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Speaker 1: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. On Monday,

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Speaker 1: we got Wall Street's first reaction to President Elect Trump's

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Speaker 1: nomination of Scott Bessant as US Treasury Secretary. In a moment,

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Speaker 1: we'll get reaction from Ross Mayfield of Barred Private Wealth Management,

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Speaker 1: as well as Tom Bruce of Tanglewood Total Wealth Management.

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Speaker 1: But first a focus on the day's top story. Tonight,

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Speaker 1: in a post on truth Social the President elect announced

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Speaker 1: a new additional tariff of ten percent on all Chinese

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Speaker 1: goods coming into the United States. Joining US now is

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Speaker 1: Helen Jue, Managing director and CIO at NF Trinity. She

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Speaker 1: joins us from our studios in Hong Kong. A lot

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Speaker 1: of this seems tied, Helen to what Trump has been

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Speaker 1: saying about the influx of illegal drugs into the US

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Speaker 1: from China. What's your reaction to this?

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Speaker 2: Well, look, this Fentono issue has been widely discussed already, right,

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Speaker 2: Biden has discussed it with she a couple of years ago,

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Speaker 2: have discussed it. Supposedly there has been some commitments, et cetera.

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Speaker 2: But obviously Trump wants to use this as a way

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Speaker 2: to expedite the process we take a look at the

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Speaker 2: rough numbers in terms of exports the US is around

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Speaker 2: five hundred billion US dollars per year, and the tariff's

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Speaker 2: being paid is around one hundred billion. But that one

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Speaker 2: hundred billion is not on the entire five hundred billion.

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Speaker 2: It's probably around three hundred billion, because there's two hundred

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Speaker 2: billion of consumer goods that are exempted, right, So that's

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Speaker 2: roughly around thirty percent on the three hundred billion. If

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Speaker 2: you increase that thirty percent to forty percent, you squeeze

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Speaker 2: out maybe an incremental thirty billion of tariff payment from

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Speaker 2: China to the US. So that number in itself is

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Speaker 2: not a huge or you know, incredibly meaningful number that's

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Speaker 2: going to make a huge difference to anybody. But I

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Speaker 2: think this is a negotiating tactic to show his strength

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Speaker 2: and to you know, kick off the trade war related

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Speaker 2: pressures that he's looking to kind of play up over

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Speaker 2: the coming months, if not quarters.

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Speaker 1: So, if this is the beginning of the negotiation, what

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Speaker 1: can we expect from from Beijing? Will China do to

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Speaker 1: kind of retaliate?

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Speaker 2: I think China will certainly make comments as they have before,

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Speaker 2: about wanting to assist in the fintannel improvements, etc. I

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Speaker 2: think that China wants to know undertake further negotiations with US,

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Speaker 2: but as it has with other trade partners over time.

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Speaker 2: But I'm not sure necessarily that it's all going to

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Speaker 2: be about economics only. I'm sure the negotiations are going

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Speaker 2: to spread more widely over other factors, including you know,

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Speaker 2: geopolitical issues around the wars, including you know, social issues.

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Speaker 2: And I think it'll be a basket of topics that

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Speaker 2: the two sides take into consideration and negotiation.

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Speaker 1: So one of the things that we saw in the

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Speaker 1: price section today in the US was this expression of satisfaction.

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Speaker 1: Maybe I can put it that way. With President Electrump's

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Speaker 1: choice of Scott Besson to run the US Treasury, He's

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Speaker 1: called for a gradual approach when it comes to implementing

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Speaker 1: some of these trade restrictions. Maybe he's open to negotiating

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Speaker 1: the exact size of tariffs in a way that may

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Speaker 1: be something that Wall Street sees as being a little

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Speaker 1: bit more reasonable. Right now, how do you assess the

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Speaker 1: appointment of Scott Bessant.

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Speaker 2: Well, I think the market certainly considers him to be

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Speaker 2: a little bit more dubbish and rational and less extreme

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Speaker 2: versus some of the other you know, prior appointments. But

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Speaker 2: I think at the end of the day, in this administration,

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Speaker 2: people realize that Trump is on the driver's seat and

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Speaker 2: he's the one who's going to want to call the shots,

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Speaker 2: and you know, I think that's going to be the

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Speaker 2: prevailing theme. But certainly, at the end of the day,

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Speaker 2: I think everybody in the administration, especially in a position

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Speaker 2: of economic importance, understands enough that global trade is quite

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Speaker 2: important that actually, if you impose all these tariffs not

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Speaker 2: only on China but the rest of the world, the

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Speaker 2: impact in terms of global growth is actually very detrimental

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Speaker 2: and could be a lot more detrimental on other countries

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Speaker 2: that are US allies versus even on Chine. Not right so,

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Speaker 2: because you know, exports and exports to the US, specifically

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Speaker 2: for China are not as big as exports of the

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Speaker 2: US may be for countries like Mexico and elsewhere in

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Speaker 2: Europe or Asia some other countries.

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Speaker 1: Technology is clearly a focus when it comes to the

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Speaker 1: US China relationship. I was struck by this report yesterday.

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Speaker 1: I think it was in the ft that Huawei is

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Speaker 1: poised to launch its first flagship smartphone with a fully

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Speaker 1: home grown operating system. And this seems to suggest, at

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Speaker 1: least in the view of the FT, that anything that

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Speaker 1: the US has tried to do in terms of sanctions

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Speaker 1: to hold Huawei back is not really working well. And

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Speaker 1: I'm wondering from your point of view. We've talked a

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Speaker 1: little bit in the past about the export controls that

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Speaker 1: the Biden administration has put on certain technology to China.

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Speaker 1: How has China responded to this in a way that's positive.

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Speaker 1: Is it kind of spurred innovation in a meaningful way?

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Speaker 2: I think it's certainly spurred innovation in many areas. So

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Speaker 2: China has been tried to become much more self sufficient

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Speaker 2: in terms of technology and products, and I think Huawei

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Speaker 2: is actually one of the companies that have done a

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Speaker 2: phenomenal job on that. So if you look at what

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Speaker 2: Huawei is selling globally, not only to emerging markets in China,

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Speaker 2: but to develop markets, it's very sophisticated, it's very competitive,

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Speaker 2: competitive and comparable to ericson and you know all the

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Speaker 2: foreign players, and you know, more cost efficient and good

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Speaker 2: value for money as well. So that's one front where

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Speaker 2: China has really nurtured the national champions onto the global stage.

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Speaker 2: There are other areas, however, where are China, you know,

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Speaker 2: still lagging far, far far behind, and might fall further

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Speaker 2: behind with some of the CHIP sanctions, etc. So I

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Speaker 2: think the gap may not necessarily narrow, especially given the

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Speaker 2: recent years with the additional aggression, And in many cases

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Speaker 2: China can produce something, but they're lacking one critical component

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Speaker 2: and that component makes a lot of difference. So that's

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Speaker 2: going to be a challenge for China to try to

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Speaker 2: catch up. And it's not something that you can resolve

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Speaker 2: just by putting more R and D into it, for sure,

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Speaker 2: So we'll have to see how that comes along.

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Speaker 1: We know the economy on the mainland is slug. I

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Speaker 1: think it was yesterday that the Economic Information Daily reported

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Speaker 1: that a new round of consumption vouchers has been issued

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Speaker 1: across the country as a way of trying to stimulate

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Speaker 1: domestic demand, maybe boost a little bit of confidence as well.

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Speaker 1: What do you think it's going to take to get people,

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Speaker 1: the consumer in China to be a little bit more

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Speaker 1: engaged with the economy.

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Speaker 2: I think it's not about consumption vouchers, which can only

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Speaker 2: you know, help a little bit in the short term.

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Speaker 2: I think it is really about confidence in the broader

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Speaker 2: economy and in the housing market, because it's really about

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Speaker 2: wealth effect.

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Speaker 3: Right.

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Speaker 2: The US is on this adrenaline fuel positive wealth effect

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Speaker 2: with the markets going up, property prices going up, everybody

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Speaker 2: feeling richer, everybody hiring, everybody's wage is going up, et cetera,

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Speaker 2: and therefore somewhat offsetting the inflationary impulses. In China is

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Speaker 2: the opposite. People feel like property prices might come down,

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Speaker 2: and you know, the economy's outlook is unclear. So the

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Speaker 2: most important thing is the property price. In China, that's

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Speaker 2: like two thirds of everybody's household wealth. So it's not

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Speaker 2: about the short a couple thousand RM and B of

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Speaker 2: consumption vouchers, about the government's ability and desire to stabilize

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Speaker 2: the expectation on property prices. If that can happen, then

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Speaker 2: I think the consumption will gradually start to normalize, especially

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Speaker 2: if the sentiment overhang of the teriffs gradually gets alleviated.

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Speaker 2: In twenty twenty.

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Speaker 1: Five, are you avoiding the Chinese market right now in

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Speaker 1: favor of, let's say the US.

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Speaker 2: I think the positives on the US are well understood

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Speaker 2: and already priced in quite a lot, and US and

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Speaker 2: China are at polar opposites. In the short term, you know,

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Speaker 2: the dollars are very very strong, the equity market is

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Speaker 2: very high, corporate profits are at peak multiples or at

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Speaker 2: peak positionings at peak. It might last a while still

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Speaker 2: because people think that Trump is going to do great

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Speaker 2: things for the economy, and you have a lot of

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Speaker 2: structural reforms, unconventional ones, even like this Dodge Commission that

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Speaker 2: he set up totally out of the blue. So I

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Speaker 2: think that lasts in the short term. But how much

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Speaker 2: upside is there further off those very high base of expectations,

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Speaker 2: I think is unclear. I think the first derivative of

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Speaker 2: financials and big tech and one has already performed in

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Speaker 2: the DXY and the dollar, et cetera. I think there

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Speaker 2: could be a second derivative next wave in terms of

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Speaker 2: the industrial cycle picking up. In terms of some tech companies,

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Speaker 2: if consumer sentiment on laptops and phones starts to pick up,

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Speaker 2: maybe small caps, if M and A resumes because of

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Speaker 2: less regulation, that could be the incremental beneficiary. It won't

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Speaker 2: move the index as much though. On the China front

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Speaker 2: is the total polar opposite. Everything is completely dead, the

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Speaker 2: positioning is super low, the corporate profits are at a trough,

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Speaker 2: the multiples are at a trough, the positioning is at

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Speaker 2: the trough. The R and B expectation is at a trough.

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Speaker 2: So I think the key critical factor is not whether

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Speaker 2: the government wants to support the domestic economy. It's actually

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Speaker 2: whether this tariff overhang gets somewhat lifted or resolved in

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Speaker 2: twenty twenty five. If that happens, I think China could

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Speaker 2: have much more upside than the US, But it might

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Speaker 2: be a while before we find out, and it's kind

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Speaker 2: of a little bit binary in the short term.

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Speaker 1: Are you seeing market opportunities in other places across the

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Speaker 1: APAC region, whether it's Taiwan, whether it's Vietnam, whether it's

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Speaker 1: South Korea, Japan, Talk to me about what you're seeing

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Speaker 1: in your neck of the woods.

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Speaker 2: Yeah, pretty much everything outside of the US, especially in

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Speaker 2: APAC and emerging markets, has been hit pretty hard as

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Speaker 2: the dollar has hit you know, historical multi multi decade peaks, right.

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Speaker 2: So there are plenty of companies that have businesses around

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Speaker 2: the world that are either exporters that people are worried

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Speaker 2: about the tariff threat, not just to China, but globally,

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Speaker 2: or they're worried about the currency depreciation when the profits

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Speaker 2: and revenues are booked back into dollars. So you see,

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Speaker 2: let's say consumer staples companies like beer and liquers and

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Speaker 2: so on. Maybe the demand on the volume side is

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Speaker 2: totally fine, but you know, the sales are getting translated

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Speaker 2: back from Latin America or from Southeast Asia back to

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Speaker 2: US allar, and therefore you have a lot of FX

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Speaker 2: losses and earnings are not growing as well. So I

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Speaker 2: think those would be interesting companies where the core fundamentals

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Speaker 2: are not that cyclical and not that sensitive, but it's

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Speaker 2: right now just being compressed because of these currency fluctuations.

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Speaker 1: Well, and thank you so much for joining us chatting

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Speaker 1: about what you're seeing in markets these days. Helen ju

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Speaker 1: is managing director and the CIO at NF Trinity, joining

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Speaker 1: us from our studios in Hong Kong here on the

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Speaker 1: Daybreak Asia podcast. Welcome back to the Bloomberg Daybreak Asia Podcast.

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Speaker 1: I'm Doug Chrisner. So now we want to examine how

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Speaker 1: Wall Street is reacting to President elect Trump's choice of

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Speaker 1: Scott Bessen, his Treasury Secretary. Joining us now is Ross Mayfield.

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Speaker 1: He's investment strategist at Baird Private Wealth Management. He's on

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Speaker 1: the line from Louisville, Kentucky. Ross, thanks for making time

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Speaker 1: to chat with us. Give me your impression of what

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Speaker 1: you're expecting from Bessent. I mean, the way in which

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Speaker 1: markets responded today was quite bullish.

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Speaker 3: Yeah, I think that there's a real expectation baked into

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Speaker 3: the move today that Bestent will limit some of the

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Speaker 3: worst or more anti growth tendencies on the tariff front.

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Speaker 4: I know he said priority number one is the tax bill.

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Speaker 3: I think almost everyone on the street expected that that

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Speaker 3: Tax Cut and Jobs Act would get extended in some way,

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Speaker 3: shape or form. So the big thing is, can we

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Speaker 3: be a little more strategic with the tariffs and a

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Speaker 3: little less blanket Some of the threats during the campaigning

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Speaker 3: were obviously, you know, had Wall Street on edge. So

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Speaker 3: I think the idea that Besson could tamp down those

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Speaker 3: worst impulses is alluring to Wall Street. But I would

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Speaker 3: also say that you can probably expect continued volatility there,

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Speaker 3: and if we remember how much turnover there was the

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Speaker 3: first Trump administration, you know, I wouldn't be surprised to

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Speaker 3: see a lot of changes across the four years.

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Speaker 1: So I just want to be clear volatility in the

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Speaker 1: equity market as well as the bond market, because yields

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Speaker 1: were down pretty dramatically today right across the curve.

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Speaker 4: Yeah, and I get it.

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Speaker 3: I think Bessin is saying all the right things about

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Speaker 3: wanting to bring the deficit back in line and attack

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Speaker 3: the national debt. I think that irregardless of who had

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Speaker 3: inherited this economy, we're in a good place. But the

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Speaker 3: challenge of continuing to grow the economy, extend the tax cuts,

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Speaker 3: and attack the deficit all at the same time. It

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Speaker 3: is a very tricky triumvirate of things. And so the

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Speaker 3: bond market likes the commentary on the deficit, I think,

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Speaker 3: but we'll see if it can be delivered upon because

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Speaker 3: there's a lot of competing forces that will have to

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Speaker 3: be dealt with.

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Speaker 1: So how do you think this will impact the way

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Speaker 1: that the Fed has been thinking? I mean, Powell has

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Speaker 1: got what eighteen months left in his term at the

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Speaker 1: very least, do you think that the Fed is going

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Speaker 1: to be a little bit more constrained now to be

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Speaker 1: accommodative given the fact that there's just a big question

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Speaker 1: mark about where inflation goes from here.

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Speaker 3: Yeah, I think obviously, you know, the policy proposals maybe

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Speaker 3: widen the bands around your inflation expectation. But I also

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Speaker 3: think that you know, Powell and the FED have been

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Speaker 3: very vocal about wanting to be independent about how they

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Speaker 3: don't really think about the politics on the hill. I

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Speaker 3: think that they will want to continue on the path

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Speaker 3: that they had pre set out. Data that they look

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Speaker 3: at changes, and I think that over the last couple

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Speaker 3: of years they've probably been a bit humbled in their

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Speaker 3: ability to forecast inflation, and certainly with policies like the

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Speaker 3: tariffs that have been proposed that we really haven't seen

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Speaker 3: in close to one hundred years. So I think they'll

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Speaker 3: continue with gradual cuts, and I think they'll watch the

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Speaker 3: job market closely. If we get, you know, another kind

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Speaker 3: of weak non farm pails report for November, I think

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Speaker 3: you can pensil in a December cut, and I think

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Speaker 3: they'll they'll probably still have four or five on the

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Speaker 3: table for twenty twenty five. I don't think as much

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Speaker 3: as he's pushed back against President Trump at times, I

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Speaker 3: don't think he'll want to go too far in the

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Speaker 3: other way out of it.

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Speaker 1: So when you look at the equity market. One of

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Speaker 1: the things that really jumps right out at you is

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Speaker 1: the rally that we had in small caps today. I mean, yes,

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Speaker 1: they are more exposed to the domestic economy. The Russell

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Speaker 1: two thousand hit an all time high today. Is this

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Speaker 1: still a trade that has legs or maybe that trade

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Speaker 1: has already been played out? How do you read it?

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Speaker 3: You know, I do think it's a trade that could

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Speaker 3: still have legs, at least in the near term. There's

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Speaker 3: a lot of animal spirits in the market. Some parts

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Speaker 3: of the Trump trade continue to rally. Certainly you're seeing

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Speaker 3: it in cryptos, small caps, financials, and banks. But it's

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Speaker 3: one that I'm not inclined to chase.

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Speaker 4: Really.

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Speaker 3: I think that in a higher for longer rate environment,

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Speaker 3: small caps are just they just are starting behind the bell.

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Speaker 3: They're more indebted, they have more floating rate debt. You know,

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Speaker 3: we've seen even as the Fed has been cutting, and

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Speaker 3: obviously we get a big move down in ten ure

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Speaker 3: yield today, but since the Fed made their first cut

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Speaker 3: in September, the tenure has been straight up into the right.

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Speaker 3: That's just a huge headwind for small caps in an

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Speaker 3: environment where the domestic economy is doing well better than

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Speaker 3: most expected at this point, but is certainly slowing or

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Speaker 3: has its fair share of challenges. So I would want

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Speaker 3: to still favor large over small, and especially if the

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Speaker 3: new administration kind of takes some of that regulatory burden

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Speaker 3: off of you know, the big tech stocks that.

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Speaker 4: We've seen lately.

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Speaker 1: Yeah, fewer regulations. Definitely. Let's talk a lit little bit

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Speaker 1: about energy policy, because this is another area where the

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Speaker 1: President elect and his incoming Treasury secretaries seem to be

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Speaker 1: on the same page. Pumping a lot more crude oil.

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Speaker 1: Are you playing energy at all in any way?

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Speaker 3: You know, it's a question that we get a lot.

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Speaker 3: And the thing that I just remind folks is while

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Speaker 3: the drill baby drill policy is good for consumers in

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Speaker 3: the sense that it has the potential to drive gas

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Speaker 3: prices down, it wasn't necessarily a winner for the energy stocks.

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Speaker 3: And Trump's first term, even before the COVID nineteen pandemic,

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Speaker 3: which absolutely, you know, obliterated the energy stocks, the energy

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Speaker 3: sector was roughly flat in Trump's first three years. So

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Speaker 3: there's a real difference between easing regulatory burden and making

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Speaker 3: it a good environment for drilling and putting holes into

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Speaker 3: the ground and for investor return, I think there are

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Speaker 3: two different things, and I would be hesitant to chase

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Speaker 3: energy here because I think we've seen this story play

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Speaker 3: out once before in twenty sixteen, and it didn't necessarily

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Speaker 3: end well for those who went all in on in.

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Speaker 1: I was talking a moment ago about President elect Trump

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Speaker 1: saying that he will impose some new tariffs, additional tariffs

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Speaker 1: on Chinese goods of about ten percent. This would be

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Speaker 1: in addition to the existing levees that are already in place.

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Speaker 1: On truth Social tonight, he was saying that this is

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Speaker 1: basically due to the influx of illegal drugs into the

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Speaker 1: US from China, and then separately he was talking about

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Speaker 1: imposing a twenty five percent tariff on all goods from

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Speaker 1: Canada and Mexico. When you hear language like that, yes,

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Speaker 1: maybe we're early innings here, and maybe the incoming Treasury

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Speaker 1: Secretary will modulate the way in which these tariffs are implemented.

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Speaker 1: But nonetheless, does it keep you a little cautious on

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Speaker 1: putting money to work offshore?

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Speaker 5: Yeah?

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Speaker 3: I think it should at a minimum. It's going to

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Speaker 3: make the dispersion amongst winners and losers.

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Speaker 4: Quite a bit more wide.

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Speaker 3: I mean, you know, you look at Mexico and Canada,

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Speaker 3: and to me, that's negotiating for the next USMCA. You know,

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Speaker 3: he's talked about a tariff on Europe. To me, that's

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Speaker 3: negotiation as well. The China stuff I would take seriously, though,

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Speaker 3: because it is the one path that he pursued vigorously

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Speaker 3: in his first term. It's fairly bipartisan, whereas the other

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Speaker 3: ones might not be as much. So I would take

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Speaker 3: the China tariff threats seriously. You know, I would hope

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Speaker 3: that again it starts as negotiating and maybe best and

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Speaker 3: can can tamp down the.

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Speaker 4: Worst impulses there.

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Speaker 3: But I take you very seriously, and to the extent

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Speaker 3: to which you look at international equities that might outperform,

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Speaker 3: I think you have to start to look at what

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Speaker 3: areas might do well if the US continues to decouple

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Speaker 3: from China, places like India, places like Vietnam. If not

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Speaker 3: for this USMCA is somewhere like Mexico where we can

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Speaker 3: we can near shore a lot of manufacturing and have

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Speaker 3: a better trade relationship.

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Speaker 4: So there are gonna be big winners and big losers.

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Speaker 3: I take the China tariff's a lot more seriously than

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Speaker 3: the other two at this point.

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Speaker 1: One question ross before I let you go, and it

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Speaker 1: has to do with bitcoin. And I understand that a

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Speaker 1: lot of this trade is due to the notion that

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Speaker 1: the president elect is going to be a lot more

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Speaker 1: crypto friendly. Is there something else going on here in

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Speaker 1: this trade? Do you trust it? Are you participating in it?

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Speaker 3: The thing that always is going on in a crypto

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Speaker 3: and bitcoin trade that doesn't really exist anywhere else in

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Speaker 3: the market is just the fervent belief of its supporters.

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Speaker 3: You just don't really have the kind of animal spirits

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Speaker 3: and enthusiasm in any other corner of the market except for,

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Speaker 3: you know, maybe in the meme stock as we saw

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Speaker 3: a couple of years ago. So when there's good news,

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Speaker 3: there's really it's just get out of the way. I'm

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Speaker 3: not necessarily the biggest believer. I think the actual mechanisms

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Speaker 3: by which a new administration could could be this good

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Speaker 3: for this cryptocurrency are a little loose. You know, a

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Speaker 3: couple of the promises that have been made kind of

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Speaker 3: just offhand and different speaking events.

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Speaker 4: So it'll be interesting.

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Speaker 3: To see obviously, the regulatory nature broadly of the administration

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Speaker 3: should help, you know, not just cryptocurrencies and bitcoin, but

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Speaker 3: the financials and banks were at large and we're seeing

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Speaker 3: that in the stocks.

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Speaker 4: But I'm same with small caps. I wouldn't chase.

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Speaker 3: I think there's a lot of uh fomo and enthusiasm,

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Speaker 3: but maybe maybe the fundamentals are a little lacking.

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Speaker 1: Ross Mayfield there, he is investment strategist at Barred Private

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Speaker 1: Wealth Management. We go next to Tom Bruce, macro investment

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Speaker 1: strategist at Tanglewood Total Wealth Management. He joins from Houston. Tom,

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Speaker 1: we've been speaking about the market's reaction to the nomination

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Speaker 1: of Scott Bessant as Treasury Secretary. I'm curious to get

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Speaker 1: your assessment.

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Speaker 5: I would certainly agree, and you know, thank you so

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Speaker 5: much for having me on as a macro investment strategist. Myself,

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Speaker 5: I couldn't be more thrilled to have a global, global

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Speaker 5: macro person as the Chasure Secretary. So you know, I

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Speaker 5: think markets we're very excited about it. And you see,

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Speaker 5: the biggest the biggest advice was a tenure coming down

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Speaker 5: which had had a wide range of effects across all

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Speaker 5: the markets. And I really feel like the main drivers

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Speaker 5: of the tenure were you know, A, we're not going

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Speaker 5: to most likely not going to have a type of

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Speaker 5: terror regime that's going to lift inflation too much. And B,

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Speaker 5: you know, with Besant, it's unlikely we're going to have

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Speaker 5: is that of fiscal deficit a lot who were concerned about.

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Speaker 5: So I think both of those help move interest rates

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Speaker 5: lower a bit.

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Speaker 1: It's very interesting that you make that point, because he

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Speaker 1: did give an interview to the Wall Street Journal, and

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Speaker 1: one of the points that he made is that he

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Speaker 1: will fulfill the President Elect's pledge when it comes to

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Speaker 1: tax cuts. Indeed, that will be one of his priorities.

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Speaker 1: So how do you balance tax cuts with the idea

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Speaker 1: that you're not going to expand the deficit. Seems to

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Speaker 1: me that that spending has got to come down in

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Speaker 1: a big way.

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Speaker 5: Well, you're right, you know, it depends how much how

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Speaker 5: much spending really needs to come down to. Because if

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Speaker 5: we don't spend more than nominalogy, we're okay with the

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Speaker 5: GDP ratio, So we we can be okay in that sense,

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Speaker 5: but you know, text cuts, it could add some potential

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Speaker 5: pressure there. I don't feel like tariffs are going to

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Speaker 5: make up for it much. You know, Well, I think

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Speaker 5: best overall was the more moderate choice for tariffs. So

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Speaker 5: if he has influence in that capacity, we'll probably not

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Speaker 5: very much everydente from that. So, yeah, it is a

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Speaker 5: little bit the concern for as far as how that

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Speaker 5: factors into the overall deficit. But you know, I have

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Speaker 5: some faith that the Department Governmental Efficiency will will help

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Speaker 5: with that, and as a whole, it's just not a

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Speaker 5: major concern of ours.

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Speaker 1: You were talking about the price action in the bond

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Speaker 1: market a moment ago. Yeah, I think the ten yure

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Speaker 1: lost about thirteen basis points today, last quoted in New

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Speaker 1: York at around four twenty seven. Is it fair to

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Speaker 1: say that the next big catalyst for markets will be

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Speaker 1: the FED meeting in December?

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Speaker 5: Well, yes, yes, yes, and no. Short answer, you guess.

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Speaker 5: Long answer is we have a good bit of data

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Speaker 5: in between. You know, we have CPI, we have the

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Speaker 5: job support. Now their main relevance would be towards what

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Speaker 5: the Fed's going to do. So it is a question

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Speaker 5: of what the FEGs next move is. And you know,

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Speaker 5: as you know, with the odds, it's about a fifty

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Speaker 5: to fifty chance. Right now, I'm personally, I'm still penciling

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Speaker 5: in a rate cut in December. I think Powell pivoted

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Speaker 5: a little bit two weeks ago saying the pace of

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Speaker 5: we're going to slow. I think we still get a

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Speaker 5: cut in December. Then moved to a quarterly rate. This

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Speaker 5: is after that. So we're looking at December, probably March,

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Speaker 5: and you know, June is too far out to really

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Speaker 5: have an educated guess on that one. We may get

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Speaker 5: another cut, then we may not. Maybe that's maybe the

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Speaker 5: dromal rates just fifty bases point lower.

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Speaker 1: Our colleagues were speaking earlier with Neil Kashkari, the head

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Speaker 1: of the Minneapolis FED, and he was saying, hey, it's

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Speaker 1: within reason to consider a rate cut. But to the

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Speaker 1: point that you just raised now, in terms of twenty

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Speaker 1: twenty five and the suggestions that the FED has already

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Speaker 1: made in terms of maybe modulating the pace of easing,

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Speaker 1: what are you seeing in the overall economy that would

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Speaker 1: argue for maybe holding rates steady right now? I mean,

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Speaker 1: I'm thinking of the labor market in particular.

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Speaker 5: My default assumption would be the neutroits of the lower

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Speaker 5: I mean, we need to cut a little bit more

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Speaker 5: from where we're at. But it turns out the US

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Speaker 5: economy is not as interest rate sensitive as previously believed.

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Speaker 5: In I think it's sort of a story of two

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Speaker 5: different consumers. You have the lower end, it's really struggled.

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Speaker 5: They're very interest rates sensitives. They're trying to buy a

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Speaker 5: home in the mortgage rates where they're at it, it's

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Speaker 5: really tough for them. And if they're renting, rents have

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Speaker 5: gone tremendously in the last few years. But the higher

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Speaker 5: income consumer tends to tend to have a lot of assets.

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Speaker 5: They own their own home, so there are shelter costs

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Speaker 5: of not gone up as much. And if you couple

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Speaker 5: that with with owning real estate and owning assets, you

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Speaker 5: have a tremendous impact on the walls effective over all

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Speaker 5: in the economy.

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Speaker 1: Are you favoring the American market over opportunities offshore?

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Speaker 5: We still are. You know, there's there's certainly opportunities off shore.

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Speaker 5: If you look at Europe, what the rate cuts are

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Speaker 5: having there, there's certainly some cyclical opportunities. But as a whole,

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Speaker 5: we still favor the US because, you know, the regulatory

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Speaker 5: structure there is just not as competitive. You you know,

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Speaker 5: I believe over the past fifteen years, the US has

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Speaker 5: gone from the same size as the European Union in

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Speaker 5: terms of terms of GDP to being fifty percent more now.

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Speaker 5: So it's just a huge, huge change over the long

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Speaker 5: term where the US has benefited from a better rank

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Speaker 5: rower environment, from being the leader in tech, much higher productivity,

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Speaker 5: and you know, we can have rate cuts in Europe

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Speaker 5: and that will help short term, but over the long

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Speaker 5: term they really need to make some structural reforms. Now,

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Speaker 5: looking at Asia, I think what China is at first, well,

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Speaker 5: we don't invest in China for you know, is we

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Speaker 5: don't invest in in autocracies. But if you look at

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Speaker 5: what China's done from a policy standpoint, a lot of

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Speaker 5: it I think is correct. It may not go quite

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Speaker 5: far enough, but the general recipe that they've they've enacted

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Speaker 5: there I think has a regional probability of success. I

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Speaker 5: believe some of Southeast Asia is interesting as well. You know,

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Speaker 5: we expect China to get hit by tariffs to some degree,

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Speaker 5: maybe not Southeast Asia we'll see, but with less goods

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Speaker 5: coming from China to the United States, we may see

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Speaker 5: lower prices for other countries that import from China, and

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Speaker 5: Southeast Asia has a significant portion of the imports come

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Speaker 5: from China, so you may have this have a tailwind

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Speaker 5: come from that where they wind up having having a

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Speaker 5: great degree disinflation than most people would expect.

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Speaker 1: Tom Bruce's macro investment strategistic Tanglewood Total Wealth Management, joining

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Speaker 1: from Houston here on the Daybreak Asia Podcast. Thanks Tom,

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Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

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00:26:13,800 --> 00:26:17,119
Speaker 1: Asia Edition podcast. Each weekday, we look at the story

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Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 1: or anywhere else you listen. Join us again tomorrow for

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00:26:28,720 --> 00:26:32,159
Speaker 1: insight on the market moves from Hong Kong to Singapore

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Speaker 1: and Australia. I'm Doug Chrisner, and this is Bloomberg