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Welcome to the Bloomberg day Break Asia Podcast. I'm Doug Prisner. Iran is facing its most perilous moment in decades. This after the US and Israel attacked Iran's nuclear facilities. It was Saturday night in the US. President Trump authorized a massive strike, even though he previously hinted at a delay. Here is Trump as he addressed the nation in televised remarks late Saturday.
Iranski nuclear and Richmond facilities have been completely and totally obliterated. Aranda, bully of the Middle East, must now make peace. If they do not, future attacks would be far greater and a lot easier.
The mission was dubbed Operation Midnight Hammer. It used B two stealth bombers, Tomahawk missiles, and precision guided weapons to disable three Irani nuclear facilities. In a moment, we'll take a look at market implications of the strikes. I'll be joined by Gene Goldman. He is the chief investment officer at SETA Financial Group. But we begin in Washington, where we heard earlier from John Bolton, former US Ambassador to
the United Nations. He spoke with Bloomberg's Bounce of Power host Joe Matthew and Kaylee Lyons.
I don't know what you make of this rhetorical dance that we're hearing about the extent of damage. Starting with President Trump suggesting that Fourdeaux was obliterated, we've heard more tempered comments from the Chairman of the Joint Chiefs and other analysts who are looking at this, including the IAEA.
Did we go far enough? Well, I don't think the job is finished.
I think it's very difficult to make evaluations of how effectively been for example, at foordoh which by definition was under a mountain and it's very difficult to see inside. But my guess is that what the Chairman of the Joint Chiefs, General Cain said is accurate that there were severe damage. We'll be checking further and seeing what happened.
There are a lot of.
Other pieces, though, that need to be put into play here. We know we've seen from overhead photographs that during the sixty plus days of negotiation that President Trump offered, the Iranians did a fair amount of work trying to move perhaps uranium stockpiles, perhaps sensitive machinery out of some of these key target areas. We may or may not know where that is, but I don't think this is over yet. Just on the mission of destroying these three sides.
Well, and on that mission, administration officials have maintained today that the objective was solely to focus on Iran's nuclear capabilities, that this objective was not regime change. But sir, even if it wasn't the objective, could that still be the end result?
And how well exactly?
And even as we just heard the President has been tweeting about regime change.
I mean, I think regime change has.
To be the objective because the Eye Tollas are never going to give up their pursuit of nuclear weapons.
They have to be worst out of power.
That's the only shot we have at really lasting peace and security in the Middle East. And a strike like this and potentially others, and certainly Israel's ongoing attacks can disrupt the regime, can destabilize it. Look at the choice that the top military officials and Keiia Tollas now have to face after the US attack.
They've been beaten.
Badly by the Israelis ever since Hamasa's attack on out of Gaza on October seventh, twenty twenty three.
Now they have to make a choice.
Do they want to take on a second military adversary in the form of the United States.
They may well do it. Look, it's a regime.
Run by medieval religious fanatics. They may well retaliate against the United States, but they will be making a big mistake from the point of view of regime survival.
Well, when we consider the day after, whether it's an attack on the alasad Air basis we saw for the killing of Costume Solo mony, maybe against Bahrain, the home of the Fifth Fleet. Maybe it's something we're not thinking of here. What would be the US response?
What should it be?
Well, I think there are three categories of possible targets. One, obviously is more attacks on Israel. Second would be a tax against the Golf Arab States, the oil producing nations of the Golf, And third on the US deployed military forces, our consulates, our embassies, private American citizens in the region, and terrorist attacks against Americans and others around the world,
including in this country. Obviously, our first concern is the Americans, but we're going to do everything we can to defend Israel, and I think we should make it clear to the Golf Arab states and Jordan and Egypt that will be
defending them too. We have a common interest against this Iranian threat, and it really at this point is much harder for Iran to do what they might like to do, given the pounding that they've been taking from Israel, given that their terrorist proxies Hamas and Hezbela have been badly beaten, their key ally, the Aside regime in.
Syria has fallen.
This is not the Iran it was on October the sixth, twenty twenty three, that's for sure.
Well, as we consider what capabilities Iran may have to retaliate militarily, what if it just is in the form of Iran no longer cooperating or participating in, say, the Nuclear Non Proliferation Treaty, no longer allowing IAEA inspectors to monitor what Iran is doing. Even if we may have diminished the threat of Iran's nuclear capability in the short term, does that not potentially risk if they were to exit that agreement much greater danger in the long term.
Now, it wouldn't make any difference at all.
They've been violating the Nuclear Non Proliferation Treaty for twenty five or thirty years, as it is now because their commitment under that treaty was not to seek nuclear weapons in any form, and that's exactly what they've been doing.
So withdrawal from the treaties just meaningless.
And as for the IAEA, look, it's it's been excluded from key sites, the weaponization activities, and many others for quite some time.
IAEA is a good agency.
I have a lot of respect for it, but it's not an intelligence agency. Frequently, the most important information that the IAE deals with we have given them.
Iran's parliament has voted to close the Strait of horror moves. As you've heard. You may not take that seriously, John Bolton, but I wonder what our capability would be if we see Iran begin to lay minds. Could we stop that or is there another way that they could close the straight?
Well, there are a number of ways they could try and do it, and that's why we've put substantially greater naval assets in the region more on the way. This is something I think that maybe more bluster than anything else, can raise the level of danger.
But we're fully aware that.
This has been a possibility and if they try it, it won't simply be clearing minds away from the strait of horror moves that we do. I expect we would put much of the Iranian navy on the bottom of the Red Sea, and we would be striking other targets inside Iran. This is a no win proposition for them if they up the stakes that way.
All right, John Bolton, former US Ambassador to the UN and former National Security Advisor under the first Trump administration. Thank you.
Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner. We're seeing market reaction to the US attack on Iran's three main nuclear sites. Stock index futures or down, Crude oil prices are higher, and treasury bonds are being boosted by some haven buying. For a closer look at market action, I'm joined now by Gene Goldman. He is the chief investment officer at Satara Financial Group. Jean joins us here in our New York studio. Nice of you to drop
by on a Sunday in the US. We're focused very much on the developments with respect to the US strikes on nuclear targets in Iran. I'm curious just to how you're thinking about this right now.
Sure, I think if you think about the weekend, and obviously the US hit Iran and investors are hitting the brakes on the markets right now. And this is for us. We're not saying this is any type of you know, this is just a detour, not any type of derailment. What do you mean by that?
Is?
Yes, this what we're seeing play out is a classic market playbook. We're seeing, you know, safe haven investments rise, gold dollar for example, US egletes are a weeker. We see some overnight futures, of course, we also see treasuries. We do think that the yalkurb will flatten a bit, especially some upper pressure and short term yields downward pressure as potential recession worries start to push down lower yields. Oil of course up two to three percent. Everything is
playing out as we expect. The big question is what's next. What's going to happen after this? Does Iran shut down the straight up poor moose? I mean I don't think they will. I mean twenty percent of oil goes through that straight upore moose. China is going to push back politically. The US will push back, you know, militarily or politically.
Does ira attack US interests in the middle East. With all it said, though, we do think any pullback is going to be a buying opportunity because you think about this, we've pretty much eliminated a terrorist threat, We've pretty much eliminated a nuclear threat, and you take all this together, if you look at the fact that geopolitical risks and geopolitical uncertainty in the last big nine big events, the S and P five hundred was positive about a year
later and seven of the nine. We're not too worried. We're taking this as a buying opportunity if market's modestly pullback.
So do we have to be prepared for oil prices remaining at higher levels? And if you look at that in concert with the inflationary risk, let's say, of tariffs, are we in an environment right now where stagflation is still a threat, which is to say that we could see an upward tick in inflationary pressures and maybe declining growth or no growth.
That's a great question, because we do think inflation is going to rise. I mean, we haven't seen the effective tariffs yet in terms of economic data. We have seen you as you know, when tariffs first come out, they tend to be pretty much deflationary because as you have demand destruction and you have pressure on economically sensitive commodities oil, copper, for example. But now this puts a little put upward pressure oil to an extent. But remember, we have significant
capacity in terms of oil. You know, you look at you know the amount of oil that we are producing, the amount oiler we're drilling, the amount oil we can export. So I'm not too worried about this sulus. If you look at the US strategic reserves. We bought out of oil over the last few months in anticipation of this, so there was some I think advanced warning in terms that we were buying a lot of oil in advance.
All this together, we do think inflation does rise because I do think, as Powell said last week in this press conference, he said that we're going to get some data in July and in terms of where inflation is headed. And I do think some of those July data points will be a little bit higher than expected, not the headline inflation, but more the core inflation when you take
out food and energy. I do think the terriffts will finally work their way in and at the end of the day, one of our key themes is that are We've said throughout the year, we don't think the FED cuts as rates as much as they said they would, So right now they're pricing into the market's pricing in two. We think zero one for this year they should be. The economy is weakening, we get that, but the inflation is a bigger worry.
So we heard from FED Governor Chris Waller last Friday. He seemed to set the table for the possibility of a July cut. Is that prematurity.
I think that's way premature. I think think about you know, obviously, I'm going to keep pause in this a little bit. I mean, he's grappling to be the next FED chair and if you look at some of the odds, there's an eighty percent chance he becomes a FED chair to replace Pale next May. At the end of the day, though, he's one person, one vote. And I do think even you saw Daily on San Francisco's Daily came on Friday and she also said we need to wait on data.
And if you listen to the Jay Palace press conference, all his key points were we need to wait, we need to be very data depends that data, analyze the data and focus and wait because I as I do believe. I know the FED has made a lot of mistakes, and I've called him out a few times. I do believe that they get this right, that inflation is actually rising and the FED can't cut rais in this environment.
So if your mentality right now was by the dip, are there things on your shopping list if there is a significant pullback and a sector or an industry group that you would be a buyer?
Yeah? I think if you take a step back, how do you get yourself set up for it to be in a good place when markets are volatile like this. Number one, be diversified. Number two, focus on fundamentals to fundamentals, focus on secular themes. Number three focus on active money manager, especially during volatile periods, and for as an investor, focused on policy shifts. That's how you should be situated in an uncertain environment. Now, how do you take advantage of this?
To your question, our favorite sectors include technology, I mean really technology, especially AI, artificial intelligence, especially cybersecurity. All those events are going to be driving earnings growth on a go forward basis. Financials, we do think the economy, Yes, there's some weakness in the economy, but I think it's a little over exaggerating some of the banking numbers. And lastly, industrials.
We've liked industrials for a long time. Geopolitical risks increasing, it's a good opportunity for industrials.
How are you exposed offshore if at all? Right now?
Yeah, we have non US exposure through some international growth, international value, and some emerging markets are more diversifiers. You know, the whole thought that the US is, you know, the US exceptionalism. Exceptionalism is dying. We don't believe that the US is going to be the biggest, the best. I guess what's the end. I'm really bad with mixed metaphors. It's the best house in a terrible neighborhood with high valuations. All that stuff taken together, there's I think it's exaggerated
in terms of the US exceptionalism actually weakning. I know the dollar is weakened about twelve thirteen percent this year, but if you think about next year, our earnings growth, our economic growth looks better than Europe, looks better than Asia, especially in Japan. If you look at our average age, our average age is younger than Europe than also in Japan and Also, at the end of the day, you have better economic growth. And I do think I've talked about this when we were on I was on your
show last time. We do think we win the terraff war. We do think we win the terrafar against the other country. At the end of the day, you think about this, you look at tariffs, we are not going to get the full you know, tariff surplus at you know, President Trump wont But the end of the day, we'll be in the right direction and those few less tariff rates
will actually help our economy. And if you look at twenty twenty six earnings growth esseens for the S and P five hundred, they're actually rising in this whole environment. This is the fact that we do think a better tariff environment for US companies.
So I hear the case that you're making to be long US equities right now? Are you avoiding the bond market? Are there opportunities there?
Oh?
No, So let's just say for a sixty to forty portfolio, we have you know, forty percent fixed income. But what we are avoiding, we're avoiding high yield. We think high yield is super expensive, spreads are super narrow, not praising any bad news within fixed income itself. That we love duration. We love high quality treasuries, high quality corporates. The reason we do is that we do think the treasury yields are going to stay between say four to five percent
for some time. The peak for treasury should be about the year of a year nominal gdp US growth. That's about five oh seven last time I checked, and that's sort of the peak in terms of where rates should be for the ten year treasury. You know, we're hovering around there right now. We'll see. And also we do think we've increased duration. We do think yield going to come back down eventually. We also think that the Fed
may become a little bit too. You know, they've said they're very not no longer preemptive, but much more reactive. That puts the question of a potential need to accelerate rate cuts next year. I know the Fed came out in their dot plug and said we cut rates only once, and they reduced that from two to one. I do think they cut more next year and less this year. That's a good play for duration.
I'm wondering if you're focused at all on the fiscal situation in Washington. The big beautiful bill. Right now, it's being hammered out in the Senate. This may be something that misses the July fourth deadline. I think that's highly probable right now. Is it part of the conversations that you're having at your firm whether or not we get the kind of tax cuts to the extent that the market was preparing for. Is there anything in this bill that you're concerned about?
Well, I mean, obviously the big sticking point of this assault tax. We're watching that very carefully. We're also watching where do the Republicans and Democrats pay for this? Where does it get paid for? But the good news is that if you look at tariff revenues, tariff revenues are likely to be between two hundred and fifty to four
hundred billion dollars. That's a good sort of pro growth opportunity, and that those tariff revenues are recycled back into the economy in pro growth areas like tax cuts or like some type of stimulus. That's good. That helps us avoid any type of recession. We're optimistic about that, and we do think you combine a potential for a big beautiful bill plus second half deregulation that goes back to one
of our favorite sectors, financials. Deregulation will definitely help financials and help our whole industry.
But it was only a couple of weeks ago that there was a tantrum of sorts in the bond market on concern about higher deficits. That doesn't trouble you at all.
Doesn't trouble us right now. I mean unfortunate, just like infrastructure spending, just like deficit, this will take some we continue to be kicked down the road. Unfortunately. We're watching it carefully, but the end of the day, this will continue to be kicked down the road. Unfortunately. I don't think this gets solved anytime soon.
What is the biggest concern that you are hearing from your clients right now?
Biggest concern is valuations. You know, how do you invest in the stock market? Tewing twenty two and a half times forward earnings. And we tell our clients and our advisors, listen, everything is priced to perfection. Any type of hiccup, any type of fed uncertainty, any type of misstep from JPAL or from a geopolitical risk. It's setting the market, is setting it stuff up for a pullback. For maybe another correction. But what we also say is, listen, we're continuing to
buy the dips because you think about our commy. We have potentially nine percent earnings growth. We also have FED not raising rates. FED is on our side. We also have the fact that we have a pretty solid labor market. I know it's slowing down. A solid labor market with the fact that you have global stimulus in our global economy and you have inflation moderating to an extent. Take that together, we do believe that stocks will be higher a year than they are right now.
We'll leave it there, Gene, It's always a pleasure. Thank you so much. Jane Goldman there. He is the chief investment officer at Satera Financial Group. Joining us here in New York City 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 Prisoner and this is Bloomberg