Treasuries Hold Gains, Bitcoin Hits New All-Time High
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. So, in the U.S. session, we had equities losing a bit of steam in the final minutes of trading. The market finished little changed. It was pretty choppy during the day, and I guess you can chalk up the last moments to some strong market-on-close selling pressure. We heard today from Fed Governor Chris Waller. He told Fox Business...

the Fed could cut rates in the second half of the year. If we can get the tariffs down closer to 10% and then that's all sealed, done, and delivered somewhere by July,

Then we're in good shape for the second half of the year. And then we're in a good position as a Fed to kind of move with rate cuts through the second half of the year. Fed Governor Chris Waller there. Elsewhere today, we had Bitcoin breaking above $111,000 for the very first time. And in a moment, we'll look at the crypto space with Peter Chung, head of research at Presto. But we begin this morning with markets. Joining me now, Eric Sterner. He is the chief investment officer at Apollon Wealth Management.

Eric, thank you so much for taking time to chat with me. Let's begin with the bond market, because in the prior session, we saw a lot of volatility, essentially a sell-off, and a lot of this seemed to reflect worries about the debt load for the federal government. Today, though, a bit of recovery here in Treasury prices. How do you make sense of this?

Yeah, well, thanks for having me. And it's interesting because over the last several months, I mean, we've seen a lot of volatility in the bond market as there's been so many concerns about tariffs and deficits. We've even heard some go so far as to say treasuries are losing their status as a safe haven investment. I think that's going too far because there's really no replacement. But at

But certainly there's just a lot of different interpretations of what this tax bill is going to do to our debt levels. And you hear some predictions and projections from economists saying it's going to increase it to the levels we haven't seen since World War II, while the White House is telling us a completely different story. So I think that's just causing a lot of volatility in the bond market.

And I think rates are going to stay high. And as long as they don't approach 5%, I think we'll be fine. I think once you start seeing that 10-year approach 5%, that's when you see potentially some pullback in the equity markets. So Chris Waller today was kind of addressing the tariff issue. It was kind of interesting, too, that Jamie Dimon, the head of JPMorgan Chase, was saying that he can't rule out

the possibility of stagflation. Now, Waller was talking about the fact that maybe it's possible that we get trading partners to settle at a tariff rate of around 10%. That sounds kind of inflationary to me, does it not? It will be initially.

inflationary, but I believe Waller has been one person in the Fed who has really gone out and predicted that these tariffs will be transitory in nature. So we'll see a slight increase in inflation, but then for it to settle down.

And we know the Fed, the word transitory is a word some in the Fed try to avoid because they use that right after COVID, thinking that once the supply chains were addressed that inflation would go down. But this is very different than what we experienced after COVID. After COVID, we saw so much inflation because there was so much stimulus and fiscal stimulus paid out. Consumers had saved a lot of money

lockdown for a number of months.

And there's a lot of imbalance in the labor markets. So I'm of the view, I agree with what Christopher Waller is saying that, yes, we'll see some increases in prices. But if you're paying more for one product, your consumers are going to have less disposable income to pay for other products, assuming there's no fiscal stimulus. So overall, inflation should be relatively tamed even through these tariffs, if inflation

To Waller's point, they settle in the 10% range. The day's economic news was largely positive. We had U.S. business activity and output expectations improving. In terms of the labor market, first-time jobless claims at the lowest level in about four weeks. Perhaps a little concerning the fact that existing home sales unexpectedly fell to the slowest pace, I think, in about seven months. How are you viewing the outlook right now?

well i remain optimistic but you know there's certainly some some with some caution because we don't know what the the final outcome will be over these uh trading negotiations so i i think we all need to get past that because the uncertainty is causing some companies and even consumers to hold back on spending uh even some companies and initiating some hiring plans

I'm of the opinion that the one entity that President Trump listens to is the stock market, is the bond market. He doesn't want to push into a recession. So I think this is all high stakes negotiation. So once we hopefully settle these trade agreements soon in the coming months,

Then we have a lot to look forward to between the tax cuts and deregulation, which will provide tailwinds to the economy. And the labor market is still very healthy. Consumer spending is holding up at the aggregate level. So I'm

I remain optimistic, but certainly we just need to get past this trade policy uncertainty and then hopefully experience some of those tailwinds that I mentioned. So where are you finding opportunity in markets these days? And if we can focus first on domestic markets.

Yeah, sure. So within large cap, we do want to tilt more into the quality factor. It's not a complete risk on environment for the reasons I mentioned before. So really companies with strong track records and strong cash flows that could withstand any potential economic slowdown.

But there are some sectors that, you know, traditional defensive sectors that I think some clients may want to tilt a bit more into until we hear the outcome of these trade negotiations. Healthcare, that had the highest earnings growth rate for the first quarter. And we know between the weight loss drugs and the aging demographics, there's a huge demand there for healthcare. And utilities, I mean, utilities, again, another classic defensive play.

But because of the AI revolution, which I think we all can agree we're in the early endings of, there's going to be enormous demand. I mean, within utilities over the past 10 years, I mean, the power demand has grown 1% to 2% annually, so very little demand there. But now with all these data centers, and we're supposed to see a 50% increase in data centers by the end of next year,

the power demand is expected to grow up to 8% over the next 10 years. So while utilities was traditionally a defensive play, I think it's part of the AI offensive playbook right now

And then we're starting to see the comeback of the mega techs. We know those were the stocks that got hit the most during the first few months of this year. First of the news, the deep seek. And then, of course, from all the fallout from Liberation Day. But like I said, we're in the early endings of this AI revolution and there's no stopping it. We know that's a huge movement. It's very competitive in the U.S. trying to keep up with China.

And these magnificent seven companies, their earnings growth for 2025 is still above all the other sectors within the economy. So those are some of the areas that I like most for the remainder of the year. We were talking a moment ago about the volatility in the bond market. How are you viewing the financials right now, the big banks especially?

That's another area that I do like within the financials, because once we get, I keep on saying once we get past this trade uncertainty, but it's certainly a cloud we have to get past. We expect M&A activity to pick up because I expect at least two rate cuts this year from the Fed and

as interest rates lower, then we could see some more M&A activity pick up. And that's only going to help the bottom line of these big banks for the remainder of this year. So, Eric, before I let you go, give me your sense of what's happening offshore right now and whether you're seeing opportunity in markets, let's say, in Asia, Europe or Latin America.

Yeah, I think if you look outside of China, the Asia X China, as were many US companies are redesigning their supply chains, there's enormous opportunity for those emerging markets within Asia.

Europe, we're starting to see some come back there. The valuations are attractive. And they're just trying to keep up with the U.S., especially on this technology front and looking for their own movements for deregulation and to increase their defense spending. So I do like some of these opportunities, whether it's Germany or Asia ex-China, but I

But I do believe for the remainder of the year, the US will reclaim the leadership and we'll see stronger returns out of the US than some of these international markets. So I know that's international certainly got off to a big lead on the US, but I expect the US to make a comeback in the second half of this year. - All right, Eric, we'll leave it there. Thank you so much. Eric Sterner there. He is the chief investment officer at Apollon Wealth Management. Joining us here on the Daybreak Asia podcast

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner, and we move to crypto next. In the States during the last session, Bitcoin surpassed 111,000 for the very first time. We have seen increasing bullishness on Bitcoin given support from the Trump administration, and that in turn is helping to foster greater institutional demand. Let's

Let's take a closer look at what's happening in the crypto market these days with our guest Peter Chung. He is head of research at quant crypto firm Presto Research. Peter joins us from Hong Kong. It's always a pleasure to talk with you. Trump has turned from crypto skeptic into what appears to be one of the industry's biggest champions. How would you say that his influence is moving the market these days?

Yeah, Trump has been very supportive of the industry, as you all probably know. And I think I'm supportive of most of the things he's done. He delivered on his promises. So he announced the strategy Bitcoin reserves.

And then, you know, that's also triggering the state governments in the U.S. to consider implementing their own version of Bitcoin reserves as well. And then I think the state of Arizona recently actually enacted a Bitcoin reserve bill. But outside that, I mean, I think the one thing that I'm a little bit kind of, I guess, nervous is, you know, whenever his family members kind of

get involved in a lot of crypto projects, including meme coins. And I think the reason why I kind of get concerned about it is because it kind of gives his political opponents an excuse to slow things down in terms of what the administration is trying to do for the industry. And a good example was, I think, recently, the stablecoin bill

went through some slowdown because I think the Democrats kind of, you know, criticized some of the dealings that his family, Trump's family members were involved in. So, I mean, luckily we overcame that. And then now I think it's very close to being passed on the Senate. But I think things like that could happen in future if the family member continues to get involved in the various dealings in crypto businesses.

We've seen lately a recent surge in crypto exchange hacks and some executive kidnapping attempts. That's put the industry, I think, a bit on edge and obviously increased interest in security. Talk to me about the degree to which you're concerned about these developments and how authorities may go about reestablishing a level of confidence in the overall infrastructure.

Yeah, so crypto is a very nascent industry. So there's a lot of building that needs to happen in terms of infrastructures. And I think security and safety and things like that

is an obvious kind of homework that the industry needs to do. But I think having said that, these sort of things has happened in the traditional banking sector as well. We just, you know,

maybe don't hear about it too often because maybe it happens on a routine basis and doesn't make interesting headlines. So it's expected from a very nascent industry. What I can tell you, I think, is that the people in the industry realize that these are the problems that needs to be fixed. And then some very smart people are working on solving these problems. So I think in due course, I think we'll have a safe and sound infrastructure for the industry to grow on.

So what is the one area in the regulatory regime that you would like to see addressed right now? I think, I mean, a lot of it, I think, has to do with, you know, providing legal framework for the industry to operate safely and predictably. I think what lacked

over the last few years is the regulatory clarity on what's legal and what's not legal, what's allowed and not allowed. And the last administration

simply kind of refused to provide it, thinking that would give their executive branches more discretionary power to run things in the way they see fit. And a lot of times were driven more by political motivations than anything else.

I think it's good that we now have an administration that wants to provide that regulatory clarity. And I think some are coming from the executive branches in the form of executive orders, which are in a speedier kind of way of dealing with it. But some others are coming from a lot of legislative efforts in the Congress. And that will obviously take more time.

I think these will be stronger and firmer foundation that cannot be removed that easily, even if after Trump leaves the office. So these are all positive developments. And I think we just have to be patient to have these things to come into place and start to have a positive impact on the industry.

What about the level of institutional demand going forward? Do you expect that to increase right now, or do you think the major institutions may be a little bit more cautious right now and there is a risk that they may adopt more of a wait-and-see attitude?

Actually, I think the events of the last few months, you know, with all the kind of a market turmoil and people talking about de-dollarization trade, I think it's all actually, I think it strengthens the argument for embracing digital assets and particularly Bitcoin. I think what we've seen that actually in the price actions,

over the course of the last two months. In April, when all the risk assets were selling off, the only two assets that actually were doing well was gold and Bitcoin, which many people treated as a digital gold. And also, we actually even saw it

I think it was earlier this week, I think it was two days ago, that the 20-year treasury auction was met with a very poor demand and all assets tanked, but the Bitcoin quickly rebounded and outperformed other risk assets. And I think it all kind of adds to the narrative of de-dollarization trade.

in the aftermath of the Liberation Day, terror finance month, and also with the Moody's downgrade. And all these things are, I think, strengthening

this argument for embracing more alternative reserve assets like Bitcoin. So beyond the world of kind of an asset class, one of the things that was much touted at the beginning of this kind of crypto revolution was the fact that it could become a medium for exchange, that it would be useful in actually conducting commerce. That really hasn't happened to the level that the early proponents were projecting.

What accounts for that? How come there's been, and I'm not going to say it's been a failure yet, but certainly there's been kind of this lackluster demand to use Bitcoin as a medium of exchange.

That's very true. And it's very interesting that you asked me that question on the day of Bitcoin Pizza Day. Some people may know that the people in the crypto industry celebrate May 22nd as a pizza day because I think it was some 10 years ago or maybe 13 years ago.

Somebody in Florida purchased the pizza for 10,000 Bitcoin, which was worth about $41 at the time. Obviously, 10,000 Bitcoin is now worth $1.1 billion. So that was one of the most expensive. It was the most expensive pizza. And I think that's what people who understand Bitcoin dynamics understand.

know that now is not the time to use Bitcoin as a medium of exchange because we're at the very early stage of embracing this asset as a store of value. And the medium of exchange part of the money evolution only comes after the stage of adoption as a store of value comes to an end. And so therefore, I think medium of exchange part

It's a very long-term story. And if you understand that, people will be very reluctant to spend your Bitcoin at the current price. So if you had to speculate on a jurisdiction or a geography where we would see early adoption using Bitcoin or any other crypto as a medium of exchange, would it happen necessarily in Asia first in a meaningful way and then spread to other parts of the world?

Well, it's hard to say. I think medium, actually, I'm not even sure whether the medium of exchange party will ever come, but it's not a very important part of the narrative for investing in Bitcoin, because the biggest upside for Bitcoin

for the Bitcoin price, I think comes during that first stage where people embrace it as a store of value. And then any additional upside that comes as a result of a medium of exchange adoption is going to be very, very small. So maybe it'll come from Asia, maybe it'll come from other parts. But I think that's not something that I think you should be overly concerned about.

as an investor in Bitcoin. Peter, we'll leave it there. Thank you so much. Peter Cheung is head of research at the quant crypto firm Presto Research. Joining me here from Hong Kong 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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