March 16, 2025 • 19 mins
On today's episode, we discuss China's plan to revive consumption by boosting people's incomes. That is according to the official Xinhua News Agency. This is part of Beijing's plan that adds to recent pledges by the government to support demand in an economy threatened by President Donald Trump’s tariffs. We speak to Paul Dobson, Bloomberg's Executive Editor for Asia Markets
Plus we take a look at how Trump's trade salvo will shape US markets with Joy Yang, Head of Index Product Management & Marketing at MarketVector Indexes.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So
we're seeing a positive tone to risk assets in the
Asia Pacific. This is on where the China will be
taking steps to revive consumption by boosting people's incomes. The
official Shinwan Use Agency sites a statement from the State Council,
and at the same time, authorities are reportedly set to
(00:32):
unveil plans later today to stabilize both the Chinese stock
and real estate markets. Let's take a closer look and
for that I am joined now by Paul Dobson. He
is Bloomberg's executive editor for Asia Markets. He joins us
from our studios in Singapore. Paul, it's always a pleasure.
So the official announcement is going to be made at
(00:52):
three pm local time. What is the chance for a
little disappointment?
Speaker 3 (00:56):
Hi there, Doug. I think yes, the chance for disappointment
is reasonably high actually, and the reason that I say
that is because the market has already built in quite
lofty expectations given the price action that we saw on Friday,
where we had a big jump in the onshore markets,
and that followed through into the US market, with the
(01:16):
Golden Dragon Index jumping more than two and a half
percent as well. Saw some speculative trades going in in
the ETFs with our call options out of the money
looking for further gains there as well. And I think
that maybe the market got a little bit too excited
about the idea that it was going to be the
PBOC leading these announcements and that we were going to
(01:38):
see some real exciting fireworks like the press conference that
we saw in September where they pre announced right cuts
and got into a lot more stimulative detail. This one
seems much more that it's micro focused, you know, kind
of here are all the ways that we're going to
flesh out the promises that we already made at the
NPC meeting earlier in the month. And that's why I think,
(02:01):
you know that although that these are you know, put
them together, there's quite a lot of useful stuff in there.
Maybe there's a little bit of a ground that there
will be some disappointment. The people that are leading the
press conference this afternoon are not the heads of departments,
so that tells you that maybe it's a little bit
lower key, and some of the details that we saw
in that Shinhua report that you referred to. There are
(02:22):
bits and bobs that are new. There's you know, the
efforts to push up maybe the minimum wage, pension payments,
ensure that unemployment benefits are paid out could all be supportive.
But I don't know whether there's that big round billion
u N number or exciting new announcements that's really going
to sustain this market rally.
Speaker 2 (02:42):
So do you have a sense as to why the
policy response is so restrained even in the face of
the severity of the deflationary trap that China seems to
be in.
Speaker 3 (02:53):
Yeah, I think that the authorities want to avoid blowing
any bubbles and they want to carry on and finish
the job getting rid of the speculation in corners of
the market, particularly property, and so from that respect, they
don't want to do anything that is overly stimulative. You know,
the GDP growth goal again for this year is five percent,
(03:15):
the CPI goal is two percent, and so they want
to hit those targets, but it doesn't feel like they
want to go a long way to meet them. And
what we've seen for the past couple of years is
they've been happy to let the economy run a relative
smooth amount and then come back in in the second
of half of the year to give a little bit
of an extra push to get to those kinds of levels,
(03:36):
but not creating any sort of speculative bubbles along the way.
I think the other thing is they just don't know
yet what the full impact or how far the US
administration is going to go with the tariffs, so they
want to leave some powder dry just in case things
worse than a lot more as exports get hit with
those levees following through.
Speaker 2 (03:55):
So right now we're twenty percent. Is there the reasonable chance,
in the view of the market watchers that you're in
touch with, that we could see that terror freight rise
above twenty percent?
Speaker 3 (04:07):
There's definitely concern. Right on the campaign trial, Trump was
talking about sixty percent. So relative to that, we're actually
in a pretty decent spot with what we've had so far.
And you've seen that China's retaliation efforts have been relatively targeted,
you know, focusing on the areas where they feel that
they can cause some pain to Trump's biggest sort of
(04:27):
electoral base, so with the farmers and that kind of thing.
But yes, depending on what China can do and look,
it's sort of said, you know, we're doing plenty on
the fentanyl trade. Now we're really trying here. You know
that you don't believe that these tariffs are justified. It's
probably not going to be enough for the Trump administration.
So there's definitely the possibility that things can ratchet up,
(04:47):
and we'll see, we get April the second the reciprocal terrifts,
will see whether there's anything extra layered on for China
there and what comes after that.
Speaker 2 (04:55):
Paul, I think it's important to point out that overall
high tech stocks in China still seem to be basking
in the glory of that deep seek moment. And I
noticed over the weekend that the Chinese search engine by
Do released two AI models. How much enthusiasm is there
still for tech stocks in China right now?
Speaker 3 (05:13):
Lots of enthusiasm and excitement. Yes, yes, yes, I think
that that's the other thing perhaps I should have mentioned
is sooner. The other thing that's giving the authorities a
little bit, you know, of reason to kind of push this,
but not give the broader economy too much of a push,
because it feels that this can take take growth and
enthusiasm and the markets for that matter, a decent way. Further,
(05:35):
the Chinese tech really seems to be thriving despite some
of the limitations that were put on imports of technology
during the Biden administration, and it's coinciding with a little
bit of a curb in enthusiasm for the US market
as well. So I think that there are some flows
that are coming into Chinese tech and out of US
tech at the moment, a bit of a rebalancing there.
So that's certainly working. And each time, you know, there's
(05:58):
been just this continuing flurry of an and I think
that's one of China's strengths is that competition, which is
really driving the innovation. So although it's caused a lot
of kind of price wars in various parts of the economy,
is also pushing people to be lean, a slicker, faster,
and so the companies that do survive are going to
be looking in very good nick and decent investment opportunities.
(06:19):
It seems to be what the market is saying.
Speaker 2 (06:20):
Away from technology, what other areas of the Chinese equity
market are getting investor attention.
Speaker 3 (06:27):
So right now with this stimulus, people are looking at
the consumers a sector and seeing you know whether there
is going to be a broadening out to companies that
are more focused on the domestic economy. I think that
healthcare as well has been something of a bright spot
of late. And you know, the banks are the ones
that are most closely tied to the economy. If the
(06:49):
PBOZ and the authorities can do enough to help those
banks kind of push out again their net interest margins,
then that can be supportive for those as well. I think,
you know, in general, the other thing that we want
to pay a bit more attention to is that a
lot of the gains so far have been in the
Hong Kong markets rather than the mainland markets. There's been
(07:11):
huge flows from the mainland into Hong Kong. Maybe it's
time to see a little bit of a rebalancing there.
That's what we saw on Friday with the mainland gauge
starting to catch up a little bit on Hong Kong's markets.
So see whether that continues to push through.
Speaker 2 (07:27):
Is this primarily retail money or institutions becoming a little
bit more aggressive as well.
Speaker 3 (07:33):
Hard to see, but probably both. I mean, I think
that the retail consumer would like to have investments outside
of the un in case the currency depreciates significantly during
the ratcheting up of terrace with the US, but at
the same time, return investors have been burned continually, so
(07:54):
they'll be the most flighty if things do to start
to turn south as well. So it needs to be
a little bit of caution there. And you know, there's
still being all of that money that's flowed into bonds
and bond like products that has pushed yields exceptionally low.
And that tells you that there is still the question
of winning hearts and minds, winning that confidence if you
want to continue to see this rally building on where
(08:14):
we are at the moment.
Speaker 2 (08:15):
Paul, before I let you go, the currency seems to
be holding up reasonably well in the face of a
lot of the trade war rhetoric that has been kind
of going back and forth between the US and China,
principally from Washington, going to other places around the world.
How do you explain what the PBOC is doing and
managing the currency.
Speaker 3 (08:34):
It is keeping it very much in check and has
needed to do at the start of the Trump administration.
But what we're seeing now is a weakening of the dollar,
and while or sort of more broadly. And while that's
going on, actually the PBOC is still leaving the UN
in the same place more or less versus the greenback,
and so as a result, on a broader basis, the
(08:57):
UN is just starting to weaken a little bit against
against this peers. And I think really it's all eyes
on the exchange rate with the dollar, because that's all
important as we get into this tariff situation, and people
will be watching to see whether we get strength again
in the dollar and whether that starts to put the
UN on depression, whether the authority starts to ease their
(09:17):
grip and allow it to weaken a little bit to
cushion some of the blow from those tarifs overtime.
Speaker 2 (09:22):
Paul, thank you so much. We'll leave it there. Paul
Dobson is executive editor for Asia Markets, joining us from
our studios in Singapore here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Dek Chrisner.
So we're gearing up for a new trading week in
(09:44):
the States after about of turbulence over the last five
trading days. At one point, the S and P five
hundred entered a correction relative to its February record high,
and for all of last week the S and P
was down two point three percent, and then over the weekend,
Treasury s Secretary Scott Besson said he's not worried about
a market downturn, and he said corrections are healthy, they're normal.
(10:07):
Let's talk about the outlook now with our guest, Joy
Young is with us. She has head of index product
management and marketing at Market Vectors Indexes. Joining from just
outside here in New York City, Joy, thank you for
being with us. Is this volatility all about US tariff policy?
Speaker 4 (10:25):
Well, the volatility is coming from every source, and I
think it's all about the headlines right now. But I
think one thing investors must ultimately keep top of mind
is to get some perspective among all this noise that's circulating. So,
you know, one key point that we always highlight is that,
(10:48):
you know, mark is a volatile We've just come off
of two back to back years of twenty percent annualized
return and historically market's only return on average thirteen percent.
So you know, it's not unusual to see drops of
ten percent in any short periods, as we've seen last week,
(11:11):
but it is unusual to see two back to back
years of twenty percent, So I think we should expect
that correction, you know, was happening and was coming. And
the question is is this a correction or are we
entering a bear market?
Speaker 1 (11:27):
And that's kind of unclear.
Speaker 4 (11:29):
But you know, having perspective on everything can help be
a healthy way to you know, start this week and
to really think clearly about how to position your portfolio.
Speaker 2 (11:40):
So I mentioned that Besin was speaking over the weekend.
One of the things that he refused to rule out
was recession. We have heard similar statement from President Trump.
Is a recession kind of worst case in your.
Speaker 4 (11:53):
Mind a recession, it's deflation. But also the worst case
is lose seeing investors losing confidence in the market because
a lot of clearly, you know, in order to be investor,
to stay invested, you really have to have confidence in
your long term strategy. So I think that's ultimately the
(12:16):
worst case because once you lose confidence, you're going to overreact,
You're going to maybe get out of the market, and
we know historically staying invested in focusing on long term
is really the best strategy.
Speaker 2 (12:31):
We had data last Friday from the University of Michigan
showing consumer sentiment now at the lowest level in more
than two years, and inflation expectations during the next five
to ten year time horizon rose to a level of
three point nine percent. That's the highest since February nineteen
ninety three. This has got to be a problematic situation
(12:53):
for the FED, no doubt about it.
Speaker 4 (12:56):
Yeah, so it's a tough road for the FED because
you know, they have to balance you know, what the
administration wants and the economy as well as their inflation target.
But we also know that, you know, there has been
this strong focus on American exceptionalism, and I think people
are starting to reevaluate what that really means. And we've
(13:20):
seen from deep Seek that it was a reminder that
AI is an evolving story and that competition in the
AI industry is certainly robust and dynamic, and innovation can
emerge from everywhere and you know, globally anywhere. And again
the trade terrorists also reminded us that you know, a
(13:44):
protectionist policy and ban can drive competition and innovation abroad.
And we also have to think about the second and
third order impacts of trade terror So, you know, just
to try to forecast.
Speaker 1 (14:00):
What we think will happen with terrorrists.
Speaker 4 (14:02):
You need to forecast what we think will happen to
the you know, response to terrorsts and also the you know,
complicated supply chains that terrorists will have in the long term.
Speaker 2 (14:13):
So we have the FED meeting this week. It's widely
expected that policymakers are going to hold right steady. If
we hear anything from Powell as it relates to the
risk in the economy right now, what do you think
he will tease out.
Speaker 4 (14:27):
I think he's going to hold off and wait for
the data. I think he's you know, it would be
really you know, I think it would be more cautious
for him to really look and have the data as
evidence and support, rather than try to project what, you know,
you know, what might happen, you know, without any of
(14:50):
the support and data, because you know, we just I
don't think anybody knows what's going to happen with the
teriff implementation at this point.
Speaker 1 (14:59):
And you know what happened next week tomorrow.
Speaker 2 (15:03):
You mentioned stagflation a moment ago, and I'm looking at
what happened Friday in the bond market. We had yields
rising just a bit. Is the bond market something that
you're playing in right now, or are you feeling as
though maybe there's too much volatility, particularly at the long
end of the curve.
Speaker 4 (15:21):
To me, it seems like the bond participants have been
a lot more cautious than the equity markets. But then again,
I think we were seeing such an expensive US equity
that it was easy to take some off the top
and really park it somewhere else. And you know, really
where we're seeing investors flow back into is gold, and
(15:45):
gold has last week hit, you know, another all time high,
so that's an indication that people are taking a flight
to safety approach.
Speaker 2 (15:56):
So in terms of the dollar, one of the things
that has happened race with a lot of the rhetoric
around tough talk on tariffs, has been a dollar positive,
although the dollar gave back a little bit of ground
in the Friday session, even though yields were up just
a bit. How do you go about thinking about currencies
right now when you're looking at overall kind of market strategy,
(16:18):
particularly where the dollar is concerned.
Speaker 4 (16:21):
I think definitely part of the dollar weakness has to
do with the uncertainty around the tear so you're seeing
a lot of currency volatility, and again that's you know,
pivoting people to to really look at gold, you know,
as a dollar alternative, and we've seen that with central banks.
(16:42):
We're now starting to see retail flow back into gold ETF.
So I think people are just kind of more cautious
about many of the safe assets that traditionally have been
US treasury US dollars, but now are kind of waiting
to see what's going to play out with you know,
the Trump administration.
Speaker 2 (17:03):
What is the most reliable signal that you can think
of these days?
Speaker 4 (17:08):
It's a hard call, but I think gold has been
pretty reliable because now you're seeing a mix of investors,
you know, central banks, retail investors, investments, Juler. You're seeing
a very strong mix of a diverse base. We also
very much watch our Bitcoin reference rate because it you know, bitcoin,
(17:31):
crypto assets, they trade real time, so it gives us
an indication of investor sentiment, you know, during the weekend
as well as during market, you know market, when markets
are when traditional markets are closed, We're seeing how investors
are reacting in real time.
Speaker 2 (17:48):
When you look at fun flows these days, is there
something that you're using as a guide right now in
terms of tracking the flow of capital.
Speaker 4 (17:57):
Yeah, So many of our indexes are linked to funds
and ETF, so we're watching those fun flows as well
as just ETF fun flows. And then you know, we
you know, watch a lot of the reports that come
out from you know, different ETF kind of source news sources.
Speaker 2 (18:19):
Is there a risk of further downside do you think?
I mean, we stabilized last week. I think for all
of last week the S and P was up about
two point three percent when some buying kind of entered
into the picture after that pullback, Is there still the
risk of more downside? Do you think for the equity market?
Speaker 4 (18:36):
Of course, there's always that risk is always you know
out there markets are volatile, and we've seen pullbacks back
in twenty twenty two of almost fifty percent, so that
you know, we could potentially see that again this year.
But I would say, you know, don't throw everything out
at once. You know there is you know, different ciated
(19:00):
performance within the US markets. Also, you know, people who
overreact this this is a good opportunity to buy something
cheap in the market.
Speaker 2 (19:10):
Joy will leave it there. Thank you so much for
taking the time to chat with us. Joey Yang, head
of Index Product Management and marketing at Market Vector Indexes.
Joining us 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,
(19:33):
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 Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So
we're seeing a positive tone to risk assets in the
Asia Pacific. This is on where the China will be
taking steps to revive consumption by boosting people's incomes. The
official Shinwan Use Agency sites a statement from the State Council,
and at the same time, authorities are reportedly set to
(00:32):
unveil plans later today to stabilize both the Chinese stock
and real estate markets. Let's take a closer look and
for that I am joined now by Paul Dobson. He
is Bloomberg's executive editor for Asia Markets. He joins us
from our studios in Singapore. Paul, it's always a pleasure.
So the official announcement is going to be made at
(00:52):
three pm local time. What is the chance for a
little disappointment?
Speaker 3 (00:56):
Hi there, Doug. I think yes, the chance for disappointment
is reasonably high actually, and the reason that I say
that is because the market has already built in quite
lofty expectations given the price action that we saw on Friday,
where we had a big jump in the onshore markets,
and that followed through into the US market, with the
(01:16):
Golden Dragon Index jumping more than two and a half
percent as well. Saw some speculative trades going in in
the ETFs with our call options out of the money
looking for further gains there as well. And I think
that maybe the market got a little bit too excited
about the idea that it was going to be the
PBOC leading these announcements and that we were going to
(01:38):
see some real exciting fireworks like the press conference that
we saw in September where they pre announced right cuts
and got into a lot more stimulative detail. This one
seems much more that it's micro focused, you know, kind
of here are all the ways that we're going to
flesh out the promises that we already made at the
NPC meeting earlier in the month. And that's why I think,
(02:01):
you know that although that these are you know, put
them together, there's quite a lot of useful stuff in there.
Maybe there's a little bit of a ground that there
will be some disappointment. The people that are leading the
press conference this afternoon are not the heads of departments,
so that tells you that maybe it's a little bit
lower key, and some of the details that we saw
in that Shinhua report that you referred to. There are
(02:22):
bits and bobs that are new. There's you know, the
efforts to push up maybe the minimum wage, pension payments,
ensure that unemployment benefits are paid out could all be supportive.
But I don't know whether there's that big round billion
u N number or exciting new announcements that's really going
to sustain this market rally.
Speaker 2 (02:42):
So do you have a sense as to why the
policy response is so restrained even in the face of
the severity of the deflationary trap that China seems to
be in.
Speaker 3 (02:53):
Yeah, I think that the authorities want to avoid blowing
any bubbles and they want to carry on and finish
the job getting rid of the speculation in corners of
the market, particularly property, and so from that respect, they
don't want to do anything that is overly stimulative. You know,
the GDP growth goal again for this year is five percent,
(03:15):
the CPI goal is two percent, and so they want
to hit those targets, but it doesn't feel like they
want to go a long way to meet them. And
what we've seen for the past couple of years is
they've been happy to let the economy run a relative
smooth amount and then come back in in the second
of half of the year to give a little bit
of an extra push to get to those kinds of levels,
(03:36):
but not creating any sort of speculative bubbles along the way.
I think the other thing is they just don't know
yet what the full impact or how far the US
administration is going to go with the tariffs, so they
want to leave some powder dry just in case things
worse than a lot more as exports get hit with
those levees following through.
Speaker 2 (03:55):
So right now we're twenty percent. Is there the reasonable chance,
in the view of the market watchers that you're in
touch with, that we could see that terror freight rise
above twenty percent?
Speaker 3 (04:07):
There's definitely concern. Right on the campaign trial, Trump was
talking about sixty percent. So relative to that, we're actually
in a pretty decent spot with what we've had so far.
And you've seen that China's retaliation efforts have been relatively targeted,
you know, focusing on the areas where they feel that
they can cause some pain to Trump's biggest sort of
(04:27):
electoral base, so with the farmers and that kind of thing.
But yes, depending on what China can do and look,
it's sort of said, you know, we're doing plenty on
the fentanyl trade. Now we're really trying here. You know
that you don't believe that these tariffs are justified. It's
probably not going to be enough for the Trump administration.
So there's definitely the possibility that things can ratchet up,
(04:47):
and we'll see, we get April the second the reciprocal terrifts,
will see whether there's anything extra layered on for China
there and what comes after that.
Speaker 2 (04:55):
Paul, I think it's important to point out that overall
high tech stocks in China still seem to be basking
in the glory of that deep seek moment. And I
noticed over the weekend that the Chinese search engine by
Do released two AI models. How much enthusiasm is there
still for tech stocks in China right now?
Speaker 3 (05:13):
Lots of enthusiasm and excitement. Yes, yes, yes, I think
that that's the other thing perhaps I should have mentioned
is sooner. The other thing that's giving the authorities a
little bit, you know, of reason to kind of push this,
but not give the broader economy too much of a push,
because it feels that this can take take growth and
enthusiasm and the markets for that matter, a decent way. Further,
(05:35):
the Chinese tech really seems to be thriving despite some
of the limitations that were put on imports of technology
during the Biden administration, and it's coinciding with a little
bit of a curb in enthusiasm for the US market
as well. So I think that there are some flows
that are coming into Chinese tech and out of US
tech at the moment, a bit of a rebalancing there.
So that's certainly working. And each time, you know, there's
(05:58):
been just this continuing flurry of an and I think
that's one of China's strengths is that competition, which is
really driving the innovation. So although it's caused a lot
of kind of price wars in various parts of the economy,
is also pushing people to be lean, a slicker, faster,
and so the companies that do survive are going to
be looking in very good nick and decent investment opportunities.
(06:19):
It seems to be what the market is saying.
Speaker 2 (06:20):
Away from technology, what other areas of the Chinese equity
market are getting investor attention.
Speaker 3 (06:27):
So right now with this stimulus, people are looking at
the consumers a sector and seeing you know whether there
is going to be a broadening out to companies that
are more focused on the domestic economy. I think that
healthcare as well has been something of a bright spot
of late. And you know, the banks are the ones
that are most closely tied to the economy. If the
(06:49):
PBOZ and the authorities can do enough to help those
banks kind of push out again their net interest margins,
then that can be supportive for those as well. I think,
you know, in general, the other thing that we want
to pay a bit more attention to is that a
lot of the gains so far have been in the
Hong Kong markets rather than the mainland markets. There's been
(07:11):
huge flows from the mainland into Hong Kong. Maybe it's
time to see a little bit of a rebalancing there.
That's what we saw on Friday with the mainland gauge
starting to catch up a little bit on Hong Kong's markets.
So see whether that continues to push through.
Speaker 2 (07:27):
Is this primarily retail money or institutions becoming a little
bit more aggressive as well.
Speaker 3 (07:33):
Hard to see, but probably both. I mean, I think
that the retail consumer would like to have investments outside
of the un in case the currency depreciates significantly during
the ratcheting up of terrace with the US, but at
the same time, return investors have been burned continually, so
(07:54):
they'll be the most flighty if things do to start
to turn south as well. So it needs to be
a little bit of caution there. And you know, there's
still being all of that money that's flowed into bonds
and bond like products that has pushed yields exceptionally low.
And that tells you that there is still the question
of winning hearts and minds, winning that confidence if you
want to continue to see this rally building on where
(08:14):
we are at the moment.
Speaker 2 (08:15):
Paul, before I let you go, the currency seems to
be holding up reasonably well in the face of a
lot of the trade war rhetoric that has been kind
of going back and forth between the US and China,
principally from Washington, going to other places around the world.
How do you explain what the PBOC is doing and
managing the currency.
Speaker 3 (08:34):
It is keeping it very much in check and has
needed to do at the start of the Trump administration.
But what we're seeing now is a weakening of the dollar,
and while or sort of more broadly. And while that's
going on, actually the PBOC is still leaving the UN
in the same place more or less versus the greenback,
and so as a result, on a broader basis, the
(08:57):
UN is just starting to weaken a little bit against
against this peers. And I think really it's all eyes
on the exchange rate with the dollar, because that's all
important as we get into this tariff situation, and people
will be watching to see whether we get strength again
in the dollar and whether that starts to put the
UN on depression, whether the authority starts to ease their
(09:17):
grip and allow it to weaken a little bit to
cushion some of the blow from those tarifs overtime.
Speaker 2 (09:22):
Paul, thank you so much. We'll leave it there. Paul
Dobson is executive editor for Asia Markets, joining us from
our studios in Singapore here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Dek Chrisner.
So we're gearing up for a new trading week in
(09:44):
the States after about of turbulence over the last five
trading days. At one point, the S and P five
hundred entered a correction relative to its February record high,
and for all of last week the S and P
was down two point three percent, and then over the weekend,
Treasury s Secretary Scott Besson said he's not worried about
a market downturn, and he said corrections are healthy, they're normal.
(10:07):
Let's talk about the outlook now with our guest, Joy
Young is with us. She has head of index product
management and marketing at Market Vectors Indexes. Joining from just
outside here in New York City, Joy, thank you for
being with us. Is this volatility all about US tariff policy?
Speaker 4 (10:25):
Well, the volatility is coming from every source, and I
think it's all about the headlines right now. But I
think one thing investors must ultimately keep top of mind
is to get some perspective among all this noise that's circulating. So,
you know, one key point that we always highlight is that,
(10:48):
you know, mark is a volatile We've just come off
of two back to back years of twenty percent annualized
return and historically market's only return on average thirteen percent.
So you know, it's not unusual to see drops of
ten percent in any short periods, as we've seen last week,
(11:11):
but it is unusual to see two back to back
years of twenty percent, So I think we should expect
that correction, you know, was happening and was coming. And
the question is is this a correction or are we
entering a bear market?
Speaker 1 (11:27):
And that's kind of unclear.
Speaker 4 (11:29):
But you know, having perspective on everything can help be
a healthy way to you know, start this week and
to really think clearly about how to position your portfolio.
Speaker 2 (11:40):
So I mentioned that Besin was speaking over the weekend.
One of the things that he refused to rule out
was recession. We have heard similar statement from President Trump.
Is a recession kind of worst case in your.
Speaker 4 (11:53):
Mind a recession, it's deflation. But also the worst case
is lose seeing investors losing confidence in the market because
a lot of clearly, you know, in order to be investor,
to stay invested, you really have to have confidence in
your long term strategy. So I think that's ultimately the
(12:16):
worst case because once you lose confidence, you're going to overreact,
You're going to maybe get out of the market, and
we know historically staying invested in focusing on long term
is really the best strategy.
Speaker 2 (12:31):
We had data last Friday from the University of Michigan
showing consumer sentiment now at the lowest level in more
than two years, and inflation expectations during the next five
to ten year time horizon rose to a level of
three point nine percent. That's the highest since February nineteen
ninety three. This has got to be a problematic situation
(12:53):
for the FED, no doubt about it.
Speaker 4 (12:56):
Yeah, so it's a tough road for the FED because
you know, they have to balance you know, what the
administration wants and the economy as well as their inflation target.
But we also know that, you know, there has been
this strong focus on American exceptionalism, and I think people
are starting to reevaluate what that really means. And we've
(13:20):
seen from deep Seek that it was a reminder that
AI is an evolving story and that competition in the
AI industry is certainly robust and dynamic, and innovation can
emerge from everywhere and you know, globally anywhere. And again
the trade terrorists also reminded us that you know, a
(13:44):
protectionist policy and ban can drive competition and innovation abroad.
And we also have to think about the second and
third order impacts of trade terror So, you know, just
to try to forecast.
Speaker 1 (14:00):
What we think will happen with terrorrists.
Speaker 4 (14:02):
You need to forecast what we think will happen to
the you know, response to terrorsts and also the you know,
complicated supply chains that terrorists will have in the long term.
Speaker 2 (14:13):
So we have the FED meeting this week. It's widely
expected that policymakers are going to hold right steady. If
we hear anything from Powell as it relates to the
risk in the economy right now, what do you think
he will tease out.
Speaker 4 (14:27):
I think he's going to hold off and wait for
the data. I think he's you know, it would be
really you know, I think it would be more cautious
for him to really look and have the data as
evidence and support, rather than try to project what, you know,
you know, what might happen, you know, without any of
(14:50):
the support and data, because you know, we just I
don't think anybody knows what's going to happen with the
teriff implementation at this point.
Speaker 1 (14:59):
And you know what happened next week tomorrow.
Speaker 2 (15:03):
You mentioned stagflation a moment ago, and I'm looking at
what happened Friday in the bond market. We had yields
rising just a bit. Is the bond market something that
you're playing in right now, or are you feeling as
though maybe there's too much volatility, particularly at the long
end of the curve.
Speaker 4 (15:21):
To me, it seems like the bond participants have been
a lot more cautious than the equity markets. But then again,
I think we were seeing such an expensive US equity
that it was easy to take some off the top
and really park it somewhere else. And you know, really
where we're seeing investors flow back into is gold, and
(15:45):
gold has last week hit, you know, another all time high,
so that's an indication that people are taking a flight
to safety approach.
Speaker 2 (15:56):
So in terms of the dollar, one of the things
that has happened race with a lot of the rhetoric
around tough talk on tariffs, has been a dollar positive,
although the dollar gave back a little bit of ground
in the Friday session, even though yields were up just
a bit. How do you go about thinking about currencies
right now when you're looking at overall kind of market strategy,
(16:18):
particularly where the dollar is concerned.
Speaker 4 (16:21):
I think definitely part of the dollar weakness has to
do with the uncertainty around the tear so you're seeing
a lot of currency volatility, and again that's you know,
pivoting people to to really look at gold, you know,
as a dollar alternative, and we've seen that with central banks.
(16:42):
We're now starting to see retail flow back into gold ETF.
So I think people are just kind of more cautious
about many of the safe assets that traditionally have been
US treasury US dollars, but now are kind of waiting
to see what's going to play out with you know,
the Trump administration.
Speaker 2 (17:03):
What is the most reliable signal that you can think
of these days?
Speaker 4 (17:08):
It's a hard call, but I think gold has been
pretty reliable because now you're seeing a mix of investors,
you know, central banks, retail investors, investments, Juler. You're seeing
a very strong mix of a diverse base. We also
very much watch our Bitcoin reference rate because it you know, bitcoin,
(17:31):
crypto assets, they trade real time, so it gives us
an indication of investor sentiment, you know, during the weekend
as well as during market, you know market, when markets
are when traditional markets are closed, We're seeing how investors
are reacting in real time.
Speaker 2 (17:48):
When you look at fun flows these days, is there
something that you're using as a guide right now in
terms of tracking the flow of capital.
Speaker 4 (17:57):
Yeah, So many of our indexes are linked to funds
and ETF, so we're watching those fun flows as well
as just ETF fun flows. And then you know, we
you know, watch a lot of the reports that come
out from you know, different ETF kind of source news sources.
Speaker 2 (18:19):
Is there a risk of further downside do you think?
I mean, we stabilized last week. I think for all
of last week the S and P was up about
two point three percent when some buying kind of entered
into the picture after that pullback, Is there still the
risk of more downside? Do you think for the equity market?
Speaker 4 (18:36):
Of course, there's always that risk is always you know
out there markets are volatile, and we've seen pullbacks back
in twenty twenty two of almost fifty percent, so that
you know, we could potentially see that again this year.
But I would say, you know, don't throw everything out
at once. You know there is you know, different ciated
(19:00):
performance within the US markets. Also, you know, people who
overreact this this is a good opportunity to buy something
cheap in the market.
Speaker 2 (19:10):
Joy will leave it there. Thank you so much for
taking the time to chat with us. Joey Yang, head
of Index Product Management and marketing at Market Vector Indexes.
Joining us 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,
(19:33):
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 Bloomberg
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