June 3, 2025 • 18 mins
Left-leaning challenger Lee Jae-myung won South Korea's presidential election, ending three years of conservative rule in a race that was largely a verdict on his ousted predecessor's botched attempt to revive martial law in the longstanding US ally. Lee, a former labor activist, won Tuesday's election with 49.4% of the vote, a comfortable win over Kim Moon-soo of the incumbent People Power Party, according to the final count released by the National Election Commission. The agency, which said voter turnout reached a 28-year high of 79.4%, officially declared Lee as the nation's 21st president at 6:21 a.m. local time on Wednesday. We get more on what's ahead from Rachel Minyoung Lee, Senior Fellow at the Stimson Center's Korea Program. She speaks with Bloomberg's Shery Ahn and Paul Allen.
Plus - Asian stocks rose for the first time in four days after data showed the US labor market is holding up despite concerns President Donald Trump's tariff war is pushing the world economy into a downturn. Just days ahead of the US payrolls report, an unexpected increase in job openings buoyed market sentiment, sending the S&P 500 and the Nasdaq 100 higher. That helped offset investor angst after the Paris-based OECD said Trump's combative trade policies have tipped the world economy into a downturn, with the US among the hardest hit. We get some market perspective from Brad Bernstein, Managing Director at UBS Private Wealth Management.
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 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner. So,
South Korea has elected a new president, while here in
the US the labor market is holding up in the
face of trade war. And in a moment, we'll take
a look at today's market action in the States with
Brad Bernstein. He is portfolio manager at UBS Private Wealth Management.
(00:30):
But we begin this morning in Seoul and the voice
of newly elected President Lee J Mung, speaking through a translator,
ton Chiga, I won't get them with it.
Speaker 3 (00:42):
While politicians may clash over interest and drawing lines between factions,
the people are not bound to follow those divisions. People
are the messer of this nation, and politicians are workers
who are responsible for people's lives. Political crawls may not
be avoidable, but the people don't have to be divided
and hate each other.
Speaker 2 (01:00):
That is President elect Lee J Mung declaring victory in
Tuesday's national election. Now this is seen as a turning
point for South Korea after former President yunsuk yuol's botched
attempt to impose martial law six months ago and a
subsequent constitutional crises. So against the backdrop of the election.
We got the latest reading this morning on Korean consumer inflation.
(01:23):
Prices cooled in May, supporting the case for the Bank
of Korea to continue easing policy settings. Consumer prices in
South Korea rose at an annual rate of one point
nine percent. That compares with a two point one percent
clip in April. Now, the Bank of Korea is seeking
to support an economy increasingly under threat from Donald Trump's
(01:43):
tariff campaign. For a closer look, we heard from Rachel
Minyung Lee. She is senior fellow at the Stimpson Center's
Korea Program. Rachel spoke earlier with Bloomberg, Cherry On and
Paul Allen.
Speaker 4 (01:55):
Rachel, thanks so much for joining us. Certainly wasting no time.
The new president's been sworn and already he's got a
number of competing demands on both the domestic and international agenda.
What's the first priority for President Lee?
Speaker 5 (02:10):
I think, well, he's got a number of priorities. On
the domestic front. Lee has promised to grow the economy.
I think he will focus on various economic issues. He
has promised a number of domestic political reforms, so I
think he will focus on those as well. On the
foreign policy agenda. Of course, there are a number of
pending issues between South Korea and the US, such as
(02:34):
tariffs and defense cost sharing.
Speaker 4 (02:37):
Well, it was a tight victory, tied to the most
forecast but decisive nonetheless, but it was interesting that the
two opposition candidates seem to split the conservative vote. Can
you talk to us a little bit about the challenges
that President Lee is going to have when it comes
to uniting a country that was so divided over the
past few months.
Speaker 5 (02:56):
Lee has certainly promised to promote national unity into a
very challenging situation because he is based with a very
divided nation politically. If you look at the map, the
electoral map, on one side, you have everything is blue, right,
all provinces so the Democratic Party, and then the other
(03:17):
side of the map is completely red, so people who
voted for the People Power Party, which is the conservative
party that lost this election. So it really will be
a big challenge for the new president to bring the
country together.
Speaker 1 (03:31):
Yeah, especially when it comes to his support among men
in their twenties. It seems that the younger male voters
in South Korea twenties and thirties there even more conservative
vertive than male in their seventies. What does his demographics
sort of society or look into South Korea tell you
about some of the future policies that we could expect
(03:52):
from the new administration.
Speaker 5 (03:55):
So I think all this again speaks to the divided
nation that that I just mentioned. As you mentioned males
in their early twenties or in their twenties, mostly many
of them voted for other reform parties LEGIONSUK and they
tend to be conservative. On the other hand, do you
have many of the women South Korean women in their
(04:16):
twenties who voted for Hmail who is now just been
sworn as sworn in as president. I think that again
this speaks to the divided nation, and President Lee will
face that challenge of divide, of bridging that gap between
genders and generations, and you know, female gender equality issue
(04:40):
is something that he has promised that he would tackle
as a priority.
Speaker 1 (04:44):
Yeah, he's very popular among young women here in South Korea.
Let's talk a little bit about foreign policy, because of
course that will also be very different from what we
saw from the Unisyol administration. What do you expect to
be the key changes.
Speaker 5 (04:59):
I think the key change will be that President Ly
will probably aim to seek more equidistance policy between the
US and China. Certainly, the Unit administration made it pretty
clear that it was aligning with the US, and it
worked very hard to align many of its policies with
the US. President E Jmong on the campaign trail, has
(05:22):
said that he wanted to mentize with China and with
North Korea as well. So I think what we'll see
is more of an equidistance policy. Now, I don't know
how well that would be taken by the Trump administration
because I think that there will be pressure from Washington
for Seoul to take take sides to make its position
more clear. Also, relations with Japan will probably it probably
(05:49):
not be as strong as as as that relationship was
in Unsungnard's time. The Unit administration worked very hard to
mentize with with Japan. Uh I think that the new
administration in South Korea will try to strike a strike
a more of a balanced approach toward Japan.
Speaker 1 (06:12):
Has cautioned about striking a deal with the US too quickly.
What are we expecting on how he'll approach those trade
negotiations with President Trump.
Speaker 5 (06:24):
I think it'll be interesting to see how he responds
to the various pressures that we can expect from the
Trump Trump administration. So far, the President Trump has not
said much about South Korea, mostly because South Korea did
not have a president. It had acting presidents over the
last six months. Now that an election has taken place,
(06:46):
I think we will see these negotiations moving more quickly.
But I think it's more I think it's a little
difficult to expect at this point or trying to to
to to figure out exactly how quickly the or how
well the new administration of South Koreole will reply will
(07:08):
respond to Washington's demands.
Speaker 4 (07:12):
One of the promises that candidate Ly made was to
make some changes to corporate governance, break the grip of
the family run conglomerates, the chabowls in South Korea. What
are his chances of success then and now that he
has an opportunity to try and enact that agenda.
Speaker 5 (07:28):
Certainly he comes in with a great amount of power.
He has won nearly fifty percent or about fifty percent
of the votes, and we have the highest turnout in
recent in the last twenty eight years, so that speaks
for something. And also the National Assembly is under control
(07:49):
by his party, which is a democratic Party, So I
think he will again. He has talked a lot about
reforms political and economic, and I think he will act
with Lee to act on those promises.
Speaker 4 (08:04):
Just finally, what now for former President Union his supporters,
because of course the former president is still facing charges.
Speaker 5 (08:12):
I think this election outcome was the biggest disappointment for
the PPP supporters, including Yun supporters and you, and still
is a faces that criminal charge of insurrection. And again
I think this goes back to our earlier point about
a earlier point about a very very divided nation. Again,
(08:35):
the opposition parties candidate Kimmunsu still managed to border forty
two percent. Now, still he didn't win, but you know,
that was a huge improvement over twenty seventeen when the
Conservative Party's candidate Hunjimpo at the time only got twenty
four percent of the vote. So so that's that's something
(08:55):
that the new Lee administration will have to.
Speaker 6 (08:58):
Reckon with.
Speaker 1 (09:00):
Racial minon Lee. Good to have you with us, senior
fellow the Simpsons Center's Career Program.
Speaker 2 (09:11):
Welcome back to the Daybreak Asia podcast. I'm dek Krisner.
In the States. On Tuesday, the equity market advanced on
signs the American labor market is holding up despite risk
stemming from the trade war. The government reported an unexpected
increase in the number of job openings. Importantly, we'll get
Friday's data on employment for the month of May. We'll
(09:33):
talk more about that momentarily as we bring into the conversation.
Brad Bernstein. He is managing director at UBS Private Wealth Management.
Brad is on the line from Philadelphia. It's good of
you to make time to chat with me. I mentioned
the JOLT data. This seems to support the Fed's assertion
that the labor market is really in a good place
right now, and maybe it would justify the Fed's maintaining
(09:56):
kind of a wait and see approach. Do you think
they have it right?
Speaker 7 (10:00):
What we continue to see is the hard data continues
to be resilient. You know, we're related to the economy,
related to GDP. You know projections now for the second
quarter out of the Atlanta Fed of potentially four point
six percent GDP up from three point eight for this quarter.
Whether it's the PCE that we got on Friday, that
was evidence that inflation over the last twelve months grew
(10:24):
at the slowest rate in four years, which, by the way,
markets are now pricing in two cuts this year instead
of one. I do think it's been fantastic that the
economy has been holding up, but I believe the Fed
is waiting for clarity on tariff policy. If it wasn't
for the tariff, you know, uncertainty, I think the Fed
(10:47):
would actually be able to start cutting this month, but
we think they'll start cutting in September.
Speaker 2 (10:51):
I don't know how much weight you would put in
anything coming out of the OECD, but today the research
group published a report. It indicated that the combative trade
policies have essentially tipped the world into an economic downturn.
Now for the US, the oe c D is expecting
GDP this year to decelerate sharply to a rate of
(11:13):
around one point six percent. I'm curious as to whether
or not you become a little concerned when you hear
that fact.
Speaker 6 (11:19):
Yes and no.
Speaker 7 (11:20):
What we've seen if you take a look at what
Wall Street is saying about where we'll be at the
end of the year with the market, these numbers continue
to go up and down with all the announcements of trade.
So what the OCD is saying is that if you
know where we are right Now, with Paris continue to
stay the course and they don't get better and decline,
(11:41):
then yeah, of course the.
Speaker 6 (11:43):
Growth is going to slow.
Speaker 7 (11:44):
So you're either on the camp that Paris are going
to stay high or or you're you're you know, you
think that the administration wants to continue to move in
the reduction of the lower number on tiis, which in
that case, you know, votes better for the economy in
the market. So it just really depends on what side
of the fence you are with where the administration is
(12:05):
going to end up.
Speaker 2 (12:06):
I want to get your sense of US fiscal policy
right now. I've been talking a lot about that big
beautiful bill. It's in the Senate up for debate, and
today Elon Musk was publicly criticizing the legislation, calling it
a budget busting abomination. Now, yes, it is forecast to
add around two and a half trillion to the federal
(12:26):
deficit over a decade. Do you expect this to sail
through the Senate or is there going to be a
lot of horse trading here?
Speaker 7 (12:34):
Well, it appears as of the moment they don't have
the Republican support to prove as it is.
Speaker 6 (12:40):
It will have to be moderated.
Speaker 7 (12:42):
If you listen to Ran Paul this morning, who was
on TV talking about it, and the President responded in
his unique way, and whether you look at you listen
to what Elon Musk said, or you listen to what
Senator Johnson said. They don't have the Republican support, so
they're going to have to amend this bill to be
(13:03):
more friendly to the deficit in order to pass. So
it'll be interesting to see what comes about over the
next few days, a few weeks.
Speaker 2 (13:09):
Would you expect the bond vigilantes to emerge to kind
of push back on anything that may be super aggressive
in adding to the deficit.
Speaker 7 (13:17):
It depends, you know, once again, it depends on where
this packs extension of cuts ends up. You know, if
as is, I think yields can move higher or steep in.
If the Fed starts cutting later this year, and if
they redo it to a degree and they don't add
(13:38):
as much debt, yields can come down. So it'll be
interesting to see what comes out of the you know,
the Senate and the reaction by the bond market based
on how much debt it adds to our how much
extra debt it ads to the.
Speaker 2 (13:50):
Deficit, mention the fact that we do get the monthly
employment report from May on Friday. I think an hour
survey economist predict growth and job of around one hundred
and thirty thousand. The unemployment rate is expected to hold
steady at around four point two percent. How does that
square with the research team at UBS.
Speaker 6 (14:10):
I think that's right about in line.
Speaker 7 (14:12):
But at the end of the day, you know, in
order to get the FED cuts, I believe we need
the trade war to continue to move in the direction
that it's been moving. We need, you know, hopefully on Friday,
there'll be some positive.
Speaker 6 (14:24):
Developments with China.
Speaker 7 (14:26):
Hopefully in the very near future there'll be positive developments
with the EU, and worst case scenarios continue to be
removed and better case scenarios can considered continue to be
priced in, and depending on those outcomes over the next
week or two, I think markets have a great chance
of moving higher into the end of the year based
on the fact of how how well the hard data
(14:47):
is held up, how well.
Speaker 6 (14:49):
Earnings have held up.
Speaker 7 (14:50):
We continue to see companies guide higher as we did
tonight in the technology space, and we think AI growth
will power earnings growth in the next couple of years.
Speaker 2 (15:01):
So, Brad, I'm curious, is AI the area where you're
still finding opportunity or are there other corners of the
market that you are attracted to right now?
Speaker 7 (15:11):
Well, I think AI got You know, the technology sector
was the worst place to be in the April sell off,
and it's been the best place to be since the
April bottom. Interestingly, and you know everyone's talking about international.
International had its day in the first quarter, but if
you look at the lows of April to today, the
US markets have actually outperformed the world and led by
(15:32):
technology dramatically. So if that trade continues, I think from
these levels into the end of the year, US market's
outperformed led by tech.
Speaker 2 (15:41):
If I ask you to diversify a portfolio away from
tech so that you weren't so heavily concentrated on technology,
what would be the first industry group that you would
want to include in that?
Speaker 7 (15:53):
So we want to be diversified in large cap, MidCap,
small cap, in multiple sectors, and yes, have some exposure international,
but overweight large cap US equities. You know, and what
we've been seeing is is that in the industrial and
power company in the industrial sector and power companies that
(16:13):
sell the data centers reiterated their solid outlook, and obviously
that bodes well for AI. So there's a lot of
ways to see the growth and and what's amazing about
AI is that you don't have to own just technology
to benefit from it.
Speaker 6 (16:25):
It's really impacting almost almost every sector.
Speaker 2 (16:29):
How are you viewing the bond market these days?
Speaker 7 (16:33):
I think if you are conservative, you get paid to
be short. You know you can, you can, you could
stay it under two year. US treasuries have no risk,
have no interest rate risk, have no credit risk, and
get paid in the low fours.
Speaker 6 (16:47):
So that that's a great place to hie out.
Speaker 7 (16:49):
But you know, depending on the outcome of the trade
war or if you want to call it that that
we're in right now, and the and the outcome of
the tax extension and what they do and how they
impact that bonds. You know, interest rates on bonds right
now yield on bombs of the highest they've been in
eighteen years. So we've been really adding a lot of money,
specifically in tax freeze. You know, in the intermediate space.
(17:13):
I think, you know, getting clipping four to four and
a half yield right now, tax free is a great
place to be.
Speaker 2 (17:19):
Brad We'll leave it there. Brad Bernstein is Managing director
at UBS Private Wealth Management. On the line from Philadelphia
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
(17:40):
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 Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner. So,
South Korea has elected a new president, while here in
the US the labor market is holding up in the
face of trade war. And in a moment, we'll take
a look at today's market action in the States with
Brad Bernstein. He is portfolio manager at UBS Private Wealth Management.
(00:30):
But we begin this morning in Seoul and the voice
of newly elected President Lee J Mung, speaking through a translator,
ton Chiga, I won't get them with it.
Speaker 3 (00:42):
While politicians may clash over interest and drawing lines between factions,
the people are not bound to follow those divisions. People
are the messer of this nation, and politicians are workers
who are responsible for people's lives. Political crawls may not
be avoidable, but the people don't have to be divided
and hate each other.
Speaker 2 (01:00):
That is President elect Lee J Mung declaring victory in
Tuesday's national election. Now this is seen as a turning
point for South Korea after former President yunsuk yuol's botched
attempt to impose martial law six months ago and a
subsequent constitutional crises. So against the backdrop of the election.
We got the latest reading this morning on Korean consumer inflation.
(01:23):
Prices cooled in May, supporting the case for the Bank
of Korea to continue easing policy settings. Consumer prices in
South Korea rose at an annual rate of one point
nine percent. That compares with a two point one percent
clip in April. Now, the Bank of Korea is seeking
to support an economy increasingly under threat from Donald Trump's
(01:43):
tariff campaign. For a closer look, we heard from Rachel
Minyung Lee. She is senior fellow at the Stimpson Center's
Korea Program. Rachel spoke earlier with Bloomberg, Cherry On and
Paul Allen.
Speaker 4 (01:55):
Rachel, thanks so much for joining us. Certainly wasting no time.
The new president's been sworn and already he's got a
number of competing demands on both the domestic and international agenda.
What's the first priority for President Lee?
Speaker 5 (02:10):
I think, well, he's got a number of priorities. On
the domestic front. Lee has promised to grow the economy.
I think he will focus on various economic issues. He
has promised a number of domestic political reforms, so I
think he will focus on those as well. On the
foreign policy agenda. Of course, there are a number of
pending issues between South Korea and the US, such as
(02:34):
tariffs and defense cost sharing.
Speaker 4 (02:37):
Well, it was a tight victory, tied to the most
forecast but decisive nonetheless, but it was interesting that the
two opposition candidates seem to split the conservative vote. Can
you talk to us a little bit about the challenges
that President Lee is going to have when it comes
to uniting a country that was so divided over the
past few months.
Speaker 5 (02:56):
Lee has certainly promised to promote national unity into a
very challenging situation because he is based with a very
divided nation politically. If you look at the map, the
electoral map, on one side, you have everything is blue, right,
all provinces so the Democratic Party, and then the other
(03:17):
side of the map is completely red, so people who
voted for the People Power Party, which is the conservative
party that lost this election. So it really will be
a big challenge for the new president to bring the
country together.
Speaker 1 (03:31):
Yeah, especially when it comes to his support among men
in their twenties. It seems that the younger male voters
in South Korea twenties and thirties there even more conservative
vertive than male in their seventies. What does his demographics
sort of society or look into South Korea tell you
about some of the future policies that we could expect
(03:52):
from the new administration.
Speaker 5 (03:55):
So I think all this again speaks to the divided
nation that that I just mentioned. As you mentioned males
in their early twenties or in their twenties, mostly many
of them voted for other reform parties LEGIONSUK and they
tend to be conservative. On the other hand, do you
have many of the women South Korean women in their
(04:16):
twenties who voted for Hmail who is now just been
sworn as sworn in as president. I think that again
this speaks to the divided nation, and President Lee will
face that challenge of divide, of bridging that gap between
genders and generations, and you know, female gender equality issue
(04:40):
is something that he has promised that he would tackle
as a priority.
Speaker 1 (04:44):
Yeah, he's very popular among young women here in South Korea.
Let's talk a little bit about foreign policy, because of
course that will also be very different from what we
saw from the Unisyol administration. What do you expect to
be the key changes.
Speaker 5 (04:59):
I think the key change will be that President Ly
will probably aim to seek more equidistance policy between the
US and China. Certainly, the Unit administration made it pretty
clear that it was aligning with the US, and it
worked very hard to align many of its policies with
the US. President E Jmong on the campaign trail, has
(05:22):
said that he wanted to mentize with China and with
North Korea as well. So I think what we'll see
is more of an equidistance policy. Now, I don't know
how well that would be taken by the Trump administration
because I think that there will be pressure from Washington
for Seoul to take take sides to make its position
more clear. Also, relations with Japan will probably it probably
(05:49):
not be as strong as as as that relationship was
in Unsungnard's time. The Unit administration worked very hard to
mentize with with Japan. Uh I think that the new
administration in South Korea will try to strike a strike
a more of a balanced approach toward Japan.
Speaker 1 (06:12):
Has cautioned about striking a deal with the US too quickly.
What are we expecting on how he'll approach those trade
negotiations with President Trump.
Speaker 5 (06:24):
I think it'll be interesting to see how he responds
to the various pressures that we can expect from the
Trump Trump administration. So far, the President Trump has not
said much about South Korea, mostly because South Korea did
not have a president. It had acting presidents over the
last six months. Now that an election has taken place,
(06:46):
I think we will see these negotiations moving more quickly.
But I think it's more I think it's a little
difficult to expect at this point or trying to to
to to figure out exactly how quickly the or how
well the new administration of South Koreole will reply will
(07:08):
respond to Washington's demands.
Speaker 4 (07:12):
One of the promises that candidate Ly made was to
make some changes to corporate governance, break the grip of
the family run conglomerates, the chabowls in South Korea. What
are his chances of success then and now that he
has an opportunity to try and enact that agenda.
Speaker 5 (07:28):
Certainly he comes in with a great amount of power.
He has won nearly fifty percent or about fifty percent
of the votes, and we have the highest turnout in
recent in the last twenty eight years, so that speaks
for something. And also the National Assembly is under control
(07:49):
by his party, which is a democratic Party, So I
think he will again. He has talked a lot about
reforms political and economic, and I think he will act
with Lee to act on those promises.
Speaker 4 (08:04):
Just finally, what now for former President Union his supporters,
because of course the former president is still facing charges.
Speaker 5 (08:12):
I think this election outcome was the biggest disappointment for
the PPP supporters, including Yun supporters and you, and still
is a faces that criminal charge of insurrection. And again
I think this goes back to our earlier point about
a earlier point about a very very divided nation. Again,
(08:35):
the opposition parties candidate Kimmunsu still managed to border forty
two percent. Now, still he didn't win, but you know,
that was a huge improvement over twenty seventeen when the
Conservative Party's candidate Hunjimpo at the time only got twenty
four percent of the vote. So so that's that's something
(08:55):
that the new Lee administration will have to.
Speaker 6 (08:58):
Reckon with.
Speaker 1 (09:00):
Racial minon Lee. Good to have you with us, senior
fellow the Simpsons Center's Career Program.
Speaker 2 (09:11):
Welcome back to the Daybreak Asia podcast. I'm dek Krisner.
In the States. On Tuesday, the equity market advanced on
signs the American labor market is holding up despite risk
stemming from the trade war. The government reported an unexpected
increase in the number of job openings. Importantly, we'll get
Friday's data on employment for the month of May. We'll
(09:33):
talk more about that momentarily as we bring into the conversation.
Brad Bernstein. He is managing director at UBS Private Wealth Management.
Brad is on the line from Philadelphia. It's good of
you to make time to chat with me. I mentioned
the JOLT data. This seems to support the Fed's assertion
that the labor market is really in a good place
right now, and maybe it would justify the Fed's maintaining
(09:56):
kind of a wait and see approach. Do you think
they have it right?
Speaker 7 (10:00):
What we continue to see is the hard data continues
to be resilient. You know, we're related to the economy,
related to GDP. You know projections now for the second
quarter out of the Atlanta Fed of potentially four point
six percent GDP up from three point eight for this quarter.
Whether it's the PCE that we got on Friday, that
was evidence that inflation over the last twelve months grew
(10:24):
at the slowest rate in four years, which, by the way,
markets are now pricing in two cuts this year instead
of one. I do think it's been fantastic that the
economy has been holding up, but I believe the Fed
is waiting for clarity on tariff policy. If it wasn't
for the tariff, you know, uncertainty, I think the Fed
(10:47):
would actually be able to start cutting this month, but
we think they'll start cutting in September.
Speaker 2 (10:51):
I don't know how much weight you would put in
anything coming out of the OECD, but today the research
group published a report. It indicated that the combative trade
policies have essentially tipped the world into an economic downturn.
Now for the US, the oe c D is expecting
GDP this year to decelerate sharply to a rate of
(11:13):
around one point six percent. I'm curious as to whether
or not you become a little concerned when you hear
that fact.
Speaker 6 (11:19):
Yes and no.
Speaker 7 (11:20):
What we've seen if you take a look at what
Wall Street is saying about where we'll be at the
end of the year with the market, these numbers continue
to go up and down with all the announcements of trade.
So what the OCD is saying is that if you
know where we are right Now, with Paris continue to
stay the course and they don't get better and decline,
(11:41):
then yeah, of course the.
Speaker 6 (11:43):
Growth is going to slow.
Speaker 7 (11:44):
So you're either on the camp that Paris are going
to stay high or or you're you're you know, you
think that the administration wants to continue to move in
the reduction of the lower number on tiis, which in
that case, you know, votes better for the economy in
the market. So it just really depends on what side
of the fence you are with where the administration is
(12:05):
going to end up.
Speaker 2 (12:06):
I want to get your sense of US fiscal policy
right now. I've been talking a lot about that big
beautiful bill. It's in the Senate up for debate, and
today Elon Musk was publicly criticizing the legislation, calling it
a budget busting abomination. Now, yes, it is forecast to
add around two and a half trillion to the federal
(12:26):
deficit over a decade. Do you expect this to sail
through the Senate or is there going to be a
lot of horse trading here?
Speaker 7 (12:34):
Well, it appears as of the moment they don't have
the Republican support to prove as it is.
Speaker 6 (12:40):
It will have to be moderated.
Speaker 7 (12:42):
If you listen to Ran Paul this morning, who was
on TV talking about it, and the President responded in
his unique way, and whether you look at you listen
to what Elon Musk said, or you listen to what
Senator Johnson said. They don't have the Republican support, so
they're going to have to amend this bill to be
(13:03):
more friendly to the deficit in order to pass. So
it'll be interesting to see what comes about over the
next few days, a few weeks.
Speaker 2 (13:09):
Would you expect the bond vigilantes to emerge to kind
of push back on anything that may be super aggressive
in adding to the deficit.
Speaker 7 (13:17):
It depends, you know, once again, it depends on where
this packs extension of cuts ends up. You know, if
as is, I think yields can move higher or steep in.
If the Fed starts cutting later this year, and if
they redo it to a degree and they don't add
(13:38):
as much debt, yields can come down. So it'll be
interesting to see what comes out of the you know,
the Senate and the reaction by the bond market based
on how much debt it adds to our how much
extra debt it ads to the.
Speaker 2 (13:50):
Deficit, mention the fact that we do get the monthly
employment report from May on Friday. I think an hour
survey economist predict growth and job of around one hundred
and thirty thousand. The unemployment rate is expected to hold
steady at around four point two percent. How does that
square with the research team at UBS.
Speaker 6 (14:10):
I think that's right about in line.
Speaker 7 (14:12):
But at the end of the day, you know, in
order to get the FED cuts, I believe we need
the trade war to continue to move in the direction
that it's been moving. We need, you know, hopefully on Friday,
there'll be some positive.
Speaker 6 (14:24):
Developments with China.
Speaker 7 (14:26):
Hopefully in the very near future there'll be positive developments
with the EU, and worst case scenarios continue to be
removed and better case scenarios can considered continue to be
priced in, and depending on those outcomes over the next
week or two, I think markets have a great chance
of moving higher into the end of the year based
on the fact of how how well the hard data
(14:47):
is held up, how well.
Speaker 6 (14:49):
Earnings have held up.
Speaker 7 (14:50):
We continue to see companies guide higher as we did
tonight in the technology space, and we think AI growth
will power earnings growth in the next couple of years.
Speaker 2 (15:01):
So, Brad, I'm curious, is AI the area where you're
still finding opportunity or are there other corners of the
market that you are attracted to right now?
Speaker 7 (15:11):
Well, I think AI got You know, the technology sector
was the worst place to be in the April sell off,
and it's been the best place to be since the
April bottom. Interestingly, and you know everyone's talking about international.
International had its day in the first quarter, but if
you look at the lows of April to today, the
US markets have actually outperformed the world and led by
(15:32):
technology dramatically. So if that trade continues, I think from
these levels into the end of the year, US market's
outperformed led by tech.
Speaker 2 (15:41):
If I ask you to diversify a portfolio away from
tech so that you weren't so heavily concentrated on technology,
what would be the first industry group that you would
want to include in that?
Speaker 7 (15:53):
So we want to be diversified in large cap, MidCap,
small cap, in multiple sectors, and yes, have some exposure international,
but overweight large cap US equities. You know, and what
we've been seeing is is that in the industrial and
power company in the industrial sector and power companies that
(16:13):
sell the data centers reiterated their solid outlook, and obviously
that bodes well for AI. So there's a lot of
ways to see the growth and and what's amazing about
AI is that you don't have to own just technology
to benefit from it.
Speaker 6 (16:25):
It's really impacting almost almost every sector.
Speaker 2 (16:29):
How are you viewing the bond market these days?
Speaker 7 (16:33):
I think if you are conservative, you get paid to
be short. You know you can, you can, you could
stay it under two year. US treasuries have no risk,
have no interest rate risk, have no credit risk, and
get paid in the low fours.
Speaker 6 (16:47):
So that that's a great place to hie out.
Speaker 7 (16:49):
But you know, depending on the outcome of the trade
war or if you want to call it that that
we're in right now, and the and the outcome of
the tax extension and what they do and how they
impact that bonds. You know, interest rates on bonds right
now yield on bombs of the highest they've been in
eighteen years. So we've been really adding a lot of money,
specifically in tax freeze. You know, in the intermediate space.
(17:13):
I think, you know, getting clipping four to four and
a half yield right now, tax free is a great
place to be.
Speaker 2 (17:19):
Brad We'll leave it there. Brad Bernstein is Managing director
at UBS Private Wealth Management. On the line from Philadelphia
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
(17:40):
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
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.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.