Fed Rate Cut Bets Fuel Rally, Commerce's Lutnick on US-China Deal
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Today, President Trump provided an update on ongoing trade negotiations, and he said that he signed a deal with China on Wednesday. Now, the president really didn't elaborate much, but later we got a few details from Commerce Secretary Howard Lutnick,

who spoke earlier to Bloomberg's balance of power, and we'll bring you that conversation in a moment or two. But we begin with markets. Today, the S&P 500 flirted with an all-time high. Now, much of the focus was on a resumption of Fed rate cuts.

We caught up earlier with the head of the San Francisco Fed, Mary Daly. She told us it doesn't look like tariffs will cause a big spike in inflation. And now she's open to cutting interest rates in the fall. It's both sides of our mandate that have really come into frame since we brought inflation down from the really high levels to something that's closer to our target. Ultimately, we have to watch both sides, and that's what I'm doing. And then the fall looks promising for a rate cut.

That's Mary Daly there, head of the San Francisco Fed, speaking earlier to Bloomberg. Joining me now is Rebecca Walzer. She is president at Walzer Wealth Management, and she is here in our New York studio. Nice of you to drop by. It's great to see you as always. Thank you. Thanks for having me. There seems to be a lot of aggressive betting in the market right now that we're going to get maybe

as many as three rate cuts this year. How are you feeling about what the Fed may deliver between now and, let's say, December? Yeah. We just saw that today, actually, Doug, that the swaps market said maybe even a third today, which was a little bit unusual. Listen, in my opinion, I think Powell's hands and the board's hands are tied until we at least get past July 9, which is the tariff kind of due date of getting these things resolved.

We're getting alerts that Europe is really getting closer to some kind of, you know, a policy tariff policy interchange with the Trump administration. And of course, then we have the China situation, which is, you know, unfortunately, not nearly as far along as it should be. You know, it's not going to stop at the 55. That was just kind of a barometer trying to get to July. And obviously, they're not going to want tariffs anywhere near that. So

To Chairman Powell's defense, he can't make policy in the absence of what's going to happen after July 9 or after we get at least some indication of how these tariff and trade deals are going to evolve.

interact and play. And so from that perspective, I understand why they're, they're basically as such a small percentage, at least there was a small percentage of any kind of cut for the July meeting, which would then lead us obviously till September. If you think they're going to get three Doug, uh, and we don't start until September, that's going to make it really tight, you know, because you've going to have September, October, November, December, and it's going to have to be almost a cut at every meeting. So that almost would indicate to me that there's, there's

systemic problems that would require three cuts. And I just don't see because of the animosity, unfortunately, between President Trump and the Federal Reserve, at least at least with Powell, I don't see Powell trying to assist

with that aggressive of cuts in the latter half of the year. So he was already floating the idea of naming another Fed chairman even before Powell's term expires in 11 months from now. Exactly. I think it's fair to assume that whoever it is, they're going to be more dovish than Powell has been. Could this potentially create a problem? I mean,

mean, you know, I think the Supreme Court tried to dispel any kind of ambiguity with what authority President Trump had around the appointment or the removal of Powell by basically stating in an unsigned order that Powell was not removable. And so then you can see that Trump is reacting to that by stating, hey, let me rattle your cage by giving you maybe some nominees already. And I think that that's probably that's not

good for us. We need to be united. If his successor is a dove, what could that do? I mean, that's a good point. You know, it's kind of similar to a lot of these CEOs and a lot of these countries hedging tariff policy and what they should do with their factories and their supply chains because they're saying, what's really going to happen in four years, right? So if you have a Trump naming a successor to Powell who is vastly different than Powell, then

you are going to upset the markets because they're going to know that whatever policy Powell puts in place is going to be probably immediately turned around 11 months from now. So you were talking about tariff policy as it relates to July 9th. We're going to have this Commerce Department investigation on the basis of national security issues and whether or not they're going to be new tariffs on things like pharmaceuticals, semiconductors.

certain metal products, maybe even steel remains an issue in terms of national security. We'll have to wait and see. How are you feeling about how this could feed into the equity market? Well, I think that it absolutely would boost any...

argument for tariffs. And I think that's because the American people just don't really have a great understanding, Doug, of how the coronavirus supply chain problem really happened with the biopharmaceutical products. We get a lot of our materials for our pharmaceuticals from China. And

whether it's an intentional thing because of tariff policy or if it's a pandemic thing because the shipping lanes are closed, whatever the case may be, our country cannot be beholden to Asia and specifically China for the health of our citizens. And I think when Americans understand how desperately dependent we are, then you are probably going to see, you know, I think that

The means to an end, tariffs in and of themselves are not good, but there are means to an end. So if it's too cheap to make something over there, but it's costing you national security, then it might cost more over here. But then we have it on our shores and we don't have to worry about shipping and we don't have to worry about...

all kinds of wars, any kinds of things like those things. Does it surprise you that the equity market is trading near record highs right now? It's such a dichotomy. Even if you look at the University of Michigan consumer sentiment, right? It plunged 29% in the first four months. We don't usually get a plunge that fast, that aggressively without a recession following. It's always indicative in the last 79 years of the survey of some kind of recession following. So to get that in the first part of the year and then get these almost record highs, it is so much...

mind-boggling. But really, Doug, what it is is it's almost a bifurcation, right? You're seeing, well, we don't know where else to invest in the world. And I know a lot of money has left the United States. A lot of the hedge funds have transferred money out and gone to Europe and those things. But really what you saw at the beginning of the year was a lot of

negativity around this tariff policy. It's going to cost more. We don't have the growth going into this year to sustain these tariffs. But at the end of the day, investors return home and say, gosh, this is the best place to be, even though this has problems too. So it is really weird to

see such a high market and know that consumers still are very tenuous at best about this economy. So what are you telling clients when they ask, is there opportunity? Have you identified one corner of the market where there is? I think that there's always opportunity right now. And you can say that with absolute confidence because we are at the beginning stages still of monetization of the fourth industrial revolution. So there is a ton of opportunity around AI, around robotics, around, uh,

blockchain technology and so crypto so all of those things are are in their infancy and have a yet to be fully monetized which means that there's a long runway for that and that is not going to change no matter who is the administration no matter what the terror policy is no matter what's going on so that is an opportunity now it has yet to monetize and that does and so what happens if you think of dot-com before it monetized it did come back down there's a massive pullback dot-com crash

I'm not suggesting that we might have that because we do have NVIDIA. We do have a lot of applications. You can see, you can type text messages. Now your email now is focused versus all because it's got AI in there. So there are already, it's already been monetized, but not anywhere near to where we're going. So there is

opportunity but it'll be on the longer term if we get into any kind of global war escalation doug and if these tariff policies really do become protectionist of the united states where we have to really do and change up supply chains then you're going to see equity global equity pullback you're not concerned about valuations i think the nasdaq 100 is around 31 times earnings right now i am a

thousand percent concern about valuations, but this is not a Trump trend or even a recent trend. This trend goes back to 2008, 2009 global financial crisis and really the United States changing from what I would say, whatever monetary policy you want to say we had before to modern monetary theory. You can look at the stimulus between monetary and fiscal from 2009 to an overlap, lay that with the S&P 500 and you will see what's

where the money went. So these valuations have been propped up massively since the global financial crisis.

What about opportunities offshore? Are you seeing any right now, particularly in Asia? I mean, we think that there's a long-term runway in Asia, but it's too risky for us right now because of the fact that there's an animosity between Asia and the West right now. So Asia x China. What about Japan, South Korea? Sure, sure. But then I would say you have to worry about Japanese, their debt problem. I mean, they obviously have the worst debt problem in the world. And so far, using the carry trade, it's

been okay for them. But if that unwinds at any time, like we saw August 5th of last year, then Japan's going to have a massive problem. Is India a market that you like? India? Absolutely. And they have a lot of natural resources and they absolutely have the population to sustain maybe new supply chains that move out of China over to India. So, I mean, and they have the capacity as far as intellectual property and their engineers. I mean, just a

extremely smart population. So if you think the market has got it wrong in pricing in aggressive Fed rate cuts, does that mean that the bond market is over its skis to the point where you would avoid the bond market right now? I mean, it's a little bit alarming to me how fast the two-year, the three-year, and even the 10-year has pulled back in just the last 10 days. And you have to say to yourself,

What is this that's happening? Underline. You have to really look. I mean, you know, Doug, I've come in here multiple times for the last year and a half and said, look, we have a global macroeconomic currency turnover that has begun away from the dollar. The de-dollarization even of China is so rapid and so fast that

that that is the long-term concern is that how are we as americans going to escape ultimately this and yet still not be the sole superpower that has the total forex currency reserves like we never are 100 but we were so much higher than we are now so that's the bigger play is what is macroeconomically globally going to be going on with currency and do we even need a reserve currency more now that we can buy directly chain trade with central bank digital currencies

Rebecca, thank you so much for joining us. Rebecca Walzer there. She is the president at Walzer Wealth Management, joining here in New York on the Daybreak Asia podcast.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business.

From fast, free shipping to in-depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals. It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to AmazonBusiness.com for support.

welcome back to the daybreak asia podcast i'm doug chrisner earlier today commerce secretary howard lutnik told us the u.s and china finalized a trade framework reached last month during talks in geneva he made the remarks late thursday during an appearance on bloomberg's balance of power radio and tv program here's part of the secretary's conversation with bloomberg's joe matthew and kaylee lines secretary i'm really interested in exploring the relationship

between the tax bill and tariffs. If you can maybe take us by the hand here, does the tax bill only work when you have the revenue coming from tariffs? And we're, of course, having this conversation as we walk ever closer to July 9th, the deadline here for the reciprocals. If the bill alters anymore, does the tariff program need to change with it?

Not at all. The tariff program is in the power of the presidency. Congress has given the president the power to work on these tariffs and to set these tariffs. So that's presidential power. So what's really interesting is this big, beautiful bill does not count the $88 billion of tariff revenue we've received. And now we're earning up to

up to 30 billion a month in tariff revenue so far. And as you get to July 9th, that number is only going to go higher. We're going to announce a whole bunch of deals over the next week or so. And then we're just going to send letters out to everybody who's responded to us, put them in the right category and off we'll go. So there's going to be tens of billions per month and those not included in the bill. So when they talk about the deficit, when they're talking about the bill, they're only talking about

the things that that bill touches, the extra 400 or 500 billion dollars a year that the tariffs bring in, the new tariffs bring in, that just doesn't count for the bill. But of course, of course, that cash counts for America. Mr. Secretary, you just said that you're going to announce a whole bunch of deals over the course of the next week with what countries? And does that include the China deal the president suggested was signed yesterday? What is that?

So the China deal, we inked the deal. You remember we had a trip to Geneva and then that was being slow played. We got back together in London and that deal was signed and sealed two days ago. President just said it just the other, just, you know, I don't know, 15 minutes ago. And then he also suggested that we are, of course,

at the very close finish line with India. Of course, the way these deals happen is their prime minister and their parliament have to approve it, and the president likes to close these deals himself. I mean, he's the dealmaker. He loves to close it. I think we have...

deal after deal after deal. The president's going to make his calls. He's going to decide exactly the finishing touches on them. And then what we're going to do is we're going to lay out a structure of all the different kinds of tariff arrangements with different countries, right? There are countries with huge deficits. There are countries that are balanced. We're going to set that all up and get that ready for July 9th.

So it sounds to me, Secretary, and correct me if I'm wrong as I listen to you, that we either get 88 deals announced in the next two weeks or there's going to be action one way or the other by this administration that July 9th will be conclusive. If there's no deal, here's the new reciprocal tariff. Is that right?

Of course. So what we're going to do is we'll announce some deals. But basically, the deals we're going to announce are sort of the head of the class, the structural spot in the line. And then all the other countries will fit behind those categories. Right. So we're going to do top 10 deals, put them in the right category, and then these other countries will fit behind. So you'll have South American deals and you'll have African deals. You'll have it all structured and set up.

And that's the model how you do leadership. And we will put these people in their proper buckets on July 9th. So those who have deals will have deals. And everybody else who's been negotiating with us, they'll get a response from us. And then they'll go into that package. And July 9th will go forward. And as the president said, if people want to come back and negotiate further, they're entitled to. But that tariff rate will be set and off we'll go.

Where does Europe fall in that sequence, Mr. Secretary? There was reporting from Politico today that the European Commission has received the latest offer from the U.S. Are you expecting that offer to potentially be accepted by next week?

I think that Europe has done an excellent job. They are working hard. Remember, it was a very, very slow process, if you remember. And the president put out a truth, kind of motivated him with that truth, as Donald Trump is capable of doing. They came to the table then. They started negotiating. They really put it on the table. And I'm actually—I've become optimistic, I think.

If you had asked me three weeks ago before that truth, I would have said no way. But since that truth by the president, I really feel I'm optimistic. I think we could get a deal done now. Europe will be right at the end. But you've got to remember, they're our largest trading partners. So the fact that they come at the very end makes some sense. It's deep. It's complex. But I'm kind of optimistic now. I wasn't optimistic three weeks ago. But now, since the president got involved, I'm pretty optimistic, actually.

How about that? Fascinating. Secretary, before you leave us, I just went to trumpcard.gov. It says Trump Card is coming. It's still on the way. When does this happen? How many will you sell when this is finally available? You've been saying that the phone's ringing off the hook here. Where are they coming from? All right, our waiting list, right? And we've got a sort of a filtered waiting list where we go in and make sure the emails are correct, the people are correct. 75,000 people waiting.

online at 5 million each, right? We're talking just under $400 billion of the people online waiting for it to go live. So obviously our focus is the big, beautiful bill. And once the big, beautiful bill comes off, we're going to go with the Trump card. And I'm really, really excited for our

That has two things. Both, it'll bring in hundreds of billions of dollars to reduce the deficit in the United States of America, and it brings in great entrepreneurs into America, and they'll build our economy as well. So you get a double positive from the Trump card. That's Commerce Secretary Howard Lutnick there speaking with Bloomberg's Joe Matthew and Kayleigh Lyons 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.

For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast.

Amazon Business takes the buying experience you know and love from Amazon, plus tools that help you save costs and make insights-based decisions. Ready to bring your visions to life? Learn how at amazonbusiness.com. This is an iHeart Podcast.