Bloomberg Audio Studios, Podcasts, radio News.
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. On today's episode, will break down the latest in the US trade war with China as it enters a second week. Stocks in the Asia Pacific as well as US equity index futures pushing higher at this hour. This is after President Trump exempted certain consumer electronic devices from the latest
reciprocal tariffs, but this relief is temporary. A specific tariff on semiconductors will be announced in due course, and in a moment we'll be hearing from Mark Matthews, head of Asia Research at Julius Behar. But first is a conversation with Chuck Camello. He is president and CEO of Essex Financial Services. He joins us from Connecticut. Chuck, it's always a pleasure to have the chance to benefit from your perspective. It was quite a week we suffered through last week.
I think we can agree on that much. Things seem to be stabilizing a bit more right now. I'm curious as to what you're looking for in the next five trading days.
Yeah, boy, it's first ball. It's very nice to be with you so thank you so much for having me. But yeah, you know, we're coming off one of the most volatile and challenging weeks that I think, you know, anybody who's been in this business for any length of time, you know, was just shaking their head. It was certainly a really really stressful one for you know, financial professionals
and clients alike. But you know, I think what we wanted to see is a little bit of what we got on Friday night and over the weekend.
Vic VI the reciprocal tariffs not.
Being applied to bones, ipadsnap tops, technology, things of that nature. So they are still you know, getting hit with a you know, I think believe they're in the twenty percent bucket. But I think that was very very positive, and you know,
I think the futures are indicating that. But I think certainly there's been so much uncertainty and you know, borderline chaos that you know, anything that gives a little bit of certainty to tear offfs or any type of certainty of the policy coming out of Washington will be helpful. And I think it will be very well well received by the markets. And quite candidly, it's what they're crying out for.
Do we need to still discuss recession risk? I mean, right now looks as though the US equity market is down about eleven percent from its high, and if there is a recession on the horizon, I think that we're going to see a significant repricing inequities. Do we still need to consider that fact?
Well? I think you certainly do.
I mean there's you know, there's no shortage of folks, you know, saying we're heading for recession or are in recession. But you know a lot of those same folks have called twelve the last seven recessions, So but this one certainly feels different. I think the big difference here is the overall sentiment. And you know, I think everybody feels it. Everybody feels this uncertainty, everybody feels this sort of looming threat. Terrorists are inflationary period, end of story. But you know,
there is the offset. There is maybe you know, some some tax help and tax cuts coming out of Washington. So you know, I've given up trying to predict the future.
But I certainly am not.
Going on in a lamb, nor am I being unique in any way of saying the odds for recessions certainly in the past. This is the crazy thing right over the past just three weeks have risen, you know, substantially, So check.
I'm curious about the extent to what you're using the credit markets right now as a guide even to put money to work on the equity side. What are you seeing in the credit space?
Well, listen, I think the bond market, you know, and again that was I think the big driver that you know, got Wednesday's ninety day freeze because again in abnormal things happen in abnormal times, and like Wednesday, was that right? So the market market, you know, uh, market goes down rather on Tuesday. Usually you're seeing bond prices, you know, and yields moved down of you know, yields moved down on fixed income that wasn't happening.
Dollar dropping as well.
And I think a lot of that is just the overall concern from a lot of overseas buyers and holders of just the instability in the US right now. So the credit market was screaming out that there's a problem, there's a big problem here, and I think that finally got the President's attention. And I think that credit market is a big barometer in terms of how things will you know, how those winds are going to be blowing.
And I think they got to such an extent and it got so much attention that it made the president pivot, and that was obviously extremely helpful for the markets on Wednesday when you saw these unbelievable increases. The challenge and what we try to remind everybody is these huge increases on Wednesday, Historically they're book ended, so we go back in time and you look of when you've seen those types of increases in percentage gained of those of the indexes.
They've happened in twenty twenty, and they've happened back in two thousand, I think was two thousand and eight. So you have to be very careful because none of us want to revisit those periods of time. But that's where you get these types of outsized moves in the market of when things have just been so crazy, so scary, and so valuable.
So I'm glad you brought up the notion of foreign investors buying US treasuries and maybe what we saw last week was just a lack of confidence in a lot of the policies that the US is putting forward on the trade side, obviously, but I'm wondering whether or not there has been a significant breakage right now that maybe it's going to take a lot more to restore confidence. Is that a possibility.
I think it is.
I mean, I think there's a lot of things that went into that into that you know, big rise in the ten year and the thirty year last week. It certainly overseas as part of it. But but you know, from everything we see, you know, we haven't heard, nor have we heard from a lot of the folks that we work with, that that there's any you know, mass selling going on.
You know, the huge hedge fund unwind of.
Treasuries, you know, the the treasuries you know, were hedge funds, et cetera loaded up on treasuries with thought that you know, there'd be a little bit more control coming out of Washington, and that you know, sadly within when the tariff announcement was made on Liberation Day at just those absurdly high rates, it just shook everything. So I think between the you know, very few things end well when the sentence starts with
leverage trades being unwound. So you know that that generally got us in a pretty bad place as well in terms of what was driving rates up.
So I'm curious, how are you approaching the equity side right now in terms of an investment strategy. Are you staying along the sidelines maybe and just hoarding a little bit of cash at the moment, looking for maybe a little bit more of a pullback and another entry point here, or is there something else that I should know about in terms of the way Chuck Camello is approaching the market right now.
No, I think we've already had a pretty significant pullback in and of itself, and there's a tremendous amount of cash sitting on the sidelines. So I think for the average investor, and one of the things obviously that this type of period of time calls four is caution, right and some patients and some prudence with how you're going to invest money. So certainly I think, you know, dollar cost averaging into the market has made sense in the past,
it is tremendously makes sense right now. But you also have to realize that these periods of time when the market does sell off like this, for longer term investors, right it is an opportunity. It's an opportunity wherever. Listen, if your time frames three or six months, you know, flip a coin, I couldn't begin to guess where it's going to be.
But if you're going out longer, and I think.
History also shows us when you have this, I mean, you know, I think the vics last week, I think.
I saw the highest at fifty six, fifty seven. I think you got the sixty.
But regardless, you look at these big sell offs, these big corrections, that level of VIX, and you look out historically of market returns looking forward there generally are very good. So we certainly have been putting some money to work, whether it's in ETFs or whether individual securities as well that now have come down to a point, especially some of these tech names, where you know there there certainly are a little they're quite a bit more attractive than
they were a few weeks ago. And again we try to stress you don't have to call the bottom, you don't have to get it perfect. So right now there are some pretty attractive entry points in the equity market. But again we're bracing and we're you're setting the expectation with clients. It is a volatile time. We expect the volatility to continue. But for a long term investor, you know, getting long term above average re urns, is the volatility is the price you pay for that.
A moment ago we talked about the possibility of recession. I would imagine that for that reason you want to
avoid anything that is particularly economically sensitive. And I'm curious that you brought up tech because as part of this consumer electronics story that we've been talking about today and the pivot away from the latest reciprocal tariffs, maybe a little bit of a temporary reprieve here, but what has been very clear from the White House today is that a specific tariff on semiconductors is on the horizon, maybe the next month or two. So within tech, how do you even play it.
Yeah, it's a great question, and it's it's not for the faint of heart. But keep in mind, what comes out of Washington, but what came out of Washington this weekend versus what might come out of Washington Tuesday, Wednesday
or Thursday could be two very different things. And so you know, we're in the business of trying to build long term investment and wealth management plans for our clients, and you know, we've had shakes in shocks that the market is seen now, thankfully, not to the extent like we've seen this past you know, a week and a half or so, but with technology again, the way that the market has pulled back, there are some pretty attractive
there can be some pretty attractive entry points. Now we're not saying that you're buying now and you're going straight back up. No, No, these are for long term investors. And if you've got a long term timeframe, listen you we might we might be looking at this market drop another ten or fifteen percent. If it does, we'll put a little bit more money to work at that time. But you know, looking forward, looking long term, these are the times where true wealth can be made.
Chuck, I'm cure as to whether or not you're seeing opportunities in the bond market. We were talking about the volatility and treasuries last week. Let's talk a little bit about what your expectations from the Fed might be and whether or not there are opportunities in credit.
Yeah, well, the Fed's in a tough spot, aren't they. So you've got inflation, you know, inflation especially you know, the most recent CPI PPI numbers came down, but again quite candidly, what the heck does that mean at this point, you know, looking at the tariffs that.
We might be dealing with in the future.
And then again you've got growth certainly slow, and so they're betwixt and between. I think in the fixed income space, you know, you know, if you asked me this this question about a week and a half ago, two weeks ago, you know, municipal bonds were doing just great and then they completely blew up last week. And so we had a great municipal bond manager in the office last week, you know, talking to us about that. And you can
get close to five percent yields now on UNI. So we certainly do think that there's an opportunity in the municipal bond space. But again I think it's going to be volatile there as well. And we here we go all the way back to what policy comes out of Washington is going to drive a lot of this kind of stuff. And if there is this continuing lack of confidence or this fear of instability in the US system from overseas buyers, you know, we're we're going to see
more volatility in the ten and the thirty year. So again it's it's, you know, somewhat of a similar story of we're going to expect volatility, but again diversifying. I think saying short to intermediate and duration is the way to go better credit quality, you know, high yield acts more like equities and times like this. But again the similar story that it also provides an opportunity as you're looking to put some money to work, and quite candidly,
now you're walking in some pretty pretty attractive returns. So it isn't It is again for the right buyer and opportunity, and good old cash is paying four percent, and so you're certainly getting paid to wait until eventually, whenever, and if the Fed does cut rates, you're at least getting four percent to sit in cash and ride this out.
Chuck, thank you so much for joining us. Chuck Amillo there, president and CEO of Essex Financial Services, joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Derek Chrisner. Asian equities have advanced after President Trump paused some import duties on a range of consumer electronics. This appears to be lifting sentiment a bit
after a volatile week for markets last week. For more we heard from Mark Matthews, he has head of Asia research at the Bank, Julius Behar, he spoke with Bloomberg's Cherry On and Heidi Stroud.
Watts very hard to know what the direction will be because we just had Commerce Secretary Lutnik and the President himself saying these exemptions are not temporary. We will have permanent tariffs. And so it's a ping pong ball. It's not being very well executed, but you never know what
they could say at the end of this week. I think last week what was encouraging in a strange way, if you want to make a positive out of a negative, is the bond market forced a reaction from the White House, and so it might do that again, and so many other markets, like the currency market and the stock market, and so it may be that tariffs that appear to be permanent now actually do become not permanent over the
long term. But we don't know, and so in the absence of any certainty, I'm not surprised that central banks want to try to help economies along, because it does look increasingly likely like the largest economy in the world is heading into a recession in the United States.
As you say, It's kind of interesting seeing the reaction that was prompted, presumably by what was really I guess Trump's pain trade rob was happening in treasuries. Does that give you more confidence in terms of pivoting to the markets that the US has targeted?
Europe?
China, for example? Where do you see the diversification opportunities there? Now?
There are lots of good diversification opportunities because in those places the authorities are starting to stimulate. And once again, to make a positive out of a negative. I read somewhere I can't remember who said it. I'm sorry I can't give them credit that Donald Trump and Vladimir Putin were the best thing that could have ever happened to Europe because they've shooken it out of its torpor and lethargy that it's been in for the last couple of decades.
And so there is lots of good value in Europe. And now it seems like next year there's going to be some growth there too, with Germany starting to stimulate its economy, and it has the resources to do that, and there's lots of things that German can spend on which will not be wasteful spending. They actually could use a lot of new infrastructure, and of course they'll be increasing their defense spending as well. And in China there's lots of room to stimulate the economy, and in other
parts of Asia as well. So yes, there are things to do around the world. But what I have to say is to the extent that the S and P five hundred is the benchmark for the world, that index, we believe is in a bear market, and I highly suspect it'll be lower at the end of this year than it was at the beginning of this year, and so that acts as a weight on risk assets generally.
Yeah, especially for countries perhaps that are not really headed towards the easing path, like Japan, which is an anomaly is sort of among advanced economies. There was a lot of optimism of our Japanese equities. But could we continue to see that trend even when the bo is trying to normalize policy at a time when the external environment is so uncertain.
Yes, that's a very complicated situation. But I would say that I like Japan because within Asia, it's the only country that has really top quality global brand names, and the overall return in equity of Japan is very low. It's less than ten percent because it's dragged down by conglomerates and banks. But because it's such a big market.
Over I believe, what seven thousand listed companies something like that, you can construct a portfolio of a dozen or more very high quality, global brand name, large and liquid companies with returns on equity in the high teens or twenties. And that's the way I would approach Japan because it does have these really high quality companies that don't mean to be nasty about the rest of Asia, but the rest of Asia doesn't have that.
What about China? I mean you mentioned earlier that Europe was really shaken into action because of this sense of crisis. Could we actually see Beijing now trying to really boost the economy and that's stimilars measures really filtering through the stock market. But on the other hand, of course, you have all of this pressure coming from tariffs.
Yes, I think so. Well, the major Chinese industries are still well below they're all time highs. And when I say well below, I mean you know, thirty forty fifty percent or not expensively hang saying index still has something like a four and a half percent dividend yield. You don't pay taxes on dividends, by the way in Hong Kong. And I think the major thing was deep seek back in January, not only because it proved that China can operate at the forefront of high technology globally and offer
very competitive products. But the government's response to that I thought was very good in that it had kind of been keeping the big technology stocks in the doghouse since Jackmaw's infamous speech a few years ago, and it's clear now the government views the big technology companies and technology in general, and China's a positive force, is a soft power for the world. So I think that mending offenses between government and big tech in China is also very important.
That was Mark Matthews, head of research at the Bank Julius Bear, speaking with Bloomberg's Sherry On and Heidi Stroud Watts right 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 YouTube 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 Chrisner and this is lumberm