Bloomberg Audio Studios, Podcasts, radio News.

Bloomberg Audio Studios, Podcasts, radio News.

Welcome to the Bloomberg day Break Asia podcast. I'm Doug Chrisner. On today's episode, we'll break down fourth quarter results from Amazon. We'll be talking with Aarun Sunderum, vice president of Equity Research at CFRA. Plus a preview of tomorrow's jobs report. We'll be talking with Keith Buchanan. He is a partner and senior portfolio manager at Globalt Investments. But we begin in the Lion City. Joining us now is Mary Nicolas. She's Bloomberg M Live strategist, joining from our studios in Singapore. I was reading your entry today in the M Live blog, and you're talking about how some Chinese e commerce stocks are under pressure here because they could be facing an additional levy this week. Can you explain what's going on here?

Welcome to the Bloomberg day Break Asia podcast. I'm Doug Chrisner. On today's episode, we'll break down fourth quarter results from Amazon. We'll be talking with Aarun Sunderum, vice president of Equity Research at CFRA. Plus a preview of tomorrow's jobs report. We'll be talking with Keith Buchanan. He is a partner and senior portfolio manager at Globalt Investments. But we begin in the Lion City. Joining us now is Mary Nicolas. She's Bloomberg M Live strategist, joining from our studios in Singapore. I was reading your entry today in the M Live blog, and you're talking about how some Chinese e commerce stocks are under pressure here because they could be facing an additional levy this week. Can you explain what's going on here?

Sure?

Sure?

So, earlier this week, when we had the Chinese tariffs, there a report that the US Postal Service was not going to accept any packages that was coming from China and Hong Kong. That was quickly reversed, but there is also reports saying that now these companies are going to have to pay an additional thirty percent levy for any packages coming into the US, So obviously there's going to be some pressure on e commerce. The news on the US postal service had already put some pressure on the e commerce. That aside, though, we saw Chinese stocks do absolutely well on the optimism surrounding AI and robotics, not only from deep Seek, but there was this other robotics dance actually that broke the Internet, just getting people excited about the wave and the future of robotics for China. But irrespective, it still puts pressure on a lot of the e commerce names and some of the bigger e commerce names.

So, earlier this week, when we had the Chinese tariffs, there a report that the US Postal Service was not going to accept any packages that was coming from China and Hong Kong. That was quickly reversed, but there is also reports saying that now these companies are going to have to pay an additional thirty percent levy for any packages coming into the US, So obviously there's going to be some pressure on e commerce. The news on the US postal service had already put some pressure on the e commerce. That aside, though, we saw Chinese stocks do absolutely well on the optimism surrounding AI and robotics, not only from deep Seek, but there was this other robotics dance actually that broke the Internet, just getting people excited about the wave and the future of robotics for China. But irrespective, it still puts pressure on a lot of the e commerce names and some of the bigger e commerce names.

To what extent is the government in China right now involved in supporting the equity market. Is that part of the story when you look at the major benchmarks, that there is just something underneath the surface where Beijing is kind of lifting prices a little bit.

To what extent is the government in China right now involved in supporting the equity market. Is that part of the story when you look at the major benchmarks, that there is just something underneath the surface where Beijing is kind of lifting prices a little bit.

Well there, I'm sure there's an element of it, because there was some sort of longer term plans of involving a lot of the mutual of of the pension funds and the lifers, et cetera. But I think there is this underlying excitement about AI and about tech, and that euphoria from deep Zeek is still really resonating among retail investors yesterday. The biggest the biggest supporters were robotics, and it was much of the much of it was focused on a lot of the smaller names. So that's why you didn't see huge games in the CSI three hundred or in the Shanghai composite, because of the fact that a lot of it was going to smaller software companies and smaller robotics companies. But I think if we see any sort of significant downdrafts in Chinese equities, I think you would see a lot of support coming in from the government side.

Well there, I'm sure there's an element of it, because there was some sort of longer term plans of involving a lot of the mutual of of the pension funds and the lifers, et cetera. But I think there is this underlying excitement about AI and about tech, and that euphoria from deep Zeek is still really resonating among retail investors yesterday. The biggest the biggest supporters were robotics, and it was much of the much of it was focused on a lot of the smaller names. So that's why you didn't see huge games in the CSI three hundred or in the Shanghai composite, because of the fact that a lot of it was going to smaller software companies and smaller robotics companies. But I think if we see any sort of significant downdrafts in Chinese equities, I think you would see a lot of support coming in from the government side.

Have you seen any high frequency data where the Chinese consumer is concerned? During the Lunar New Year holiday, do we know how well the spending was kind of helping to drive the economy.

Have you seen any high frequency data where the Chinese consumer is concerned? During the Lunar New Year holiday, do we know how well the spending was kind of helping to drive the economy.

Yeah, so there were some reports that arrivals at the box office were really really strong. Travel was really strong as well, so it showed some sort of upside. But if you look underneath the hood and the per capita spending, it's still a little bit under what we saw in twenty nineteen, and that is still an issue because you don't see that there's a complete relaxation or a motivation to continue with spending the subsidies, the trade and subsidies that the government had provided the people where you can trade in some of your electronic goods for newer and more updated ones. That also showed some signs of resilience as well. So it's moving but very very slowly, and theyre's still underlying and underneath the hood, it's still confidence isn't as strong as you would expect.

Yeah, so there were some reports that arrivals at the box office were really really strong. Travel was really strong as well, so it showed some sort of upside. But if you look underneath the hood and the per capita spending, it's still a little bit under what we saw in twenty nineteen, and that is still an issue because you don't see that there's a complete relaxation or a motivation to continue with spending the subsidies, the trade and subsidies that the government had provided the people where you can trade in some of your electronic goods for newer and more updated ones. That also showed some signs of resilience as well. So it's moving but very very slowly, and theyre's still underlying and underneath the hood, it's still confidence isn't as strong as you would expect.

It's the final trading day of the week where you are, and I'm wondering if you look to next week, is there anything that we should be paying close attention to that may end up driving the market.

It's the final trading day of the week where you are, and I'm wondering if you look to next week, is there anything that we should be paying close attention to that may end up driving the market.

Yeah. I think next week it's going to be about retail sales and CPI data out of the US. Today we have the labor market report, and that should give an indication of, you know, where risk assets are headed, because at the end of the day, even you know, trade noise aside this, still the drivers from the FED is still really strong. So where the Fed is heading and how the market perceives the Fed is heading because so far right now they're much more conservative than where the Fed is thinking. So market is looking for one to two rate cuts, where as the FED had told US that they were looking for two cuts in twenty twenty five, So the labor market report will be one, the second one will be CPI and where the direction of inflation is going. And then of course retail sales. Retail sales will not only be important in terms of showing the resilience of the US consumer, but also feed into the equity markets, and of course, you know the outlooks for a lot of the for equity. More generally, you and.

Yeah. I think next week it's going to be about retail sales and CPI data out of the US. Today we have the labor market report, and that should give an indication of, you know, where risk assets are headed, because at the end of the day, even you know, trade noise aside this, still the drivers from the FED is still really strong. So where the Fed is heading and how the market perceives the Fed is heading because so far right now they're much more conservative than where the Fed is thinking. So market is looking for one to two rate cuts, where as the FED had told US that they were looking for two cuts in twenty twenty five, So the labor market report will be one, the second one will be CPI and where the direction of inflation is going. And then of course retail sales. Retail sales will not only be important in terms of showing the resilience of the US consumer, but also feed into the equity markets, and of course, you know the outlooks for a lot of the for equity. More generally, you and.

I have talked a lot in the past about the strength of the US dollar, and I'm kind of surprised at the strength of the end this week. I mean, we're flirting with one fifty one. What's happening with the.

I have talked a lot in the past about the strength of the US dollar, and I'm kind of surprised at the strength of the end this week. I mean, we're flirting with one fifty one. What's happening with the.

En Yeah, it's it's had a really good run, and largely because we've heard little snippets from BOJ members talking about So for example, one of the BOJ members, Tamora, yesterday had commented about seeing rates at one percent, and he retraced and retraced some of those comments. But at the same time, if that's what the BOJ is thinking, and they're moving in that direction, and then of course you had wage earnings and they were really really strong today. Household spending was really strong. That's all pushing the narrative towards more rate hikes for the BA, and I think that's also increasing expectations from traders that they are coming. So if you look at pricing, not necessarily for the next meeting in March, but the following one on April thirty May, first, you're seeing expectations rise for a hike coming then, which was a lot sooner than people had projected because projections were more for July.

En Yeah, it's it's had a really good run, and largely because we've heard little snippets from BOJ members talking about So for example, one of the BOJ members, Tamora, yesterday had commented about seeing rates at one percent, and he retraced and retraced some of those comments. But at the same time, if that's what the BOJ is thinking, and they're moving in that direction, and then of course you had wage earnings and they were really really strong today. Household spending was really strong. That's all pushing the narrative towards more rate hikes for the BA, and I think that's also increasing expectations from traders that they are coming. So if you look at pricing, not necessarily for the next meeting in March, but the following one on April thirty May, first, you're seeing expectations rise for a hike coming then, which was a lot sooner than people had projected because projections were more for July.

Does that necessarily spell trouble for the Japanese equity market?

Does that necessarily spell trouble for the Japanese equity market?

Not necessarily, so it does for the big exporters, I would say, but we have seen a breakdown in the correlation between where the yen is headed and the directionality of the en and the equity markets. So I think some of the bigger names will suffer. But remember there's still a lot of importers within the Japanese equity markets who have been struggling as a result of a much weaker yen.

Not necessarily, so it does for the big exporters, I would say, but we have seen a breakdown in the correlation between where the yen is headed and the directionality of the en and the equity markets. So I think some of the bigger names will suffer. But remember there's still a lot of importers within the Japanese equity markets who have been struggling as a result of a much weaker yen.

So when you talk to analysts that focus on the Japanese equity market, are they highlighting certain industry groups or certain areas of the market that represent value right now? I mean you were talking about a move to shy away from anything that may have exposure to a stronger currency, those big multinational exporters. But I'm wondering whether there is value in some other pockets of the Japanese equity market.

So when you talk to analysts that focus on the Japanese equity market, are they highlighting certain industry groups or certain areas of the market that represent value right now? I mean you were talking about a move to shy away from anything that may have exposure to a stronger currency, those big multinational exporters. But I'm wondering whether there is value in some other pockets of the Japanese equity market.

So there's a lot of excitement on Japanese financials because they're going to be one of the big beneficiaries from a rate hike. So financials have been doing well, They've actually surprised to the upside. Consumer discretionary have also surprised to the upside. That could continue as well, and earnings overall has been very much broad based, so there could be Probably the main pockets that will outperform are probably financials, but at the same time, the others have plenty of room to catch up.

So there's a lot of excitement on Japanese financials because they're going to be one of the big beneficiaries from a rate hike. So financials have been doing well, They've actually surprised to the upside. Consumer discretionary have also surprised to the upside. That could continue as well, and earnings overall has been very much broad based, so there could be Probably the main pockets that will outperform are probably financials, but at the same time, the others have plenty of room to catch up.

Mary will leave it there, Thank you so much. I hope you have a good weekend in Singapore. That is Bloomberg m Live strategist Mary Nicola joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast time Doug Krisner. After the battle, we heard from Amazon and the company issued a revenue forecast for the current quarter below estimates. For a closer look, I'm joined by Arun Sundrum, Vice President of Equity Research at CFRA A run Thank you so much for making time to chat with us. I understand that you just jumped off the earnings called. What did you learn?

Mary will leave it there, Thank you so much. I hope you have a good weekend in Singapore. That is Bloomberg m Live strategist Mary Nicola joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast time Doug Krisner. After the battle, we heard from Amazon and the company issued a revenue forecast for the current quarter below estimates. For a closer look, I'm joined by Arun Sundrum, Vice President of Equity Research at CFRA A run Thank you so much for making time to chat with us. I understand that you just jumped off the earnings called. What did you learn?

Yeah?

Yeah?

Yeah, I think one of the big takeaways from the earnings call is that this this capex cycle that we started to see this past year, that's going to continue into US in twenty five. I don't think that's that much of a surprise, given that all the big tech firms and have announced a pretty sizeable acceleration in capex spending. But Amazon did announce that they're expecting probably about one hundred and five billion, one hundred and ten billion dollars of capex in twenty twenty five. The consensus going into the year was eighty five billion, so it's about twenty and twenty five percent higher than the street expectation. So clearly big tech is still investing in specificly investing in AI, and that's that's going to continue.

Yeah, I think one of the big takeaways from the earnings call is that this this capex cycle that we started to see this past year, that's going to continue into US in twenty five. I don't think that's that much of a surprise, given that all the big tech firms and have announced a pretty sizeable acceleration in capex spending. But Amazon did announce that they're expecting probably about one hundred and five billion, one hundred and ten billion dollars of capex in twenty twenty five. The consensus going into the year was eighty five billion, so it's about twenty and twenty five percent higher than the street expectation. So clearly big tech is still investing in specificly investing in AI, and that's that's going to continue.

What do we know about demand for these services and whether or not there's going to be a return on investment?

What do we know about demand for these services and whether or not there's going to be a return on investment?

Yeah, I mean, I don't think Amazon, as well as a lot of analysts investors, are overly worried about the return. I say that because one, I mean this past year in twenty twenty four, the margins aws have been quite attractive despite the fact that they've been ramping up CAPEC spending there. And Amazon also has I think a proven track record to generating returns on their investment. So I think, you know, it'll take time for you know, to fully see the full ROI se on these investments. I think we'll likely see some headwinds in twenty twenty five, just given how much extra CAPEX are spending, but I think by twenty twenty six, twenty twenty seven, we should see something better returns you know, of the of those investments.

Yeah, I mean, I don't think Amazon, as well as a lot of analysts investors, are overly worried about the return. I say that because one, I mean this past year in twenty twenty four, the margins aws have been quite attractive despite the fact that they've been ramping up CAPEC spending there. And Amazon also has I think a proven track record to generating returns on their investment. So I think, you know, it'll take time for you know, to fully see the full ROI se on these investments. I think we'll likely see some headwinds in twenty twenty five, just given how much extra CAPEX are spending, but I think by twenty twenty six, twenty twenty seven, we should see something better returns you know, of the of those investments.

So how is the market for cloud computing changing right now? Is it a lot less competitive and more concentrated? How would you evaluate it?

So how is the market for cloud computing changing right now? Is it a lot less competitive and more concentrated? How would you evaluate it?

No, I would say it's it's still very de bandside is still very strong, you know. I think all the big tech players, the hyper scalers have announced that right now, you know, their their demand is exceeding supply. So there's supply chain issues throughout the industry and Amazon included. You know, I think it's going to take probably at least half a year to a full year for supply to catch up. With demand. That's why these companies are investing so heavily. But there's clearly a lot of demand for AI. I think the recent news with deep sea coming out of China, there's been a lot of jitter in the market regarding that. In Amazon's perspective, this is just going to accelerate the adoption of AI. If AI is cheaper, more companies are going to adopt AI, and more companies probably gonna spend more on AI, and Amazon, being the largest cloud provider, should be a direct beneficiarya of that. So their a w's business is very large. Today Amazon is the leading leading market share in that of that business, but that's likely going to going to see continued growth over the over the next you know, foreseeable future.

No, I would say it's it's still very de bandside is still very strong, you know. I think all the big tech players, the hyper scalers have announced that right now, you know, their their demand is exceeding supply. So there's supply chain issues throughout the industry and Amazon included. You know, I think it's going to take probably at least half a year to a full year for supply to catch up. With demand. That's why these companies are investing so heavily. But there's clearly a lot of demand for AI. I think the recent news with deep sea coming out of China, there's been a lot of jitter in the market regarding that. In Amazon's perspective, this is just going to accelerate the adoption of AI. If AI is cheaper, more companies are going to adopt AI, and more companies probably gonna spend more on AI, and Amazon, being the largest cloud provider, should be a direct beneficiarya of that. So their a w's business is very large. Today Amazon is the leading leading market share in that of that business, but that's likely going to going to see continued growth over the over the next you know, foreseeable future.

I'm looking at an item right now related to Amazon on the Bloomberg terminal and Andy Jase, the CEO, was talking about insufficient electricity. This seems to echo some of the concern that we heard from Microsoft. How does Amazon propose to solve this problem the power that's required to drive a lot of these data centers.

I'm looking at an item right now related to Amazon on the Bloomberg terminal and Andy Jase, the CEO, was talking about insufficient electricity. This seems to echo some of the concern that we heard from Microsoft. How does Amazon propose to solve this problem the power that's required to drive a lot of these data centers.

Yeah, so they're even investing in their own power infrastructure themselves, and they're partnering with other companies. Clearly, over the next you say, five to ten years, it's going to be a massive demand for energy and that is a concern throughout throughout the industry. So I expect, you know, to see continued investments in that space from the hyperscalers, Microsoft, Google, Amazon. I think they'll start to also invest in energy infrastructure.

Yeah, so they're even investing in their own power infrastructure themselves, and they're partnering with other companies. Clearly, over the next you say, five to ten years, it's going to be a massive demand for energy and that is a concern throughout throughout the industry. So I expect, you know, to see continued investments in that space from the hyperscalers, Microsoft, Google, Amazon. I think they'll start to also invest in energy infrastructure.

So when you create these data centers, do you think it would behoove a company like Amazon to create a little bit more geographic distribution, not to have them concentrated in certain regions, to kind of help address this problem with power.

So when you create these data centers, do you think it would behoove a company like Amazon to create a little bit more geographic distribution, not to have them concentrated in certain regions, to kind of help address this problem with power.

Yeah, I mean, right now, a lot of these data centers. So I live in the Washington, DC metro area, and Northern Virginia is like the hub for for data centers. A lot of Amazon data centers are here. But right now, you know, Amazon's not a ws is not just expanding in the United States, They're also expanding around the world. You know, I think Amazon just recently announced I believe it's Thailand that's going to be another data center hub for the for the Asia market. So I do expect over the next you know, you know, five to ten years, we'll start to see more countries as essentially hubs for for data centers. As you know, AWS expands throughout the world.

Yeah, I mean, right now, a lot of these data centers. So I live in the Washington, DC metro area, and Northern Virginia is like the hub for for data centers. A lot of Amazon data centers are here. But right now, you know, Amazon's not a ws is not just expanding in the United States, They're also expanding around the world. You know, I think Amazon just recently announced I believe it's Thailand that's going to be another data center hub for the for the Asia market. So I do expect over the next you know, you know, five to ten years, we'll start to see more countries as essentially hubs for for data centers. As you know, AWS expands throughout the world.

What do we know about the rest of Amazon's businesses? How well are they performing right now?

What do we know about the rest of Amazon's businesses? How well are they performing right now?

Yeah?

Yeah?

So, I mean the biggest businesses is their e commerce business that you know had a phenomenal quarter. That's not a surprise given that you know, overall the holiday spending in the US was really strong this past year. Uh, that business is on fire. Their their advertising business has slowed down a little bit. You know, right now, Amazon generates most of their ad revenue from their e commerce business. Only they're their video ads business or Prime Video. They just introduced ads to Prime Video this past year, so that's still a very portion of their overall advertising business. I think there's some excitement right now that in twenty twenty five we could see better monetization of Prime video ads, especially as Amazon rolls out more live sports in their own content. So that video ads business should see some strong growth over the next few years. And we're hopeful that that advertising business, that growth in that advertising business will reaccelerate because, like I said, last few quarters we did see some deceleration in the ad business.

So, I mean the biggest businesses is their e commerce business that you know had a phenomenal quarter. That's not a surprise given that you know, overall the holiday spending in the US was really strong this past year. Uh, that business is on fire. Their their advertising business has slowed down a little bit. You know, right now, Amazon generates most of their ad revenue from their e commerce business. Only they're their video ads business or Prime Video. They just introduced ads to Prime Video this past year, so that's still a very portion of their overall advertising business. I think there's some excitement right now that in twenty twenty five we could see better monetization of Prime video ads, especially as Amazon rolls out more live sports in their own content. So that video ads business should see some strong growth over the next few years. And we're hopeful that that advertising business, that growth in that advertising business will reaccelerate because, like I said, last few quarters we did see some deceleration in the ad business.

I'm curious as to whether the company on the call addressed the issue of tariffs, particularly those that have been put on China recently. Is that perhaps a benefit to this company?

I'm curious as to whether the company on the call addressed the issue of tariffs, particularly those that have been put on China recently. Is that perhaps a benefit to this company?

Yeah, so they didn't talk about it much on the call. I think it was a little bit baked into their outlooks. One of the reasons the stock is down right now is because of the weaker than expected outlook, and I think it's due to you know, tariff headwinds is one and also the stronger US dollars is another sizable headwind. But yeah, regarding tariff, you know, I think tariffs are a bad word in retail. But you know, the silver lining is that tariffs impact everyone. It's not it's not you know, single singling, one retailer out. So typically when you see tariffs like this, you tend to see the larger retailers, you know, oper form and find ways to better navigate through tariffs. So, you know, I'm expecting Amazon as well as you know, Walmart, Target, you know these I think these retailers will be able to better navigate and work through these tariffs. Then maybe some of the smaller retailers. And you have to remember, I mean this is not their first go around with tariffs. You know, these companies experience the trade war with China back in twenty eighteen, twenty nineteen, So overall, I think the industry is better prepared for tariffs this time this time around than you know, compared to back back in twenty eighteen, twenty nineteen.

Yeah, so they didn't talk about it much on the call. I think it was a little bit baked into their outlooks. One of the reasons the stock is down right now is because of the weaker than expected outlook, and I think it's due to you know, tariff headwinds is one and also the stronger US dollars is another sizable headwind. But yeah, regarding tariff, you know, I think tariffs are a bad word in retail. But you know, the silver lining is that tariffs impact everyone. It's not it's not you know, single singling, one retailer out. So typically when you see tariffs like this, you tend to see the larger retailers, you know, oper form and find ways to better navigate through tariffs. So, you know, I'm expecting Amazon as well as you know, Walmart, Target, you know these I think these retailers will be able to better navigate and work through these tariffs. Then maybe some of the smaller retailers. And you have to remember, I mean this is not their first go around with tariffs. You know, these companies experience the trade war with China back in twenty eighteen, twenty nineteen, So overall, I think the industry is better prepared for tariffs this time this time around than you know, compared to back back in twenty eighteen, twenty nineteen.

Run. We'll leave it there. Thank you so much for being with us. Aarun Sundrum, a vice president of equity research at cfr A joining us here on the Daybreak Asia podcast. Tomorrow's US jobs report will be the focal point for markets and the Fed as well. Joining me now for a preview is Keith Cannon. He is senior portfolio manager and partner at Global To Investments, joining us from Atlanta. If you look at the consensus estimate right now, Keith, when we're looking for non farm payrolls to rise by around one hundred and seventy three thousand, that doesn't sound like a lot. What do you think it says if that were to come to pass, what would it say about the labor market?

Run. We'll leave it there. Thank you so much for being with us. Aarun Sundrum, a vice president of equity research at cfr A joining us here on the Daybreak Asia podcast. Tomorrow's US jobs report will be the focal point for markets and the Fed as well. Joining me now for a preview is Keith Cannon. He is senior portfolio manager and partner at Global To Investments, joining us from Atlanta. If you look at the consensus estimate right now, Keith, when we're looking for non farm payrolls to rise by around one hundred and seventy three thousand, that doesn't sound like a lot. What do you think it says if that were to come to pass, what would it say about the labor market?

Oh dog, and thanks again for having me. We've done a lot of work around you know, what's going on in the labor market from a perspective of we're seeing on the margin softness that hasn't really materialized into.

Oh dog, and thanks again for having me. We've done a lot of work around you know, what's going on in the labor market from a perspective of we're seeing on the margin softness that hasn't really materialized into.

The AUGORICM numbers.

The AUGORICM numbers.

If we do hit one seven as come the sweet spot we have been, you know, the course of the last year or so if you look on a full week trailing basis, So that's kind of powerful the course. Anything shy of that, we feel like we'll ride on markets and probably reinstitute some expectations of a more aggressive fad. And also on the alternative, as we've seen a couple of beasts that were hired and expected for the past several months, anything much higher than two hundred to ten could bring into question whether or not the inflation will be taming. Of course, that it's going to come back to what wage both does within the report, but also just what stands the FED has and becoming more hawkish and if their hawkishness is more warranted given a very tight level market, which they've communicated over the last couple of years.

If we do hit one seven as come the sweet spot we have been, you know, the course of the last year or so if you look on a full week trailing basis, So that's kind of powerful the course. Anything shy of that, we feel like we'll ride on markets and probably reinstitute some expectations of a more aggressive fad. And also on the alternative, as we've seen a couple of beasts that were hired and expected for the past several months, anything much higher than two hundred to ten could bring into question whether or not the inflation will be taming. Of course, that it's going to come back to what wage both does within the report, but also just what stands the FED has and becoming more hawkish and if their hawkishness is more warranted given a very tight level market, which they've communicated over the last couple of years.

How do you define an aggressive FED? Is that a FED that stays higher for longer or is that a FED that potentially could hike rates?

How do you define an aggressive FED? Is that a FED that stays higher for longer or is that a FED that potentially could hike rates?

Well, that's so the potential for a rate hike we really are starting to creep into some of vir expectations, not necessarily the odds on bet at this point, but we're noticing the rhetoric tilt a little from from the Federal Reserve VERET. They say very concerned with the re emergence of inflation, as they have been over the course of this tightening cycle, and they don't want to be too early in that three three and a half percent inflation and become the new norm.

Well, that's so the potential for a rate hike we really are starting to creep into some of vir expectations, not necessarily the odds on bet at this point, but we're noticing the rhetoric tilt a little from from the Federal Reserve VERET. They say very concerned with the re emergence of inflation, as they have been over the course of this tightening cycle, and they don't want to be too early in that three three and a half percent inflation and become the new norm.

I think they still want to remain to keep pressure and.

I think they still want to remain to keep pressure and.

As long as the inflation rate is below the fair funds rate, that continues to be the case of restricted policy remained in place. I think they want to keep it restrictive as long as they can continue to see progress. But a tight living mark kind of leads to that progress diminishing in a way. They will make us more concern with a fair staying higher for longer, and again if it remains much tighter, possibly highs being priced into what we expect from the Fed to do over the next twelve months.

As long as the inflation rate is below the fair funds rate, that continues to be the case of restricted policy remained in place. I think they want to keep it restrictive as long as they can continue to see progress. But a tight living mark kind of leads to that progress diminishing in a way. They will make us more concern with a fair staying higher for longer, and again if it remains much tighter, possibly highs being priced into what we expect from the Fed to do over the next twelve months.

So it's a very pivotal point right now in the Fed side.

So it's a very pivotal point right now in the Fed side.

One of our colleagues here at Bloomberg had a very interesting conversation today with Treasury Secretary Besson and one of the things that he's stressed was that the Trump administration is not really focused on whether the FED will cut its policy rate. The focus for the administration is instead on achieving a lower tenure treasury yield. How does that square with your expectations of what we may see from the Trump administration, I.

One of our colleagues here at Bloomberg had a very interesting conversation today with Treasury Secretary Besson and one of the things that he's stressed was that the Trump administration is not really focused on whether the FED will cut its policy rate. The focus for the administration is instead on achieving a lower tenure treasury yield. How does that square with your expectations of what we may see from the Trump administration, I.

Think, and that was a fascinating interview.

Think, and that was a fascinating interview.

Couple of ways to get the tenure treasure rate lower, whether inflation expectations come down, or growth expectations come down, or some combination of the ball and both of those scenarios.

Couple of ways to get the tenure treasure rate lower, whether inflation expectations come down, or growth expectations come down, or some combination of the ball and both of those scenarios.

From a policy standpoint, there is.

From a policy standpoint, there is.

A very delicate balance as to how we achieved those and with race being you know, inflation being where it is, that's really not anything that any any central bank or any government can fix in one fell swoop.

A very delicate balance as to how we achieved those and with race being you know, inflation being where it is, that's really not anything that any any central bank or any government can fix in one fell swoop.

So the focus on the tenure makes it makes it feel.

So the focus on the tenure makes it makes it feel.

A lot less month to month and quarter to quarter meeting the meeting from the fast standpoint, so there's some relief from that regard, but we've seen the tenure take on the mind of its own. It's not anything that any one entity or federal reserve can can really control. So you know, we're that interview was really perked our ears up to see what they're communicating as a focus is going to be almost to pivot away from what they think the market is thinking, which is more shorter terminature.

A lot less month to month and quarter to quarter meeting the meeting from the fast standpoint, so there's some relief from that regard, but we've seen the tenure take on the mind of its own. It's not anything that any one entity or federal reserve can can really control. So you know, we're that interview was really perked our ears up to see what they're communicating as a focus is going to be almost to pivot away from what they think the market is thinking, which is more shorter terminature.

The other thing that the Treasury Secretary addressed in that interview was a strong US dollar policy under the Trump administration. Bessin said it was completely intact.

The other thing that the Treasury Secretary addressed in that interview was a strong US dollar policy under the Trump administration. Bessin said it was completely intact.

Now.

Now.

I know you look at the earnings and the quality of earnings for the big multinationals in particular. So the question is whether the dollar is going to be a significant headwind here going forward.

I know you look at the earnings and the quality of earnings for the big multinationals in particular. So the question is whether the dollar is going to be a significant headwind here going forward.

Just every economics textbook tells you that that is the case. When a stronger dollar affect international and global companies there and their overseas operations. It depends on the mixture of how we get to a stronger dollar. If we are talking about you know, inflation really aiding that path, or tariffs kind of pushing pushing the dollar higher. There's so many ways to get to a stronger dollar from where we are now, and it's really hard to say, you know, whether or not you know in the national marketplace would be better off or worse off with a stronger dollars. Two almost done a wrong because there's.

Just every economics textbook tells you that that is the case. When a stronger dollar affect international and global companies there and their overseas operations. It depends on the mixture of how we get to a stronger dollar. If we are talking about you know, inflation really aiding that path, or tariffs kind of pushing pushing the dollar higher. There's so many ways to get to a stronger dollar from where we are now, and it's really hard to say, you know, whether or not you know in the national marketplace would be better off or worse off with a stronger dollars. Two almost done a wrong because there's.

So many pathways to get there, we're not.

So many pathways to get there, we're not.

As concerned with the absolute level over the next twelve months mrgus I would necessarily in the path to get there, so you know, the quarter to quarter earnings and what we can pick up from these corporations. Then their plans for capital working capital expenditures going forward is going to play a role in that as well, So you know, we're less concerned about the absolute level of the dollar and more concerned with the path to get there and whether it's geopolitical driven or here. Strength here in the US without the rest of the world into a session is also important as well.

As concerned with the absolute level over the next twelve months mrgus I would necessarily in the path to get there, so you know, the quarter to quarter earnings and what we can pick up from these corporations. Then their plans for capital working capital expenditures going forward is going to play a role in that as well, So you know, we're less concerned about the absolute level of the dollar and more concerned with the path to get there and whether it's geopolitical driven or here. Strength here in the US without the rest of the world into a session is also important as well.

You mentioned tariffs there, Keith, and what the conventional wisdom has been that this really has the potential to drive inflation higher. Tariff policy I'm referring to best during this interview said that there could be a small one time price adjustment as a result of these tariffs. How do you view tariff policy as it relates to inflation.

You mentioned tariffs there, Keith, and what the conventional wisdom has been that this really has the potential to drive inflation higher. Tariff policy I'm referring to best during this interview said that there could be a small one time price adjustment as a result of these tariffs. How do you view tariff policy as it relates to inflation.

There's typically of one one adjustment if the market is convinced that there's one set of tariffs. If they're in the market things, this is one of potentially many or several or more than one. After this, then there's not one adjustment the market continues to pursue that equilibrium where the tariffs kind of between multiinational corporation as far as nations in there in the Southern Bank. So if the expectation is for more trash down the road, there won't be one adjustment.

There's typically of one one adjustment if the market is convinced that there's one set of tariffs. If they're in the market things, this is one of potentially many or several or more than one. After this, then there's not one adjustment the market continues to pursue that equilibrium where the tariffs kind of between multiinational corporation as far as nations in there in the Southern Bank. So if the expectation is for more trash down the road, there won't be one adjustment.

If there is clear communication.

If there is clear communication.

And clarity around the tariff policy and that there's one and it's one of them for sure, then that's the case for one adjustment. Problem is I think that that is opposite of what the typical negotiation is that we've seen on part of this administration in this administration as well as the last time up.

And clarity around the tariff policy and that there's one and it's one of them for sure, then that's the case for one adjustment. Problem is I think that that is opposite of what the typical negotiation is that we've seen on part of this administration in this administration as well as the last time up.

So I think those two are at play.

So I think those two are at play.

When negotiates well doesn't typically set the markets up to trade well from expectations of inflation and how the market adjust the tariffs. So those too are odds right now. We're interested to see which.

When negotiates well doesn't typically set the markets up to trade well from expectations of inflation and how the market adjust the tariffs. So those too are odds right now. We're interested to see which.

One whins battle.

One whins battle.

Going forward of whether the marketing space terastic, can continue to increase or we can price in wind fail school and less inflation over time.

Going forward of whether the marketing space terastic, can continue to increase or we can price in wind fail school and less inflation over time.

So what is the level of confidence that you have right now that there will be a successful negotiation on the trade front to the extent that there will not be an increase in the tariff that has been applied on China and that the US will not apply tariffs on Mexico and Canada.

So what is the level of confidence that you have right now that there will be a successful negotiation on the trade front to the extent that there will not be an increase in the tariff that has been applied on China and that the US will not apply tariffs on Mexico and Canada.

We don't think this anyway unless you're somehow plugged into the inner workings of these negotiations to have a lot of certainty better than a coin flip certainty of any path forward when it comes to our negotiations with China and the terraff polities between the two nations. So, I think the lack of confidence and the lack of certainty is a healthy check on how we view.

We don't think this anyway unless you're somehow plugged into the inner workings of these negotiations to have a lot of certainty better than a coin flip certainty of any path forward when it comes to our negotiations with China and the terraff polities between the two nations. So, I think the lack of confidence and the lack of certainty is a healthy check on how we view.

The world markets.

The world markets.

And we're comfortable being uncertain until we have more clarity and more certainty coming out to the public as far as how those negotiations are going. So we're comfortably uncomfortable with our less than fifty percent certainty.

And we're comfortable being uncertain until we have more clarity and more certainty coming out to the public as far as how those negotiations are going. So we're comfortably uncomfortable with our less than fifty percent certainty.

On where things land.

On where things land.

And because anything beyond that, we feel like an over confidence is, which is where you get in trouble.

And because anything beyond that, we feel like an over confidence is, which is where you get in trouble.

All right, we'll leave it there. Good stuff, Keith, Thank you so much. Keith Buchanan there. He is senior portfolio manager also a partner at Globalt Investments. Joining us from Atlanta 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 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 Prisoner and this is Bloomberg

All right, we'll leave it there. Good stuff, Keith, Thank you so much. Keith Buchanan there. He is senior portfolio manager also a partner at Globalt Investments. Joining us from Atlanta 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 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 Prisoner and this is Bloomberg