October 14, 2025 • 21 mins
US President Donald Trump said he might stop trade in cooking oil with China, injecting fresh tensions into the relationship between the world's two largest economies. Trump on Tuesday cast the potential move as retaliation against Beijing for its refusal to buy American soybeans, which he said "is an Economically Hostile Act" that is purposefully "causing difficulty for our Soybean Farmers." The benchmark S&P 500 turned negative as Trump's comments re-escalated the conflict with China. Just hours earlier, both Trump and US Trade Representative Jamieson Greer expressed confidence that friction would ease through ongoing trade talks. We get perspective from Sandra Swirski, Founder & CEO of Integer.
Plus - Earnings season has just kicked off. A gauge of big banks jumped after solid results from financial giants. Also today, Federal Reserve Chair Jerome Powell signaled the US central bank is on track to deliver another quarter-point interest-rate cut later this month, even as a government shutdown significantly reduces its read on the economy. For more, we turn to Rob Williams, Managing Partner and Chief Investment Strategist at Sage Advisory Services.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
Welcome to the Daybreak Asia Podcast. I'm deg Krisner. Some
renewed tension today in the US China relationship. It was
early on Tuesday that China sanctioned five US units of
the South Korean shipping firm Hanwa Ocean Company, and at
the same time Beijing threatened more retaliation. Then later in
the day we heard from US Trade Rep Jamison Greer.
(00:33):
He told c NBC President Trump was still set to
meet with Chinese President Shei at the end of the month.
Speaker 1 (00:39):
Right now, there is a plan, there's a scheduled time
for that. There is it's on the schedule. There's a
scheduled time for that. You know whether it'll go through
or not. I don't want to pre commit, either ourselves
or the Chinese, but I think it makes sense for
people to talk when they can, so.
Speaker 2 (00:55):
Jamison Greer's remarks helped provide a little bit of hope
for negotiation. But then near the close of US trading,
President Trump said the US might stop trade in cooking
oil with China, and he framed this potential move as
retaliation against Beijing for its refusal to buy American soybeans.
For a closer look now at the state of US
(01:15):
China trade. I'm joined by Sandra Swirsky. She is the
founder and CEO of the advisory firm Integer. She joins
us from Washington, d C. Sandra, thank you so much
for making time to chat with me. Do you have
a sense of where we are in this process of
the US and China attempting to reach some type of
workable path forward?
Speaker 3 (01:36):
Well, thanks for having me on. I think it's safe
to say that both China and the US have plenty
of balls that they can put in the air, and
they're increasingly doing that, from tariff to export controls on
(01:58):
key rare earth minerals in the case of China, and
key semiconductors in the case of the US, to agriculture products.
And it appears that both sides, in anticipation in the
lead up to what are supposed to be trade talks
(02:18):
later this month, both sides are throwing everything they have
at each other to try to gain some leverage at
these talks. So one to look at this really as posturing, but.
Speaker 2 (02:33):
It is.
Speaker 3 (02:35):
Very unsettling given to given these superpowers.
Speaker 2 (02:40):
It certainly has helped to contribute to a lot of
volatility in markets, that's for sure. Moments ago, we learned
that Apple is preparing to expand it's manufacturing operations in Vietnam.
It's part of a push on the part of Apple
to lessons it's dependence on China. This is something the
company has been pretty transparent about in the past, and
for years we've seemed to kind of attempt to focus
(03:03):
on this issue of decoupling between the US and China.
It seems that that's inevitable, right that these two very
large economies, the largest in the world, are going to
kind of begin to become less dependent on one another.
Speaker 3 (03:18):
I think it makes complete sense they're looking for other
supply chains because the US is a supply chain to
China and vice versa just isn't working. And so, just
just like Apple, the US nd China are looking for
other countries to supply the raw materials, the goods that
(03:39):
they need so that they can continue to advance the
super technologies that are going to revolutionize our day to
day lives. I think recently I saw that Australia has
ramped up its production of rare earth minerals, which is
(03:59):
increasingly important to the US and to all of our
advanced technologies, but even with them ramping up, it is
hardly going to replace if it needs to replace, hardly
going to replace what we're buying from China.
Speaker 2 (04:16):
So lately, as a part of this tit for tat,
President Trump threatened new tariffs of one hundred percent on
Chinese goods that would be imported by the United States.
There are already a number of tariffs in place, and
one of the things that the markets have been wrestling
with is whether or not these tariffs are going to
produce much higher inflation. Now we really haven't seen much
(04:38):
of that, although there is the suggestion that inflation expectations
on the part of consumers are beginning to rise. How
do you feel about the way in which these tariffs
potentially have the ability to contribute to a higher rate
of inflation in the US.
Speaker 3 (04:58):
That's a great question. I think that when tariffs started
to go north back in the spring, there was a
lot of concern that consumers were going to feel the
pinch almost immediately. And what we saw was that June
came July August, and the inflation rate, the pain point
(05:21):
for consumers just wasn't there, and in large part it's
because businesses weren't passing along the tariffs to consumers. They
didn't want to lock out their customers, and so they
ate those tariffs. At this point, tariffs are becoming so
(05:42):
high and companies and businesses are not able to continue
to eat those extra costs. The concern now is that
we are going to see higher prices because of those
tariffs hitting consumers right when we start to head into
(06:05):
the holiday season, when the store shelves are packed with
all the goodies that we want to buy, and we've
all got Amazon purchases on our minds. Now there is
a greater concern that inflation is going to begin to
pinch the consumer, and.
Speaker 2 (06:23):
I think that may be a little troubling for the Fed.
Although we heard from Chair Jay Powell today and a
lot of his focus continues to be on this weakness
in the labor market. It's going to be very very
interesting to see how the FED navigates this terrain and
at what point the Fed really has to do a
better job of balancing the risk between weakness in the
(06:45):
labor market with the potential for very very sticky inflation.
But if the market has to dial back from expectations
of aggressive FED easing. Given the clients that you have,
the folks that you speak to in Washington, would that
be deeply concerning? Are these people that you speak with
very dependent on the idea that we're going to see
(07:07):
easier monetary policy.
Speaker 3 (07:09):
I think the expectation after September and the lead up
to the next FED meeting is that we are going
to see another cut, maybe not in October, but certainly
before the end of the year. We are going to
see another cut, based in large part on the weekending
job market. Now, we don't have numbers, prospective numbers because
(07:33):
the government is shut down and so all of those
indicators are not being supplied by the Bureau of Labor Statistics.
So we have some really good guesses based upon some
private sector data and all of those and all of
that data looks like it is a much weekend job market,
(07:55):
and that is going to play into the Fed's decision
to perhaps ups lower interest rates. But again, they're looking
at all of the threat of all the increased tariffs,
which at one hundred percent coming out of China on
all those Chinese input imports, will affect consumers, will affect inflation.
(08:18):
So boy, I don't envy their next couple of weeks.
Speaker 2 (08:24):
I'm curious and Andre, given the client base that you have,
how do they feel about the way in which the
Trump administration has been been managing the economy, whether it's
tariffs or tax policy deregulation. I mean, is there a
consensus here that you can address or is there a
kind of a range of opinion in terms of how
(08:45):
the administration is doing.
Speaker 3 (08:48):
So, I think when the administration first took office and
our clients saw the tariff threats and the safe rattling
and the rest, there is a lot of concern and
a lot of pause, but they've come to expect some
of that. In some cases, the Trump administration has normalized
(09:12):
the threatening tariffs and the saber rattling, and despite what
appears to be instability in the government, the market continues
to go up. So I think the market and our
clients that rely on the market and are part of
the market feel like they've believed that they have figured
(09:36):
out the secret sauce, figured out that the administration is
going to continue to threaten and to provoke, but many
of them believe that that will have little real impact
in the long term on the market or their companies.
There may be some short term instability and volatility, but
(10:00):
long term they believe that the president wants a strong
economy and we'll do what he and is doing what
he's doing in order to get us to a stronger economy,
even though if you look at the day to day
it does not. It seems it's very unsettling.
Speaker 2 (10:19):
Sandra will leave it there, Thank you so very much.
Sandra Swirsky is the founder also the CEO of the
advisory firm Integer, joining us from Washington, d C. In
a moment or two, we'll bring in Rob Williams from
Sage Advisory Services. He's in Austin, Texas, and we'll take
a look at the interest rate environment and what's happening
(10:39):
in the fixed income space. Coming up here on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.
I'm Doug Krisner. The earning season is underway in the
US and in the last session we heard from several
of the big banks. The results were by and large
(11:00):
pretty solid, although the commentary seemed to be a little mixed.
We had bank stocks finishing mixed as well. The KBW
Bank index was up one point eight percent, but it
closed off its session high for a look at the
earning season. I'm joined by Rob Williams. He is managing
partner also the chief investment strategist at Sage Advisory Services.
(11:20):
Rob is based in Austin, Texas. Thank you so much
for making time to chat with me. Give me your
sense of what you heard today from the big banks.
Speaker 4 (11:31):
Yeah, I mean, we look w'ere fix think a manager.
We do a lot of investing in credit obviously, and
we're very concerned about the consumer, so we wanted the
overall thing we wanted to see is any read on
insight on the consumer, especially kind of write down things
like that. And overall, like you said earlier, very healthy,
driven a lot by IPO activity, trading revenue, things like that,
(11:56):
not much damage. You know, these big banks hold very
little limited subprime auto type of exposure or anything that
would have hurt them that much. So pretty positive overall.
But the comments, like you also said, kind of looking forward,
not as optimistic as kind of the current run rate
that you've seen, you know, slow down the consumer.
Speaker 5 (12:19):
Maybe some cracks on the credit side.
Speaker 4 (12:22):
You've seen a few little cracks and you know, and
we all know how tight credit spreads are so there's
not a lot of room for any kind of you know,
bigger systemic sort of crisis would certainly impact the credit
markets overall.
Speaker 2 (12:38):
So I'm glad you mentioned Jamie Diamond there, the CEO
of JP Morgan. He was warning today of a potential
deterioration in credit quality. Now you and I both know
that lately we have seen the implosion of Tricolor holdings,
the auto lender, as well as the car parks supplier
First Brands, and Diamond was remarking when he sees situations
(12:59):
like this, is his antenna go up. And he also said,
when you see one cockroach, there are probably more. Does
he have a point there?
Speaker 4 (13:08):
Yeah, I mean, look, there's a lot of opaque sides
of the credit market now, in private credit and other things.
So for sure there needs to be a little more
dispersion amongst some of these BDCs and other things because
there are some problems under there. Whether they're going to
be big enough to bleed up to you know, investment
grade credit. Uh, you know, we don't see that happening
(13:31):
anytime soon, but we certainly think it's not a bad
time to be thinking about, Hey, should I be moving
up in liquidity in my income side of my portfolio, right,
you know, bank you know, bank reserves have been going down.
Bank reserves as a percentage of GDP, which is what
the kind of the FED measures sort of when we're
in ample liquidity situation. That's been kind of getting down
(13:54):
lower and lower, kind of out of that band of
like ample. So maybe liquidity is shrinking a little bit.
We've seen some cracks. Not a bad time to stay
in more liquid, transparent, higher you know, not just higher quality,
but lower volatility kind of markets in the fixed income space.
Speaker 2 (14:12):
Well, that takes us to FED share j Powell today
he kind of reinforced bets on a raidcat in October.
That shouldn't be a big surprise if you've been tracking
the FED speak. A number of policymakers have been very
concerned about the weakness of the labor market. Powell also
indicated that FED may stop shrinking its balance sheet in
the coming months as a way of perhaps maintaining, to
(14:34):
your point, a little of the liquidity, especially in the
overnight funding markets. So are you really seeing evidence now
that things are kind of drying up a bit?
Speaker 5 (14:44):
Yeah?
Speaker 4 (14:45):
I mean bankers have certainly been run down, right, and
the FED has has been engaging and triggering their balance
sheet for a while. They've said when when liquidity is
gone from excessive to ample is when they would think
about and down QT. And we're in that zone. We're
the bottom of that zone. I think some of the
governors has pointed at put the number in that kind
(15:07):
of twelve ten to twelve percent of GDP for bank reserves.
Speaker 5 (15:12):
We're right around ten. So we're right at the lower
end of that.
Speaker 4 (15:15):
So the good news is they're probably getting ready to
fold up that and ENQT. The bad news is that, yeah,
liquidity has shrunk a little bit. It's not like tight
at this moment, but like I said earlier, maybe a
good time to be thinking about, Hey, I want to
be a little more liquid in my fixed income side.
Speaker 2 (15:35):
I'm curious about how you view the macro these days,
particularly in the absence of a lot of government data.
We've been lacking some key data points here because of
the shutdown and the CPI report, which was to have
been released tomorrow that would have been the October fifteenth
here in the States. It's been pushed out to I
think the twenty fourth. Give me a sense of how
(15:56):
you've had to navigate this landscape right now without a
lack of or with a lack of government data.
Speaker 4 (16:03):
Yeah, that is a problem, especially if it continues on.
You know, Fortunately, there's a good there's been a you know,
twenty years ago it would have been more difficult, but
there's been a growing amount of sort of alternative private
data that you can sort of lean into, and you know,
Bloomberg certainly, you know, has a good read on that.
There's even a worksheet of all the various private sources
(16:24):
like you had one today, the one piece of data
you had with small business optimism, right, and that ticked down.
If you crack that open. There are some inflation components
to that, so you have to be a little more
creative and dig a little deeper. But that one, we
actually look at that small business and there's a reading
in that that says, hey, what percentage of small businesses
(16:45):
are expecting to increase prices? So it's a good indication
of price pressures and that that's been ticking up. So
that tells us, yeah, there's price pressure still coming. And
you have to kind of lean into some of the
other alternative data sources for job the job numbers and
they've basically been telling you the same thing. Jobs are weakening,
pricing pressures, okay, but we're seeing some sign that are
(17:07):
starting to percolate.
Speaker 2 (17:08):
Does that necessarily equate to stagflation?
Speaker 4 (17:12):
No, I think because you just haven't seen the goods.
You're getting some stag and the job numbers, you know,
but you're not getting inflation coming through. The goods path
through has not been that bad. The housing and the
energy and the service sector slowing down to sort of
contain that. What we're kind of looking for is, hey,
you know, we know inventories have been built up, they're
(17:34):
running down. And when we start to see more margin
pressures and things like that small business price index and
really starting to come through, we get a little nervous.
But right now it looks more like the Fed is
going to be more and they've said it more worried
about jobs and inflation at the moment.
Speaker 2 (17:52):
I'd like to get your view Rob on this debasement
trade that's been rippling across not just markets here in
the States, but globally is well. It seems like a
number of investors are pulling away from sovereign debt, chasing
gold maybe's even silver give me your sense of what's
happening and what the risks are right now.
Speaker 4 (18:11):
Yeah, you know, there's many reasons, but it's just like
when you saw that back end volatility in the curve.
There's still a lot of uncertainty policy politically for inflation,
and there's also deficits.
Speaker 5 (18:25):
Are not a US problem.
Speaker 4 (18:27):
They are a global problem and they're not going away
anytime soon. So that's going to kind of keep pushing
people away from some of the traditional things and creating
some volatility on the back end of the curve and
pushing people towards gold and things like and even crypto
and things like that. And it's not going away anytime soon.
But it's also from a rape perspective, I think it's
(18:51):
not going to get out of hand either. I think
it'll be contained because, like I said, inflation is not
out of the bag. Here apply demand for for rates
and some of this stuff is still pretty favorable.
Speaker 5 (19:04):
We just talked about QT ending.
Speaker 4 (19:08):
You know, the Treasury is going to issue more bills
in long paper, so they're going to do their level
best to keep the volatility sort of down at the long.
Speaker 5 (19:16):
End of the curve.
Speaker 4 (19:18):
But people are certainly the driving forces I think global deficits.
Speaker 2 (19:23):
So you wouldn't be shunning US treasuries in favor of
high quality IG credit like a Microsoft, would you.
Speaker 4 (19:31):
Uh No, Look, I'd have a diversified portfolio. I wouldn't
shy away from duration. Right, the cash is not going
to look is going to look increasingly less attractive in
an easing cycle. Right, You've gotten good returns and save
fixed income treasuries IG credit six seven percent, you're going
to get just in carry. You're going to get another
percent percent and a half in the fourth quarter just
(19:52):
in carry. So I wouldn't. I wouldn't worry a whole
lot about duration. And again, you're not. If you're in
a diversified portfolio, you don't have a a lot of
the extreme long end exposure. If that's what you're worried about,
and we're frankly, I'm not too worried about having that
long end. But I'm just saying, typical investor is not
going to have a bunch of thirty year paper. They're
going to have you in the one to ten year
(20:13):
part of the curve anyhow. So No, I wouldn't shy
away from duration or high quality fixed income.
Speaker 2 (20:19):
Okay, Robill leave it there. Thank you so much. Rob
Williams is managing partner also the Chief Investment Strategist at
Sage Advisory Services from Austin, Texas. 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.
(20:43):
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 four
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
Welcome to the Daybreak Asia Podcast. I'm deg Krisner. Some
renewed tension today in the US China relationship. It was
early on Tuesday that China sanctioned five US units of
the South Korean shipping firm Hanwa Ocean Company, and at
the same time Beijing threatened more retaliation. Then later in
the day we heard from US Trade Rep Jamison Greer.
(00:33):
He told c NBC President Trump was still set to
meet with Chinese President Shei at the end of the month.
Speaker 1 (00:39):
Right now, there is a plan, there's a scheduled time
for that. There is it's on the schedule. There's a
scheduled time for that. You know whether it'll go through
or not. I don't want to pre commit, either ourselves
or the Chinese, but I think it makes sense for
people to talk when they can, so.
Speaker 2 (00:55):
Jamison Greer's remarks helped provide a little bit of hope
for negotiation. But then near the close of US trading,
President Trump said the US might stop trade in cooking
oil with China, and he framed this potential move as
retaliation against Beijing for its refusal to buy American soybeans.
For a closer look now at the state of US
(01:15):
China trade. I'm joined by Sandra Swirsky. She is the
founder and CEO of the advisory firm Integer. She joins
us from Washington, d C. Sandra, thank you so much
for making time to chat with me. Do you have
a sense of where we are in this process of
the US and China attempting to reach some type of
workable path forward?
Speaker 3 (01:36):
Well, thanks for having me on. I think it's safe
to say that both China and the US have plenty
of balls that they can put in the air, and
they're increasingly doing that, from tariff to export controls on
(01:58):
key rare earth minerals in the case of China, and
key semiconductors in the case of the US, to agriculture products.
And it appears that both sides, in anticipation in the
lead up to what are supposed to be trade talks
(02:18):
later this month, both sides are throwing everything they have
at each other to try to gain some leverage at
these talks. So one to look at this really as posturing, but.
Speaker 2 (02:33):
It is.
Speaker 3 (02:35):
Very unsettling given to given these superpowers.
Speaker 2 (02:40):
It certainly has helped to contribute to a lot of
volatility in markets, that's for sure. Moments ago, we learned
that Apple is preparing to expand it's manufacturing operations in Vietnam.
It's part of a push on the part of Apple
to lessons it's dependence on China. This is something the
company has been pretty transparent about in the past, and
for years we've seemed to kind of attempt to focus
(03:03):
on this issue of decoupling between the US and China.
It seems that that's inevitable, right that these two very
large economies, the largest in the world, are going to
kind of begin to become less dependent on one another.
Speaker 3 (03:18):
I think it makes complete sense they're looking for other
supply chains because the US is a supply chain to
China and vice versa just isn't working. And so, just
just like Apple, the US nd China are looking for
other countries to supply the raw materials, the goods that
(03:39):
they need so that they can continue to advance the
super technologies that are going to revolutionize our day to
day lives. I think recently I saw that Australia has
ramped up its production of rare earth minerals, which is
(03:59):
increasingly important to the US and to all of our
advanced technologies, but even with them ramping up, it is
hardly going to replace if it needs to replace, hardly
going to replace what we're buying from China.
Speaker 2 (04:16):
So lately, as a part of this tit for tat,
President Trump threatened new tariffs of one hundred percent on
Chinese goods that would be imported by the United States.
There are already a number of tariffs in place, and
one of the things that the markets have been wrestling
with is whether or not these tariffs are going to
produce much higher inflation. Now we really haven't seen much
(04:38):
of that, although there is the suggestion that inflation expectations
on the part of consumers are beginning to rise. How
do you feel about the way in which these tariffs
potentially have the ability to contribute to a higher rate
of inflation in the US.
Speaker 3 (04:58):
That's a great question. I think that when tariffs started
to go north back in the spring, there was a
lot of concern that consumers were going to feel the
pinch almost immediately. And what we saw was that June
came July August, and the inflation rate, the pain point
(05:21):
for consumers just wasn't there, and in large part it's
because businesses weren't passing along the tariffs to consumers. They
didn't want to lock out their customers, and so they
ate those tariffs. At this point, tariffs are becoming so
(05:42):
high and companies and businesses are not able to continue
to eat those extra costs. The concern now is that
we are going to see higher prices because of those
tariffs hitting consumers right when we start to head into
(06:05):
the holiday season, when the store shelves are packed with
all the goodies that we want to buy, and we've
all got Amazon purchases on our minds. Now there is
a greater concern that inflation is going to begin to
pinch the consumer, and.
Speaker 2 (06:23):
I think that may be a little troubling for the Fed.
Although we heard from Chair Jay Powell today and a
lot of his focus continues to be on this weakness
in the labor market. It's going to be very very
interesting to see how the FED navigates this terrain and
at what point the Fed really has to do a
better job of balancing the risk between weakness in the
(06:45):
labor market with the potential for very very sticky inflation.
But if the market has to dial back from expectations
of aggressive FED easing. Given the clients that you have,
the folks that you speak to in Washington, would that
be deeply concerning? Are these people that you speak with
very dependent on the idea that we're going to see
(07:07):
easier monetary policy.
Speaker 3 (07:09):
I think the expectation after September and the lead up
to the next FED meeting is that we are going
to see another cut, maybe not in October, but certainly
before the end of the year. We are going to
see another cut, based in large part on the weekending
job market. Now, we don't have numbers, prospective numbers because
(07:33):
the government is shut down and so all of those
indicators are not being supplied by the Bureau of Labor Statistics.
So we have some really good guesses based upon some
private sector data and all of those and all of
that data looks like it is a much weekend job market,
(07:55):
and that is going to play into the Fed's decision
to perhaps ups lower interest rates. But again, they're looking
at all of the threat of all the increased tariffs,
which at one hundred percent coming out of China on
all those Chinese input imports, will affect consumers, will affect inflation.
(08:18):
So boy, I don't envy their next couple of weeks.
Speaker 2 (08:24):
I'm curious and Andre, given the client base that you have,
how do they feel about the way in which the
Trump administration has been been managing the economy, whether it's
tariffs or tax policy deregulation. I mean, is there a
consensus here that you can address or is there a
kind of a range of opinion in terms of how
(08:45):
the administration is doing.
Speaker 3 (08:48):
So, I think when the administration first took office and
our clients saw the tariff threats and the safe rattling
and the rest, there is a lot of concern and
a lot of pause, but they've come to expect some
of that. In some cases, the Trump administration has normalized
(09:12):
the threatening tariffs and the saber rattling, and despite what
appears to be instability in the government, the market continues
to go up. So I think the market and our
clients that rely on the market and are part of
the market feel like they've believed that they have figured
(09:36):
out the secret sauce, figured out that the administration is
going to continue to threaten and to provoke, but many
of them believe that that will have little real impact
in the long term on the market or their companies.
There may be some short term instability and volatility, but
(10:00):
long term they believe that the president wants a strong
economy and we'll do what he and is doing what
he's doing in order to get us to a stronger economy,
even though if you look at the day to day
it does not. It seems it's very unsettling.
Speaker 2 (10:19):
Sandra will leave it there, Thank you so very much.
Sandra Swirsky is the founder also the CEO of the
advisory firm Integer, joining us from Washington, d C. In
a moment or two, we'll bring in Rob Williams from
Sage Advisory Services. He's in Austin, Texas, and we'll take
a look at the interest rate environment and what's happening
(10:39):
in the fixed income space. Coming up here on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.
I'm Doug Krisner. The earning season is underway in the
US and in the last session we heard from several
of the big banks. The results were by and large
(11:00):
pretty solid, although the commentary seemed to be a little mixed.
We had bank stocks finishing mixed as well. The KBW
Bank index was up one point eight percent, but it
closed off its session high for a look at the
earning season. I'm joined by Rob Williams. He is managing
partner also the chief investment strategist at Sage Advisory Services.
(11:20):
Rob is based in Austin, Texas. Thank you so much
for making time to chat with me. Give me your
sense of what you heard today from the big banks.
Speaker 4 (11:31):
Yeah, I mean, we look w'ere fix think a manager.
We do a lot of investing in credit obviously, and
we're very concerned about the consumer, so we wanted the
overall thing we wanted to see is any read on
insight on the consumer, especially kind of write down things
like that. And overall, like you said earlier, very healthy,
driven a lot by IPO activity, trading revenue, things like that,
(11:56):
not much damage. You know, these big banks hold very
little limited subprime auto type of exposure or anything that
would have hurt them that much. So pretty positive overall.
But the comments, like you also said, kind of looking forward,
not as optimistic as kind of the current run rate
that you've seen, you know, slow down the consumer.
Speaker 5 (12:19):
Maybe some cracks on the credit side.
Speaker 4 (12:22):
You've seen a few little cracks and you know, and
we all know how tight credit spreads are so there's
not a lot of room for any kind of you know,
bigger systemic sort of crisis would certainly impact the credit
markets overall.
Speaker 2 (12:38):
So I'm glad you mentioned Jamie Diamond there, the CEO
of JP Morgan. He was warning today of a potential
deterioration in credit quality. Now you and I both know
that lately we have seen the implosion of Tricolor holdings,
the auto lender, as well as the car parks supplier
First Brands, and Diamond was remarking when he sees situations
(12:59):
like this, is his antenna go up. And he also said,
when you see one cockroach, there are probably more. Does
he have a point there?
Speaker 4 (13:08):
Yeah, I mean, look, there's a lot of opaque sides
of the credit market now, in private credit and other things.
So for sure there needs to be a little more
dispersion amongst some of these BDCs and other things because
there are some problems under there. Whether they're going to
be big enough to bleed up to you know, investment
grade credit. Uh, you know, we don't see that happening
(13:31):
anytime soon, but we certainly think it's not a bad
time to be thinking about, Hey, should I be moving
up in liquidity in my income side of my portfolio, right,
you know, bank you know, bank reserves have been going down.
Bank reserves as a percentage of GDP, which is what
the kind of the FED measures sort of when we're
in ample liquidity situation. That's been kind of getting down
(13:54):
lower and lower, kind of out of that band of
like ample. So maybe liquidity is shrinking a little bit.
We've seen some cracks. Not a bad time to stay
in more liquid, transparent, higher you know, not just higher quality,
but lower volatility kind of markets in the fixed income space.
Speaker 2 (14:12):
Well, that takes us to FED share j Powell today
he kind of reinforced bets on a raidcat in October.
That shouldn't be a big surprise if you've been tracking
the FED speak. A number of policymakers have been very
concerned about the weakness of the labor market. Powell also
indicated that FED may stop shrinking its balance sheet in
the coming months as a way of perhaps maintaining, to
(14:34):
your point, a little of the liquidity, especially in the
overnight funding markets. So are you really seeing evidence now
that things are kind of drying up a bit?
Speaker 5 (14:44):
Yeah?
Speaker 4 (14:45):
I mean bankers have certainly been run down, right, and
the FED has has been engaging and triggering their balance
sheet for a while. They've said when when liquidity is
gone from excessive to ample is when they would think
about and down QT. And we're in that zone. We're
the bottom of that zone. I think some of the
governors has pointed at put the number in that kind
(15:07):
of twelve ten to twelve percent of GDP for bank reserves.
Speaker 5 (15:12):
We're right around ten. So we're right at the lower
end of that.
Speaker 4 (15:15):
So the good news is they're probably getting ready to
fold up that and ENQT. The bad news is that, yeah,
liquidity has shrunk a little bit. It's not like tight
at this moment, but like I said earlier, maybe a
good time to be thinking about, Hey, I want to
be a little more liquid in my fixed income side.
Speaker 2 (15:35):
I'm curious about how you view the macro these days,
particularly in the absence of a lot of government data.
We've been lacking some key data points here because of
the shutdown and the CPI report, which was to have
been released tomorrow that would have been the October fifteenth
here in the States. It's been pushed out to I
think the twenty fourth. Give me a sense of how
(15:56):
you've had to navigate this landscape right now without a
lack of or with a lack of government data.
Speaker 4 (16:03):
Yeah, that is a problem, especially if it continues on.
You know, Fortunately, there's a good there's been a you know,
twenty years ago it would have been more difficult, but
there's been a growing amount of sort of alternative private
data that you can sort of lean into, and you know,
Bloomberg certainly, you know, has a good read on that.
There's even a worksheet of all the various private sources
(16:24):
like you had one today, the one piece of data
you had with small business optimism, right, and that ticked down.
If you crack that open. There are some inflation components
to that, so you have to be a little more
creative and dig a little deeper. But that one, we
actually look at that small business and there's a reading
in that that says, hey, what percentage of small businesses
(16:45):
are expecting to increase prices? So it's a good indication
of price pressures and that that's been ticking up. So
that tells us, yeah, there's price pressure still coming. And
you have to kind of lean into some of the
other alternative data sources for job the job numbers and
they've basically been telling you the same thing. Jobs are weakening,
pricing pressures, okay, but we're seeing some sign that are
(17:07):
starting to percolate.
Speaker 2 (17:08):
Does that necessarily equate to stagflation?
Speaker 4 (17:12):
No, I think because you just haven't seen the goods.
You're getting some stag and the job numbers, you know,
but you're not getting inflation coming through. The goods path
through has not been that bad. The housing and the
energy and the service sector slowing down to sort of
contain that. What we're kind of looking for is, hey,
you know, we know inventories have been built up, they're
(17:34):
running down. And when we start to see more margin
pressures and things like that small business price index and
really starting to come through, we get a little nervous.
But right now it looks more like the Fed is
going to be more and they've said it more worried
about jobs and inflation at the moment.
Speaker 2 (17:52):
I'd like to get your view Rob on this debasement
trade that's been rippling across not just markets here in
the States, but globally is well. It seems like a
number of investors are pulling away from sovereign debt, chasing
gold maybe's even silver give me your sense of what's
happening and what the risks are right now.
Speaker 4 (18:11):
Yeah, you know, there's many reasons, but it's just like
when you saw that back end volatility in the curve.
There's still a lot of uncertainty policy politically for inflation,
and there's also deficits.
Speaker 5 (18:25):
Are not a US problem.
Speaker 4 (18:27):
They are a global problem and they're not going away
anytime soon. So that's going to kind of keep pushing
people away from some of the traditional things and creating
some volatility on the back end of the curve and
pushing people towards gold and things like and even crypto
and things like that. And it's not going away anytime soon.
But it's also from a rape perspective, I think it's
(18:51):
not going to get out of hand either. I think
it'll be contained because, like I said, inflation is not
out of the bag. Here apply demand for for rates
and some of this stuff is still pretty favorable.
Speaker 5 (19:04):
We just talked about QT ending.
Speaker 4 (19:08):
You know, the Treasury is going to issue more bills
in long paper, so they're going to do their level
best to keep the volatility sort of down at the long.
Speaker 5 (19:16):
End of the curve.
Speaker 4 (19:18):
But people are certainly the driving forces I think global deficits.
Speaker 2 (19:23):
So you wouldn't be shunning US treasuries in favor of
high quality IG credit like a Microsoft, would you.
Speaker 4 (19:31):
Uh No, Look, I'd have a diversified portfolio. I wouldn't
shy away from duration. Right, the cash is not going
to look is going to look increasingly less attractive in
an easing cycle. Right, You've gotten good returns and save
fixed income treasuries IG credit six seven percent, you're going
to get just in carry. You're going to get another
percent percent and a half in the fourth quarter just
(19:52):
in carry. So I wouldn't. I wouldn't worry a whole
lot about duration. And again, you're not. If you're in
a diversified portfolio, you don't have a a lot of
the extreme long end exposure. If that's what you're worried about,
and we're frankly, I'm not too worried about having that
long end. But I'm just saying, typical investor is not
going to have a bunch of thirty year paper. They're
going to have you in the one to ten year
(20:13):
part of the curve anyhow. So No, I wouldn't shy
away from duration or high quality fixed income.
Speaker 2 (20:19):
Okay, Robill leave it there. Thank you so much. Rob
Williams is managing partner also the Chief Investment Strategist at
Sage Advisory Services from Austin, Texas. 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.
(20:43):
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 four
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