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Speaker 1: Let's get to our guests for the half hour. A

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Speaker 1: Yako Yoshioka, senior portfolio consultant with a wealth enhancement group,

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Speaker 1: joining on the line from Los Angeles. A Yako, thanks

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Speaker 1: for being with us. We're talking a lot about the

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Speaker 1: weakness that we're seeing in some of these manufacturing p

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Speaker 1: m I s. The numbers coming out of the Asia

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Speaker 1: Pacific overnight were very soft. Then we got to the

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Speaker 1: numbers out of Europe today and in each case the

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Speaker 1: readings came in below fifty. That would imply that Europe

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Speaker 1: is on the verge of recession. The US number was

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Speaker 1: a little soft. We do remain in expansion, but there's

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Speaker 1: no doubt about it. FED tightening is beginning to have

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Speaker 1: an effect. Do you think that the FEED is going

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Speaker 1: to be in a position to soften its stance on

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Speaker 1: raising interest rates? Thanks so much for having me, Doug.

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Speaker 1: We do think that the FEED is going to soften

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Speaker 1: its stands a little bit in terms of, you know,

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Speaker 1: the magnitude of rate increases going forward. However, you know,

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Speaker 1: it's still a tightening stance, and we think that a

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Speaker 1: lot of the impact of what they've done already really

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Speaker 1: hasn't had a chance to trickle through into the economy.

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Speaker 1: So we'll be waiting to see how that data actually

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Speaker 1: comes about UM as we go through the end of

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Speaker 1: the year. But we did hear from Treasury Secretary Janet

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Speaker 1: Yellen last week, you know, things a big grim on inflation,

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Speaker 1: but the jobs markets still strong, so not really a recission.

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Speaker 1: How long is it going to stay that way though?

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Speaker 1: You know, it's tough to say, simply because we are

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Speaker 1: seeing UM at least with jobless claims that come in

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Speaker 1: weekly that they've been rising since the middle of April,

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Speaker 1: and so we're continuing to watch that because that might

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Speaker 1: be a harbinger of things to come. You know, we

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Speaker 1: were talking about the volatility and the currency markets as

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Speaker 1: a result of China again warning of potential military action

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Speaker 1: if Nancy Pelosi, the US House Speaker, does in fact

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Speaker 1: make a visit to Taiwan. It's looking increasingly as though

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Speaker 1: that's going to happen. Are you concerned about the effect

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Speaker 1: of US China relations on asset prices right now? Sure?

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Speaker 1: You know, as if inflation and the FED wasn't enough

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Speaker 1: to deal with this year, we've certainly had our bouts

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Speaker 1: of geopological tension, whether it be the Russian invasion of Ukraine,

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Speaker 1: UM or these heightened tensions between the US and China.

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Speaker 1: I think in the long term, as we like to

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Speaker 1: focus clients on, UM will be able to hopefully navigate

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Speaker 1: through all of this. It'll just be another short term dislocation.

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Speaker 1: But it is always concerning when they do happen. On

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Speaker 1: a bright note, earnings have been relatively decent so far

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Speaker 1: this season. To what degree of these supporting equity prices? Sure,

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Speaker 1: you know, for to certain extent, Uh, they've been better

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Speaker 1: than feared, perhaps is the better way to to say.

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Speaker 1: But we are seeing some strength in pockets of the

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Speaker 1: consumer UM. But we you know, certain companies have called

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Speaker 1: out weakness and small to medium sized businesses, and so

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Speaker 1: I think it's just going to take continued monitoring to

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Speaker 1: see where the pockets of weakness will continue to deteriorate

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Speaker 1: and where there's still some stability and earnings. So we

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Speaker 1: had news today that Apple is going to sell some

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Speaker 1: high grade bonds to help fund some stock buybacks and

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Speaker 1: maybe pay some dividends as well, even though they've got

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Speaker 1: a mountain of cash on the balance sheet. Fifteen or

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Speaker 1: twenty seconds on this topic, is that a troubling behavior

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Speaker 1: for you you know, it's it's a high quality problem

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Speaker 1: to have for Apple, um, you know, it's nice that

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Speaker 1: they can support their stock price by issuing additional bonds.

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Speaker 1: But you know, we like to see companies that are

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Speaker 1: investing back in their business, and I think Apple continues

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Speaker 1: to do that. It's just that they're generating so much

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Speaker 1: cash in addition to investing back in their business that

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Speaker 1: they're able to do things like that. And we've been

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Speaker 1: talking about the macro p sure a little earlier, just

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Speaker 1: wondering the that environment. What positions are you looking to

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Speaker 1: add to this time? Sure, you know, we do like

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Speaker 1: a lot of technology as well as some energy sector names.

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Speaker 1: Right now, technology companies have become much more reasonable in

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Speaker 1: terms of their valuation, and if you take a longer

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Speaker 1: term view on energy companies, there's a lot to like

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Speaker 1: simply because there's been an under investment in the overall

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Speaker 1: sector and so prices can remain higher than than most

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Speaker 1: people think over the longer term. Yeah, I'm wondering given

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Speaker 1: the fact that we saw a crude oil tumble today

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Speaker 1: in New York, there's a lot of concern that with

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Speaker 1: the weakness that we're seeing in some of these economic figures,

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Speaker 1: like the pm I data that at some point we're

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Speaker 1: going to see serious demand destruction. Doesn't that concern you

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Speaker 1: at all? For sure? I think in the short term

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Speaker 1: we are seeing the expectation that demand will be a

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Speaker 1: little bit lower as you go through the coming months,

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Speaker 1: simply as the economy slows down. However, as we look

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Speaker 1: towards you know, the next couple of years, we do

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Speaker 1: think that uh, a lot of these energy companies can

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Speaker 1: make a little bit more money and have some better

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Speaker 1: free cash flow over the over the cycle, so we

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Speaker 1: like them longer term. Yeah, we have seen historically high

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Speaker 1: crude prices. You as shell drillers have been having a

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Speaker 1: good few weeks, So what do you see the oil

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Speaker 1: price eventually, Satling. You know, we think that fair value

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Speaker 1: is somewhere in in the you know, sixty five to

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Speaker 1: eighty five dollar range, so it's a little bit lower

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Speaker 1: than where we are currently. However, you know, we think

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Speaker 1: that that's over a long cycle, not just you know,

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Speaker 1: in the in the near term. When I hear technology

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Speaker 1: and when I hear energy, that doesn't really sound like

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Speaker 1: you're ready to become completely defensive right now. When I

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Speaker 1: say the word recession. Do you think it's likely. You know,

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Speaker 1: everybody has been trying to define what a true recession is.

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Speaker 1: I think in this current environment, in whether or not

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Speaker 1: the two negative prints on GDP really define that. Um However,

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Speaker 1: I think it's really a matter of the duration of

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Speaker 1: the slowdown. How long are we going to have this

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Speaker 1: economic slowdown before we start to refocus on a recovery.

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Speaker 1: So I think at some point we can start to

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Speaker 1: refocus on a recovery, since every recession is followed by one. Yeah,

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Speaker 1: already the discussion has turned to will the fit's not

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Speaker 1: easing again in three? Is that a scenario that you

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Speaker 1: can imagine. We think that that is definitely looking to

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Speaker 1: pause at some point. Whether or not they'll cut rates

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Speaker 1: as we go into the back half of three, as

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Speaker 1: the market presumes, I think we'll have to wait and see.

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Speaker 1: We had the Parlor Bureau meeting last week in China

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Speaker 1: and curiously, not a lot of information when it comes

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Speaker 1: to potential stimulus. Does that Chinese market in spite of

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Speaker 1: all the risk there with the soft pm I data

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Speaker 1: that we had for China over the weekend, combined with

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Speaker 1: sagging property prices and contraction in um the overall real

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Speaker 1: estate segment of the Chinese economy are Are you tempted

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Speaker 1: to avoid China or do you want to maybe while

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Speaker 1: the getting is good here and prices are low, do

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Speaker 1: you want to begin to nibble? I think having an

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Speaker 1: allocation to China's economy is definitely warranted over the long term.

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Speaker 1: It is a large portion of the global economy, and

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Speaker 1: despite some of the near term issues that they may

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Speaker 1: have with housing, they are seeing some recovery from a

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Speaker 1: post COVID lockdown, and so we do think that it

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Speaker 1: does make sense to nibble here in China. Post COVID,

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Speaker 1: those starting to look more like long COVID. At the moment,

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Speaker 1: those lockdowns just seem to roll on and on and

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Speaker 1: all and until that policy is abandoned. How long is

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Speaker 1: it going to be before we see a more reassuring

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Speaker 1: Macray pictures starting to imagine China. Sure, it may take

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Speaker 1: longer than most investors have the patients for. However, at

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Speaker 1: some point, uh, you know, we do think that the

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Speaker 1: way that the virus may mutate may become a little

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Speaker 1: less problematic, and at that point, perhaps there's a policy

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Speaker 1: change that may allow for less severe lockdowns to to

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Speaker 1: be the policy of choice. We had the trade data

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Speaker 1: yesterday for South Korea, and imports were up in a

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Speaker 1: big way, largely because the price of crude oil is

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Speaker 1: so elevated. But when it came to the export figure

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Speaker 1: for South Korea, not bad at all. And I'm wondering

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Speaker 1: whether or not that market overall is is attractive to you.

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Speaker 1: You know, I haven't specifically followed the South Korean economy, UM,

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Speaker 1: but we you know, we do think that the overall

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Speaker 1: Asian economy continues to sort of chug along here um

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Speaker 1: as the overall global economy continues to benefit on one

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Speaker 1: side from higher inflation just nominally, UM, but you know

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Speaker 1: also experience the slowdowns we're seeing globally as well. Just wondering.

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Speaker 1: A number of the people we speak to have a

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Speaker 1: larger than normal cash allocations at the moment. Do you

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Speaker 1: put yourself on that category. We do have slightly elevated

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Speaker 1: cash positions in some of our portfolios, but a lot

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Speaker 1: of it is tied to sort of unique client situations. UM.

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Speaker 1: We don't necessarily believe in having a large cash allocation

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Speaker 1: just from a strategic standpoint, so many of our portfolios

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Speaker 1: do have a low cash allocations as well. Hi Yako,

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Speaker 1: thank you so much for being with us and sharing

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Speaker 1: your perspective. Ayako Yoshi Yoka is the senior portfolio consultant

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Speaker 1: with Wealth Enhancement Group, joining us here on daybreak Asia