April 28, 2025 • 20 mins
The Asian Development Bank has lowered its growth forecast for Asia further after the region found itself the hardest hit by tariffs from the US. The multilateral institution said those tariffs will shave growth in the region by a third of a percentage point in 2025 and a full percentage point in 2026. In its annual outlook report released Wednesday - numbers for which were calculated before the April 2 tariff announcements by President Donald Trump - ADB forecast growth in emerging Asia to moderate to 4.9% in 2025 and 4.7% in 2026. ADB President Masato Kanda speaks exclusively with Bloomberg's Shery Ahn in Tokyo.
Plus - a late-day wave of dip buying in the US erased losses in stocks, with Wall Street investors awaiting a slew of corporate earnings and economic data for insights on the impacts of President Donald Trump's tariff war. As the S&P 500 closed higher for five consecutive sessions, the American equity benchmark posted its longest winning streak since November. Monday marked the fifth time in the past month the index fully wiped out an intraday gain or drop of 1% or more. The number of reversals already matches the total seen in the entire year of 2024. We take a look at the US economy with Clayton Triick, Head of Portfolio Management at Angel Oak Capital Advisors.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
We had a mixed finish for US equities given some
angst ahead of earnings this week from four mag seven members,
and sentiment was dampened a bit as well by news
over the weekend. The China's Huawei Technologies is set to
test a new chip. Here is Bloomberg's Valerie Titel.
Speaker 3 (00:31):
Huawei is reportedly preparing to test a new AI chip
that it hopes can replace some of those products replaced
by Navidia. This comes from the Wall Street Journal reporting
that Huawei has approached some Chinese tech companies about testing
the new chip. The new processor would put China's capabilities
around two generations behind Navidia's new Blackwell chip.
Speaker 2 (00:50):
That is Bloomberg's Valerie Titel. Their shares an Nvidia. We're
down today by more than two percent. Now we're also
expecting a flurry of economic data this week and in
a moment speaking with Clayton Trick, he is head of
portfolio management at angel O Capital Advisors. But we begin
this morning in the Asia Pacific. The Asian Development Bank
(01:10):
has lowered its growth forecast for the continent, the institution
saying that US tariffs will shave growth in the region
by a third of a percentage point, falling to four
point nine percent in twenty twenty five, and then dropping
by a full percentage point in twenty twenty six to
four point seven percent. Now, the ADB released its annual
(01:30):
outlook on Wednesday, numbers for which were calculated before the
April second tariff announcement was made by President Trump, and
the ADB's chief economist has already said those numbers will
be revised lower in its July report. For more, we
heard from the President of the Asian Development Bank, Masato Conda.
He spoke exclusively with Bloomberg sherry On in Tokyo.
Speaker 1 (01:54):
You're really coming directly from Washington, DC. Tell us a
little bit about those conversations about the trade negotiations and
how that's really weighing on developing Asia.
Speaker 4 (02:03):
Yeah, of course, we have talked about the you know,
the challenges, particularly from the conflict, geopolitical attentions, but also
we discussed much more about the opportunities because you know,
of course this is a lot of difficult times, but
we've got to translated these challenges into the opportunities to improve.
(02:26):
So we have talked very much about the for instance,
the private sector development and private capital mobilizations, and it
illiginated with the ministers, including the US A tragedy, security,
a scot Present and all of the mdb has including
the world of bank prisons A Jabanga and particularly I
(02:51):
put my ambition to increase private sector lending full forward
to thirteen billion annually lending to the private sector.
Speaker 1 (03:02):
How feasible are those plans when the global economy faces
a potential downturn, given of course, all the challenges around trade.
Speaker 4 (03:11):
Yeah, of course this is strange in time, but this
is a great opportunity to make more resisions under this,
you know, building the enabling environment for private sector invests,
for instance, they through the very good deportics including the
deregations or or even the privatization, and the capital market
(03:34):
development and the regional corporation, the connectivity all over, then
we can support.
Speaker 1 (03:41):
Do you see the potential and risk of a downturn globally?
Speaker 4 (03:46):
Of course we have pretty much vigilant because you know,
as you mentioned, the Asian economy is a lather exposed
to the global market. So through not only the trade
it but also the financial capital market. There by the
decrease the confidence or the you know, rather weak sentiment.
(04:12):
But I think the agent countries are stronger than in
the past, but no room for comprecencis. So this is
the time for Asia to boost the domestic demand. And
there are parts of the sound economic policy and the
you know or diversify the uh you know, industries and
(04:34):
the trade partners as.
Speaker 1 (04:36):
Well, diversified partners and training within the region. Even more
so when you have when you're facing these incredible rates
of terists coming from Washington, d C.
Speaker 4 (04:46):
Yeah, I believe that this is the opportunity to you know,
even open more actually you know, the this is the
moment the need to find out the more partners the economies,
but not only from the US or others, but always
(05:07):
I believe the diversification of the industries is good.
Speaker 1 (05:10):
Does not train include China because Washington wants to restrict
any conversations with Beijing.
Speaker 4 (05:17):
Not really, but of course the United States is a
very much important pattern of all us. The foundational, the
shareholders and the one of the largest that I really value,
the advices and the looking forward to the even crosser
partnership with the United States, but also the China is
(05:37):
a bit important to member countries, so we will try
to find the solution benefiting benefiting or membership.
Speaker 1 (05:46):
How much of an opportunity is the fact that we
could see stronger Asian currencies given the sell America sell
US dollar trade.
Speaker 4 (05:54):
It's quite a difficult to terror because you know, particularly
the trade street is full of uncertainty and changing ud
by day. So what we can't do is to protect
the regional economies against external shocks and the builder resisiens
uh in the future shocks.
Speaker 1 (06:16):
The fact that, for example here in Japan, the yen
wasn't incorporated in the trade negotiations. How important is it
for all of these trading partners to separate those negotiations
pretending to trade, pretending to financial markets like currencies.
Speaker 4 (06:31):
Or are inter related to the butter trade and the
currency are quite a different animal, and probably there uh
you know, needs to be negotiated from the uh you know,
professional point of views in the respectively, but also for
the polity side. Always for instance, that we needed to
pass the sound of Marcro economic apology, which is a
(06:52):
business protection about the currencies various so and also the
deepening the capital market. The financial market would be a
very good in any case. So you know, the what
we can do and we should do is quite the same.
Speaker 1 (07:09):
Japan is one of the first to negotiate with Washington.
Could this serve as a model in trade negotiations for
developing Asia?
Speaker 4 (07:17):
Yeah, not really, I don't think so. But anyway, ADB
will help all member countries to build their religions against
these things and the otherwise, and if the shops comes,
we have a variety of instruments and support, including the
counta secret COLO assistance and also the UH the data
(07:39):
management or captain market development. Many things we can do.
Speaker 1 (07:44):
Why don't you think that this trade negotiation model could apply,
for example for the lights of Thailand Vietnam. We know
that they also face really stiff tires coming from Washington.
Speaker 4 (07:54):
But as I said, what they can do and we
can just is to for instance, the divastications of the
trade partners. Who increases the regigions, so not only inside
the for instance, the we are supporting their more connectivity
amongst the same countries or sub regional initiatives, but also
(08:19):
trying to find the more partners beyond the region and
Also the deepening the trade agreement inside the region could
be possible, including the uh you know, you know father
developing towards the services and sects like.
Speaker 1 (08:35):
Prime Minister issue, for example, was in Thailand in Vietnam.
What sort of cooperation do we need to see more
between developing and developed countries?
Speaker 4 (08:45):
You know, this is quite simple, deeper under the you know,
more opener so the you know, in terms of the
uh you know products, you know, it could be broadened
including the services sectors and also the uh you know,
the liberal protection could be a lot of other So
there are many things we can do, but it depends
(09:07):
on the specific institutions, particularly the you know, each country
has their own domestic political stations, so we've got to
be very capful. But in principle probably the sticking to
the open economy will be good for the.
Speaker 1 (09:27):
Digital sat Kana really good to have you with us
here in the Tokyo studio. He's president of the Asian
Development Bank.
Speaker 2 (09:42):
Welcome back to the Daybreak Asia podcast. I'm Derek Krisner.
So in the States, it will be a busy week
for both corporate earnings and economic data, and I think
it's fair to say that the key question here is
whether these numbers will begin to illustrate the impacts of
the trade war. We're joined now by clay and Trick.
He is head of portfolio management at angel O Capital Advisors.
(10:04):
Clayton joining us from Atlanta, Georgia. Good of you to
make time to chat with us. Give me your sense
of where you think the overall economy is right now
up against the tariffs that the Trump administration has put
into effect.
Speaker 5 (10:19):
Yeah, definitely been an interesting start to the year. We
really had anticipated this year could have a lot of turbulence.
Investors went into twenty twenty five, you know, very very
bolish on potential deregulation and tax cut bill at some
point in twenty twenty five. But we definitely got a
lot of turbulence. In the short term. The US economy,
(10:39):
or at least capital markets in the last week really stabilized,
but we are at different levels. You know, the SMP
is down about ten percent from the peak in the
first quarter. Corporate credit spreads are a little bit wider,
but we are sinsing a stabilization here in the markets.
It's really trying to see if some of the soft data,
(11:03):
which has been getting a lot weaker in the last
thirty days, you know, translates to weakness in hard data,
and so you know, the jobs numbers coming out Friday,
We're getting is report very soon, and so there's a
lot that we're going to have to digest as market participants.
Speaker 2 (11:20):
We had an interesting piece on the Bloomberg today indicating
that the US is still receiving containerships that departed China
pre teariff, and if you accept the idea that it
takes maybe thirty days perhaps a little more for those
vessels to travel from China to the nearest US port,
we really haven't felt the full impact quite yet, have we.
Speaker 5 (11:42):
Yeah, I don't think we have. I think that especially
in DC, things these are moving very quickly. It does
seem that deals are potentially going to get done very fast.
So you know, things could evolve in the coming days
and weeks on what deals get done between mean global leaders.
(12:02):
But I agree, you know, we haven't seen that full
impact yet. You know, the hard data has continued to
be very strong. First quarter data looks to continue to
be strong. We haven't really seen much of a slowing
in the labor market. We really haven't seen a big,
large increase in jobless claims, right in companies laying off.
So overall, the hard data still looks pretty strong. It's
(12:23):
really around trying to dissect when when the data potentially
does change later this year. And for us, you know,
the big question is there are a lot of cross
currents right now happening in DC. Some are expansionary policy,
some are contractionary policy. It's really around what is going
(12:43):
to outweigh each other. And we think that you know,
returns for market investors are really going to have much
larger tails, both in the upside and downside risks. So
a lot of things can really be evolving here.
Speaker 2 (12:56):
So we had a measure of manufacturing activity today for
Texas published by the Dallas FED, and it weakened significantly.
A lot of the businesses that were surveyed used towards
like chaos and insanity to describe the turmoil as a
result of these tariffs. And I'm wondering whether or not
if things follow this same path, whether the level of
(13:19):
pain expressed in market action is going to put some
pressure on the administration to get deals done sooner rather
than later, or whether you think there's a risk that
the administration may stick to its guns and try to
get more of what it's after, irrespective of what markets
are saying.
Speaker 5 (13:38):
Yeah, no, we think that trying to happen. It seems
the administration was definitely holding its ground early in April
when there was the initial saw off in the equity markets.
It really was the sharp move higher in the treasury
yield that really happened over one week from four percent
to north of four and a half percent. They're really
(14:00):
seemed to create you know, indigestion if you will, in
d C. And so it does seem like the overall
tone is shifting, and the data has been slowing. To
your point that Dallas FED was a pretty shocking lower number.
There's a lot of soft data through surveys don't look
quite good in the Beige Book talks about, you know,
(14:22):
a slowing of hiring. So all those things are starting
to crab collaborate and create an environment where we do
think the tone is changing in DC. And so that's
why we think markets in the short term redly stabilized.
You know, we're not seeing a return of stock market,
you know, to previous highs. We do think it's stabilized
here as to tone and shifting and there's a lot
(14:44):
more discussion around a tax build that seems a little
more eminent. So it seems like things are happening in
the background, but you know, don't feel like markets are
out of the woods yet.
Speaker 2 (14:54):
It's going to be a very interesting week when it
comes to the economic data. A couple of data points
on the growth side GDP and at the end of
the week the April employment report, and then we've got
numbers that are more aligned with the inflation story. And
I'm thinking here of the employment cost Index and the
report on first quarter PCEE. Where are you right now
(15:15):
in your view when you look at the balance between
inflation on one hand and growth on the other.
Speaker 5 (15:21):
Yeah, we're in the camp that you know, typically when
you get an inflation shock to tear ups, it is
a little more transitory. We think the bond market right
now is really pricing a FED that has changed their
tune from an inflation reducing regime to a more of
a growth supporter regime. This is the kind of the
biggest wildcard, and that's where the markets are pricing in
(15:43):
the FED funds rate to get you know, sub three
percent in the coming quarters. So that's a that's a
pretty big change in FED policy in environment where inflation
you can could rise. Here, that's a huge wildcard that
the market's pricing in. If we don't get the cuts
that are expected, it could be quite different our perspective,
(16:03):
but we think is going to happen. We definitely think
you could see a slight move higher in inflation. But
we're in the camp that growth was expected to continue
to slow into twenty twenty five. So we've been looking
for slower growth in the United States. The US consumer,
which is the largest portion of GDP consumer spending, and
(16:26):
the consumer was extremely strong conteenue to have really strong
consumer spending through the fourth quarter. If you didn't have
that strong of a consumer, you would have not had
a positive GDP print. And so if you get a
pause in a slowing a consumer spending throughout the middle
of this year, we think that the FED is going
to be more focused on the growth side of the equation,
which we thought was already going to take place before
(16:47):
this new kind of self inflicted on certain neighbor getting
in DC.
Speaker 2 (16:50):
So if growth is going to slow and you're confident
that any inflationary impact from the tariffs will be temporary,
does that mean there are compelling opportunities right now in
the bond market, let's say at the long end.
Speaker 5 (17:02):
Yeah, we would definitely agree the bond market looks quite attractive.
You know, the figures we were talking about as a
team today was that the fixed income market looks very solid,
especially amidst a lot of the amount of volatility we
are facing and headwinds potentially facing here in twenty twenty five,
and so we think there's great opportunities and really investment
(17:22):
grade fixed income areas like agency mortgages, even just treasuries,
you're wrapped around kind of a four percent treasury yield
that's north of inflation, so positive real rate level. So
that at this juncture, given the really uncertainty you have
on growth and the valuations, you see inequities. You know,
we've been recommending investors look to be overweight US fixed income,
(17:45):
but really focused on higher quality given the tails seem
like you could have a lot more, it could be
a lot fatter. Later in twenty twenty five, you were
a little more cautious on lower quality areas of US
fixed income. So we're more focused on the front end
of the year curve relative to the long end but
US high quality looks really attractive right now.
Speaker 2 (18:04):
In terms of corporate versus munis versus sovereign. How are
you balanced right now?
Speaker 5 (18:09):
Yeah, so we're more weighted to two areas, one being
the US homeowner and then also US corporate high investment
great corporate credit. So while corporate credit is going to
be more correlated with equity returns, we think that below
investment grade corporate credit will be more correlated. We think
high quality should actually perform quite well. The best real
(18:32):
opportunity to rere tilted toward is the US homeowner. Agency
mortgages being the primary example, one of the largest bond
markets in the world. That is an area that is
really benefiting from this higher rate volatility. Ie, you get
a much higher income historically today than you do relative
to treasury yields. Also, investors tend to overlook areas like
(18:53):
non agency mortgages and asset back bonds. Those markets certainly
never fully retraced from the seller off in twenty twenty
two that we saw equities and corporate credit retrays, not
agency mortgages and asset bag bonds, and they never go
back to the levels that we had in twenty one,
And so we see that as really the best opportunity
(19:14):
for later in this year. We've been overweight those areas
of the market, you know, really throughout twenty and twenty
five to start, and we plan to continue to do
that in the second world.
Speaker 2 (19:22):
All Right, we'll leave it there, Clayton, Thank you so much.
Clayton Trick, he is head of portfolio management at angel
Oak Capital Advisors. Joining us from Atlanta, Georgia 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
(19:45):
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 Krisner
and this is Bloomberg
Speaker 1 (20:08):
MHM.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
We had a mixed finish for US equities given some
angst ahead of earnings this week from four mag seven members,
and sentiment was dampened a bit as well by news
over the weekend. The China's Huawei Technologies is set to
test a new chip. Here is Bloomberg's Valerie Titel.
Speaker 3 (00:31):
Huawei is reportedly preparing to test a new AI chip
that it hopes can replace some of those products replaced
by Navidia. This comes from the Wall Street Journal reporting
that Huawei has approached some Chinese tech companies about testing
the new chip. The new processor would put China's capabilities
around two generations behind Navidia's new Blackwell chip.
Speaker 2 (00:50):
That is Bloomberg's Valerie Titel. Their shares an Nvidia. We're
down today by more than two percent. Now we're also
expecting a flurry of economic data this week and in
a moment speaking with Clayton Trick, he is head of
portfolio management at angel O Capital Advisors. But we begin
this morning in the Asia Pacific. The Asian Development Bank
(01:10):
has lowered its growth forecast for the continent, the institution
saying that US tariffs will shave growth in the region
by a third of a percentage point, falling to four
point nine percent in twenty twenty five, and then dropping
by a full percentage point in twenty twenty six to
four point seven percent. Now, the ADB released its annual
(01:30):
outlook on Wednesday, numbers for which were calculated before the
April second tariff announcement was made by President Trump, and
the ADB's chief economist has already said those numbers will
be revised lower in its July report. For more, we
heard from the President of the Asian Development Bank, Masato Conda.
He spoke exclusively with Bloomberg sherry On in Tokyo.
Speaker 1 (01:54):
You're really coming directly from Washington, DC. Tell us a
little bit about those conversations about the trade negotiations and
how that's really weighing on developing Asia.
Speaker 4 (02:03):
Yeah, of course, we have talked about the you know,
the challenges, particularly from the conflict, geopolitical attentions, but also
we discussed much more about the opportunities because you know,
of course this is a lot of difficult times, but
we've got to translated these challenges into the opportunities to improve.
(02:26):
So we have talked very much about the for instance,
the private sector development and private capital mobilizations, and it
illiginated with the ministers, including the US A tragedy, security,
a scot Present and all of the mdb has including
the world of bank prisons A Jabanga and particularly I
(02:51):
put my ambition to increase private sector lending full forward
to thirteen billion annually lending to the private sector.
Speaker 1 (03:02):
How feasible are those plans when the global economy faces
a potential downturn, given of course, all the challenges around trade.
Speaker 4 (03:11):
Yeah, of course this is strange in time, but this
is a great opportunity to make more resisions under this,
you know, building the enabling environment for private sector invests,
for instance, they through the very good deportics including the
deregations or or even the privatization, and the capital market
(03:34):
development and the regional corporation, the connectivity all over, then
we can support.
Speaker 1 (03:41):
Do you see the potential and risk of a downturn globally?
Speaker 4 (03:46):
Of course we have pretty much vigilant because you know,
as you mentioned, the Asian economy is a lather exposed
to the global market. So through not only the trade
it but also the financial capital market. There by the
decrease the confidence or the you know, rather weak sentiment.
(04:12):
But I think the agent countries are stronger than in
the past, but no room for comprecencis. So this is
the time for Asia to boost the domestic demand. And
there are parts of the sound economic policy and the
you know or diversify the uh you know, industries and
(04:34):
the trade partners as.
Speaker 1 (04:36):
Well, diversified partners and training within the region. Even more
so when you have when you're facing these incredible rates
of terists coming from Washington, d C.
Speaker 4 (04:46):
Yeah, I believe that this is the opportunity to you know,
even open more actually you know, the this is the
moment the need to find out the more partners the economies,
but not only from the US or others, but always
(05:07):
I believe the diversification of the industries is good.
Speaker 1 (05:10):
Does not train include China because Washington wants to restrict
any conversations with Beijing.
Speaker 4 (05:17):
Not really, but of course the United States is a
very much important pattern of all us. The foundational, the
shareholders and the one of the largest that I really value,
the advices and the looking forward to the even crosser
partnership with the United States, but also the China is
(05:37):
a bit important to member countries, so we will try
to find the solution benefiting benefiting or membership.
Speaker 1 (05:46):
How much of an opportunity is the fact that we
could see stronger Asian currencies given the sell America sell
US dollar trade.
Speaker 4 (05:54):
It's quite a difficult to terror because you know, particularly
the trade street is full of uncertainty and changing ud
by day. So what we can't do is to protect
the regional economies against external shocks and the builder resisiens
uh in the future shocks.
Speaker 1 (06:16):
The fact that, for example here in Japan, the yen
wasn't incorporated in the trade negotiations. How important is it
for all of these trading partners to separate those negotiations
pretending to trade, pretending to financial markets like currencies.
Speaker 4 (06:31):
Or are inter related to the butter trade and the
currency are quite a different animal, and probably there uh
you know, needs to be negotiated from the uh you know,
professional point of views in the respectively, but also for
the polity side. Always for instance, that we needed to
pass the sound of Marcro economic apology, which is a
(06:52):
business protection about the currencies various so and also the
deepening the capital market. The financial market would be a
very good in any case. So you know, the what
we can do and we should do is quite the same.
Speaker 1 (07:09):
Japan is one of the first to negotiate with Washington.
Could this serve as a model in trade negotiations for
developing Asia?
Speaker 4 (07:17):
Yeah, not really, I don't think so. But anyway, ADB
will help all member countries to build their religions against
these things and the otherwise, and if the shops comes,
we have a variety of instruments and support, including the
counta secret COLO assistance and also the UH the data
(07:39):
management or captain market development. Many things we can do.
Speaker 1 (07:44):
Why don't you think that this trade negotiation model could apply,
for example for the lights of Thailand Vietnam. We know
that they also face really stiff tires coming from Washington.
Speaker 4 (07:54):
But as I said, what they can do and we
can just is to for instance, the divastications of the
trade partners. Who increases the regigions, so not only inside
the for instance, the we are supporting their more connectivity
amongst the same countries or sub regional initiatives, but also
(08:19):
trying to find the more partners beyond the region and
Also the deepening the trade agreement inside the region could
be possible, including the uh you know, you know father
developing towards the services and sects like.
Speaker 1 (08:35):
Prime Minister issue, for example, was in Thailand in Vietnam.
What sort of cooperation do we need to see more
between developing and developed countries?
Speaker 4 (08:45):
You know, this is quite simple, deeper under the you know,
more opener so the you know, in terms of the
uh you know products, you know, it could be broadened
including the services sectors and also the uh you know,
the liberal protection could be a lot of other So
there are many things we can do, but it depends
(09:07):
on the specific institutions, particularly the you know, each country
has their own domestic political stations, so we've got to
be very capful. But in principle probably the sticking to
the open economy will be good for the.
Speaker 1 (09:27):
Digital sat Kana really good to have you with us
here in the Tokyo studio. He's president of the Asian
Development Bank.
Speaker 2 (09:42):
Welcome back to the Daybreak Asia podcast. I'm Derek Krisner.
So in the States, it will be a busy week
for both corporate earnings and economic data, and I think
it's fair to say that the key question here is
whether these numbers will begin to illustrate the impacts of
the trade war. We're joined now by clay and Trick.
He is head of portfolio management at angel O Capital Advisors.
(10:04):
Clayton joining us from Atlanta, Georgia. Good of you to
make time to chat with us. Give me your sense
of where you think the overall economy is right now
up against the tariffs that the Trump administration has put
into effect.
Speaker 5 (10:19):
Yeah, definitely been an interesting start to the year. We
really had anticipated this year could have a lot of turbulence.
Investors went into twenty twenty five, you know, very very
bolish on potential deregulation and tax cut bill at some
point in twenty twenty five. But we definitely got a
lot of turbulence. In the short term. The US economy,
(10:39):
or at least capital markets in the last week really stabilized,
but we are at different levels. You know, the SMP
is down about ten percent from the peak in the
first quarter. Corporate credit spreads are a little bit wider,
but we are sinsing a stabilization here in the markets.
It's really trying to see if some of the soft data,
(11:03):
which has been getting a lot weaker in the last
thirty days, you know, translates to weakness in hard data,
and so you know, the jobs numbers coming out Friday,
We're getting is report very soon, and so there's a
lot that we're going to have to digest as market participants.
Speaker 2 (11:20):
We had an interesting piece on the Bloomberg today indicating
that the US is still receiving containerships that departed China
pre teariff, and if you accept the idea that it
takes maybe thirty days perhaps a little more for those
vessels to travel from China to the nearest US port,
we really haven't felt the full impact quite yet, have we.
Speaker 5 (11:42):
Yeah, I don't think we have. I think that especially
in DC, things these are moving very quickly. It does
seem that deals are potentially going to get done very fast.
So you know, things could evolve in the coming days
and weeks on what deals get done between mean global leaders.
(12:02):
But I agree, you know, we haven't seen that full
impact yet. You know, the hard data has continued to
be very strong. First quarter data looks to continue to
be strong. We haven't really seen much of a slowing
in the labor market. We really haven't seen a big,
large increase in jobless claims, right in companies laying off.
So overall, the hard data still looks pretty strong. It's
(12:23):
really around trying to dissect when when the data potentially
does change later this year. And for us, you know,
the big question is there are a lot of cross
currents right now happening in DC. Some are expansionary policy,
some are contractionary policy. It's really around what is going
(12:43):
to outweigh each other. And we think that you know,
returns for market investors are really going to have much
larger tails, both in the upside and downside risks. So
a lot of things can really be evolving here.
Speaker 2 (12:56):
So we had a measure of manufacturing activity today for
Texas published by the Dallas FED, and it weakened significantly.
A lot of the businesses that were surveyed used towards
like chaos and insanity to describe the turmoil as a
result of these tariffs. And I'm wondering whether or not
if things follow this same path, whether the level of
(13:19):
pain expressed in market action is going to put some
pressure on the administration to get deals done sooner rather
than later, or whether you think there's a risk that
the administration may stick to its guns and try to
get more of what it's after, irrespective of what markets
are saying.
Speaker 5 (13:38):
Yeah, no, we think that trying to happen. It seems
the administration was definitely holding its ground early in April
when there was the initial saw off in the equity markets.
It really was the sharp move higher in the treasury
yield that really happened over one week from four percent
to north of four and a half percent. They're really
(14:00):
seemed to create you know, indigestion if you will, in
d C. And so it does seem like the overall
tone is shifting, and the data has been slowing. To
your point that Dallas FED was a pretty shocking lower number.
There's a lot of soft data through surveys don't look
quite good in the Beige Book talks about, you know,
(14:22):
a slowing of hiring. So all those things are starting
to crab collaborate and create an environment where we do
think the tone is changing in DC. And so that's
why we think markets in the short term redly stabilized.
You know, we're not seeing a return of stock market,
you know, to previous highs. We do think it's stabilized
here as to tone and shifting and there's a lot
(14:44):
more discussion around a tax build that seems a little
more eminent. So it seems like things are happening in
the background, but you know, don't feel like markets are
out of the woods yet.
Speaker 2 (14:54):
It's going to be a very interesting week when it
comes to the economic data. A couple of data points
on the growth side GDP and at the end of
the week the April employment report, and then we've got
numbers that are more aligned with the inflation story. And
I'm thinking here of the employment cost Index and the
report on first quarter PCEE. Where are you right now
(15:15):
in your view when you look at the balance between
inflation on one hand and growth on the other.
Speaker 5 (15:21):
Yeah, we're in the camp that you know, typically when
you get an inflation shock to tear ups, it is
a little more transitory. We think the bond market right
now is really pricing a FED that has changed their
tune from an inflation reducing regime to a more of
a growth supporter regime. This is the kind of the
biggest wildcard, and that's where the markets are pricing in
(15:43):
the FED funds rate to get you know, sub three
percent in the coming quarters. So that's a that's a
pretty big change in FED policy in environment where inflation
you can could rise. Here, that's a huge wildcard that
the market's pricing in. If we don't get the cuts
that are expected, it could be quite different our perspective,
(16:03):
but we think is going to happen. We definitely think
you could see a slight move higher in inflation. But
we're in the camp that growth was expected to continue
to slow into twenty twenty five. So we've been looking
for slower growth in the United States. The US consumer,
which is the largest portion of GDP consumer spending, and
(16:26):
the consumer was extremely strong conteenue to have really strong
consumer spending through the fourth quarter. If you didn't have
that strong of a consumer, you would have not had
a positive GDP print. And so if you get a
pause in a slowing a consumer spending throughout the middle
of this year, we think that the FED is going
to be more focused on the growth side of the equation,
which we thought was already going to take place before
(16:47):
this new kind of self inflicted on certain neighbor getting
in DC.
Speaker 2 (16:50):
So if growth is going to slow and you're confident
that any inflationary impact from the tariffs will be temporary,
does that mean there are compelling opportunities right now in
the bond market, let's say at the long end.
Speaker 5 (17:02):
Yeah, we would definitely agree the bond market looks quite attractive.
You know, the figures we were talking about as a
team today was that the fixed income market looks very solid,
especially amidst a lot of the amount of volatility we
are facing and headwinds potentially facing here in twenty twenty five,
and so we think there's great opportunities and really investment
(17:22):
grade fixed income areas like agency mortgages, even just treasuries,
you're wrapped around kind of a four percent treasury yield
that's north of inflation, so positive real rate level. So
that at this juncture, given the really uncertainty you have
on growth and the valuations, you see inequities. You know,
we've been recommending investors look to be overweight US fixed income,
(17:45):
but really focused on higher quality given the tails seem
like you could have a lot more, it could be
a lot fatter. Later in twenty twenty five, you were
a little more cautious on lower quality areas of US
fixed income. So we're more focused on the front end
of the year curve relative to the long end but
US high quality looks really attractive right now.
Speaker 2 (18:04):
In terms of corporate versus munis versus sovereign. How are
you balanced right now?
Speaker 5 (18:09):
Yeah, so we're more weighted to two areas, one being
the US homeowner and then also US corporate high investment
great corporate credit. So while corporate credit is going to
be more correlated with equity returns, we think that below
investment grade corporate credit will be more correlated. We think
high quality should actually perform quite well. The best real
(18:32):
opportunity to rere tilted toward is the US homeowner. Agency
mortgages being the primary example, one of the largest bond
markets in the world. That is an area that is
really benefiting from this higher rate volatility. Ie, you get
a much higher income historically today than you do relative
to treasury yields. Also, investors tend to overlook areas like
(18:53):
non agency mortgages and asset back bonds. Those markets certainly
never fully retraced from the seller off in twenty twenty
two that we saw equities and corporate credit retrays, not
agency mortgages and asset bag bonds, and they never go
back to the levels that we had in twenty one,
And so we see that as really the best opportunity
(19:14):
for later in this year. We've been overweight those areas
of the market, you know, really throughout twenty and twenty
five to start, and we plan to continue to do
that in the second world.
Speaker 2 (19:22):
All Right, we'll leave it there, Clayton, Thank you so much.
Clayton Trick, he is head of portfolio management at angel
Oak Capital Advisors. Joining us from Atlanta, Georgia 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
(19:45):
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 Krisner
and this is Bloomberg
Speaker 1 (20:08):
MHM.
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