1 00:00:02,759 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,039 --> 00:00:11,080 Speaker 2: We begin this now with stockslower as investors away clarity 3 00:00:11,200 --> 00:00:13,960 Speaker 2: on trade talks. Jenny Johnson, the CEO of Franklin Sempleson, 4 00:00:14,120 --> 00:00:16,720 Speaker 2: one of the world's largest investment managers, joined us now 5 00:00:16,840 --> 00:00:17,120 Speaker 2: for more. 6 00:00:17,200 --> 00:00:18,960 Speaker 1: Jenny's good to see you. It's great to be here. 7 00:00:18,960 --> 00:00:19,639 Speaker 1: Thanks for having me. 8 00:00:19,760 --> 00:00:21,520 Speaker 2: Things have changed a lot since we caught up with 9 00:00:21,560 --> 00:00:23,880 Speaker 2: you in Davos, Switzerland. It's a lot of optimism. You 10 00:00:23,920 --> 00:00:27,680 Speaker 2: remember everyone was charged as exceptionalism. Well, strowth, lots of 11 00:00:27,760 --> 00:00:30,440 Speaker 2: hiring markets are great. Things have changed a lot. Have 12 00:00:30,480 --> 00:00:31,160 Speaker 2: they changed for you? 13 00:00:31,920 --> 00:00:34,599 Speaker 3: Well, you know, I actually we talked about it at 14 00:00:34,600 --> 00:00:38,680 Speaker 3: the time. You know, I think that you have to 15 00:00:38,800 --> 00:00:41,320 Speaker 3: think through kind of where the president is, right, He's 16 00:00:41,320 --> 00:00:42,120 Speaker 3: come in with a plan. 17 00:00:42,200 --> 00:00:43,600 Speaker 1: It's been very clear, right, it's. 18 00:00:43,479 --> 00:00:47,920 Speaker 3: Taxes, immigration, tariffs, government efficiency and deregulation, right and so, 19 00:00:48,400 --> 00:00:51,040 Speaker 3: and he has about a year and a half to 20 00:00:51,120 --> 00:00:54,560 Speaker 3: get those things done before the midterms come in. And so, 21 00:00:55,600 --> 00:00:59,000 Speaker 3: you know, from the tariff standpoint, again, he's a deal maker. 22 00:00:59,200 --> 00:01:01,640 Speaker 3: So when you are trying to make a deal, you 23 00:01:01,800 --> 00:01:04,160 Speaker 3: need to show that you are in the position of strength, right. 24 00:01:04,200 --> 00:01:06,920 Speaker 3: So a lot of this blistering is around. I'm in 25 00:01:06,920 --> 00:01:08,520 Speaker 3: a position of strength and you're going to have to 26 00:01:08,560 --> 00:01:11,080 Speaker 3: bow to my will. I think the challenge has been 27 00:01:11,319 --> 00:01:13,759 Speaker 3: There are some unintended consequences of that. I was talking 28 00:01:13,800 --> 00:01:17,400 Speaker 3: to somebody yesterday about Canadians. They're so they're not upset 29 00:01:17,440 --> 00:01:20,000 Speaker 3: about the terroifts, they're upset about the fifty first state comment, 30 00:01:20,440 --> 00:01:23,480 Speaker 3: and that Airbnbs in Rhode Island are down because the 31 00:01:23,520 --> 00:01:25,480 Speaker 3: Canadians say, I'm not going to come visit the US. 32 00:01:25,720 --> 00:01:27,520 Speaker 3: So those are the undertendant consequences. 33 00:01:27,680 --> 00:01:28,840 Speaker 1: The other piece of this is. 34 00:01:29,280 --> 00:01:34,840 Speaker 3: He needs the tax revenues identified in tariffs to help 35 00:01:35,000 --> 00:01:37,720 Speaker 3: fund his tax cuts, which, by the way, are not 36 00:01:37,880 --> 00:01:41,000 Speaker 3: tax cuts really, they're extensions. And if we don't get 37 00:01:41,040 --> 00:01:44,560 Speaker 3: that extension, there is a massive tax increase that happens, 38 00:01:44,680 --> 00:01:46,840 Speaker 3: which really becomes an issue around the economy. 39 00:01:46,840 --> 00:01:48,400 Speaker 2: Can you describe how you and the same thing the 40 00:01:48,480 --> 00:01:50,160 Speaker 2: endgame looks like? What do you think it looks like? 41 00:01:50,200 --> 00:01:52,800 Speaker 2: Because some people have described the last few weeks as madness. 42 00:01:53,200 --> 00:01:54,120 Speaker 2: Is there a method to it? 43 00:01:54,360 --> 00:01:54,560 Speaker 1: Yeah? 44 00:01:54,600 --> 00:01:57,160 Speaker 3: So I think what we hope to see, you'd like 45 00:01:57,200 --> 00:01:59,280 Speaker 3: to see a couple of deals done right to show 46 00:01:59,320 --> 00:02:01,280 Speaker 3: that he's willing to come to the table and make 47 00:02:01,320 --> 00:02:01,640 Speaker 3: a deal. 48 00:02:01,720 --> 00:02:02,840 Speaker 1: Right, so we can see a deal. 49 00:02:02,720 --> 00:02:05,800 Speaker 3: With Japan or Vietnam or you know somewhere to show no, no, no, 50 00:02:06,040 --> 00:02:07,160 Speaker 3: he's playing his deals. 51 00:02:07,400 --> 00:02:09,880 Speaker 1: You'd like to know who is responsible. 52 00:02:10,200 --> 00:02:12,840 Speaker 3: Remember it was Paul Ryan who ushered the first tax 53 00:02:12,880 --> 00:02:16,320 Speaker 3: cuts through, Like who's responsible for ushering that legislation through 54 00:02:16,400 --> 00:02:18,920 Speaker 3: and champion that that'll be very important because he's got 55 00:02:18,960 --> 00:02:21,120 Speaker 3: to get those done. And the question is how quickly 56 00:02:21,200 --> 00:02:23,280 Speaker 3: can he get it done? To calm the markets, because 57 00:02:23,320 --> 00:02:25,880 Speaker 3: what we've seen is, you know, look at you when 58 00:02:25,919 --> 00:02:28,600 Speaker 3: you suddenly have CEOs who say I can't give guidance 59 00:02:28,639 --> 00:02:33,160 Speaker 3: because there's so much uncertainty. That uncertainty makes them fear, 60 00:02:33,360 --> 00:02:36,200 Speaker 3: and then they stop making investments. If you stop making investments, 61 00:02:36,200 --> 00:02:39,079 Speaker 3: it slows down the economy. Right, So I think what 62 00:02:39,400 --> 00:02:41,520 Speaker 3: we need to see in the next ninety days is 63 00:02:41,560 --> 00:02:43,799 Speaker 3: some clarity in the meantime uncertainty. 64 00:02:43,840 --> 00:02:45,800 Speaker 4: It leads to a lot of conspiracy theories and lots 65 00:02:45,800 --> 00:02:49,799 Speaker 4: of other types of speculation. As someone who oversees one 66 00:02:49,840 --> 00:02:52,720 Speaker 4: and a half trillion dollars of assets, how much of 67 00:02:52,760 --> 00:02:57,760 Speaker 4: a material shift have you seen with customers consumers shifting 68 00:02:57,880 --> 00:03:00,720 Speaker 4: just slightly away from US assets to insulate from some 69 00:03:00,800 --> 00:03:02,560 Speaker 4: of the whip side and the uncertainty. 70 00:03:02,880 --> 00:03:08,400 Speaker 3: You definitely see, you know, non Americans reducing on the 71 00:03:08,400 --> 00:03:10,600 Speaker 3: institutional side some of their exposure to US equities. 72 00:03:10,639 --> 00:03:12,000 Speaker 1: Okay, so we've seen that a bit. 73 00:03:12,919 --> 00:03:15,280 Speaker 3: But on your hand, you know, you sort of you 74 00:03:15,480 --> 00:03:17,799 Speaker 3: if you are in the market now, this is not 75 00:03:17,919 --> 00:03:19,200 Speaker 3: the time to get out of the market, right. 76 00:03:19,240 --> 00:03:20,480 Speaker 1: You need to play this out. 77 00:03:20,840 --> 00:03:23,360 Speaker 3: And if you hadn't made the trade to being in 78 00:03:23,440 --> 00:03:27,160 Speaker 3: more defensive stocks, then there's no point in doing that now, 79 00:03:27,400 --> 00:03:29,320 Speaker 3: right because you've already sort of missed it. 80 00:03:29,440 --> 00:03:32,000 Speaker 1: So you know, the reality is AI. 81 00:03:32,000 --> 00:03:35,119 Speaker 3: I actually played around this weekend with an app called 82 00:03:35,160 --> 00:03:38,080 Speaker 3: replet where you can just use natural language processing to 83 00:03:38,120 --> 00:03:40,560 Speaker 3: have it code and generate an app for you. Like 84 00:03:40,600 --> 00:03:43,200 Speaker 3: the efficiencies are income from AI, we haven't seen those 85 00:03:43,240 --> 00:03:46,040 Speaker 3: kind of productivity gains yet. The productivity gains that we're 86 00:03:46,040 --> 00:03:49,680 Speaker 3: seeing are coming from technologies that came out twenty years ago, 87 00:03:50,040 --> 00:03:52,960 Speaker 3: and so as those things play into companies, I think 88 00:03:53,000 --> 00:03:54,480 Speaker 3: you'll see real opportunity. 89 00:03:54,720 --> 00:03:56,240 Speaker 4: You know, one thing that I hear from you, and 90 00:03:56,240 --> 00:03:58,280 Speaker 4: I heard from Mike Wilson of mart and Stanley earlier 91 00:03:58,320 --> 00:04:01,080 Speaker 4: this morning, was that corporate America has a lot of 92 00:04:01,080 --> 00:04:03,280 Speaker 4: good about it in terms of strength, in terms of resilience, 93 00:04:03,280 --> 00:04:06,440 Speaker 4: in terms of technological progress. It's the question about other 94 00:04:06,680 --> 00:04:09,320 Speaker 4: dollar denominated assets, and I'm talking about treasuries, I'm talking 95 00:04:09,360 --> 00:04:11,840 Speaker 4: about government debt, especially given some of what you were 96 00:04:11,840 --> 00:04:14,040 Speaker 4: talking about with respect to who is driving some of 97 00:04:14,080 --> 00:04:16,840 Speaker 4: these bunch of proposals through Congress. 98 00:04:17,560 --> 00:04:20,120 Speaker 1: That really is the issue. How much have you seen. 99 00:04:19,960 --> 00:04:24,040 Speaker 4: That bid get called into question as institutions, particularly foreign 100 00:04:24,040 --> 00:04:24,599 Speaker 4: ones move away. 101 00:04:24,640 --> 00:04:26,160 Speaker 3: Well, I think there's a question of you know, how 102 00:04:26,240 --> 00:04:30,560 Speaker 3: much are you know, foreign governments pulling away from treasuries? 103 00:04:30,640 --> 00:04:32,520 Speaker 3: And you know, is that is that what we're seeing 104 00:04:32,520 --> 00:04:34,479 Speaker 3: the treasury market? Or are we seeing the unwinding of 105 00:04:34,480 --> 00:04:36,520 Speaker 3: the basis point? They are the basis trade and so 106 00:04:37,640 --> 00:04:41,839 Speaker 3: you know, Look, then the question falls into will is 107 00:04:41,920 --> 00:04:42,480 Speaker 3: the reserve? 108 00:04:42,640 --> 00:04:45,120 Speaker 1: US is the reserve currency? At question? Look, is not 109 00:04:45,160 --> 00:04:46,000 Speaker 1: where else she going to go? 110 00:04:46,160 --> 00:04:46,280 Speaker 2: Right? 111 00:04:46,279 --> 00:04:48,559 Speaker 3: The US is going to be the reserve currency. People 112 00:04:48,560 --> 00:04:51,120 Speaker 3: will say, well, China trade has gone up to two percent. Yeah, 113 00:04:51,120 --> 00:04:53,320 Speaker 3: it's come from four to six percent of trade. Right, 114 00:04:53,640 --> 00:04:55,800 Speaker 3: you know, it'll chip away at it, but we are 115 00:04:55,839 --> 00:04:57,679 Speaker 3: still going to continue to be the reserve currency. 116 00:04:57,920 --> 00:05:00,240 Speaker 5: You mentioned a lot of non US and ves there 117 00:05:00,279 --> 00:05:02,280 Speaker 5: is pulling back from the United States. Morning Star had 118 00:05:02,320 --> 00:05:04,120 Speaker 5: research out this week that said some of that is 119 00:05:04,160 --> 00:05:08,599 Speaker 5: actually patriotic rebalancing from capital from America to Europe. Do 120 00:05:08,680 --> 00:05:10,800 Speaker 5: you think it's that emotional for some of these. 121 00:05:10,720 --> 00:05:15,000 Speaker 3: People, Well, you know, just again talking to folks from 122 00:05:15,120 --> 00:05:19,359 Speaker 3: Canada who are so fundamentally offended by the comment of 123 00:05:19,600 --> 00:05:20,839 Speaker 3: you know, the fifty first state. 124 00:05:21,600 --> 00:05:25,040 Speaker 1: Yeah, it's emotional, right. They kind of get it on. 125 00:05:25,000 --> 00:05:26,960 Speaker 3: The trade and tariffs and we can deal and you 126 00:05:27,000 --> 00:05:28,080 Speaker 3: want help on immigration. 127 00:05:28,880 --> 00:05:29,640 Speaker 1: But a comment like. 128 00:05:29,600 --> 00:05:31,920 Speaker 3: That has obviously you had that kind of nationalists response. 129 00:05:31,920 --> 00:05:35,080 Speaker 5: What are the long term impacts of feelings like that? 130 00:05:36,080 --> 00:05:38,640 Speaker 3: You know, who's at a dinner last night, we're you know, 131 00:05:38,680 --> 00:05:41,760 Speaker 3: debating does that push Europe to China? 132 00:05:42,320 --> 00:05:43,880 Speaker 1: I don't think it, you know, obviously. 133 00:05:43,960 --> 00:05:46,039 Speaker 3: I think what it does is there's the joke of 134 00:05:46,120 --> 00:05:48,960 Speaker 3: you know, it's not Mega, it's Mega make Europe great again, right, 135 00:05:49,000 --> 00:05:53,520 Speaker 3: It forces Europe to do things like more defense independence, 136 00:05:53,600 --> 00:05:57,600 Speaker 3: more energy independence. Look, there's been a lot of brilliant 137 00:05:57,680 --> 00:06:01,000 Speaker 3: talent in Europe. Why are we not seeing these unicorn 138 00:06:01,080 --> 00:06:03,480 Speaker 3: companies from a technological and a lot of people say 139 00:06:03,480 --> 00:06:06,039 Speaker 3: it's the regulation and it's some of the policies that 140 00:06:06,040 --> 00:06:08,920 Speaker 3: they have in Europe. And so if this forces Europe 141 00:06:09,240 --> 00:06:12,680 Speaker 3: to be more resilient on its own, that's actually a 142 00:06:12,680 --> 00:06:14,880 Speaker 3: good thing for Europe. I don't think it necessarily they 143 00:06:14,880 --> 00:06:18,640 Speaker 3: don't suddenly trust China much. We're we're already trading with China. 144 00:06:18,720 --> 00:06:21,360 Speaker 3: But it forces them to say, you know what, we 145 00:06:21,480 --> 00:06:23,640 Speaker 3: have to stand on our own a little bit more. 146 00:06:23,680 --> 00:06:26,360 Speaker 2: It's why we're seeing some investors rebalance towards Europe since 147 00:06:26,400 --> 00:06:28,000 Speaker 2: the start of the year. I wanted to build on 148 00:06:28,040 --> 00:06:29,880 Speaker 2: some of Lisa's questions, and I think this is an 149 00:06:29,880 --> 00:06:32,719 Speaker 2: important line of questioning. At the moment, some investors aren't 150 00:06:32,760 --> 00:06:35,880 Speaker 2: drawing a distinction between risk assets in America and the 151 00:06:35,920 --> 00:06:38,520 Speaker 2: safe haven asset in America. It's trading as one bucket 152 00:06:38,720 --> 00:06:42,120 Speaker 2: dollar denominated assets. And I wonder, from your perspective, when 153 00:06:42,120 --> 00:06:44,400 Speaker 2: that a dynamic starts to take hold of the country, 154 00:06:44,680 --> 00:06:47,039 Speaker 2: whether that's a risk you need to actively manage or 155 00:06:47,040 --> 00:06:49,000 Speaker 2: a dislocation you take advantage of. 156 00:06:49,320 --> 00:06:50,440 Speaker 1: Which one is it at the moment? 157 00:06:50,520 --> 00:06:53,800 Speaker 3: Well, I think anytime that it becomes a risk on, 158 00:06:54,000 --> 00:06:56,320 Speaker 3: risk off in a big block, and yet you know 159 00:06:56,400 --> 00:06:59,920 Speaker 3: the underlying fundamentals are different in kind of an investment 160 00:07:00,040 --> 00:07:02,400 Speaker 3: that's that actually becomes a great investment opportunity. So I 161 00:07:02,440 --> 00:07:04,640 Speaker 3: think you have to look at it and unpack those Do. 162 00:07:04,600 --> 00:07:06,800 Speaker 2: You think that's what this is right now and it's 163 00:07:06,800 --> 00:07:08,479 Speaker 2: the opportunity in stocks or bonds With that. 164 00:07:08,520 --> 00:07:12,000 Speaker 3: In mind, I think you know right now it's it's 165 00:07:12,040 --> 00:07:15,520 Speaker 3: it's almost a market reacting to just a headline statement, right, 166 00:07:15,600 --> 00:07:17,720 Speaker 3: and so it's it's really sort of on and off. 167 00:07:17,760 --> 00:07:21,440 Speaker 1: It's a risk on, risk off. I think that from a. 168 00:07:21,520 --> 00:07:25,120 Speaker 3: You know, the dollar was was someone would say overvalued, 169 00:07:25,120 --> 00:07:27,560 Speaker 3: who knows, right, and it's come down a fair bit. 170 00:07:27,600 --> 00:07:28,760 Speaker 3: I think there are a lot of people that were 171 00:07:28,800 --> 00:07:31,680 Speaker 3: the US uh the debt and the deficit, you know, 172 00:07:31,760 --> 00:07:34,720 Speaker 3: thought that it was overvalued, and so probably in this 173 00:07:34,760 --> 00:07:36,960 Speaker 3: there's a little bit of that coming, you know, some 174 00:07:37,000 --> 00:07:38,320 Speaker 3: of that frothy ness coming off. 175 00:07:38,440 --> 00:07:40,240 Speaker 2: What's your advice to people right now who were part 176 00:07:40,280 --> 00:07:42,200 Speaker 2: of that dollar bit. They've built up that massive dollar 177 00:07:42,200 --> 00:07:44,800 Speaker 2: long over the period of a decade across asset classes, 178 00:07:44,800 --> 00:07:47,640 Speaker 2: in both equities and fixed income, and they're nervous about 179 00:07:47,640 --> 00:07:50,360 Speaker 2: the policy in Washington and looking to reallocate. What do 180 00:07:50,400 --> 00:07:51,280 Speaker 2: you suggesting they do. 181 00:07:51,400 --> 00:07:53,400 Speaker 3: I think it depends on where you're if you if 182 00:07:53,440 --> 00:07:56,000 Speaker 3: you're a dollar based economy, I think that's okay. You 183 00:07:56,000 --> 00:07:57,440 Speaker 3: don't have to worry about that. If you're not a 184 00:07:57,480 --> 00:08:00,320 Speaker 3: dollar based economy, you have to understand how that's going 185 00:08:00,320 --> 00:08:01,840 Speaker 3: to impact your investments. 186 00:08:01,840 --> 00:08:03,720 Speaker 2: Certainly been something that the Europeans about to think about over 187 00:08:03,720 --> 00:08:05,520 Speaker 2: the last few months, that's for sure. Jenny, it's good 188 00:08:05,520 --> 00:08:07,400 Speaker 2: to see you lost to talk about. I can't imagine 189 00:08:07,440 --> 00:08:09,840 Speaker 2: how much has changed the next time we spoke speak 190 00:08:10,040 --> 00:08:12,960 Speaker 2: Jennie Johnson there the Franklin Templeton CEO, on the latest 191 00:08:12,960 --> 00:08:13,520 Speaker 2: in this market.