July 13, 2025 • 21 mins
President Trump’s latest tariff threats are testing the market’s resilience after the US leader ratcheted up trade measures on everyone from Canada to Brazil to Algeria last week. Despite warnings of complacency, investors have so far behaved as if they’re counting on the president to back down, having seen previous U-turns from his administration. Meantime, the second quarter earnings season is also due to begin this week, with Wall Street expecting the weakest reporting season since mid-2023. We speak to Roderick von Lipsey, managing director, UBS Private Wealth Management.
Plus - for more insight on President Trump's latest tariff moves and a look at the week ahead in Asia, we speak to Mary Nicola, Bloomberg MLIV Strategist in Singapore.
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 Chrisner. So
markets are now dealing with a new thread of tariffs
on US imports. Last Friday, President Trump declared a thirty
percent tariff on goods from both the European Union and
Mexico effective August first. It was just the day before
Trump threatened Canada with a thirty five percent tariff. So
(00:32):
markets have been somewhat well behaved as if they are
counting on mister Trump to back down, having seen you
turns before. The question is whether that remains the best
bet In a moment, we'll travel to Singapore and speak
with Bloomberg Markets Live strategist Mary Nicola. We begin in
the States, though, as we look ahead to second quarter earnings.
(00:52):
Joining me now is Rod Van Lipsey. He is managing
director at UBS Private Wealth Management. On the line from Washington, DC. Rod,
thank you so much for making time to chat with me.
So earnings from a couple of the big banks are
on the list this week, we'll also get numbers from
TSMC and Netflix. I'm curious, how do you feel about
the quality of the results that we're going to see
(01:13):
for Q two.
Speaker 3 (01:14):
You know, this is going to be a very interesting
quarter over quarter year over year look in part because
we go back just to a quarter ago and the
whole tariff scenario really put corporations in a very strange place.
The estimates right now on the street, we're looking at
under five percent earnings for EPs growth year every year.
(01:35):
We at UBS believe are going to come in closer
to about six percent when we look at twenty twenty
five and growing to call it two hundred and sixty
five dollars a share on the S and P five hundred.
I think that this busy week, you know, you're really
going to see some acceleration in the earnings reports, you know,
from Monday Tuesday, Wednesday, the big banks really start to
(01:57):
kick off on Tuesday, and our expectation is that those
estimates are going to beat consensus. They're going to be
pretty strong in one case, because the higher interest rates,
especially for financials, have been very very supportive of NII
and that interest income and that interest margin for these banks.
So we'll see some good numbers there. And I expect
(02:18):
that some of the economic activity has been pulled forward
in this second quarter, especially since tariffs have been threatened
and delayed and postponed, so lots of activity, but it's
going to be a strange one and everyone is going
to be looking at not just the second quarter results,
but what will be the forecast for third quarter and
looking forward.
Speaker 2 (02:37):
Before we leave the banks, I want to ask about
whether trading revenue has the potential to be a real
standout here given the volatility that we had in markets
in the second quarter, whether banks really benefited from that
on the trading side.
Speaker 3 (02:50):
Anecdotally, dug absolutely. And that's why we are not only
sort of very very bullish, if you will, on financials
and the asset manager because we think the trading activity
in this second quarter was just off the charts, especially
during April, and so with that pick up an activity,
with all of that uncertainty and all of the activity
(03:12):
that went around that, I think it's going to be
a pretty strong, strong especially for the broker dealers, is
going to be a very very strong second quarter.
Speaker 2 (03:18):
We mentioned earlier the impact of the tariffs, and I
thought it was very interesting. Last Thursday we heard from
ConAgra the outlook well below expectations, and the company pointed
out that rising cost for tin plate steel used for
food cans due to tariffs is going to have a
very consequential negative impact. Is this something that's going to
(03:39):
be more predominant when we talk about margins? Just how
this begins to manifest.
Speaker 3 (03:44):
It's interesting. The UBS base case is that we're going
to end up somewhere around the fifteen percent, you know,
sort of across the board tariff rate, and that the
consumer is going to be asked to bear the brunt
of much of that, and so that works into our
echnomic forecast numbers. But the commodity prices, quite frankly, are
(04:04):
just all over the charts because of the dramatic uncertainty.
Most of our investors are focused on commodities like gold
and oil and don't dig too far into the commodity indices.
But when we look at commodities, they truly are really
all over the charts because it's very difficult to understand
how the policy and the tariffs and the trade considerations
(04:25):
will affect those utter blank commodities. But I think it
manifests itself at least in our forecasts on inflation that
remains fairly pernicious in stays above the FED state of
two percent.
Speaker 2 (04:39):
Target interesting, and yet with all the risk out there,
we've got an S and P five hundred trading at
twenty four times earnings. Is that a little bit of
a headscratcher for you?
Speaker 3 (04:51):
It truly is, because we have different things, especially if
we look at our ubs macro economic forecasts see for
example GDP growth in the Americas for twenty twenty five,
estimating you know, one and a half percent GDP growth.
But we're looking at CPI or inflation. Can we have
some releases this week that will tell us. But we
(05:13):
see inflation coming in almost to three percent and actually
accelerating into twenty twenty six, and that is directly because
of this concern about how tariffs are going to flow
through to the consumer and how they're going to keep
inflation fairly high. Now, the markets seem to be unfhazed
by the tariff talks. The markets seem to believe that
(05:35):
we're going to get to August first and either we'll
have a favorable outcome or things will get pushed back again,
and so they are completely unfazed. At least if we
look at the you know, at all time highs and
continuing to be there and so on. A macro level.
We think that this bull market that we've been experiencing
continues to have legs, it continues to have momentum, But
(05:57):
the real place to keep an eye out is going
to be the market, because at some point in time,
a lot of the things that were in the big
beautiful bill, a lot of the things that are coming
into the economy because of increasing tariffs, at some point
in time, the bond market is going to give us
a signal. And that's really where we have a cautious outlook.
Speaker 2 (06:15):
So, if you were going to be in the fixed
income space, where do you want to hide out the
belly of the curve or do you want to be
maybe more exposed to the short end. What's the strategy?
Speaker 3 (06:24):
Listen, we think that in the belly of the curve,
and we think that on balance again with our forecasts
looking one year out, with ten year rates coming back
down to four percent, we think that the bond market
provides an opportunity for the long term investor. These are
actually attractive levels, especially when you look at spreads for
(06:45):
high quality municipal bonds for taxable investors in the US,
or corporate corporate bonds. We're seeing an opportunity there to
get nice returns, but that does not mean it's not
going to be volatile in the short term. And that's
the real challenge for the bond investor is to take
a look at it, dick your yield, say this is
the yield that I think is going to work, and
(07:06):
recognize that next week, next month, that might feel like
a bad decision, but by next year you'll be glad
that you're sitting on that high quality paper.
Speaker 2 (07:15):
Does the Big Beautiful Bill at any point in the
future begin to negatively impact the muni market, particularly at
the state level.
Speaker 3 (07:24):
Well, that's a fantastic question, and I think that that
has been structurally appears to be something that's been pushed
down the road a little bit. Doug. I've got to
say that I have not read The Big Beautiful Bill,
and I don't know very many people who have actually
been able to read that book cover to cover. But
it's my understanding that much of the good news has
(07:47):
been baked in and takes immediate effect, and then some
of the ways to pay for that good news have
been pushed back, some of it beyond the midterm elections,
and so that is going to create some challenges. It's
going to create pressure for things that are being put
on states and municipalities. There's been a lot of bond issuance,
especially by municipal issuers there this year to try to
(08:09):
get out in front of this before rates potentially go up.
So I yes, I do think there's some challenges that'll
be ahead, but I don't know that those are near term.
I think those are pushed into twenty twenty six and beyond.
Speaker 2 (08:21):
Okay, fair enough, But I'm wondering whether or not, given
everything that we've been laying out that you're attempted to
look a little offshore right now to remain diversified, do
you want to look at foreign markets.
Speaker 3 (08:32):
Our investors have been the clamoring to understand ways to
diversify against either monetary or fiscal pressures and challenges here
in the US, and so listen. That's why we're seeing
gold prices in the current range. But we're also seeing
lots of great performance out of the international markets. I
think one of the questions is whether the international equity markets,
(08:55):
especially the Eurozone, whether it's it's fully caught up or
is there more room to grow. We think that selectively
looking offshore holding foreign currency holding gold that those are
nice hedges, But when it comes to actually making an
investment that will outperform the US markets, that becomes a
little bit more of a murky question, very very difficult
(09:16):
to us to look at European equity market growth in
US equity market growth, especially when we look at the
focus of it and financials here in the US and
believe that there's a lot of room for outperformance there.
In the developed international markets, emerging markets, both on the
debt and the equity side, do show some grain shoots
(09:39):
and do show some very very strong either sovereign balance
sheets or good positions for these corporations. But the path
of tariffs will really really make a difference, and so
that makes it a little bit of a challenge for
US investors to go too deeply and go too far
either out of dollar investing or entered national equities.
Speaker 2 (10:01):
House Republicans have declared the week ahead is crypto week,
and I'm curious to get the take from the private
wealth management perspective. How is the cryptocurrency space viewed? Is
is bitcoin something that represents opportunity or do you see
it pretty much as kind of noise around the edges?
Of what the market is involved in these days.
Speaker 3 (10:23):
Boy, that is a really challenging one. It's also very
challenging for someone in a broker dealer, especially a big
firm facing the FED, to really understand the path and
the fate of cryptocurrencies. I think three points though, One
is that these are certainly with us, and they're going
to stay with us. To believe that there are many
(10:45):
of the cryptocurrencies themselves that are highly speculative, and we
are now starting to see a number of stable coins
that are actually buying treasuries and basing them on treasury.
And so one of the interesting things, interesting dynamics that
we're seeing in the stable coin or the crypto assets
is the purchase of treasuries, which is, you know, if
(11:06):
you would had sort of thought about it initially or
off the cuff, you would think that that the crypto
or emergence of more crypto options would actually be a
move away from from treasuries, when in fact, the underlying
securities and the underlying issuers are actually buying treasuries to make
sure that they get that stability. So I think that
(11:27):
it's going to be a very very interesting thing. Obviously,
there's administration and on the hill there's support for crypto assets,
but we continue to look at them as being highly speculative.
Speaker 2 (11:41):
Okay, we'll leave it there, Rod, thank you so much
for joining us. Rod van Lipsey there, Managing director, UBS
Private Wealth Management, on the line from Washington, d C.
Here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Krisner. So we know last Friday,
(12:03):
President Trump declared a thirty percent tariff on goods from
both the European Union and Mexico. They are effective August first,
unless there is some sort of trade deal with both jurisdictions.
Over the weekend, we heard from Ursula vander Lyon. She
is the President of the European Commission, and she said
the EU will extend the suspension of trade countermeasures against
(12:27):
the US until August first, and that in fact will
allow for further trade talks. We also heard from Mexican
President Claudia Sinbaum. She said that her team had already
begun discussions with the US on Friday. Joining me now
for a closer look at the tariff story is Mary Nicola,
Bloomberg Markets Live strategist. Mary joins us from Singapore, It's
(12:48):
always a pleasure to chat with you. I'm curious as
to get your take on the tariff headwinds where you
are and what's being said about whether President Trump may
be bluffing.
Speaker 1 (13:00):
I think that is very much the case, especially if
you saw the way Asian equities had reacted last week,
and it looked like they were shrugging off a lot
of the noise that was coming through on tariffs. They
shrugged off the noise on fifty percent on Brazil. Obviously
this morning, Japanese stocks are down, but actually if you
(13:21):
look at the Cosby in Korea, that's holding up quite well.
So there has been this disparity in terms of they're
shrugging it off because doors are still open for negotiations,
and I think that's key for market and also the
fact that we could potentially see President Trump backpedaling. Also,
the fact is that the data is holding up quite well.
(13:43):
So I don't think you'll start seeing cracks coming through
into markets until we actually see some of the data
come through fruition or the fact that you're seeing weakness
coming through, And because we haven't seen that, it looks like,
you know, the markets here in Asia are holding up relatively.
Speaker 2 (14:01):
Well, it's interesting tonight here in the US. So we
had Trump saying that South Korea wants to make a
trade deal. Now that's coming from mister Trump's perspective. I'm
not so sure that the same thing could be said
for the South Korean side. Isn't it really difficult to
kind of get a sense of where we are in
the negotiating process.
Speaker 1 (14:19):
Yeah, it's interesting too because if you look at Korea,
the US has a free trade agreement with Korea, so
obviously the building blocks are solid and they're already there.
But it's a matter of what more is the US
looking for? And I think that keeps coming up, especially
in negotiations. So for example, which a pan you've had
a set back because of agriculture. Agriculture is always a
(14:42):
key sticking point when you're discussing trade negotiations and trade
agreements because obviously agriculture is considered some sort of national
security issue as well. And then but for Korea specifically,
it's interesting because you do have solid building blocks, you
do have a free trade agreement, but of course it's
a matter of the twenty five percent tariffs on cars.
(15:06):
That's obviously a key sticking point for the Koreans, and
they want it to go away because obviously cars are
a big part of what they're sending and what they're
selling to the US. So unless those sectoral tariffs, which
are still some of the bigger issues, go away, I
think that might still hold Korea back and hold off
(15:29):
an agreement between the two nations.
Speaker 2 (15:31):
So I'm curious Mary as to whether or not we
have any data, high frequency or otherwise that might give
a little bit of insight into how this trade war
is impacting not only Japan but South Korea as well economically.
Do we know anything, Yeah, so so far.
Speaker 1 (15:46):
Actually, if you look at some of the Korea, for example,
releases export data ten days, twenty days, and then also
if you look at the current account data, actually all
of them have been quite solid. So that's another key
reason as to want the Asian. Asian markets have been
holding up relatively well. Not to mention the fact that
(16:07):
China as well has been holding holding up relatively well
as well in addition to that, but if you look
at some of the trade data coming out of Korea,
there's no real indications that there has been a real slump,
and that's really helping a lot of the markets, and
I think as long as you see the strength in
the current account, the strength in the external sector, that's
(16:29):
going to keep equity markets, at least in the region robust.
Speaker 2 (16:33):
So I know, we get a couple of key data
points for the Japanese economy this week, machine tool orders,
industrial production. I think there's some inflation data in there
as well. What are you going to be looking at?
Speaker 1 (16:46):
Yeah, I think the main thing for investors right now
for the Japanese economy is on CPI. Obviously there's a
lot of concern about inflation. There's a lot of concern
about what because especially we're seeing yields rise, and there's
this toxic mix for Japan, whether you're seeing it because
of quantitative tightening, whether you're seeing it because of inflation,
(17:08):
whether you're seeing it because of worries about fiscal profligacy,
and especially with the elections coming through and the potential
for more fiscal spending. So there is really the heightened
focus is on CPI. Is CPI still high? And of
course we know that the Bank of Japan has been
quite reluctant to high grates, so real rates remain quite high,
(17:30):
and as a result, I think you're seeing investors just
incredibly wary of especially Japanese bonds. That's also going to
weigh on the yen in addition, So I think the
focus for investors this week is going to be not
only on CPI, but also on the election.
Speaker 2 (17:47):
So is the BOJ in a little bit of a
bind here. I mean, if there is upward pressure on
price action, or to say, upward pressure on inflation and
the risk of more economic slowing, I mean, how do
you engineer your way out of that?
Speaker 1 (18:03):
Absolutely, and that's a really good question in terms of
what do they do. And so far they've sent a
message that, especially on the tightening side, that they're sitting
on their hands, They're weighing what is happening externally. They're
concerned more about the external challenges and the implications on
the economy than inflation. And that has actually been to
(18:25):
the dutchment of the Japanese bond market and will likely
hurt the end as well. But in the meantime we
are seeing quantitative tightening, and it's interesting to see the
bond market reaction that despite the tweaks they've made. So
for example, the Ministry of Finance has already decided to
reduce issuance in the back end, and we've seen some
(18:46):
of those tweaks, yet we're still seeing pressure on bonds.
So it's almost like they've let out their tools, but
the tools aren't working, and that's just very much indicative
of the bind that they're in. And of course adding
to that is just the potential of fiscal expansion and
that will just only add to the pressures on the
(19:06):
bond market.
Speaker 2 (19:07):
So I know, based on our history of conversations over
the last several years, you pay very close attention to
what the FED is doing. And we've got President Trump
and some of his allies who have been very critical
of FED Shair J. Powell's handling of some of the
renovations being done at the FED headquarters, and a few
people in the administration have been now building the case
(19:29):
to remove Powell from the fed's Board of Governors. Were
that to happen, it's probably a very extreme type scenario.
What would the reaction do you think in Asian markets
be under that scenario?
Speaker 1 (19:43):
Yeah, I think it's actually still a very dangerous game
to play where where you're potentially cracking and ruining the
credibility of the FED. And that's essentially what's been happening
with all this pressure on the FED. Where you do
see is a potential reaction, is that a move and
a shift away from the dollar, and that actually could
be beneficial to a lot of the Asian currencies. We've
(20:05):
seen the dollar slowly decline, actually more than slowly decline
since the start of this year, and I think that
just precipitates it. And what you'll see is a switch
over to a lot of the Asian currencies, for example,
the c and y, the Korean wan as well, where
they are likely to get a bid as a result
(20:27):
because of the fact that you know, there is just
this loss of credibility because if you do put someone
who is in that is complies with what the fiscal
policy and what the administration wants, that just risks where
we could see inflation and how potential policy monetary policy
(20:49):
just gets out of control. So I think in general
what you'll see is just that shift continue away from
the dollar as a result, if you see further cracks
in the fence credibility.
Speaker 2 (21:00):
Mary, we'll leave it there. It's always a pleasure. I
hope you have a productive week in the Lion City. Mary, Nicola.
There Bloomberg Markets Live Strategists joining from Singapore 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
(21:21):
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
markets are now dealing with a new thread of tariffs
on US imports. Last Friday, President Trump declared a thirty
percent tariff on goods from both the European Union and
Mexico effective August first. It was just the day before
Trump threatened Canada with a thirty five percent tariff. So
(00:32):
markets have been somewhat well behaved as if they are
counting on mister Trump to back down, having seen you
turns before. The question is whether that remains the best
bet In a moment, we'll travel to Singapore and speak
with Bloomberg Markets Live strategist Mary Nicola. We begin in
the States, though, as we look ahead to second quarter earnings.
(00:52):
Joining me now is Rod Van Lipsey. He is managing
director at UBS Private Wealth Management. On the line from Washington, DC. Rod,
thank you so much for making time to chat with me.
So earnings from a couple of the big banks are
on the list this week, we'll also get numbers from
TSMC and Netflix. I'm curious, how do you feel about
the quality of the results that we're going to see
(01:13):
for Q two.
Speaker 3 (01:14):
You know, this is going to be a very interesting
quarter over quarter year over year look in part because
we go back just to a quarter ago and the
whole tariff scenario really put corporations in a very strange place.
The estimates right now on the street, we're looking at
under five percent earnings for EPs growth year every year.
(01:35):
We at UBS believe are going to come in closer
to about six percent when we look at twenty twenty
five and growing to call it two hundred and sixty
five dollars a share on the S and P five hundred.
I think that this busy week, you know, you're really
going to see some acceleration in the earnings reports, you know,
from Monday Tuesday, Wednesday, the big banks really start to
(01:57):
kick off on Tuesday, and our expectation is that those
estimates are going to beat consensus. They're going to be
pretty strong in one case, because the higher interest rates,
especially for financials, have been very very supportive of NII
and that interest income and that interest margin for these banks.
So we'll see some good numbers there. And I expect
(02:18):
that some of the economic activity has been pulled forward
in this second quarter, especially since tariffs have been threatened
and delayed and postponed, so lots of activity, but it's
going to be a strange one and everyone is going
to be looking at not just the second quarter results,
but what will be the forecast for third quarter and
looking forward.
Speaker 2 (02:37):
Before we leave the banks, I want to ask about
whether trading revenue has the potential to be a real
standout here given the volatility that we had in markets
in the second quarter, whether banks really benefited from that
on the trading side.
Speaker 3 (02:50):
Anecdotally, dug absolutely. And that's why we are not only
sort of very very bullish, if you will, on financials
and the asset manager because we think the trading activity
in this second quarter was just off the charts, especially
during April, and so with that pick up an activity,
with all of that uncertainty and all of the activity
(03:12):
that went around that, I think it's going to be
a pretty strong, strong especially for the broker dealers, is
going to be a very very strong second quarter.
Speaker 2 (03:18):
We mentioned earlier the impact of the tariffs, and I
thought it was very interesting. Last Thursday we heard from
ConAgra the outlook well below expectations, and the company pointed
out that rising cost for tin plate steel used for
food cans due to tariffs is going to have a
very consequential negative impact. Is this something that's going to
(03:39):
be more predominant when we talk about margins? Just how
this begins to manifest.
Speaker 3 (03:44):
It's interesting. The UBS base case is that we're going
to end up somewhere around the fifteen percent, you know,
sort of across the board tariff rate, and that the
consumer is going to be asked to bear the brunt
of much of that, and so that works into our
echnomic forecast numbers. But the commodity prices, quite frankly, are
(04:04):
just all over the charts because of the dramatic uncertainty.
Most of our investors are focused on commodities like gold
and oil and don't dig too far into the commodity indices.
But when we look at commodities, they truly are really
all over the charts because it's very difficult to understand
how the policy and the tariffs and the trade considerations
(04:25):
will affect those utter blank commodities. But I think it
manifests itself at least in our forecasts on inflation that
remains fairly pernicious in stays above the FED state of
two percent.
Speaker 2 (04:39):
Target interesting, and yet with all the risk out there,
we've got an S and P five hundred trading at
twenty four times earnings. Is that a little bit of
a headscratcher for you?
Speaker 3 (04:51):
It truly is, because we have different things, especially if
we look at our ubs macro economic forecasts see for
example GDP growth in the Americas for twenty twenty five,
estimating you know, one and a half percent GDP growth.
But we're looking at CPI or inflation. Can we have
some releases this week that will tell us. But we
(05:13):
see inflation coming in almost to three percent and actually
accelerating into twenty twenty six, and that is directly because
of this concern about how tariffs are going to flow
through to the consumer and how they're going to keep
inflation fairly high. Now, the markets seem to be unfhazed
by the tariff talks. The markets seem to believe that
(05:35):
we're going to get to August first and either we'll
have a favorable outcome or things will get pushed back again,
and so they are completely unfazed. At least if we
look at the you know, at all time highs and
continuing to be there and so on. A macro level.
We think that this bull market that we've been experiencing
continues to have legs, it continues to have momentum, But
(05:57):
the real place to keep an eye out is going
to be the market, because at some point in time,
a lot of the things that were in the big
beautiful bill, a lot of the things that are coming
into the economy because of increasing tariffs, at some point
in time, the bond market is going to give us
a signal. And that's really where we have a cautious outlook.
Speaker 2 (06:15):
So, if you were going to be in the fixed
income space, where do you want to hide out the
belly of the curve or do you want to be
maybe more exposed to the short end. What's the strategy?
Speaker 3 (06:24):
Listen, we think that in the belly of the curve,
and we think that on balance again with our forecasts
looking one year out, with ten year rates coming back
down to four percent, we think that the bond market
provides an opportunity for the long term investor. These are
actually attractive levels, especially when you look at spreads for
(06:45):
high quality municipal bonds for taxable investors in the US,
or corporate corporate bonds. We're seeing an opportunity there to
get nice returns, but that does not mean it's not
going to be volatile in the short term. And that's
the real challenge for the bond investor is to take
a look at it, dick your yield, say this is
the yield that I think is going to work, and
(07:06):
recognize that next week, next month, that might feel like
a bad decision, but by next year you'll be glad
that you're sitting on that high quality paper.
Speaker 2 (07:15):
Does the Big Beautiful Bill at any point in the
future begin to negatively impact the muni market, particularly at
the state level.
Speaker 3 (07:24):
Well, that's a fantastic question, and I think that that
has been structurally appears to be something that's been pushed
down the road a little bit. Doug. I've got to
say that I have not read The Big Beautiful Bill,
and I don't know very many people who have actually
been able to read that book cover to cover. But
it's my understanding that much of the good news has
(07:47):
been baked in and takes immediate effect, and then some
of the ways to pay for that good news have
been pushed back, some of it beyond the midterm elections,
and so that is going to create some challenges. It's
going to create pressure for things that are being put
on states and municipalities. There's been a lot of bond issuance,
especially by municipal issuers there this year to try to
(08:09):
get out in front of this before rates potentially go up.
So I yes, I do think there's some challenges that'll
be ahead, but I don't know that those are near term.
I think those are pushed into twenty twenty six and beyond.
Speaker 2 (08:21):
Okay, fair enough, But I'm wondering whether or not, given
everything that we've been laying out that you're attempted to
look a little offshore right now to remain diversified, do
you want to look at foreign markets.
Speaker 3 (08:32):
Our investors have been the clamoring to understand ways to
diversify against either monetary or fiscal pressures and challenges here
in the US, and so listen. That's why we're seeing
gold prices in the current range. But we're also seeing
lots of great performance out of the international markets. I
think one of the questions is whether the international equity markets,
(08:55):
especially the Eurozone, whether it's it's fully caught up or
is there more room to grow. We think that selectively
looking offshore holding foreign currency holding gold that those are
nice hedges, But when it comes to actually making an
investment that will outperform the US markets, that becomes a
little bit more of a murky question, very very difficult
(09:16):
to us to look at European equity market growth in
US equity market growth, especially when we look at the
focus of it and financials here in the US and
believe that there's a lot of room for outperformance there.
In the developed international markets, emerging markets, both on the
debt and the equity side, do show some grain shoots
(09:39):
and do show some very very strong either sovereign balance
sheets or good positions for these corporations. But the path
of tariffs will really really make a difference, and so
that makes it a little bit of a challenge for
US investors to go too deeply and go too far
either out of dollar investing or entered national equities.
Speaker 2 (10:01):
House Republicans have declared the week ahead is crypto week,
and I'm curious to get the take from the private
wealth management perspective. How is the cryptocurrency space viewed? Is
is bitcoin something that represents opportunity or do you see
it pretty much as kind of noise around the edges?
Of what the market is involved in these days.
Speaker 3 (10:23):
Boy, that is a really challenging one. It's also very
challenging for someone in a broker dealer, especially a big
firm facing the FED, to really understand the path and
the fate of cryptocurrencies. I think three points though, One
is that these are certainly with us, and they're going
to stay with us. To believe that there are many
(10:45):
of the cryptocurrencies themselves that are highly speculative, and we
are now starting to see a number of stable coins
that are actually buying treasuries and basing them on treasury.
And so one of the interesting things, interesting dynamics that
we're seeing in the stable coin or the crypto assets
is the purchase of treasuries, which is, you know, if
(11:06):
you would had sort of thought about it initially or
off the cuff, you would think that that the crypto
or emergence of more crypto options would actually be a
move away from from treasuries, when in fact, the underlying
securities and the underlying issuers are actually buying treasuries to make
sure that they get that stability. So I think that
(11:27):
it's going to be a very very interesting thing. Obviously,
there's administration and on the hill there's support for crypto assets,
but we continue to look at them as being highly speculative.
Speaker 2 (11:41):
Okay, we'll leave it there, Rod, thank you so much
for joining us. Rod van Lipsey there, Managing director, UBS
Private Wealth Management, on the line from Washington, d C.
Here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Krisner. So we know last Friday,
(12:03):
President Trump declared a thirty percent tariff on goods from
both the European Union and Mexico. They are effective August first,
unless there is some sort of trade deal with both jurisdictions.
Over the weekend, we heard from Ursula vander Lyon. She
is the President of the European Commission, and she said
the EU will extend the suspension of trade countermeasures against
(12:27):
the US until August first, and that in fact will
allow for further trade talks. We also heard from Mexican
President Claudia Sinbaum. She said that her team had already
begun discussions with the US on Friday. Joining me now
for a closer look at the tariff story is Mary Nicola,
Bloomberg Markets Live strategist. Mary joins us from Singapore, It's
(12:48):
always a pleasure to chat with you. I'm curious as
to get your take on the tariff headwinds where you
are and what's being said about whether President Trump may
be bluffing.
Speaker 1 (13:00):
I think that is very much the case, especially if
you saw the way Asian equities had reacted last week,
and it looked like they were shrugging off a lot
of the noise that was coming through on tariffs. They
shrugged off the noise on fifty percent on Brazil. Obviously
this morning, Japanese stocks are down, but actually if you
(13:21):
look at the Cosby in Korea, that's holding up quite well.
So there has been this disparity in terms of they're
shrugging it off because doors are still open for negotiations,
and I think that's key for market and also the
fact that we could potentially see President Trump backpedaling. Also,
the fact is that the data is holding up quite well.
(13:43):
So I don't think you'll start seeing cracks coming through
into markets until we actually see some of the data
come through fruition or the fact that you're seeing weakness
coming through, And because we haven't seen that, it looks like,
you know, the markets here in Asia are holding up relatively.
Speaker 2 (14:01):
Well, it's interesting tonight here in the US. So we
had Trump saying that South Korea wants to make a
trade deal. Now that's coming from mister Trump's perspective. I'm
not so sure that the same thing could be said
for the South Korean side. Isn't it really difficult to
kind of get a sense of where we are in
the negotiating process.
Speaker 1 (14:19):
Yeah, it's interesting too because if you look at Korea,
the US has a free trade agreement with Korea, so
obviously the building blocks are solid and they're already there.
But it's a matter of what more is the US
looking for? And I think that keeps coming up, especially
in negotiations. So for example, which a pan you've had
a set back because of agriculture. Agriculture is always a
(14:42):
key sticking point when you're discussing trade negotiations and trade
agreements because obviously agriculture is considered some sort of national
security issue as well. And then but for Korea specifically,
it's interesting because you do have solid building blocks, you
do have a free trade agreement, but of course it's
a matter of the twenty five percent tariffs on cars.
(15:06):
That's obviously a key sticking point for the Koreans, and
they want it to go away because obviously cars are
a big part of what they're sending and what they're
selling to the US. So unless those sectoral tariffs, which
are still some of the bigger issues, go away, I
think that might still hold Korea back and hold off
(15:29):
an agreement between the two nations.
Speaker 2 (15:31):
So I'm curious Mary as to whether or not we
have any data, high frequency or otherwise that might give
a little bit of insight into how this trade war
is impacting not only Japan but South Korea as well economically.
Do we know anything, Yeah, so so far.
Speaker 1 (15:46):
Actually, if you look at some of the Korea, for example,
releases export data ten days, twenty days, and then also
if you look at the current account data, actually all
of them have been quite solid. So that's another key
reason as to want the Asian. Asian markets have been
holding up relatively well. Not to mention the fact that
(16:07):
China as well has been holding holding up relatively well
as well in addition to that, but if you look
at some of the trade data coming out of Korea,
there's no real indications that there has been a real slump,
and that's really helping a lot of the markets, and
I think as long as you see the strength in
the current account, the strength in the external sector, that's
(16:29):
going to keep equity markets, at least in the region robust.
Speaker 2 (16:33):
So I know, we get a couple of key data
points for the Japanese economy this week, machine tool orders,
industrial production. I think there's some inflation data in there
as well. What are you going to be looking at?
Speaker 1 (16:46):
Yeah, I think the main thing for investors right now
for the Japanese economy is on CPI. Obviously there's a
lot of concern about inflation. There's a lot of concern
about what because especially we're seeing yields rise, and there's
this toxic mix for Japan, whether you're seeing it because
of quantitative tightening, whether you're seeing it because of inflation,
(17:08):
whether you're seeing it because of worries about fiscal profligacy,
and especially with the elections coming through and the potential
for more fiscal spending. So there is really the heightened
focus is on CPI. Is CPI still high? And of
course we know that the Bank of Japan has been
quite reluctant to high grates, so real rates remain quite high,
(17:30):
and as a result, I think you're seeing investors just
incredibly wary of especially Japanese bonds. That's also going to
weigh on the yen in addition, So I think the
focus for investors this week is going to be not
only on CPI, but also on the election.
Speaker 2 (17:47):
So is the BOJ in a little bit of a
bind here. I mean, if there is upward pressure on
price action, or to say, upward pressure on inflation and
the risk of more economic slowing, I mean, how do
you engineer your way out of that?
Speaker 1 (18:03):
Absolutely, and that's a really good question in terms of
what do they do. And so far they've sent a
message that, especially on the tightening side, that they're sitting
on their hands, They're weighing what is happening externally. They're
concerned more about the external challenges and the implications on
the economy than inflation. And that has actually been to
(18:25):
the dutchment of the Japanese bond market and will likely
hurt the end as well. But in the meantime we
are seeing quantitative tightening, and it's interesting to see the
bond market reaction that despite the tweaks they've made. So
for example, the Ministry of Finance has already decided to
reduce issuance in the back end, and we've seen some
(18:46):
of those tweaks, yet we're still seeing pressure on bonds.
So it's almost like they've let out their tools, but
the tools aren't working, and that's just very much indicative
of the bind that they're in. And of course adding
to that is just the potential of fiscal expansion and
that will just only add to the pressures on the
(19:06):
bond market.
Speaker 2 (19:07):
So I know, based on our history of conversations over
the last several years, you pay very close attention to
what the FED is doing. And we've got President Trump
and some of his allies who have been very critical
of FED Shair J. Powell's handling of some of the
renovations being done at the FED headquarters, and a few
people in the administration have been now building the case
(19:29):
to remove Powell from the fed's Board of Governors. Were
that to happen, it's probably a very extreme type scenario.
What would the reaction do you think in Asian markets
be under that scenario?
Speaker 1 (19:43):
Yeah, I think it's actually still a very dangerous game
to play where where you're potentially cracking and ruining the
credibility of the FED. And that's essentially what's been happening
with all this pressure on the FED. Where you do
see is a potential reaction, is that a move and
a shift away from the dollar, and that actually could
be beneficial to a lot of the Asian currencies. We've
(20:05):
seen the dollar slowly decline, actually more than slowly decline
since the start of this year, and I think that
just precipitates it. And what you'll see is a switch
over to a lot of the Asian currencies, for example,
the c and y, the Korean wan as well, where
they are likely to get a bid as a result
(20:27):
because of the fact that you know, there is just
this loss of credibility because if you do put someone
who is in that is complies with what the fiscal
policy and what the administration wants, that just risks where
we could see inflation and how potential policy monetary policy
(20:49):
just gets out of control. So I think in general
what you'll see is just that shift continue away from
the dollar as a result, if you see further cracks
in the fence credibility.
Speaker 2 (21:00):
Mary, we'll leave it there. It's always a pleasure. I
hope you have a productive week in the Lion City. Mary, Nicola.
There Bloomberg Markets Live Strategists joining from Singapore 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
(21:21):
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
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
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.