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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's talk more now

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Speaker 1: about how the country plans to navigate this trade environment

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Speaker 1: and the market as well. Of course, the son of

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Speaker 1: Vis CEO and founder of Rock Creek Group of Sunny.

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Speaker 1: You know, we have to wait and see if this

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Speaker 1: market reaction holds, but for now it appears the market

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Speaker 1: wasn't expecting anything this, you know, seismic. Let's say, we have,

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Speaker 1: you know, quite a strong move in currencies and equities

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Speaker 1: at their session lows. What is now your base case

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Speaker 1: on trade for August first.

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Speaker 2: Yeah, absolutely right, Vanni.

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Speaker 3: The market expected something closer to fifteen to seventeen percent

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Speaker 3: in terms of the average tariffs that would be getting

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Speaker 3: sometime end of July ninth or some point later. So

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Speaker 3: the twenty five number is a little bit up there

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Speaker 3: versus the seventeen percent. So I think the market is

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Speaker 3: gradually getting adjusted to this. But the fact that there's

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Speaker 3: this choppiness and there's this uncertainty about one the dates

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Speaker 3: to the amounts three to some of our most important

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Speaker 3: trading partners like Japan and Korea, does create a lot

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Speaker 3: of impact, I think, on the markets going forward, and

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Speaker 3: we should expect the choppiness that we've seen over the

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Speaker 3: last few days to probably continue, maybe not April scale,

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Speaker 3: but certainly to continue.

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Speaker 1: There will be bouts of volativity already, you know, the

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Speaker 1: vexes up to just around eighteen. So nothing panicky just yet,

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Speaker 1: but you know, we need to keep an eye on that, right,

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Speaker 1: and we obviously need to watch for Japan's response. But

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Speaker 1: what would you be doing in this environment given that

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Speaker 1: there's only perhaps so much that Japan can do now.

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Speaker 3: So I think one thing is that, you know, if

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Speaker 3: we assumed that we would go back to that sort

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Speaker 3: of average, even seventeen percent, even that is a very

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Speaker 3: large tax on consumers, right because at the end of

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Speaker 3: the day, the consumers will be having a large share

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Speaker 3: of that.

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Speaker 2: So with that scenario, if you're assuming.

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Speaker 3: That US growth will be a little bit slower based

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Speaker 3: on that, we have to obviously wait to see what

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Speaker 3: the earnings reports are that are coming out.

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Speaker 2: But what has been happening already.

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Speaker 3: The kind of outflows that we saw from the US

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Speaker 3: equity markets did continue in Q two, as we saw

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Speaker 3: in the numbers that came out last week about thirty

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Speaker 3: some billion that came out of US equities. Some of

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Speaker 3: that went into small caps. Some of that went into

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Speaker 3: international markets. Bond markets saw a flow. Interest rates could

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Speaker 3: be coming down sooner, potentially in September money. We thought

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Speaker 3: that they might be coming down later in at the

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Speaker 3: end of the year in twenty twenty five. Now there's

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Speaker 3: a scenario if we're slowing down, potentially we might see

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Speaker 3: interest rates come down, which also has impacts on the dollar.

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Speaker 3: So what does that say in general dollarsification away from

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Speaker 3: US assets over time?

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Speaker 2: Not one big swoop, but over time.

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Speaker 1: Yeah, we're seeing the tenure yield now at four thirty

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Speaker 1: eight seventy three. It had been dropping ever so slightly

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Speaker 1: just after we got the guitar off announcement, but it's

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Speaker 1: back at the level it was at before those letters

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Speaker 1: went out. And bear in mind these are just letters, right,

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Speaker 1: We're waiting for a lot more before we know what's

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Speaker 1: actually going to happen. We had Med Faber on last

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Speaker 1: week and he made the point that, look, valuations are

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Speaker 1: very very rich right here. Perhaps you can have listened

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Speaker 1: to what he had to say.

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Speaker 4: Could just last fifteen years come on the show, say

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Speaker 4: by SPI go away, right, But here we are and

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Speaker 4: US stocks are now expensive. We came into this year,

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Speaker 4: we tracked forty five countries US stocks for the first time.

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Speaker 4: We've been tracking this for I think a decade. US

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Speaker 4: stocks ranked the most expensive stock market in the world.

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Speaker 1: So if we are the most expensive stock market in

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Speaker 1: the world, and yeah, sure, breath has been improving and

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Speaker 1: so on, nevertheless, we are at these levels and we're

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Speaker 1: potentially going to get some detrimental tariff impact. You know,

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Speaker 1: where is there to hide?

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Speaker 3: So US stock market is what about two thirds or

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Speaker 3: a little bit more than two thirds of the total

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Speaker 3: stock market about you know, ten years ago it was

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Speaker 3: maybe in excess of fifty percent, So it is sort

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Speaker 3: of the overwhelming part of the market Europe, you know,

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Speaker 3: added together Japan we just talked about Japan. The rest

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Speaker 3: of the world really are the rest of the equity.

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Speaker 2: Markets what we saw some of us.

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Speaker 3: Remember what happened to Japan when japan stock market reached

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Speaker 3: a very big high and it took a very long time,

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Speaker 3: and then it collapsed because of very bad economic policies.

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Speaker 3: I'm not suggesting that's going to happen here, but I'm

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Speaker 3: suggesting that US equity share in people's portfolios has started

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Speaker 3: to go down aunt slightly and every institutional investment committee

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Speaker 3: is looking now at looking at other asset classes, be

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Speaker 3: it European securities. They might have obviously better price earnings ratios,

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Speaker 3: especially if they are oriented towards domestic markets. Japanese stocks

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Speaker 3: that are oriented towards domestic markets, emerging market stocks similarly,

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Speaker 3: So I think people are starting to look at those

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Speaker 3: kinds of assets. Bonds in other countries similarly as well

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Speaker 3: as gold. Gold is already reached two thousand, but it

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Speaker 3: could be you know, reaching a point under four thousand

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Speaker 3: because central banks that saw US dollar as a safe

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Speaker 3: haven may not be seeing it the safe haven. And

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Speaker 3: little kids are taking their mothers to Cosco.

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Speaker 2: To buy buy gold bars.

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Speaker 3: So you see that people who never thought about anything

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Speaker 3: but the US dollars, from the kid on the street

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Speaker 3: to the central banks, are starting to think while the

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Speaker 3: US dollars are going to be predominant, they will stay

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Speaker 3: predominant in their portfolios will not have the same size,

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Speaker 3: So I think that will be important. And one last

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Speaker 3: point is people are doing FX hedging, particularly institutions, so

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Speaker 3: that even if they are despite rich earning price earnings ratios,

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Speaker 3: they want to stay in certain US DOOC special will

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Speaker 3: benefit from Ai. They are doing the fx he edging

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Speaker 3: to reduce their US dollar exposure.

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Speaker 2: I've Sanda.

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Speaker 1: Last time you were on, which is April, you were

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Speaker 1: saying that Vietnam would be an important one to watch

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Speaker 1: for the impact that we have on China, whether it

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Speaker 1: you know, pick the US over China or what China

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Speaker 1: would do in response. Do you have any further thoughts

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Speaker 1: now that we have some kind of a deal with

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Speaker 1: Vietnam on what this means for China's relationship with its partners.

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Speaker 1: Bearing in mind that we had Trump put in these

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Speaker 1: letters about transhipments and he's obviously, you know, cracking down

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Speaker 1: on that now as well.

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Speaker 3: Now, I think transshipments is going to be a very

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Speaker 3: big deal. I think Vietnam is it beneficiary. As you said,

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Speaker 3: they did make one of the first trade deals and

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Speaker 3: they will continue to benefit. But the size of the

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Speaker 3: Vietnamese market at the same time, let's just be frank,

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Speaker 3: is not huge. Even if it expands, it's still going

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Speaker 3: to be a tiny market, So it's not going to

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Speaker 3: be life changing for anyone. China has surprisingly been quiet

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Speaker 3: in the last few weeks. You know, it was sort

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Speaker 3: of very bustering in the in the early days it's

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Speaker 3: been quieter, so it will be very interesting to see

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Speaker 3: how whether a letter is going to China. Particular, we

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Speaker 3: saw that ten percent extra potential tariffs on countries that

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Speaker 3: are negotiating together as part of the Brick Group, so

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Speaker 3: that will be interesting to see whether the letter to

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Speaker 3: China has the twenty five plus a ten or whatever

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Speaker 3: other numbers come up.

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Speaker 1: All right, we have to leave there about our thanks

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Speaker 1: to your Sana Vishla's CEO and founder of Rock Creek Group.

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Speaker 1: And I just want to point out that the ADRs

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Speaker 1: of Japanese automakers are now at session low as well,

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Speaker 1: Toyota and Honda down three plus percent a piece