April 17, 2025 • 17 mins
Japanese stocks rose in the early Friday session as expectations for progress in trade negotiations between the US and the European Union supported automotive-related sectors. Most Asian markets are shut for the Good Friday holiday. Data released Friday showed Japan's consumer inflation advanced last month, supporting the central bank's stance on a gradual rate hike path before US tariff measures clouded the economic outlook. We speak with Mary Nicola, Bloomberg MLIV Strategist in Singapore.
Stateside - a rebound in US stocks evaporated this week after Chair Jerome Powell pushed back on the idea of the Federal Reserve stepping in to bolster markets, rankling President Donald Trump who touted a smattering of deals Thursday. We cap off the trading week with insights from James Demmert, Founder and Chief Investment Officer at Main Street Research.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner in Asia.
Today the spotlight is going to focus primarily on Japan, China,
and South Korea on the final trading day of the week.
That's because former Commonwealth countries will be closed for good Friday. Volume,
I think it's fair to say will likely be lighter
than usual across global markets, and that could produce some
(00:31):
exaggerated moves. In a moment, we'll look at the price
action here in the US with James demmert CIO at
Main Street Research. But we begin this morning in Singapore.
Joining me now is Bloomberg m Live strategist and friend
of the show, Mary Nikola. She's on the line from
the Lion City. I want to talk about Japan first,
and we can focus in a moment on trade talks
(00:52):
between the Trump administration and members of the Japanese delegation
that happened to be in Washington this week. Can we
talk about the latest inflation data for Japan? What are
you seeing right now?
Speaker 1 (01:04):
Yeah, there's obviously price pressures that are still there. So
if you look at inflation X food and energy, you're
seeing that the numbers are around two point nine percent
for Japan, that seems quite high, especially given the route
of deflation that we've had for so many years and
now that we've seen and now we're seeing inflation pick up.
The problem is for Japan is that the tightening cycle
(01:27):
is likely delayed for some time, especially because of the
trade uncertainty so boj Governor Uada has repeatedly said that,
you know, there's a lot of uncertainty, and the markets
have almost completely wiped out expectations of further tightening. So
for example, probably a month ago, we were looking at
(01:48):
ninety basis points of hikes over the next year, and
now we're looking at sixteen. So it just shows you
the expectations that traders are seeing for the Bank of Japan.
And that's and obviously that a lot of that just
still hinges on trade policy.
Speaker 2 (02:03):
Yeah, and I mentioned the fact that the Japanese trade
delegation was in Washington this week. Obviously the primary objective
is to come to some type of understanding, maybe to
strike a deal in the near term that would alleviate
a lot of the concern about economic weakness, particularly when
you look at companies that deal and steal and in
the automobile industry. Is there a sense if these tariffs
(02:25):
were to remain in place for a while, is there
a sense of how damaging that could be to the
overall economy.
Speaker 3 (02:31):
Yeah.
Speaker 1 (02:31):
I think the key thing for what we're seeing with Japan,
and that is going to remain under scrutiny is Japan
is obviously a close ally of the United States. So
how the US deals with Japan will be indicative of
how it deals with other allies, and I think that's
the key thing. So if we're looking that they're going
to remain punitive, then I think market sentiment is just
(02:53):
going to worsen as a result because Japan isn't getting
a good deal, And if an ally isn't, then who
exactly will which wor since the potential implications for what
is happening between China and the US. So even if
you get, let's say, for Japan, a good deal, there's
still some broader implications of a slowdown in growth just
(03:15):
because you have tensions between the world's two largest economies,
the US and China, And as long as that means
in place, that does have broader implications on the rest
of the world. And specifically for here in Asia where
a lot of these economies are more export oriented, so.
Speaker 2 (03:33):
You would know better than I. Yesterday we learned that
as a part of the meetings that were taking place
between the Trump administration and the Japanese trade delegation, there
was no mention of the currency. What would the Trump
administration ultimately like to see Ian dollar yen? Do you think?
Speaker 1 (03:49):
Yeah, they would love to see dollar yen a lot
lower from here, even though we've come a long way,
we're hovering around one forty two. And if you remember,
just a month ago, we were in one fifties or
so when we were talking about it reaching back to
one sixty. Now the market chatter is all about moving
to one thirty. And granted, there is this whole focus
(04:13):
on the yen moving in that direction, and it comes
part of the deal, and I think a lot of
it has to do with if you look at it
from a real effective exchange rate basis and how is
performing against its trading partners. The yen is quite undervalued
on a number of different metrics, so it does warrant
(04:35):
and it could allow for some appreciation. That's quite evident
with where it stands from that from the valuation perspective,
but at the same time it's very punitive. So if
you have tariffs on top of it and then you
have an appreciating currency, that's not good for the economy.
Speaker 2 (04:52):
One of the stories that we were talking about here
in the States today Mary is President Trump saying that
he could force J. Powell from his position as FED chairman.
And it didn't stop there. Trump rebuked the notion that
the FED is independent. Can you give me a sense
of the reaction that you're hearing in Asia to these remarks.
Speaker 1 (05:11):
I think it would definitely spook markets in the sense
of what we saw in the bond raut earlier. I
think it exacerbates it because it's always been seen as
the FED is independent from the administration. Once you start
calling the FED independence into question, that just puts greater
stress on the bond market, and bondvigitalantes are likely to
(05:33):
come out in full force as a result. So I
think it's quite a tricky situation to highlight some of
these things out in public, because it does spark fear
of how policy and policy credibility comes into play. And
of course we've already seen a transition away from US
assets because of policy credibility, because a lot of the
(05:54):
policy uncertainty is stemming from the US, and so you're
seeing the impact of of coming through on US equities,
on US bonds as a result, and that shift that
we're seeing into let's say, for example, the Euro, the
Swiss franc, and the Japanese yen as a result. So
I think that notion, especially if the Fed's credibility comes
(06:15):
into question, is only going to accelerate that shift away
from US assets into the likes of the Euro and
the Swiss frig.
Speaker 2 (06:25):
Before I let you go, I want to just get
your thoughts on China, the degree to which this tariff
policy is going to have an adverse impact on the
economy and what the government in Beijing is prepared to
do to support the economy. Do we have any more
detail on that?
Speaker 1 (06:40):
Not really, So we've had a lot of sound bites,
and the equity markets just at this point needs a
lot more than sound bites. So Q one GDP was strong,
but a lot of that you can credit to front
loading on exports ahead of the tariffs, and of course
now it's just seen as backward looking. So now the
focus is on what is happening to the Chinese economy,
(07:02):
especially with very punitive tariffs in place, and I think
unless we see some sort of actionable policy in terms
of whether it's physical or monetary, I think you're going
to see pressure continuing on Chinese equities. But I think
also the other thing too to focus on, and that's
been a big focus here in Asia is on the
(07:23):
CNY and the ongoing depreciation in the currency, and I
think you'll still see that orderly decline, nothing too drastic.
There have been some speculating of a thirty percent devaluation
that is obviously would spark greater instability, greater volatility, not
something that policymakers want, nor have they ever wanted any
(07:48):
sort of significant instability that would cause outflows in particular.
So I think what you'll see is a gradual decline
in the CNY to continue.
Speaker 2 (07:58):
All right, Mary, good stuff, Thank you. We'll leave it there.
Enjoy the weekend. Mary Nicola there, Bloomberg Markets Live strategist
joining us from Singapore here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
(08:20):
It was a mixed day for the US equity market
before good Friday, when American markets will be closed, and
the benchmark seems to have settled into an uneasy calm
after a period of high volatility. Now some of the
market have sensed a bit of foreboding that this calm
will not last. Let's take a closer look. Joining me
now is James Demmert. He is the chief investment officer
(08:43):
at main Street Research. James, thank you so much for
joining us. I think it's obvious that market psychology has
been dominated by mister Trump's trade war. The big question
one at least, seems to be on the degree to
which this tariff policy has undermined confidence not only in
the our kind economy, but in risk assets as well.
(09:03):
What is your sense right now of where we are to.
Speaker 4 (09:05):
Be with you again, Doug, and our sense is that
the market was way overdue for normal correction, which turned
into something much worse when those tariff announcement came out
much more dramatic than anyone expected, and that's why you
saw the S and P five hundred tumble to level
of five thousand, and that did spark a lot of fear.
(09:27):
And you know, in our view, probably the kind of
barishness that you see at market bottoms.
Speaker 3 (09:33):
So since we've bounced off.
Speaker 4 (09:35):
Those levels, there is definitely an uneasy feeling amongst investors.
I think a lot of people are worried that we're
going to go down to that level again, and maybe
much lower. In our view, the worst is probably behind
us relative to the tariffs anyway, in the market level,
but we might.
Speaker 3 (09:53):
Retest those levels.
Speaker 4 (09:54):
But you know, most importantly here, I think investors should
recognize from wherever the market gets stable, it starts to
go up again, it's probably going to be led by
a different group of stocks than what we saw last
year or the year before.
Speaker 2 (10:06):
What is your sense about recession and whether or not
we're going to have an inflationary shock and maybe a
combination that leads to stagflation.
Speaker 4 (10:15):
You know, stagflation is really the buzzword, and we think
that because it's so talked about, it's probably a lower risk,
and then there's always the possibility of a recession. And
our view when we really look at tariffs, I think
this is important for investors to consider. Even with the
extreme level of tariff's pre negotiating, that would shave in
(10:38):
our view, about three quarters or percent off a GDP
now right now, We're growing at two and a half
percent annually, so that takes us down, let's just say,
to one and a half or one percent growth, It
really doesn't take us to stall recession recession levels. So
our view is that a, yes, this will slow us
(10:59):
growth both, but not to recession levels. And even if
it got near there, Doug, let's say the labor market
really starts to crumble. The FED has got more than
enough ammunition to do things with the balance sheet or
cut rates, and I think they would to avoid any
sort of recession. So that's why I think investors want
to be careful here of you know, getting completely liquidated
(11:21):
from stocks, because the idea of recession is probably out
of the out of the out of the game as
far as we can see.
Speaker 2 (11:29):
So you're talking about leadership changing, and I'm curious what
that looks like. I mean, are there areas of the
market now that you feel are more attractive, let's say,
than they were prior to this corrective phase that we
were in.
Speaker 3 (11:42):
Yes, And you know, I consider it a new world order.
Speaker 4 (11:45):
You know, it's you've got tariffs that are not going
to come off certain industries and sectors, and I think
those are the things that investors need to avoid, and
that where it's really acute is in the industrial stocks
such as Caterpillar that sells products all over the world,
or the autos. I'm sure those are going to be
very difficult, but if you think about it, at least
(12:06):
in the US. And we're also big advocates of investing
outside the US, and that's another thing that'll be different
than what we saw in the last couple of years.
But in the US, you look at companies like in
the financials, they are pretty much immune to tariffs, and
that would be anything like a JP Morgan.
Speaker 3 (12:24):
Or Berkshire Hathaway.
Speaker 4 (12:26):
Look at companies in the telecommunication space like T Mobile.
There's a lot of companies out there, McKesson and the
drug industry that are completely not affected by this. So
unlike some of the bad markets you and I have
gone through where it's a full blown recession, everything falls,
we think this is really a tariff related situation and
if you're selective, you can find companies that will benefit
(12:50):
or do fine through this, and that's kind of what
we're seeing. And then of course we think investors should
be allocated outside the US, which I'm happy to chat
about as well.
Speaker 2 (13:00):
So before we go there, I'm curious to get your
sense on the period of time where the market can
tolerate a level of uncertainty as these negotiations get worked out.
What's interesting is whether or not there's a point when
the passage of time becomes problematic when no resolution has
been brought about.
Speaker 3 (13:20):
I'm not sure.
Speaker 4 (13:22):
And one of the things that I would would consider,
as you look at it as a market of stocks,
not a stock market. During the last you know, let's
say a few weeks, you see companies like McKesson acting gray.
You see companies like Netflix which reported obviously tonight and
had great numbers and stocks up six percent in.
Speaker 3 (13:41):
The after hours.
Speaker 4 (13:42):
We think that's that is a microcosm of the next
six months. If there was still uncertainty. You've got to
be not a passive investor. I don't even think an
index investor, but being maybe a stock picker.
Speaker 3 (13:54):
Which is kind of our kind of market.
Speaker 4 (13:57):
And there are great opportunities because a lot of these
stocks are immune, as you know, have been sold off
pretty dramatically, and that spells opportunity to step in. Yes,
it takes courage when you know the news in general
is so negative.
Speaker 3 (14:11):
But if you look at some of these.
Speaker 4 (14:12):
Businesses, they're pretty much immune to this and they're presenting
great opportunities.
Speaker 2 (14:17):
Okay, so let's circle back now and talk a little
bit about the opportunities that you see offshore. Talk to
me about Asia first, Which markets or jurisdictions do you favor.
Speaker 4 (14:27):
Well, we like develop markets because of liquidity, particularly when
you're in an uncertain world. So that draws us to Japan,
it draws us to China, and I know some people think, well, gosh, China,
Well that's right in the crosshairs. But if you look
at individual companies, particularly those that are well developed and
have liquidity, like BYD the electric vehicle operator.
Speaker 3 (14:50):
You know, they don't sell.
Speaker 4 (14:52):
Those those automobiles in the US, but they have significant
market share in China and in Europe, which will probably
to trade. So that's a great example there. I also
would look at great companies in Japan as another way
to find liquidity, in great brands, companies like Atachi. Now
(15:13):
there could be tariff issues with some of those stocks,
but many of them have fallen way further certainly discounting
whatever tariff implications there may be.
Speaker 2 (15:24):
I want to get your senses to whether or not
you feel because of this trade war that's been happening,
particularly between Washington, let's call it Asia more broadly, it's
not just Beijing. I mean Tokyo was in the crosshairs
as well, and the Japanese trade delegation was just at
the White House the other day. Do you think this
kind of the way in which the Trump administration has
(15:46):
approached this has damaged those relationships beyond the point of
maybe a trust level that was there pre tariff.
Speaker 4 (15:55):
I do, And I also think that it's created a
distrust among investors outside the US, and I think that's
something as investors in general, we want to consider what
is the excitement about investing in the US. I think
that shine has worn off, and I think that exceptionalism
that people talked about, you know, maybe a thing of
(16:17):
the past while this goes on.
Speaker 2 (16:18):
At least, are you fully invested right now or you're
sitting on a little bit of dry powder.
Speaker 4 (16:23):
We're about twenty percent under invested, and we're using that
as an opportunity to find value in the continued volatility.
I would expect though, that we'll probably be fully invested
over the next coming weeks, probably not months.
Speaker 2 (16:40):
Okay, we'll leave it there, James, Thank you so much.
James Dembert there. He is the founder also the CIO
at Main Street Research. 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, and geopolitics in the Asia Pacific.
(17:04):
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
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner in Asia.
Today the spotlight is going to focus primarily on Japan, China,
and South Korea on the final trading day of the week.
That's because former Commonwealth countries will be closed for good Friday. Volume,
I think it's fair to say will likely be lighter
than usual across global markets, and that could produce some
(00:31):
exaggerated moves. In a moment, we'll look at the price
action here in the US with James demmert CIO at
Main Street Research. But we begin this morning in Singapore.
Joining me now is Bloomberg m Live strategist and friend
of the show, Mary Nikola. She's on the line from
the Lion City. I want to talk about Japan first,
and we can focus in a moment on trade talks
(00:52):
between the Trump administration and members of the Japanese delegation
that happened to be in Washington this week. Can we
talk about the latest inflation data for Japan? What are
you seeing right now?
Speaker 1 (01:04):
Yeah, there's obviously price pressures that are still there. So
if you look at inflation X food and energy, you're
seeing that the numbers are around two point nine percent
for Japan, that seems quite high, especially given the route
of deflation that we've had for so many years and
now that we've seen and now we're seeing inflation pick up.
The problem is for Japan is that the tightening cycle
(01:27):
is likely delayed for some time, especially because of the
trade uncertainty so boj Governor Uada has repeatedly said that,
you know, there's a lot of uncertainty, and the markets
have almost completely wiped out expectations of further tightening. So
for example, probably a month ago, we were looking at
(01:48):
ninety basis points of hikes over the next year, and
now we're looking at sixteen. So it just shows you
the expectations that traders are seeing for the Bank of Japan.
And that's and obviously that a lot of that just
still hinges on trade policy.
Speaker 2 (02:03):
Yeah, and I mentioned the fact that the Japanese trade
delegation was in Washington this week. Obviously the primary objective
is to come to some type of understanding, maybe to
strike a deal in the near term that would alleviate
a lot of the concern about economic weakness, particularly when
you look at companies that deal and steal and in
the automobile industry. Is there a sense if these tariffs
(02:25):
were to remain in place for a while, is there
a sense of how damaging that could be to the
overall economy.
Speaker 3 (02:31):
Yeah.
Speaker 1 (02:31):
I think the key thing for what we're seeing with Japan,
and that is going to remain under scrutiny is Japan
is obviously a close ally of the United States. So
how the US deals with Japan will be indicative of
how it deals with other allies, and I think that's
the key thing. So if we're looking that they're going
to remain punitive, then I think market sentiment is just
(02:53):
going to worsen as a result because Japan isn't getting
a good deal, And if an ally isn't, then who
exactly will which wor since the potential implications for what
is happening between China and the US. So even if
you get, let's say, for Japan, a good deal, there's
still some broader implications of a slowdown in growth just
(03:15):
because you have tensions between the world's two largest economies,
the US and China, And as long as that means
in place, that does have broader implications on the rest
of the world. And specifically for here in Asia where
a lot of these economies are more export oriented, so.
Speaker 2 (03:33):
You would know better than I. Yesterday we learned that
as a part of the meetings that were taking place
between the Trump administration and the Japanese trade delegation, there
was no mention of the currency. What would the Trump
administration ultimately like to see Ian dollar yen? Do you think?
Speaker 1 (03:49):
Yeah, they would love to see dollar yen a lot
lower from here, even though we've come a long way,
we're hovering around one forty two. And if you remember,
just a month ago, we were in one fifties or
so when we were talking about it reaching back to
one sixty. Now the market chatter is all about moving
to one thirty. And granted, there is this whole focus
(04:13):
on the yen moving in that direction, and it comes
part of the deal, and I think a lot of
it has to do with if you look at it
from a real effective exchange rate basis and how is
performing against its trading partners. The yen is quite undervalued
on a number of different metrics, so it does warrant
(04:35):
and it could allow for some appreciation. That's quite evident
with where it stands from that from the valuation perspective,
but at the same time it's very punitive. So if
you have tariffs on top of it and then you
have an appreciating currency, that's not good for the economy.
Speaker 2 (04:52):
One of the stories that we were talking about here
in the States today Mary is President Trump saying that
he could force J. Powell from his position as FED chairman.
And it didn't stop there. Trump rebuked the notion that
the FED is independent. Can you give me a sense
of the reaction that you're hearing in Asia to these remarks.
Speaker 1 (05:11):
I think it would definitely spook markets in the sense
of what we saw in the bond raut earlier. I
think it exacerbates it because it's always been seen as
the FED is independent from the administration. Once you start
calling the FED independence into question, that just puts greater
stress on the bond market, and bondvigitalantes are likely to
(05:33):
come out in full force as a result. So I
think it's quite a tricky situation to highlight some of
these things out in public, because it does spark fear
of how policy and policy credibility comes into play. And
of course we've already seen a transition away from US
assets because of policy credibility, because a lot of the
(05:54):
policy uncertainty is stemming from the US, and so you're
seeing the impact of of coming through on US equities,
on US bonds as a result, and that shift that
we're seeing into let's say, for example, the Euro, the
Swiss franc, and the Japanese yen as a result. So
I think that notion, especially if the Fed's credibility comes
(06:15):
into question, is only going to accelerate that shift away
from US assets into the likes of the Euro and
the Swiss frig.
Speaker 2 (06:25):
Before I let you go, I want to just get
your thoughts on China, the degree to which this tariff
policy is going to have an adverse impact on the
economy and what the government in Beijing is prepared to
do to support the economy. Do we have any more
detail on that?
Speaker 1 (06:40):
Not really, So we've had a lot of sound bites,
and the equity markets just at this point needs a
lot more than sound bites. So Q one GDP was strong,
but a lot of that you can credit to front
loading on exports ahead of the tariffs, and of course
now it's just seen as backward looking. So now the
focus is on what is happening to the Chinese economy,
(07:02):
especially with very punitive tariffs in place, and I think
unless we see some sort of actionable policy in terms
of whether it's physical or monetary, I think you're going
to see pressure continuing on Chinese equities. But I think
also the other thing too to focus on, and that's
been a big focus here in Asia is on the
(07:23):
CNY and the ongoing depreciation in the currency, and I
think you'll still see that orderly decline, nothing too drastic.
There have been some speculating of a thirty percent devaluation
that is obviously would spark greater instability, greater volatility, not
something that policymakers want, nor have they ever wanted any
(07:48):
sort of significant instability that would cause outflows in particular.
So I think what you'll see is a gradual decline
in the CNY to continue.
Speaker 2 (07:58):
All right, Mary, good stuff, Thank you. We'll leave it there.
Enjoy the weekend. Mary Nicola there, Bloomberg Markets Live strategist
joining us from Singapore here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
(08:20):
It was a mixed day for the US equity market
before good Friday, when American markets will be closed, and
the benchmark seems to have settled into an uneasy calm
after a period of high volatility. Now some of the
market have sensed a bit of foreboding that this calm
will not last. Let's take a closer look. Joining me
now is James Demmert. He is the chief investment officer
(08:43):
at main Street Research. James, thank you so much for
joining us. I think it's obvious that market psychology has
been dominated by mister Trump's trade war. The big question
one at least, seems to be on the degree to
which this tariff policy has undermined confidence not only in
the our kind economy, but in risk assets as well.
(09:03):
What is your sense right now of where we are to.
Speaker 4 (09:05):
Be with you again, Doug, and our sense is that
the market was way overdue for normal correction, which turned
into something much worse when those tariff announcement came out
much more dramatic than anyone expected, and that's why you
saw the S and P five hundred tumble to level
of five thousand, and that did spark a lot of fear.
(09:27):
And you know, in our view, probably the kind of
barishness that you see at market bottoms.
Speaker 3 (09:33):
So since we've bounced off.
Speaker 4 (09:35):
Those levels, there is definitely an uneasy feeling amongst investors.
I think a lot of people are worried that we're
going to go down to that level again, and maybe
much lower. In our view, the worst is probably behind
us relative to the tariffs anyway, in the market level,
but we might.
Speaker 3 (09:53):
Retest those levels.
Speaker 4 (09:54):
But you know, most importantly here, I think investors should
recognize from wherever the market gets stable, it starts to
go up again, it's probably going to be led by
a different group of stocks than what we saw last
year or the year before.
Speaker 2 (10:06):
What is your sense about recession and whether or not
we're going to have an inflationary shock and maybe a
combination that leads to stagflation.
Speaker 4 (10:15):
You know, stagflation is really the buzzword, and we think
that because it's so talked about, it's probably a lower risk,
and then there's always the possibility of a recession. And
our view when we really look at tariffs, I think
this is important for investors to consider. Even with the
extreme level of tariff's pre negotiating, that would shave in
(10:38):
our view, about three quarters or percent off a GDP
now right now, We're growing at two and a half
percent annually, so that takes us down, let's just say,
to one and a half or one percent growth, It
really doesn't take us to stall recession recession levels. So
our view is that a, yes, this will slow us
(10:59):
growth both, but not to recession levels. And even if
it got near there, Doug, let's say the labor market
really starts to crumble. The FED has got more than
enough ammunition to do things with the balance sheet or
cut rates, and I think they would to avoid any
sort of recession. So that's why I think investors want
to be careful here of you know, getting completely liquidated
(11:21):
from stocks, because the idea of recession is probably out
of the out of the out of the game as
far as we can see.
Speaker 2 (11:29):
So you're talking about leadership changing, and I'm curious what
that looks like. I mean, are there areas of the
market now that you feel are more attractive, let's say,
than they were prior to this corrective phase that we
were in.
Speaker 3 (11:42):
Yes, And you know, I consider it a new world order.
Speaker 4 (11:45):
You know, it's you've got tariffs that are not going
to come off certain industries and sectors, and I think
those are the things that investors need to avoid, and
that where it's really acute is in the industrial stocks
such as Caterpillar that sells products all over the world,
or the autos. I'm sure those are going to be
very difficult, but if you think about it, at least
(12:06):
in the US. And we're also big advocates of investing
outside the US, and that's another thing that'll be different
than what we saw in the last couple of years.
But in the US, you look at companies like in
the financials, they are pretty much immune to tariffs, and
that would be anything like a JP Morgan.
Speaker 3 (12:24):
Or Berkshire Hathaway.
Speaker 4 (12:26):
Look at companies in the telecommunication space like T Mobile.
There's a lot of companies out there, McKesson and the
drug industry that are completely not affected by this. So
unlike some of the bad markets you and I have
gone through where it's a full blown recession, everything falls,
we think this is really a tariff related situation and
if you're selective, you can find companies that will benefit
(12:50):
or do fine through this, and that's kind of what
we're seeing. And then of course we think investors should
be allocated outside the US, which I'm happy to chat
about as well.
Speaker 2 (13:00):
So before we go there, I'm curious to get your
sense on the period of time where the market can
tolerate a level of uncertainty as these negotiations get worked out.
What's interesting is whether or not there's a point when
the passage of time becomes problematic when no resolution has
been brought about.
Speaker 3 (13:20):
I'm not sure.
Speaker 4 (13:22):
And one of the things that I would would consider,
as you look at it as a market of stocks,
not a stock market. During the last you know, let's
say a few weeks, you see companies like McKesson acting gray.
You see companies like Netflix which reported obviously tonight and
had great numbers and stocks up six percent in.
Speaker 3 (13:41):
The after hours.
Speaker 4 (13:42):
We think that's that is a microcosm of the next
six months. If there was still uncertainty. You've got to
be not a passive investor. I don't even think an
index investor, but being maybe a stock picker.
Speaker 3 (13:54):
Which is kind of our kind of market.
Speaker 4 (13:57):
And there are great opportunities because a lot of these
stocks are immune, as you know, have been sold off
pretty dramatically, and that spells opportunity to step in. Yes,
it takes courage when you know the news in general
is so negative.
Speaker 3 (14:11):
But if you look at some of these.
Speaker 4 (14:12):
Businesses, they're pretty much immune to this and they're presenting
great opportunities.
Speaker 2 (14:17):
Okay, so let's circle back now and talk a little
bit about the opportunities that you see offshore. Talk to
me about Asia first, Which markets or jurisdictions do you favor.
Speaker 4 (14:27):
Well, we like develop markets because of liquidity, particularly when
you're in an uncertain world. So that draws us to Japan,
it draws us to China, and I know some people think, well, gosh, China,
Well that's right in the crosshairs. But if you look
at individual companies, particularly those that are well developed and
have liquidity, like BYD the electric vehicle operator.
Speaker 3 (14:50):
You know, they don't sell.
Speaker 4 (14:52):
Those those automobiles in the US, but they have significant
market share in China and in Europe, which will probably
to trade. So that's a great example there. I also
would look at great companies in Japan as another way
to find liquidity, in great brands, companies like Atachi. Now
(15:13):
there could be tariff issues with some of those stocks,
but many of them have fallen way further certainly discounting
whatever tariff implications there may be.
Speaker 2 (15:24):
I want to get your senses to whether or not
you feel because of this trade war that's been happening,
particularly between Washington, let's call it Asia more broadly, it's
not just Beijing. I mean Tokyo was in the crosshairs
as well, and the Japanese trade delegation was just at
the White House the other day. Do you think this
kind of the way in which the Trump administration has
(15:46):
approached this has damaged those relationships beyond the point of
maybe a trust level that was there pre tariff.
Speaker 4 (15:55):
I do, And I also think that it's created a
distrust among investors outside the US, and I think that's
something as investors in general, we want to consider what
is the excitement about investing in the US. I think
that shine has worn off, and I think that exceptionalism
that people talked about, you know, maybe a thing of
(16:17):
the past while this goes on.
Speaker 2 (16:18):
At least, are you fully invested right now or you're
sitting on a little bit of dry powder.
Speaker 4 (16:23):
We're about twenty percent under invested, and we're using that
as an opportunity to find value in the continued volatility.
I would expect though, that we'll probably be fully invested
over the next coming weeks, probably not months.
Speaker 2 (16:40):
Okay, we'll leave it there, James, Thank you so much.
James Dembert there. He is the founder also the CIO
at Main Street Research. 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, and geopolitics in the Asia Pacific.
(17:04):
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
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!