WEBVTT - Asian Development Bank Lowers Growth Forecast on Tariff Concerns 0:00:00.080 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.000 --> 0:00:14.560 Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:14.880 --> 0:00:17.439 We had a mixed finish for US equities given some 0:00:17.560 --> 0:00:20.959 angst ahead of earnings this week from four mag seven members, 0:00:21.320 --> 0:00:23.799 and sentiment was dampened a bit as well by news 0:00:23.840 --> 0:00:27.280 over the weekend. The China's Huawei Technologies is set to 0:00:27.360 --> 0:00:30.800 test a new chip. Here is Bloomberg's Valerie Titel. 0:00:31.120 --> 0:00:34.320 Huawei is reportedly preparing to test a new AI chip 0:00:34.600 --> 0:00:37.239 that it hopes can replace some of those products replaced 0:00:37.240 --> 0:00:40.199 by Navidia. This comes from the Wall Street Journal reporting 0:00:40.240 --> 0:00:44.400 that Huawei has approached some Chinese tech companies about testing 0:00:44.479 --> 0:00:47.160 the new chip. The new processor would put China's capabilities 0:00:47.280 --> 0:00:50.080 around two generations behind Navidia's new Blackwell chip. 0:00:50.120 --> 0:00:53.280 That is Bloomberg's Valerie Titel. Their shares an Nvidia. We're 0:00:53.280 --> 0:00:56.240 down today by more than two percent. Now we're also 0:00:56.320 --> 0:00:59.320 expecting a flurry of economic data this week and in 0:00:59.360 --> 0:01:02.160 a moment speaking with Clayton Trick, he is head of 0:01:02.160 --> 0:01:06.480 portfolio management at angel O Capital Advisors. But we begin 0:01:06.560 --> 0:01:10.320 this morning in the Asia Pacific. The Asian Development Bank 0:01:10.360 --> 0:01:13.840 has lowered its growth forecast for the continent, the institution 0:01:14.080 --> 0:01:17.000 saying that US tariffs will shave growth in the region 0:01:17.080 --> 0:01:19.800 by a third of a percentage point, falling to four 0:01:19.840 --> 0:01:23.320 point nine percent in twenty twenty five, and then dropping 0:01:23.400 --> 0:01:26.840 by a full percentage point in twenty twenty six to 0:01:26.959 --> 0:01:30.760 four point seven percent. Now, the ADB released its annual 0:01:30.800 --> 0:01:35.319 outlook on Wednesday, numbers for which were calculated before the 0:01:35.360 --> 0:01:39.040 April second tariff announcement was made by President Trump, and 0:01:39.120 --> 0:01:43.080 the ADB's chief economist has already said those numbers will 0:01:43.120 --> 0:01:46.360 be revised lower in its July report. For more, we 0:01:46.440 --> 0:01:50.440 heard from the President of the Asian Development Bank, Masato Conda. 0:01:50.560 --> 0:01:53.920 He spoke exclusively with Bloomberg sherry On in Tokyo. 0:01:54.240 --> 0:01:57.120 You're really coming directly from Washington, DC. Tell us a 0:01:57.120 --> 0:02:00.400 little bit about those conversations about the trade negotiations and 0:02:00.400 --> 0:02:03.160 how that's really weighing on developing Asia. 0:02:03.400 --> 0:02:06.480 Yeah, of course, we have talked about the you know, 0:02:06.680 --> 0:02:13.000 the challenges, particularly from the conflict, geopolitical attentions, but also 0:02:13.280 --> 0:02:17.720 we discussed much more about the opportunities because you know, 0:02:18.240 --> 0:02:21.040 of course this is a lot of difficult times, but 0:02:21.280 --> 0:02:25.960 we've got to translated these challenges into the opportunities to improve. 0:02:26.040 --> 0:02:30.320 So we have talked very much about the for instance, 0:02:30.440 --> 0:02:35.920 the private sector development and private capital mobilizations, and it 0:02:36.040 --> 0:02:40.800 illiginated with the ministers, including the US A tragedy, security, 0:02:41.320 --> 0:02:45.840 a scot Present and all of the mdb has including 0:02:45.960 --> 0:02:51.480 the world of bank prisons A Jabanga and particularly I 0:02:51.600 --> 0:02:56.960 put my ambition to increase private sector lending full forward 0:02:57.120 --> 0:03:01.480 to thirteen billion annually lending to the private sector. 0:03:02.440 --> 0:03:06.800 How feasible are those plans when the global economy faces 0:03:06.800 --> 0:03:10.600 a potential downturn, given of course, all the challenges around trade. 0:03:11.080 --> 0:03:13.720 Yeah, of course this is strange in time, but this 0:03:13.840 --> 0:03:18.160 is a great opportunity to make more resisions under this, 0:03:18.600 --> 0:03:24.239 you know, building the enabling environment for private sector invests, 0:03:24.280 --> 0:03:28.120 for instance, they through the very good deportics including the 0:03:28.160 --> 0:03:34.440 deregations or or even the privatization, and the capital market 0:03:34.880 --> 0:03:40.440 development and the regional corporation, the connectivity all over, then 0:03:40.680 --> 0:03:41.440 we can support. 0:03:41.680 --> 0:03:45.120 Do you see the potential and risk of a downturn globally? 0:03:46.040 --> 0:03:49.680 Of course we have pretty much vigilant because you know, 0:03:49.840 --> 0:03:54.200 as you mentioned, the Asian economy is a lather exposed 0:03:54.280 --> 0:04:00.000 to the global market. So through not only the trade 0:04:00.080 --> 0:04:05.640 it but also the financial capital market. There by the 0:04:05.680 --> 0:04:11.840 decrease the confidence or the you know, rather weak sentiment. 0:04:12.360 --> 0:04:17.000 But I think the agent countries are stronger than in 0:04:17.040 --> 0:04:20.720 the past, but no room for comprecencis. So this is 0:04:20.760 --> 0:04:25.960 the time for Asia to boost the domestic demand. And 0:04:26.000 --> 0:04:29.480 there are parts of the sound economic policy and the 0:04:29.520 --> 0:04:34.599 you know or diversify the uh you know, industries and 0:04:34.800 --> 0:04:36.160 the trade partners as. 0:04:36.080 --> 0:04:41.159 Well, diversified partners and training within the region. Even more 0:04:41.240 --> 0:04:44.960 so when you have when you're facing these incredible rates 0:04:44.960 --> 0:04:46.320 of terists coming from Washington, d C. 0:04:46.680 --> 0:04:50.240 Yeah, I believe that this is the opportunity to you know, 0:04:50.800 --> 0:04:58.080 even open more actually you know, the this is the 0:04:58.080 --> 0:05:02.960 moment the need to find out the more partners the economies, 0:05:03.240 --> 0:05:07.000 but not only from the US or others, but always 0:05:07.040 --> 0:05:10.360 I believe the diversification of the industries is good. 0:05:10.560 --> 0:05:14.280 Does not train include China because Washington wants to restrict 0:05:14.360 --> 0:05:16.000 any conversations with Beijing. 0:05:17.400 --> 0:05:20.320 Not really, but of course the United States is a 0:05:20.480 --> 0:05:25.560 very much important pattern of all us. The foundational, the 0:05:25.560 --> 0:05:29.120 shareholders and the one of the largest that I really value, 0:05:29.440 --> 0:05:33.880 the advices and the looking forward to the even crosser 0:05:33.920 --> 0:05:37.760 partnership with the United States, but also the China is 0:05:37.760 --> 0:05:41.360 a bit important to member countries, so we will try 0:05:41.440 --> 0:05:45.599 to find the solution benefiting benefiting or membership. 0:05:46.160 --> 0:05:48.200 How much of an opportunity is the fact that we 0:05:48.279 --> 0:05:52.360 could see stronger Asian currencies given the sell America sell 0:05:52.480 --> 0:05:53.560 US dollar trade. 0:05:54.520 --> 0:05:58.279 It's quite a difficult to terror because you know, particularly 0:05:58.480 --> 0:06:04.040 the trade street is full of uncertainty and changing ud 0:06:04.200 --> 0:06:07.920 by day. So what we can't do is to protect 0:06:08.360 --> 0:06:13.240 the regional economies against external shocks and the builder resisiens 0:06:13.760 --> 0:06:16.160 uh in the future shocks. 0:06:16.880 --> 0:06:19.640 The fact that, for example here in Japan, the yen 0:06:19.800 --> 0:06:23.039 wasn't incorporated in the trade negotiations. How important is it 0:06:23.240 --> 0:06:26.400 for all of these trading partners to separate those negotiations 0:06:26.800 --> 0:06:31.400 pretending to trade, pretending to financial markets like currencies. 0:06:31.720 --> 0:06:33.960 Or are inter related to the butter trade and the 0:06:34.000 --> 0:06:37.360 currency are quite a different animal, and probably there uh 0:06:37.520 --> 0:06:40.960 you know, needs to be negotiated from the uh you know, 0:06:41.440 --> 0:06:45.960 professional point of views in the respectively, but also for 0:06:46.080 --> 0:06:49.599 the polity side. Always for instance, that we needed to 0:06:49.640 --> 0:06:52.440 pass the sound of Marcro economic apology, which is a 0:06:52.440 --> 0:06:58.520 business protection about the currencies various so and also the 0:06:58.680 --> 0:07:02.000 deepening the capital market. The financial market would be a 0:07:02.160 --> 0:07:05.840 very good in any case. So you know, the what 0:07:05.960 --> 0:07:09.000 we can do and we should do is quite the same. 0:07:09.680 --> 0:07:13.239 Japan is one of the first to negotiate with Washington. 0:07:13.280 --> 0:07:16.200 Could this serve as a model in trade negotiations for 0:07:16.280 --> 0:07:17.080 developing Asia? 0:07:17.320 --> 0:07:20.280 Yeah, not really, I don't think so. But anyway, ADB 0:07:20.720 --> 0:07:25.640 will help all member countries to build their religions against 0:07:25.640 --> 0:07:30.400 these things and the otherwise, and if the shops comes, 0:07:31.160 --> 0:07:34.400 we have a variety of instruments and support, including the 0:07:34.480 --> 0:07:39.640 counta secret COLO assistance and also the UH the data 0:07:39.680 --> 0:07:42.960 management or captain market development. Many things we can do. 0:07:44.120 --> 0:07:47.239 Why don't you think that this trade negotiation model could apply, 0:07:47.400 --> 0:07:49.960 for example for the lights of Thailand Vietnam. We know 0:07:50.040 --> 0:07:53.280 that they also face really stiff tires coming from Washington. 0:07:54.800 --> 0:07:58.000 But as I said, what they can do and we 0:07:58.040 --> 0:08:02.800 can just is to for instance, the divastications of the 0:08:03.000 --> 0:08:08.560 trade partners. Who increases the regigions, so not only inside 0:08:08.680 --> 0:08:12.680 the for instance, the we are supporting their more connectivity 0:08:12.720 --> 0:08:17.800 amongst the same countries or sub regional initiatives, but also 0:08:19.160 --> 0:08:23.640 trying to find the more partners beyond the region and 0:08:23.800 --> 0:08:28.720 Also the deepening the trade agreement inside the region could 0:08:28.800 --> 0:08:32.880 be possible, including the uh you know, you know father 0:08:32.960 --> 0:08:35.559 developing towards the services and sects like. 0:08:35.520 --> 0:08:39.120 Prime Minister issue, for example, was in Thailand in Vietnam. 0:08:39.320 --> 0:08:41.400 What sort of cooperation do we need to see more 0:08:41.480 --> 0:08:43.960 between developing and developed countries? 0:08:45.480 --> 0:08:49.200 You know, this is quite simple, deeper under the you know, 0:08:49.360 --> 0:08:52.760 more opener so the you know, in terms of the 0:08:53.360 --> 0:08:57.280 uh you know products, you know, it could be broadened 0:08:57.840 --> 0:09:02.200 including the services sectors and also the uh you know, 0:09:02.360 --> 0:09:04.920 the liberal protection could be a lot of other So 0:09:05.000 --> 0:09:07.360 there are many things we can do, but it depends 0:09:07.400 --> 0:09:12.199 on the specific institutions, particularly the you know, each country 0:09:12.480 --> 0:09:18.199 has their own domestic political stations, so we've got to 0:09:18.240 --> 0:09:24.080 be very capful. But in principle probably the sticking to 0:09:24.200 --> 0:09:27.880 the open economy will be good for the. 0:09:27.960 --> 0:09:30.920 Digital sat Kana really good to have you with us 0:09:30.960 --> 0:09:34.080 here in the Tokyo studio. He's president of the Asian 0:09:34.200 --> 0:09:35.160 Development Bank. 0:09:42.600 --> 0:09:45.920 Welcome back to the Daybreak Asia podcast. I'm Derek Krisner. 0:09:46.280 --> 0:09:48.839 So in the States, it will be a busy week 0:09:48.920 --> 0:09:51.800 for both corporate earnings and economic data, and I think 0:09:51.840 --> 0:09:53.960 it's fair to say that the key question here is 0:09:54.000 --> 0:09:57.559 whether these numbers will begin to illustrate the impacts of 0:09:57.600 --> 0:10:00.480 the trade war. We're joined now by clay and Trick. 0:10:00.559 --> 0:10:04.600 He is head of portfolio management at angel O Capital Advisors. 0:10:04.880 --> 0:10:08.280 Clayton joining us from Atlanta, Georgia. Good of you to 0:10:08.280 --> 0:10:10.600 make time to chat with us. Give me your sense 0:10:10.640 --> 0:10:14.200 of where you think the overall economy is right now 0:10:14.320 --> 0:10:17.600 up against the tariffs that the Trump administration has put 0:10:17.640 --> 0:10:18.319 into effect. 0:10:19.080 --> 0:10:22.000 Yeah, definitely been an interesting start to the year. We 0:10:22.480 --> 0:10:26.000 really had anticipated this year could have a lot of turbulence. 0:10:26.600 --> 0:10:29.720 Investors went into twenty twenty five, you know, very very 0:10:29.760 --> 0:10:34.280 bolish on potential deregulation and tax cut bill at some 0:10:34.320 --> 0:10:36.880 point in twenty twenty five. But we definitely got a 0:10:36.920 --> 0:10:39.880 lot of turbulence. In the short term. The US economy, 0:10:39.960 --> 0:10:43.480 or at least capital markets in the last week really stabilized, 0:10:44.040 --> 0:10:46.400 but we are at different levels. You know, the SMP 0:10:46.559 --> 0:10:49.360 is down about ten percent from the peak in the 0:10:49.400 --> 0:10:53.520 first quarter. Corporate credit spreads are a little bit wider, 0:10:54.120 --> 0:10:58.400 but we are sinsing a stabilization here in the markets. 0:10:58.840 --> 0:11:02.800 It's really trying to see if some of the soft data, 0:11:03.080 --> 0:11:05.960 which has been getting a lot weaker in the last 0:11:05.960 --> 0:11:09.520 thirty days, you know, translates to weakness in hard data, 0:11:09.559 --> 0:11:12.000 and so you know, the jobs numbers coming out Friday, 0:11:12.040 --> 0:11:16.480 We're getting is report very soon, and so there's a 0:11:16.520 --> 0:11:20.199 lot that we're going to have to digest as market participants. 0:11:20.480 --> 0:11:23.679 We had an interesting piece on the Bloomberg today indicating 0:11:23.720 --> 0:11:28.560 that the US is still receiving containerships that departed China 0:11:28.679 --> 0:11:31.280 pre teariff, and if you accept the idea that it 0:11:31.320 --> 0:11:34.280 takes maybe thirty days perhaps a little more for those 0:11:34.360 --> 0:11:37.600 vessels to travel from China to the nearest US port, 0:11:37.880 --> 0:11:41.080 we really haven't felt the full impact quite yet, have we. 0:11:42.040 --> 0:11:45.360 Yeah, I don't think we have. I think that especially 0:11:45.440 --> 0:11:48.720 in DC, things these are moving very quickly. It does 0:11:48.760 --> 0:11:52.400 seem that deals are potentially going to get done very fast. 0:11:52.440 --> 0:11:56.760 So you know, things could evolve in the coming days 0:11:56.800 --> 0:12:01.840 and weeks on what deals get done between mean global leaders. 0:12:02.320 --> 0:12:04.120 But I agree, you know, we haven't seen that full 0:12:04.160 --> 0:12:06.720 impact yet. You know, the hard data has continued to 0:12:06.720 --> 0:12:10.440 be very strong. First quarter data looks to continue to 0:12:10.440 --> 0:12:13.880 be strong. We haven't really seen much of a slowing 0:12:14.280 --> 0:12:16.559 in the labor market. We really haven't seen a big, 0:12:16.640 --> 0:12:19.840 large increase in jobless claims, right in companies laying off. 0:12:19.920 --> 0:12:23.200 So overall, the hard data still looks pretty strong. It's 0:12:23.240 --> 0:12:27.000 really around trying to dissect when when the data potentially 0:12:27.040 --> 0:12:30.480 does change later this year. And for us, you know, 0:12:30.679 --> 0:12:33.880 the big question is there are a lot of cross 0:12:33.920 --> 0:12:38.480 currents right now happening in DC. Some are expansionary policy, 0:12:38.800 --> 0:12:43.560 some are contractionary policy. It's really around what is going 0:12:43.600 --> 0:12:46.040 to outweigh each other. And we think that you know, 0:12:46.160 --> 0:12:49.720 returns for market investors are really going to have much 0:12:49.800 --> 0:12:53.240 larger tails, both in the upside and downside risks. So 0:12:53.720 --> 0:12:55.960 a lot of things can really be evolving here. 0:12:56.480 --> 0:12:59.840 So we had a measure of manufacturing activity today for 0:13:00.120 --> 0:13:04.240 Texas published by the Dallas FED, and it weakened significantly. 0:13:04.480 --> 0:13:07.640 A lot of the businesses that were surveyed used towards 0:13:07.800 --> 0:13:11.480 like chaos and insanity to describe the turmoil as a 0:13:11.480 --> 0:13:14.600 result of these tariffs. And I'm wondering whether or not 0:13:15.160 --> 0:13:19.280 if things follow this same path, whether the level of 0:13:19.320 --> 0:13:23.240 pain expressed in market action is going to put some 0:13:23.360 --> 0:13:27.120 pressure on the administration to get deals done sooner rather 0:13:27.160 --> 0:13:30.160 than later, or whether you think there's a risk that 0:13:30.280 --> 0:13:33.400 the administration may stick to its guns and try to 0:13:33.480 --> 0:13:37.200 get more of what it's after, irrespective of what markets 0:13:37.520 --> 0:13:38.040 are saying. 0:13:38.840 --> 0:13:42.160 Yeah, no, we think that trying to happen. It seems 0:13:42.200 --> 0:13:46.120 the administration was definitely holding its ground early in April 0:13:46.120 --> 0:13:49.320 when there was the initial saw off in the equity markets. 0:13:49.760 --> 0:13:53.960 It really was the sharp move higher in the treasury 0:13:54.040 --> 0:13:57.040 yield that really happened over one week from four percent 0:13:57.360 --> 0:13:59.800 to north of four and a half percent. They're really 0:14:00.040 --> 0:14:04.040 seemed to create you know, indigestion if you will, in 0:14:04.200 --> 0:14:08.280 d C. And so it does seem like the overall 0:14:08.400 --> 0:14:12.280 tone is shifting, and the data has been slowing. To 0:14:12.280 --> 0:14:16.000 your point that Dallas FED was a pretty shocking lower number. 0:14:16.559 --> 0:14:19.760 There's a lot of soft data through surveys don't look 0:14:19.840 --> 0:14:22.520 quite good in the Beige Book talks about, you know, 0:14:22.600 --> 0:14:26.040 a slowing of hiring. So all those things are starting 0:14:26.080 --> 0:14:30.040 to crab collaborate and create an environment where we do 0:14:30.120 --> 0:14:32.640 think the tone is changing in DC. And so that's 0:14:32.680 --> 0:14:35.200 why we think markets in the short term redly stabilized. 0:14:35.440 --> 0:14:39.000 You know, we're not seeing a return of stock market, 0:14:39.280 --> 0:14:42.080 you know, to previous highs. We do think it's stabilized 0:14:42.120 --> 0:14:44.480 here as to tone and shifting and there's a lot 0:14:44.520 --> 0:14:47.520 more discussion around a tax build that seems a little 0:14:47.520 --> 0:14:50.240 more eminent. So it seems like things are happening in 0:14:50.280 --> 0:14:52.880 the background, but you know, don't feel like markets are 0:14:52.880 --> 0:14:53.800 out of the woods yet. 0:14:54.400 --> 0:14:56.320 It's going to be a very interesting week when it 0:14:56.360 --> 0:14:59.120 comes to the economic data. A couple of data points 0:14:59.160 --> 0:15:02.040 on the growth side GDP and at the end of 0:15:02.040 --> 0:15:05.640 the week the April employment report, and then we've got 0:15:05.760 --> 0:15:08.320 numbers that are more aligned with the inflation story. And 0:15:08.360 --> 0:15:12.000 I'm thinking here of the employment cost Index and the 0:15:12.080 --> 0:15:15.480 report on first quarter PCEE. Where are you right now 0:15:15.520 --> 0:15:18.440 in your view when you look at the balance between 0:15:18.560 --> 0:15:20.920 inflation on one hand and growth on the other. 0:15:21.800 --> 0:15:25.400 Yeah, we're in the camp that you know, typically when 0:15:25.400 --> 0:15:27.920 you get an inflation shock to tear ups, it is 0:15:27.920 --> 0:15:31.000 a little more transitory. We think the bond market right 0:15:31.000 --> 0:15:34.160 now is really pricing a FED that has changed their 0:15:34.200 --> 0:15:37.040 tune from an inflation reducing regime to a more of 0:15:37.040 --> 0:15:40.160 a growth supporter regime. This is the kind of the 0:15:40.160 --> 0:15:43.280 biggest wildcard, and that's where the markets are pricing in 0:15:43.520 --> 0:15:45.800 the FED funds rate to get you know, sub three 0:15:45.840 --> 0:15:48.640 percent in the coming quarters. So that's a that's a 0:15:48.680 --> 0:15:52.880 pretty big change in FED policy in environment where inflation 0:15:53.400 --> 0:15:57.320 you can could rise. Here, that's a huge wildcard that 0:15:57.400 --> 0:16:00.760 the market's pricing in. If we don't get the cuts 0:16:00.800 --> 0:16:03.920 that are expected, it could be quite different our perspective, 0:16:03.920 --> 0:16:06.320 but we think is going to happen. We definitely think 0:16:06.320 --> 0:16:09.840 you could see a slight move higher in inflation. But 0:16:09.960 --> 0:16:12.800 we're in the camp that growth was expected to continue 0:16:12.840 --> 0:16:16.720 to slow into twenty twenty five. So we've been looking 0:16:16.760 --> 0:16:21.040 for slower growth in the United States. The US consumer, 0:16:21.600 --> 0:16:26.280 which is the largest portion of GDP consumer spending, and 0:16:26.440 --> 0:16:29.760 the consumer was extremely strong conteenue to have really strong 0:16:29.800 --> 0:16:32.280 consumer spending through the fourth quarter. If you didn't have 0:16:32.680 --> 0:16:34.680 that strong of a consumer, you would have not had 0:16:34.720 --> 0:16:37.240 a positive GDP print. And so if you get a 0:16:37.280 --> 0:16:40.120 pause in a slowing a consumer spending throughout the middle 0:16:40.120 --> 0:16:42.360 of this year, we think that the FED is going 0:16:42.400 --> 0:16:44.480 to be more focused on the growth side of the equation, 0:16:44.560 --> 0:16:47.280 which we thought was already going to take place before 0:16:47.320 --> 0:16:50.040 this new kind of self inflicted on certain neighbor getting 0:16:50.040 --> 0:16:50.360 in DC. 0:16:50.720 --> 0:16:52.920 So if growth is going to slow and you're confident 0:16:53.040 --> 0:16:56.840 that any inflationary impact from the tariffs will be temporary, 0:16:57.120 --> 0:17:00.200 does that mean there are compelling opportunities right now in 0:17:00.200 --> 0:17:02.000 the bond market, let's say at the long end. 0:17:02.760 --> 0:17:06.000 Yeah, we would definitely agree the bond market looks quite attractive. 0:17:06.400 --> 0:17:08.439 You know, the figures we were talking about as a 0:17:08.440 --> 0:17:12.320 team today was that the fixed income market looks very solid, 0:17:12.920 --> 0:17:15.280 especially amidst a lot of the amount of volatility we 0:17:15.320 --> 0:17:19.240 are facing and headwinds potentially facing here in twenty twenty five, 0:17:19.600 --> 0:17:22.880 and so we think there's great opportunities and really investment 0:17:22.920 --> 0:17:27.200 grade fixed income areas like agency mortgages, even just treasuries, 0:17:27.200 --> 0:17:30.280 you're wrapped around kind of a four percent treasury yield 0:17:30.320 --> 0:17:33.400 that's north of inflation, so positive real rate level. So 0:17:34.000 --> 0:17:37.440 that at this juncture, given the really uncertainty you have 0:17:37.640 --> 0:17:40.919 on growth and the valuations, you see inequities. You know, 0:17:40.920 --> 0:17:44.639 we've been recommending investors look to be overweight US fixed income, 0:17:45.160 --> 0:17:49.359 but really focused on higher quality given the tails seem 0:17:49.400 --> 0:17:50.760 like you could have a lot more, it could be 0:17:50.800 --> 0:17:53.960 a lot fatter. Later in twenty twenty five, you were 0:17:53.960 --> 0:17:56.800 a little more cautious on lower quality areas of US 0:17:56.840 --> 0:17:59.679 fixed income. So we're more focused on the front end 0:17:59.680 --> 0:18:01.600 of the year curve relative to the long end but 0:18:01.880 --> 0:18:04.160 US high quality looks really attractive right now. 0:18:04.160 --> 0:18:08.359 In terms of corporate versus munis versus sovereign. How are 0:18:08.440 --> 0:18:09.520 you balanced right now? 0:18:09.920 --> 0:18:13.760 Yeah, so we're more weighted to two areas, one being 0:18:13.760 --> 0:18:19.240 the US homeowner and then also US corporate high investment 0:18:19.280 --> 0:18:22.399 great corporate credit. So while corporate credit is going to 0:18:22.400 --> 0:18:26.720 be more correlated with equity returns, we think that below 0:18:26.760 --> 0:18:29.600 investment grade corporate credit will be more correlated. We think 0:18:29.680 --> 0:18:32.760 high quality should actually perform quite well. The best real 0:18:32.760 --> 0:18:36.400 opportunity to rere tilted toward is the US homeowner. Agency 0:18:36.440 --> 0:18:39.000 mortgages being the primary example, one of the largest bond 0:18:39.000 --> 0:18:41.240 markets in the world. That is an area that is 0:18:41.280 --> 0:18:44.800 really benefiting from this higher rate volatility. Ie, you get 0:18:44.840 --> 0:18:49.240 a much higher income historically today than you do relative 0:18:49.280 --> 0:18:53.159 to treasury yields. Also, investors tend to overlook areas like 0:18:53.280 --> 0:18:57.639 non agency mortgages and asset back bonds. Those markets certainly 0:18:57.720 --> 0:19:00.840 never fully retraced from the seller off in twenty twenty 0:19:00.920 --> 0:19:06.720 two that we saw equities and corporate credit retrays, not 0:19:06.800 --> 0:19:08.800 agency mortgages and asset bag bonds, and they never go 0:19:08.920 --> 0:19:10.480 back to the levels that we had in twenty one, 0:19:10.520 --> 0:19:13.640 And so we see that as really the best opportunity 0:19:14.040 --> 0:19:16.520 for later in this year. We've been overweight those areas 0:19:16.560 --> 0:19:19.080 of the market, you know, really throughout twenty and twenty 0:19:19.080 --> 0:19:21.159 five to start, and we plan to continue to do 0:19:21.200 --> 0:19:22.159 that in the second world. 0:19:22.200 --> 0:19:24.160 All Right, we'll leave it there, Clayton, Thank you so much. 0:19:24.200 --> 0:19:27.679 Clayton Trick, he is head of portfolio management at angel 0:19:27.760 --> 0:19:31.280 Oak Capital Advisors. Joining us from Atlanta, Georgia here on 0:19:31.280 --> 0:19:37.200 the Daybreak Asia Podcast. Thanks for listening to today's episode 0:19:37.280 --> 0:19:41.280 of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we 0:19:41.320 --> 0:19:45.200 look at the story shaping markets, finance, and geopolitics in 0:19:45.240 --> 0:19:48.399 the Asia Pacific. You can find us on Apple, Spotify, 0:19:48.560 --> 0:19:52.040 the Bloomberg Podcast YouTube channel, or anywhere else you listen. 0:19:52.480 --> 0:19:55.359 Join us again tomorrow for insight on the market moves 0:19:55.440 --> 0:19:59.920 from Hong Kong to Singapore and Australia. I'm Doug Krisner 0:20:00.119 --> 0:20:01.480 and this is Bloomberg 0:20:08.640 --> 0:20:09.000 MHM.