WEBVTT - De-Dollarization and Equity Concerns amid US-China Trade War 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.480 --> 0:00:31.080 Right now, joining us, Jordan Rochester with a wonderful set 0:00:31.160 --> 0:00:32.159 of overnight notes. 0:00:32.159 --> 0:00:36.720 He's with FIC macro strategy, you know, with Miszuo. Jordan. 0:00:36.840 --> 0:00:38.680 Let's go a little walk as year right now as 0:00:38.760 --> 0:00:42.600 Cam Dawston was talking about this trust series, so for 0:00:42.800 --> 0:00:47.080 ten year, I'm looking at it out three standard deviations. 0:00:47.440 --> 0:00:49.919 It's been worse over the last four days. 0:00:50.360 --> 0:00:55.240 Where's the trip point for these liquidity trust series for you? 0:00:55.600 --> 0:00:57.240 Where we get to market chaos? 0:00:58.280 --> 0:01:00.880 I think that's the biggest question to it. 0:01:01.000 --> 0:01:03.440 Was one of my big key concerns earlier this week 0:01:03.640 --> 0:01:06.880 was about dollar funding because the whole world was facing 0:01:06.959 --> 0:01:07.880 such higher. 0:01:07.600 --> 0:01:09.399 Tariff rates for the US. 0:01:09.440 --> 0:01:12.080 What you're going to see is that exporters to the 0:01:12.200 --> 0:01:14.640 US were no longer going to receive their dollar receipts, 0:01:15.000 --> 0:01:17.240 and then dollar funding would become an issue. The only 0:01:17.280 --> 0:01:19.600 good news that I can give you is that you 0:01:19.800 --> 0:01:23.640 just had a record Q one imports in America and 0:01:23.680 --> 0:01:25.680 so a lot of these exporters around the world will 0:01:25.680 --> 0:01:28.080 be sitting on a dollar cash pile. That's a little 0:01:28.080 --> 0:01:31.200 bit more healthier than usual. Now we've had this ninety 0:01:31.280 --> 0:01:34.120 day reprieve at ten percent tariff rates. I do see 0:01:34.400 --> 0:01:37.319 the flows of commerce still taking place between Europe and 0:01:37.319 --> 0:01:39.960 the rest. But the problem is with China with these 0:01:40.000 --> 0:01:42.160 extreme tariffs that we have. We've got one hundred and 0:01:42.200 --> 0:01:45.959 forty five percent tariff rate on China. It's the largest, 0:01:45.959 --> 0:01:47.520 one of the largest trading partners in the world with 0:01:47.560 --> 0:01:49.600 the US, and so you're going to see a dollar 0:01:49.600 --> 0:01:52.720 a quizy issue at some point unless we have are 0:01:52.720 --> 0:01:53.320 climbed out. 0:01:53.560 --> 0:01:55.080 Jordan Rochester with this Missouri. 0:01:55.200 --> 0:01:57.400 We welcome all of you on your commute this morning 0:01:57.480 --> 0:02:01.200 across the nation this Friday of Bloomberg's Veillance. Very much 0:02:01.480 --> 0:02:04.320 market focus. We'll do a little bit of Washington and 0:02:04.400 --> 0:02:07.640 certainly those announcements out of the White House will be 0:02:07.720 --> 0:02:10.440 Key John Tucker with us for Lisa Matteo in this hour. 0:02:10.800 --> 0:02:15.520 Damien sasaur In for Paul Sweeney with this wonderful emerging 0:02:15.560 --> 0:02:18.040 market focus at Bloomberg Intelligence. 0:02:18.080 --> 0:02:19.960 Damien a question to mister Rochester. 0:02:20.080 --> 0:02:23.240 Yes, mister Rochester formerly fic Macro at Nomor and out 0:02:23.240 --> 0:02:25.200 in the zoo. So really in a great place to 0:02:25.240 --> 0:02:27.600 talk about China here. And look, everybody's blaming the thirty 0:02:27.680 --> 0:02:30.120 year move on the basis on leverage, selling or buying 0:02:30.200 --> 0:02:31.600 or whatever it is. But you know, I just got 0:02:31.639 --> 0:02:33.239 to ask you. I'm getting a lot of questions about 0:02:33.320 --> 0:02:36.160 China and what role it pad in these treasury swings. 0:02:36.240 --> 0:02:38.240 I know you're well, not your colleagues, but your peers 0:02:38.280 --> 0:02:41.440 over at SNBC are basically saying that China was involved 0:02:41.440 --> 0:02:43.480 in that, and now City Group's getting, you know, getting 0:02:43.520 --> 0:02:43.919 on board. 0:02:44.240 --> 0:02:45.160 What are your thoughts there? 0:02:46.040 --> 0:02:48.640 I could never say whether China is involved not. We 0:02:48.720 --> 0:02:51.239 just don't have the data yet until at next the 0:02:51.320 --> 0:02:53.240 end of the month for next month. That's the irritating 0:02:53.280 --> 0:02:54.000 thing about data. 0:02:54.040 --> 0:02:54.440 It's slow. 0:02:54.480 --> 0:02:56.440 But what we can say is that if you're a 0:02:56.480 --> 0:02:59.560 central bank and you're facing extreme currency pressures, it makes 0:02:59.600 --> 0:03:02.480 sense to selling US treasuries to defend your currency. It's 0:03:02.520 --> 0:03:05.320 been very smooth in dollar ramimbi and so that's kind 0:03:05.320 --> 0:03:08.359 of possibly been behind it, I would add. 0:03:08.280 --> 0:03:09.800 So let me ask you this now that you know 0:03:09.840 --> 0:03:12.359 the dollars declining in the face of all this very unusual. 0:03:12.400 --> 0:03:14.280 Do you think Asian central banks have more scope to 0:03:14.320 --> 0:03:14.919 cut rates here? 0:03:16.240 --> 0:03:17.280 I think the whole world does. 0:03:17.760 --> 0:03:19.519 This is going to be a huge growth shock to 0:03:19.560 --> 0:03:22.119 the US, but a big growth shop to the rest 0:03:22.120 --> 0:03:25.000 of the world. And what's going to happen is the 0:03:25.080 --> 0:03:27.600 Chinese exports are no longer going to go to the 0:03:27.720 --> 0:03:30.360 US at the same rate. We'll be looking for the 0:03:30.400 --> 0:03:33.480 next consumer. Europe stands out to me, but parts of 0:03:33.520 --> 0:03:37.480 Asia too. We'll see excess supply of Chinese goods hit 0:03:37.520 --> 0:03:40.160 their markets and that's going to load the selling price. 0:03:40.440 --> 0:03:43.800 Jordan, Rochester within all the research capabilities of your shop, 0:03:44.440 --> 0:03:47.920 do you people just look at the various supply chains 0:03:47.920 --> 0:03:49.960 and almost frankly the demand chains. 0:03:50.520 --> 0:03:55.360 Where China belieguered by the White House, runs their products 0:03:55.360 --> 0:04:00.240 through Vietnam, runs their product through Indonesia, runs their next 0:04:00.280 --> 0:04:01.160 to Kazakhstan. 0:04:02.600 --> 0:04:05.560 Long term, that's probably what's going to happen. Short term. 0:04:05.600 --> 0:04:08.040 How quickly they can do it is difficult. For example, 0:04:08.120 --> 0:04:11.840 Chinese exporters were discussing in an FT article just over 0:04:11.920 --> 0:04:14.120 over the past few days they had set up in Jordan, 0:04:14.160 --> 0:04:17.520 which has an FTA Jordan, the country not me an 0:04:17.600 --> 0:04:20.320 FTA with the US, but Jordan as a result has 0:04:20.320 --> 0:04:23.520 a twenty percent tariff rate. Now under these the sort 0:04:23.520 --> 0:04:27.240 of expected levels of reciprocal and so even countries with 0:04:27.400 --> 0:04:30.800 FDAs where China exporters had sort of hedged themselves by 0:04:30.839 --> 0:04:33.880 moving into countries to do the final production part there 0:04:33.920 --> 0:04:36.640 and sell on to the US that the plans scuffered. 0:04:36.680 --> 0:04:39.039 If everybody has a ten percent taraf rate, it's really 0:04:39.080 --> 0:04:41.800 hard to do the rerouting. But for Chinese exports at 0:04:41.800 --> 0:04:44.360 one hundred and forty five percent, sure they will take 0:04:44.440 --> 0:04:47.800 ten percent by rerouting, but it it takes time and 0:04:47.800 --> 0:04:49.400 it's not going to happen in the next few weeks. 0:04:49.480 --> 0:04:51.760 I mean, Danian, we got to focus this down here 0:04:51.760 --> 0:04:53.599 because we have Danian Sasar with us. 0:04:53.720 --> 0:04:56.640 The bottom line is Fuscheng is making. 0:04:56.360 --> 0:04:59.480 A lot of the golf heads for callaway, ping and tidiness. 0:05:00.040 --> 0:05:02.599 Going to have to run that through Vietnam, Damien SASA 0:05:02.720 --> 0:05:04.880 or hey to help improve your lousy game. 0:05:04.960 --> 0:05:07.000 I pay an awful lot for my probi one excess. 0:05:07.000 --> 0:05:08.800 But here's what I have to ask Jordan. I mean, look, 0:05:08.800 --> 0:05:10.880 we know that the China dumping is on the rest 0:05:10.880 --> 0:05:12.279 of the world is going to happen where we know 0:05:12.320 --> 0:05:14.640 transhipments are going to happen. We know Europe's the clear winner. 0:05:14.680 --> 0:05:18.039 But here's my question. How will bilateral trade negotiations with 0:05:18.080 --> 0:05:20.159 the US evolve? And here's what I'm thinking here. You 0:05:20.200 --> 0:05:22.599 have active discussions going on right now with India, Japan, 0:05:22.640 --> 0:05:25.600 South Korea. Are non tara variables going to play a 0:05:25.680 --> 0:05:27.279 role here? I mean, are they going to start talking 0:05:27.320 --> 0:05:30.560 about currency manipulation and start holding some of these Asian 0:05:30.600 --> 0:05:32.760 economies you know to bear for that? I mean, how 0:05:32.800 --> 0:05:34.839 do you how do you even begin to talk about 0:05:34.839 --> 0:05:36.320 that and regulate that. 0:05:37.320 --> 0:05:39.640 I don't know about your experience with government officials, but 0:05:40.160 --> 0:05:42.480 it never goes quickly, does it. Whenever your life involves 0:05:42.480 --> 0:05:44.960 dealing with the government, it's quite difficult to get things 0:05:45.640 --> 0:05:48.599 via email chains over the line. So I am skeptical 0:05:48.760 --> 0:05:52.039 about how quickly you can get complete free trade agreements 0:05:52.920 --> 0:05:54.160 in the next ninety days. 0:05:54.279 --> 0:05:55.440 What I can think that. 0:05:55.480 --> 0:05:58.200 A lot of these countries can do is buy themselves 0:05:58.240 --> 0:06:01.960 more time extensions. Way, there's more time to deliberate. The 0:06:02.000 --> 0:06:04.880 EUS offering zero for zero tariff rates, for example, but 0:06:04.920 --> 0:06:08.440 the US is claiming that non tariff barriers are their issue. 0:06:08.760 --> 0:06:13.200 Non tariff barriers requires regulation, changes, requires votes in parts, 0:06:13.360 --> 0:06:15.760 it's a bit more difficult to do than just simple 0:06:15.800 --> 0:06:19.040 tariff manipulation stories. And on the FX side, I do 0:06:19.120 --> 0:06:23.480 agree Lessons made it clear several times informally and formally 0:06:23.760 --> 0:06:26.520 about Japan, for example, having two weeks of an exchange 0:06:26.600 --> 0:06:29.479 rate and the Bank Japan perhaps needing to hike rates 0:06:29.520 --> 0:06:32.200 more so these will be a factor in the talks. 0:06:32.720 --> 0:06:35.120 I got John Tucker's thinking, long yen here to be 0:06:35.200 --> 0:06:37.240 stronger again? Can you model out as you did the 0:06:37.320 --> 0:06:40.880 other day, Jordan Rochester one for five yen down to 0:06:40.920 --> 0:06:45.560 one thirty five? Dare I say, short term, given dollar malignancy, 0:06:45.640 --> 0:06:48.800 that we get yen to a strong one thirty per dollar. 0:06:49.880 --> 0:06:50.080 Yeah. 0:06:50.120 --> 0:06:52.680 What's quite clear is we're having a d dollarization theme 0:06:52.720 --> 0:06:55.440 play out in the market. The theme's gone from slow 0:06:55.480 --> 0:06:57.480 to rapid in the past forty eight hours. 0:06:57.680 --> 0:06:58.440 A lot of that has. 0:06:58.320 --> 0:07:01.679 Been corporate demands as well that the market's been seeing, 0:07:01.720 --> 0:07:04.240 pushing up the likes of euro dollar and dollien and 0:07:04.279 --> 0:07:07.200 the yen stronger for the Japanese yen. I think that 0:07:07.240 --> 0:07:10.080 we could have another five percent devaluation in the. 0:07:10.000 --> 0:07:10.680 Dollar from here. 0:07:10.760 --> 0:07:13.880 If we are truly pricing in the US, exceeptionism come 0:07:13.920 --> 0:07:16.400 to an end. Once you have a ten percent trade 0:07:16.400 --> 0:07:19.520 weighted fall in the dollar, typically that's when it bottoms 0:07:19.560 --> 0:07:22.600 out and rebounds. So we're using the twenty eighteen the 0:07:22.600 --> 0:07:25.680 COVID nineteen playbooks, and we've won another five percent at 0:07:25.760 --> 0:07:28.440 least to go here. That gets dolly En quite close 0:07:28.480 --> 0:07:30.880 to one thirty five and lower. That's the sort of 0:07:30.960 --> 0:07:32.720 view I have for where we get to over. 0:07:32.520 --> 0:07:33.360 The next few months. 0:07:33.400 --> 0:07:35.400 And it was something I thought would happen next year. 0:07:35.600 --> 0:07:36.840 So it's all happening very quickly. 0:07:37.000 --> 0:07:41.280 Jordan, Thank you so much. Jordan Rochester with us with Missoul. 0:07:41.840 --> 0:07:45.400 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:07:45.480 --> 0:07:48.640 weekday afternoons from seven to ten am Eastern. Listen on 0:07:48.720 --> 0:07:52.400 Applecarplay and Android Otto with the Bloomberg Business app, or 0:07:52.520 --> 0:07:54.200 watch us live on YouTube. 0:07:54.720 --> 0:07:57.680 What does Kathy say at Schwab joining us now Kathy 0:07:57.800 --> 0:08:00.760 Jones to straighten out our fixed income portfolio? 0:08:01.160 --> 0:08:05.480 Do people buy the dip in bonds? 0:08:06.000 --> 0:08:07.760 Yeah, I think you have to be careful, but I 0:08:07.760 --> 0:08:11.800 think that is probably a very good idea. The question is, 0:08:11.840 --> 0:08:14.320 are we at the yield level that's really attractive in 0:08:14.400 --> 0:08:16.640 some parts of the market. I think we are. I 0:08:16.640 --> 0:08:20.960 think in municipal bonds you're looking at, you know, tax 0:08:21.000 --> 0:08:25.000 equivalent yields or a high earner in the eight nine 0:08:25.040 --> 0:08:29.840 percent area, the high st equality. I think that that's 0:08:29.840 --> 0:08:31.080 the place you start to nimble. 0:08:31.080 --> 0:08:33.400 Okay, But on the commercial break, John Tucker's over here 0:08:33.440 --> 0:08:36.439 with robinhood Day trading in Nvidia. He's buying the dip. 0:08:36.760 --> 0:08:40.880 When you buy the Kathy Jones dip? Are you buying duration? 0:08:41.080 --> 0:08:44.480 Are you, like saying, extending out your maturity? Are you 0:08:45.200 --> 0:08:48.839 what's the what's the math of buying the fixed income dip? 0:08:49.360 --> 0:08:52.440 Yeah, so right now we're still at benchmark, which is 0:08:52.679 --> 0:08:55.600 consistent with the Bloomberg egg, and that's around six years 0:08:55.640 --> 0:08:58.200 and we've been kind of hugging the benchmark for a 0:08:58.240 --> 0:09:01.280 long time because of all the uncertainty. We feel like 0:09:01.320 --> 0:09:03.640 you're still clipping a pretty good coupon of four and 0:09:03.679 --> 0:09:07.240 a half upwards to five percent in high quality bonds. 0:09:07.520 --> 0:09:10.480 That's a good base. We're not extending duration yet. We 0:09:10.600 --> 0:09:13.520 have to wait and see how things play out, but 0:09:13.600 --> 0:09:15.880 I think that will be a move that we make 0:09:16.559 --> 0:09:20.240 probably some time later this year, but you know, high 0:09:20.240 --> 0:09:24.360 credit quality. For We're we're really just focused on high 0:09:24.360 --> 0:09:27.400 credit quality and making sure we have enough liquidity, not 0:09:27.480 --> 0:09:30.080 going into instruments that they're ill liquid at this stage 0:09:30.080 --> 0:09:32.520 of the game, trying to play it safe. But I 0:09:32.559 --> 0:09:34.760 think the opportunities are starting to emerge. 0:09:34.880 --> 0:09:37.160 Jamien, is a dollar an a liquid instrument? 0:09:38.080 --> 0:09:39.560 Well, you know, Kathy, I have to agree with you. 0:09:39.800 --> 0:09:41.839 Muni's mortgages as well. You know, I think you know 0:09:41.880 --> 0:09:44.240 high quality mortgages. But you know what really stands out 0:09:44.280 --> 0:09:46.640 in this move. Guess what acid class woke up within 0:09:46.679 --> 0:09:49.520 fixed income credit and we saw spreads blow And now 0:09:49.559 --> 0:09:51.439 I'm looking at IG and high yield, you know, down 0:09:51.480 --> 0:09:53.080 two and a half three percent, you know, just since 0:09:53.120 --> 0:09:55.120 the second of April. What are your thoughts on credit 0:09:55.120 --> 0:09:55.920 markets going forward? 0:09:56.160 --> 0:09:58.679 Yeah, we're so a little bit cautious, although again we're 0:09:58.679 --> 0:10:01.040 getting tempted. We have been and kind of on the 0:10:01.080 --> 0:10:03.560 sidelines and credit for a while, just staying up in 0:10:03.559 --> 0:10:05.760 credit quality because the spreads were so tight. It didn't 0:10:05.800 --> 0:10:08.360 get paid for taking risk. But now you know, we're 0:10:08.360 --> 0:10:11.480 starting to get paid for taking risk. The problem is, 0:10:11.520 --> 0:10:13.880 I think the mix of policies we have right now 0:10:13.960 --> 0:10:17.080 is so difficult to interpret or even come up with 0:10:17.120 --> 0:10:19.920 an investment thesis that you can carry through the end 0:10:20.000 --> 0:10:22.320 of the year, because it could change in the heartbeat. 0:10:22.800 --> 0:10:26.080 That's where we're that's where we're having trouble. But I 0:10:26.120 --> 0:10:28.559 do think as we get if those spreads blow out 0:10:28.600 --> 0:10:32.200 some more, you know, we will start looking at more credit. 0:10:32.320 --> 0:10:34.760 We've also seen a massive steepening dare I say, in 0:10:34.880 --> 0:10:37.320 US yield curve, not just the US, really global yield curves, 0:10:37.320 --> 0:10:38.800 you know, And so you know when it talks, when 0:10:38.840 --> 0:10:41.400 Tom asks about positioning along the yield curve, I'm just curious, 0:10:41.400 --> 0:10:42.880 you know, I'm hearing a lot of people saying they 0:10:43.000 --> 0:10:45.600 still want to be, you know, along the short end 0:10:45.600 --> 0:10:47.000 of the curve, you know, as opposed to the long end. 0:10:47.000 --> 0:10:48.199 I'm just curious to hear thoughts there. 0:10:48.679 --> 0:10:48.880 Yeah. 0:10:49.160 --> 0:10:51.760 No, I think that thesis makes sense because we are 0:10:51.800 --> 0:10:54.920 anticipating rate cuts down the road, and if this continues, 0:10:54.960 --> 0:10:56.679 I don't see how the FED holds off because you 0:10:56.800 --> 0:11:01.240 see higher unemployment on the horizon. But I don't want 0:11:01.240 --> 0:11:03.480 to just hug the short end and miss out on 0:11:04.040 --> 0:11:06.679 grasping some of these yields for the long run, because 0:11:06.679 --> 0:11:08.640 I do think we're going to get a slower economy. 0:11:08.880 --> 0:11:10.680 I do think the FED will at some point have 0:11:10.800 --> 0:11:13.640 to lower rate, and I want to capture some of that, right. 0:11:13.720 --> 0:11:17.000 I want to report, Damien Damiens stay there right now 0:11:17.640 --> 0:11:19.880 the market moving futures are up like forty and they're 0:11:19.880 --> 0:11:20.480 now at eleven. 0:11:20.520 --> 0:11:22.520 We actually had read in the screen for a bit 0:11:22.600 --> 0:11:23.640 the Secretary. 0:11:23.160 --> 0:11:25.640 Of treasurer with Maria right now, maybe he can have 0:11:25.679 --> 0:11:27.920 the same effect as James Diamond a few days ago. 0:11:28.040 --> 0:11:30.960 Damien Kathy US Treasury demanded this, you know, kind of 0:11:31.000 --> 0:11:33.360 downtick really took a bit of a knock, and you know, 0:11:33.400 --> 0:11:35.640 I'm just curious. You know, we know we've been transitioning 0:11:35.640 --> 0:11:38.319 away from the FED, from US banks and foreigners, and 0:11:38.559 --> 0:11:40.400 you know, what does this mean in your opinion to 0:11:40.480 --> 0:11:42.400 term premium over time? I mean, are you thinking that 0:11:42.480 --> 0:11:44.960 this steepening of the curve is structural, that it's going 0:11:45.000 --> 0:11:46.040 to last for a long period. 0:11:46.240 --> 0:11:47.199 That's a really good pa. 0:11:47.320 --> 0:11:50.920 I do think it's going to last. Okay, term premium. 0:11:50.960 --> 0:11:53.360 We actually came into this year calling at the year 0:11:53.400 --> 0:11:56.920 of the term premium because we have to. We have 0:11:57.040 --> 0:12:00.240 to incorporate now these risks that are out there, and 0:12:00.320 --> 0:12:02.400 I do think we'll continue to see the term premium 0:12:02.440 --> 0:12:04.839 move up, not just here but globally, but especially here 0:12:04.920 --> 0:12:07.559 because this is the source of uncertainty. 0:12:08.080 --> 0:12:10.680 I got twenty more questions. We don't have time, Kathy Jones, 0:12:10.679 --> 0:12:13.079 your trooper to come in today. I can't imagine what 0:12:13.120 --> 0:12:16.000 the Kathy Jones calendar looks like at Charles Schwab today 0:12:16.400 --> 0:12:21.520 Chief Fixed Income Strategists, and ye'll curve watcher at Charles Schwab. 0:12:22.080 --> 0:12:26.000 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:12:26.040 --> 0:12:29.319 starting at seven am Eastern on Applecarplay and Android Auto 0:12:29.440 --> 0:12:32.400 with the Bloomberg Business App. You can also listen live 0:12:32.480 --> 0:12:36.080 on Amazon Alexa from our flagship New York station, Just 0:12:36.120 --> 0:12:38.640 say Alexa play Bloomberg eleven thirty. 0:12:38.880 --> 0:12:41.640 Within the span of this week, this historic week, it 0:12:41.760 --> 0:12:45.680 is a good time to speak to Sevita Supermanian. She 0:12:45.800 --> 0:12:48.520 is with the Bank of America, but far more than that, 0:12:49.120 --> 0:12:54.120 delivers Berkeley mathematics, philosophy and massive dead head knowledge and. 0:12:54.240 --> 0:12:58.360 Joins us this morning here. She was definitive in making 0:12:58.760 --> 0:12:59.839 esg adult for. 0:12:59.800 --> 0:13:03.520 All all of you that were screaming, stop the peace, 0:13:03.600 --> 0:13:07.120 love and dope, just give me the math. Savina Supermanian 0:13:07.520 --> 0:13:11.520 led the charge to a constructive ESG debate more than 0:13:11.559 --> 0:13:13.680 a few years ago, where through she could joined us 0:13:13.679 --> 0:13:14.080 at studio. 0:13:14.160 --> 0:13:16.160 Wonderful to have you here. 0:13:16.320 --> 0:13:19.480 I love what you do in your Bank of America report, which, 0:13:19.600 --> 0:13:23.840 unlike most ego driven strategists, you actually listen to your 0:13:23.880 --> 0:13:28.480 securities research. You actually pay attention to what's going on 0:13:28.559 --> 0:13:32.800 in the trenches. Lorraine Hutchinson has a worst job at 0:13:32.800 --> 0:13:33.720 Bank of America. 0:13:34.000 --> 0:13:36.800 She's got to figure out what Walmart's going to do 0:13:36.880 --> 0:13:37.640 with China. 0:13:37.679 --> 0:13:40.440 I know, what does China do to the consumer and 0:13:40.480 --> 0:13:42.360 that how does that fold into your world? 0:13:42.760 --> 0:13:46.040 Well, I mean, you know, Lorraine has been spot on 0:13:46.520 --> 0:13:49.400 in calling out that a lot of these companies with 0:13:49.520 --> 0:13:55.000 exposure to China actually started shifting sourcing out of China 0:13:55.080 --> 0:13:59.360 into other regions of Asia as well as Mexico, you know, 0:13:59.400 --> 0:14:02.760 other parts of globe as early as you know, twenty fifteen, 0:14:02.840 --> 0:14:05.520 even before any of the tariff talk began. 0:14:05.760 --> 0:14:08.280 So, you know, I think that the idea that these. 0:14:08.120 --> 0:14:14.400 Companies are vulnerable to China alone is nice, is not 0:14:14.440 --> 0:14:20.360 necessarily the case anymore. But closet China via you know, Vietnam, Mexico, 0:14:20.840 --> 0:14:24.640 That's what worried us about the initial April second announcement. 0:14:24.880 --> 0:14:27.120 A few years ago, you were in high school. I 0:14:27.160 --> 0:14:29.400 got a phone call in Singapore. Go over to Bank 0:14:29.440 --> 0:14:30.040 of America. 0:14:30.120 --> 0:14:30.720 So I walk in. 0:14:30.760 --> 0:14:34.240 It's me and Ken Lewis having a conversation about Bank 0:14:34.280 --> 0:14:37.280 of America and Asia. You guys have a heritage there, 0:14:37.280 --> 0:14:40.680 you have a history there really like no one else. 0:14:41.080 --> 0:14:44.840 So what's China do here? Damien's going to say they dedollarize. 0:14:45.120 --> 0:14:49.760 Do you just assume China solves the problem without unilateral 0:14:49.800 --> 0:14:51.960 negotiations with the White House bilateral? 0:14:52.000 --> 0:14:54.200 I should say, you know, that's TBD. 0:14:54.320 --> 0:14:56.520 I think that where we are now is where corporates 0:14:56.520 --> 0:15:00.520 have to really think about how they're going to plan. 0:15:00.880 --> 0:15:03.320 And that's the problem is that it's hard to plan 0:15:03.400 --> 0:15:05.720 when you just don't know what the playing field looks like. 0:15:06.640 --> 0:15:06.840 You know. 0:15:06.880 --> 0:15:09.400 What I think is interesting, though, is that there's been 0:15:09.440 --> 0:15:12.680 this knee jerk reaction to buy treasury bonds instead of 0:15:12.720 --> 0:15:15.480 stocks as a safe haven. And I think that's exactly 0:15:15.600 --> 0:15:18.120 wrong because if you look back on what happened in 0:15:18.160 --> 0:15:22.800 prior periods of protectionism, prior periods of stagflation, whatever we're 0:15:22.840 --> 0:15:30.200 heading into value stocks outperformed treasury bonds by a massive margin. 0:15:30.520 --> 0:15:33.080 The last thing you want to be stuck in during 0:15:33.120 --> 0:15:38.240 a stagflationary environment is long duration bonds. They have no options, 0:15:38.520 --> 0:15:42.080 whereas stocks, to me, are the best place to be. 0:15:42.360 --> 0:15:46.120 In an environment where you need those options, companies can 0:15:46.160 --> 0:15:50.040 extend or shorten their duration. We saw this with Meta 0:15:50.080 --> 0:15:54.200 and Google in twenty twenty three. They both initiated dividends 0:15:54.240 --> 0:15:56.239 and transition from being just pure. 0:15:56.000 --> 0:15:57.240 Growth to value. 0:15:57.520 --> 0:15:59.680 I think this is a really interesting time to think 0:15:59.720 --> 0:16:03.760 about value equities. Companies that are returning capital, like utilities, 0:16:04.120 --> 0:16:07.680 even metals and mining, even you know, energy companies that 0:16:07.760 --> 0:16:10.640 where the dividends are sacro SYNCD. I think those are 0:16:10.680 --> 0:16:12.400 areas that you really want to think about. 0:16:12.600 --> 0:16:14.920 Sabina, I'd love to ask you whether you prefer Tarpent 0:16:14.920 --> 0:16:17.760 station or American beauty, but we're not going to ask that. 0:16:17.760 --> 0:16:19.960 An earning season, it's a great time to be alive. 0:16:20.120 --> 0:16:21.720 And you know, I don't think it's going to be 0:16:21.920 --> 0:16:23.960 you know, the earnings at all that moves markets. It's 0:16:23.960 --> 0:16:27.040 going to be the words, the forward guidance around it. 0:16:27.200 --> 0:16:28.240 What are you expecting here? 0:16:28.360 --> 0:16:28.920 Absolutely? 0:16:29.000 --> 0:16:31.000 And I think what's a little bit worrisome is that 0:16:31.040 --> 0:16:33.360 we have a lot of companies shutting down guidance and 0:16:33.400 --> 0:16:36.680 going dark, and that's never really good because the worst 0:16:36.760 --> 0:16:38.600 you know, I think one of the reasons that we 0:16:38.600 --> 0:16:41.080 were a bullish on US stocks is that they're the 0:16:41.120 --> 0:16:44.760 most transparent, you know, equity market in the world. All 0:16:44.800 --> 0:16:47.760 of these companies issue guidance, and now if they stop, 0:16:47.920 --> 0:16:51.320 that's that's one you know, one more nick in the 0:16:51.360 --> 0:16:56.520 America you know exceptionalism story. I think, you know, what 0:16:56.560 --> 0:16:59.480 do we do with that that information vacuum? I mean, 0:17:00.120 --> 0:17:02.680 what I think is interesting is that companies are already 0:17:02.720 --> 0:17:07.040 thinking about how to navigate this period. And it could 0:17:07.040 --> 0:17:12.600 be something like recasting your costs as IP or you know, 0:17:12.680 --> 0:17:17.679 thinking about how to shift sourcing more creatively, how to price, 0:17:17.760 --> 0:17:20.000 how to pass that price along to consumers, and a 0:17:20.000 --> 0:17:23.200 lot of companies have the option to increase prices as 0:17:23.240 --> 0:17:26.080 long as wages remain relatively healthy. 0:17:26.200 --> 0:17:29.040 With the Bank of America, Savita Supermanian with us, we 0:17:29.080 --> 0:17:32.920 welcome all over your commute across Bank of America's nation 0:17:33.119 --> 0:17:35.760 and of course on YouTube and particularly good evening in 0:17:35.800 --> 0:17:41.119 the Pacific RIM YouTube subscribe to Bloomberg Podcast as CPI. Yesterday, 0:17:41.320 --> 0:17:45.480 I got negative statistics for that business inflation PPI. I'm 0:17:45.480 --> 0:17:47.160 not going to go into it other than to say 0:17:47.200 --> 0:17:52.040 it does show a disinflationary tendency. Pretty much everything said, 0:17:52.119 --> 0:17:55.359 futures go from up twenty to up twenty six. The 0:17:55.440 --> 0:17:58.920 VIX comes in actually forty one point four or five. 0:17:59.280 --> 0:17:59.840 Let me say that. 0:18:00.000 --> 0:18:02.840 Blomberg surveillance and all of our economics. It's brought to 0:18:02.840 --> 0:18:07.879 you by Commonwealth. Join over two thousand independent financial advisors. 0:18:07.880 --> 0:18:11.240 They are taking control of their growth with advisor centric 0:18:11.280 --> 0:18:14.000 support and future ready technologies. 0:18:14.160 --> 0:18:15.120 Grow on your. 0:18:15.000 --> 0:18:18.800 Own terms with a partner dedicated to your success. Go 0:18:18.920 --> 0:18:21.520 to Commonwealth dot com to learn how. 0:18:21.520 --> 0:18:24.239 Damian Savida put on your options hat for me. With 0:18:24.280 --> 0:18:26.439 all the uncertainty that's out there, implied boles have been 0:18:26.480 --> 0:18:29.160 all over the map, surfaces or inverting skis or stapening. 0:18:29.880 --> 0:18:32.480 What are your thoughts on buying and or underwriting equity 0:18:32.480 --> 0:18:33.120 protection here? 0:18:33.800 --> 0:18:37.240 Yeah, I mean I think that protections already probably pretty 0:18:37.280 --> 0:18:41.160 well uh sought after. Yeah, you know, I think there 0:18:41.200 --> 0:18:44.800 is actually potentially more upside than downside risk to the 0:18:44.880 --> 0:18:46.639 S and P five hundred And I know I sound 0:18:46.680 --> 0:18:47.880 a little bit, you. 0:18:47.840 --> 0:18:50.360 Know, out of sync with everybody else. 0:18:50.160 --> 0:18:52.560 Here, but you know, again, I see this as a 0:18:52.600 --> 0:18:55.520 market environment where you want to follow the money. The 0:18:55.600 --> 0:18:58.320 money is not going into US Treasury bonds. There's a 0:18:58.359 --> 0:19:01.240 buyers strike on US treasure rebonds. Where is the money 0:19:01.280 --> 0:19:03.040 going to go? I think it's going to go into 0:19:03.160 --> 0:19:07.960 inflation protected income. Think about retirees. Retirees right now own 0:19:08.040 --> 0:19:09.400