Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We begin this now with stockslower as investors away clarity
Speaker 2: on trade talks. Jenny Johnson, the CEO of Franklin Sempleson,
Speaker 2: one of the world's largest investment managers, joined us now
Speaker 2: for more.
Speaker 1: Jenny's good to see you. It's great to be here.
Speaker 1: Thanks for having me.
Speaker 2: Things have changed a lot since we caught up with
Speaker 2: you in Davos, Switzerland. It's a lot of optimism. You
Speaker 2: remember everyone was charged as exceptionalism. Well, strowth, lots of
Speaker 2: hiring markets are great. Things have changed a lot. Have
Speaker 2: they changed for you?
Speaker 3: Well, you know, I actually we talked about it at
Speaker 3: the time. You know, I think that you have to
Speaker 3: think through kind of where the president is, right, He's
Speaker 3: come in with a plan.
Speaker 1: It's been very clear, right, it's.
Speaker 3: Taxes, immigration, tariffs, government efficiency and deregulation, right and so,
Speaker 3: and he has about a year and a half to
Speaker 3: get those things done before the midterms come in. And so,
Speaker 3: you know, from the tariff standpoint, again, he's a deal maker.
Speaker 3: So when you are trying to make a deal, you
Speaker 3: need to show that you are in the position of strength, right.
Speaker 3: So a lot of this blistering is around. I'm in
Speaker 3: a position of strength and you're going to have to
Speaker 3: bow to my will. I think the challenge has been
Speaker 3: There are some unintended consequences of that. I was talking
Speaker 3: to somebody yesterday about Canadians. They're so they're not upset
Speaker 3: about the terroifts, they're upset about the fifty first state comment,
Speaker 3: and that Airbnbs in Rhode Island are down because the
Speaker 3: Canadians say, I'm not going to come visit the US.
Speaker 3: So those are the undertendant consequences.
Speaker 1: The other piece of this is.
Speaker 3: He needs the tax revenues identified in tariffs to help
Speaker 3: fund his tax cuts, which, by the way, are not
Speaker 3: tax cuts really, they're extensions. And if we don't get
Speaker 3: that extension, there is a massive tax increase that happens,
Speaker 3: which really becomes an issue around the economy.
Speaker 2: Can you describe how you and the same thing the
Speaker 2: endgame looks like? What do you think it looks like?
Speaker 2: Because some people have described the last few weeks as madness.
Speaker 2: Is there a method to it?
Speaker 1: Yeah?
Speaker 3: So I think what we hope to see, you'd like
Speaker 3: to see a couple of deals done right to show
Speaker 3: that he's willing to come to the table and make
Speaker 3: a deal.
Speaker 1: Right, so we can see a deal.
Speaker 3: With Japan or Vietnam or you know somewhere to show no, no, no,
Speaker 3: he's playing his deals.
Speaker 1: You'd like to know who is responsible.
Speaker 3: Remember it was Paul Ryan who ushered the first tax
Speaker 3: cuts through, Like who's responsible for ushering that legislation through
Speaker 3: and champion that that'll be very important because he's got
Speaker 3: to get those done. And the question is how quickly
Speaker 3: can he get it done? To calm the markets, because
Speaker 3: what we've seen is, you know, look at you when
Speaker 3: you suddenly have CEOs who say I can't give guidance
Speaker 3: because there's so much uncertainty. That uncertainty makes them fear,
Speaker 3: and then they stop making investments. If you stop making investments,
Speaker 3: it slows down the economy. Right, So I think what
Speaker 3: we need to see in the next ninety days is
Speaker 3: some clarity in the meantime uncertainty.
Speaker 4: It leads to a lot of conspiracy theories and lots
Speaker 4: of other types of speculation. As someone who oversees one
Speaker 4: and a half trillion dollars of assets, how much of
Speaker 4: a material shift have you seen with customers consumers shifting
Speaker 4: just slightly away from US assets to insulate from some
Speaker 4: of the whip side and the uncertainty.
Speaker 3: You definitely see, you know, non Americans reducing on the
Speaker 3: institutional side some of their exposure to US equities.
Speaker 1: Okay, so we've seen that a bit.
Speaker 3: But on your hand, you know, you sort of you
Speaker 3: if you are in the market now, this is not
Speaker 3: the time to get out of the market, right.
Speaker 1: You need to play this out.
Speaker 3: And if you hadn't made the trade to being in
Speaker 3: more defensive stocks, then there's no point in doing that now,
Speaker 3: right because you've already sort of missed it.
Speaker 1: So you know, the reality is AI.
Speaker 3: I actually played around this weekend with an app called
Speaker 3: replet where you can just use natural language processing to
Speaker 3: have it code and generate an app for you. Like
Speaker 3: the efficiencies are income from AI, we haven't seen those
Speaker 3: kind of productivity gains yet. The productivity gains that we're
Speaker 3: seeing are coming from technologies that came out twenty years ago,
Speaker 3: and so as those things play into companies, I think
Speaker 3: you'll see real opportunity.
Speaker 4: You know, one thing that I hear from you, and
Speaker 4: I heard from Mike Wilson of mart and Stanley earlier
Speaker 4: this morning, was that corporate America has a lot of
Speaker 4: good about it in terms of strength, in terms of resilience,
Speaker 4: in terms of technological progress. It's the question about other
Speaker 4: dollar denominated assets, and I'm talking about treasuries, I'm talking
Speaker 4: about government debt, especially given some of what you were
Speaker 4: talking about with respect to who is driving some of
Speaker 4: these bunch of proposals through Congress.
Speaker 1: That really is the issue. How much have you seen.
Speaker 4: That bid get called into question as institutions, particularly foreign
Speaker 4: ones move away.
Speaker 3: Well, I think there's a question of you know, how
Speaker 3: much are you know, foreign governments pulling away from treasuries?
Speaker 3: And you know, is that is that what we're seeing
Speaker 3: the treasury market? Or are we seeing the unwinding of
Speaker 3: the basis point? They are the basis trade and so
Speaker 3: you know, Look, then the question falls into will is
Speaker 3: the reserve?
Speaker 1: US is the reserve currency? At question? Look, is not
Speaker 1: where else she going to go?
Speaker 2: Right?
Speaker 3: The US is going to be the reserve currency. People
Speaker 3: will say, well, China trade has gone up to two percent. Yeah,
Speaker 3: it's come from four to six percent of trade. Right,
Speaker 3: you know, it'll chip away at it, but we are
Speaker 3: still going to continue to be the reserve currency.
Speaker 5: You mentioned a lot of non US and ves there
Speaker 5: is pulling back from the United States. Morning Star had
Speaker 5: research out this week that said some of that is
Speaker 5: actually patriotic rebalancing from capital from America to Europe. Do
Speaker 5: you think it's that emotional for some of these.
Speaker 3: People, Well, you know, just again talking to folks from
Speaker 3: Canada who are so fundamentally offended by the comment of
Speaker 3: you know, the fifty first state.
Speaker 1: Yeah, it's emotional, right. They kind of get it on.
Speaker 3: The trade and tariffs and we can deal and you
Speaker 3: want help on immigration.
Speaker 1: But a comment like.
Speaker 3: That has obviously you had that kind of nationalists response.
Speaker 5: What are the long term impacts of feelings like that?
Speaker 3: You know, who's at a dinner last night, we're you know,
Speaker 3: debating does that push Europe to China?
Speaker 1: I don't think it, you know, obviously.
Speaker 3: I think what it does is there's the joke of
Speaker 3: you know, it's not Mega, it's Mega make Europe great again, right,
Speaker 3: It forces Europe to do things like more defense independence,
Speaker 3: more energy independence. Look, there's been a lot of brilliant
Speaker 3: talent in Europe. Why are we not seeing these unicorn
Speaker 3: companies from a technological and a lot of people say
Speaker 3: it's the regulation and it's some of the policies that
Speaker 3: they have in Europe. And so if this forces Europe
Speaker 3: to be more resilient on its own, that's actually a
Speaker 3: good thing for Europe. I don't think it necessarily they
Speaker 3: don't suddenly trust China much. We're we're already trading with China.
Speaker 3: But it forces them to say, you know what, we
Speaker 3: have to stand on our own a little bit more.
Speaker 2: It's why we're seeing some investors rebalance towards Europe since
Speaker 2: the start of the year. I wanted to build on
Speaker 2: some of Lisa's questions, and I think this is an
Speaker 2: important line of questioning. At the moment, some investors aren't
Speaker 2: drawing a distinction between risk assets in America and the
Speaker 2: safe haven asset in America. It's trading as one bucket
Speaker 2: dollar denominated assets. And I wonder, from your perspective, when
Speaker 2: that a dynamic starts to take hold of the country,
Speaker 2: whether that's a risk you need to actively manage or
Speaker 2: a dislocation you take advantage of.
Speaker 1: Which one is it at the moment?
Speaker 3: Well, I think anytime that it becomes a risk on,
Speaker 3: risk off in a big block, and yet you know
Speaker 3: the underlying fundamentals are different in kind of an investment
Speaker 3: that's that actually becomes a great investment opportunity. So I
Speaker 3: think you have to look at it and unpack those Do.
Speaker 2: You think that's what this is right now and it's
Speaker 2: the opportunity in stocks or bonds With that.
Speaker 3: In mind, I think you know right now it's it's
Speaker 3: it's almost a market reacting to just a headline statement, right,
Speaker 3: and so it's it's really sort of on and off.
Speaker 1: It's a risk on, risk off. I think that from a.
Speaker 3: You know, the dollar was was someone would say overvalued,
Speaker 3: who knows, right, and it's come down a fair bit.
Speaker 3: I think there are a lot of people that were
Speaker 3: the US uh the debt and the deficit, you know,
Speaker 3: thought that it was overvalued, and so probably in this
Speaker 3: there's a little bit of that coming, you know, some
Speaker 3: of that frothy ness coming off.
Speaker 2: What's your advice to people right now who were part
Speaker 2: of that dollar bit. They've built up that massive dollar
Speaker 2: long over the period of a decade across asset classes,
Speaker 2: in both equities and fixed income, and they're nervous about
Speaker 2: the policy in Washington and looking to reallocate. What do
Speaker 2: you suggesting they do.
Speaker 3: I think it depends on where you're if you if
Speaker 3: you're a dollar based economy, I think that's okay. You
Speaker 3: don't have to worry about that. If you're not a
Speaker 3: dollar based economy, you have to understand how that's going
Speaker 3: to impact your investments.
Speaker 2: Certainly been something that the Europeans about to think about over
Speaker 2: the last few months, that's for sure. Jenny, it's good
Speaker 2: to see you lost to talk about. I can't imagine
Speaker 2: how much has changed the next time we spoke speak
Speaker 2: Jennie Johnson there the Franklin Templeton CEO, on the latest
Speaker 2: in this market.