Trump Delays Canada & Mexico Tariffs, Bank of America CEO Brian Moynihan
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krizner. It was all about headline risk in the U.S. News on those tariffs sparked a lot of volatility in equity trading. President Trump delaying levies on Mexican and Canadian goods covered by the North American trade deal. In a moment, we'll be speaking with Karen Paye. She is the executive vice president and head of portfolio management at Fiduciary Trust International.

But we begin in Tokyo. Earlier this morning, Bank of America CEO Brian Moynihan sat down for an exclusive interview with Bloomberg's Sherry Ahn. Here's part of their conversation. Brian, good to have you in the Tokyo studio. It's good to be here, Sherry. It's a very exciting place these days.

You guys have been operating since the end of World War II. How is your business going? It's great. So we operated in the banking side since the end of World War II. We've operated on the security side and became a full member in 86. So we've been here a long time. About 800 teammates, one of the largest non-Japanese banks in the city.

corporate banking, investment banking, treasury services, and obviously the markets business have done very well here. What parts especially are we seeing more excitement about? Well, if you think about Japan, the excitement overall is the changes in structure. Obviously, the interest rate structure coming up.

inflation from a country that had no inflation for years, for 30 years. It changes people's attitudes, wage growth. And then also, on the other side of it, you're seeing the corporate reforms going through, which are critical, and the push for the government to move the money outside the deposit banking system into the investment system, which will happen, which has drawn a lot of interest from outside the world. So we're hearing a lot of M&A dialogue and

It was up last year and we expect to be up this year. We're hearing about 30, 40 percent of our revenues of Asia are in here in Japan. So strong. We're seeing a lot of market activity. And then the flows, the capital flows, you know, the Treasury services business, which is as exciting as an M&A deal.

but it's critically important to the profitability of our company. We were just mentioning Seven and I, for example, and I know that you guys have been involved with them. We're now hearing potential listing in the U.S. business? That I'd have to lead to my teammates. I don't get involved in a deal. But look, we have a great team here and they do a great job. And if they think it's right for our customers, they'll tell them and we'll see what happens. But that's sort of part of that corporate reform story. Yeah, it is. That's

The idea, we've been with government officials and clients and the companies are excited to have a, you know, in the classic word, animal spirits. Let's get moving. Let's merge these companies together. Let's modernize them. Let's keep working on the cost structure. You have, you know,

you know, very low unemployment rate here, you know, 2% plus, you know, very low. There's plenty of capacity to absorb, you know, employees. There's a little more competition for wages, competition for employees, wage growth. So I think all that sets up the ability to get the reforms going through, whether corporate reforms, return reforms that demands that you've got to return capital, getting cash off the balance of these corporates, either back to shareholders to do something. But it

many in the day you got to come back and study wise deals are strategically important that add value because spending money is easy part making it really forget the returns after spenders are partners more the pipeline for bank of america here when it comes to deal with this yet did it just the amount of conversation that excitement both inbound from outside the the the rest of the world and also outbound from

the large companies here continue to expand across Asia, but importantly into the United States because frankly, a lot of the manufacturing debate that you talked about in your earlier section is they need to expand their manufacturing to maybe avoid potential tariffs, which is unknown what's going on. Yeah. How much does that add to business uncertainty for you?

Well, I think clearly on the business side, you know, after the election you had businesses very enthusiastic about the lower regulatory burden they'd have, the ability to get deals done. And you went from conversations last summer, which were sort of interesting conversations with the boards. Our teammates tell me they go in and they talk and they'd show them these deals and they'd say, that makes sense, but it may be harder to get it done now to, oh, get in here and let's talk about these deals.

You know, President Trump's administration has made it clear they're trying to get some things done, which may cause some short-term sort of lack of understanding. That affects the business community, but they're saying at the end of the day, you know, and

President said in a speech earlier, we may have some short-term disruption to get to the long-term goal of downsizing government, downsizing regulation, et cetera. And I think the businesses now are sort of saying, well, I've got to figure that answer out. And that's fine because it's what it feels like forever, a month or two or three. But meanwhile, on the consumer side, you're not seeing any change in activity despite what they're saying, which is interesting. Tell

Tell us a little bit about that, because in your last earnings call in January, and that was before the inauguration of President Trump, you were saying that consumers were still spending more than last year. Is that still the case? So this is sort of the dichotomy of what a consumer says they're thinking about versus what they actually do. So if you read the information of the last month or so, consumer conferences come down and they're worried about inflation going up and all that. That's

That's sort of what they say they're going to do. What they really are doing in the month of February, they spent 6% more money out of our accounts into the economy than they did last February. And year to date, it's about 6.5%. You compare that to the fourth quarter, it was about 4.5%. We felt pretty good about that. So the consumer is still spending. And by the way, if you look at what they spent on food, basically flat in February. So despite the discussion about egg prices and things, the actual...

total expenditures about flat services, travel, entertainment growing, and that helps drive jobs because those, all spending by consumers drives jobs, but the ones that are service-oriented and the entertainment require a lot of people's services. Aren't other policies from the administration, though, a little bit more disruptive when it comes to, say, immigration and hiring for these small and medium-sized businesses? Well, if you go to small and medium-sized businesses, they've been facing two issues. One is the real cost of

Money went up a lot for them because they borrow on lines of credit, short-term lines of credit. And so they have to make sure when you're talking about a, you have SOFR at 4.5% or whatever, plus their spread, that was SOFR at 50 basis points plus their spread. That was a big change in rates. They had to always be more careful. When you saw them kind of conservatively handle their lines of credit usage and stuff,

Then the election happens, and they feel really good about the regulatory. But they started noticing they weren't going to be able to hire as easily and stuff. And so they're worried about where people think they're worried about inflation. They're actually right now a little bit more worried about getting employees and running the businesses. And I think as these policies settle in, you'll see them settle in. But, you know, they were overregulated. All companies were. But the small, medium-sized businesses felt overregulated.

all the labor regulation stuff. We have thousands of people who can deal with it. They don't. And so if you're running your own business, and they feel good about that, but it's offset by let's get a set of rules set, and then we can go. How soon do you think they'll get some help from the Federal Reserve by lower rates?

Well, the market now, I think, put three cuts in after some of the data. And the market's been all over the place in a sense because over the last 90 or 120 days, I bet you we've had five, six cuts to zero cuts, back to three cuts. Our team believes that the Fed is kind of done cutting rates until inflation kind of gets in control. They believe that the... And I'd say...

They may, as they're thinking about that, given that if these tariffs go in, they thought they would have some impact on the growth in the U.S., and that may cause them to think about that. But right now they're saying, look, you've got a real rate structure, which is Fed. You've got employment pretty stable and loosened a lot over the last year. And so maybe their view is there'll be no cuts. We'll see what happens if they start to see it. You also don't think inflation is getting under control or there are upside risks? Our team...

Our team of economists always thought it would take three years to get inflation under control. And so they projected to get down near the target towards the end of 26. But it takes that long. And everybody says, why isn't it happening faster? It just takes a while for it all to work through the system, especially with the amount of stimulus and other things that went on. In the meantime, you talk about markets being all over the place.

Has that increased your activity in that sense, in business and markets activity? Well, if you look at the first quarter, we gave our guidance in our first quarter call, and the NIA was going to be up a flattish quarter to quarter with two less days. That looks in great shape. Loans and deposits are what we expect to happen. The trading revenue has been strong and up from last year, mid-single digits type of numbers. So we feel very good. I'd say the M&A, the M&A,

Debt capital markets open and processing through. The equity capital markets, as we talked about, a little slower, but still solid. Everything's in good shape. And then the wealth management business is very strong. So we feel very good about the current prospects of our company. Same here in Japan, because we saw the brokerage union, for example, posting a loss for Bank of America in 2023. Did it get better last year? Yeah.

You've got to be careful of our legal entities because we don't run the business that way. We run the global things. But the group here made about 30% of the pre-tax profit for Asia. They're a very strong group. And so sometimes the mechanics of how that runs through because of the bank and the broker-dealer and the...

And the parent, I wouldn't get too concerned about that or too interested in the legal entity. When it comes to the JGB trading aspect of things, are you seeing more interest? Are you building that up? Yeah, we continue to add people in the trading business across the world. Honestly, Jimmy DeMar's done a great job. We've moved up about 200 basis points or so in market share across the last five years. We've given them more balance sheet, more risk to take. They've done a good job of deploying it and they keep adding everywhere. As the activity picks up, we're adding people here, too.

Yeah, because I mean, for the first time in a very long time, we are seeing a lot of volatility in the rates market, a lot of interest as well. We've heard about difficulties hiring, for example, rates traders, because all of a sudden this became so exciting. That's going to be true. And I think one of the keys, and you personally are saying this, there's a lot more people coming from the outside to work in Japan and the

rules and regulations allow that to happen. So we'll also hire internal people, but if there's not enough, we'll bring people from around the world to help on it. It's an exciting city to live in in Tokyo, so it's not hard to get people to come here. And you're able to get them in and work, and so we feel good about that. And from the country's perspective...

That's one of the things after women came into the workforce and after there were people worked a little longer, what you're seeing is foreign workers coming in of all different types. And so we feel good about that. We can get prospects here, but it is a tight labor market. There's no question. A lot of talent, but a lot of demand for that talent. We are seeing also a lot of interest by activist investors, and you have a big advisory in that sector. What are you seeing? We agree with you. And I think I'd be careful about...

only equating that to Activist Investor is the pronouncements by the government and the exchanges and stuff that you've got to move, the amount of cash on these balance sheets are making things happen. So activists can catalyze that activity, but at the end of the day, what's going to also catalyze that activity is boards of directors and management teams saying,

We have been given a mandate to change. And now with the interest rate and inflation and things, a more bullion economy, we got Japan growing at 1%. That doesn't sound great, except for where it came from, that is great. And so I think that is going to cause more activity necessarily. So yes, there's activists and we have an advisory business that helps people through that discussion and they'll cause activity.

But the imprimatur by the government to drive activity also causes it. And when I talk to CEOs of companies with big market caps, they're figuring out how to reposition themselves to keep driving. Are you using more of Bank of America's balance sheet in trading here in Japan compared to other parts of Asia? Well, in Asia, we have 5 or 6 percent growth, so you really have to be careful. So in Australia, we have a great business. And so we

We've added about $200 billion across the world in trading balance sheet. And what percentage of when here I have to get somebody give me the statistics, but we're supporting the business everywhere. Some of the things that we've seen across the world, of course, we've talked a little bit about the fragmentation, about tariffs. When you see that growing rivalry between China and the U.S., for example, is that something that concerns you as a CEO when you look at Bank of America's business? Yeah, well...

Our business is going to reflect our customers and clients. And so in the U.S., that's consumers and wealthy consumers and business of all size and corporates and then investors. Outside the U.S., our business is very specific. It's large companies and large investors.

And so anything that causes them to move money, we have to follow and help them do it. So it'd be great if everybody were all on the same page and everything was perfect. That just never happens. It's never happened in the world's history. It's not going to happen tomorrow either. So I think the concerns of how to move money around and where to invest

you know I think in the end of the day we're sitting here in Tokyo this has become a favorite place to look and there's other places like this around the world the United States is a strong place to look as we travel around Europe and other places so I think it's really going to reflect those customers as opposed to us catalyzing activity and us running our business differently

We run our business to support our customers and clients, and they dictate the activity, and then we help advise them about that activity. And what we're saying is they're enthusiastic about the growth in the U.S., the growth on a global basis, 3% plus, the rate structure coming down a little bit across the world, the ECB cut rates, so they're feeling good about it. They just need a business like plans 3, 5, 7, 10-year cycles, and it's hard to do that when there's this much movement. But on the other hand...

They face this all the time. That was Bank of America CEO Brian Moynihan speaking exclusively with Bloomberg Sherry Ahn. Coming up, Karen Paye from Fiduciary Trust International. This is Bloomberg.

I'm Alpine skier Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there.

At Stiefel, we invest everything into our advisors so they can invest everything into their clients. That means direct access to one of the industry's largest equity research franchises and a leading middle market investment bank. And it's why Stiefel has won the J.D. Power Award for Employee Advisor Satisfaction two years in a row.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc., member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award. Your customers are important to you, but they won't feel that way if they're stuck messaging a clunky chatbot or waiting on hold for a representative.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So we know now that the Trump administration is suspending tariffs on U.S. imports from Mexico and Canada covered by the North American trade agreement for a period of one month. But the headlines on tariffs today sparked a lot of intense, quick and sharp swings in the equity market.

At the end of the day, there were losses right across the board. We had the S&P down 1.8%, NASDAQ comp weaker today by 2.6%. For a closer look, I'm joined now by Karen Paye, Executive Vice President, also the Head of Portfolio Management at Fiduciary Trust International, joining us from here in New York. Karen, thank you for making time to chat with us. What's it been like in the office these days?

It's actually been relatively calm. We have not heard a lot of panic calls from clients, but, you know, I think it's starting to pick up a little bit in terms of, you know, clients are starting to ask questions and not surprisingly, right, because there's a lot going on in the news and, you know, there's a lot to keep up with. And there's certainly, you know, a greater degree of volatility in the market that we're seeing, as you mentioned. And, you know, I think it's starting to pick up a little bit in terms of, you know, clients are starting to ask questions and not surprisingly, right, because there's a lot going on in the news and, you know, there's a lot to keep up with.

And so, it's been relatively orderly, but I would say that it's starting to pick up a little bit in terms of just the attention being paid to what's going on in the market. So, have you been making adjustments to your portfolios with all of the headlines that we've been talking about, whether it's on the economic data side or whether it's on the tariff side? Are you adjusting positioning? Well, I would say that we have been adjusting positioning kind of coming into the year.

In December, when we were thinking about 2025 and the outlook, we sort of expected that perhaps in the upcoming quarters that we would get some market volatility. We recognize that valuations, you know, towards the end of the year and kind of coming into this year were at the higher end of the range. We also recognize that the market was falling.

very concentrated in terms of what was driving the markets for the past two years. And so coming into this year, we sort of felt that

there would be more volatility expected. We were expecting that tariffs would be a topic of conversation. We thought that there would certainly be uncertainty related to tariffs. And therefore, we've been rebalancing portfolios just from a risk standpoint, from an asset allocation standpoint. We're still positive on equities because

The fundamental backdrop in terms of the economy, in terms of the pro-growth, pro-U.S. agenda is still sort of the main theme for this year. But we do think that, you know, right now we're going through a period of a soft patch or a pause that's being created by some of this uncertainty related to tariffs. Do you think there's a risk that we could see a pickup in inflation?

Certainly, we would acknowledge that there is a risk. I think that that's been playing a lot into the bond yields. You know, we in January, we saw bond yields actually rise to about 4.8 percent because the markets were thinking that there could be tariff induced inflation.

inflation, but also that pro-growth meant that there would be an acceleration in the economy, and that combination could be inflationary. I think it's to be seen whether there would be and whether, you know, to what magnitude. I think that it's

Definitely, you know, on the table in terms of, you know, how much is to be seen, because one of the offsets is that we are starting to see a slower economy right now. And, you know, we have seen that some of these factors are caused by some consumers and businesses front loading, you know, their orders.

before the tariffs take place. So there's a lot of noise right now in terms of the data. And, you know, there's also the part that businesses are not in a position to raise prices as much as they were able to do so in the last

couple of years. So we're at a point where consumers are starting to push back or they just can't afford these higher prices anymore. Certainly the lower income consumer is feeling a lot of those pressures. So I hear that you're, broadly speaking, still constructive on the equity market. You've been doing some rebalancing, though, and I'm wondering whether or not you look to the fixed income markets as a part of that rebalancing. Have you been leaning a little bit more into fixed income?

We have. I think that over the past year, we have been leaning a little bit more towards fixed income. We are cognizant and we are paying attention to, you know, just like we pay attention to valuations on the equity side,

We do the same thing on the fixed income side. And, you know, bonds were definitely a lot more attractive when 10-year bond yields were around 4.8% or north of 4.5%. I think that right now with 10-year bond yields at 4.2%, 4.3-ish, they're still attractive. We still think that they provide balance to a portfolio, to a balanced portfolio. But we want to be more opportunistic.

opportunistic and be more tactical in this environment. We do think that there are opportunities that are created based on the market volatility on both the fixed income side as well as the equity side. Are you looking offshore at all these days? Are you seeing opportunities in Asia right now, for example? Yeah, it's a great question. And of course, you know, there's been a lot of

recovery and significant moves in the Asian market, particularly in the Chinese technology stocks. We think that a lot of that has to do with the fact that they've underperformed so much in the past few years.

And so, you know, there really hasn't been any interest in that part of the market. And so it's easy to kind of see any positive news lifting those stocks up very quickly. And there's also, you know, the news around DeepSeek and also now, you know, Alibaba talking about the Chinese tech companies coming out with sort of better, more efficient technology around AI is helping to lift those stocks.

I would say that we are definitely recognizing that there could be a valuation catch up in foreign markets, particularly. I think we would say that it's probably more interesting for us to look at European equities

than it is necessarily emerging markets or the Chinese market, just because longer term, we still see secular challenges in terms of growth for emerging markets and for the Chinese market. Karen, I'm curious about your cash position right now. Are you fully invested? Are you keeping a little bit of dry powder on the sidelines in case we get a little bit more of a pullback? I mean, right now, I think the NASDAQ 100 is flirting with a correction.

Yes, yes, definitely. I noticed that as well. NASDAQ's down over 10% from the highs. S&P's down a little bit over 6%. So, you know, we are getting into correction territory and, you know, significant parts of the market. And certainly if you look within the equity market, there are, you know, stocks that are down 20% or more, right? So, you know, I think that there are opportunities

opportunities in terms of market leadership and what's underperforming. We've seen a big recovery in value stocks, for example, this year, and some dividend yielding stocks, the defensive stocks. So it's really a matter of, to your question, what are we doing with cash? We have been, as I mentioned earlier, rebalancing portfolios, recognizing some of the risks. We've also sort of gone ahead of

when we had much higher valuations to make sure that clients that need cash, that we've raised the cash. Aside from that, I would say that from a portfolio positioning standpoint, we're more or less actually overweight a little bit fixed income compared to cash because we see better yield opportunities and fixed income. And the Fed right now is probably going to continue to lower rates.

It's been a little bit of back and forth in terms of market expectations for the Fed. You know, we went from expectations of one rate cut just a few weeks ago to now potentially three rate cuts. So the yields on very short term cash could be going lower, whereas you can lock in some better and more attractive yields and fixed incomes.

It's interesting you make that point. We heard from Fed Governor Chris Waller today. He was saying that he would not support lowering rates in March. Even so, he does see room for two, possibly three rate cuts sometime this year. Karen, great stuff. Thank you so much for joining us. Karen Paye there. She is executive VP, also the head of portfolio management at Fiduciary Trust International. Joining us 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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