:38.480
<v Speaker 4>be a little bit more defensive, dividend paying stocks or

0:14:38.480 --> 0:14:41.360
<v Speaker 4>start you're starting to see perhaps a broadening of returns

0:14:41.360 --> 0:14:44.280
<v Speaker 4>and maybe a paradigm shift away from some of the

0:14:44.360 --> 0:14:47.600
<v Speaker 4>megacap tech towards areas like companies that are paying and

0:14:47.640 --> 0:14:48.640
<v Speaker 4>growing dividends.

0:14:48.960 --> 0:14:51.400
<v Speaker 2>I'd like to get your view on the American consumer.

0:14:51.480 --> 0:14:55.640
<v Speaker 2>Recently we heard from both Delta air Lines American Airlines.

0:14:55.680 --> 0:14:59.920
<v Speaker 2>They're very concerned about a pullback in travel leisure track

0:15:00.200 --> 0:15:03.880
<v Speaker 2>and by extension, that did some damage to hotels. Also

0:15:03.920 --> 0:15:07.320
<v Speaker 2>a company like Airbnb. How do you understand the American

0:15:07.360 --> 0:15:09.920
<v Speaker 2>consumer right now in terms of their health?

0:15:10.360 --> 0:15:13.040
<v Speaker 4>Well, again, you know, job openings are still solid, and

0:15:13.120 --> 0:15:15.680
<v Speaker 4>so you know, I mean, but at the same time

0:15:15.720 --> 0:15:17.280
<v Speaker 4>you are starting to see you know, you mentioned some

0:15:17.320 --> 0:15:20.720
<v Speaker 4>of the travel companies that sounded alarms, you know, Walmart

0:15:20.760 --> 0:15:23.360
<v Speaker 4>was another one. I think it was a couple of

0:15:23.520 --> 0:15:25.800
<v Speaker 4>a couple of weeks back, whereas you know, they tend

0:15:25.800 --> 0:15:28.080
<v Speaker 4>to be a bell weather for consumer spending, and they

0:15:28.120 --> 0:15:30.960
<v Speaker 4>suggested that it is going to be a little bit softer.

0:15:31.920 --> 0:15:35.120
<v Speaker 4>That said, I think that the good news there with

0:15:35.160 --> 0:15:37.360
<v Speaker 4>respect to the consumer is that we're starting from a

0:15:37.400 --> 0:15:39.640
<v Speaker 4>point of having a little bit of a cushion. You know,

0:15:39.680 --> 0:15:42.680
<v Speaker 4>the consumer spending has been fairly solid, so the point

0:15:42.680 --> 0:15:45.720
<v Speaker 4>that you know, if we're seeing signs of softness now,

0:15:46.040 --> 0:15:49.080
<v Speaker 4>we could be softening to something that after you know,

0:15:49.120 --> 0:15:52.920
<v Speaker 4>big surges that we've had in twenty twenty two, twenty three,

0:15:53.120 --> 0:15:55.200
<v Speaker 4>you know, maybe something that's a little bit more long

0:15:55.320 --> 0:15:58.160
<v Speaker 4>term sustainable going forward.

0:15:58.600 --> 0:15:58.800
<v Speaker 5>You know.

0:15:58.920 --> 0:16:01.760
<v Speaker 4>Just yeah, if you come out trying to run a

0:16:01.800 --> 0:16:04.680
<v Speaker 4>marathon five minute mile, you're going to burn up pretty quickly.

0:16:04.720 --> 0:16:06.240
<v Speaker 4>But if you kind of come out at a little

0:16:06.240 --> 0:16:09.400
<v Speaker 4>bit more measured pace, it could allow us to maybe

0:16:09.440 --> 0:16:11.200
<v Speaker 4>push off any sort of hard landing for.

0:16:11.200 --> 0:16:12.000
<v Speaker 5>A little bit longer.

0:16:12.080 --> 0:16:14.040
<v Speaker 2>So mortgage rates have come in a bit as well,

0:16:14.080 --> 0:16:16.760
<v Speaker 2>I mean, that's got to be another positive it is.

0:16:17.320 --> 0:16:20.120
<v Speaker 4>Yeah, I think that that's certainly a positive. That said,

0:16:20.680 --> 0:16:24.920
<v Speaker 4>housing valuations are still fairly rich, and so even with

0:16:25.000 --> 0:16:28.560
<v Speaker 4>lower mortgage rates, which you know, economy certainly needs. Yeah,

0:16:28.600 --> 0:16:31.320
<v Speaker 4>I think that's something where the economy overall might not

0:16:31.360 --> 0:16:35.040
<v Speaker 4>necessarily expect to get a big boost from housing, which

0:16:35.080 --> 0:16:36.880
<v Speaker 4>is certainly a huge part of the economy.

0:16:37.160 --> 0:16:39.960
<v Speaker 2>Are you inclined to look offshore given everything that we've

0:16:39.960 --> 0:16:42.920
<v Speaker 2>been describing here and some of the turbulence that's been

0:16:42.960 --> 0:16:46.800
<v Speaker 2>associated with kind of the equity market behavior as it

0:16:46.840 --> 0:16:50.600
<v Speaker 2>relates to questions over the impact of tariffs, where we

0:16:50.680 --> 0:16:53.360
<v Speaker 2>go in terms of earnings, the inflation story, where the

0:16:53.400 --> 0:16:55.320
<v Speaker 2>FED is in all of this. I mean, are you

0:16:55.480 --> 0:16:58.320
<v Speaker 2>inclined to maybe look to a place like Europe or

0:16:58.960 --> 0:17:02.440
<v Speaker 2>is that trade pretty much already been effectively put to

0:17:02.480 --> 0:17:02.960
<v Speaker 2>good use.

0:17:03.520 --> 0:17:05.359
<v Speaker 4>No, I think there's there's a lot of meat on

0:17:05.400 --> 0:17:09.480
<v Speaker 4>the bone there as far as the overseas trade. You've had,

0:17:09.640 --> 0:17:12.600
<v Speaker 4>you know, circumstances where US equities have been you know this,

0:17:12.600 --> 0:17:15.920
<v Speaker 4>this this concept of US exceptionalism has allowed US equities

0:17:15.920 --> 0:17:19.800
<v Speaker 4>to perform over five years and and and ten plus years,

0:17:19.840 --> 0:17:22.280
<v Speaker 4>and that's not necessarily going to be unwound in the

0:17:22.320 --> 0:17:24.480
<v Speaker 4>span of a month or two. And you know, you

0:17:24.560 --> 0:17:29.800
<v Speaker 4>have very historically wide valuation discrepancies, whereby you know, places

0:17:29.840 --> 0:17:33.720
<v Speaker 4>like Europe or even the emerging markets UH trade in

0:17:33.760 --> 0:17:36.919
<v Speaker 4>line with to even discounts to their historical averages, whereas

0:17:36.920 --> 0:17:37.520
<v Speaker 4>the US is.

0:17:37.520 --> 0:17:38.520
<v Speaker 5>Trading at a premium.

0:17:38.640 --> 0:17:40.240
<v Speaker 4>And you know, one of the things that I think

0:17:40.320 --> 0:17:43.200
<v Speaker 4>might be driving some of that near term outperformance of

0:17:43.240 --> 0:17:47.000
<v Speaker 4>overseas stocks of late has been that, you know, whereas

0:17:47.359 --> 0:17:49.480
<v Speaker 4>you know, the U, you know, I think the US

0:17:49.640 --> 0:17:52.960
<v Speaker 4>is seeing you know, the FED pausing versus you know,

0:17:53.240 --> 0:17:57.160
<v Speaker 4>in the EU monetary policy may be a little bit

0:17:57.960 --> 0:18:01.280
<v Speaker 4>easier going forward. And so there's a lot to like there.

0:18:01.320 --> 0:18:05.240
<v Speaker 4>But it really again starts and finishes with lower I mean,

0:18:05.240 --> 0:18:09.080
<v Speaker 4>obviously European equities have historically traded in a discount to

0:18:09.119 --> 0:18:11.560
<v Speaker 4>the United States, but that discounts as wide as we've

0:18:11.600 --> 0:18:12.760
<v Speaker 4>seen in a long time.

0:18:13.240 --> 0:18:14.960
<v Speaker 2>Last question, before I let you go, I'll give you

0:18:15.040 --> 0:18:17.920
<v Speaker 2>twenty seconds to answer. Will we fall into recession here

0:18:17.920 --> 0:18:18.880
<v Speaker 2>in the US this year?

0:18:19.600 --> 0:18:20.960
<v Speaker 5>The odds are still against it.

0:18:21.359 --> 0:18:24.119
<v Speaker 4>The odds now, the odds have been climbing over the

0:18:24.200 --> 0:18:26.680
<v Speaker 4>last couple of months, and there are fears of hard

0:18:26.760 --> 0:18:29.800
<v Speaker 4>landing or stagflation, but you know, we're still looking at

0:18:29.880 --> 0:18:31.880
<v Speaker 4>you know, certainly less than the fifty to fifty chance

0:18:31.920 --> 0:18:32.880
<v Speaker 4>of a recession this year.

0:18:32.920 --> 0:18:35.280
<v Speaker 5>They could see employments fairly solid and the Fed.

0:18:35.920 --> 0:18:37.320
<v Speaker 4>You don't want to fight the Fed, and the Fed

0:18:37.400 --> 0:18:39.000
<v Speaker 4>could revert to easing mode again.

0:18:39.160 --> 0:18:42.200
<v Speaker 2>Burn's always a pleasure. Thank you so much, Burns McKinney. There.

0:18:42.200 --> 0:18:46.440
<v Speaker 2>He is Managing director also Senior portfolio Manager at NFJA

0:18:46.680 --> 0:18:50.120
<v Speaker 2>Investment Group. Joining from Dallas, Texas here on the Daybreak

0:18:50.160 --> 0:18:56.240
<v Speaker 2>Asia Podcast. Thanks for listening to today's episode of the

0:18:56.240 --> 0:19:00.480
<v Speaker 2>Bloomberg Daybreak Asia Edition podcast. Each weekday look at the

0:19:00.520 --> 0:19:04.920
<v Speaker 2>story shaping markets, finance, and geopolitics in the Asia Pacific.

0:19:05.119 --> 0:19:08.440
<v Speaker 2>You can find us on Apple, Spotify, the Bloomberg Podcast

0:19:08.480 --> 0:19:11.880
<v Speaker 2>YouTube channel, or anywhere else you listen. Join us again

0:19:11.880 --> 0:19:15.200
<v Speaker 2>tomorrow for insight on the market moves from Hong Kong

0:19:15.320 --> 0:19:19.720
<v Speaker 2>to Singapore and Australia. I'm Doug Prisoner and this is

0:19:19.760 --> 0:19:20.280
<v Speaker 2>Bloomberg