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This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis along with Doug Krisner join us each day for the stories making news and moving markets in the Asia Pacific. You can subscribe to the show anywhere you get your podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.
All right, let's get to that. Closing arguments in Donald Trump's hush money trial today round very long and late. Joining us live as Hadrianna Loan Crown, who is a national politics reporter. Thank you, Hadriana, really appreciate it you were in court today. Now we're going to go through what happened. But that was a long day. What an adjourney to eight Eastern.
Yes, it was definitely a long day. We started at around nine five, wrapped up at around eight pm. It was a six hour long summation from the prosecution. It was a bid over two and a half three hour to two two and a half hours, i would say, for the defense, which is what we began our morning with. So it was a long day for sure.
So let's go through it. Defense first, and the theme would be that both Stormy Daniels and Michael co under liars correct.
Right, So essentially Todd Blantz has been arguing that Trump committed no crimes in that Stormy Daniels, you know, the adult film actress kind of part of the centerpiece of this of this big puzzle here, was trying to extort money from Trump. In twenty sixteen, Blanch even produced a
top ten list of reasonable doubts for jurors. Is, as you know, all we need is one juror to have some form of reasonable doubt to prevent a conviction here, and so part of that list included a claim that prosecutors failed to produce evidence that Trump used some unlawful means to influence the election, that Trump himself never reviewed checks he signed for Michael Cohen because he was too busy running the country, kind of portraying this as something
that his associates had done without him being aware, because he was in the capacity of president and therefore was not paying attention to this issue. So that was really what Blant was trying to argue here.
Yeah, Now, the prosecution its job then was to go back and try to back up what Cohen and Daniels had testified, right.
And so we knew all along, I mean, having Michael Cohen be the star witness could be potentially risky for the prosecution just given of course his own criminal history.
So a big part of you know, the direct and the you know, the questioning of Cohen as well as now here in the wrap up for the prosecution has been to try to get around Cohen's credibility problems, really pointing to evidence instances of corroboration with other witnesses that were called to testify, such as David Pecker, who was who you know, ran a natural inquirer, which, as we all know from earlier in the trial, had agreed to be the kind of eyes and ears of of the
campaign and catch and kill really you know, buying stories that were negative about Trump and then not publishing them, publishing hit pieces on Trump's opponents, and then also publishing
positive pieces on Trump. So a big part of the prosecution was to again, uh, try to get other you know, try to prove that there wasn't as much of a credibility issue with Cohen, that there were other witnesses to corroborate it, as well as to lay out it's you know, their own evidence with phone wrecords, et cetera, showing that Trump did in fact know that all of this was taking place, even using his own tweets where he, you know, said very plainly this was a reimbursement to Michael Cohen.
Now, just go through the ground rules here. The prosecution had to raise the bar to election fraud to make this a felony. Is there any way that the jury and we understand they come back tomorrow, I'll ask you about that that the jury or the judge can come back and say no felony, but convict of a misdemeanor.
That's I mean, that's something that is something that I think we'll learn more about tomorrow because the judge has to kind of instruct the jury. He's going to spend about an hour or so tomorrow morning. They're coming back at ten. Usually it's nine thirty, but we get a half hour of sleeping in so the judge will really walk the jury through exactly what is needed, what can be concluded at the end of the deliberation. So we'll definitely get more details about that tomorrow.
Okay, And as you say, they come back at ten Eastern, not knowing there is no way to predict what juries will do and this needs to be unanimous to get a felony. Have you heard any feeling you were in the courtroom, any gut and I know you're a reporter, but any gut on on who was stronger here or what we're going to look for.
Well, you know, it's interesting. There are a couple of things to point out here. One is, obviously the prosecution is kind of the last taste in the jurors you know minds, and so earlier on today we had Blanche kind of repeatedly say, you know, here's an instance of Cohen lying in the past. Here's another instance, really trying to prove that they should not rely on Cohen to make their decision. And at the end of that, you know, one might say, you know, that was pretty strong. Okay,
I'm seeing this. He's a liar. Why should I trust him?
Right?
But then you go on to the prosecution. Obviously it was six hours, there was a lot more, you know, kind of painstakingly walking through so many different pieces of evidence. A lot of the evidence, as I just said, was Trump himself showing that he had knowledge of what was going on. Again, a tweet saying it was a reimbursement you know of documents with Alan Weisselberg, the CFO, his
handwriting and all of these different pieces. So after that, I mean, I think that anyone who was kind of worried about Cohen now realizes, well, it's not just Cohen
as maybe they had thought before. They're reminded of every single witness before that, because there were you know, a dozen or so witnesses, and so because the prosecution spent a lot of time detailed detailing that, I think that does suggest or you know, maybe poke holes a bit at the defense's argument, which really focused around Cohen Cohen Cohen. So I think that that could have been, you know,
a choice that maybe ends up backfiring on them. And then of course something to consider in our attempt to you know, figure out in advance what could happen is
how long the jury takes to deliberate. And what I'm hearing from sources who I'm speaking with is that generally the longer the deliberations, the more likely it is that they you know, maybe a hung juries or something else that would you know, rule in I guess you could say the favor of Trump or not in the favor of the prosecution, So that's something we'll keep an eye out for as well.
Yeah yeah, and the as you say, the instructions tomorrow. Great job, Hedriana, Thank you. We really appreciate your time. That is a Adriana loenkra on that National politics reporter if she was in the court room at today, and a lot for the jury to consider. In San Francisco, I'm a boxer.
Joining us now with Sarah Malick Cio of Vene for her take on markets. Sarah, I think we can talk about a lot of different asset classes. I know you're quite gifted in that regard, but let's start off first with I think the perception is that stocks have been rallying like crazy, and it's not totally the case. I mean, we have seen the S and P five hundred bound from a bit of a sell off in April, and I was just having to look at some of the
key names. If you look at companies like Microsoft and Amazon, they're basically flat over the past three months. Meta is actually down a little over the last three months, and you have Apple, which has made a comeback. So it's a little bit of mix and match there in the market. So what do you like at the moment?
Well, I think definitely, the market rally has been fairly narrow. First of all, it's been wrapped up by the strength of Nvidia and their earnings last week. And Apple was another company you brought up. And Apple actually, you know, the while a quarter was not incredibly impressive because the stock was so under owned. That's why Apple rallied.
You know.
What I make of the market though, is that there's two drivers from here, and that's earnings and the economy. First quarter earnings were very strong. Eighty percent of companies beat earnings estimates and that's a big driver for the markets. And then the economy has remained fairly strong. Manufacturing data has been you know, somewhat on the stronger side. Perils data remains fairly strong. And all of that means our economy is still growing while inflation has stopped reaccelerating like
we saw earlier this year. So all that together is why the market continues to have a strong performance.
Yeah, the environment feels pretty good. It seems like I mean, if you go back and look at the two year yield, the last time it was close to five percent, like this because investors you get nervous about rising market interest rates. The SEB five hundred was a thousand points lower, so
we've gained a thousand points. That yield on the two year basically sideways the level that the two years at is essentially I guess telling you you might only get one, maybe two cuts from the FED over the next two years, and yet the markets have hung in there. And I think it's interesting that you mentioned in Nvidia, but a lot of the companies that might be riding on the back of Nvidia companies that I mentioned, like Amazon and
Microsoft and Google. While Google's done pretty well, some of the others didn't really do much over the past month. So it does leave you with a lot of choices here in if you're trying to play AI, where to go to maybe get some games.
Well, there's very limited winners in the AI space at this point that win no matter what. And those two companies are first of all, in Vidia because it basically supplies to anyone trying to grow in the AAI space, and secondive Microsoft, which has had a very strong lead and head start in artificial intelligence by spending tens of billion in that area. So those are the two key players.
That's one reason why Nvidia continues to perform well. Second, for those concerned about Nvidia and the rally that it's had, if you look at Nvidia's EE ratio versus the semic inductor space for twenty twenty five in video is actually still trading at a discount, So the argument that Invidia is expensive really doesn't hold true. As for the markets going higher from here, you know, continued consumer spending has been what's driven the markets higher, and inflation has stopped
reaccelerating like it did earlier this year. So when we talk about less FED rate cuts than expected, and why are the markets okay with that, it's because the FED is cutting less for the right reasons, and those reasons are that the economy remains strong. So the Fed is said, Okay, we don't need to cut as much because we're not imminently going into a recession.
You know, at some point the bond vigilantes may come back. We saw a little bit of weak auction sales today. It kind of brings to mind what happens when investors finally get worried about debt and deficits. Are we there yet?
You know, I don't think we're there yet, but it is definitely a concern when we look at the level of US debt and interest rates that are going to stay higher for longer. I think that is a long term structural issue for the US, except it's not something as we can see with the markets up you know, quite nicely year to date, that the markets are that concerned about, you know, switching over to fixed income as
an asset class. I think, you know, what you can lock in now is yield in certain areas that we haven't seen in many years than often times decades. So fundamentally strong acet classes like municipal bonds, high yield municipal bonds are offering very attractive yeals at this point.
Are you seeing any attractive options in Asia at the moment? I mean, obviously this is Bloomberg daybreak Asia. We tend to focus on Asia once we get past the initial Wall Street wrap up. What do you like out here?
Yeah? Sure, So two things we think about with Asia and markets outside of the US, and that's currency and what's going on with inflation. You know, with currency, I think that could be a positive outside of the US because as the FED finally gets the rate cuts or the economy starts to slow, that should make the dollar a little bit weaker here and that's more positive for international investments for Asia. I think Japan still has a lot of legs, strong corporate governments and strong earnings or
drivers there. And we have three themes in Japan reopening, reflation, and restoring post the pandemic. We like sectors like defense, artificial intelligence because of the demographics issues in Japan, exporters as the end may weaken from here. And also we like companies outside of Japan in areas for example, that are exposed to China, which is kind of lagged, and as that perhaps comes back with some spending, I think that could be positive for China exposed companies.
Bloomberg did a survey of a dozen economists looking at China, looking at the property market and the efforts that we've seen here of late in terms of pushing some of the big cities to lower some of their buying restrictions for housing. It seems to be working a little bit. According to this survey, seven out of twelve respondents see a jump across the board in China and they're seeing growth improve. The economists see growth in twenty twenty four,
edging up to four point nine percent. How much of a concern for you is the property sector and whether or not it's ongoing in terms of stress.
Yeah, two areas of concern for us in China. One is the property sector. Two is trade issues with other countries doing less trade with China, including US. China has bounced off the bottom as folio managers from a global basis have come back in to buy in China. We have seen a pickup in some of the electronic spaces and luxury apparel spaces. But I think those two structural issues of trade and property are still ones that China
may need to overcome. So you know, the question of do you want to chase China from here after you know some of the bounce off the bottom that we've seen. I would like to see more progress with the property sector and understand where the trade issues might bottom.
I've been looking very carefully at ways of playing you know, derivative plays on AI and you know, some of them, like the independent power producers and utilities, they've already seen a big balance. A piece are kind of high. So let me put it to you, what's your number one pick in the AI sphere.
I think you know, you can look outside of in video. You can look at areas that may benefit as AI becomes more highly used. So one is infrastructure, which has multiple tail on. Number one is we need to build more manufacturing. This is US infrastructure in the United States and even global infrastructure. You know, in order to meet the needs of artificial intelligence. Infrastructure will benefit. Second trend for infrastructure renewable energy. As we upgrade our grids, will
need more renewable energy and more infrastructure. And then we look across sectors like healthcare and financial services that use a ton of data, which is also very promising targets.
All right, Sarah, thanks so much for joining us. Sarah Malex, cio of newbe Charlie Ripley, Senior investment strategist at Alian's Investment Management for our Closer look at markets, Charlie. In some ways, the auctions grabbed the most attention today. The US Treasury sold seventy billion dollars of five year notes at four point five to five three percent. That was above the pre auction level of four point five to
four percent. It doesn't sound like a lot, but it did send ripples through the market and yields did pop on that up eight basis points. Are the bond vigilantes getting ready to do their thing?
Hi, Brian, thanks for having me on.
Yeah.
You know, when you look at today's auction set, you know, there is a different set of investors that invest in you know, the three year and the five year and
the seven year space. And you know, I think today's tailing auctions, you know, probably did feed into some of that negative pricing that we saw on the bond market, but I don't think it's going to be particularly reflective of what we what we might see and you know, maybe the longer end of the curve, you know, I think those are a different set of investors, you know,
particularly insurance investors that are looking for longer duration. So it'll be interesting to see how that plays out next month, but you know, it's likely not you know, a precursor to to what we'll see at auctions next month.
There was a Wall Street Journal story just a short while ago that broke, and I just want to mention it briefly and then ask you a question about M and a murk. According to the Wall Street Journal, is nearing one point three billion dollar deal for an eye drug company called I Biotech. We did actually have a
flurry of deals getting some coverage today in the marketplace. Obviously, the big one was Hess Investors approving the Chevron fifty three billion dollar takeover, but another one involving energy trends for acquiring assets from WTG and also T Mobile acquiring some of US Cellular's wireless operations. And it bigs the question about whether this pickup in M and A that we're seeing, is it sending a broad message or is it too early to say.
You know, I think it's too early to say. You know, typically, you know, in a higher rate environment, it's harder to see some of these larger M and A deals get through with interest rates at these levels. So you know, I think, you know, because we've been at you know, high interest rate levels for some time, maybe there's a little bit less patience to get some of these deals done.
But you know, I think the real catalyst is going to be, you know, a lower interest rate environment that really drives you know, additional M and A activity.
And do you see a lower interest rate environment coming.
That's a great question. And I think, you know, when you look at the set of probabilities and you know, a data dependent FED and and you know everything that's happening on the inflation front. You know, I think the path of probabilities is a little bit wider than expected, and you know, I think people are a little bit less convicted about the directions of rates in this environment.
You know, you did mention we have seen, you know, some mixed data sets on the economic front, and even when you look at the FED speak from policy makers, you know, Neil cash Car's comments today, you know, alluded to, you know, the potential for rate hikes should they need
to move in that direction. So, you know, against this backdrop where you know, we have a very data dependent FED and a very reactionary function from them, you know, I think it's going to be you know, difficult to have a high conviction of of of anything in any direction if they're basing policy specifically on inflation data.
Yeah.
Is it dangerous to a certain extent that the FED is data dependent in that it's sort of disallowing itself from getting out in front of something. And I talk about that because you have a lag in the lag defect, I mean, we're we're not seeing the strong impact on the economy that we expected from higher interest rates, and we're also seeing a kind of slow lag in inflation
coming down to where we think it should be. So should the should the Fed make a call and act on it, or do you think it's right to be data dependent?
You know, I think they they've committed to the data dependent you know, transparency view. You know, you look at you know, December of last year. You know, they'll let the proverbial genie out of the out of the out of the bottle when they decided to forecast three rate
cuts for the year. And you know, perhaps maybe they did get a little bit ahead of themselves and in terms of being a little bit preemptive there, but you know, I think the reality is, you know, that the data is moving slower than what they had made it expected back then, and they have to adjust to that today. And I think that's why we're seeing, you know, market pricing from market participants on rate cuts continue to go lower and lower, or get pushed out further and further.
Yeah, we're just reminded sometimes of the differences in the way central banks look at interest rates. For instance, in Europe, they don't mess around with owner's equivalent rent and so our data pumped through their system, inflation would be running around two percent, it would be acceptable. But since we do have this owner's equivalent rent and you know, sort of a lagged input into the numbers from that, we're stuck in this position. Do you do you worry that
that inflation is going to stay high too long? Or do you think that, hey, it's really not all that bad at these levels. And the reason we and the way we know that is look at the markets.
Yeah, I think that's a great question. You know, obviously, in the first half of this year so far, we've seen you know, the impact on service inflation, particularly rents, and how that's been a legging factor. But you know, when we think about how the FED, you know, should should position through that, you know, it really makes sense for them to be data dependent. But on the one hand, you know, they have to understand that there is a leg and effect to the policy here.
I suppose what most people are doing here is is kind of enjoying the best of both worlds. You know, they've got a lot of cash and they've plowed that into short term treasuries and then you know they're playing in the equity markets with x number of dollars kind of addressing the AI frenzy and X number and just sort of good old fashioned industrials and materials and that sort of thing. Is that the smart way to play this? Or do you have a better way?
Yeah? You know, I think if you look at you know, bond yields, historically, they've been fairly low for the last decade, and you know, you go back to the two thousand to twenty ten era, you know, ten year rates averaged a little bit higher than or you know, about two percent higher than where they were at in the decade following you know, the Great Financial Crisis, And I think, you know, an investment strategy that looks at you know,
long duration to hedge against. You know, some types of systematic risk can be problematic, and we've seen that, you know, throughout this hiking cycle as rates have risen, and so you know, I think it does behoove investors to look for other types of strategies, you know, to mitigate those risks, whether it's investing in cash or other derivative based ETFs that might you know, benefit of portfolio structure overall.
So are you leaning toward opportunity here or caution?
You know, I think we lean towards a little bit more caution. I mean, there's a lot of uncertainty around the path of inflation. You know, we look at the data set, we look at you know, the hawks and the doves that comprise the f MC. I think, you know, they really want to cut rates at some point this year, but the inflation data isn't isn't allowing them to do so.
And all right, Charlie, we got to go. Thanks so much for joining us. That's Charlie Ripley, senior investment strategist at Alion's Investment Management.
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Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.