US-China Reignites Trade Tensions, Powell Signals Another Cut | Bloomberg Daybreak: Asia Edition
Summary
US-China Trade Tensions: Renewed tensions between the US and China are impacting markets, with China sanctioning US units and potential US retaliation on trade in cooking oil.
Supply Chain Shifts: Companies like Apple are expanding manufacturing outside of China to reduce dependency, highlighting a broader trend of supply chain diversification.
Tariffs and Inflation: The potential for increased tariffs is raising concerns about inflation, although businesses have so far absorbed costs without passing them onto consumers.
Federal Reserve Policy: Fed Chair Jay Powell signals a potential rate cut due to a weakening labor market, despite concerns over inflation from tariffs.
Market Volatility: Despite political and economic instability, markets remain resilient, with investors adapting to the Trump administration's tariff strategies.
Bank Earnings: Big banks report solid earnings driven by IPO activity, though there are concerns about consumer credit quality and potential cracks in the credit market.
Fixed Income Strategy: Investors are advised to consider liquidity and quality in fixed income portfolios amid shrinking liquidity and potential rate cuts.
Global Debt Concerns: Rising global deficits are pushing investors towards gold and other non-traditional assets, though US treasuries remain a stable option.
Transcript
[Music] Bloomberg Audio Studios podcasts radio news. Welcome to the Daybreak Asia podcast. I'm Doug Krer. Some renewed tension today in the US China relationship. It was early on Tuesday that China sanctioned five US units of the South Korean shipping firm Hana Ocean Company. And at the same time, Beijing threatened more retaliation. Then later in the day, we heard from US trade rep Jameson Greer. He told CNBC President Trump was still set to meet with Chinese President Xi at the end of the month. >> Right now, there there is a plan. There's a scheduled time for that. It's on the schedule. It's there's there's a scheduled time for that. Um, you know, whether it'll go through or not, I don't want to pre-commit either ourselves or the Chinese. Uh, but I I think it makes sense for people to talk uh when they can. So Jameson Greer's remarks helped provide a little bit of hope for negotiation. But then near the close of US trading, President Trump said the US might stop trade in cooking oil with China. And he framed this potential move as retaliation against Beijing for its refusal to buy American soybeans. For a closer look now at the state of US China trade, I'm joined by Sandra Schwarzki. She is the founder and CEO of the advisory firm Integer. She joins us from Washington, DC. Sandra, thank you so much for making time to chat with me. Do you have a sense of where we are in this process of the US and China attempting to reach some type of workable path forward? >> Well, thanks for having me on. I think it's safe to say that both China and the US have plenty of balls that they can put in the air and they're increasingly doing that from tariffs to export controls on key uh rare earth minerals in the case of China and key semiconductors in the case of the US to agricultural products. And it appears that both sides in anticipation in the leadup to what are supposed to be trade talks uh later this month, both sides are throwing everything they have at each other to try to gain some leverage at these talks. So one could look at this really as posturing. Um but it is it is it is very unsettling given the two given these superpowers. >> It certainly has helped to contribute to a lot of volatility in markets. That's for sure. Moments ago, we learned that Apple is preparing to expand its manufacturing operations in Vietnam. It's part of a push on the part of Apple to lessens its dependence on China. This is something the company's been pretty transparent about in the past and for years we've seemed to kind of attempt to focus on this issue of decoupling between the US and China. It seems that that's inevitable, right? That these two very large economies, the largest in the world, are going to kind of begin to become less dependent on one another. >> I think it makes complete sense. They're looking for other supply chains because the US is a supply chain to China and vice versa. It just isn't working. And so just like uh just like Apple, the US and China are looking for other countries to supply the raw materials, the goods that they need so that so that they can continue to advance the these super technologies that are going to revolutionize uh our day-to-day lives. I think recently I saw that um Australia has ramped up its production of rare earth minerals which is increasingly important to the US and to all of our advanced technologies. But even even with them ramping up it is it is hardly going to replace if it needs to replace hardly going to replace what we're buying from China. So lately, as a part of this tit fortat, President Trump threatened new tariffs of 100% on Chinese goods that would be imported by the United States. There are already a number of tariffs in place. And one of the things that the markets have been wrestling with is whether or not these tariffs are going to produce much higher inflation. Now, we really haven't seen much of that. Although there is the suggestion that inflation expectations on the part of consumers are beginning to rise. How do you feel about the way in which these tariffs potentially have the ability to contribute to a higher rate of inflation in the US? >> Well, that's a great question. I think that when tariffs started to go north back in the spring, uh there was a lot of concern that consumers were going to feel the pinch almost immediately. And what we saw was that June came, July, August, and the and the inflation rate, the pain point for consumers just wasn't there. And in large part, it's because businesses weren't passing along the tariffs to consumers. They didn't want to lock out their their customers and so they ate those those tariffs. At this point, tariffs are um are becoming so high and companies and businesses are uh are are not able to continue to eat those extra costs. The concern now is that we are going to see higher prices um because of those tariffs hitting consumers right when we start to head into the holiday season when the store shelves are packed with all the goodies that we want to buy and we've all got Amazon purchases on our minds. Now there's a there is a greater concern that inflation is going to begin to pinch the consumer >> and I think that may be a little troubling for the Fed. Although we heard from Chair Jay Powell today and a lot of his focus continues to be on this weakness in the labor market. It's going to be very very interesting to see how the Fed navigates this terrain and at what point the Fed really has to do a better job of balancing the risk between weakness in the labor market with the potential for very very sticky inflation. But if the market has to dial back from expectations of aggressive Fed easing given the clients that you have, the folks that you speak to in Washington, would that be deeply concerning? Are these people that you speak with very dependent on the idea that we're going to see easier monetary policy? >> I think the expectation um after September and in the leadup to the next Fed meeting is that we are going to see another cut. Maybe not in October but certainly before the end of the year we are going to see another cut uh based in large part on the weakening job market. Now, we don't have numbers uh prospective numbers because the government is shut down and so all of the um all of those indicators are not being supplied by the Bureau of Labor Statistics. So, we have some really good guesses based upon some private sector data and all of those uh and all of that data looks like it is a much uh weakened job market. Um, and that is going to play into the Fed's decision to perhaps lower interest rates. But again, they're looking at all of the the the threat of all the increased tariffs, which at 100% coming out of China on on all those Chinese input uh imports will affect consumers, will affect inflation. So, boy, I don't I don't envy their uh their next couple of weeks. M I'm curious, Sandra, given the client base that you have, how do they feel about the way in which the Trump administration has been been managing the economy, whether it's tariffs or tax policy, deregulation? I mean, is there a consensus here that that you can address or is there a kind of a range of opinion in terms of how the administration is doing? So, I think when the administration first took office and the and our clients saw the tariff threats and the and the saber rattling and the rest, there was a lot of concern and a lot of pause, but they've come to expect some of that. In some cases, the Trump administration has normalized the threatening tariffs and the saber rattling. And despite uh what appears to be instability in the government, the market continues to go up. So I think the market um and our clients that rely on the market and are part of the market feel like they've uh and believe that they have figured out the secret sauce, figured out that the administration is going to continue to threaten and to provoke. But many of them believe that uh that will have little real impact in the long term on the market or their companies. There may be some short-term instability and volatility but long term they believe that uh the president wants a strong economy and will do what he and and and is doing what he's doing in order to get us to a stronger economy. Even though if you look at the dayto-day it does not it it seems it's it's very unsettling. >> Sandra we'll leave it there. Thank you so very much. Sandra Schwarzki is the founder also the CEO of the advisory firm Integer joining us from Washington DC. In a moment or two we'll bring in Rob Williams from Sage Advisory Services. He's in Austin, Texas. And we'll take a look at the interest rate environment and what's happening in the fixed income space coming up here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Krer. The earning season is underway in the US and in the last session we heard from several of the big banks. The results were by and large pretty solid although the commentary seemed to be a little mixed. We had bank stocks finishing mixed as well. The KBW Bank index was up 1.8% but it closed off its session high. For a look at the earning season, I'm joined by Rob Williams. He is managing partner, also the chief investment strategist at Sage Advisory Services. Rob is based in Austin, Texas. Thank you so much for making time to chat with me. Give me your sense of what you heard today from the big banks. >> Yeah, I mean we look we're think manager. We do a lot of uh investing in credit obviously and and we're very concerned about the consumer. So we wanted the overall thing we wanted to see is uh any read on on insight on the consumer especially kind of uh write downs things like that and overall like you said earlier very healthy driven a lot by IPO activity trading revenue things like that uh not much damage you know these big banks hold very little limited subprime auto type of exposure or anything that would have hurt them that much so pretty positive overall but but the comments uh like You also said kind of looking forward uh not not as optimistic as as kind of the current run rate that you've seen you know slow down the consumer maybe some cracks on the credit side. You've seen a few little cracks and you know and we all know how tight credit spreads are. So there's not a lot of room uh for any kind of you know bigger systemic sort of crisis would would certainly impact uh the credit markets overall. >> So I'm glad you mentioned Jamie Diamond there the CEO of JP Morgan. He was warning today of a potential deterioration in credit quality. Now you and I both know that lately we have seen the implosion ofricolor holdings the auto lender as well as the car parts supplier first brands and Diamond was remarking when he sees situations like this his antenna go up and he also said when you see one cockroach there are probably more. Does he have a point there? >> Yeah I mean look there's a lot of opaque sides of the credit market now in private credit and other and other things. So for sure there needs to be a little more dispersion amongst some of these BDC's and other things because there are some problems under there whether they're going to be big enough to bleed up to you know investment grade credit uh you know we don't see that happening anytime soon but we certainly think it's not a bad time to be thinking about hey should I be moving up in liquidity in my income side of my portfolio right you know bank you know bank reserves have been going down bank reserves serves as a percentage of GDP, which is what the kind of the Fed measures sort of when we're in ample liquidity situation. That's been kind of getting down lower and lower, kind of out of that band of like ample. So maybe liquidity shrinking a little bit. We've seeing some cracks. Not a bad time to stay in more liquid, transparent, higher uh you know, not just higher quality, but but lower volatility kind of markets in the fixed income space. Well, that takes us to Fed Chair Jay Powell. Today, he kind of reinforced bets on a rate cut in October. That shouldn't be a big surprise if you've been tracking the Fed speak. A number of policy makers have been very concerned about the weakness of the labor market. Powell also indicated the Fed may stop shrinking its balance sheet in the coming months as a way of perhaps maintaining, to your point, a little of the liquidity, especially in the overnight funding markets. So are you really seeing evidence now that things are kind of drying up a bit? >> Yeah, I mean bankers have certainly been run down, right? And the Fed has has, you know, been engaging in triggering their balance sheet for a while. They've said when when when liquidity is is gone from excessive to ample uh is when they would think about shutting down QT. And we're we're in that zone. We're the bottom of that zone. I think some of the governors has pointed at put the number in that kind of 12 10 to 12% of GDP for bank reserves. We're right around 10. So we're right at the lower end of that. So the good news is uh they're probably getting ready to fold up that and and NQT. The bad news is that yeah, liquidity has shrunk a little bit. It's not it's not like tight at this moment, but like I said earlier, maybe a good time to be thinking about, hey, I want to be a little more uh you know, liquid in my fixed income side. >> I'm curious about how you view the macro these days, particularly in the absence of a lot of government data. We've been lacking some key data points here because of the shutdown and the CPI report, which was to have been released tomorrow. That would have been the October 15th here in the States. It's been pushed out to I think the 24th. Give me a sense of how you've had to navigate this landscape right now without a lack of or with a lack of government data. >> Yeah, that that is a problem, especially if it continues on. You know, fortunately, there's a good there's been a you know, 20 years ago it would have been more difficult, but there's been a growing amount of sort of alternative private data that you can sort of lean into. Um, and you know, Bloomberg certainly, you know, has a has a good read on that. There's even a worksheet of of all the various private sources like you had one today. The one piece of data you had was small business optimism, right? And that ticked down. If you crack that open, there are some inflation components to that. So, you have to be a little more creative and dig a little deeper. But that one, we we actually look at that small business and there's a reading in that that says, hey, what percentage of small businesses are expecting to increase prices? So, it's a good indication of price pressures. and that that's been ticking up. So that tells us, yeah, this price pressure is still coming and you have to kind of lean into some of the other alternative data sources for job uh the job numbers and they basically been telling you the same thing. Jobs are weakening, pricing pressure is okay, but we're seeing some sign that it's starting to percolate. >> Does that necessarily equate to stagflation? >> No, I I think because you just haven't seen the goods, you're getting some stag in the job numbers. um you know, but you're not getting inflation coming through that. The goods pass through has not been that bad. The housing and the energy and the service sector slowing down has sort of contained that. What we're kind of looking for is hey, you know, we know inventories have been built up, they're running down. And when we start to see more margin pressures and things like that small business price index and and really starting to come through, we get a little nervous. But right now it looks more like the Fed's going to be wor more and they've said it more worried about jobs and inflation. Uh at the moment >> I'd like to get your view Rob on this debasement trade that's been rippling across not just markets here in the states but globally as well. It seems like a number of investors are pulling away from sovereign debt chasing gold maybe even silver. Give me your sense of what's happening and what the risks are right now. Yeah, I you know uh there's there's many reasons, but it's just like when you saw that backend volatility in the curve, there's still a lot of uncertainty policy politically uh for inflation. And there's also deficits are not a US problem. They are a global problem and they're not going away anytime soon. So that's going to kind of keep pushing people away from some of the traditional things and get and creating some volatility on the back end of the curve and pushing people towards gold and and things like and and even crypto and things like that for and it's it's not going away anytime soon, but it's also from a rate perspective, I I think it's not going to get out of hand either. Uh I think it'll be contained because like I said, inflation is not out of the bag here. Um the supply demand for for rates and some of this stuff is still pretty favorable. We just talked about QT ending. Um you know the Treasury is going to issue more bills than long paper. So they're going to do their level best to keep uh the volatility sort of down at the long end of the curve. Uh but people are certainly the the driving force is I think global deficits. So you wouldn't be shunning US treasuries in favor of highquality IG credit like a Microsoft would you? >> Uh no I look I'd have a diversified portfolio. I wouldn't shy away from duration, right? The cash is not going to look is going to look increasingly less attractive in an easing cycle, right? You you've gotten good returns in say fixed income, treasuries, IG, credit, 6 7%, you're going to get just in carry, you're going to get another percent and a half in the fourth quarter just in carry. So, I wouldn't I wouldn't worry a whole lot about duration. And and again, you're not if you're in a diversified portfolio, you don't have a lot of the extreme longend exposure if that's what you're worried about. And we're frankly, I'm not too worried about having u that long end. But I'm just saying typical investor is not going to have a bunch of 30-year paper. They're going to have, you know, in the 1 to 10year part of the curve anyhow. So, no, I wouldn't shy away from duration or or high quality fixed income. >> Okay, Rob, we'll leave it there. Thank you so much. Rob Williams is managing partner, also the chief investment strategist at Sage Advisory Services from Austin, Texas here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories 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 Krer and this is Bloomberg. [Music]
US-China Reignites Trade Tensions, Powell Signals Another Cut | Bloomberg Daybreak: Asia Edition
Summary
Transcript
[Music] Bloomberg Audio Studios podcasts radio news. Welcome to the Daybreak Asia podcast. I'm Doug Krer. Some renewed tension today in the US China relationship. It was early on Tuesday that China sanctioned five US units of the South Korean shipping firm Hana Ocean Company. And at the same time, Beijing threatened more retaliation. Then later in the day, we heard from US trade rep Jameson Greer. He told CNBC President Trump was still set to meet with Chinese President Xi at the end of the month. >> Right now, there there is a plan. There's a scheduled time for that. It's on the schedule. It's there's there's a scheduled time for that. Um, you know, whether it'll go through or not, I don't want to pre-commit either ourselves or the Chinese. Uh, but I I think it makes sense for people to talk uh when they can. So Jameson Greer's remarks helped provide a little bit of hope for negotiation. But then near the close of US trading, President Trump said the US might stop trade in cooking oil with China. And he framed this potential move as retaliation against Beijing for its refusal to buy American soybeans. For a closer look now at the state of US China trade, I'm joined by Sandra Schwarzki. She is the founder and CEO of the advisory firm Integer. She joins us from Washington, DC. Sandra, thank you so much for making time to chat with me. Do you have a sense of where we are in this process of the US and China attempting to reach some type of workable path forward? >> Well, thanks for having me on. I think it's safe to say that both China and the US have plenty of balls that they can put in the air and they're increasingly doing that from tariffs to export controls on key uh rare earth minerals in the case of China and key semiconductors in the case of the US to agricultural products. And it appears that both sides in anticipation in the leadup to what are supposed to be trade talks uh later this month, both sides are throwing everything they have at each other to try to gain some leverage at these talks. So one could look at this really as posturing. Um but it is it is it is very unsettling given the two given these superpowers. >> It certainly has helped to contribute to a lot of volatility in markets. That's for sure. Moments ago, we learned that Apple is preparing to expand its manufacturing operations in Vietnam. It's part of a push on the part of Apple to lessens its dependence on China. This is something the company's been pretty transparent about in the past and for years we've seemed to kind of attempt to focus on this issue of decoupling between the US and China. It seems that that's inevitable, right? That these two very large economies, the largest in the world, are going to kind of begin to become less dependent on one another. >> I think it makes complete sense. They're looking for other supply chains because the US is a supply chain to China and vice versa. It just isn't working. And so just like uh just like Apple, the US and China are looking for other countries to supply the raw materials, the goods that they need so that so that they can continue to advance the these super technologies that are going to revolutionize uh our day-to-day lives. I think recently I saw that um Australia has ramped up its production of rare earth minerals which is increasingly important to the US and to all of our advanced technologies. But even even with them ramping up it is it is hardly going to replace if it needs to replace hardly going to replace what we're buying from China. So lately, as a part of this tit fortat, President Trump threatened new tariffs of 100% on Chinese goods that would be imported by the United States. There are already a number of tariffs in place. And one of the things that the markets have been wrestling with is whether or not these tariffs are going to produce much higher inflation. Now, we really haven't seen much of that. Although there is the suggestion that inflation expectations on the part of consumers are beginning to rise. How do you feel about the way in which these tariffs potentially have the ability to contribute to a higher rate of inflation in the US? >> Well, that's a great question. I think that when tariffs started to go north back in the spring, uh there was a lot of concern that consumers were going to feel the pinch almost immediately. And what we saw was that June came, July, August, and the and the inflation rate, the pain point for consumers just wasn't there. And in large part, it's because businesses weren't passing along the tariffs to consumers. They didn't want to lock out their their customers and so they ate those those tariffs. At this point, tariffs are um are becoming so high and companies and businesses are uh are are not able to continue to eat those extra costs. The concern now is that we are going to see higher prices um because of those tariffs hitting consumers right when we start to head into the holiday season when the store shelves are packed with all the goodies that we want to buy and we've all got Amazon purchases on our minds. Now there's a there is a greater concern that inflation is going to begin to pinch the consumer >> and I think that may be a little troubling for the Fed. Although we heard from Chair Jay Powell today and a lot of his focus continues to be on this weakness in the labor market. It's going to be very very interesting to see how the Fed navigates this terrain and at what point the Fed really has to do a better job of balancing the risk between weakness in the labor market with the potential for very very sticky inflation. But if the market has to dial back from expectations of aggressive Fed easing given the clients that you have, the folks that you speak to in Washington, would that be deeply concerning? Are these people that you speak with very dependent on the idea that we're going to see easier monetary policy? >> I think the expectation um after September and in the leadup to the next Fed meeting is that we are going to see another cut. Maybe not in October but certainly before the end of the year we are going to see another cut uh based in large part on the weakening job market. Now, we don't have numbers uh prospective numbers because the government is shut down and so all of the um all of those indicators are not being supplied by the Bureau of Labor Statistics. So, we have some really good guesses based upon some private sector data and all of those uh and all of that data looks like it is a much uh weakened job market. Um, and that is going to play into the Fed's decision to perhaps lower interest rates. But again, they're looking at all of the the the threat of all the increased tariffs, which at 100% coming out of China on on all those Chinese input uh imports will affect consumers, will affect inflation. So, boy, I don't I don't envy their uh their next couple of weeks. M I'm curious, Sandra, given the client base that you have, how do they feel about the way in which the Trump administration has been been managing the economy, whether it's tariffs or tax policy, deregulation? I mean, is there a consensus here that that you can address or is there a kind of a range of opinion in terms of how the administration is doing? So, I think when the administration first took office and the and our clients saw the tariff threats and the and the saber rattling and the rest, there was a lot of concern and a lot of pause, but they've come to expect some of that. In some cases, the Trump administration has normalized the threatening tariffs and the saber rattling. And despite uh what appears to be instability in the government, the market continues to go up. So I think the market um and our clients that rely on the market and are part of the market feel like they've uh and believe that they have figured out the secret sauce, figured out that the administration is going to continue to threaten and to provoke. But many of them believe that uh that will have little real impact in the long term on the market or their companies. There may be some short-term instability and volatility but long term they believe that uh the president wants a strong economy and will do what he and and and is doing what he's doing in order to get us to a stronger economy. Even though if you look at the dayto-day it does not it it seems it's it's very unsettling. >> Sandra we'll leave it there. Thank you so very much. Sandra Schwarzki is the founder also the CEO of the advisory firm Integer joining us from Washington DC. In a moment or two we'll bring in Rob Williams from Sage Advisory Services. He's in Austin, Texas. And we'll take a look at the interest rate environment and what's happening in the fixed income space coming up here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Krer. The earning season is underway in the US and in the last session we heard from several of the big banks. The results were by and large pretty solid although the commentary seemed to be a little mixed. We had bank stocks finishing mixed as well. The KBW Bank index was up 1.8% but it closed off its session high. For a look at the earning season, I'm joined by Rob Williams. He is managing partner, also the chief investment strategist at Sage Advisory Services. Rob is based in Austin, Texas. Thank you so much for making time to chat with me. Give me your sense of what you heard today from the big banks. >> Yeah, I mean we look we're think manager. We do a lot of uh investing in credit obviously and and we're very concerned about the consumer. So we wanted the overall thing we wanted to see is uh any read on on insight on the consumer especially kind of uh write downs things like that and overall like you said earlier very healthy driven a lot by IPO activity trading revenue things like that uh not much damage you know these big banks hold very little limited subprime auto type of exposure or anything that would have hurt them that much so pretty positive overall but but the comments uh like You also said kind of looking forward uh not not as optimistic as as kind of the current run rate that you've seen you know slow down the consumer maybe some cracks on the credit side. You've seen a few little cracks and you know and we all know how tight credit spreads are. So there's not a lot of room uh for any kind of you know bigger systemic sort of crisis would would certainly impact uh the credit markets overall. >> So I'm glad you mentioned Jamie Diamond there the CEO of JP Morgan. He was warning today of a potential deterioration in credit quality. Now you and I both know that lately we have seen the implosion ofricolor holdings the auto lender as well as the car parts supplier first brands and Diamond was remarking when he sees situations like this his antenna go up and he also said when you see one cockroach there are probably more. Does he have a point there? >> Yeah I mean look there's a lot of opaque sides of the credit market now in private credit and other and other things. So for sure there needs to be a little more dispersion amongst some of these BDC's and other things because there are some problems under there whether they're going to be big enough to bleed up to you know investment grade credit uh you know we don't see that happening anytime soon but we certainly think it's not a bad time to be thinking about hey should I be moving up in liquidity in my income side of my portfolio right you know bank you know bank reserves have been going down bank reserves serves as a percentage of GDP, which is what the kind of the Fed measures sort of when we're in ample liquidity situation. That's been kind of getting down lower and lower, kind of out of that band of like ample. So maybe liquidity shrinking a little bit. We've seeing some cracks. Not a bad time to stay in more liquid, transparent, higher uh you know, not just higher quality, but but lower volatility kind of markets in the fixed income space. Well, that takes us to Fed Chair Jay Powell. Today, he kind of reinforced bets on a rate cut in October. That shouldn't be a big surprise if you've been tracking the Fed speak. A number of policy makers have been very concerned about the weakness of the labor market. Powell also indicated the Fed may stop shrinking its balance sheet in the coming months as a way of perhaps maintaining, to your point, a little of the liquidity, especially in the overnight funding markets. So are you really seeing evidence now that things are kind of drying up a bit? >> Yeah, I mean bankers have certainly been run down, right? And the Fed has has, you know, been engaging in triggering their balance sheet for a while. They've said when when when liquidity is is gone from excessive to ample uh is when they would think about shutting down QT. And we're we're in that zone. We're the bottom of that zone. I think some of the governors has pointed at put the number in that kind of 12 10 to 12% of GDP for bank reserves. We're right around 10. So we're right at the lower end of that. So the good news is uh they're probably getting ready to fold up that and and NQT. The bad news is that yeah, liquidity has shrunk a little bit. It's not it's not like tight at this moment, but like I said earlier, maybe a good time to be thinking about, hey, I want to be a little more uh you know, liquid in my fixed income side. >> I'm curious about how you view the macro these days, particularly in the absence of a lot of government data. We've been lacking some key data points here because of the shutdown and the CPI report, which was to have been released tomorrow. That would have been the October 15th here in the States. It's been pushed out to I think the 24th. Give me a sense of how you've had to navigate this landscape right now without a lack of or with a lack of government data. >> Yeah, that that is a problem, especially if it continues on. You know, fortunately, there's a good there's been a you know, 20 years ago it would have been more difficult, but there's been a growing amount of sort of alternative private data that you can sort of lean into. Um, and you know, Bloomberg certainly, you know, has a has a good read on that. There's even a worksheet of of all the various private sources like you had one today. The one piece of data you had was small business optimism, right? And that ticked down. If you crack that open, there are some inflation components to that. So, you have to be a little more creative and dig a little deeper. But that one, we we actually look at that small business and there's a reading in that that says, hey, what percentage of small businesses are expecting to increase prices? So, it's a good indication of price pressures. and that that's been ticking up. So that tells us, yeah, this price pressure is still coming and you have to kind of lean into some of the other alternative data sources for job uh the job numbers and they basically been telling you the same thing. Jobs are weakening, pricing pressure is okay, but we're seeing some sign that it's starting to percolate. >> Does that necessarily equate to stagflation? >> No, I I think because you just haven't seen the goods, you're getting some stag in the job numbers. um you know, but you're not getting inflation coming through that. The goods pass through has not been that bad. The housing and the energy and the service sector slowing down has sort of contained that. What we're kind of looking for is hey, you know, we know inventories have been built up, they're running down. And when we start to see more margin pressures and things like that small business price index and and really starting to come through, we get a little nervous. But right now it looks more like the Fed's going to be wor more and they've said it more worried about jobs and inflation. Uh at the moment >> I'd like to get your view Rob on this debasement trade that's been rippling across not just markets here in the states but globally as well. It seems like a number of investors are pulling away from sovereign debt chasing gold maybe even silver. Give me your sense of what's happening and what the risks are right now. Yeah, I you know uh there's there's many reasons, but it's just like when you saw that backend volatility in the curve, there's still a lot of uncertainty policy politically uh for inflation. And there's also deficits are not a US problem. They are a global problem and they're not going away anytime soon. So that's going to kind of keep pushing people away from some of the traditional things and get and creating some volatility on the back end of the curve and pushing people towards gold and and things like and and even crypto and things like that for and it's it's not going away anytime soon, but it's also from a rate perspective, I I think it's not going to get out of hand either. Uh I think it'll be contained because like I said, inflation is not out of the bag here. Um the supply demand for for rates and some of this stuff is still pretty favorable. We just talked about QT ending. Um you know the Treasury is going to issue more bills than long paper. So they're going to do their level best to keep uh the volatility sort of down at the long end of the curve. Uh but people are certainly the the driving force is I think global deficits. So you wouldn't be shunning US treasuries in favor of highquality IG credit like a Microsoft would you? >> Uh no I look I'd have a diversified portfolio. I wouldn't shy away from duration, right? The cash is not going to look is going to look increasingly less attractive in an easing cycle, right? You you've gotten good returns in say fixed income, treasuries, IG, credit, 6 7%, you're going to get just in carry, you're going to get another percent and a half in the fourth quarter just in carry. So, I wouldn't I wouldn't worry a whole lot about duration. And and again, you're not if you're in a diversified portfolio, you don't have a lot of the extreme longend exposure if that's what you're worried about. And we're frankly, I'm not too worried about having u that long end. But I'm just saying typical investor is not going to have a bunch of 30-year paper. They're going to have, you know, in the 1 to 10year part of the curve anyhow. So, no, I wouldn't shy away from duration or or high quality fixed income. >> Okay, Rob, we'll leave it there. Thank you so much. Rob Williams is managing partner, also the chief investment strategist at Sage Advisory Services from Austin, Texas here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories 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 Krer and this is Bloomberg. [Music]