WEBVTT - India's Modi, BJP Coalition Look to Retain Power

0:00:00.120 --> 0:00:10.480
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

0:00:10.520 --> 0:00:13.720
<v Speaker 1>Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

0:00:13.800 --> 0:00:16.640
<v Speaker 1>Curtis and myself for the stories, making news and moving

0:00:16.680 --> 0:00:19.560
<v Speaker 1>markets in the APAC region. You can subscribe to the

0:00:19.600 --> 0:00:23.080
<v Speaker 1>show anywhere you get your podcast and always on Bloomberg Radio,

0:00:23.320 --> 0:00:26.080
<v Speaker 1>the Bloomberg Terminal, and the Bloomberg Business app.

0:00:27.160 --> 0:00:30.360
<v Speaker 2>Let's get to tanvi Madon, Senior Fellow on Foreign Policy

0:00:30.760 --> 0:00:33.360
<v Speaker 2>at the Brookings Institution, to talk a little bit more

0:00:33.360 --> 0:00:37.000
<v Speaker 2>about the India elections. Tonvie, thank you for joining us.

0:00:37.040 --> 0:00:37.199
<v Speaker 3>Now.

0:00:37.200 --> 0:00:40.120
<v Speaker 2>You see comments like even if Mody remains Prime Minister,

0:00:40.560 --> 0:00:43.839
<v Speaker 2>his position will be much diminished. He won't be the

0:00:43.880 --> 0:00:48.000
<v Speaker 2>same MODI it puts the eight percent growth target at risk.

0:00:48.320 --> 0:00:49.879
<v Speaker 2>But I want to flip the argument a little bit

0:00:49.920 --> 0:00:52.120
<v Speaker 2>and put this to you. Might this not be a

0:00:52.159 --> 0:00:55.760
<v Speaker 2>good thing in that it shows democracies working in India

0:00:56.200 --> 0:00:59.920
<v Speaker 2>and even smart strongmen need a check on their power.

0:01:01.040 --> 0:01:06.040
<v Speaker 4>I think the word you're hearing a lot from analysts

0:01:06.160 --> 0:01:09.640
<v Speaker 4>but also from voters is balanced. That the Indian voter

0:01:10.200 --> 0:01:13.040
<v Speaker 4>has voted for more balance, and as you said, that's

0:01:13.080 --> 0:01:16.640
<v Speaker 4>not necessarily a bad thing. You could see an argument

0:01:17.280 --> 0:01:21.360
<v Speaker 4>made that Prime Minister Mode will continue some reforms, for

0:01:21.440 --> 0:01:24.000
<v Speaker 4>example on the economic side, but he will need to

0:01:24.080 --> 0:01:28.560
<v Speaker 4>think about how to ensure more inclusive growth. The message

0:01:28.640 --> 0:01:32.119
<v Speaker 4>from voters seems to be that India is shining for some,

0:01:32.360 --> 0:01:35.160
<v Speaker 4>but not for many, and so I think you will

0:01:35.200 --> 0:01:38.520
<v Speaker 4>see it doesn't mean that you won't see the same direction,

0:01:38.680 --> 0:01:40.880
<v Speaker 4>but I think there will have to be some tweaks

0:01:41.160 --> 0:01:43.640
<v Speaker 4>and adaptations. But as you said, I don't think this

0:01:43.720 --> 0:01:47.240
<v Speaker 4>is necessarily a bad thing. It shows that at the

0:01:47.319 --> 0:01:50.400
<v Speaker 4>end of the day, the ultimate guarant of Indian democracy

0:01:50.400 --> 0:01:54.320
<v Speaker 4>are Indian voters and they want choice and the exercise choice.

0:01:54.360 --> 0:01:56.800
<v Speaker 1>So let's drill down into that if we can. How

0:01:56.840 --> 0:02:01.280
<v Speaker 1>pervasive is inequality, joblessness and inflation when it comes to

0:02:01.320 --> 0:02:02.200
<v Speaker 1>the cost of living.

0:02:03.360 --> 0:02:06.080
<v Speaker 4>I think it depends from state to state, and one

0:02:06.080 --> 0:02:07.960
<v Speaker 4>of the things that analysts will do in the next

0:02:08.040 --> 0:02:11.280
<v Speaker 4>few days is drilled down in each state and see

0:02:11.320 --> 0:02:14.680
<v Speaker 4>what the signal has been. One thing we've heard even

0:02:14.760 --> 0:02:17.200
<v Speaker 4>in the state elections in the studden southern state of

0:02:17.240 --> 0:02:21.880
<v Speaker 4>Karnataka a few months ago where Bangalore, is that what

0:02:22.160 --> 0:02:26.720
<v Speaker 4>rural voters in particular, we're feeling economic distress, We're upset

0:02:26.760 --> 0:02:31.040
<v Speaker 4>about inflation and prices, and we're pleased actually by Prime

0:02:31.040 --> 0:02:36.160
<v Speaker 4>Minister Modi's welfare schemes cash transfers, but they also want

0:02:36.360 --> 0:02:38.720
<v Speaker 4>jobs and so I think that's where you will see

0:02:38.720 --> 0:02:42.240
<v Speaker 4>some of the focus as Prime Minister Modi tries to

0:02:42.600 --> 0:02:45.240
<v Speaker 4>not just form a coalition but think about what the

0:02:45.240 --> 0:02:47.359
<v Speaker 4>policy priorities are going to be in the months ahead.

0:02:48.200 --> 0:02:52.440
<v Speaker 2>So those thirty seats that are controlled by the allies,

0:02:52.560 --> 0:02:56.840
<v Speaker 2>the small parties, we did have the Telugu Dessaum Party

0:02:57.320 --> 0:03:00.200
<v Speaker 2>in under Pradesh saying that they will that they are are,

0:03:00.880 --> 0:03:04.440
<v Speaker 2>you know, reaffirming their support for Modi. Is it possible

0:03:04.480 --> 0:03:08.519
<v Speaker 2>that not really all that much changes because the coalition

0:03:08.960 --> 0:03:11.000
<v Speaker 2>will still be in power and Modi will still be

0:03:11.040 --> 0:03:11.400
<v Speaker 2>the man.

0:03:12.600 --> 0:03:16.120
<v Speaker 4>I think where you will see change is from the

0:03:16.200 --> 0:03:19.680
<v Speaker 4>fact that Primal Simodi is somebody who has never had

0:03:19.720 --> 0:03:23.480
<v Speaker 4>to deal with a coalition government. He was a Chief minister,

0:03:23.639 --> 0:03:26.280
<v Speaker 4>the equivalent of governor of the state of Gujrat for

0:03:26.320 --> 0:03:28.840
<v Speaker 4>a number of years. He's been Prime Minister for ten years,

0:03:29.040 --> 0:03:32.320
<v Speaker 4>but he's always had a majority. So there will have

0:03:32.480 --> 0:03:36.240
<v Speaker 4>to be some change, even though it's only about thirty

0:03:36.320 --> 0:03:41.480
<v Speaker 4>forty seats that they need partners for they'll be changed

0:03:41.480 --> 0:03:43.960
<v Speaker 4>from the fact that Primal Simodi now has to deal

0:03:44.000 --> 0:03:47.320
<v Speaker 4>with coalition partners. I think the second thing that we

0:03:47.360 --> 0:03:50.840
<v Speaker 4>will will see over the next few months is what

0:03:50.880 --> 0:03:55.080
<v Speaker 4>this means for the party internally. What is their assessment

0:03:55.200 --> 0:03:57.560
<v Speaker 4>of why they have lost? And I think there will

0:03:57.640 --> 0:04:00.560
<v Speaker 4>have to be some adaptation. And if there is not,

0:04:00.840 --> 0:04:05.280
<v Speaker 4>if Prime Minister Modi and his party do not adapt

0:04:05.320 --> 0:04:09.760
<v Speaker 4>and send a signalative voters that actually they're not acknowledging

0:04:10.080 --> 0:04:12.280
<v Speaker 4>that the voters have sent a different message from twenty

0:04:12.360 --> 0:04:17.120
<v Speaker 4>nineteen twenty fourteen, they will perhaps suffer greater defeats in future,

0:04:17.440 --> 0:04:19.800
<v Speaker 4>not just national elections but state elections as well. So

0:04:19.839 --> 0:04:22.839
<v Speaker 4>I do think there will be some adaptation that's necessary.

0:04:23.000 --> 0:04:25.640
<v Speaker 1>I'm curious about what this may mean for foreign policy,

0:04:25.680 --> 0:04:29.360
<v Speaker 1>particularly with India's relationship with Russia, whether we're talking about

0:04:29.680 --> 0:04:34.800
<v Speaker 1>support for the conflict in Ukraine or the importation of

0:04:34.839 --> 0:04:38.560
<v Speaker 1>a Russian crude oil into India. Does it change the

0:04:38.600 --> 0:04:40.520
<v Speaker 1>calculus on foreign policy at all?

0:04:41.640 --> 0:04:44.440
<v Speaker 4>Not really. I think foreign policy is one place that

0:04:44.680 --> 0:04:48.400
<v Speaker 4>even though you see their ruling party often say that

0:04:48.520 --> 0:04:51.599
<v Speaker 4>everything has changed with Madi, whether it is actually more

0:04:51.680 --> 0:04:56.159
<v Speaker 4>continuity rather than change. Sometimes this emphasis that differs for

0:04:56.200 --> 0:05:00.760
<v Speaker 4>example on the diaspora or on cultural issues, but largely

0:05:00.839 --> 0:05:05.440
<v Speaker 4>whether it's the traditional partnership with Russia that remains but

0:05:05.680 --> 0:05:09.680
<v Speaker 4>has been both this government, the Modi government and previous

0:05:09.680 --> 0:05:12.760
<v Speaker 4>governments have been diversifying away from it to some extent.

0:05:13.080 --> 0:05:15.880
<v Speaker 4>You'll see that continue. You'll see at the end of

0:05:15.880 --> 0:05:19.599
<v Speaker 4>the day, a recognition that even job creation needs foreign

0:05:19.640 --> 0:05:24.000
<v Speaker 4>investment and that's been coming mostly from the West writ large,

0:05:24.160 --> 0:05:26.080
<v Speaker 4>or from the Middle East. And I think so you'll

0:05:26.120 --> 0:05:30.839
<v Speaker 4>see I think more con consistency, then change, maybe a

0:05:30.960 --> 0:05:33.920
<v Speaker 4>change in pace, but not change in direction and foreign.

0:05:33.680 --> 0:05:37.640
<v Speaker 2>Policy Tanvi domestically, how much does this strengthen the hand

0:05:37.760 --> 0:05:38.760
<v Speaker 2>of Rol Gandhi.

0:05:39.960 --> 0:05:43.239
<v Speaker 4>I think this will definitely change his image in India.

0:05:43.279 --> 0:05:46.400
<v Speaker 4>He was seen as somebody who you know, could not

0:05:47.120 --> 0:05:51.720
<v Speaker 4>pull off a victory for the Congress Party. And technically

0:05:51.760 --> 0:05:55.000
<v Speaker 4>he's not the leader. There's another leader of the Congress Party,

0:05:55.040 --> 0:05:57.080
<v Speaker 4>but he was seen as the face of it. And

0:05:57.120 --> 0:05:59.920
<v Speaker 4>so I think it will in the voter's mind, but

0:06:00.160 --> 0:06:02.920
<v Speaker 4>also a narrative, and I think that's huge can be

0:06:03.000 --> 0:06:06.440
<v Speaker 4>hugely important in Indian politics. In the narrative, the kind

0:06:06.440 --> 0:06:09.600
<v Speaker 4>of image that the BJP has tried to portray him

0:06:09.760 --> 0:06:14.040
<v Speaker 4>as a loser of sorts, you know, has nothing, hasn't

0:06:14.080 --> 0:06:17.800
<v Speaker 4>been able to kind of pull off victories. I think

0:06:17.839 --> 0:06:20.679
<v Speaker 4>that will change a bit. I think the Indian voters

0:06:20.760 --> 0:06:23.880
<v Speaker 4>have shown that they're actually not that willing to dismiss

0:06:23.960 --> 0:06:25.839
<v Speaker 4>him as the BGB perhaps would like.

0:06:26.480 --> 0:06:28.800
<v Speaker 2>Tommy, thank you so much for joining us. Tom V. Madon,

0:06:29.000 --> 0:06:32.599
<v Speaker 2>Senior Fellow on Foreign Policy at the Brookings Institution.

0:06:39.320 --> 0:06:42.400
<v Speaker 1>We go to Indian next, where Prime Minister nurenber Modi

0:06:42.640 --> 0:06:45.400
<v Speaker 1>has avowed to continue in his role even though his

0:06:45.480 --> 0:06:49.840
<v Speaker 1>party did lose a majority in parliament. Let's bring in

0:06:50.000 --> 0:06:54.960
<v Speaker 1>Hustlin to Amen. Bloomberg's the chief international correspondent for Southeast Asia.

0:06:55.240 --> 0:06:57.840
<v Speaker 1>She is in Delhi and she joins us. Now hawas

0:06:57.920 --> 0:07:01.559
<v Speaker 1>it's always a pleasure. I'm curious. It feels like we've

0:07:01.600 --> 0:07:04.680
<v Speaker 1>witnessed what some are describing as a political earthquake. Can

0:07:04.720 --> 0:07:06.520
<v Speaker 1>you give us a sense of what you saw as

0:07:06.560 --> 0:07:08.320
<v Speaker 1>these election results came in.

0:07:10.360 --> 0:07:14.360
<v Speaker 3>Wow, it's such a stunning blow to Modi. I mean,

0:07:14.600 --> 0:07:17.840
<v Speaker 3>when we were tracking the vote ground and you know,

0:07:17.880 --> 0:07:19.720
<v Speaker 3>initially it stopped with oh, it's going to be a

0:07:19.800 --> 0:07:22.000
<v Speaker 3>landslide victory for Modi. Then he went to like, oh,

0:07:22.280 --> 0:07:24.840
<v Speaker 3>it's getting really really close. You know, in the end,

0:07:25.480 --> 0:07:28.320
<v Speaker 3>this is the largest democracy and they're voted against the

0:07:28.400 --> 0:07:31.080
<v Speaker 3>status go they want change. You know, we talk about

0:07:31.080 --> 0:07:34.400
<v Speaker 3>how India is a rich country. We talked about India,

0:07:34.400 --> 0:07:38.600
<v Speaker 3>how it's growed at eight percent the fosses growing economy

0:07:38.760 --> 0:07:42.080
<v Speaker 3>among the G twenty, but that wealth has not been

0:07:42.280 --> 0:07:45.880
<v Speaker 3>equal and the people voted against that. It's been a blow.

0:07:45.920 --> 0:07:48.720
<v Speaker 3>You talk about political usquake, this is how it landed. Really.

0:07:49.520 --> 0:07:52.480
<v Speaker 3>Modi's VJP parties secured two hundred and forty one seat.

0:07:52.800 --> 0:07:55.040
<v Speaker 3>What in needed for a majority was two hundred and

0:07:55.040 --> 0:07:58.200
<v Speaker 3>seventy two. Essentially, what it needs to do now is

0:07:58.240 --> 0:08:01.880
<v Speaker 3>to get those votes from its allies. The problem is

0:08:01.920 --> 0:08:04.920
<v Speaker 3>the leaders of the two allies are flip swapping. They've

0:08:04.920 --> 0:08:08.040
<v Speaker 3>been flip swapping for the last couple of months. In fact,

0:08:08.040 --> 0:08:10.800
<v Speaker 3>they joined the alliance only several months ago. So he

0:08:10.880 --> 0:08:13.600
<v Speaker 3>remains to be seen if Modi can get them on

0:08:13.840 --> 0:08:14.560
<v Speaker 3>its side.

0:08:15.160 --> 0:08:18.440
<v Speaker 2>In our stories though, we are saying that a spokesperson

0:08:18.480 --> 0:08:23.440
<v Speaker 2>for the allies basically affirming support for the coalition. But

0:08:23.520 --> 0:08:25.400
<v Speaker 2>it does give them some power, so it kind of

0:08:25.480 --> 0:08:29.200
<v Speaker 2>raises the questions if Mody is a I wouldn't say

0:08:29.200 --> 0:08:32.559
<v Speaker 2>a loser, but I mean he's definitely in that category

0:08:32.640 --> 0:08:36.040
<v Speaker 2>of not achieving quite what he'd hoped. Who has achieved

0:08:36.040 --> 0:08:38.080
<v Speaker 2>a lot more and how much power does it give them?

0:08:40.200 --> 0:08:43.680
<v Speaker 3>Well los to say it is a weekend Modi Mody

0:08:44.160 --> 0:08:46.640
<v Speaker 3>was seen for a very long time as the strong man,

0:08:46.920 --> 0:08:49.760
<v Speaker 3>unbeatable I mean cint he king to power, which was

0:08:49.800 --> 0:08:53.319
<v Speaker 3>a surprise. Ten years ago his bill his power near

0:08:53.480 --> 0:08:56.960
<v Speaker 3>a year afia no one expected to see a week

0:08:57.000 --> 0:08:59.000
<v Speaker 3>in Modi. He talked about what's staying in power to

0:08:59.160 --> 0:09:02.719
<v Speaker 3>twenty forty evans. That is when he targets in it

0:09:02.840 --> 0:09:05.199
<v Speaker 3>to be a middle income country right now, if you're

0:09:05.200 --> 0:09:08.280
<v Speaker 3>talking about a torments alternative to motive, that isn't any

0:09:08.600 --> 0:09:11.960
<v Speaker 3>nobody's ever talked about succession plan. But you are right.

0:09:12.360 --> 0:09:15.640
<v Speaker 3>The power now lies are the regional leaders, those allies

0:09:15.679 --> 0:09:18.760
<v Speaker 3>and Modi is after we could see a hung parliament

0:09:18.840 --> 0:09:21.439
<v Speaker 3>in both sides the opposition as well as the b

0:09:21.600 --> 0:09:24.599
<v Speaker 3>Japs fail to get that majority, So a lot of

0:09:24.720 --> 0:09:27.160
<v Speaker 3>like state right now, we don't really know for sure

0:09:27.800 --> 0:09:31.720
<v Speaker 3>Modi remains in power, remains the Prime minister a week

0:09:31.760 --> 0:09:32.200
<v Speaker 3>from now.

0:09:32.520 --> 0:09:35.680
<v Speaker 1>So has we've talked a little bit about the economic backdrop.

0:09:35.760 --> 0:09:40.360
<v Speaker 1>I'm curious about Modi's Hindu nationalism and whether or not

0:09:40.400 --> 0:09:44.200
<v Speaker 1>that played a role as well. Well.

0:09:44.280 --> 0:09:46.720
<v Speaker 3>I guess in a way it did play a role.

0:09:46.840 --> 0:09:50.840
<v Speaker 3>I mean, body tried to rule the Hindus in the country.

0:09:50.880 --> 0:09:53.640
<v Speaker 3>That means eighty percent of the population. But if you

0:09:53.720 --> 0:09:56.600
<v Speaker 3>take a look at the most populars state out there,

0:09:56.679 --> 0:10:00.640
<v Speaker 3>that is Uja Pradesh, mainly Hindus. In fact, he recently

0:10:00.760 --> 0:10:05.200
<v Speaker 3>erected the Rum Temple, which replaced a mosque which was

0:10:05.240 --> 0:10:08.160
<v Speaker 3>there since the eighteen fifties. But then again that did

0:10:08.240 --> 0:10:11.760
<v Speaker 3>not translate to more votes for him. At the lost

0:10:11.800 --> 0:10:16.040
<v Speaker 3>election in twenty nineteen, the BJP secured sixty two seats

0:10:16.120 --> 0:10:19.559
<v Speaker 3>out of the eighty available up for grabs. This time round,

0:10:19.920 --> 0:10:22.400
<v Speaker 3>that was reduced to only forty seats. If you want

0:10:22.400 --> 0:10:25.760
<v Speaker 3>to win the overall election, you need to win Uta Pradesh.

0:10:26.080 --> 0:10:31.520
<v Speaker 3>And so barren lies the evidence that Hindu nationalism that

0:10:32.360 --> 0:10:35.640
<v Speaker 3>Modi has been touting all the time on us for

0:10:35.679 --> 0:10:37.480
<v Speaker 3>the lost and years has not really worked.

0:10:38.320 --> 0:10:40.240
<v Speaker 2>So has I think we need to kind of put

0:10:40.240 --> 0:10:43.199
<v Speaker 2>this in the category of another wealth divide story. It's

0:10:43.559 --> 0:10:46.160
<v Speaker 2>evident that people at the lower end have suffered a

0:10:46.200 --> 0:10:50.040
<v Speaker 2>little bit, even though even though India has seen dramatic

0:10:50.040 --> 0:10:54.040
<v Speaker 2>growth rates and has a target of eight percent ongoing.

0:10:54.480 --> 0:10:56.720
<v Speaker 2>So what are the changes that Mody might have to

0:10:56.760 --> 0:11:00.200
<v Speaker 2>put in place to satisfy those people who voted against him.

0:11:01.600 --> 0:11:06.160
<v Speaker 3>It's about income inequality, right, I mean income inequalities at

0:11:06.200 --> 0:11:10.120
<v Speaker 3>the widest in twelve years. And when it comes to

0:11:10.360 --> 0:11:14.240
<v Speaker 3>getting help from the government, eight hundred million people out

0:11:14.240 --> 0:11:17.120
<v Speaker 3>of the one point three billion people get free grain

0:11:17.679 --> 0:11:23.000
<v Speaker 3>from the government. Therein lies how poverty looks in India. More,

0:11:23.120 --> 0:11:26.520
<v Speaker 3>he needs to ensure that wealth gets distributed more evenly

0:11:26.640 --> 0:11:31.280
<v Speaker 3>to the people. He's concentrated, some say on the wealthy

0:11:31.520 --> 0:11:35.559
<v Speaker 3>in the country. He's concentrated on manufacturing in getting investments.

0:11:35.840 --> 0:11:39.080
<v Speaker 3>The likes of Google and Apple have made huge investments

0:11:39.200 --> 0:11:41.600
<v Speaker 3>in the south of the country. But that's not translating

0:11:41.800 --> 0:11:45.160
<v Speaker 3>to real jobs for the people, not translating to real wealth.

0:11:45.400 --> 0:11:47.400
<v Speaker 3>So the question really is what does he needs to

0:11:47.440 --> 0:11:50.560
<v Speaker 3>do or perhaps he needs to grow the services sector

0:11:50.640 --> 0:11:54.800
<v Speaker 3>even more. Some like Graham Rajan, who's a farmer IBI governor,

0:11:55.320 --> 0:11:58.520
<v Speaker 3>he's been saying that services can create the kind of

0:11:58.600 --> 0:12:04.079
<v Speaker 3>jobs that right now India needs structural changes and if

0:12:04.480 --> 0:12:06.880
<v Speaker 3>what he remains in power in the next five years,

0:12:06.960 --> 0:12:10.720
<v Speaker 3>he needs to look at that, raise consumption levels, raise

0:12:10.800 --> 0:12:15.640
<v Speaker 3>the level of the quality of life for the ordinary Indians.

0:12:16.440 --> 0:12:18.280
<v Speaker 1>Haz thank you so much for making time to chat

0:12:18.320 --> 0:12:21.040
<v Speaker 1>with us, filling us in on the details surrounding the

0:12:21.080 --> 0:12:24.880
<v Speaker 1>election in India, where Prime Minister and Arndra Modi vowed

0:12:24.920 --> 0:12:28.360
<v Speaker 1>to continue in his role after his party did lose

0:12:28.520 --> 0:12:32.880
<v Speaker 1>its majority in parliament. Has Linda Ahman, Bloomberg's chief international

0:12:32.920 --> 0:12:36.559
<v Speaker 1>correspondent for Southeast Asia, joining us from Delhi here on

0:12:36.760 --> 0:12:38.760
<v Speaker 1>Daybreak Asia.

0:12:43.920 --> 0:12:47.160
<v Speaker 2>Joining us now is James Demmer, chief investment officer at

0:12:47.200 --> 0:12:50.480
<v Speaker 2>Main Street Research. James plenty of time to talk about

0:12:50.480 --> 0:12:53.680
<v Speaker 2>the US. I wanted to get some reaction here to

0:12:53.800 --> 0:12:57.360
<v Speaker 2>the strong reaction that we saw in the election results

0:12:57.360 --> 0:13:01.120
<v Speaker 2>from Mexico and India. The landslide VI three by Claudia

0:13:01.160 --> 0:13:05.880
<v Speaker 2>Scheinbaum in Mexico rattled markets there. It strengthens the hand

0:13:05.960 --> 0:13:08.280
<v Speaker 2>of the leftist of the ruling leftist party, So that's

0:13:08.320 --> 0:13:12.360
<v Speaker 2>one thing, and then the result in India may Weakennuendra

0:13:12.520 --> 0:13:14.679
<v Speaker 2>Modi's hands. So I'm wondering if you've looked at this

0:13:14.840 --> 0:13:18.480
<v Speaker 2>and whether there's any sort of invisible thread takeaway from

0:13:18.559 --> 0:13:20.760
<v Speaker 2>these results for emerging markets.

0:13:21.520 --> 0:13:24.400
<v Speaker 5>Thanks Brian. Yeah, I think there are there are a

0:13:24.520 --> 0:13:28.800
<v Speaker 5>number of takeaways here, and I think markets absolutely were

0:13:28.840 --> 0:13:33.000
<v Speaker 5>not expecting this in Mexico or certainly in India, and

0:13:33.400 --> 0:13:37.400
<v Speaker 5>it is definitely a blow to equities and this very

0:13:37.640 --> 0:13:42.000
<v Speaker 5>pro growth era that Modi's had, you know, eight hundred

0:13:42.040 --> 0:13:44.880
<v Speaker 5>million Indians and as you mentioned or was mentioned earlier,

0:13:44.920 --> 0:13:49.079
<v Speaker 5>six hundred and forty million going to the polls was

0:13:49.120 --> 0:13:54.960
<v Speaker 5>a big surprise, a big move towards the Gandhi administration

0:13:55.240 --> 0:13:57.200
<v Speaker 5>and the big changes that they see. And this is

0:13:57.240 --> 0:14:01.360
<v Speaker 5>not a positive for equities, no question question. And that's

0:14:01.400 --> 0:14:04.000
<v Speaker 5>why you're seeing the big sell off, the significant selloff

0:14:04.040 --> 0:14:06.920
<v Speaker 5>and even in bigger in individual names and indexes. And

0:14:06.960 --> 0:14:09.160
<v Speaker 5>we would suggest investors here, you know, you wanted to

0:14:09.280 --> 0:14:13.560
<v Speaker 5>use risk management tools here, stop losses whatever, because even

0:14:13.559 --> 0:14:17.720
<v Speaker 5>though Mody thinks that he may gather enough to stay

0:14:18.000 --> 0:14:21.160
<v Speaker 5>in power, it looks less likely and definite an uphill

0:14:21.200 --> 0:14:23.960
<v Speaker 5>battle for him and also for equity markets there.

0:14:24.080 --> 0:14:26.000
<v Speaker 1>Yeah, and I'm wondering whether or that was a part

0:14:26.040 --> 0:14:28.920
<v Speaker 1>of the stable situation for the dollar today. You would

0:14:28.960 --> 0:14:32.960
<v Speaker 1>expect with lower treasury bond yields and expectations now that, Yeah,

0:14:33.000 --> 0:14:34.960
<v Speaker 1>maybe the Fed is going to have room to cut rates.

0:14:35.000 --> 0:14:36.840
<v Speaker 1>The dollar held in and we had a rally in

0:14:36.880 --> 0:14:39.960
<v Speaker 1>the end, So currencies that may be a little bit

0:14:40.000 --> 0:14:42.400
<v Speaker 1>of a kind of a safe haven. Is that going

0:14:42.440 --> 0:14:45.840
<v Speaker 1>to be the case going forward, favoring haven currencies?

0:14:46.760 --> 0:14:46.960
<v Speaker 3>Yeah.

0:14:47.000 --> 0:14:49.080
<v Speaker 5>I think whatever you have these kind of disruptions, and

0:14:49.120 --> 0:14:51.120
<v Speaker 5>we've seen a lot of them over the last thirty years,

0:14:51.360 --> 0:14:54.080
<v Speaker 5>there's going to be a flight to qualities to stability.

0:14:54.200 --> 0:14:56.520
<v Speaker 5>The US dollar is absolutely going to be a beneficiary

0:14:56.520 --> 0:14:58.320
<v Speaker 5>of that. That certainly saw that today.

0:14:59.200 --> 0:15:01.800
<v Speaker 2>So with bond yields down, in the dollar down, we've

0:15:01.920 --> 0:15:04.760
<v Speaker 2>entered this period here where it seems like, you know,

0:15:04.960 --> 0:15:07.320
<v Speaker 2>the what we had before, which is bad news is

0:15:07.360 --> 0:15:09.800
<v Speaker 2>good news. That that's giving way to bad news is

0:15:09.840 --> 0:15:12.520
<v Speaker 2>bad news. People want to see growth hang in there.

0:15:13.320 --> 0:15:15.760
<v Speaker 2>It's it's a little bit of a concern, but it's

0:15:15.800 --> 0:15:18.400
<v Speaker 2>not yet a scare, right. I mean we haven't had

0:15:18.880 --> 0:15:24.120
<v Speaker 2>dramatic economic data suggesting any sort of meaningful move down, right.

0:15:25.240 --> 0:15:27.480
<v Speaker 5>Yeah, I would agree with that, and I think investors

0:15:28.280 --> 0:15:31.640
<v Speaker 5>continue in general to focus maybe on the wrong thing.

0:15:31.680 --> 0:15:34.680
<v Speaker 5>I mean, you've got people, you know, really parsing through

0:15:34.880 --> 0:15:37.640
<v Speaker 5>the inflation data, which frankly has has gone in the

0:15:37.720 --> 0:15:40.400
<v Speaker 5>right direction, you know, certainly lower over the last couple

0:15:40.440 --> 0:15:45.000
<v Speaker 5>of years and closer to the FEDS target. And you know,

0:15:45.120 --> 0:15:48.480
<v Speaker 5>jobs reports, you know they ebb and flow, but they

0:15:48.840 --> 0:15:52.160
<v Speaker 5>generally speaking are healthy. So you know, in our view,

0:15:52.880 --> 0:15:56.440
<v Speaker 5>you know, this is a great setup for equities if

0:15:56.440 --> 0:16:00.880
<v Speaker 5>you stop thinking necessarily about the economic data, which is

0:16:01.080 --> 0:16:04.600
<v Speaker 5>generally speaking better, and focus more on earnings. I mean,

0:16:05.080 --> 0:16:07.440
<v Speaker 5>the last two quarters and we can get deeper into

0:16:07.440 --> 0:16:12.080
<v Speaker 5>that have been much better than expected to a wide degree.

0:16:12.160 --> 0:16:14.960
<v Speaker 5>So earnings are what drive stocks once you get the

0:16:15.000 --> 0:16:16.440
<v Speaker 5>Fed out of the way, and we think they are

0:16:16.480 --> 0:16:17.000
<v Speaker 5>out of the way.

0:16:18.080 --> 0:16:20.840
<v Speaker 1>So if the fit is out of the way, I'm

0:16:21.040 --> 0:16:23.720
<v Speaker 1>imagining that you think, okay, they're going to still be

0:16:23.720 --> 0:16:26.040
<v Speaker 1>in a position to cut rates this year. How much

0:16:26.080 --> 0:16:27.560
<v Speaker 1>do you think we're going to see in terms of

0:16:27.560 --> 0:16:29.280
<v Speaker 1>easing between now and December.

0:16:30.760 --> 0:16:33.680
<v Speaker 5>You know, we've been of the thought that this economy

0:16:33.760 --> 0:16:37.640
<v Speaker 5>growing at north around four percent, let's call it, and

0:16:37.840 --> 0:16:42.000
<v Speaker 5>positive earnings and particularly recently more broadening of that earnings growth,

0:16:42.600 --> 0:16:45.480
<v Speaker 5>that the Fed may not have to do anything. And

0:16:45.720 --> 0:16:52.240
<v Speaker 5>you know, again recent data, most specifically cooling jobs and inflation,

0:16:52.640 --> 0:16:56.840
<v Speaker 5>suggested they could cut, now, that's super bullish. If they

0:16:56.840 --> 0:17:00.120
<v Speaker 5>can cut in September, which probably the futures markets say

0:17:00.920 --> 0:17:08.640
<v Speaker 5>possibly September, certainly November. Now that's another layer of bullish

0:17:08.840 --> 0:17:12.160
<v Speaker 5>data and potential strategy that would work for equities. Here.

0:17:12.640 --> 0:17:15.000
<v Speaker 5>Our feeling is that equities can do continue to do

0:17:15.160 --> 0:17:18.280
<v Speaker 5>fine even if the FED sort of stays out of

0:17:18.320 --> 0:17:20.480
<v Speaker 5>the way and the economy grow up and again or

0:17:20.520 --> 0:17:22.040
<v Speaker 5>inaction to be where they are.

0:17:22.400 --> 0:17:24.440
<v Speaker 2>In fact, many would say that that might even be

0:17:24.440 --> 0:17:27.440
<v Speaker 2>better to have the FED just stay what it's been doing,

0:17:27.520 --> 0:17:30.159
<v Speaker 2>because once you start getting some cuts, you know, some

0:17:30.200 --> 0:17:32.280
<v Speaker 2>people will worry that there's something under the hood and

0:17:32.280 --> 0:17:34.720
<v Speaker 2>all that. This is an interesting period that we're coming

0:17:34.720 --> 0:17:39.680
<v Speaker 2>into here. No earnings basically now for several weeks, and

0:17:40.240 --> 0:17:42.840
<v Speaker 2>the FED is I mean, it's what it's saying, it's

0:17:42.920 --> 0:17:45.480
<v Speaker 2>data dependence. We can see the same data they see,

0:17:45.600 --> 0:17:47.280
<v Speaker 2>so you're not going to get much of a surprise.

0:17:47.320 --> 0:17:49.439
<v Speaker 2>They don't really want to surprise the market here. So

0:17:49.880 --> 0:17:52.080
<v Speaker 2>do you think that the drift is lower or the

0:17:52.160 --> 0:17:53.400
<v Speaker 2>drift is higher?

0:17:55.760 --> 0:17:57.520
<v Speaker 5>You know, I would suggest I hate to say this,

0:17:57.640 --> 0:18:00.280
<v Speaker 5>it's kind of boring, but I think it's choppy. I

0:18:00.359 --> 0:18:03.120
<v Speaker 5>don't think you're going to see an economy that gets

0:18:03.160 --> 0:18:06.800
<v Speaker 5>real weak here, particularly here in the US, and I

0:18:06.840 --> 0:18:10.359
<v Speaker 5>don't really think that you're going to see any significant

0:18:10.440 --> 0:18:12.720
<v Speaker 5>more strength than we have. I mean, four percent is

0:18:13.200 --> 0:18:16.640
<v Speaker 5>a higher growth rate than we've really seen in GDP

0:18:17.640 --> 0:18:20.480
<v Speaker 5>for the last ten years. So we've got an economy

0:18:20.520 --> 0:18:23.520
<v Speaker 5>that seems to be much more resilient, growing at a

0:18:23.640 --> 0:18:26.840
<v Speaker 5>much higher pace, and we don't think that it's going

0:18:26.880 --> 0:18:29.359
<v Speaker 5>to accelerate a lot from here. But we also just

0:18:29.480 --> 0:18:34.360
<v Speaker 5>can't see how it's going to sort of get accelerate

0:18:34.640 --> 0:18:36.840
<v Speaker 5>at any significance. So again that's why we think the

0:18:36.880 --> 0:18:40.520
<v Speaker 5>FED doesn't necessarily certainly need to cut I mean, I'm sorry,

0:18:40.600 --> 0:18:45.959
<v Speaker 5>raise rates, and probably without meaningful deterioration, probably isn't going

0:18:46.040 --> 0:18:48.000
<v Speaker 5>to be interested in cutting.

0:18:48.160 --> 0:18:50.120
<v Speaker 1>So what area is the market do you like, James,

0:18:50.200 --> 0:18:53.440
<v Speaker 1>as we wrap up here, is it industrials, materials? Given

0:18:53.480 --> 0:18:56.879
<v Speaker 1>the economic sensitivity of those groups. Do you like artificial

0:18:56.920 --> 0:18:59.360
<v Speaker 1>intelligence and the tech trade? Do you want to chase that?

0:18:59.640 --> 0:19:00.879
<v Speaker 1>What do you favor these days?

0:19:01.480 --> 0:19:03.280
<v Speaker 5>Yeah, it's a new business cycle. You got the FED

0:19:03.320 --> 0:19:05.159
<v Speaker 5>out of the way. Ernie's going to drive stocks the

0:19:05.160 --> 0:19:07.879
<v Speaker 5>next seven to eight years, and we want to focus

0:19:07.920 --> 0:19:09.760
<v Speaker 5>on where that Ernie's growth is going to be. That's

0:19:09.840 --> 0:19:13.199
<v Speaker 5>tech and telecom because of the AI tailwinds, and then

0:19:13.280 --> 0:19:15.040
<v Speaker 5>how does that affect everything else. You got to own

0:19:15.080 --> 0:19:19.359
<v Speaker 5>the financials like JP Morgan or healthcare industrials and the

0:19:19.440 --> 0:19:24.080
<v Speaker 5>utility sector with the expanding grid to absorb all this energy,

0:19:24.119 --> 0:19:26.159
<v Speaker 5>we're going to need to run. These chips going to

0:19:26.160 --> 0:19:29.800
<v Speaker 5>be important sectors. So investors should be here and be bullish.

0:19:30.040 --> 0:19:33.400
<v Speaker 5>Stocks are relatively cheap based on forward earnings. I think

0:19:33.400 --> 0:19:34.640
<v Speaker 5>it's a great setup requities.

0:19:34.760 --> 0:19:37.280
<v Speaker 2>Yeah, all right, James, thanks very much for joining us.

0:19:37.359 --> 0:19:40.440
<v Speaker 2>James Demmer at, Chief Investment Officer, Main Street Research.

0:19:43.080 --> 0:19:46.000
<v Speaker 1>This has been the Bloomberg Daybreak Asia podcast, bringing you

0:19:46.080 --> 0:19:49.160
<v Speaker 1>the stories, making news and moving markets in the Asia Pacific.

0:19:49.680 --> 0:19:52.800
<v Speaker 1>Visit the Bloomberg Podcast channel on YouTube to get more

0:19:52.840 --> 0:19:56.439
<v Speaker 1>episodes of this and other shows from Bloomberg. Subscribe to

0:19:56.480 --> 0:19:59.959
<v Speaker 1>the podcast on Apple, Spotify, or anywhere else you live.

0:20:00.000 --> 0:20:03.280
<v Speaker 1>Listen and always on Bloomberg Radio, the Bloomberg Terminal, and

0:20:03.400 --> 0:20:04.639
<v Speaker 1>the Bloomberg Business Appen