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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. Let's begin with the FED,

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Speaker 1: because tonight in New York we learn that President Trump

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Speaker 1: is removing Governor Lisa Cook effective immediately. You might recall

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Speaker 1: last Friday, Trump said he would fire Coke if she

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Speaker 1: did not resign over accusations about alleged mortgage fraud. Needless

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Speaker 1: to say, the dismissal of Cooke will allow Trump to

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Speaker 1: appoint a replacement that could sway interest rates lower. In

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Speaker 1: the last session, we had global stock markets a bit

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Speaker 1: on edge in front of the earnings Wednesday from Nvidia,

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Speaker 1: as well as the Fed's preferred measure of inflation that's

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Speaker 1: due Friday when we get the PCE, And in a moment,

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Speaker 1: we'll check in with Mary Ann Bartles. She is the

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Speaker 1: chief investment strategist at Sanctuary Wealth. Earlier today at the

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Speaker 1: White House, South Korean President Lee J Mung met with

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Speaker 1: President Trump for the first time in person, and prior

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Speaker 1: to that meeting, Trump blasted South Korea for political instability. Well,

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Speaker 1: needless to say, that had the potential to create a

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Speaker 1: rocky visit. However, the two leaders voiced optimism on cooperation

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Speaker 1: over North Korea, as well as security and even shipbuilding.

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Speaker 1: Speaking later to reporters, Trump said his trade deal with

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Speaker 1: South Korea will remain unchanged. That's despite a lobbying effort

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Speaker 1: from Lee.

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Speaker 2: They had some problems with it, but we stepped to

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Speaker 2: our guns. We are going to They're going to make

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Speaker 2: the deal that they agreed to make. And he's a

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Speaker 2: very good guy, very good representative for South Korea. It's

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Speaker 2: a very big trade deal. You know, it's the biggest

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Speaker 2: deal they've ever made by.

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Speaker 1: Farm as President Trump there now, if you remember, that

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Speaker 1: trade deal agreed to last month has South Korean goods

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Speaker 1: subject to a tariff of fifteen percent here in the US.

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Speaker 1: By the way, after the meeting, we learned that Korea

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Speaker 1: Airlines is planning an order for more than one hundred

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Speaker 1: aircraft from Boeing. To help me take you closer look

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Speaker 1: at what's happening at this hour in markets is Peter MacGuire.

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Speaker 1: He is a currency trader, also the CEO of Trading

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Speaker 1: dot Com Australia. Peter is on the line from just

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Speaker 1: outside Sydney. Thank you so much for making time to

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Speaker 1: chat with me. Can I get your reaction to the

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Speaker 1: breaking news that we have had on the dismissal of

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Speaker 1: FED Governor Lisa Cook, effective immediately.

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Speaker 3: Yeah, good morning, Doug, Greetings from Sydney. I'll tell you what.

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Speaker 4: It's hit everyone by surprise, certainly hit the dollar and

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Speaker 4: Lisa Cook dismissed, you know, by the President. It's hard

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Speaker 4: to really inhale that unprecedented removal of a governor, you know,

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Speaker 4: and being referred to the Department of Justice. So I

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Speaker 4: think everyone's just in a little bit of a shell shock.

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Speaker 4: It'll be interesting to see what impact it has naturally

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Speaker 4: to dollar in Asia today and then you know, you

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Speaker 4: guys opening up for New York tonight, whether there's repercussions

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Speaker 4: across bond markets and certainly equities.

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Speaker 1: I'm seeing a little bit of dollar weakness, and we've

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Speaker 1: got a rally in the end US yields, particularly at

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Speaker 1: the short end, moving lower. I think the two year

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Speaker 1: is off about three basis points at the moment at

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Speaker 1: three sixty nine. Do you put a lot of stock

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Speaker 1: in FED independence. Maybe that's a ridiculous question, but I

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Speaker 1: want to get your take on the idea that an

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Speaker 1: independent central bank is critical to the when which markets function.

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Speaker 4: Yes, it is, and there's no doubting that. And that's

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Speaker 4: been very much in place for more than a century.

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Speaker 4: So I think that that's the general theme everyone's been.

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Speaker 4: You go to business school and that's what you learn, Doug.

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Speaker 4: Regardless of the school, you get that body of thought

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Speaker 4: across finance. And I've been a student of Professor Jeremy Siegel,

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Speaker 4: a good friend of you, and that's what they teach

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Speaker 4: at the Wharton School. So that's my understanding as far

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Speaker 4: as independence and the frameworks associated with it. And you know,

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Speaker 4: I listen, I'll just diverse or diverge a little bit,

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Speaker 4: but you listen to Scott percent. He's won in one

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Speaker 4: point twenty five to one five to one point seventy

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Speaker 4: five percent, and President Trump's won two to three hundred

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Speaker 4: basis points cut. So this is going to be very

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Speaker 4: fascinating how this plays out leading into Christmas.

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Speaker 1: I'm wondering if there is a risk. We know that

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Speaker 1: the labor market is slowing down a bit, but inflation

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Speaker 1: may prove to be a little stubborn. Right now, the

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Speaker 1: market's convinced. I think maybe there's an eighty percent probability

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Speaker 1: that we get a rate cut twenty five basis points

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Speaker 1: in September and perhaps perhaps another rate cut before the

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Speaker 1: end of the year. Do you think the market may

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Speaker 1: be a little too aggressive here and it's thinking, well.

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Speaker 4: It's hard to I mean, futures are running nearly even

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Speaker 4: yesterday though, were nearly ninety percent probability, So that may

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Speaker 4: be the course that the pathway forward. It's we're very

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Speaker 4: conscious as far as non farm payrolls. We're really you know,

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Speaker 4: that stickiness as far as the CPI and PBI and

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Speaker 4: the issues I think moving forward. You know, if you

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Speaker 4: do get two rate cuts, then that probably is fairly

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Speaker 4: baked in from the street and that seems to be

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Speaker 4: the general thought. But this is really I think changed

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Speaker 4: the dimension. If this stacks up and Lisa Cook is

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Speaker 4: removed Governor Cook, then that changes, I think the potential

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Speaker 4: for even greater cuts sometime later in twenty five, early

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Speaker 4: twenty six, Doug.

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Speaker 1: So before we get there, would you expect a great

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Speaker 1: deal more volatility in the foreign exchange, particularly where the

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Speaker 1: dollar is concerned.

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Speaker 4: Absolutely, I mean, you know, you're down eleven percent since

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Speaker 4: in eight months from President Trump came in it was

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Speaker 4: one ten. I think you know, now you're looking at

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Speaker 4: ninety eight that US dollar index, it's been spanked down,

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Speaker 4: and I would think that that would be a continuation.

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Speaker 4: If you see successive rate cuts, then that's only going

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Speaker 4: to strip more out of the dollar.

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Speaker 3: That would be my thoughts.

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Speaker 1: So one of the other things that happened during New

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Speaker 1: York trading, we had a much weaker euro after the

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Speaker 1: French prime minister called for a confidence vote. I think

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Speaker 1: that would be September the eighth. When you look at

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Speaker 1: price action in the eurov the greenback, what are you

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Speaker 1: seeing one.

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Speaker 4: Sixteen fifty at the moment and it was one seventeen

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Speaker 4: and it's very choppy, and it's again had a huge

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Speaker 4: run up from that one oh two to one oh

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Speaker 4: three handle going back, you know, since the start of

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Speaker 4: the year, So you can't I mean, it's just been

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Speaker 4: one way traffic and maybe you've got a one twenty

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Speaker 4: possibility by early October if this continuation, if we see

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Speaker 4: a rate cut in September, I would think that that

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Speaker 4: would really push that US dollar further down.

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Speaker 3: That had raised the euro, and that's the I think

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Speaker 3: that's the play at the moment.

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Speaker 4: But a lot of the smart money's already been earned

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Speaker 4: over the last eight months. If you traded one market

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Speaker 4: and one market only short dollar, long euro, you'd be

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Speaker 4: rubbing your hands with glee.

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Speaker 1: Dug, Yeah, I've seen that. I'm curious about what your

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Speaker 1: take is on the meeting that we had today at

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Speaker 1: the White House between President Trump and South Korean President

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Speaker 1: Dale Jmjong. This was their first in person meeting, and

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Speaker 1: one of the things that occurred to me is that, yes,

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Speaker 1: Trump did refuse to change terms of the tariff agreement

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Speaker 1: with South Korea. They remained at fifteen percent. But there

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Speaker 1: seem to be a lot of positivity in other areas

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Speaker 1: of concern, notably the situation with North Korea. How do

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Speaker 1: you look at the Korean win right now visa VI

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Speaker 1: the dollar.

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Speaker 4: Well, that's an interesting market again. First off, before I

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Speaker 4: get to that, I think there's there's a lot of well,

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Speaker 4: President Trump really wants to engage South Korea both from

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Speaker 4: a technology standpoint and from shipbuilding, and so that could

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Speaker 4: be very good for the US economy. As far as

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Speaker 4: the one's concerned, I wouldn't be surprised to see a

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Speaker 4: little bit further leg up if that US dollar continues

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Speaker 4: to slide, keep an eye on it. I mean you know,

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Speaker 4: you've only got to look at what's happening with the Kosdak.

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Speaker 4: It's been not a bad market to trade so far

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Speaker 4: this year, and again, you know, I think South Korea's

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Speaker 4: best days. I understand the fifteen percent tariff and what

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Speaker 4: impact it will probably have, but I think the overall

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Speaker 4: relation ship where the States is being galvanized.

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Speaker 3: And then you're looking at what's the the you.

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Speaker 4: Know, I've read some thoughts as far as what's happening

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Speaker 4: with North Korea, and that's again a very much a

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Speaker 4: work in progress. And is that the ultimate strategy of

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Speaker 4: President Trump to try and get a truce between both sides.

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Speaker 1: So I mentioned that we're seeing a bid in the

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Speaker 1: Japanese he nd at one forty seven ten on the

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Speaker 1: news of the removal of Governor Lisa Cook. What's your

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Speaker 1: sense of the Japanese and Visa VI the greenback.

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Speaker 3: Well, you know you're one forty seven.

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Speaker 4: If we see a rate hike, and there's every chance

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Speaker 4: you will before year end for the boj I think

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Speaker 4: that's what Governor leader is wanting. Well, that's going to

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Speaker 4: force I think a stronger yen. You've got a weaker

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Speaker 4: dollar cutting rates. So I wouldn't be surprised to see

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Speaker 4: the yen have another leg up from here. So yeah,

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Speaker 4: stronger yen again rolling into Christmas week a dollar.

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Speaker 3: It's again a great market to trade.

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Speaker 4: It's been very, very dynamic over the last eight months,

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Speaker 4: and I don't think that utility is being stripped out

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Speaker 4: of it yet.

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Speaker 1: Doug stronger than one forty five from here? Do you think?

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Speaker 3: Yeah, I wouldn't be surprised.

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Speaker 4: I mean, a few raise rates and if that's what

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Speaker 4: the situation is, and that's pretty much baked in, I

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Speaker 4: think everyone's working along that sort of framework. As far

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Speaker 4: as Governor Ouwieda, you know, the optimism about another rate

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Speaker 4: hike soon. Conditions are favorable on interest hikes as wages

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Speaker 4: rise and labor markets improved. So it's about a seventy

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Speaker 4: percent chance, Doug of a boj have another rate hike

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Speaker 4: by the end of the year. And you've got accelerating

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Speaker 4: cpis that make that probability higher? So I think, yeah,

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Speaker 4: one could be the new handle.

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Speaker 1: Wow, well, okay, Peter always is a pleasure, Thank you

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Speaker 1: so much. Currency trader Peter maguire. He is also the

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Speaker 1: CEO of Trading dot Com Australia joining from just outside

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Speaker 1: Sydney here on the Debreakasia podcast. Welcome back to the

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Speaker 1: Debreak Asia Podcast. I'm Doug Krisner. We're seeing some dollar

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Speaker 1: weakness this morning and gold is moving higher. All of

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Speaker 1: this after President Trump announced the removal of FED Governor

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Speaker 1: Lisa Cook, and this is raising concern about a number

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Speaker 1: of things, not the least of which is independence of

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Speaker 1: the Central Bank. Meantime, stocks were already under pressure after

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Speaker 1: initial optimism about the FED lowering interest rates. That seemed

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Speaker 1: to vanish a little bit today. For a closer look

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Speaker 1: at market action, let's bring in mary Ann Barteles. She

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Speaker 1: is the chief investment strategist at Sanctuary Wealth. Mary Ann,

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Speaker 1: thank you so much for making time to chat with me.

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Speaker 1: So we heard last Friday from FED share J. Powell.

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Speaker 1: Seems like the door is open for at least a

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Speaker 1: twenty five basis point rate cut. Do you think there's

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Speaker 1: an outside chance we get maybe as much as fifty

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Speaker 1: basis points and easy.

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Speaker 5: I don't think it's fifty. In fact, I was really

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Speaker 5: surprised that Powell pivoted. The economy is growing well, the

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Speaker 5: inflation data is a little bit elevated. We're still at

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Speaker 5: full employment. This is not typically the type of environment

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Speaker 5: that we would see interest rates to come down, but

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Speaker 5: he definitely did pivot in his speech, and what that

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Speaker 5: tells me is that's going to allow risk assets to

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Speaker 5: continue to go to go up, and I think we're

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Speaker 5: going to continue to see equities hit new record all

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Speaker 5: time highs Now, I wouldn't be surprised if we got

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Speaker 5: some volatility as we go into September and October. But

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Speaker 5: I think if we were having this conversation towards the

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Speaker 5: end of December, we're going to be sitting at records.

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Speaker 1: So at the end of the week, we get the

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Speaker 1: Personal Consumption Expenditures Price Index. We know this to be

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Speaker 1: the Fed's preferred measure of inflation. A core PCE number

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Speaker 1: is expected to show an annual increase of two point

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Speaker 1: nine percent. That seems hot, does it not?

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Speaker 5: I one hundred percent agree with you. The FED has

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Speaker 5: been very consistent in saying that their target is two percent,

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Speaker 5: yet we're not at that two percent. So again, I'm

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Speaker 5: kind of surprised that that Powell actually did pivot to

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Speaker 5: a more dubvish tone, but it is what it is.

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Speaker 1: So do you think we're entering a world now where

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Speaker 1: the focus clearly is going to be the labor market

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Speaker 1: and inflation takes a backseat. And if that in fact

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Speaker 1: is the case, is that a little I don't want

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Speaker 1: to say a dangerous scenario, but it certainly will be

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Speaker 1: tricky for the FED to navigate.

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Speaker 5: Definitely tricky for the FED to navigate. But if we

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Speaker 5: get a hot inflation number, that could be part of

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Speaker 5: the catalyst of how we have a correction, because then

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Speaker 5: the market's going to assume that the Fed's not going

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Speaker 5: to be able to cut interest rates. And you know

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Speaker 5: we've had this environment before. You know, raycut on, ray

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Speaker 5: cut off at the end. I don't think the market

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Speaker 5: needs a raycut to rally because earnings have been so strong.

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Speaker 5: If you looked at earnings for the second quarter, they

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Speaker 5: came in substantially higher than expected and really strong in

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Speaker 5: the tech and tech related area. So you know, I

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Speaker 5: think inflation data could cause more volatility than anything else.

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Speaker 1: Speaking of tech, I think we can agree. We've got

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Speaker 1: a major test this week Wednesday after the bell when

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Speaker 1: we hear from in video. Key question is whether this

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Speaker 1: company can deliver results in issue and outlook to support

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Speaker 1: evaluation of forty times forward earnings. What's your sense here, Well.

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Speaker 5: Normally if you were talking about forty times earnings, you

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Speaker 5: would say that's high. But believe it or not, for

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Speaker 5: Nvidio effects low. Based on history, they can come out

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Speaker 5: with great numbers, great forecast and I still wouldn't be

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Speaker 5: surprised if the stock had some volatility and you had

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Speaker 5: a little bit of a pullback. Markets are very overbought,

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Speaker 5: and video stock technically is extended. But when I look

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Speaker 5: at where the true leadership of the market is, it's

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Speaker 5: in the semiconductors. And that's been the case now for

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Speaker 5: a few years. So even if Nvidia was to have

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Speaker 5: some volatility around earnings, I think if we're looking out

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Speaker 5: a year two years out, semiconductors are the place to be.

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Speaker 1: We had a meeting today at the White House between

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Speaker 1: President Trump and South Korea's President Lee. One of the

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Speaker 1: things that Trump refused to do was to change terms

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Speaker 1: of the tariff agreement that he made with Soul fifteen

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Speaker 1: percent on South Korean goods that will remain unchanged. Where

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Speaker 1: are you right now in understanding the tariff story as

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Speaker 1: it feeds into inflation.

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Speaker 5: Well, it can take time for tariffs to feed in

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Speaker 5: if you look at the Trump's previous administration, it can

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Speaker 5: take you know, six, eight to nine months before you

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Speaker 5: start seeing a full impact. And again this is part

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Speaker 5: you know, I'm surprising and that that Powell kind of

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Speaker 5: pivoted because we haven't necessarily seen what the potential inflation

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Speaker 5: impacts are from terror and we don't have all the

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Speaker 5: terroriffs in place yet. But again, when I look at

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Speaker 5: where we were in April and where we are today

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Speaker 5: with all the tariff talk, the market has really been

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Speaker 5: able to digest all of this news, and companies have

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Speaker 5: been able to navigate an economy and a labor market

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Speaker 5: and an interest rate environment where they're producing really good earnings.

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Speaker 5: Now it's in you know, certain pockets like we've talked about,

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Speaker 5: you're really seeing the bigger strength in technology, and that's

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Speaker 5: because we're in a major technological innovation upgrade in terms

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Speaker 5: of technology and whether you're talking about AI, of robotics, blockchain,

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Speaker 5: even crypto. Uh, this is a major transformation across global markets.

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Speaker 5: And you're actually seeing companies navigate this very well, where

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Speaker 5: their profit margins are growing and their earnings are growing

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Speaker 5: again concentrated, but it's supporting the higher valuations within the markets.

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Speaker 1: So we know historically that the months of September and

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Speaker 1: October can be pretty volatile, to say the least for

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Speaker 1: the equity markets, particularly here in the US. And I'm

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Speaker 1: wondering whether or not you're on high alert for maybe

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Speaker 1: a little bit more volatility and perhaps a substantial pullback

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Speaker 1: in the months ahead.

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Speaker 5: I mean, we could get a ten percent pullback, and

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Speaker 5: given the move that we've had so far, that would

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Speaker 5: be very normal. What's interesting is October is really the

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Speaker 5: month where we make great bottoms that start the rallies

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Speaker 5: that go into November and December. So I am on

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Speaker 5: higher alert. I would not be surprised if we get

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Speaker 5: some type of pull back, you know, somewhere between five

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Speaker 5: and ten percent, and that would allow the markets to

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Speaker 5: have a seasonal year end rally.

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Speaker 1: So there was a bit of a rotation today out

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Speaker 1: of value and particularly some of the consumer staples names

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Speaker 1: that were up big in the Friday session of last week.

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Speaker 1: What is your sense of where the American consumer is

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Speaker 1: right now, particularly given this inflationary pressure that we just

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Speaker 1: laid out that may be coming from the tariff story.

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Speaker 5: You know, it's it's a great question because it's the

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Speaker 5: question is really what kind of balance sheet and income

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Speaker 5: is the consumer having. And you know, the low end

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Speaker 5: consumer is struggling, but the average consumer is doing very well.

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Speaker 5: When we look at disposable income, disposable income is rising,

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Speaker 5: the savings rate is rising, and when we look at

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Speaker 5: the consumer per capita income, it's rising. So the consumer

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Speaker 5: is still solid. And that's a really important question because

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Speaker 5: they really have a significant impact on the economy and

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Speaker 5: there has been a major structural change where we were

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Speaker 5: a goods producing economy and now we're really a service

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Speaker 5: economy and the consumer is picking and choosing what services

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Speaker 5: they want. So you're seeing, you know, during the holiday season,

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Speaker 5: summer season, travel has done very well. Restaurants have done

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Speaker 5: very well, and they've slowed down and they've picked back up.

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Speaker 5: Certain retail stores are doing okay. Certain retail stores are

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Speaker 5: not doing okay. But when we look at the net

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Speaker 5: net even wages are going up on average. So when

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Speaker 5: you take an average profile of the consumer, the consumer

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Speaker 5: is totally fine.

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Speaker 1: Okay, Mary, and good stuff. We'll leave it there, Thanks

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Speaker 1: so much. Maryann Bartell's chief investment strategist at Sanctuary Wealth,

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Speaker 1: joining us here on the Daybreak Asia podcast Thanks for

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Speaker 1: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 1: Each weekday, we look at the story shaping markets, finance,

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Speaker 1: and geopolitics in the Asia Pacific. You can find us

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Speaker 1: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 1: else you listen. Join us again tomorrow for insight on

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Speaker 1: the market moves from Hong Kong to Singapore and Australia.

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Speaker 1: I'm Doug Prisner, and this is Bloomberg