September 20, 2025 • 38 mins
Bloomberg Daybreak Weekend with Host Tom Busby take a look at some of the stories we'll be tracking in the coming week.
- In the US – how The K-Shaped Recession Hasn’t Hurt US Equities...Yet
- In the UK – Are Private Markets Entering Their Golden Age
- In Asia – a look at Stephen Miran's Impact on EM and the Dollar
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Episode Transcript
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Speaker 1 (00:02):
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight ahead on the program, the
FED lowers inter straits, but will the data support more
rate cuts for the rest of this year. I'm Tom
Busby in New York.
Speaker 2 (00:16):
I can and Headkait in London, where we're asking where
the private markets are entering the Golden eg.
Speaker 3 (00:21):
I'm Doug Prisner looking at what's at stake when Australian
Prime Minister Anthony Albanisi meets with President Trump on the
sidelines of the UN General Assembly.
Speaker 4 (00:32):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year in New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 1 (00:55):
Good day to you. I'm Tom Busby, and we begin
today's program with a look at the Fed's twenty five
bases point cut to the federal funds rate this past week,
what it means, and whether some upcoming data will support
the two rate cuts the FED has penciled in for
the rest of this year. For more, we're joined by
Edward Harrison, senior strategist and author of Bloomberg's Everything Risk newsletter.
(01:17):
Fed policymakers, in a nearly unanimous vote, lowered the federal
funds rate by a quarter point this past week and
signaled we could see two more rate cuts before this
year is out. In your opinion, did the FED make
the right decision and why?
Speaker 5 (01:31):
Yeah? I think that the tom the economy is slowing,
and so that is the right decision just for insurance purposes.
As an insurance cut, there was one member of the
FED who thought they were playing catch up so much
that they should probably go with fifty basis points as
opposed to twenty five. He was a complete outlier, not
(01:54):
just in terms of the descent. This is Stephen Moron,
who is actually in the White House on leave while
he's at the FED, but he also was very much
an outline in terms of his projection for the interest
rate at the end of the year, which he'd put
at lower than three percent.
Speaker 1 (02:14):
Which would mean several rate cuts of fifty basis points
or more.
Speaker 5 (02:18):
That's not what the rest of the FED is looking at.
And so I think, you know, the thing that was
most demonstrable is the fact that there was only the
one descent from someone who's very associated with the White House.
All of the existing FED officials went along with the
twenty five basis point cut, which would suggest that any
(02:39):
attempts to erode the fed's independence are likely to be stymied.
And this is the first indication that that's the case.
Speaker 1 (02:47):
Well, let's talk about what really drove this, and that
is a weakening US labor market. And boy, have we
seen some kind of frightening stats in the last couple
of weeks, like nine hundred and eleven thousand jobs correct
in the year leading up to March. Well, what does
this tell us about how the Bureau of Labor Statistics
surveys are done, or does it tell us more about
(03:08):
real weakness in the US job market.
Speaker 5 (03:12):
It tells us more about real weakness in the US
job market, because basically what the BLS does is they
collect the data that's available to them at the time,
and then later, based on other data like filings for
taxes and things of that nature, they can update the data.
And what they've done is they've updated the data from
(03:35):
March of twenty twenty four through March of twenty twenty
five and found that there were nine hundred thousand fewer
jobs that were created over that year time span than
we had thought, which says that the FED rate cuts
from twenty twenty two to twenty twenty three acted with
a lag that was more severe, you know, the act
(03:56):
of those rate hikes, rather from twenty twenty two to
twenty three that was worse than we had anticipated based
upon the initial numbers. So the FED was basically playing
with a lot of data that wasn't correct and so
they're in the process of reevaluating how weak the labor
(04:19):
market is.
Speaker 1 (04:20):
And that's not it not just those corrections, but black
unemployment soaring under this president. Seven and a half percent
underemployment is rising. College grads with engineering degrees can't get
a job. And it looks like you're right about now
we're going to start to see the impact of all
those federal workers that were laid off back in April.
There six months severance deals coming to an end.
Speaker 5 (04:41):
Now you hit it right on the head, Tom, I
think that all of those things are coming together in
a way that show that the economy, just from the
labor market perspective, is weaker than we had thought and
it will continue to weaken. And the average FED official
is looking at three rate cuts for the year. That
(05:02):
is not only this cut, but the next two meetings
for this year, and then they're going to continue to
cut rates in twenty twenty six. And mind you, this
is why inflation is above target at three percent. So
that's how alarmed they are at the state of the
economy that even though the inflation rate is high, they
(05:23):
still feel like in order to avoid a recession they
need to cut and inflation.
Speaker 1 (05:29):
Now we're we're gonna get another read this coming week
with August PCE forecast to be two point nine percent,
that is well above the fed's longtime target of two percent.
But also, will we know and when will we know
the real impact of the Trump tariffs on inflation. I mean,
we haven't seen and the Fed admits it hasn't been
very bad yet. But is it coming?
Speaker 5 (05:52):
Yeah, the question is is when is it coming? From
all indications really a foreign companies have not paid the tariffs.
What's really happened for the most part is the lion's
share of the tariffs have been eaten by the companies.
They've found ways to get their costs down and to
(06:12):
keep their margins up even though the costs. They've absorbed
the costs. But part of the reason that they absorbed
the cost was because they thought perhaps the tariffs would
be lesser over time, you know, there would be rollbacks.
But that's not happening, and so we're seeing increasingly that
these tariff costs are being passed on to end consumers
(06:35):
where they can be and so we should expect some
level of higher inflation between now and the end of
the year and probably even beyond that. So it's going
to be an ongoing process how long we get this
new inflation. But it's clear that if we already have
inflation near three percent and it goes higher, then it's
(06:59):
going to be well above the FEDS target, even as
they're cutting, and so that's the danger, and that limits
how much they're able to support the labor market.
Speaker 1 (07:11):
Well, we're going to find out about the economy with
a final read on Q two GDP out this Thursday,
and personal spending and PCE inflation data out on Friday.
Our thanks to Edward Harrison, senior strategist and author of
Bloomberg's Everything Risk newsletter. Well, next, we turned to the
US airline industry, which saw a tremendous rebound in summer
travel demand, but some carriers appear to be doing a
(07:33):
lot better than others. For more, we're joined by George Ferguson,
Bloomberg Intelligence Senior analysts for Airlines, Aerospace, and Defense. Well, George,
let's start with that rebound and travel that we saw
this past summer. How was it and can that momentum
continue for these carriers?
Speaker 6 (07:50):
Look, I think what we saw this summer is continued
strong demand for those premium travelers. And so you know,
we heard another number of airlines give us updates as
they went into the Morgan Stanley Laguna Beach conference. And
you know, really, I think what we heard as we
(08:12):
heard improving demand, and we did hear some of that
improving demand even at the low cost carriers of the
I think the challenges they still have so much excess capacity,
it's going to be hard to capitalize as much as
they'd like on it. But I think, really, you know,
the story that we got coming out of Laguna is
(08:35):
and we're seeing in the broader economy is that the
well healed consumer is continuing to you know, take their vacations,
fly to Europe, spend a bunch of money, and that's
been good for the United Delta's Americans. And we're continuing
(08:55):
to see there's probably too much capacity in the low
cost world. And you know, we we've seen bumpy results
at companies like Spirit, which you know, declared bankruptcy again, Frontier,
Jet Blue again, all indicative of some of the weakness
down and what i'd call maybe the basic economy traveler.
(09:17):
So I think this summer sort of reinforced that trend.
Three Q is always a great quarter, not quite as
good as two Q for airlines, but two of the
best quarters for them. We're hearing noise about more demand
and you know what they call the shoulder seasons four
Q one Q. So I think, look what, you know, well,
(09:38):
we'll really see how well airline demand is holding up
as we get into that four Q and one Q
season and people really have to want to get out
there and travel and have a full budget to keep going.
But again I think the rap is, Yeah, the the
well hill travelers you know, came at it again. This
(09:58):
three Q had the get their vacation in Europe, spent
up for some premium seats to get across the bond.
And it's probably going to help out those big full
service carriers.
Speaker 1 (10:07):
Right, the big legacy carriers. But let's talk more about
the ones. You know, you said, Frontier, Jed Blue and Spirit,
which again filed for bankruptcy, still flying, But what happens
Who is going to benefit when Spirit finally winds down,
and it looks like it will unless somebody rescues it.
Who's going to benefit? Is that those other carriers or
(10:28):
will the big ones?
Speaker 6 (10:31):
So I mean, look, I think everybody benefits, right, the
big full service carriers again, American, Delta, United, they have
been subsidizing let's call it, some of that back of
the airplane demand, some of that basic economy demand with
their nice premium income, and so if they don't have
(10:53):
to subsidize as much, that's obviously going to help them.
But I think the real benefactors are going to be
the low cost and budget carriers, right, And so I
think you'll see that ripple through the Jet Blues, the Frontiers,
the Southwest more, even though Southwest model is going to
sort of full service world I think that's where you're
(11:15):
going to see more of the gains. And look, I'll
just say Spirit Airlines is relatively small. We don't see
it going away yet. As talking to my colleague Phil Brendel,
who does distressed analysis right before we got on this discussion,
and you know, he's saying, look, Spirit could linger in
(11:36):
bankruptcy for a while, but right now they are starting
to cut routes and they're starting to cancel gate contracts
and things like that. Bear in mind that they're going
to cancel those assets where they're least productive, right and
so we're going to see a pick up again in
the low cost world from this, but they're going to
(11:58):
take those routes that just wonn't working well anyways that
maybe maybe nobody should be flying to or at least
fewer people should be flying to fewer airlines and cancel.
So I guess what I'm trying to tell you is
I would moderate my expectations and Spirit alone. I still
think more capacity needs to come out of this market,
but it should again help the low cost more.
Speaker 1 (12:21):
Our Thanks to George Ferguson, Senior analyst for Airlines, Aerospace
and Defense with Bloomberg Intelligence aerospace and defense, and coming
up on Bloomberg day Break weekend, are private markets in
the UK entering their golden age. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break weekend, our
(12:49):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. Up
later in our program a big announcement out of Australia.
But first, private markets fast at exposure from investors seeking
shelter from public volatility. It comes as some policymakers for
tracking the situation with alarm, while others, including President Trump,
(13:09):
are clearing the way for private domination. It's a discussion
that will likely be on the agenda as industry heavyweights
gather in Paris for the International Private Equity Market Conference.
For more, let's get to London and bring in Bloomberg
Daybreak era banker Caroline Hepgar Tom.
Speaker 2 (13:25):
From as early as January this year, commentators and market
watchers have been hailing the beginning of a golden age
for private markets, thanks to vast pools of capital controlled
by rich families poise to pour into illiquid assets. Now
nine months into twenty twenty five, that prediction hangs in
the balance. Despite industry giants from KKR to Blackstone targeting
(13:49):
the world's wealthy to fuel the next phase of growth
for private equity, economic circumstances and geopolitical uncertainty have challenged growth.
There is a new source of capital, though that may
be about to arrive. Regulation and compliance have driven an
unprecedented wall of US retirement money into private assets. According
(14:11):
to a report from Bloomberg Intelligence, the top twenty US
pension funds alone hold about half a trillion dollars of
private market exposure, the analyst found, with some having doubled
their allocations to unlisted investments over the past decade. It
is a development that could supercharge a sector with an
(14:32):
already bright outlook. According to Tristram Leech, partner and head
of investments for Credit and Hybrid in Europe at Apollo.
Speaker 7 (14:41):
Clearly we feel that the risk return is more compelling
in private credit than in public markets, especially at the moment,
and to the idea that you'd want savers to be
denied the opportunity to benefit from the incremental return that's
available seems to us are bizarre, So certainly, making those
(15:01):
products available to a broader swathe of the market is
something that we feel strongly about, be that the wealth
market or be that, you know, working with institutions to
make those products available.
Speaker 8 (15:14):
How does that work?
Speaker 9 (15:14):
I mean, how are those conversations going about trying to
get that expanded base opened.
Speaker 7 (15:19):
We have been advocating for the availability of private credit
and for the attractiveness is that as a product from
you know, from the top of the house, and I
think there's a pretty you know, widespread discourse around how
attractive that product is and certainly the relative value versus
public markets. Yeah.
Speaker 10 (15:39):
Across the flip side to this is the discussion of
systemic risk, and over the past year you've had increasing
discussion from the likes of Moody's and the IMF saying
that private credit does pose this systemic risk.
Speaker 8 (15:50):
Is that fair?
Speaker 10 (15:51):
Are we going to see some funds collapse?
Speaker 7 (15:53):
What's interesting is that what we just discussed was the
relative value of private credit versus public credit looking attractive,
and yet you don't see these same points made about
public credit markets. We've noticed liquidity in public credit markets declining.
So for us to focus exclusively on private credit markets
as a place where all the risk is doesn't make sense.
(16:16):
Are you going to see funds a differentiation in fun performance?
I think you are. You know, the last twenty years
have been an environment where there hasn't really been a
very deep cycle in credit markets, and so you've seen
very highly correlated performance across the private credit industry. I
think you're certainly going to see an environment where you
see dispersion in credit outcomes and you probably also see
(16:38):
dispersion in manager outcomes.
Speaker 2 (16:40):
Apollos twistram Leach there. But despite that optimism, some are concerned.
Officials from the US Securities and Exchange Commission have long
called out the potential risks for markets going dark, as
companies favor saying private over a public listing, allowing them
to bypass traditional disclosure and governance requirements. So is this
(17:03):
the new age of the private market? So what could
the consequences be. It's something I've been discussing with Bloomberg's
private equity reporter Suiteter Gopinath ahead of a major gathering
in Paris this September, so the last EPM event, So
this is last September. We heard predictions of the end
(17:23):
of private market's golden era. Has that actually come about?
Speaker 11 (17:27):
Unfortunately? Yes, when interest rates were low, when financing was cheap.
Private equity was in this golden era right because they
could pursue all these leverage buyouts, they could return capital
to investors, they could fundraise at a fast clip.
Speaker 8 (17:42):
All of that has died down.
Speaker 11 (17:43):
Pretty much thanks to interest rates more than anything else,
and also a difficult deal making environment. It's not as
easy to exit or monetize assets as it used to be.
That's partly because the IPO market has been semi functional
for the last eighteen months. It's slowly beginning to pick
up now. Deal making exits why M and A have
been difficult as well, so P firms have not been
(18:03):
able to return cash to their own investors, which means
investors don't have cash to invest in new funds.
Speaker 8 (18:09):
It's sort of a vicious cycle.
Speaker 2 (18:10):
But with US interest rates beginning to go down, do
you think the bust might be temporary? Will we say
a bit of a momentary search or not?
Speaker 8 (18:21):
Yes?
Speaker 11 (18:21):
I think yeah. There are signs of a pickup. Low
interest rates certainly help. The IPO market is sort of
beginning to bubble back up. M and A activities speaking
gaining steam as well. So all of these are good signs.
But at the same time we have large LPs saying
we don't want as many relationships as we used to
have with GPS. We want to be really selective of
(18:44):
the funds we invest in. So say, you know, LPs
who used to invest in two dozen or three dozen
firms and now saying we're going to focus on the
top five or ten, which means the largest firms. You know,
the Blackstones, the polos kkos will still do well, but
what happens to the in the middle or in the
bottom rank of the.
Speaker 2 (19:01):
Market h bit harder there. Maybe in a regulatory sense,
it's thought that Trump's deregulation drive has pushed private markets forwards.
Is that happening in Europe.
Speaker 11 (19:13):
It's yet to trickle down to Europe for sure, but
the opening up of four oh one case, the opening
up of retail money to private equity, to private capital
is definitely a good sign. Europe is making strikes and
similar direction. The UK government is also talking about opening
up savings to private investments. Regulation is really moving in
(19:34):
favor of the industry.
Speaker 2 (19:36):
Yeah, there's been lots of talk of that, hasn't now
under Chancellor Rachel Raves in the UK is there resistance
to pension funds increasing private exposure, you know, worries about
what that means, transparency and so on.
Speaker 11 (19:49):
There are worries to be sure, because private companies obviously
don't disclose results every quarter. There is in the kind
of transparency as you say. But at the same time,
in the UK especially, a lot of ballets have been
drawn to the Canadian pension system. If you look at
DBP Ontario teachers pension scheme, for example, there's a feeling that,
(20:12):
you know, you have sort of these teachers out in
the middle of Canada who have better pensions than an
even working in the city of London.
Speaker 8 (20:19):
So all of these.
Speaker 11 (20:19):
Efforts are sort of being made to equalize that.
Speaker 8 (20:23):
I suppose.
Speaker 2 (20:24):
Well, it's taken them a long time though, hasn't it
in terms of when that was set up, in the
amount of time and the size of the fund. So
you know, you can understand, you know, all of those caveats.
But yes, maybe a slightly envious arty being cast adds
the success stories here and maybe how they can be
emulated in terms of European firms then, and also at
(20:45):
this event, what do you think is going to be
on the agenda? Maybe Europeans looking to try to catch
up with the US. What's going to be on the
agenda at the actual event. Do you think there's been
a lot of European exuberance this year?
Speaker 11 (20:57):
To be sure, that's because people like getting a bit
fed up with.
Speaker 8 (21:01):
The volatility in the US.
Speaker 11 (21:03):
They're also worries about investing in the US, about having
money locked up in the US because of changing tariff
and trade regimes. So there is a lot more positivity
about Europe. People are talking about capital flows into Europe
for the first time in decades. Maybe, so European firms
will really be looking to cash in on that momentum
and change sort of that exuberance into actual fund commitments in.
Speaker 2 (21:26):
Terms of these specific funding needs for Europe that of
course is around infrastructure and defense spending. Can private markets
fill that kind of gap? In recent days, Mario Draghi
came back to Europe to give a big speech about
his recommendations for the European markets about, you know, opening
(21:47):
up and trying to generate growth and investment in Europe.
Do you think the private markets can fill some of
the gap.
Speaker 11 (21:53):
Yes, but private markets are certainly hoping they can and
are pretty much betting they can. Blackstone has committed about
five hundred billion of capitalty eure up on the whole.
Apollo spent spending one hundred billion in Germany alone. So
on the infrastructure side, it's sort of I guess, slightly
easily done. But in defense because historically a lot of
their own investors, a lot of their own LPs have
(22:13):
been prohibited from investing in defense assets. A lot of
work is being done behind the scenes to change sort
of wording and prospectuses and so on.
Speaker 2 (22:22):
And in terms of whether the private markets are recession
proof or more recession proof than other markets.
Speaker 11 (22:29):
I guess they would like us to believe they are
more recession proof, but I don't know that it's true
because a lot of these businesses and the end of
the day, tried to the real economy.
Speaker 2 (22:38):
And what about the concerns of regulators and the idea
of markets going dark as it were, with little information
about these businesses. I mean, it's caught up particular investors
here in the UK in the past, hasn't it. So
there's also even this idea that President Trump has been
talking about of for listed companies that they wouldn't have
(22:59):
to you actually report every quarter it's a Wall Street
but then maybe a six month cycle is better. So
there's a lot shifting in that regulatory space, isn't that.
Speaker 11 (23:08):
Yeah, Listed companies certainly do talk about sort of onerous
regulatory requirements and having to list every quarter obviously increases transparency,
but it has its.
Speaker 8 (23:21):
Detractors as well, the practice.
Speaker 11 (23:22):
Because there's this idea that companies sort of tend to
meet analyst estimates and then bump forecast just based on
what analyst expectations are, that it's not really indicative of their.
Speaker 8 (23:33):
Underlying growth per se.
Speaker 11 (23:35):
And also when you talk to companies that are private
and looking to go public, yes, the one thing they
always cite as a hurdle is this regulatory requirement to
list to sort of disclosed reports every three months. So
I don't know if loosening that requirement perhaps might be
helpful in terms of bringing more private companies public and
in terms of bringing more private companies to the IPO market.
Speaker 8 (23:57):
Certainly, but at the same.
Speaker 11 (23:59):
Time, yeah, lack of transparencies and good investors need to
know what they're putting their money in, so there needs
to be a degree of financial disclosure.
Speaker 2 (24:07):
So what do you think is going to be the
outlook then for private markets, as you say, is face
quite a bit of challenge in the last twelve to
eighteen months. What are you thinking about for the next year.
Speaker 11 (24:19):
I think the opening up of private markets to retail
money is a big boom sign for the industry. It
just means more capital flowing into the industry. In that regard,
that's very much a positive. Improving m ANDA markets are
also positive because it means they can monetize assets quicker.
But I think there's going to be a bifurcation in
the industry where the big get bigger in terms of size,
in terms of assets under management, struggle to survive.
Speaker 2 (24:40):
Okay, Sweater, thank you so much for being with me today.
Sweater to Gopinath. That was Bloomberg's private equity reporter, Sweeter Gopinath.
My thanks to her. Will have full coverage of all
the deals, the conversations and activities from EPM in Paris.
Here on Bloomberg, I'm Caroline Hepga. Here in London, you
can catch us every weekday morning for plaus Big daybak
(25:00):
you at beginning at six am in London. That's one
am on Wall Street.
Speaker 8 (25:04):
Tom.
Speaker 1 (25:05):
Thanks Caroline and coming up on Bloomberg day Break weekend,
a major investment in defense spending in Australia. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break Weekend,
(25:26):
our global look ahead at the top stories for investors
in the coming week. I'm Tom Busby in New York,
Australia announcing plans to spend eight billion dollars in US
money on a defense hub to build naval ships and
doc nuclear submarines. Prime Minister Anthony Albanize made the announcement
this past week as Canberra seeks to bolster US backing
for the August Pact. For more, let's get to the
(25:48):
host of the Daybreak Asia podcast, Doug Krisner. Tom.
Speaker 3 (25:52):
Diplomacy will be front and center in the week ahead
as the UN convenes its eightieth General Assembly in New York,
and it's there that Australian Prime Minister Anthony ALBANIZI will
be meeting with Donald Trump and the two have a
lot to discuss. Principally, the multi billion dollar Aucus Partnership
now AUCUS is a trilateral security arrangement between Australia, the
(26:15):
United Kingdom and the US. The aim here is to
promote a free and open Indo Pacific that is secure
and stable. For a closer look at what's at stake,
I'm joined by Bloomberg Swati Pondi Swati joins us from
our studios in Sydney. Swati, thank you so much for
making time to chat with me. Remember that AUCUS was
signed back in twenty twenty one by then President Biden.
(26:38):
Obviously we have seen a major shift in foreign policy
under the Trump administration. What change has occurred that may
affect AUCUS?
Speaker 9 (26:48):
So since Donald Trump came to office, all of American
allies have kind of been put on notice to increase
their difference spending and that was something that was expected
out of Australia as well. In response, Albaniazi had sounded
quite defiant and kind of sought independence in saying that
(27:12):
this will be australia sovereign decision what it does with
defense spending. And then during that period, the US also
launched a review of the UCUS and that led to
question marks around the future of this partnership. And then
in recent weeks we have seen Australia making massive billion
(27:35):
dollar announcements with uh TO kind of I think satisfy
the US, and it has also signed treaties around August
with the UK. So it seems like Australia is trying
to make those attempts and get that first meeting with
(27:56):
Donald Trump since he came to power earlier this year.
Speaker 3 (28:00):
For Australia, there is the point here I think that
we really have to tease out, is that the US
will help develop Australia's nuclear powered submarine fleet as a
part of the Auchice Agreement. Is any of that in
doubt right now?
Speaker 9 (28:14):
Not right now? So I had some conversations with sources
in Australia who are familiar with the Australian government's thinking
but also the American government's thinking, and it looks like
the partnership will go ahead. The point of the review
was really to reinforce the pact rather than unravel it.
(28:34):
We don't really know a lot of the information. Obviously,
the Secretary of State and Defense Secretary in the US
have not publicly spoken about the intent of the review,
but it does look like the pact will go ahead
and Australia will be able to get the submarines at
(28:58):
some point in distant future.
Speaker 3 (29:01):
So from what I understand the Australian government recently announced
around nine billion dollars that would be US in related
defense investments, and I'm wondering from the conversations that you
have had with people there whether that level would be
sufficient to satisfy the Trump administration.
Speaker 9 (29:19):
It may not be enough to satisfy them, but it
is a step in the right direction as far as
the US is concerned. It's the intention, it's what they'd
like to hear. And it's also a change of tactic
from Australia side, where Albinizi and Australia's Foreign Minister Penny
(29:40):
Wong had earlier sounded a lot more defiant when it
came to increasing defense spending and that tone has shifted
in recent weeks and months. So that will definitely be welcomed,
and probably that is why we are getting that first
meeting with Trump as well. So it's definitely welcome.
Speaker 3 (30:01):
So we know that Trump administration is currently in trade
negotiations with China. Can you give me a sense of
the reaction that Beijing is having right now to this
this continued refinement of the orchest.
Speaker 9 (30:14):
Treating the response from Beijing has not been quite vocal.
I'd say, we had the China operate the Shanghai Cooperation recently,
where a lot of the country's dictators Russia, North Korea,
even Indian Prime Minister and aar In Ramodi were there.
(30:35):
It was a show of weapons. It was a show
of China's might what it is capable of. Uh and
and I think that is one of the ways that
China is trying to show to the US and to
the world to not take it lightly.
Speaker 3 (30:54):
Can you give me a sense of what the Australian
press is reporting as we look ahead to this meeting
between mean Prime Minister Albanizi and President Trump.
Speaker 9 (31:03):
The Australian press has actually been quite critical of the
US and Donald Trump in particular. Remember Australia had had
an election in May when Albinizi came back to power
for his second term, and it was a landslide victory.
(31:25):
It was not expected, so it was a surprise landslide victory.
Uh and and so Albinizi thinks that it is in
his favor in terms of domestic politics to take a
stand against Donald Trump uh to sound more defiant in
(31:47):
sticking up to what Australia stands for. Uh and and
the local press has also kind of been reporting along
those lines as well. However, in recent weeks, and especially
since the Chinese parade, the conversations have also kind of
tilted towards the need for a stronger Western alliance and
(32:10):
for Western democracies to come together and and fight the
growing fragmentation uh that we are seeing in the world.
I was at an event last week where Kurt Campbell,
who's the former Deputy Secretary of State, was speaking, and
he actually said that this meeting between Albanesi and Trump
(32:32):
will be the most consequential meeting of an American and
an Australian in living memory. And he said that Albanesi
should use this meeting to talk beyond bilateral ties and
talk talk beyond narrow economic issues two more regional defense
(32:53):
and other global defragmentation uh issues. So uh so that
is what will be on Albinizi's agenda as well.
Speaker 3 (33:03):
Should make for a very interesting meeting this week between
Australian Prime Minister Anthony Albanisian President Trump on the sidelines
of the eightieth General Assembly of the UN here in
New York City. Swati, thank you so much for joining
me Bloomberg. Swati PONDI there, joining from Sydney. Now, the
global influence of the Trump administration goes well beyond the
(33:23):
defense budgets of other countries. Look no further than trade
policy and the use of those tariffs. And then there
is the US dollar, the world's dominant reserve currency. So
far this year, the dollar is down by more than
ten percent against a basket of its peers. Yes, increased
nervousness from global investors may be a part of that decline,
(33:43):
but another aspect is the desire from the Trump administration
to see a weaker currency. Stephen Myron, the newly seated
Fed Governor, has taken unpaid leave from his role as
chair of the White House Council of Economic Advisors, and
in Myron's view, the dollar is overvalued. For a closer look,
I'm joined by Bloomberg opinion columnist Shuley Wren, who joins
(34:06):
us from Hong Kong. Surely it's always a pleasure. Thank
you so very much. I know you're writing about Myron's
policy where the dollar is concerned. Fill me in a
little bit.
Speaker 12 (34:16):
He's definitely a dollar beer. He blamed the US society's
various economic problems from the loss of manufacturing, to wealth inequality,
to the overvaluation of dollar. In a very well read
paper published the last November, he basically called the that
the He basically said that the dollar is overvalued and
(34:40):
that it should not be acting as a reserve currency.
And that's that's very much freaking global investors out. Like
what we're seeing is that the Fed was holding the
rates right throughout this year until Wednesday, but the dollar,
the broader Dollar index has come down twelve percent already.
Speaker 3 (35:00):
Do you think he's likely to have much in a
way of influence while he's sitting on the Fed's Board
of governors.
Speaker 12 (35:06):
He is only one of the seven members. However, his
rhetoric and the fact that the Trump will get to
decide on the next FET chair does do influence market narratives,
and you are actually seeing it already. For instance, Goal
is on trying to take over US treasuries as global
(35:27):
central bank's biggest reserve assets. That's a sign that the
global investors are trying to hatch against the instability at
the Federal Reserve. And also what you are seeing is
that the global asset managers are increasingly keen to diversify
overseas into international stocks from Europe to Hong Kong.
Speaker 3 (35:51):
So I mentioned that Myron is on lee from his
role as chair of the White House Council of Economic Advisors.
And we know a cornerstone of Trump's economic policy have
to do with tariffs. And I'm wondering whether we need
to talk a little bit about the tariff story as
it relates to the dollar as well well.
Speaker 12 (36:08):
And that's another problem, right, Like in the past, a
lot of foreign governments they ended up holding a lot
of dollar because they were exporting their goods and services
into the United States. But if the terror boar is
set up, there is less need for them to hold
dollar anymore. In fact that there will be in the
case of China, there will be few opportunities to earn dollar.
Speaker 10 (36:31):
Right.
Speaker 12 (36:32):
That means that there is a lot of selling pressure
on the green back.
Speaker 3 (36:36):
So if we step back and we look at the
shift that is happening right now in global markets, is
this a time where many, I will say, especially institutional
investors are diversifying and perhaps some of that diversification is
moving assets out of the US.
Speaker 12 (36:52):
I think we are already seeing that already Europe and
China have been doing very well this year. And it's
also in part because the US dooll market has become
very expensive, right Like if the AI boom is not
showing up in the earnings in say twenty twenty six,
twenty twenty seven, then the US dooll market is just
(37:12):
way too expensive. So there are incentives to move out anyhow.
Speaker 3 (37:16):
So we know that when you are involved in the
foreign exchange, it's always a pair that you're talking about
a dollar related to another currency. And I'm wondering if
we can talk about the path of the dollar to
the downside, I'm wondering what currencies will benefit on the
strong side beyond the Japanese ND.
Speaker 12 (37:34):
So if you look at emergent markets in the last
couple of months, emergent markets currencies that the author quality
carry trade, and I'm talking about those from Brazil, Mexico
and South Africa, they have been rallying the most. It's
a sign that the carry trade is back and the
people are using the dollar as the funding currency to
(37:55):
buy into higher yielding currencies.
Speaker 3 (37:58):
Julie, thank you so very much. Bloomberg Opinion columnist Shuley Wrenn.
I'm Doug Chrisner. You can catch us weekdays for the
Daybreak Asia podcast. It's available wherever you get your podcast.
Speaker 1 (38:09):
Tom, Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight ahead on the program, the
FED lowers inter straits, but will the data support more
rate cuts for the rest of this year. I'm Tom
Busby in New York.
Speaker 2 (00:16):
I can and Headkait in London, where we're asking where
the private markets are entering the Golden eg.
Speaker 3 (00:21):
I'm Doug Prisner looking at what's at stake when Australian
Prime Minister Anthony Albanisi meets with President Trump on the
sidelines of the UN General Assembly.
Speaker 4 (00:32):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year in New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 1 (00:55):
Good day to you. I'm Tom Busby, and we begin
today's program with a look at the Fed's twenty five
bases point cut to the federal funds rate this past week,
what it means, and whether some upcoming data will support
the two rate cuts the FED has penciled in for
the rest of this year. For more, we're joined by
Edward Harrison, senior strategist and author of Bloomberg's Everything Risk newsletter.
(01:17):
Fed policymakers, in a nearly unanimous vote, lowered the federal
funds rate by a quarter point this past week and
signaled we could see two more rate cuts before this
year is out. In your opinion, did the FED make
the right decision and why?
Speaker 5 (01:31):
Yeah? I think that the tom the economy is slowing,
and so that is the right decision just for insurance purposes.
As an insurance cut, there was one member of the
FED who thought they were playing catch up so much
that they should probably go with fifty basis points as
opposed to twenty five. He was a complete outlier, not
(01:54):
just in terms of the descent. This is Stephen Moron,
who is actually in the White House on leave while
he's at the FED, but he also was very much
an outline in terms of his projection for the interest
rate at the end of the year, which he'd put
at lower than three percent.
Speaker 1 (02:14):
Which would mean several rate cuts of fifty basis points
or more.
Speaker 5 (02:18):
That's not what the rest of the FED is looking at.
And so I think, you know, the thing that was
most demonstrable is the fact that there was only the
one descent from someone who's very associated with the White House.
All of the existing FED officials went along with the
twenty five basis point cut, which would suggest that any
(02:39):
attempts to erode the fed's independence are likely to be stymied.
And this is the first indication that that's the case.
Speaker 1 (02:47):
Well, let's talk about what really drove this, and that
is a weakening US labor market. And boy, have we
seen some kind of frightening stats in the last couple
of weeks, like nine hundred and eleven thousand jobs correct
in the year leading up to March. Well, what does
this tell us about how the Bureau of Labor Statistics
surveys are done, or does it tell us more about
(03:08):
real weakness in the US job market.
Speaker 5 (03:12):
It tells us more about real weakness in the US
job market, because basically what the BLS does is they
collect the data that's available to them at the time,
and then later, based on other data like filings for
taxes and things of that nature, they can update the data.
And what they've done is they've updated the data from
(03:35):
March of twenty twenty four through March of twenty twenty
five and found that there were nine hundred thousand fewer
jobs that were created over that year time span than
we had thought, which says that the FED rate cuts
from twenty twenty two to twenty twenty three acted with
a lag that was more severe, you know, the act
(03:56):
of those rate hikes, rather from twenty twenty two to
twenty three that was worse than we had anticipated based
upon the initial numbers. So the FED was basically playing
with a lot of data that wasn't correct and so
they're in the process of reevaluating how weak the labor
(04:19):
market is.
Speaker 1 (04:20):
And that's not it not just those corrections, but black
unemployment soaring under this president. Seven and a half percent
underemployment is rising. College grads with engineering degrees can't get
a job. And it looks like you're right about now
we're going to start to see the impact of all
those federal workers that were laid off back in April.
There six months severance deals coming to an end.
Speaker 5 (04:41):
Now you hit it right on the head, Tom, I
think that all of those things are coming together in
a way that show that the economy, just from the
labor market perspective, is weaker than we had thought and
it will continue to weaken. And the average FED official
is looking at three rate cuts for the year. That
(05:02):
is not only this cut, but the next two meetings
for this year, and then they're going to continue to
cut rates in twenty twenty six. And mind you, this
is why inflation is above target at three percent. So
that's how alarmed they are at the state of the
economy that even though the inflation rate is high, they
(05:23):
still feel like in order to avoid a recession they
need to cut and inflation.
Speaker 1 (05:29):
Now we're we're gonna get another read this coming week
with August PCE forecast to be two point nine percent,
that is well above the fed's longtime target of two percent.
But also, will we know and when will we know
the real impact of the Trump tariffs on inflation. I mean,
we haven't seen and the Fed admits it hasn't been
very bad yet. But is it coming?
Speaker 5 (05:52):
Yeah, the question is is when is it coming? From
all indications really a foreign companies have not paid the tariffs.
What's really happened for the most part is the lion's
share of the tariffs have been eaten by the companies.
They've found ways to get their costs down and to
(06:12):
keep their margins up even though the costs. They've absorbed
the costs. But part of the reason that they absorbed
the cost was because they thought perhaps the tariffs would
be lesser over time, you know, there would be rollbacks.
But that's not happening, and so we're seeing increasingly that
these tariff costs are being passed on to end consumers
(06:35):
where they can be and so we should expect some
level of higher inflation between now and the end of
the year and probably even beyond that. So it's going
to be an ongoing process how long we get this
new inflation. But it's clear that if we already have
inflation near three percent and it goes higher, then it's
(06:59):
going to be well above the FEDS target, even as
they're cutting, and so that's the danger, and that limits
how much they're able to support the labor market.
Speaker 1 (07:11):
Well, we're going to find out about the economy with
a final read on Q two GDP out this Thursday,
and personal spending and PCE inflation data out on Friday.
Our thanks to Edward Harrison, senior strategist and author of
Bloomberg's Everything Risk newsletter. Well, next, we turned to the
US airline industry, which saw a tremendous rebound in summer
travel demand, but some carriers appear to be doing a
(07:33):
lot better than others. For more, we're joined by George Ferguson,
Bloomberg Intelligence Senior analysts for Airlines, Aerospace, and Defense. Well, George,
let's start with that rebound and travel that we saw
this past summer. How was it and can that momentum
continue for these carriers?
Speaker 6 (07:50):
Look, I think what we saw this summer is continued
strong demand for those premium travelers. And so you know,
we heard another number of airlines give us updates as
they went into the Morgan Stanley Laguna Beach conference. And
you know, really, I think what we heard as we
(08:12):
heard improving demand, and we did hear some of that
improving demand even at the low cost carriers of the
I think the challenges they still have so much excess capacity,
it's going to be hard to capitalize as much as
they'd like on it. But I think, really, you know,
the story that we got coming out of Laguna is
(08:35):
and we're seeing in the broader economy is that the
well healed consumer is continuing to you know, take their vacations,
fly to Europe, spend a bunch of money, and that's
been good for the United Delta's Americans. And we're continuing
(08:55):
to see there's probably too much capacity in the low
cost world. And you know, we we've seen bumpy results
at companies like Spirit, which you know, declared bankruptcy again, Frontier,
Jet Blue again, all indicative of some of the weakness
down and what i'd call maybe the basic economy traveler.
(09:17):
So I think this summer sort of reinforced that trend.
Three Q is always a great quarter, not quite as
good as two Q for airlines, but two of the
best quarters for them. We're hearing noise about more demand
and you know what they call the shoulder seasons four
Q one Q. So I think, look what, you know, well,
(09:38):
we'll really see how well airline demand is holding up
as we get into that four Q and one Q
season and people really have to want to get out
there and travel and have a full budget to keep going.
But again I think the rap is, Yeah, the the
well hill travelers you know, came at it again. This
(09:58):
three Q had the get their vacation in Europe, spent
up for some premium seats to get across the bond.
And it's probably going to help out those big full
service carriers.
Speaker 1 (10:07):
Right, the big legacy carriers. But let's talk more about
the ones. You know, you said, Frontier, Jed Blue and Spirit,
which again filed for bankruptcy, still flying, But what happens
Who is going to benefit when Spirit finally winds down,
and it looks like it will unless somebody rescues it.
Who's going to benefit? Is that those other carriers or
(10:28):
will the big ones?
Speaker 6 (10:31):
So I mean, look, I think everybody benefits, right, the
big full service carriers again, American, Delta, United, they have
been subsidizing let's call it, some of that back of
the airplane demand, some of that basic economy demand with
their nice premium income, and so if they don't have
(10:53):
to subsidize as much, that's obviously going to help them.
But I think the real benefactors are going to be
the low cost and budget carriers, right, And so I
think you'll see that ripple through the Jet Blues, the Frontiers,
the Southwest more, even though Southwest model is going to
sort of full service world I think that's where you're
(11:15):
going to see more of the gains. And look, I'll
just say Spirit Airlines is relatively small. We don't see
it going away yet. As talking to my colleague Phil Brendel,
who does distressed analysis right before we got on this discussion,
and you know, he's saying, look, Spirit could linger in
(11:36):
bankruptcy for a while, but right now they are starting
to cut routes and they're starting to cancel gate contracts
and things like that. Bear in mind that they're going
to cancel those assets where they're least productive, right and
so we're going to see a pick up again in
the low cost world from this, but they're going to
(11:58):
take those routes that just wonn't working well anyways that
maybe maybe nobody should be flying to or at least
fewer people should be flying to fewer airlines and cancel.
So I guess what I'm trying to tell you is
I would moderate my expectations and Spirit alone. I still
think more capacity needs to come out of this market,
but it should again help the low cost more.
Speaker 1 (12:21):
Our Thanks to George Ferguson, Senior analyst for Airlines, Aerospace
and Defense with Bloomberg Intelligence aerospace and defense, and coming
up on Bloomberg day Break weekend, are private markets in
the UK entering their golden age. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break weekend, our
(12:49):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. Up
later in our program a big announcement out of Australia.
But first, private markets fast at exposure from investors seeking
shelter from public volatility. It comes as some policymakers for
tracking the situation with alarm, while others, including President Trump,
(13:09):
are clearing the way for private domination. It's a discussion
that will likely be on the agenda as industry heavyweights
gather in Paris for the International Private Equity Market Conference.
For more, let's get to London and bring in Bloomberg
Daybreak era banker Caroline Hepgar Tom.
Speaker 2 (13:25):
From as early as January this year, commentators and market
watchers have been hailing the beginning of a golden age
for private markets, thanks to vast pools of capital controlled
by rich families poise to pour into illiquid assets. Now
nine months into twenty twenty five, that prediction hangs in
the balance. Despite industry giants from KKR to Blackstone targeting
(13:49):
the world's wealthy to fuel the next phase of growth
for private equity, economic circumstances and geopolitical uncertainty have challenged growth.
There is a new source of capital, though that may
be about to arrive. Regulation and compliance have driven an
unprecedented wall of US retirement money into private assets. According
(14:11):
to a report from Bloomberg Intelligence, the top twenty US
pension funds alone hold about half a trillion dollars of
private market exposure, the analyst found, with some having doubled
their allocations to unlisted investments over the past decade. It
is a development that could supercharge a sector with an
(14:32):
already bright outlook. According to Tristram Leech, partner and head
of investments for Credit and Hybrid in Europe at Apollo.
Speaker 7 (14:41):
Clearly we feel that the risk return is more compelling
in private credit than in public markets, especially at the moment,
and to the idea that you'd want savers to be
denied the opportunity to benefit from the incremental return that's
available seems to us are bizarre, So certainly, making those
(15:01):
products available to a broader swathe of the market is
something that we feel strongly about, be that the wealth
market or be that, you know, working with institutions to
make those products available.
Speaker 8 (15:14):
How does that work?
Speaker 9 (15:14):
I mean, how are those conversations going about trying to
get that expanded base opened.
Speaker 7 (15:19):
We have been advocating for the availability of private credit
and for the attractiveness is that as a product from
you know, from the top of the house, and I
think there's a pretty you know, widespread discourse around how
attractive that product is and certainly the relative value versus
public markets. Yeah.
Speaker 10 (15:39):
Across the flip side to this is the discussion of
systemic risk, and over the past year you've had increasing
discussion from the likes of Moody's and the IMF saying
that private credit does pose this systemic risk.
Speaker 8 (15:50):
Is that fair?
Speaker 10 (15:51):
Are we going to see some funds collapse?
Speaker 7 (15:53):
What's interesting is that what we just discussed was the
relative value of private credit versus public credit looking attractive,
and yet you don't see these same points made about
public credit markets. We've noticed liquidity in public credit markets declining.
So for us to focus exclusively on private credit markets
as a place where all the risk is doesn't make sense.
(16:16):
Are you going to see funds a differentiation in fun performance?
I think you are. You know, the last twenty years
have been an environment where there hasn't really been a
very deep cycle in credit markets, and so you've seen
very highly correlated performance across the private credit industry. I
think you're certainly going to see an environment where you
see dispersion in credit outcomes and you probably also see
(16:38):
dispersion in manager outcomes.
Speaker 2 (16:40):
Apollos twistram Leach there. But despite that optimism, some are concerned.
Officials from the US Securities and Exchange Commission have long
called out the potential risks for markets going dark, as
companies favor saying private over a public listing, allowing them
to bypass traditional disclosure and governance requirements. So is this
(17:03):
the new age of the private market? So what could
the consequences be. It's something I've been discussing with Bloomberg's
private equity reporter Suiteter Gopinath ahead of a major gathering
in Paris this September, so the last EPM event, So
this is last September. We heard predictions of the end
(17:23):
of private market's golden era. Has that actually come about?
Speaker 11 (17:27):
Unfortunately? Yes, when interest rates were low, when financing was cheap.
Private equity was in this golden era right because they
could pursue all these leverage buyouts, they could return capital
to investors, they could fundraise at a fast clip.
Speaker 8 (17:42):
All of that has died down.
Speaker 11 (17:43):
Pretty much thanks to interest rates more than anything else,
and also a difficult deal making environment. It's not as
easy to exit or monetize assets as it used to be.
That's partly because the IPO market has been semi functional
for the last eighteen months. It's slowly beginning to pick
up now. Deal making exits why M and A have
been difficult as well, so P firms have not been
(18:03):
able to return cash to their own investors, which means
investors don't have cash to invest in new funds.
Speaker 8 (18:09):
It's sort of a vicious cycle.
Speaker 2 (18:10):
But with US interest rates beginning to go down, do
you think the bust might be temporary? Will we say
a bit of a momentary search or not?
Speaker 8 (18:21):
Yes?
Speaker 11 (18:21):
I think yeah. There are signs of a pickup. Low
interest rates certainly help. The IPO market is sort of
beginning to bubble back up. M and A activities speaking
gaining steam as well. So all of these are good signs.
But at the same time we have large LPs saying
we don't want as many relationships as we used to
have with GPS. We want to be really selective of
(18:44):
the funds we invest in. So say, you know, LPs
who used to invest in two dozen or three dozen
firms and now saying we're going to focus on the
top five or ten, which means the largest firms. You know,
the Blackstones, the polos kkos will still do well, but
what happens to the in the middle or in the
bottom rank of the.
Speaker 2 (19:01):
Market h bit harder there. Maybe in a regulatory sense,
it's thought that Trump's deregulation drive has pushed private markets forwards.
Is that happening in Europe.
Speaker 11 (19:13):
It's yet to trickle down to Europe for sure, but
the opening up of four oh one case, the opening
up of retail money to private equity, to private capital
is definitely a good sign. Europe is making strikes and
similar direction. The UK government is also talking about opening
up savings to private investments. Regulation is really moving in
(19:34):
favor of the industry.
Speaker 2 (19:36):
Yeah, there's been lots of talk of that, hasn't now
under Chancellor Rachel Raves in the UK is there resistance
to pension funds increasing private exposure, you know, worries about
what that means, transparency and so on.
Speaker 11 (19:49):
There are worries to be sure, because private companies obviously
don't disclose results every quarter. There is in the kind
of transparency as you say. But at the same time,
in the UK especially, a lot of ballets have been
drawn to the Canadian pension system. If you look at
DBP Ontario teachers pension scheme, for example, there's a feeling that,
(20:12):
you know, you have sort of these teachers out in
the middle of Canada who have better pensions than an
even working in the city of London.
Speaker 8 (20:19):
So all of these.
Speaker 11 (20:19):
Efforts are sort of being made to equalize that.
Speaker 8 (20:23):
I suppose.
Speaker 2 (20:24):
Well, it's taken them a long time though, hasn't it
in terms of when that was set up, in the
amount of time and the size of the fund. So
you know, you can understand, you know, all of those caveats.
But yes, maybe a slightly envious arty being cast adds
the success stories here and maybe how they can be
emulated in terms of European firms then, and also at
(20:45):
this event, what do you think is going to be
on the agenda? Maybe Europeans looking to try to catch
up with the US. What's going to be on the
agenda at the actual event. Do you think there's been
a lot of European exuberance this year?
Speaker 11 (20:57):
To be sure, that's because people like getting a bit
fed up with.
Speaker 8 (21:01):
The volatility in the US.
Speaker 11 (21:03):
They're also worries about investing in the US, about having
money locked up in the US because of changing tariff
and trade regimes. So there is a lot more positivity
about Europe. People are talking about capital flows into Europe
for the first time in decades. Maybe, so European firms
will really be looking to cash in on that momentum
and change sort of that exuberance into actual fund commitments in.
Speaker 2 (21:26):
Terms of these specific funding needs for Europe that of
course is around infrastructure and defense spending. Can private markets
fill that kind of gap? In recent days, Mario Draghi
came back to Europe to give a big speech about
his recommendations for the European markets about, you know, opening
(21:47):
up and trying to generate growth and investment in Europe.
Do you think the private markets can fill some of
the gap.
Speaker 11 (21:53):
Yes, but private markets are certainly hoping they can and
are pretty much betting they can. Blackstone has committed about
five hundred billion of capitalty eure up on the whole.
Apollo spent spending one hundred billion in Germany alone. So
on the infrastructure side, it's sort of I guess, slightly
easily done. But in defense because historically a lot of
their own investors, a lot of their own LPs have
(22:13):
been prohibited from investing in defense assets. A lot of
work is being done behind the scenes to change sort
of wording and prospectuses and so on.
Speaker 2 (22:22):
And in terms of whether the private markets are recession
proof or more recession proof than other markets.
Speaker 11 (22:29):
I guess they would like us to believe they are
more recession proof, but I don't know that it's true
because a lot of these businesses and the end of
the day, tried to the real economy.
Speaker 2 (22:38):
And what about the concerns of regulators and the idea
of markets going dark as it were, with little information
about these businesses. I mean, it's caught up particular investors
here in the UK in the past, hasn't it. So
there's also even this idea that President Trump has been
talking about of for listed companies that they wouldn't have
(22:59):
to you actually report every quarter it's a Wall Street
but then maybe a six month cycle is better. So
there's a lot shifting in that regulatory space, isn't that.
Speaker 11 (23:08):
Yeah, Listed companies certainly do talk about sort of onerous
regulatory requirements and having to list every quarter obviously increases transparency,
but it has its.
Speaker 8 (23:21):
Detractors as well, the practice.
Speaker 11 (23:22):
Because there's this idea that companies sort of tend to
meet analyst estimates and then bump forecast just based on
what analyst expectations are, that it's not really indicative of their.
Speaker 8 (23:33):
Underlying growth per se.
Speaker 11 (23:35):
And also when you talk to companies that are private
and looking to go public, yes, the one thing they
always cite as a hurdle is this regulatory requirement to
list to sort of disclosed reports every three months. So
I don't know if loosening that requirement perhaps might be
helpful in terms of bringing more private companies public and
in terms of bringing more private companies to the IPO market.
Speaker 8 (23:57):
Certainly, but at the same.
Speaker 11 (23:59):
Time, yeah, lack of transparencies and good investors need to
know what they're putting their money in, so there needs
to be a degree of financial disclosure.
Speaker 2 (24:07):
So what do you think is going to be the
outlook then for private markets, as you say, is face
quite a bit of challenge in the last twelve to
eighteen months. What are you thinking about for the next year.
Speaker 11 (24:19):
I think the opening up of private markets to retail
money is a big boom sign for the industry. It
just means more capital flowing into the industry. In that regard,
that's very much a positive. Improving m ANDA markets are
also positive because it means they can monetize assets quicker.
But I think there's going to be a bifurcation in
the industry where the big get bigger in terms of size,
in terms of assets under management, struggle to survive.
Speaker 2 (24:40):
Okay, Sweater, thank you so much for being with me today.
Sweater to Gopinath. That was Bloomberg's private equity reporter, Sweeter Gopinath.
My thanks to her. Will have full coverage of all
the deals, the conversations and activities from EPM in Paris.
Here on Bloomberg, I'm Caroline Hepga. Here in London, you
can catch us every weekday morning for plaus Big daybak
(25:00):
you at beginning at six am in London. That's one
am on Wall Street.
Speaker 8 (25:04):
Tom.
Speaker 1 (25:05):
Thanks Caroline and coming up on Bloomberg day Break weekend,
a major investment in defense spending in Australia. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break Weekend,
(25:26):
our global look ahead at the top stories for investors
in the coming week. I'm Tom Busby in New York,
Australia announcing plans to spend eight billion dollars in US
money on a defense hub to build naval ships and
doc nuclear submarines. Prime Minister Anthony Albanize made the announcement
this past week as Canberra seeks to bolster US backing
for the August Pact. For more, let's get to the
(25:48):
host of the Daybreak Asia podcast, Doug Krisner. Tom.
Speaker 3 (25:52):
Diplomacy will be front and center in the week ahead
as the UN convenes its eightieth General Assembly in New York,
and it's there that Australian Prime Minister Anthony ALBANIZI will
be meeting with Donald Trump and the two have a
lot to discuss. Principally, the multi billion dollar Aucus Partnership
now AUCUS is a trilateral security arrangement between Australia, the
(26:15):
United Kingdom and the US. The aim here is to
promote a free and open Indo Pacific that is secure
and stable. For a closer look at what's at stake,
I'm joined by Bloomberg Swati Pondi Swati joins us from
our studios in Sydney. Swati, thank you so much for
making time to chat with me. Remember that AUCUS was
signed back in twenty twenty one by then President Biden.
(26:38):
Obviously we have seen a major shift in foreign policy
under the Trump administration. What change has occurred that may
affect AUCUS?
Speaker 9 (26:48):
So since Donald Trump came to office, all of American
allies have kind of been put on notice to increase
their difference spending and that was something that was expected
out of Australia as well. In response, Albaniazi had sounded
quite defiant and kind of sought independence in saying that
(27:12):
this will be australia sovereign decision what it does with
defense spending. And then during that period, the US also
launched a review of the UCUS and that led to
question marks around the future of this partnership. And then
in recent weeks we have seen Australia making massive billion
(27:35):
dollar announcements with uh TO kind of I think satisfy
the US, and it has also signed treaties around August
with the UK. So it seems like Australia is trying
to make those attempts and get that first meeting with
(27:56):
Donald Trump since he came to power earlier this year.
Speaker 3 (28:00):
For Australia, there is the point here I think that
we really have to tease out, is that the US
will help develop Australia's nuclear powered submarine fleet as a
part of the Auchice Agreement. Is any of that in
doubt right now?
Speaker 9 (28:14):
Not right now? So I had some conversations with sources
in Australia who are familiar with the Australian government's thinking
but also the American government's thinking, and it looks like
the partnership will go ahead. The point of the review
was really to reinforce the pact rather than unravel it.
(28:34):
We don't really know a lot of the information. Obviously,
the Secretary of State and Defense Secretary in the US
have not publicly spoken about the intent of the review,
but it does look like the pact will go ahead
and Australia will be able to get the submarines at
(28:58):
some point in distant future.
Speaker 3 (29:01):
So from what I understand the Australian government recently announced
around nine billion dollars that would be US in related
defense investments, and I'm wondering from the conversations that you
have had with people there whether that level would be
sufficient to satisfy the Trump administration.
Speaker 9 (29:19):
It may not be enough to satisfy them, but it
is a step in the right direction as far as
the US is concerned. It's the intention, it's what they'd
like to hear. And it's also a change of tactic
from Australia side, where Albinizi and Australia's Foreign Minister Penny
(29:40):
Wong had earlier sounded a lot more defiant when it
came to increasing defense spending and that tone has shifted
in recent weeks and months. So that will definitely be welcomed,
and probably that is why we are getting that first
meeting with Trump as well. So it's definitely welcome.
Speaker 3 (30:01):
So we know that Trump administration is currently in trade
negotiations with China. Can you give me a sense of
the reaction that Beijing is having right now to this
this continued refinement of the orchest.
Speaker 9 (30:14):
Treating the response from Beijing has not been quite vocal.
I'd say, we had the China operate the Shanghai Cooperation recently,
where a lot of the country's dictators Russia, North Korea,
even Indian Prime Minister and aar In Ramodi were there.
(30:35):
It was a show of weapons. It was a show
of China's might what it is capable of. Uh and
and I think that is one of the ways that
China is trying to show to the US and to
the world to not take it lightly.
Speaker 3 (30:54):
Can you give me a sense of what the Australian
press is reporting as we look ahead to this meeting
between mean Prime Minister Albanizi and President Trump.
Speaker 9 (31:03):
The Australian press has actually been quite critical of the
US and Donald Trump in particular. Remember Australia had had
an election in May when Albinizi came back to power
for his second term, and it was a landslide victory.
(31:25):
It was not expected, so it was a surprise landslide victory.
Uh and and so Albinizi thinks that it is in
his favor in terms of domestic politics to take a
stand against Donald Trump uh to sound more defiant in
(31:47):
sticking up to what Australia stands for. Uh and and
the local press has also kind of been reporting along
those lines as well. However, in recent weeks, and especially
since the Chinese parade, the conversations have also kind of
tilted towards the need for a stronger Western alliance and
(32:10):
for Western democracies to come together and and fight the
growing fragmentation uh that we are seeing in the world.
I was at an event last week where Kurt Campbell,
who's the former Deputy Secretary of State, was speaking, and
he actually said that this meeting between Albanesi and Trump
(32:32):
will be the most consequential meeting of an American and
an Australian in living memory. And he said that Albanesi
should use this meeting to talk beyond bilateral ties and
talk talk beyond narrow economic issues two more regional defense
(32:53):
and other global defragmentation uh issues. So uh so that
is what will be on Albinizi's agenda as well.
Speaker 3 (33:03):
Should make for a very interesting meeting this week between
Australian Prime Minister Anthony Albanisian President Trump on the sidelines
of the eightieth General Assembly of the UN here in
New York City. Swati, thank you so much for joining
me Bloomberg. Swati PONDI there, joining from Sydney. Now, the
global influence of the Trump administration goes well beyond the
(33:23):
defense budgets of other countries. Look no further than trade
policy and the use of those tariffs. And then there
is the US dollar, the world's dominant reserve currency. So
far this year, the dollar is down by more than
ten percent against a basket of its peers. Yes, increased
nervousness from global investors may be a part of that decline,
(33:43):
but another aspect is the desire from the Trump administration
to see a weaker currency. Stephen Myron, the newly seated
Fed Governor, has taken unpaid leave from his role as
chair of the White House Council of Economic Advisors, and
in Myron's view, the dollar is overvalued. For a closer look,
I'm joined by Bloomberg opinion columnist Shuley Wren, who joins
(34:06):
us from Hong Kong. Surely it's always a pleasure. Thank
you so very much. I know you're writing about Myron's
policy where the dollar is concerned. Fill me in a
little bit.
Speaker 12 (34:16):
He's definitely a dollar beer. He blamed the US society's
various economic problems from the loss of manufacturing, to wealth inequality,
to the overvaluation of dollar. In a very well read
paper published the last November, he basically called the that
the He basically said that the dollar is overvalued and
(34:40):
that it should not be acting as a reserve currency.
And that's that's very much freaking global investors out. Like
what we're seeing is that the Fed was holding the
rates right throughout this year until Wednesday, but the dollar,
the broader Dollar index has come down twelve percent already.
Speaker 3 (35:00):
Do you think he's likely to have much in a
way of influence while he's sitting on the Fed's Board
of governors.
Speaker 12 (35:06):
He is only one of the seven members. However, his
rhetoric and the fact that the Trump will get to
decide on the next FET chair does do influence market narratives,
and you are actually seeing it already. For instance, Goal
is on trying to take over US treasuries as global
(35:27):
central bank's biggest reserve assets. That's a sign that the
global investors are trying to hatch against the instability at
the Federal Reserve. And also what you are seeing is
that the global asset managers are increasingly keen to diversify
overseas into international stocks from Europe to Hong Kong.
Speaker 3 (35:51):
So I mentioned that Myron is on lee from his
role as chair of the White House Council of Economic Advisors.
And we know a cornerstone of Trump's economic policy have
to do with tariffs. And I'm wondering whether we need
to talk a little bit about the tariff story as
it relates to the dollar as well well.
Speaker 12 (36:08):
And that's another problem, right, Like in the past, a
lot of foreign governments they ended up holding a lot
of dollar because they were exporting their goods and services
into the United States. But if the terror boar is
set up, there is less need for them to hold
dollar anymore. In fact that there will be in the
case of China, there will be few opportunities to earn dollar.
Speaker 10 (36:31):
Right.
Speaker 12 (36:32):
That means that there is a lot of selling pressure
on the green back.
Speaker 3 (36:36):
So if we step back and we look at the
shift that is happening right now in global markets, is
this a time where many, I will say, especially institutional
investors are diversifying and perhaps some of that diversification is
moving assets out of the US.
Speaker 12 (36:52):
I think we are already seeing that already Europe and
China have been doing very well this year. And it's
also in part because the US dooll market has become
very expensive, right Like if the AI boom is not
showing up in the earnings in say twenty twenty six,
twenty twenty seven, then the US dooll market is just
(37:12):
way too expensive. So there are incentives to move out anyhow.
Speaker 3 (37:16):
So we know that when you are involved in the
foreign exchange, it's always a pair that you're talking about
a dollar related to another currency. And I'm wondering if
we can talk about the path of the dollar to
the downside, I'm wondering what currencies will benefit on the
strong side beyond the Japanese ND.
Speaker 12 (37:34):
So if you look at emergent markets in the last
couple of months, emergent markets currencies that the author quality
carry trade, and I'm talking about those from Brazil, Mexico
and South Africa, they have been rallying the most. It's
a sign that the carry trade is back and the
people are using the dollar as the funding currency to
(37:55):
buy into higher yielding currencies.
Speaker 3 (37:58):
Julie, thank you so very much. Bloomberg Opinion columnist Shuley Wrenn.
I'm Doug Chrisner. You can catch us weekdays for the
Daybreak Asia podcast. It's available wherever you get your podcast.
Speaker 1 (38:09):
Tom, Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
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