Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. So Wall Street took a bit of a breather in the last session. Equities drifted lower after a six day advance, and in the bond market, longer term treasure yields were a bit higher as US budget negotiations showed little sign of resolution. In a moment, we'll be speaking with Brian Vendig. He is
the chief investment officer over at MJP Wealth Advisors. But we start with the US China trade war and the story on tariffs. Now in the US session, we heard from the head of the Saint Louis fed Albertumusalom. He said tariffs will likely weigh on growth and weaken the labor market, even after the recent ninety day de escalation between Washington and Beijing. Here is Musalam speaking earlier at an event in Minneapolis.
Are higher have been more broadly applied and have prompted stronger retaliation than I and many others had expected. Ongoing negotiations with trading partners might dial back tariff significantly and durably, as we have seen with the recent announcement of a ninety day reduction in reciprocal tariffs with China.
That is the head of the Saint Louis fed Albertu Musalom with a perspective on how tariffs are impacting the US. So now let's take a look at how tariffs are impacting China. I'm joined by Helen Ju, managing partner and Chief investment Officer at NF Trinity. Helen is joining us from our studios in Hong Kong. Good of you to make time to chat with us before we get to the Moody's downgrade on the US credit rating. Can we start with the April activity data for China, the numbers
that we got on Monday. It seems somewhat surprising that industrial output performed as well as it did. What do you make of the activity data that we saw on Monday for the mainland economy?
Look, I think there's going to be a lot of noise in the activity data year today. So there's a couple of factors to consider. One is that there was clearly a lot of government support and stimulus in various parts of the economy, harder for it to reach consumers or to massively change consumer behavior and then your term. But certainly in terms of manufacturing, infrastructure, investment, et cetera,
the government policies can have meaningful impacts short term. The second thing I would mention is that because of the trade war, there has been a lot of time shifting of activity as well. So, for example, the exports were very strong in the first quarter, probably because people wanted to put in their orders and get the stuff shipped prior to the trade war or prior to Liberation Day coming in, and then later on I think it was not necessarily clear whether you know, things were going to
be potentially extended as we did see in May. So you know, I think there's a lot of like jerkiness in terms of the activity because of these types of one off events.
So the reading on retail sales was disappointing. Is it still very much the case that anything related to consumer sentiment begins and ends with the home market, the property market. I saw the China's home prices down in the month of April at a faster clip. Is that really the eye of the storm still?
I would say that's one factor, but probably not the only factor, but certainly it affects, you know, the wealth effect in terms of high end discretionary spending, but retail sales itself is not just all high end discretionary spending. A lot of it could be specific sectors. You know, for example, autos depending on what you know new models were coming out that particular month, and you know in the past, whether there were specific ev subsidy policies that
are less relevant today. There could also be impacts in terms of other specifics, like you know, were their subsidies relating to three C products coming from the government. You know, those types of things I think do tend to have an impact on the short term. But generally speaking, with the backdrop of the trade war lurking in the month of April, it's not a surprise that people would feel less confident about spending, irrespective of what's happening in terms of the property market.
So we're still in this period of a truce between the US and China when it comes to the trade war. What is going to be the ultimate outcome of this? Do you think if you had to place a bet on where we go on the other side of that ninety day period, what does it look like.
I think it's highly unlikely that the tariffs that have been bradscheted back are going to come back in, because if you actually put those back in, then essentially there won't be any trade between the US and China because the tariffs will be so high. So I do think that there is going to be some decent compromise in
terms of the overall headline. But as with China, similar to the rest of the world, I think within the ninety day period there will be specifics coming out not only on a per country basis, but also exemptions and adjustments to the teriff rates on a per sector basis. That actually makes a lot more sense, right. The US cares much more about what kind of products need to come back to the US versus can continue to be
made overseas for economic or other supply chain reasons. So I think there will be a lot more complex adjustments the headline numbers for not only China but the rest of the world over the coming weeks. But in the end, China is still going to end up with a higher headline tariff versus the rest of the world because the US does want to incentimize the supply chain to migrate out of China and into other markets where it feels more friendly and more diversified.
So more of a decoupling here, And how bad could this get? Do you think?
Well, I think the decoupling already started during the first Trump administration of the first trade war, right, so it's just going to continue, but it won't be a full decoupling the way that people were assuming back in April, when the reciprocal tariffs had gone out of control into levels that were basically going to mean that there was barely any activity on the trade front between the US
and China. So generally speaking, I think where the market is pricing in is probably a pretty decently mild outcome already. You can see that in both the Chinese equities as well as US equities performance.
So how is this affecting your strategy these days? I mean, what are you putting money to work in right now? In Asia?
Generally, we've actually been looking at other markets outside of China. So for example, you know, we've added to some of our positions in Taiwan, Korea, and Japan as well as Southeast Asia. In Taiwan, we had that massive move in the NTD, which was unexpected and probably you know, not as conspiracy much of a conspiracy as what people had had feared. So some of the you know, tech supply chain companies got hit aggressively on the back of that.
So we've been adding to that. Korea we've been positive on for some time. The Korean Wan's been pressured by the very strong US dollar last year, and that has eased to some extent, and we actually think that the value up efforts as well as the political situation are both going to see some improvement off of relatively low base. Japan was pressured by the fact that the yen kept appreciating and you know, earlier this year because the dollar
was plummeting. Now I think the risk reward on the currency front is a little bit more balanced and the valuations are still fairly reasonable. In Southeast Asia, you know, slam with a ton of very aggressive tariffs and people are quite concerned. But I do think that like Mexico, like some other places in Latin and Southeast Asia, those tariffs will probably be brought down to very reasonable levels going forward. And so as a result of that, we
think that you know, those are looking better. And then obviously the weaker US dollar helps a lot as well.
To what extent is your strategy kind of concentrated in the area of technology. You mentioned South Korea, I'm thinking semiconductors Taiwan. There are other electronic components that are manufactured there. Is it mostly centered around high tech?
Oh no, not necessarily. We're very versified investors across different ASA classes, across different regions, across different sectors. So no, it's definitely not purely tech. And you know, tech has a pretty broad definition as well, everything from internet to software, to hardware to semi et cetera. So we will pick and choose between those different areas depending on where they are in the cycle. We do think that the expectations now for some of the AI plays is no longer low.
In the last couple of weeks, they've really popped quite a bit. We do have a lot of those positions. We're holding on to them, but we're not adding to them at this point. But for example, some of the smartphone and other hardware supply chain, I think the expectations are very low at the moment, and you know, that might be a good time to potentially, you know, add
to those positions. China Internet has rallied pretty dramatically since the beginning of the year, and so you know, maybe have to be a little bit more selective versus before. And you know US software is more idiosyncratic than just the beta trade, so various parts of tech are not necessarily the same.
How are you feeling about US risk assets right now? Do you have an appetite for US stocks?
Look, we added to US stocks and April on the selloff, but now I think the risk reward is no longer as obvious. This is basically because the market has pretty much rebounded as if the trade war didn't really happen to this extent and that there will be a pretty decent resolution. Also, at some point the market was pricing a much higher risk of recession. Now I think that has been priced out to a certain extent, so the room for further positive surprise on US equities is not
as great as before. But we do still think that if we have a mild outcome in terms of the trade negotiations, and Trump ends up being fairly reasonable and people stop thinking that the US system is going to be potentially breaking down quickly, then we actually see more upside for treasury and fixing come versus equities in the US at the moment will leave it.
There, Helen, It's always a pleasure. Thank you so much. Helen Ju, managing partner, also the CIO at NF Trinity from Hong Kong. Joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. So the FED seems likely to resist the notion of rate cuts, at least in the near term, given some of the mounting headwinds we've been talking about for the American economy. The founder of Bridgewater Associates, Ray Daalio, says
the FED should not be cutting rates right now. Here is Dalio in conversation with Bloomberg Shanali Bosik speaking at the BNP Parabah Annual Global Electric Vehicle and Mobility Conference.
I think the markets, if they were to see a too aggressive cut and monetary policy too inappropriate cut, that it would actually be bad for the bottom market.
That is Bridgewater founder Dalio speaking to Bloomberg Shanali Bossik in Hong Kong. For a closer look at the macro let's bring in Brian Vendig. He is the chief investment officer at MJP Wealth Advisors. Brian is on the line from Westport Connecticut. Brian, thank you so much for making time to chat. How do you understand the economic risk
right now? Given the story on tariffs. I know this is a very dynamic situation working pretty much in the middle of a ninety day cooling off period, let's call it a pause, But I'm curious to get your take on where you think things stand right now.
Yeah, thanks, Doug. I mean, I think in the short term there has been damage to the economy, as we've seen with business leaders on surveys talking about slowing hiring, slowing investment in their businesses, and obviously the consumer pulling back a little bit, even though retail sales numbers in the past have come in healthy. I think the concern is moving forward, moving forward price sensitivity there So I think damage has been done in the short term to
the economy. However, depending on the jump ball, on the speed of further trade negotiations and are we going to get to some meaningful trade negotiations of some of our larger partners over the next sixty days on the first pause, and of course China later on in the summer, I think that's really where that economic risk is going to present itself, because if we have some resolution on trade and some improving confidence coming back to the business community
and consumers, then I still think over the second half of the year the economy still has a chance or some growth. However, of course, if things go to the contrary and these negotiations are extended, then I think those A session ods can continue to stay elevated up.
I'm curious to get your take on price pressure, as we heard earlier in the week from Jamie Diamond, the head of JP Morgan, and he was saying, the chances of elevated inflation, even stagflation, are greater than people think. Do you think that pretty much a risk?
I think stagflation is a risk in the short term in the sense that we're going to start to see price increases start to flow through. However, going back to my comment about trade, and also just looking at earnings forecasts right now, I mean earnings forecasts have been taken down, but for Q two we're still looking at year over year profits of about five and a half percent something very similar. Still on the outlooks for Q three and some improvement in Q four, and I think once we
get to July earnings we'll get some confirmation there. I think if there is stagflation, assuming trade negotiation, and those earnings outlooks cold when we get to July, then I think Jamie Diamond's comments might be short lived and there will be some disruption in the short term, but not necessarily over the longer term. I think also at the same point in time, when we think about the disruptions that have happened with supply chains, in the short term,
inventory levels need to be restocked in June. We've heard from Walmart, for example, saying, you know, we'll do our best to try to control margin, but we're going to have to pass on some of these prices. I think that's a concern that investors have over the next two to three months.
Let's talk a little bit about the bond market. We had a backup in yields today, ever so slightly. The budget negotiations today showed very little in the way of resolution, and we were told that the President expressed a little bit of frustration today with demands to significantly boost a cap on state and local tax deductions. If you look at all the variables right now that are influencing the bond market, where is the fiscal story right now? As something that's carrying weight.
Yeah, Doug. I mean, I think with the uncertainty around the level of government spending and how much the new bill that's getting worked onne in Congress is going to add two budget deficits going forward, I think the bond market is telling us, you know, that uncertainty is leading to an app it's a confidence in holding treasuries right now, and you're seeing a little bit of selling pressure there with yields going up, very similar to the reaction that
we saw on the treasury market, you know, back in the beginning of April with the announcement of tariffs on Liberation Deck. I also think there's a little bit of flow through as well with elevated yields because of those concerns about prices increasing coming from tariffs as well in the short term. So I really think it's a double
edged sword. But when once we get some resolution later on this summer, I think with the Reconciliation Bill, and we get a better clear view on taxes and spending, I think there's a ceiling on yields in the treasury market where we'd really be surprised we see yields, you know, shoot past you know, four point seven or four point eight on the ten years, So definitely keeping a close eye on it. But I think it's it's not surprising in seeing that that slite increase based on today's news.
Before I get your view on how to put new money to work in these markets, I want to address geopolitical risk because we were getting indications from CNN that US intelligence has suggested that Israel is planning to make preparations to possibly strike Iranian nuclear facilities, and crude oil right now is up by more than two percent in the electronic session. How are you waiting geopolitics, whether it's in the Mid East or whether we're talking about trying
to find an end to war in Ukraine. Well, when you look.
Back historically when geopolitical events come up, you know they're primarily short lived, and yes they create violatility and disruption in the market. But if you still have a longer term view, focusing on earnings, fundamentals and some of the things we talked about, you know earlier, I think having a broadly diversified portfolio in this in this environment is still going to is going to help you weather through the storm. So you know, I don't see gold, you know,
I see gold appreciating. When you go through these types of geopolitical uncertainties, yields usually come in which favor more
conservative investments like bonds. And I think when you think about equities, you know, just making making sure in this environment was so much going on that you're not overpaying for growth, uh, and making sure that your your balance between value stocks, uh, mid cap stocks that really haven't participated as much in the past in market rallies are good ways to kind of hedge a little bit in the short term against those geopolitical events.
How are you viewing markets offshore right now? Are there opportunities that you're taking advantage of?
Oh, definitely, you know, we we added to international equities, uh, you know, a couple of months ago, especially more on the news of UH countries wanting to reinvest in themselves, relooking at fiscal policies that are helping US support domestic economic growth as the US is evaluating uh, you know, trade and maybe taking a step back and decoupling from
some aspects of of of a global economy. And I think valuations there on international equities are definitely a lot more fair per se than you know than S and P that's back up to you know, a four pe with a twenty handle, while international equities are in the low teams. So I think being selective in developed markets right now makes a lot of sense. We like Europe, we like Japan and specific parts of Latin South America.
But I think at the same point in time, there's been a huge run international equities, Doug, so I wouldn't be surprised if there's a little consolidation to find a better edgy point moving forward.
All right, Brian, we'll leave it there. Thank you so much for joining us. Brian Vendig there. He is the chief investment Officer at MJP Wealth Advisors, joining from Westport, Connecticut. Here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics
in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast Tube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg