WEBVTT - Asian Stocks Rebound on US Economic Data 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.320 --> 0:00:13.040 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:13.119 --> 0:00:15.840 along with Doug Krisner, join us each day for the 0:00:15.880 --> 0:00:19.240 stories making news and moving markets in the Asia Pacific. 0:00:19.480 --> 0:00:21.880 You can subscribe to the show anywhere you get your 0:00:21.920 --> 0:00:25.799 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:25.920 --> 0:00:27.240 the Bloomberg Business App. 0:00:27.440 --> 0:00:29.880 Let's bring in our guest. Rebecca Waalser is with us. 0:00:29.920 --> 0:00:33.279 She is president at Wallser Wealth Management, joining us here 0:00:33.320 --> 0:00:35.440 at the Interactive Broker Studio in New York. 0:00:35.560 --> 0:00:37.440 Thanks for dropping by, so glad to be here, deg 0:00:37.479 --> 0:00:38.159 thanks for having me. 0:00:38.280 --> 0:00:40.400 Are we talking about a soft landing now? When you 0:00:40.440 --> 0:00:42.800 look at kind of what the FED is signaling and 0:00:42.840 --> 0:00:45.680 then the data that we had today, particularly the second 0:00:45.760 --> 0:00:46.879 quarter GDP. 0:00:46.640 --> 0:00:48.240 Number, Oh gosh. 0:00:48.240 --> 0:00:51.000 I hate to be such a contrarium, but I wish 0:00:51.080 --> 0:00:53.440 I could say yes, Doug, but I just don't see it. 0:00:53.960 --> 0:00:54.800 I wish I did. 0:00:54.880 --> 0:00:57.160 I know, the retail numbers are great, but I'm looking 0:00:57.200 --> 0:01:00.320 at the forward guidance of the consumer, and the consumer 0:01:00.520 --> 0:01:03.480 is really telling us that they are out of cash 0:01:03.520 --> 0:01:05.520 to spend. I know, retail sales have been good, But 0:01:05.600 --> 0:01:08.360 that's always historical data, right, So we're looking forward and 0:01:08.360 --> 0:01:10.920 we're seeing the consumers. We have the highest credit card 0:01:11.000 --> 0:01:13.760 balances one point three trillion in the history of our country. 0:01:13.840 --> 0:01:18.600 Our delinquency rates are astronomically accelerating. Our car delinquency rates 0:01:18.600 --> 0:01:21.280 are accelerating. So, Doug, the stories aren't matching up with 0:01:21.360 --> 0:01:24.959 the GDP numbers showing such good, strong consumer spending versus 0:01:24.959 --> 0:01:26.360 where we know the consumer is right now. 0:01:26.400 --> 0:01:27.759 So that's what I'm talking about the future. 0:01:27.840 --> 0:01:30.440 Okay. So the equity market then should be pretty worried 0:01:30.480 --> 0:01:32.880 when it comes to earnings, right, I believe so. 0:01:33.120 --> 0:01:35.280 And I do think that we've had some, you know, 0:01:35.520 --> 0:01:40.080 mag seven not great numbers this season, and in Video 0:01:40.240 --> 0:01:42.480 was great, I'm not a double beat, absolutely great, but 0:01:42.520 --> 0:01:45.960 the guidance was still you know, saying are we it 0:01:46.000 --> 0:01:49.000 was it was a reassurance that their market has got 0:01:49.000 --> 0:01:51.560 a long runway. But Doug, when you look at the guidance, 0:01:51.560 --> 0:01:54.120 people are still wondering, how is this going to be monetized? 0:01:54.160 --> 0:01:57.960 And if these other commercial buyers of in video chips 0:01:57.960 --> 0:02:00.280 for AI are not able to get a return non 0:02:00.320 --> 0:02:03.760 investment fast enough, are they going to be keeping pouring 0:02:03.800 --> 0:02:05.600 the billions and billions that are going to envy that 0:02:05.640 --> 0:02:09.280 are giving us these crazy, astronomical three thousand percent growth 0:02:09.320 --> 0:02:09.919 in five years. 0:02:10.120 --> 0:02:12.680 The autumn can be very rough for the equity market. 0:02:12.720 --> 0:02:15.560 We're a week away from September. Are you braced for 0:02:15.639 --> 0:02:16.440 some downside? 0:02:16.520 --> 0:02:21.560 Absolutely? I mean, this is this is the most shallow 0:02:22.200 --> 0:02:23.600 depth that we have seen. 0:02:23.639 --> 0:02:26.920 I mean, look at the concentration of mag seven in 0:02:27.000 --> 0:02:28.960 the Nasdaq, in the S and P five hundred. This 0:02:29.080 --> 0:02:32.760 is awful concentration in it. So if anything goes wrong, 0:02:32.800 --> 0:02:33.880 I mean, you look at the Middle East, and you 0:02:33.880 --> 0:02:35.600 look at Russia, Ukraine, and you look at all the 0:02:35.600 --> 0:02:37.200 things geopolitically that are. 0:02:37.040 --> 0:02:39.240 Going on in the middle of an election season, in 0:02:39.280 --> 0:02:39.840 the middle. 0:02:39.639 --> 0:02:42.799 Of you know, we've got all of these pandemics who 0:02:42.800 --> 0:02:45.200 has declared a new pandemic of impocs. So you have 0:02:45.720 --> 0:02:49.079 so many factors that any one of them pops off. 0:02:49.120 --> 0:02:51.880 When you have such a weak economy fund the fundamentals 0:02:51.919 --> 0:02:56.640 are so weak, then you should expect a really unfortunately 0:02:56.960 --> 0:03:00.000 an oversized response to anything that is on the outbum 0:03:00.160 --> 0:03:01.200 that will be affecting it. 0:03:01.360 --> 0:03:03.440 So you mentioned the election, I'm curious as to how 0:03:03.480 --> 0:03:06.800 that's affected your thinking. On markets these days. 0:03:07.840 --> 0:03:11.760 Yeah, I mean I think that obviously with a Trump 0:03:11.760 --> 0:03:15.040 administration we would be more business friendly. I mean, we 0:03:15.120 --> 0:03:18.399 don't really know where Kamala's positions are economically. I'm really 0:03:18.440 --> 0:03:20.520 looking forward to this nine o'clock interview. I'm hoping that 0:03:20.560 --> 0:03:23.760 she actually does go more into the economics of her plans, because, 0:03:23.919 --> 0:03:25.840 you know, Doug her first kind of things that she's 0:03:25.840 --> 0:03:28.440 talking about our price controls, and all of us are 0:03:28.520 --> 0:03:31.120 racing and saying, where is this coming from? This is 0:03:31.240 --> 0:03:33.720 not anything that we were expecting to hear. So for me, 0:03:33.840 --> 0:03:36.680 we're really looking for more details on what is her 0:03:36.720 --> 0:03:37.600 economic positions. 0:03:37.600 --> 0:03:41.080 Now, speaking of the economy, how do you think the 0:03:41.080 --> 0:03:43.840 FED has been doing it kind of getting away from 0:03:44.000 --> 0:03:47.280 ultra tight monetary policy. We got an indication pretty strong 0:03:47.320 --> 0:03:50.760 one last week from Feedshair J. Powell. We're looking at 0:03:50.800 --> 0:03:53.320 a rate cut as soon as the September meeting. It 0:03:53.360 --> 0:03:56.000 could be as much as fifty basis points, although I 0:03:56.000 --> 0:03:58.680 don't think when you look at what the market is telegraphing, 0:03:58.680 --> 0:04:01.840 it's more likely twenty five. How do you feel about 0:04:01.920 --> 0:04:03.680 raid cuts going into the end of the year. Is 0:04:03.720 --> 0:04:06.160 it possible that we get a total of one hundred 0:04:06.160 --> 0:04:07.560 basis points and cuts. 0:04:07.920 --> 0:04:09.760 Well, I think that would be difficult if we only 0:04:09.760 --> 0:04:12.040 get a twenty five in September on September eighteenth, So 0:04:12.360 --> 0:04:13.080 we'll see. 0:04:13.200 --> 0:04:14.600 But I don't think the Fed. 0:04:14.440 --> 0:04:16.640 Is going to go to a fifty point cut swing 0:04:16.800 --> 0:04:18.960 as fast as September one because it's so close to 0:04:18.960 --> 0:04:20.919 the election and that can kind of be couch as 0:04:20.960 --> 0:04:21.640 political by. 0:04:21.520 --> 0:04:22.839 People that don't appreciate that. 0:04:23.240 --> 0:04:26.480 But two, it also really dug sends a more fundamental 0:04:26.520 --> 0:04:30.640 message to the global economy that something is wrong fundamentally underlying. 0:04:30.920 --> 0:04:33.599 And if you look at we had the largest second 0:04:33.720 --> 0:04:37.840 largest retraction of jobs eight hundred and eighteen thousand last Wednesday, 0:04:38.160 --> 0:04:40.159 and we already that's on top of all of the 0:04:40.200 --> 0:04:42.919 diminutions that we had monthly, all the corrections. This is 0:04:42.960 --> 0:04:47.080 the second most corrected BLS that we've had since two 0:04:47.120 --> 0:04:49.400 thousand and eight and two thousand and nine. So obviously 0:04:49.480 --> 0:04:52.520 those numbers were just coming in way over, you know, 0:04:52.600 --> 0:04:55.320 too extreme, and they were brought back down as they 0:04:55.320 --> 0:04:56.400 were corrected. 0:04:56.000 --> 0:04:56.760 All over the months. 0:04:56.760 --> 0:05:00.000 But then the annual correction almost took another million job 0:05:00.200 --> 0:05:02.679 away from last year. So that is where you're seeing 0:05:02.720 --> 0:05:06.000 PAL come back in insane labor is definitely now a concern. 0:05:06.240 --> 0:05:09.760 We're seeing the softness and so he's looking at a cut. 0:05:10.160 --> 0:05:12.200 But if we have to go to a fifty basis 0:05:12.200 --> 0:05:14.800 point cut, that is signaling that there's something even more 0:05:14.839 --> 0:05:15.720 alarming going on. 0:05:15.960 --> 0:05:18.320 Where are you seeing opportunity in markets these days? 0:05:18.520 --> 0:05:21.279 You know, obviously the hate to say it, but the 0:05:21.480 --> 0:05:24.039 breadth or the long term runway that we really do 0:05:24.120 --> 0:05:26.640 think is there is the AI tech space and that's 0:05:26.680 --> 0:05:27.040 why the. 0:05:27.000 --> 0:05:30.159 Whole world is invested in it. So there is common 0:05:30.200 --> 0:05:30.720 sense there. 0:05:30.960 --> 0:05:34.000 But you know, you have to look at if we're 0:05:34.000 --> 0:05:37.640 going to go into recessionary worldwide kind of period, where 0:05:37.680 --> 0:05:40.400 are recessionary places And that's always going to be your consumer, 0:05:40.680 --> 0:05:46.360 you know, defensive your staples, your utilities, you know, your commodities. 0:05:46.560 --> 0:05:49.240 So we would look at if we start to see 0:05:49.279 --> 0:05:52.520 really moving towards more weakening economic data, then we would 0:05:52.520 --> 0:05:54.040 look at more defensive positions. 0:05:54.080 --> 0:05:55.640 Are you worried about recession at all? 0:05:55.920 --> 0:05:56.279 I am? 0:05:56.440 --> 0:05:58.520 I am, because you know you look at Germany and 0:05:58.560 --> 0:06:01.600 they're manufacturing is PRESHI level. You look at China and 0:06:01.640 --> 0:06:04.200 we know what's happened there. You just mentioned yourself. Japan 0:06:04.680 --> 0:06:08.560 is slowing. Everything is slowing globally, and really, if you think. 0:06:08.440 --> 0:06:10.920 About it from my perspective, it starts kind of in. 0:06:10.880 --> 0:06:14.239 The East with the Asian exporters, and then it also 0:06:14.320 --> 0:06:16.880 moves to Europe, the European Zone, which we know how 0:06:16.920 --> 0:06:19.120 that is going with Germany, and it really then comes 0:06:19.120 --> 0:06:21.960 to America. So these have already kind of been going 0:06:22.000 --> 0:06:25.080 through the slow down and it's now coming to us. 0:06:25.120 --> 0:06:27.240 And we are the world's reserve. 0:06:26.880 --> 0:06:30.200 Currency, which helps us, you know, export our inflation as 0:06:30.279 --> 0:06:32.600 much as we possibly can. But there is a day, Doug, 0:06:32.640 --> 0:06:34.400 that we have to we have to pay the piper too. 0:06:34.600 --> 0:06:37.800 So if we can agree then that places like Asia 0:06:37.839 --> 0:06:40.440 and Europe have been slowing for a while, maybe there's 0:06:40.480 --> 0:06:43.679 opportunity in those markets. What do you think, Well, can. 0:06:43.520 --> 0:06:45.960 Telpany tell you that I don't recommend anybody go out 0:06:46.000 --> 0:06:49.039 and borrow yin and buy and do investments and dollars 0:06:49.080 --> 0:06:51.440 if you guess the garage trade that we know came 0:06:51.520 --> 0:06:54.240 up in August, the fifth is far from being over with. 0:06:54.640 --> 0:06:58.320 So be careful, just be be cautious because right now 0:06:58.440 --> 0:07:01.640 if we go into a kind of global financial and 0:07:01.680 --> 0:07:04.200 you have to understand too, Doug, this is the first 0:07:04.240 --> 0:07:10.160 time that we are really seeing global economic interplace so 0:07:10.840 --> 0:07:15.200 vastly that as China, you know, potentially collapses as Japan. 0:07:15.280 --> 0:07:17.560 I'm not saying it's collapsing, but I'm saying, as these 0:07:17.600 --> 0:07:21.120 things happen, we are so dependent now as they're the 0:07:21.200 --> 0:07:24.080 exporters and we are the importers, that what happens with 0:07:24.120 --> 0:07:25.480 them is going to come to us. 0:07:25.600 --> 0:07:26.720 We just have to be very cautious. 0:07:26.760 --> 0:07:28.640 So do you like the bond market there if you're 0:07:28.680 --> 0:07:31.160 a little concerned about growth going forward and the FED 0:07:31.240 --> 0:07:33.960 is going to cut rates. We don't know by the magnitude, 0:07:34.000 --> 0:07:36.360 but are you seeing opportunity in the bond market? 0:07:36.800 --> 0:07:40.119 I mean, I think that the bond market always does 0:07:40.240 --> 0:07:44.280 well in a period where there's less interference by central 0:07:44.280 --> 0:07:46.280 bank policy. So that's where we have to see where 0:07:46.320 --> 0:07:48.880 are the central bank policies taking us. We know they're 0:07:48.880 --> 0:07:51.040 implementing Basal three, and that's why we've seen all of 0:07:51.080 --> 0:07:53.600 this gold purchases by all of these central banks around 0:07:53.640 --> 0:07:56.280 the world. How does that impact what the central banks 0:07:56.280 --> 0:07:58.360 are going to be doing? But you're looking at the 0:07:58.560 --> 0:08:00.960 like just even here in the Federals Serve here we're 0:08:00.960 --> 0:08:03.760 in a negative interest rate situation. We're normally having the 0:08:03.800 --> 0:08:06.600 FED send the Treasury interest on a monthly basis. That 0:08:06.760 --> 0:08:09.360 is costing us money right now, so the Fed's balance 0:08:09.400 --> 0:08:11.360 sheet at seven trillion, it still needs to come down 0:08:11.560 --> 0:08:14.000 to your point earlier said, how are we slowing down 0:08:14.040 --> 0:08:16.880 the tightening? Well, we reduce quantitative tightening from some ninety 0:08:16.880 --> 0:08:19.680 billion to some much less sixty billion less, and that 0:08:19.760 --> 0:08:22.560 has helped our economies be sustainable. But now are at 0:08:22.600 --> 0:08:24.400 the point of cuts, and so I would be more 0:08:24.440 --> 0:08:27.040 concerned about yields in the short term. 0:08:27.320 --> 0:08:29.440 Just want to point out that everything that the FED 0:08:29.560 --> 0:08:33.360 earns on its balance sheet is deposited at the Fed's 0:08:33.360 --> 0:08:35.600 account in the US Treasury. So it's a way the 0:08:35.640 --> 0:08:37.920 government can make a little bit of money in the margin. 0:08:38.000 --> 0:08:38.720 Right, That's right. 0:08:38.880 --> 0:08:42.040 Let's do some walk about economics. You're based in Florida. 0:08:42.120 --> 0:08:44.480 How is the economy and in Florida holding up? 0:08:44.600 --> 0:08:47.040 I mean, I think that for us, you know, I'm 0:08:47.040 --> 0:08:49.320 in Central Florida, Tampa, and we're still seeing just a 0:08:49.480 --> 0:08:52.960 massive amount of relocations. Business wise, you know, we still 0:08:53.040 --> 0:08:56.200 I mean, our property in the commercial space is actually 0:08:56.200 --> 0:08:58.840 really tight. Our inventory's low as far as the you know, 0:08:58.920 --> 0:09:03.040 retail and consumer housing that has the inventory is ticked up, 0:09:03.120 --> 0:09:05.160 just like it has across the country, but we are 0:09:05.200 --> 0:09:10.080 still seeing a really tight commercial retail availability. So that 0:09:10.240 --> 0:09:12.720 is really just because of the pure a lot of 0:09:12.720 --> 0:09:15.800 businesses relocating to the state of Florida, state of Texas 0:09:15.840 --> 0:09:19.679 from other states that are maybe more restrictive and more expensive. 0:09:20.080 --> 0:09:21.440 Miami in particular too. 0:09:21.520 --> 0:09:23.800 Do you get down to Miami Ago, I do, absolutely, 0:09:23.840 --> 0:09:26.559 and it is it is just Florida just feels like 0:09:26.600 --> 0:09:28.400 a different part of the country right now. Everyone else 0:09:28.400 --> 0:09:32.599 seems to be slowing down, and I just know Florida, Texas, Arizona, 0:09:32.679 --> 0:09:36.440 these countries are really growing their net, you know, businesses, 0:09:36.480 --> 0:09:40.319 which is which is great, but it is a problem 0:09:40.559 --> 0:09:42.600 in between moving office spaces and it has been quite 0:09:42.600 --> 0:09:46.360 a challenge in Tampa just securing office space and doing 0:09:46.400 --> 0:09:48.240 a build out because of how much activity is going on. 0:09:48.280 --> 0:09:48.680 It's crazy. 0:09:48.720 --> 0:09:50.520 It's like we're living in two different worlds. 0:09:50.640 --> 0:09:52.760 Rebecca A delight to have you on the program here 0:09:52.800 --> 0:09:55.400 in New York. Rebecca Walls are president at Walls Are 0:09:55.480 --> 0:10:04.840 Wealth Management. Joining us here on that daybreak Asia, Let's 0:10:04.840 --> 0:10:07.320 bring in our guest. Thomas Todd joins us. Thomas is 0:10:07.400 --> 0:10:09.839 head of a pack investment strategy at black Rock. He 0:10:09.960 --> 0:10:12.640 joins us from our studios in Hong Kong. Good of 0:10:12.679 --> 0:10:14.320 you to drop by. I hope you're doing well. Are 0:10:14.360 --> 0:10:16.800 you still constructive on markets generally speaking? 0:10:17.800 --> 0:10:20.240 Hey Doug, how are you doing? Good to be back? Yeah, 0:10:20.280 --> 0:10:21.720 I mean, I think for the for the most part, 0:10:21.760 --> 0:10:24.800 there are some some shifts that we've been making over 0:10:24.840 --> 0:10:29.760 the last month, particularly around the US market, not essentially 0:10:29.800 --> 0:10:32.360 telling investors to to to sell out of positions, but 0:10:32.480 --> 0:10:35.920 maybe take some rotation and beta off the table. I mean, 0:10:35.920 --> 0:10:39.920 the US economy looks relatively strong. There's a little bit 0:10:39.960 --> 0:10:43.480 concerned about the labor market and perhaps that weakening, but 0:10:43.960 --> 0:10:47.200 earnings growth across most sectors has done pretty well. I think, 0:10:47.240 --> 0:10:49.160 you know, in terms of taking the bit off, it's 0:10:49.160 --> 0:10:53.280 more about the rotation trade, which we see continuing, particularly 0:10:53.280 --> 0:10:56.320 into some of those those small caps and companies that 0:10:56.360 --> 0:10:59.440 are more more aligned and more sensitive to to FED 0:10:59.480 --> 0:11:00.880 funds rate in terms of borrowing. 0:11:01.320 --> 0:11:03.480 I have to ask you about the AI trade because 0:11:03.520 --> 0:11:06.400 we were kind of breaking down the Nvidia result yesterday 0:11:06.440 --> 0:11:08.840 after the bell of course, and the fact that the 0:11:08.880 --> 0:11:12.040 revenue forecast was a little disappointing to some who have 0:11:12.160 --> 0:11:16.800 been very optimistic about the rate of sales growth continuing. 0:11:16.840 --> 0:11:19.280 I mean, when you look at some of these AI stocks, 0:11:19.440 --> 0:11:21.960 are you still a buyer of the thesis? Are you 0:11:22.080 --> 0:11:24.439 still willing to put new money to work in these names? 0:11:24.559 --> 0:11:27.560 Or maybe it's getting a little topy here? What do 0:11:27.600 --> 0:11:30.360 you think? Yeah? I think not just now. 0:11:31.000 --> 0:11:35.280 You know, Navidia is obviously the kind of the poster 0:11:35.400 --> 0:11:39.240 child for that trade, and in terms of the AI story, 0:11:39.280 --> 0:11:41.360 obviously it's a long term story, you know. I think 0:11:41.520 --> 0:11:44.240 what's basically happened is, you know, we've had a lot 0:11:44.240 --> 0:11:47.040 of rhetoric around what AI means for productivity, gains, et cetera. 0:11:47.200 --> 0:11:51.000 It's very hard to quantify that the initial phase of 0:11:51.040 --> 0:11:55.559 that investment leg was around basically buying hardware and chips 0:11:55.600 --> 0:11:58.840 makers semiconductors, that that was kind of the first rotation 0:11:58.920 --> 0:12:01.240 we've seen. And then we have investors looking at, Okay, 0:12:01.320 --> 0:12:04.920 what's what's the actual next leg of this? Is it cybersecurity? 0:12:04.960 --> 0:12:06.640 You know, where do we where do we go after this? 0:12:06.760 --> 0:12:08.200 So I think, you know, we're looking at it as 0:12:08.200 --> 0:12:11.440 a longer term thematic. It always concerns me when the 0:12:11.559 --> 0:12:14.280 entire market is looking at the earnings, the earnings calls 0:12:14.280 --> 0:12:16.640 of a single company in the S and P five hundred, 0:12:16.679 --> 0:12:19.720 So I think in terms of concentration risks, they are there. 0:12:19.760 --> 0:12:21.240 But I think that the AI story is more of 0:12:21.240 --> 0:12:23.920 a long term but probably it's one to revisit the 0:12:24.080 --> 0:12:24.560 next year. 0:12:24.679 --> 0:12:26.880 Are you equally as cautious on some of those high 0:12:26.920 --> 0:12:30.760 bandwidth memory chip makers less sk Heinex in South Korea 0:12:30.760 --> 0:12:33.480 along with Samsung. Are you cautious? Well, we don't. 0:12:33.520 --> 0:12:37.040 I mean I don't look particularly at single stocks, but certainly, 0:12:37.080 --> 0:12:40.400 you know, if you look at their their holdings or 0:12:40.440 --> 0:12:44.400 their waitings in the South Korean Stock Index COSTP or 0:12:44.480 --> 0:12:47.280 the or the Taiwan Stock Index, it is a little 0:12:47.320 --> 0:12:49.400 bit concerning. You know, there's about they're about twenty five 0:12:49.400 --> 0:12:52.479 percent of both, and when we look at the general portfolio, 0:12:52.480 --> 0:12:54.480 it is we are talking about how do we take 0:12:54.520 --> 0:12:58.000 some of the growth exposure, the tech exposure away from 0:12:58.000 --> 0:13:02.320 that and moving into Q moving to Q four and 0:13:02.360 --> 0:13:06.120 also into next year. It's about, you know, looking for 0:13:06.200 --> 0:13:09.040 economies that are more driven by domestic factors rather than 0:13:09.080 --> 0:13:12.079 than global factors as we move into into US election. 0:13:12.200 --> 0:13:14.640 So South Korea Taiwan are not in that bucket. It's 0:13:14.679 --> 0:13:16.520 more kind of India and Japan, at least on the 0:13:16.600 --> 0:13:17.800 on the larger exposure. 0:13:17.920 --> 0:13:19.920 You read my mind, I was wondering about Japan and 0:13:20.000 --> 0:13:22.960 the domestic demand story there, But the retail sales number 0:13:23.000 --> 0:13:25.720 that we just had for July was very disappointing. Half 0:13:25.720 --> 0:13:28.000 of what the market's looking for here? Is there something 0:13:28.240 --> 0:13:29.480 to be concerned about now? 0:13:30.880 --> 0:13:33.280 You know, in terms of the in terms of the 0:13:33.320 --> 0:13:36.000 next leg of the structural bull story in Japan, it 0:13:36.080 --> 0:13:38.200 is about the domestic consumer. You know, you have to 0:13:38.200 --> 0:13:40.440 bear in mind that you know, for forty years they've 0:13:40.440 --> 0:13:45.760 had basically zero inflation or disinflation, and so it's going 0:13:45.800 --> 0:13:47.679 to take a little bit of time for that consumer 0:13:47.720 --> 0:13:51.240 mindset to change. We are seeing some signs that we're 0:13:51.280 --> 0:13:54.760 getting more investing through NISA programs and things like that, 0:13:54.880 --> 0:13:56.959 but you know, there is a lot of money sitting 0:13:56.960 --> 0:13:59.400 on the sideline in Japan, somewhere around seven trillion US 0:13:59.480 --> 0:14:04.200 dollars in cash, and you know, inflation is going up. 0:14:04.640 --> 0:14:07.280 The stock market did have a brief drop, and I 0:14:07.280 --> 0:14:10.359 think I think if you look the foreign investor positioning, 0:14:10.720 --> 0:14:13.120 it's kind of the index money kind of moved out 0:14:13.160 --> 0:14:15.000 very quickly, and now it's kind of more of an 0:14:15.080 --> 0:14:18.600 active story finding those companies with actual earnings growth that 0:14:18.640 --> 0:14:21.720 benefit from structural reform. So it will take some time, 0:14:21.800 --> 0:14:24.120 and there is a lot of faith being put in 0:14:24.160 --> 0:14:26.800 that consumer story, but I think that transition is going 0:14:26.840 --> 0:14:28.560 to take a little bit of time. But we're still 0:14:28.640 --> 0:14:29.800 we're still bulls on Japan. 0:14:30.160 --> 0:14:33.600 A few hours before Jay Powell spoke at the Jackson 0:14:33.640 --> 0:14:36.960 Hole Symposium, we heard from the governor of the bojks 0:14:37.280 --> 0:14:40.640 way to talking about the possibility, the likelihood that the 0:14:40.640 --> 0:14:44.000 Bank of Japan would continue to raise interest rates. We 0:14:44.040 --> 0:14:46.600 see a rate hike between now and the end of 0:14:46.600 --> 0:14:47.480 the year from the BOJ. 0:14:48.080 --> 0:14:49.440 I think, so yeah, I mean, I don't think it's 0:14:49.480 --> 0:14:51.720 going to come in September, but I think October is 0:14:51.760 --> 0:14:55.920 definitely a possibility. Inflation is trending up, and so, you know, 0:14:55.960 --> 0:14:58.240 I think that's definitely a possibility. In terms of the 0:14:58.880 --> 0:15:02.120 JPY movement, it's very basic. But we also have to 0:15:02.160 --> 0:15:04.800 understand that the BOJ moves in increments of ten BIPs 0:15:04.800 --> 0:15:06.840 and the Fed moves in increments of twenty five BIPs. 0:15:06.880 --> 0:15:10.520 So net you know, I think that there's there's still 0:15:10.520 --> 0:15:13.760 a possibility that we get some repricing on four rate 0:15:13.800 --> 0:15:16.280 cuts this year, So I do think that the end 0:15:16.320 --> 0:15:19.360 will continue to appreciate, but we could see a little 0:15:19.360 --> 0:15:21.240 bit of a depreciation going into end of year. 0:15:21.280 --> 0:15:23.920 To what extent would we have a much better Japanese 0:15:24.000 --> 0:15:27.560 economy if the Chinese economy we're doing better than it is. 0:15:29.440 --> 0:15:32.360 I mean, I don't think it's that it's that relevant. 0:15:32.440 --> 0:15:35.920 I mean, you're currently again moving into US election cycle. 0:15:36.360 --> 0:15:39.760 We're looking at those economies that are more exposed to 0:15:39.880 --> 0:15:44.040 China trade, China growth and US trade and US growth, 0:15:44.080 --> 0:15:46.680 and basically trying to find economies that are more domestically driven. 0:15:46.880 --> 0:15:50.640 Japan is obviously a big exporter, but one of the 0:15:50.720 --> 0:15:52.280 one of the things that we're looking at in Japan 0:15:52.320 --> 0:15:57.720 now is basically moving away from those broad export driven 0:15:58.240 --> 0:16:02.200 indexes topic for example, more into kind of the granular, 0:16:02.960 --> 0:16:08.120 high divinend type of exposure. So the trade with China 0:16:08.160 --> 0:16:10.760 is important, but it's again we're kind of more focused 0:16:10.800 --> 0:16:11.960 on the domestic story here. 0:16:12.520 --> 0:16:15.120 So if it's the domestic story, then you avoid China 0:16:15.120 --> 0:16:17.040 at all cost I would imagine, right. 0:16:18.120 --> 0:16:20.480 Well, I mean, I think for the most part, foreign 0:16:20.480 --> 0:16:23.640 investors have been avoiding China at all costs. But actually 0:16:23.920 --> 0:16:27.560 China is very much driven by the domestic domestic retail. 0:16:27.600 --> 0:16:29.040 That's kind of the issue is that that. 0:16:29.400 --> 0:16:31.440 Growth hasn't been there at all. 0:16:31.600 --> 0:16:34.520 So until that picks up, I think foreign investors are 0:16:34.520 --> 0:16:36.200 just going to stay on the sideline when it comes 0:16:36.200 --> 0:16:37.840 to when it comes to China equities. 0:16:38.360 --> 0:16:40.520 Tom, It's always a pleasure to have you on the program. 0:16:40.680 --> 0:16:43.480 Thank you so much. Thomas Ta ahead of APAC Investment 0:16:43.560 --> 0:16:47.200 Strategy at Blackrock, joining us from our studios in Hong Kong. 0:16:47.280 --> 0:16:56.240 Here on daybreak Asia, Let's go to Singapore. Bring in 0:16:56.320 --> 0:17:00.480 Bloomberg's marrying Nicola, who is one of the m lives 0:17:00.560 --> 0:17:03.000 in the APAC region. I was looking at the M 0:17:03.080 --> 0:17:05.760 Live blog right on the Bloomberg terminal and I see 0:17:05.760 --> 0:17:08.440 that you had a posting earlier in the day. What 0:17:08.560 --> 0:17:13.160 was the genesis behind this? What caused you to write 0:17:13.200 --> 0:17:15.639 about the subject matter that you unpacked today. 0:17:16.480 --> 0:17:19.640 Yeah, I think the main thing, especially with what we've 0:17:19.680 --> 0:17:22.359 seen with the equity markets, we've been so focused on 0:17:22.400 --> 0:17:25.240 in Vidia and how in Nvidia plays out into the 0:17:25.240 --> 0:17:28.199 rest of the markets. But the key thing here is 0:17:28.240 --> 0:17:30.879 that even though we had a weekday because in Vidia 0:17:30.960 --> 0:17:33.560 dragged down the S and P five hundred, most stocks 0:17:33.600 --> 0:17:36.399 advanced and you're seeing this broad based rally and a 0:17:37.080 --> 0:17:39.919 sign of a more sustainable rally because now the focus 0:17:40.040 --> 0:17:43.040 is not only shifting, is shifting from the Magnificent seven 0:17:43.280 --> 0:17:45.520 to the rest of the four ninety three, and that 0:17:45.600 --> 0:17:49.960 actually bodes very well for a more sustainable and broad 0:17:50.040 --> 0:17:50.800 based rally. 0:17:50.960 --> 0:17:52.679 Do you think that the pivot on the part of 0:17:52.680 --> 0:17:54.719 the FED chairman last Friday had a lot to do 0:17:54.800 --> 0:17:57.959 with what you're describing here in terms of a broadening 0:17:58.560 --> 0:18:01.280 where the market can feel that they're some wind at 0:18:01.320 --> 0:18:01.760 its back. 0:18:02.640 --> 0:18:05.359 Well, it also helps too that Q two earnings were 0:18:05.440 --> 0:18:07.439 quite strong for the rest of the four ninety three. 0:18:07.640 --> 0:18:11.359 I think that's another key important factor to consider. So 0:18:11.400 --> 0:18:14.800 it's actually that fundamentals are working in their favor as well. 0:18:15.480 --> 0:18:17.639 Of course, the fact that the FED is pivoting and 0:18:17.640 --> 0:18:20.639 we're looking for cuts to come as soon as September 0:18:20.720 --> 0:18:23.159 is another one. But I think the fact that the 0:18:23.200 --> 0:18:26.840 fundamentals are also playing in favor and valuations are actually 0:18:26.840 --> 0:18:31.320 looking better and brighter for the four ninety three says 0:18:31.600 --> 0:18:33.439 says something for equities. 0:18:33.560 --> 0:18:36.280 So if you were to compare and contrast the games 0:18:36.280 --> 0:18:38.720 that we have seen for the US equity market versus 0:18:38.840 --> 0:18:42.320 let's say the US bond market, not just treasuries, but 0:18:42.440 --> 0:18:46.120 corporate bonds as well. What do we know about that relationship. 0:18:46.960 --> 0:18:50.000 Yeah, Interestingly, we've had over the past few years that 0:18:50.040 --> 0:18:54.480 there's been this positive correlation right between bonds and equities, 0:18:54.520 --> 0:18:59.399 so as especially, and they haven't usually there's a negative 0:18:59.400 --> 0:19:05.240