July 3, 2025 • 22 mins
Asian equities were set to climb Friday following fresh highs for US stocks as strong jobs data eased concerns the economy slowing down. Treasuries fell and the dollar rose Thursday in a sign traders see less pressure on the Federal Reserve to cut interest rates after US jobs growth exceeded expectations in June. Swap traders saw almost no chance of a July Fed cut, compared with a roughly 25% probability seen before the data. The chance of a move in September ebbed to about 70%. We get reaction from Rob Haworth, Senior Vice President and Senior Investment Strategy Director at U.S. Bank Asset Management Group.
Plus - US markets closed prior to the House passing President Donald Trump's tax bill that had weeks earlier sparked concerns over rising deficits. Separately, Trump also said his administration may begin sending out letters to trading partners as soon as Friday setting unilateral tariff rates ahead of a July 9 deadline for negotiations. Before the vote, we heard from Treasury Secretary Scott Bessent. He spoke with Bloomberg's Romaine Bostick and Matt Miller.
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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 President Trump's Big Beautiful Bill was passed today by
the House. It will be signed into law on the
fourth of July, and in a moment or two we'll
bring you a conversation on the bill's impact with US
Treasury Secretary Scott Bessant. But we begin with markets and
record highs today for both the S and P five
(00:32):
hundred and the Nasdaq composite. The monthly employment report was
stronger than forecast. It tempered worries over a slowing economy,
and it also reduced speculation on the Fed cutting its
policy rate anytime soon. Joining me now for a look
at the price section and the overall macro is Rob Hayworth.
He is Senior investment strategy director at US Bank Asset Management.
(00:55):
Rob is on the line from Seattle, Washington. Thank you
for making time to chat with me. Can I begin
by getting your reaction to the jobs data?
Speaker 3 (01:03):
Absolutely? Yeah.
Speaker 4 (01:04):
The job's data today was certainly, I think a surprise,
surprisingly strong, even though one hundred and forty seven thousand
new payroll jobs is not the highest we've seen of late.
It is much stronger than people expected, and I think
that tells us we're seeing a resilient economy, which is
some of what we saw on the PMI data, some
of what we saw in the job openings to data
(01:25):
today as well this week, and the market certainly reacted
that way.
Speaker 2 (01:30):
Where does it leave the Fed? Do you think? I
mean July obviously, at least in the market's view, is
off the table for a rate cut. Perhaps the first
move is in September. Is that about right? Yeah?
Speaker 4 (01:41):
I think it leaves the Fed in their wait and
see mode, as chair Powell even hinted at the CenTra
conference in Europe this week, and that maybe means they'll
get to two cuts this year. It's what they're expecting,
it's what the market expects, but we'll have to see
how the data unfolds. We still really haven't seeing much
impact one way or the other, whether it's inflation or
(02:03):
profit margin pressure from tariffs just yet. And when it
comes to the reconciliation bill that just passed and the
President will likely sign tomorrow, the benefits of that to
the economy are probably not until late this year early
next year, so there's probably some tough sledding ahead that
gives the FED room to cut rates.
Speaker 2 (02:26):
So we have the big, beautiful bill that will become
law as of July fourth. One of the things that
the Congressional Budget Office is quick to point out it
will add about three point four trillion dollars to the
US deficit over the next ten years. Is that problematic
for you?
Speaker 4 (02:42):
I think it's something we're watching, and the bond market
is watching closely, and that's what we're watching to tell
us if it's problematic. Right now, with the ten year
treasury below four and a half percent, we'd say the
bond market is a little seguine about it at the moment,
and certainly over the next ten years there's a lot
can change when it comes to the US debt burden,
(03:04):
but it's something that could be a problem. We think
the signal for that to us would be if we
start seeing the tenure treasury yield to get closer to
five percent. That may be the market either having some
trouble with a growing debt burden here.
Speaker 2 (03:20):
In the US. One of the things I think that's
been a little confounding. The impact of tariffs really hasn't
shown up to be kind of an inflationary problem at
this point. Anyway, I think to go back to your
point about the FED being in a weight and see mode,
I think that that's perhaps one of the things that
is really causing them the tread water at the moment.
Today the President said the administration may begin sending out
(03:42):
letters to trading partners on those so called unilateral tariffs
ahead of the July ninth deadline for more trade negotiations.
Do you think that the situation with tariffs has the
potential to worsen in a way that we could in
fact see an inflationary effect.
Speaker 4 (04:00):
I think what will happen with tariffs is one of
two things.
Speaker 5 (04:05):
Right.
Speaker 4 (04:05):
Either consumers will have to pay for them. That will
be inflationary, and we'll see that in a one time
bump to inflation, where businesses will have to pay for them,
whether here or abroad, and that will come out of
profit margins. That means a tougher road for labor. So
I think the challenge will be there is a cost
somewhere to this economy. It's probably a bit of both,
(04:28):
and that's what we'll have to watch out for. And
I think that's maybe the biggest kind of headwind for
the market in time, which is not our base case,
but it is that that companies may not be able
to grow quite as quickly as they'd hoped, and consumers
will face some bump in inflation, which could slow activity
here for a little bit. And when we look at
kind of average growth over the course of twenty twenty five,
(04:51):
we certainly that's really what we're seeing in the Consensus
Economist data around one one and a half percent is
they're expecting hit from either a slower consumer because they're
facing some inflationary pressure, or slower corporate spending because they're
facing some profit margin pressure from the tariffs.
Speaker 2 (05:10):
One of the other things that has kind of shown
up here is dollar weakness, particularly since the beginning of
the year, and some of this has to do, obviously
with a tariff story. I think that the dollar has
weakened by roughly ten percent over the first half of
the year, and I'm wondering whether or not that may
have a little bit of a positive impact for some
(05:31):
of the big US multinationals, or maybe that won't manifest
because of this trade tension. I mean, how do you
see the role of the dollars position in kind of
global markets right now. Yeah.
Speaker 4 (05:44):
I think certainly the way tariffs are positioning it is
there's not as much demand for the dollar as we
may have seen. We're hearing and we've had some reports
that exporters to the US are demanding payment in their
currency rather than dollars, which is probably putting a little
downward pressure on the dollar. The fact that the FEDS
(06:05):
on hold isn't really helping the dollar at this point,
even though you've had the European Central Bank and the
Bank of England cutting interest rates. But I think the
good news is you're not seeing it show up in
financial flows, meaning we're not seeing foreign sales of treasuries
at this point. So this weakness and the dollar maybe
reflects some concern that the US may not be getting
(06:28):
as demanding as much from the rest of the world
as we try and reshore goods, and so that's going
to keep a little pressure on the dollar. I think
for multinationals, the hope is that is making their goods
cheaper when they look to export overseas, and maybe that
will help certainly if we think about the trade deal
with Vietnam, the fact that US exporters face no tariffs
(06:50):
headed into Vietnam could help, although Vietnam is such a
small economy and really what we need to be selling
into is some of the larger economies and some of
our our largest trading partners Canada, Mexico, China and Europe.
Speaker 2 (07:05):
So I mentioned earlier that the equity market closed it
record highs today for the S and P and the
Nasdaq comp We know that valuations are elevated, maybe a
bit stretched in some cases. Are you left to conclude
that there is still opportunity here in stocks? Are you
still constructive on the market or are you getting a
little worried? Now?
Speaker 4 (07:26):
We're still actually glass half full, but it's a glass
that I think we're worried that there's not a lot
of margin for error in this. I think the constructive
things fundamentally are one, the consumer is still spending money.
They may not be able to grow rapidly, but wage
growth and low unemployment are keeping the consumer able to
(07:48):
spend money, so that should support the economy. Two, corporate
earnings growth is remaining positive, so that should help. But
the challenge is with valuation at these levels, the market
for error is quite slim. So if we start to
see some faltering that could could take a little something
out of the market, But for now, we think it
looks like the economy can thread this needle, especially if
(08:12):
tariffs are maybe not as bad as people had hoped,
and we come in in this ten to twenty percent
range of tariffs, we may be able to kind of
companies may be able to handle that, consumers may be
able to handle that, and the economy can kind of
continue to grow. So we'd be a little more constructive here,
but we still would emphasize diversification and portfolios, so looking
(08:33):
beyond the US for opportunities, particularly because evaluation is cheaper there,
and then within the US markets, looking for more diversification
away from what the last couple of years has been
lots of strong tech performance, we'd look into other segments
of the market. You're seeing stronger performance from industrials and financials,
and certainly we'd point to utilities as the next beneficiary
(08:56):
from this artifictional intelligence spending boom.
Speaker 2 (08:59):
So before I let you go rob so far this
year the S and P is up nearly seven percent,
So for the remainder of twenty twenty five, will that
return kind of be equivalent to what we have seen
so far, or could we be in for some choppy
waters ahead.
Speaker 4 (09:15):
Yeah, we'll look to it reevaluate our s and P
five hundred forecast as we get through second quarter earning season.
I think we see a more modest bump relative to
our forecast at this point. But if things actually come
out a little better, if some of this uncertainty goes away,
I think there's room for an equal increase.
Speaker 2 (09:34):
Rob, believe it there. Thank you so very much, Rob
Hayworth there. He is senior investment strategy director at us
Bank Asset Management Group. Joining from Seattle here on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner. So, as mentioned earlier, the House did
(09:57):
pass President trump sweeping budget and tax bill. Now, this
includes tax cuts, it also curtails spending on safety net programs,
and it reverses much of the previous administration's move toward
a clean energy economy. Before the vote, we caught up
with Treasury Secretary Scott Bessant. This was a wide ranging interview.
Bessant discussed the possible economic impact of the bill, as
(10:20):
well as the Treasury's financing needs and the recent decline
that we have seen in the US dollar. Here is
part of Besson's conversation with Bloomberg's Romaine Bostick and Matt Miller.
Speaker 1 (10:31):
There's a lot of concern about that addition to the
federal deficit, the idea of a widening of that deficit
because of some deficiencies and pain for some of those
tax cuts. What is your message to the market.
Speaker 3 (10:43):
Well, Romayne, I'm not quite sure what you mean, because
stock markets had a new high and the bond market
just had its best six months in five years, So
I disagree with that. So I think the markets are
telling us that they liked the bill and that they
believe that it is fiscally prudent and stimulative for growth.
(11:07):
And importantly, I think we can get back to the
kind of growth that we saw in President Trump's term
two point eight three point two percent non inflationary growth,
which the Biden administration was not capable of.
Speaker 5 (11:22):
Mister Secretary Matt Miller. Here, I'm wondering, as someone who
grew up with Alex P. Keaton, watching Milton Friedman on
Phil Donahue and always thinking we were on the wrong
side of the laughter curve, why haven't these kind of
massive tax cuts worked to really stimulate growth in the past,
and they certainly haven't worked to replace the amount of
(11:43):
revenue that's taken out. We didn't see that with the
Reagan tax cuts. It didn't work out with the Bush
tax cuts, and it didn't work out with the TCJA
in twenty seventeen either. Why is it going to work now?
Speaker 3 (11:54):
Well, I would disagree with TCJA. TCJA was a work
in products and then we hit COVID, and I think
what's different here also is we're going to be constraining spending.
I spend a lot of time with the Freedom Caucus
members and their constituents should be very proud of them.
(12:15):
They should be very proud of themselves. They change the
center of gravity of the debate. So we are both
going to stimulate the economy, pick up tax revenues, but
more importantly constrain and pull down spending.
Speaker 5 (12:29):
So far, though, it looks like we're going to boost
deficits up to seven percent. You ran on this three
three three plan. Three percent deficit, three percent economic growth,
and three million barrels of oil, an increase of three
million barrels of oil a day in the US. Do
you expect to get to that by the end of
President Trump's term.
Speaker 3 (12:50):
I do. And I'm not sure where the seven percent
number is coming from, right because I reject the CBO scoring.
But on the other side, the CBO also word terraff
income at two point eight trillion, so you know that
substance that substantially increases government revenues. I think the growth
(13:10):
is going to be much higher, and I believe that
what we've done in constraining spending here is just the
first bite at the apple.
Speaker 1 (13:20):
Do you anticipate, mister Secretary, that the US government's financing needs,
the Treasury's financing needs will increase over the next couple
of years.
Speaker 3 (13:29):
I think that we will see what happens to interest rates,
and there could be an increase in financing needs based
on yields. But everything that I'm seeing says that inflation
is under control and likely coming down.
Speaker 1 (13:50):
There's, of course, the costs to finance that, and we
look at where yields had been, and we know there's
been a lot of volatility there some stability in recent
week's partly because of some of the things that you've
done and said publicly, but we've also seen a little
bit of reticence to buy into longer dated US treasuries.
I know you have been public about the idea, at
(14:12):
least in the short term, of relying a little bit
more on shorter term treasury issuance. Do you anticipate that
will continue?
Speaker 3 (14:19):
Well, I think what we're going to see is one
of the underreported things of the One Big Beautiful Bill
is it also gets us away from this terrible debt
ceiling dilemma, and because of that, we've had to constrain issuance.
So it's likely that initially we will use bills to
(14:40):
refill the Treasury General account.
Speaker 1 (14:43):
Do you worry about any potential rollover risk in that strategy.
Speaker 3 (14:48):
No, I don't. We've seen very durable and robust treasury
auctions that I see who the buyers are. I think
that we are going to see US banks would take
up more of the debt issuance because of the supplement
(15:09):
supplementary leverage ratio reliefs that they're going to be getting,
and were going to pass the bill today. President Trump's
going to sign that tomorrow, and then probably the following week.
We're also going to have the stable coin legislation, which
I think could create at least two trillion in demand
(15:31):
for treasury bills.
Speaker 1 (15:33):
So, mister Secretary, I do want to get your thoughts
about just broader policies coming out of this administration, beyond
just this one big, beautiful bill that is now appears
to be advancing in Congress. There's been a lot of
questions in the market about what the administration's stances on
the dollar, whether there truly is a strong dollar policy,
(15:55):
or whether that policy a long term policy. All strong
dollar support has shifted to something else.
Speaker 3 (16:01):
I'm not sure why that is in the market. The
price of the dollar has nothing to do with a
strong dollar policy. Current currencies move up and down based
on a variety of factors. But a strong dollar policy
means several things. One is what is the dollar strong against?
(16:22):
Or other is another currency stronger higher in price of
the moment. That doesn't have anything to do with a
strong dollar policy. The strong dollar policy is are we
doing the things over the long term to ensure that
the US dollar remains a reserve currency of the world.
(16:43):
And we are. We are setting the stage for economic growth,
we are constraining inflation, we are making the United States
the best destination for global capital. And I think that's
going to continue to happen. I think, as A said
many times over since World War Two, the demise of
(17:06):
the dollar as reserve currency has been predicted, and I
think once again the skept is going to be wrong.
But there is no change in policy.
Speaker 1 (17:15):
Fair enough, but I'm sure you understand that the weakness
that we've seen in the dollar to start the year
is something we have not seen in decades, and there
are other countries that have been trying to take advantage
of it. In a speech just this week, we heard
from the Chinese Central Bank governor who really laid out
at least their vision, their Chinese vision for a new
global currency order, which would of course mean a reduced
(17:37):
rule for the dollar and in their view, a greater
role for the Yuon Now, regardless of whether that is
a viable plan, I am curious as to what you
think about the idea that this is even being spoken
about publicly.
Speaker 3 (17:49):
Well, I mean, look, what are the Chinese going to say?
And by the way, it's complete policy. They have a
non convertible currency, so how are they going to be
a reserve currency. They also have one point four billion
people who want to get their money out of China,
they have capital constraints on taking out money. The sine
(18:13):
kwannon for a reserve currency is that it trades freely.
And I saw my friend Christian Legard, president of the ECBST,
the other day said that maybe this is the Euro's moment,
but I can tell you if the Euro hits one twenty,
Europeans are going to be squawking that it is too strong.
They're an export economy, so let's see what happens. They
(18:36):
should be careful what they wish for, whereas in the
United States we recognize the responsibility that comes with being
a reserve currency.
Speaker 1 (18:45):
Mister Secretary, I am curious about what comes next after this.
We know that we ostensibly have this July ninth deadline
on trade, and I know it's going to take several weeks,
if not months, following that to really start to hammer
out some of these dealsticipate that we're going to see
additional deals and more substantive deals pretty soon within the
(19:05):
next few weeks.
Speaker 3 (19:07):
I think we're going to see a flurry of deals
before July ninth. We'll see how the President wants to
treat those who are negotiating, whether he's happy that they're
negotiating in good faith. I think that we're going to
see about one hundred countries who just get the minimum
ten percent of reciprocal tariff and we'll go from there.
(19:32):
So I think we are going to see a lot
of action over the coming days.
Speaker 1 (19:38):
Have you been directly involved in any of those negotiations
and it's so, are there specific provisions that those other
countries have been asking the US?
Speaker 3 (19:47):
Well, I'm not going to negotiate on international television.
Speaker 1 (19:52):
But I want to negotiate.
Speaker 3 (19:53):
Just tell us well, yeah, sorry. I would say is
some countries have come with or trading blocks, have come
with good deals, some would come with okay, some would
come with deals that are unacceptable. And we are going
to be announcing several deals. The President has the final say.
(20:19):
And what I can tell you is that the career staff,
whether it's a Treasury, Commerce USTR, are all saying that
they can't believe that these countries are given up things
that they haven't seen them offer in the past two
or three decades. So this is a win for the
American people. It's a win for fair trade.
Speaker 5 (20:40):
Can I ask, just finally about the pressure the president
and others in an administration have put on Jerome Pallet
to cut rates. President Trump has asked now for three
full percentage points of cuts, three hundred basis points, and
it strikes me that that would either overheat the economy
or cause absolute chaos in the treasury market. Don't you
(21:01):
think it's important that the Federal Reserve operate with an
amount of independence?
Speaker 3 (21:07):
Well, Fed Reserve does operate with the amount of independence,
just like a referee does out of the flour of
the basketball court. They're independent, but the coaches work the
ref all the time. President Trump is the most sophisticated
president economically, perhaps in the past one hundred years. Perhaps. Ever,
(21:29):
I will note that in his first term he was
more right than the FED was on when it was
time to cut rates. FED normally followed later on. So
I think he's going to make his views known. And
I would also point out that the market agrees with
(21:50):
President Trump in terms of the direction, if not the
magnitude of the cuts.
Speaker 5 (21:54):
Do you agree with President Trump that the FED should
cut by three percent in July?
Speaker 3 (22:00):
I believe that I followed the market and the market
both for the rest of the year, and the two
year market is signaling cuts.
Speaker 2 (22:09):
That is Treasury Secretary Scott Bessant there, speaking with Bloomberg's
Romain Bostik and Matt Miller 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. You
(22:30):
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 Prisner, 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 President Trump's Big Beautiful Bill was passed today by
the House. It will be signed into law on the
fourth of July, and in a moment or two we'll
bring you a conversation on the bill's impact with US
Treasury Secretary Scott Bessant. But we begin with markets and
record highs today for both the S and P five
(00:32):
hundred and the Nasdaq composite. The monthly employment report was
stronger than forecast. It tempered worries over a slowing economy,
and it also reduced speculation on the Fed cutting its
policy rate anytime soon. Joining me now for a look
at the price section and the overall macro is Rob Hayworth.
He is Senior investment strategy director at US Bank Asset Management.
(00:55):
Rob is on the line from Seattle, Washington. Thank you
for making time to chat with me. Can I begin
by getting your reaction to the jobs data?
Speaker 3 (01:03):
Absolutely? Yeah.
Speaker 4 (01:04):
The job's data today was certainly, I think a surprise,
surprisingly strong, even though one hundred and forty seven thousand
new payroll jobs is not the highest we've seen of late.
It is much stronger than people expected, and I think
that tells us we're seeing a resilient economy, which is
some of what we saw on the PMI data, some
of what we saw in the job openings to data
(01:25):
today as well this week, and the market certainly reacted
that way.
Speaker 2 (01:30):
Where does it leave the Fed? Do you think? I
mean July obviously, at least in the market's view, is
off the table for a rate cut. Perhaps the first
move is in September. Is that about right? Yeah?
Speaker 4 (01:41):
I think it leaves the Fed in their wait and
see mode, as chair Powell even hinted at the CenTra
conference in Europe this week, and that maybe means they'll
get to two cuts this year. It's what they're expecting,
it's what the market expects, but we'll have to see
how the data unfolds. We still really haven't seeing much
impact one way or the other, whether it's inflation or
(02:03):
profit margin pressure from tariffs just yet. And when it
comes to the reconciliation bill that just passed and the
President will likely sign tomorrow, the benefits of that to
the economy are probably not until late this year early
next year, so there's probably some tough sledding ahead that
gives the FED room to cut rates.
Speaker 2 (02:26):
So we have the big, beautiful bill that will become
law as of July fourth. One of the things that
the Congressional Budget Office is quick to point out it
will add about three point four trillion dollars to the
US deficit over the next ten years. Is that problematic
for you?
Speaker 4 (02:42):
I think it's something we're watching, and the bond market
is watching closely, and that's what we're watching to tell
us if it's problematic. Right now, with the ten year
treasury below four and a half percent, we'd say the
bond market is a little seguine about it at the moment,
and certainly over the next ten years there's a lot
can change when it comes to the US debt burden,
(03:04):
but it's something that could be a problem. We think
the signal for that to us would be if we
start seeing the tenure treasury yield to get closer to
five percent. That may be the market either having some
trouble with a growing debt burden here.
Speaker 2 (03:20):
In the US. One of the things I think that's
been a little confounding. The impact of tariffs really hasn't
shown up to be kind of an inflationary problem at
this point. Anyway, I think to go back to your
point about the FED being in a weight and see mode,
I think that that's perhaps one of the things that
is really causing them the tread water at the moment.
Today the President said the administration may begin sending out
(03:42):
letters to trading partners on those so called unilateral tariffs
ahead of the July ninth deadline for more trade negotiations.
Do you think that the situation with tariffs has the
potential to worsen in a way that we could in
fact see an inflationary effect.
Speaker 4 (04:00):
I think what will happen with tariffs is one of
two things.
Speaker 5 (04:05):
Right.
Speaker 4 (04:05):
Either consumers will have to pay for them. That will
be inflationary, and we'll see that in a one time
bump to inflation, where businesses will have to pay for them,
whether here or abroad, and that will come out of
profit margins. That means a tougher road for labor. So
I think the challenge will be there is a cost
somewhere to this economy. It's probably a bit of both,
(04:28):
and that's what we'll have to watch out for. And
I think that's maybe the biggest kind of headwind for
the market in time, which is not our base case,
but it is that that companies may not be able
to grow quite as quickly as they'd hoped, and consumers
will face some bump in inflation, which could slow activity
here for a little bit. And when we look at
kind of average growth over the course of twenty twenty five,
(04:51):
we certainly that's really what we're seeing in the Consensus
Economist data around one one and a half percent is
they're expecting hit from either a slower consumer because they're
facing some inflationary pressure, or slower corporate spending because they're
facing some profit margin pressure from the tariffs.
Speaker 2 (05:10):
One of the other things that has kind of shown
up here is dollar weakness, particularly since the beginning of
the year, and some of this has to do, obviously
with a tariff story. I think that the dollar has
weakened by roughly ten percent over the first half of
the year, and I'm wondering whether or not that may
have a little bit of a positive impact for some
(05:31):
of the big US multinationals, or maybe that won't manifest
because of this trade tension. I mean, how do you
see the role of the dollars position in kind of
global markets right now. Yeah.
Speaker 4 (05:44):
I think certainly the way tariffs are positioning it is
there's not as much demand for the dollar as we
may have seen. We're hearing and we've had some reports
that exporters to the US are demanding payment in their
currency rather than dollars, which is probably putting a little
downward pressure on the dollar. The fact that the FEDS
(06:05):
on hold isn't really helping the dollar at this point,
even though you've had the European Central Bank and the
Bank of England cutting interest rates. But I think the
good news is you're not seeing it show up in
financial flows, meaning we're not seeing foreign sales of treasuries
at this point. So this weakness and the dollar maybe
reflects some concern that the US may not be getting
(06:28):
as demanding as much from the rest of the world
as we try and reshore goods, and so that's going
to keep a little pressure on the dollar. I think
for multinationals, the hope is that is making their goods
cheaper when they look to export overseas, and maybe that
will help certainly if we think about the trade deal
with Vietnam, the fact that US exporters face no tariffs
(06:50):
headed into Vietnam could help, although Vietnam is such a
small economy and really what we need to be selling
into is some of the larger economies and some of
our our largest trading partners Canada, Mexico, China and Europe.
Speaker 2 (07:05):
So I mentioned earlier that the equity market closed it
record highs today for the S and P and the
Nasdaq comp We know that valuations are elevated, maybe a
bit stretched in some cases. Are you left to conclude
that there is still opportunity here in stocks? Are you
still constructive on the market or are you getting a
little worried? Now?
Speaker 4 (07:26):
We're still actually glass half full, but it's a glass
that I think we're worried that there's not a lot
of margin for error in this. I think the constructive
things fundamentally are one, the consumer is still spending money.
They may not be able to grow rapidly, but wage
growth and low unemployment are keeping the consumer able to
(07:48):
spend money, so that should support the economy. Two, corporate
earnings growth is remaining positive, so that should help. But
the challenge is with valuation at these levels, the market
for error is quite slim. So if we start to
see some faltering that could could take a little something
out of the market, But for now, we think it
looks like the economy can thread this needle, especially if
(08:12):
tariffs are maybe not as bad as people had hoped,
and we come in in this ten to twenty percent
range of tariffs, we may be able to kind of
companies may be able to handle that, consumers may be
able to handle that, and the economy can kind of
continue to grow. So we'd be a little more constructive here,
but we still would emphasize diversification and portfolios, so looking
(08:33):
beyond the US for opportunities, particularly because evaluation is cheaper there,
and then within the US markets, looking for more diversification
away from what the last couple of years has been
lots of strong tech performance, we'd look into other segments
of the market. You're seeing stronger performance from industrials and financials,
and certainly we'd point to utilities as the next beneficiary
(08:56):
from this artifictional intelligence spending boom.
Speaker 2 (08:59):
So before I let you go rob so far this
year the S and P is up nearly seven percent,
So for the remainder of twenty twenty five, will that
return kind of be equivalent to what we have seen
so far, or could we be in for some choppy
waters ahead.
Speaker 4 (09:15):
Yeah, we'll look to it reevaluate our s and P
five hundred forecast as we get through second quarter earning season.
I think we see a more modest bump relative to
our forecast at this point. But if things actually come
out a little better, if some of this uncertainty goes away,
I think there's room for an equal increase.
Speaker 2 (09:34):
Rob, believe it there. Thank you so very much, Rob
Hayworth there. He is senior investment strategy director at us
Bank Asset Management Group. Joining from Seattle here on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner. So, as mentioned earlier, the House did
(09:57):
pass President trump sweeping budget and tax bill. Now, this
includes tax cuts, it also curtails spending on safety net programs,
and it reverses much of the previous administration's move toward
a clean energy economy. Before the vote, we caught up
with Treasury Secretary Scott Bessant. This was a wide ranging interview.
Bessant discussed the possible economic impact of the bill, as
(10:20):
well as the Treasury's financing needs and the recent decline
that we have seen in the US dollar. Here is
part of Besson's conversation with Bloomberg's Romaine Bostick and Matt Miller.
Speaker 1 (10:31):
There's a lot of concern about that addition to the
federal deficit, the idea of a widening of that deficit
because of some deficiencies and pain for some of those
tax cuts. What is your message to the market.
Speaker 3 (10:43):
Well, Romayne, I'm not quite sure what you mean, because
stock markets had a new high and the bond market
just had its best six months in five years, So
I disagree with that. So I think the markets are
telling us that they liked the bill and that they
believe that it is fiscally prudent and stimulative for growth.
(11:07):
And importantly, I think we can get back to the
kind of growth that we saw in President Trump's term
two point eight three point two percent non inflationary growth,
which the Biden administration was not capable of.
Speaker 5 (11:22):
Mister Secretary Matt Miller. Here, I'm wondering, as someone who
grew up with Alex P. Keaton, watching Milton Friedman on
Phil Donahue and always thinking we were on the wrong
side of the laughter curve, why haven't these kind of
massive tax cuts worked to really stimulate growth in the past,
and they certainly haven't worked to replace the amount of
(11:43):
revenue that's taken out. We didn't see that with the
Reagan tax cuts. It didn't work out with the Bush
tax cuts, and it didn't work out with the TCJA
in twenty seventeen either. Why is it going to work now?
Speaker 3 (11:54):
Well, I would disagree with TCJA. TCJA was a work
in products and then we hit COVID, and I think
what's different here also is we're going to be constraining spending.
I spend a lot of time with the Freedom Caucus
members and their constituents should be very proud of them.
(12:15):
They should be very proud of themselves. They change the
center of gravity of the debate. So we are both
going to stimulate the economy, pick up tax revenues, but
more importantly constrain and pull down spending.
Speaker 5 (12:29):
So far, though, it looks like we're going to boost
deficits up to seven percent. You ran on this three
three three plan. Three percent deficit, three percent economic growth,
and three million barrels of oil, an increase of three
million barrels of oil a day in the US. Do
you expect to get to that by the end of
President Trump's term.
Speaker 3 (12:50):
I do. And I'm not sure where the seven percent
number is coming from, right because I reject the CBO scoring.
But on the other side, the CBO also word terraff
income at two point eight trillion, so you know that
substance that substantially increases government revenues. I think the growth
(13:10):
is going to be much higher, and I believe that
what we've done in constraining spending here is just the
first bite at the apple.
Speaker 1 (13:20):
Do you anticipate, mister Secretary, that the US government's financing needs,
the Treasury's financing needs will increase over the next couple
of years.
Speaker 3 (13:29):
I think that we will see what happens to interest rates,
and there could be an increase in financing needs based
on yields. But everything that I'm seeing says that inflation
is under control and likely coming down.
Speaker 1 (13:50):
There's, of course, the costs to finance that, and we
look at where yields had been, and we know there's
been a lot of volatility there some stability in recent
week's partly because of some of the things that you've
done and said publicly, but we've also seen a little
bit of reticence to buy into longer dated US treasuries.
I know you have been public about the idea, at
(14:12):
least in the short term, of relying a little bit
more on shorter term treasury issuance. Do you anticipate that
will continue?
Speaker 3 (14:19):
Well, I think what we're going to see is one
of the underreported things of the One Big Beautiful Bill
is it also gets us away from this terrible debt
ceiling dilemma, and because of that, we've had to constrain issuance.
So it's likely that initially we will use bills to
(14:40):
refill the Treasury General account.
Speaker 1 (14:43):
Do you worry about any potential rollover risk in that strategy.
Speaker 3 (14:48):
No, I don't. We've seen very durable and robust treasury
auctions that I see who the buyers are. I think
that we are going to see US banks would take
up more of the debt issuance because of the supplement
(15:09):
supplementary leverage ratio reliefs that they're going to be getting,
and were going to pass the bill today. President Trump's
going to sign that tomorrow, and then probably the following week.
We're also going to have the stable coin legislation, which
I think could create at least two trillion in demand
(15:31):
for treasury bills.
Speaker 1 (15:33):
So, mister Secretary, I do want to get your thoughts
about just broader policies coming out of this administration, beyond
just this one big, beautiful bill that is now appears
to be advancing in Congress. There's been a lot of
questions in the market about what the administration's stances on
the dollar, whether there truly is a strong dollar policy,
(15:55):
or whether that policy a long term policy. All strong
dollar support has shifted to something else.
Speaker 3 (16:01):
I'm not sure why that is in the market. The
price of the dollar has nothing to do with a
strong dollar policy. Current currencies move up and down based
on a variety of factors. But a strong dollar policy
means several things. One is what is the dollar strong against?
(16:22):
Or other is another currency stronger higher in price of
the moment. That doesn't have anything to do with a
strong dollar policy. The strong dollar policy is are we
doing the things over the long term to ensure that
the US dollar remains a reserve currency of the world.
(16:43):
And we are. We are setting the stage for economic growth,
we are constraining inflation, we are making the United States
the best destination for global capital. And I think that's
going to continue to happen. I think, as A said
many times over since World War Two, the demise of
(17:06):
the dollar as reserve currency has been predicted, and I
think once again the skept is going to be wrong.
But there is no change in policy.
Speaker 1 (17:15):
Fair enough, but I'm sure you understand that the weakness
that we've seen in the dollar to start the year
is something we have not seen in decades, and there
are other countries that have been trying to take advantage
of it. In a speech just this week, we heard
from the Chinese Central Bank governor who really laid out
at least their vision, their Chinese vision for a new
global currency order, which would of course mean a reduced
(17:37):
rule for the dollar and in their view, a greater
role for the Yuon Now, regardless of whether that is
a viable plan, I am curious as to what you
think about the idea that this is even being spoken
about publicly.
Speaker 3 (17:49):
Well, I mean, look, what are the Chinese going to say?
And by the way, it's complete policy. They have a
non convertible currency, so how are they going to be
a reserve currency. They also have one point four billion
people who want to get their money out of China,
they have capital constraints on taking out money. The sine
(18:13):
kwannon for a reserve currency is that it trades freely.
And I saw my friend Christian Legard, president of the ECBST,
the other day said that maybe this is the Euro's moment,
but I can tell you if the Euro hits one twenty,
Europeans are going to be squawking that it is too strong.
They're an export economy, so let's see what happens. They
(18:36):
should be careful what they wish for, whereas in the
United States we recognize the responsibility that comes with being
a reserve currency.
Speaker 1 (18:45):
Mister Secretary, I am curious about what comes next after this.
We know that we ostensibly have this July ninth deadline
on trade, and I know it's going to take several weeks,
if not months, following that to really start to hammer
out some of these dealsticipate that we're going to see
additional deals and more substantive deals pretty soon within the
(19:05):
next few weeks.
Speaker 3 (19:07):
I think we're going to see a flurry of deals
before July ninth. We'll see how the President wants to
treat those who are negotiating, whether he's happy that they're
negotiating in good faith. I think that we're going to
see about one hundred countries who just get the minimum
ten percent of reciprocal tariff and we'll go from there.
(19:32):
So I think we are going to see a lot
of action over the coming days.
Speaker 1 (19:38):
Have you been directly involved in any of those negotiations
and it's so, are there specific provisions that those other
countries have been asking the US?
Speaker 3 (19:47):
Well, I'm not going to negotiate on international television.
Speaker 1 (19:52):
But I want to negotiate.
Speaker 3 (19:53):
Just tell us well, yeah, sorry. I would say is
some countries have come with or trading blocks, have come
with good deals, some would come with okay, some would
come with deals that are unacceptable. And we are going
to be announcing several deals. The President has the final say.
(20:19):
And what I can tell you is that the career staff,
whether it's a Treasury, Commerce USTR, are all saying that
they can't believe that these countries are given up things
that they haven't seen them offer in the past two
or three decades. So this is a win for the
American people. It's a win for fair trade.
Speaker 5 (20:40):
Can I ask, just finally about the pressure the president
and others in an administration have put on Jerome Pallet
to cut rates. President Trump has asked now for three
full percentage points of cuts, three hundred basis points, and
it strikes me that that would either overheat the economy
or cause absolute chaos in the treasury market. Don't you
(21:01):
think it's important that the Federal Reserve operate with an
amount of independence?
Speaker 3 (21:07):
Well, Fed Reserve does operate with the amount of independence,
just like a referee does out of the flour of
the basketball court. They're independent, but the coaches work the
ref all the time. President Trump is the most sophisticated
president economically, perhaps in the past one hundred years. Perhaps. Ever,
(21:29):
I will note that in his first term he was
more right than the FED was on when it was
time to cut rates. FED normally followed later on. So
I think he's going to make his views known. And
I would also point out that the market agrees with
(21:50):
President Trump in terms of the direction, if not the
magnitude of the cuts.
Speaker 5 (21:54):
Do you agree with President Trump that the FED should
cut by three percent in July?
Speaker 3 (22:00):
I believe that I followed the market and the market
both for the rest of the year, and the two
year market is signaling cuts.
Speaker 2 (22:09):
That is Treasury Secretary Scott Bessant there, speaking with Bloomberg's
Romain Bostik and Matt Miller 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. You
(22:30):
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 Prisner, and this is Bloomberg
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