Equities Fall in Risk Off Start, New Zealand's 'Golden Visa' Surge
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Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Tariffs and other policies from the Trump administration do remain a major risk for markets. It was on Friday we had the S&P falling more than 1% intraday. That's when President Trump accused Beijing of violating an agreement with the U.S. to ease tariffs. Then later in the day,

The market was able to recover, and that came after Trump said he's expecting to speak with President Xi. Over the weekend, the White House said that call could happen this week. Here is Kevin Hassett. He is the director of the National Economic Council, speaking on ABC's This Week.

We expect us going to have a wonderful conversation about the trade negotiations this week with President Xi. That's our expectation. But the bottom line is that we've got to be ready in case things don't happen the way we want. That's Kevin Hassett. He is the director of the White House National Economic Council. So let's take a closer look at what tariffs mean for the economy. I'm joined now by Carol Schleif. She's on the line from Minneapolis. Carol is the chief market strategist at BMO Private Wealth.

Carol, it's always a pleasure. It's been too long since we last spoke. I'm glad you could join us. Thank you so much. I don't know how anyone these days can go about predicting the impact of tariff policy, especially the Fed. But I would like to begin with the impact on the consumer. And I'm wondering, from your point of view, whether the tariff story has been the primary driver of this weakening that we have seen in consumer sentiment.

You know, it's one factor in sentiment and it's always important to put the caveat or when you're talking about either consumer sentiment, business sentiment, market sentiment, investor sentiment is that the consumers can tell pollsters they're crabby and then go out and purchase anyway. So it's what consumers actually in the long run are much more tough.

tied to job prospects and employment prospects, whether or not they have a job and feel like they can continue to have a job. If they do, they'll spend. But it is overarching, particularly in that very sensitive top-tier consumer who are responsible for so much of the aggregate GDP. And they're tied as well to how they're feeling about their portfolios. And

You know, fortunately or unfortunately, markets can react very quickly to changing tariff news. Companies can't. And so the tricky thing for us in the wealth management space is to watch, does consumer sentiment translate into what they actually do on the one hand and do fundamentals, does the fundamental stasis, if you will, that businesses put in by all the uncertainty translate into economic stability?

And so far, consumers are spending and the economy is in pretty reasonable shape. So, so far, so good. But it's a very fragile relationship. So we're now at the end of the earnings season. And I'm sure you've been listening to many calls and getting the guidance.

Much of it reflects the fact, yes, that these tariffs are in place and higher prices are clearly a part of the equation right now. You can debate whether or not these companies are in a position to pass on those higher costs to consumers. But to what extent are you concerned now about margin pressure? Yeah, there's definitely that potential. It's important to remember that the starting ground for that margin pressure is margins that, by and large, in aggregate are at all-time highs.

It was a very instructive earnings season, and then companies were trying to thread a very fine needle in trying to outline what the impact or the potential impact of tariffs were without waving too big of a red flag, because that's obviously a politically sensitive issue. But I think as investors, we got a lot of good read, and particularly in the most recent batch of retail earnings, where a lot of the retail companies

were outlining what their impact was, what steps they were taking where they could to try to shift supply chains.

And they also, by and large, illustrated a lot of sensitivity because they understand this is not like in the pandemic when we had inflation for the first time and they could just simply pass it all through. This time around, consumers are highly tired of price increases and it's going to be very selective, if at all. And you've seen that creep through in the economic numbers where on the producer side is where some of that's absorbed. But hopefully...

company by company they can find some offsets for some of that in terms of deployment of artificial intelligence deployment of technology slow walking hires you know there's a lot of things that companies are trying to do behind the scenes

to minimize that margin pressure because they understand that they're going to have to eat more of this than they did last time around. One of the conversations on the street, and I know that you're well aware of this, is the gap between what the hard data is indicating and what some of the softer, more sentiment-driven data is kind of indicating. And I'm wondering how you make sense of that. Well, I think a piece of it is...

Because even Chair Powell in several of the different press conferences from recent FOMC meetings will tell you that sentiment data has a very loose correlation typically through to the hard data. And we saw some hints last week that you might have seen that start to shift in both the UMich community

survey and the conference board where you saw some snapback in consumer confidence that came after the thawing in relationship or in the thawing in the trade war between the U.S. and China. And I think that's

The hard part is in the last two weeks in particular, we've had so many flip flops on tariffs that it feels like consumers and definitely investors want to move on to some other topic. So the sooner we can get the narrative focused on growth in the economy or the more pro-business

friendly pieces of the administration's tax policy as long as they keep it to a reasonable price tag and don't upset the bond markets, which is a whole other issue. But right now we're watching it very closely to see if it translates through to economic activity. It hasn't translated through yet.

But we're watching it very, very carefully. I'm glad you mentioned the bond market. We'll get there in a moment. But we were talking about margin pressure, companies trying to contain cost. We get the employment data this week, which is significant, I guess, probably the most important piece on a monthly basis. What are your expectations here? What are we going to learn about the labor market that we don't already know?

Well, I think the one thing I want to see is I've heard some inclinations from or some hinting from economists that for the first time since well before the pandemic, we may get to a point where job openings are

are below job seekers. Because as you recall, some of the tightness we've had in the labor market off and on for the last five years has been we were at a point at one point where there were two openings for every seeker. And so a better balanced job market means people have jobs

It's tougher asking for raises. They're more likely to hunker down and stay put and not change jobs, which is more helpful for employers. And I think watching employers, too, because selectively you're seeing some cutbacks, although they're being very quiet and not...

not necessarily announcing them with big media headlines because they don't want to overly concern the workers they do have because of the understanding how hard it was to get those workers in place. But, you know, some of the different manufacturing seminars and gatherings I've been going to since the first of the year, that has been a theme all year is that employers are able to hang on to employees and

So there's the job market has been less of an issue, but we'll definitely want to watch if the wages are going up or if they're staying in line because they've been moderating quite a bit in the last couple of quarters. So the Senate returns to Washington this week and lawmakers are going to be taking up the spending bill that recently passed the House.

you know well that during that process there were some ruxians in the bond market. Now we heard recently from Jamie Dimon, the head of JPMorgan Chase, and he was saying that a crack in the bond market is going to happen. And I'm wondering what he knows that maybe we need to know. I'm not certain he knows anything. I mean, keep in mind the heads of banks were calling for serious recessions a couple years ago that never emerged either. But I do think...

And I wrote about this a couple of weeks ago because I wrote up the issue coming out of the House. And I noted then that you'd had the 20-year bond auction had been very squishy and that it was, I don't want to say cute or amusing, but it's interesting that Congress thinks they have a big vote in this because I think ultimately the bond market is going to have the biggest vote in what the size of the potential deficit is.

is because the thing that will be interesting is one of the things I'll be talking to our field about this week too to watch is that now that the Senate's back this week, they've on paper allowed themselves a bigger potential deficit than the House had. And the bond market will not take kindly to that. And we saw what happened last week.

In Japan, with the longer yields, they're having very poor auctions. Our bond markets were a little reassured this week because we had shorter auctions and they all went off well and yields drifted back down a little bit. But they're still with the 10 year at four and a half percent and the 30 year having flirted with five. Investors will be watching that very carefully. And I sincerely hope that

the Senate does too. Are you wary of the bond market right now? Maybe you would be disinclined to take a position, even if it were, let's say, at the short to medium part of the curve. No, I think the bond market will help keep them in line. And I think

The fact that Secretary Besant is so plugged in and I mean, because he started coaching President Trump very early on, even before he was had secured Senate approval. He was getting President Trump to focus on that tenure and the yields there. So I would assume that if you start to see.

serious things come out of the bond market that you're going to get Congress to toe the line on that. So I'm less concerned there. And I think, you know, our estimate of fair value on the 10-year is four and a quarter, four and three quarter in the near term. So you're right in the middle of that range right now. And we've been short, recommending staying shorter on the curve for a very long time, but I wouldn't mind stepping out a little bit because we've

We are not in the camp where we think yields are going to blow out marketly to the top side. Okay, we'll leave it there. Carol, always a pleasure. Thank you so much. Thank you. For joining us. Carol Schleif from Minneapolis. She is the chief market strategist at BMO Private Wealth, joining us here on the Daybreak Asia podcast.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Recently, U.S. Commerce Secretary Howard Lutnick said a new U.S. visa program backed by President Trump was nearing launch. Lutnick told Axios that a government website for the gold card visa would be live within days. Well, that was more than a week ago, and so far it hasn't.

The $5 million Trump gold card visa would give wealthy investors U.S. residency and an expedited path to citizenship. Well, Forbes magazine said it's still just a concept of a marketing plan without nearly enough potential buyers. But that's not to say golden visa programs aren't working. In New Zealand, for example, the country has streamlined its program and it's been able to attract more wealthy investors.

For a closer look at golden visas, I'm joined now by Stuart Nash. He is former Minister of Economic Development in New Zealand. He's also a co-founder of Nash Kelly Global. Stuart, thank you so much for making time to chat with me. Why do you think there is this interest in golden visa programs these days? Well, certainly I can speak about New Zealand. There's a lot of global uncertainty at the moment. You've got obviously a war going on in Europe. You've got the tinderbox, which is the Middle East.

You've got a change in the US administration, which again in itself was causing a lot of uncertainty. And in a country like New Zealand, we're sort of seen as an oasis at the bottom of the world, where by and large, the ultra high net worth, they tend to seek out tax havens for their wealth. But at the moment, there's a number who are seeking out safe havens as opposed to tax havens.

You also have a background in law enforcement, so I'm going to ask you about the vetting process in a situation like this. Describe to me what it looks like.

Yeah, well, I was the Minister of Police. And what we're very clear about with regard to our golden visa is that it has to have integrity. So there is a process you've got to go through. You've got to invest. There are two schemes. One of them is 5 million New Zealand, which is about 2.8 million US dollars. And you've got to prove that the money was gained through legitimate means. And that's a reasonably reasonable.

robust process. And there's another scheme where you can invest $10 million. Again, that's about just under $6 million US. Again, you've got to prove the money was going through legitimate processes. You've also got to go through health checks and your stock standard checks to prove that you're a suitable person. So we don't want rogues and vagabonds into the country. We want people who are legitimate investors who

who play into the New Zealand brand and who bring not only their wealth, but for me, one of the really important things is they bring their experience, their competencies, their capabilities, their networks and their connections. What about the requirement to speak English? That was in the old visa. The visa has now changed and there is now no English language requirement. The other thing about New Zealand's golden visa as well, and this is important for a number of our

clients at Nash Kelly Global, because as mentioned, we bring in the ultra high net worth into New Zealand through Nash Kelly Global, is that once you have the visa, you do not have to reapply for it. And that is reasonably unique in terms of golden visas globally. So once you've got your permanent residency, you've got it for life.

So are there requirements or at least guidelines in terms of the people who would apply for these visas, the expectation that they would put money to work in the economy to invest? Is there a kind of a structure to that part of the process? Yeah, there is. So there's two categories. There's the growth category, that's the 5 million Kiwi, and then there's the balance category and that's 10 million Kiwi. As mentioned, about 2.8 million U.S., about just under 6 million U.S. in the others category.

And the businesses that people can invest in, they must be vetted by our New Zealand trading enterprise, which is like an economic development

of the government. So there are a number of companies that have been vetted by the government to prove that they are of majority New Zealand citizenship. People could also put their money into bonds or managed funds. And again, the managed funds have to be approved by the Ministry for Economic Development. Now, there are two reasons for this. First and foremost, we need to make sure that when people are investing in New Zealand companies,

that the companies themselves have integrity. We don't want investors coming over here from the other side of the world and feeling as if they've been ripped off at all. And it's one of the services that we offer at Nash Kelly Global, actually. But the other thing is that it's got to be companies or funds that are predominantly New Zealand-owned because why would you seek money

It's a bit to invest in a company or a fund in New Zealand when it's not helping the New Zealand economy. So Nash Kelly Global helps to facilitate this process. But when I think of the economy in New Zealand, I think of the rising property market, how expensive the cost of living is, particularly on the housing front. And I'm wondering whether or not the local community has been supportive of this program or whether there has been a pushback. It's a really good point, Doug.

We're not dealing with hundreds of thousands of people here. And there was a point in time when I was in cabinet where we put a foreign buyer ban on because what we were seeing is literally plane loads of people coming over and buying houses in New Zealand because we have no capital gains tax.

And so we put a stop on that. But what we're now seeing is ultra high net worth people coming in. And if you're spending 5 million Kiwi or 10 million Kiwi, you're not competing with first home buyers in New Zealand. You're competing with the lotto winners, right? So the people who are coming and they're settling here, they are buying houses here.

you know, 5 million plus. And so by and large, the business community and the vast majority in our communities get the fact that the people coming over under the golden visa scheme are bringing actually wealth and connections and money that will actually create economic development and jobs. So look, there's a little bit of pushback on the fringe.

But by and large, the vast majority are very supportive of this. That said, does the government need to, or is it in the process of creating restrictions around this program?

Not at all. In fact, we've opened it up a little bit more. Whilst other countries are putting restrictions, New Zealand has taken off the English language test. We've reduced the amount of time that you have to spend in the country. So in the growth category, you've only got to spend three weeks over three years in order to get your permanent residency. In the balance category, it's 49 days over five years. So we have...

reduced some of the barriers. But we also acknowledge, as back to the earlier point, Doug, that we want people with integrity, hence the reason why the process you've got to go through to get your visa is robust. I'm curious as to whether or not there has been any economic analysis as to the extent to which this may contribute to overall growth in the economy.

Yeah, we have seen a lot. The new visa was only launched on the 1st of April. There was quite a lot of analysis done under the old visa scheme and it showed, I can't remember the exact amount, but it was certainly billions into the economy.

One thing we have tightened up on though, I launched this visa in December 2022. What we did tighten up on is the money has got to be invested and stay in New Zealand as opposed to repatriating it elsewhere.

out of the country. So our immigration ministry will check that people are actually investing in a way that they said they would to ensure that the money is staying here and helping the New Zealand economy and the number of our companies go global if that's what they want to do. Stuart, we'll leave it there. Thank you so much for joining us. Great conversation with Stuart Nash of Nash Kelly Global. He is a former Minister of Economic Development in New Zealand as we talk about golden visas 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 Krisner, and this is Bloomberg.

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