WEBVTT - Futures Mixed on Fed Rate Cut Hopes, Tepid US Eco Data

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

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<v Speaker 2>Markets in the Asia Pacific are reacting to some disappointing

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<v Speaker 2>US ECO data. We had some weak prints on both

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<v Speaker 2>hiring and services activity, and that in turn seemed to

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<v Speaker 2>boost conviction in the FED cutting infrast rates as soon

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<v Speaker 2>as September. In a moment, we'll get reaction from David Bonson,

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<v Speaker 2>he is the CIO at the Bonson Group. But we

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<v Speaker 2>begin this morning in Hong Kong. Joining me now is

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<v Speaker 2>Villam Sells. He is the global CIO at HSBC Global

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<v Speaker 2>Private Banking and Premiere Wealth Film. Joins us from our

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<v Speaker 2>studios in Hong Kong. Thank you for making time to

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<v Speaker 2>chat with me. Let's begin with the global macro if

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<v Speaker 2>we can. Just the other day, the OECD cut its

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<v Speaker 2>forecast for global growth and given a lot of the

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<v Speaker 2>sentiment indicators that we have been seeing and the week

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<v Speaker 2>readings that we have been looking at as a result

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<v Speaker 2>of the trade war, that really shouldn't come as a

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<v Speaker 2>surprise for the US. The oe c D is saying

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<v Speaker 2>we're going to see a deceleration in GDP, a pretty

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<v Speaker 2>sharp one at that to a rate of around one

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<v Speaker 2>point six percent. It seems dramatic. Do you think that's

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<v Speaker 2>about right?

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<v Speaker 1>We have a one point nine percent growth forecast for

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<v Speaker 1>the US. I think most economists will agree that, you know,

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<v Speaker 1>tariff's you know, could lower growth and increase inflation to

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<v Speaker 1>some extent directionally. But I think what is most important

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<v Speaker 1>for investors is that we are of the view that

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<v Speaker 1>we don't go into recession, and I'm glad that the

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<v Speaker 1>OECD agrees with that, neither recession nor stagflation. And that

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<v Speaker 1>is to a very large extent, because we you know,

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<v Speaker 1>before we undergo this shock, we are actually in a

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<v Speaker 1>relatively decent and healthy position from an economic perspective, in

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<v Speaker 1>the labor markets, in terms of corporate balance sheets, you know,

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<v Speaker 1>the Atlanta Fed, the things that we are currently running

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<v Speaker 1>into three point eight two percent growth rate for example.

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<v Speaker 1>So certainly the first quarter GDP number was misleading because

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<v Speaker 1>it's all due to that from running of impulse. Corporate

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<v Speaker 1>profits are healthy as well, you know, with solid surprises,

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<v Speaker 1>and the margins are strong. So I think we can

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<v Speaker 1>undergo a shock without going into recession.

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<v Speaker 2>Does that necessarily mean that we should expect the fed

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<v Speaker 2>to lower interest rates by maybe fifty basis points between

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<v Speaker 2>now and the end of the year.

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<v Speaker 1>So they are obviously in that bind where they are

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<v Speaker 1>balancing that, you know, the growth story together with the

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<v Speaker 1>inflation story. So there is at this point in time,

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<v Speaker 1>as economic growth is reasonably resilient, less of an urge

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<v Speaker 1>to cut, but also they are still looking at whether

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<v Speaker 1>inflation allows them to cut. And you know, I do

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<v Speaker 1>think that they will see some of the tariffs being

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<v Speaker 1>absorbed in those fat margins of the corporates and therefore

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<v Speaker 1>and somewhat an trees in inflation to probably two point

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<v Speaker 1>nine percent this year. But importantly that is already priced

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<v Speaker 1>into the bond market. But yes, we do expect a

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<v Speaker 1>few cusps from the fit still this year.

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<v Speaker 2>So if we could take a step back and look

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<v Speaker 2>at the global economy, worldwide manufacturing operating conditions, we're down

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<v Speaker 2>for a second month in a row in May. That's

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<v Speaker 2>according to JP Morgan. They have the global manufacturing PMI.

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<v Speaker 2>I think it's at a five month low now and

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<v Speaker 2>among large nations you've got pmis contracting in China, Germany,

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<v Speaker 2>Japan and the UK. I know, the PMI is a

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<v Speaker 2>sentiment indicator we call it soft data versus you know,

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<v Speaker 2>when you look at an industrial production reading, which is

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<v Speaker 2>a more firm kind of hard data point. Are you

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<v Speaker 2>seeing a big divergence between hard data and soft data

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<v Speaker 2>still or do you think that gap is beginning to narrow.

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<v Speaker 1>It's narrowing a little bit, but there is indeed a gap,

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<v Speaker 1>and it's of course it's it's logical that you do

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<v Speaker 1>gain you know, net gap. Also importantly, we need to,

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<v Speaker 1>you know, realize that manufacturing in many countries is much

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<v Speaker 1>smaller than services. So in the US, for example, it's

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<v Speaker 1>eleven percent of GDP, it's about eight nine percent of employment.

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<v Speaker 1>You know, services is healthier. And you know what I

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<v Speaker 1>look at for the stock market, you see that correlation

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<v Speaker 1>between an ism manufacturing and the stock market, how the

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<v Speaker 1>stock market moves. That has broken down. It used to

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<v Speaker 1>be very strongly correlated over the last decades. Over the

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<v Speaker 1>last three four years much less so. And that's obviously

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<v Speaker 1>because of the growth in services and technology. So as

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<v Speaker 1>long as services and technology can do well, and we've

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<v Speaker 1>seen good results from technology in the first quarter, I

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<v Speaker 1>do think the stock market can hold up.

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<v Speaker 2>You're in Hong Kong. Let's talk about the Asia Pacific

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<v Speaker 2>China in particular. We recently heard from Treasury Secretary Scott

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<v Speaker 2>Besson saying that China needs to shift to a more

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<v Speaker 2>consumption led economy to help ease global imbalances. That seems

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<v Speaker 2>like it's a very obvious point. It's been out there

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<v Speaker 2>the zeitgeist for some time right now, But I'm curious

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<v Speaker 2>to get your take on what Beijing could be doing

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<v Speaker 2>to stimulate more domestic demand. I mean, is there some resistance.

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<v Speaker 2>Do you think that the government has to try to

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<v Speaker 2>improve domestic consumption?

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<v Speaker 1>China has been you know, building out some of its

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<v Speaker 1>you know, domestic stimulus already. There were those exchange programs

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<v Speaker 1>you know, of of of consumer goods for example, and

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<v Speaker 1>we do think that we will you know, continue to

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<v Speaker 1>see you know, stimulus added further. But it doesn't want

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<v Speaker 1>to react to every single change in you know, US

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<v Speaker 1>government policy. It's rather a longer term trend that we

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<v Speaker 1>are seeing. There. Again, from a stock market perspective, this

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<v Speaker 1>is actually a very domestic economy. So the so the

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<v Speaker 1>so the GDP exposure to US trade is much bigger

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<v Speaker 1>than the actual stocks in the stock market. Their exposure

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<v Speaker 1>to to to the US. So to give you an

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<v Speaker 1>idea of that. You know, Chinese stocks in the MSAI

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<v Speaker 1>China only their revenues only two point three percent is

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<v Speaker 1>goods exports to the US. So it's a very domestic

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<v Speaker 1>market and that's why I do think that number one,

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<v Speaker 1>that domestic stimulus is important, but also that makes it

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<v Speaker 1>a bit more resilient in terms of a stock market

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<v Speaker 1>visa VI the tariff news flow.

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<v Speaker 2>But we know that the deflation story in China is

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<v Speaker 2>pretty bleak right now, and in essence, the government has

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<v Speaker 2>been allowing excess products to be exported as a way

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<v Speaker 2>of trying to help with the issue of overcapacity to

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<v Speaker 2>some extent, and this is where the criticism is coming

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<v Speaker 2>from and the part of the United States. Do you

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<v Speaker 2>think that that's going to change in a meaningful way.

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<v Speaker 1>Well, we do think that there is going to be

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<v Speaker 1>further you know domestic staminus on top of you know,

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<v Speaker 1>regional integration. So China doesn't just trade with US, it

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<v Speaker 1>trades a lot with the region as well, and that

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<v Speaker 1>is also an avenue you know, to continue those exports

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<v Speaker 1>so that it continues to be in a balanced economy

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<v Speaker 1>where you have you know, exports as well as obviously

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<v Speaker 1>that domestic stimulus feeding through into a bit more support

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<v Speaker 1>for domestic amount.

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<v Speaker 2>I'm curious to get your take on the signals that

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<v Speaker 2>you're getting from the US bond market. I mean, the

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<v Speaker 2>inflation story is one part of it. The deficit, the

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<v Speaker 2>budget deficit story is another part of it. I mean,

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<v Speaker 2>what is your takeaway really from the if you look

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<v Speaker 2>at the price section in US treasuries.

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<v Speaker 1>So I think there are three elements to look at.

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<v Speaker 1>The inflation story. Obviously, we will have a tariff impact

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<v Speaker 1>on goods, where you will have goods inflation rising, But

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<v Speaker 1>goods inflation has not been the issue over the last

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<v Speaker 1>number of months. It has been that services inflation that

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<v Speaker 1>is coming down. So if you add it up together,

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<v Speaker 1>the components of CPI may change, but it will be

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<v Speaker 1>a mild increase to around the two point nine percent level.

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<v Speaker 1>Then on top of that, bond market is asking for

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<v Speaker 1>two kinds of risk premiums. One is the real yield,

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<v Speaker 1>which is simply the compensation over inflation expectations, and that

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<v Speaker 1>is already at a multi year high. The other one

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<v Speaker 1>is the term premium, and the term premium compensates you

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<v Speaker 1>for taking longer dated risk, and that obviously needs to

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<v Speaker 1>compensate for the difficulty to assess where's economic growth going

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<v Speaker 1>over the next number of years and where is that

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<v Speaker 1>debt pile going over the next number of years. Well,

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<v Speaker 1>that term premium as well is near multi year highs,

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<v Speaker 1>so I do think that the market compensates you with

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<v Speaker 1>a risk premium. Clearly, we will have continued volatility until

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<v Speaker 1>we get to the big beautiful bill being voted and

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<v Speaker 1>then the budget being voted. But I do think that

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<v Speaker 1>bonds have a place in portfolios because of the valuations

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<v Speaker 1>that already incorporate at risk premium, and certainly for people

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<v Speaker 1>who worry, of course about the recesion risk.

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<v Speaker 2>Philm We've been having a number of conversation on this

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<v Speaker 2>podcast about the degree to which foreign investors have been

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<v Speaker 2>reducing their exposure to US risk assets. Is that a

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<v Speaker 2>trade that you're participating in.

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<v Speaker 1>We're seeing this a little bit from our Asian clients,

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<v Speaker 1>but much less so from our European clients, and frankly,

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<v Speaker 1>that is what you see as well in the data

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<v Speaker 1>so far in terms of flows. Now, the DICK data

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<v Speaker 1>are very slow. You will have a new release, so

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<v Speaker 1>put it in your calendar for the eighteenth of June.

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<v Speaker 1>On the same day as the FED where you will

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<v Speaker 1>see a lot of specific data around US flows. So far,

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<v Speaker 1>it's in details Asians that have potentially been selling a

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<v Speaker 1>little bit, but the European has been buying. What we

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<v Speaker 1>are doing is, rather than flee from the US, diversify

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<v Speaker 1>a bit. And I think that is healthy Asia merits

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<v Speaker 1>and higher allocation in many portfolios, not just for diversification purposes,

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<v Speaker 1>but also because of the because of the improving fundamentals here.

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<v Speaker 1>We were talking about the challenges to Chinese demand, but

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<v Speaker 1>there is on the other hand, the very strong, you know,

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<v Speaker 1>technological innovation that we have here in the region, and

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<v Speaker 1>that is creating a lot of excitement. And obviously those

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<v Speaker 1>technology companies are trading at much lower multiples than in

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<v Speaker 1>the US, so a lot of clients are very interested

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<v Speaker 1>in that AI plus the application so automation and so on.

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<v Speaker 2>What markets in the Asia Pacific are you favoring right

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<v Speaker 2>now and for what reason?

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<v Speaker 1>So mostly we're favoring India, China and Singapore, and that

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<v Speaker 1>is indeed because of the point that we just touched on,

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<v Speaker 1>which is that domestic angle. So China, India and Singapore

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<v Speaker 1>have some somewhere between two and four percent of their

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<v Speaker 1>revenues for the equity markets coming from goods exports to

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<v Speaker 1>the US. If you compare that to Korea, that's twelve percent.

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<v Speaker 1>If you compare it to Japan, it's eighteen percent. So

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<v Speaker 1>that's the choice that we're making here, is that we

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<v Speaker 1>think that the tariff and volatility is going to continue

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<v Speaker 1>to lead to equity market volatility. So to shield yourself,

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<v Speaker 1>you go to those three domestic markets.

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<v Speaker 2>Villain will leave it there, Thank you so much. Villain

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<v Speaker 2>Sells the Global CIO at HSBC Global Private Banking and

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<v Speaker 2>Premiere Wealth. Joining from our Hong Kong studio here on

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<v Speaker 2>the Daybreak Asia podcast, Welcome back to the Daybreak Asia Podcast.

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<v Speaker 2>I'm Doug Krisner. The latest economic news in the US

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<v Speaker 2>was a bit disappointing and it seemed to boost the

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<v Speaker 2>conviction in the Fed cutting interest rates as soon as September.

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<v Speaker 2>We had the ISM measure of services activity contracting in

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<v Speaker 2>May for the first time in a year, and the

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<v Speaker 2>private payroll survey from ADP showed weakness and job creation

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<v Speaker 2>the weakest job creation that we've had in about two years.

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<v Speaker 2>In the bond market, today, we had yields down right

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<v Speaker 2>across the treasury curve For a closer look at the macro,

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<v Speaker 2>I am joined by David Bonson. He is the founder

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<v Speaker 2>also the CIO at the Bonson Group. He is on

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<v Speaker 2>the line from Newport Beach, California. David, thank you for

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<v Speaker 2>making time to chat with me. Can we talk about

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<v Speaker 2>what you saw today in not only the data but

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<v Speaker 2>the way in which the bond market performed. That was

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<v Speaker 2>a pretty big move in the tenure. I think we

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<v Speaker 2>were down about ten basis points. Do you think the

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<v Speaker 2>bond market is getting maybe a little too ahead of itself,

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<v Speaker 2>given the fact that we still have a lot of

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<v Speaker 2>uncertainty on this spending bill that has yet to get

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<v Speaker 2>out of Congress.

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<v Speaker 3>I think that the bond market is properly responding to

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<v Speaker 3>growth expectations. So this is a rally in bonds for

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<v Speaker 3>the wrong reason. It's not coming from declining inflation expectations

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<v Speaker 3>or greater stability. It's coming from declining real growth expectations.

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<v Speaker 3>If we want a ten year around four to four

0:12:56.559 --> 0:12:59.480
<v Speaker 3>point three, you really want that because you're getting somewhere

0:12:59.480 --> 0:13:03.200
<v Speaker 3>around one half for two inflation expectations and then another

0:13:03.400 --> 0:13:06.240
<v Speaker 3>you know, two to three real GDP growth we're not

0:13:06.280 --> 0:13:10.960
<v Speaker 3>getting that. I think. I think that the other side

0:13:10.960 --> 0:13:13.640
<v Speaker 3>to this coin is very important. Though, when the yield

0:13:13.720 --> 0:13:17.080
<v Speaker 3>was up around four point five and everybody said, oh boy,

0:13:17.160 --> 0:13:20.360
<v Speaker 3>the bond market is really revolting against this spending bill,

0:13:20.840 --> 0:13:24.480
<v Speaker 3>that was rather exaggerated as well. So my my own

0:13:24.600 --> 0:13:28.199
<v Speaker 3>view is that the bond market is in a very

0:13:28.240 --> 0:13:32.599
<v Speaker 3>tight range. Actually, it is not pricing in a big extreme,

0:13:33.000 --> 0:13:37.640
<v Speaker 3>either for recession or for some sort of runaway fears

0:13:37.720 --> 0:13:40.640
<v Speaker 3>about where the debt is going. My fear is that

0:13:40.679 --> 0:13:42.640
<v Speaker 3>the debt is going too high, but it isn't the

0:13:42.679 --> 0:13:45.520
<v Speaker 3>bond market saying so, it's just our our expectations of

0:13:45.559 --> 0:13:46.199
<v Speaker 3>real growth.

0:13:46.240 --> 0:13:49.480
<v Speaker 2>We also had the latest survey from the FED, the

0:13:49.480 --> 0:13:53.079
<v Speaker 2>Beijbook Report, and it seemed to underscore the risk facing

0:13:53.120 --> 0:13:58.600
<v Speaker 2>the economy, where overall activity declined slightly, but all twelve

0:13:58.679 --> 0:14:01.960
<v Speaker 2>FED districts did report elevated levels of uncertainty. And this

0:14:02.040 --> 0:14:05.599
<v Speaker 2>seems directly correlated to the story on tariffs. Wouldn't you

0:14:05.640 --> 0:14:07.400
<v Speaker 2>agree there's.

0:14:07.200 --> 0:14:10.360
<v Speaker 3>Absolutely no question that that is correct, that the uncertainty

0:14:10.679 --> 0:14:16.559
<v Speaker 3>is highly correlated to the tariff policy reality not only

0:14:16.600 --> 0:14:19.600
<v Speaker 3>the difficulties of the policy, but the uncertainties around the

0:14:19.640 --> 0:14:26.120
<v Speaker 3>policy including implementation timing, and just various expectations. So I

0:14:26.160 --> 0:14:28.760
<v Speaker 3>expect to see more of it in data that we

0:14:29.720 --> 0:14:32.680
<v Speaker 3>find out throughout month of May. There was a really

0:14:33.840 --> 0:14:38.720
<v Speaker 3>compressed reality of productive activity as a result of tariff uncertainty.

0:14:38.840 --> 0:14:41.200
<v Speaker 2>But it's not just the story on weaker growth. I mean,

0:14:41.240 --> 0:14:46.560
<v Speaker 2>the basebook indicates widespread expectations that both cost and prices

0:14:46.600 --> 0:14:48.720
<v Speaker 2>are going to rise at a faster rate going forward.

0:14:48.760 --> 0:14:51.520
<v Speaker 2>That sounds like a recipe for stagflation, which is the

0:14:51.520 --> 0:14:52.240
<v Speaker 2>big concern.

0:14:53.000 --> 0:14:55.200
<v Speaker 3>Well, if that were the case the bond market, you

0:14:55.200 --> 0:14:58.240
<v Speaker 3>would see tip spreads widening. I just simply don't believe

0:14:58.240 --> 0:15:01.000
<v Speaker 3>that we're seeing that. I think that we mix up

0:15:01.080 --> 0:15:04.480
<v Speaker 3>the definition of inflation sometimes. I think that it's very

0:15:04.600 --> 0:15:09.000
<v Speaker 3>true the tariffs raise prices on certain things. But if

0:15:09.040 --> 0:15:12.320
<v Speaker 3>inflation is indeed a monetary phenomena in theory, what it's

0:15:12.320 --> 0:15:15.960
<v Speaker 3>doing is pushing price is higher on autos or steel aluminum,

0:15:16.280 --> 0:15:20.040
<v Speaker 3>and yet pushing prices lower on other things. My bigger

0:15:20.160 --> 0:15:23.440
<v Speaker 3>fear as to why I see them as problematic is

0:15:23.560 --> 0:15:27.080
<v Speaker 3>that they force a lower level of productive activity, a

0:15:27.080 --> 0:15:30.040
<v Speaker 3>lower level of trade. So I would be worried about

0:15:30.080 --> 0:15:33.000
<v Speaker 3>the stag of portion, but not the inflation portion. I

0:15:33.080 --> 0:15:36.000
<v Speaker 3>think there's downward pressure on prices, and I don't say

0:15:36.040 --> 0:15:36.800
<v Speaker 3>that is a good thing.

0:15:37.160 --> 0:15:38.760
<v Speaker 2>So where does this leave the Fed at the end

0:15:38.760 --> 0:15:40.760
<v Speaker 2>of the day, We've got a policy decision in a

0:15:40.760 --> 0:15:41.440
<v Speaker 2>couple of weeks.

0:15:42.080 --> 0:15:44.640
<v Speaker 3>Well, it's pretty clear in the futures market that they

0:15:44.640 --> 0:15:48.600
<v Speaker 3>don't intend to be cutting rates at the next meeting.

0:15:49.480 --> 0:15:52.960
<v Speaker 3>The future's curve is indicating September. Do they end up

0:15:53.000 --> 0:15:57.040
<v Speaker 3>acting in July? It's possible, it's not zero percent, but

0:15:57.960 --> 0:16:00.480
<v Speaker 3>I think you're going to get two to three by

0:16:00.480 --> 0:16:02.720
<v Speaker 3>the end of the year. And the question is more

0:16:02.760 --> 0:16:04.800
<v Speaker 3>if you're going to start getting them a little bit

0:16:04.840 --> 0:16:07.960
<v Speaker 3>sooner than later, so you get a couple other weak

0:16:08.080 --> 0:16:11.760
<v Speaker 3>economic points. You know this ism services today, the ISM

0:16:11.800 --> 0:16:14.960
<v Speaker 3>manufacturing the other day, the ADP number today. If you

0:16:15.080 --> 0:16:19.720
<v Speaker 3>get a couple tag on negative economic data points, that

0:16:19.760 --> 0:16:24.400
<v Speaker 3>will start more of a narrative of the FED doing

0:16:24.440 --> 0:16:27.360
<v Speaker 3>so sooner than later. But I don't think it changes

0:16:27.400 --> 0:16:29.280
<v Speaker 3>the terminal for the end of the year. I think

0:16:29.520 --> 0:16:31.600
<v Speaker 3>at the most they're going to cut seventy five out.

0:16:31.680 --> 0:16:33.120
<v Speaker 3>It's just a matter of when they start.

0:16:33.400 --> 0:16:35.720
<v Speaker 2>So let's change gears. If we can talk a little

0:16:35.720 --> 0:16:38.720
<v Speaker 2>bit about the equity market. Are you still constructive on

0:16:38.840 --> 0:16:39.520
<v Speaker 2>US stocks?

0:16:40.440 --> 0:16:43.720
<v Speaker 3>Well, I am, but it requires someone being selective, It

0:16:43.760 --> 0:16:48.440
<v Speaker 3>requires someone having a value orientation. I do not think

0:16:48.520 --> 0:16:52.280
<v Speaker 3>that i'd be constructive on buying forty x you know,

0:16:52.320 --> 0:16:56.320
<v Speaker 3>fortype stocks, hoping they go to fifty PE and in

0:16:56.320 --> 0:17:01.600
<v Speaker 3>some cases that's been conservative. So unfortunately for capitlated index investors,

0:17:01.640 --> 0:17:05.119
<v Speaker 3>they're still heavily, heavily reliant on a few names, and

0:17:05.240 --> 0:17:07.600
<v Speaker 3>I think that's going to prove to run in place

0:17:07.680 --> 0:17:11.280
<v Speaker 3>for quite some time. But where there is better value,

0:17:11.320 --> 0:17:16.640
<v Speaker 3>better opportunity, better you know PE ratios and yet organic

0:17:16.680 --> 0:17:20.160
<v Speaker 3>earnings growth, ourselves, as divid and growth investors are very

0:17:20.160 --> 0:17:22.560
<v Speaker 3>focused in some of those names, and we think there's

0:17:22.560 --> 0:17:26.200
<v Speaker 3>some good opportunities in financials and healthcare and consumer staples and.

0:17:26.240 --> 0:17:30.280
<v Speaker 2>Energy without naming a specific stock or a specific company.

0:17:30.400 --> 0:17:34.240
<v Speaker 2>Are there generalizations that you can make about certain industry

0:17:34.320 --> 0:17:37.520
<v Speaker 2>groups groups right now that you believe have some type

0:17:37.520 --> 0:17:38.520
<v Speaker 2>of advantage.

0:17:39.080 --> 0:17:41.160
<v Speaker 3>Yes, And again I'm happy to talk in visual names

0:17:41.200 --> 0:17:42.200
<v Speaker 3>if you want me to do it. But if you'd

0:17:42.280 --> 0:17:44.840
<v Speaker 3>rather I just talk sectors, that's fine. I think, like

0:17:44.880 --> 0:17:48.280
<v Speaker 3>I said, the mid stream energy sector provides a lot

0:17:48.320 --> 0:17:52.160
<v Speaker 3>of great opportunity. There's very attractive yield spreads and very

0:17:52.200 --> 0:17:58.760
<v Speaker 3>healthy financials, and so that sector to me is attractive

0:17:59.000 --> 0:18:03.520
<v Speaker 3>regardless of where some of these issues around tariffs go. Similarly,

0:18:03.560 --> 0:18:06.080
<v Speaker 3>with healthcare, they've kind of priced in a lot of

0:18:06.080 --> 0:18:10.119
<v Speaker 3>bad news some of the pharmaceutical names. There's this fear of,

0:18:11.280 --> 0:18:14.359
<v Speaker 3>you know, the pricing executive order. There's a lot of

0:18:14.480 --> 0:18:17.520
<v Speaker 3>upside possibility because some of those things that the presidents

0:18:17.560 --> 0:18:21.000
<v Speaker 3>threatened are at risk of not happening once courts and

0:18:21.080 --> 0:18:24.080
<v Speaker 3>Congress and other things get involved. But at the end

0:18:24.080 --> 0:18:26.760
<v Speaker 3>of the day, though, the bad news seems to be

0:18:27.000 --> 0:18:31.120
<v Speaker 3>disproportionately priced in. So we think pharma and energy offer

0:18:31.200 --> 0:18:33.800
<v Speaker 3>some great opportunities where you're not trying to buy a

0:18:33.840 --> 0:18:35.360
<v Speaker 3>stock at thirty times earnings.

0:18:35.760 --> 0:18:37.960
<v Speaker 2>What about the financials. We were talking a moment ago

0:18:38.000 --> 0:18:41.679
<v Speaker 2>about your expectations for lower interest rates a slower economy.

0:18:41.880 --> 0:18:44.359
<v Speaker 2>Does that necessarily mean that you want to put money

0:18:44.440 --> 0:18:45.560
<v Speaker 2>into the banks right now?

0:18:46.119 --> 0:18:48.160
<v Speaker 3>No. I think when I talk about the financials, we're

0:18:48.160 --> 0:18:53.840
<v Speaker 3>talking about asset managers. We're talking about some fee based

0:18:53.840 --> 0:18:57.080
<v Speaker 3>type businesses. There are a couple of banks we own

0:18:57.280 --> 0:18:59.840
<v Speaker 3>that we like, but as a group or as a

0:19:00.880 --> 0:19:03.040
<v Speaker 3>I think that the overall business model that is just

0:19:03.080 --> 0:19:08.320
<v Speaker 3>requiring that interest margin is more difficult. But again, the

0:19:08.840 --> 0:19:12.520
<v Speaker 3>commercial banks tend to be more pro cyclical and even

0:19:12.520 --> 0:19:14.919
<v Speaker 3>in good times are pretty boring businesses. There are a

0:19:14.920 --> 0:19:18.760
<v Speaker 3>couple we like, but the financials includes more than just

0:19:18.800 --> 0:19:20.440
<v Speaker 3>the banks, and when you look at some of the

0:19:20.880 --> 0:19:24.040
<v Speaker 3>asset managers, there's some good opportunities there.

0:19:24.119 --> 0:19:26.080
<v Speaker 2>Before I let you go, David, I have to ask

0:19:26.240 --> 0:19:29.720
<v Speaker 2>about opportunities offshore and whether you're compelled to look at

0:19:29.760 --> 0:19:32.399
<v Speaker 2>markets elsewhere, particularly in Asia.

0:19:33.240 --> 0:19:36.440
<v Speaker 3>Well, we're more bottom up investors, and so the top

0:19:36.520 --> 0:19:41.720
<v Speaker 3>down side, meaning looking at a country to provoke opportunity,

0:19:41.800 --> 0:19:43.600
<v Speaker 3>is a little bit different than our process. What I

0:19:43.640 --> 0:19:46.200
<v Speaker 3>would say is if one has a week dollar thesis,

0:19:46.200 --> 0:19:48.399
<v Speaker 3>so they believe that the end result of a lot

0:19:48.480 --> 0:19:51.240
<v Speaker 3>of these trade deals is going to be the administration

0:19:51.760 --> 0:19:55.320
<v Speaker 3>wanting a weeker dollar, then I think emerging markets are

0:19:55.359 --> 0:19:58.600
<v Speaker 3>finally going to get a little better tailwind, and so

0:19:58.720 --> 0:20:03.760
<v Speaker 3>we wouldn't mind a excuse me emerging markets, But in

0:20:03.840 --> 0:20:08.840
<v Speaker 3>terms of the developed Asian, developed European markets, it's hard

0:20:08.840 --> 0:20:10.040
<v Speaker 3>to get real bullish there.

0:20:10.240 --> 0:20:12.240
<v Speaker 2>David. We'll leave it there, thank you so much. David

0:20:12.240 --> 0:20:14.960
<v Speaker 2>Bonson there. He is the founder also the CIO at

0:20:14.960 --> 0:20:18.680
<v Speaker 2>Bonson Group. On the line from Newport Beach, California, here

0:20:18.680 --> 0:20:24.400
<v Speaker 2>on the Daybreak Asia podcast. Thanks for listening to today's

0:20:24.400 --> 0:20:28.920
<v Speaker 2>episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

0:20:28.960 --> 0:20:32.880
<v Speaker 2>we look at the story shaping markets, finance, and geopolitics

0:20:32.880 --> 0:20:36.159
<v Speaker 2>in the Asia Pacific. You can find us on Apple, Spotify,

0:20:36.320 --> 0:20:39.800
<v Speaker 2>the Bloomberg Podcast YouTube channel, or anywhere else you listen.

0:20:40.200 --> 0:20:43.119
<v Speaker 2>Join us again tomorrow for insight on the market moves

0:20:43.160 --> 0:20:47.680
<v Speaker 2>from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

0:20:47.880 --> 0:20:49.280
<v Speaker 2>and this is Bloomberg