Markets Open Higher on US Tech Tariff Pause
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. On today's episode, we'll break down the latest in the U.S. trade war with China as it enters a second week. Stocks in the Asia-Pacific, as well as U.S. equity index futures, pushing higher at this hour. This is after President Trump exempted certain consumer electronic devices from the U.S.

from the latest reciprocal tariffs, but this relief is temporary. A specific tariff on semiconductors will be announced in due course. And in a moment, we'll be hearing from Mark Matthews, head of Asia Research at Julius Baer. But first is a conversation with Chuck Camillo. He is president and CEO of Essex Financial Services. He joins us from Connecticut. Chuck, it's always a pleasure to have the chance to benefit from your perspective.

It was quite a week we suffered through last week. I think we can agree on that much. Things seem to be stabilizing a bit more right now. I'm curious as to what you're looking for in the next five trading days. Yeah, boy, first of all, it's very nice to be with you. So thank you so much for having me. But yeah, we're coming off one of the most

and challenging weeks that I think anybody that's been in this business for any length of time was just shaking their head. It was certainly a really, really stressful one for financial professionals and clients alike. But I think what we wanted to see is a little bit of what we got on Friday night and over the weekend vis-a-vis the reciprocal tariffs not being applied to the

phones, iPads, laptops, technology, things of that nature. So they are still getting hit with a-- I believe they're in the 20% bucket. But I think that was very, very positive. And I think the futures are indicating that. But I think certainly,

there's been so much uncertainty and borderline chaos that anything that gives a little bit of certainty to tariffs or any type of certainty of the policy coming out of Washington will be helpful. And I think it will be very well received by the markets. And quite candidly, it's what they're crying out for. Do we need to still discuss recession risk? I mean, right now, it looks as though the U.S. equity market is down about 11 percent from its high. And if there is

a recession on the horizon, I think that we're going to see a significant repricing in equities. Do we still need to consider that fact?

Well, I think you certainly do. I mean, there's no shortage of folks saying we're heading for a recession or are in recession. But a lot of those same folks have called 12 the last seven recessions. But this one certainly feels different. I think the big difference here is the overall sentiment. And I think everybody feels it. Everybody feels this uncertainty. Everybody feels this sort of looming threat.

Tariffs are inflationary, period, end of story. But there is the offset. There is maybe some tax help and tax cuts coming out of Washington.

I've given up trying to predict the future, but I certainly am not going on a limb, nor am I being unique in any way of saying the odds for recession, certainly in the past. This is the crazy thing, right? Over the past just three weeks have risen substantially. So, Chuck, I'm curious about the extent to which you're using the credit markets right now as a guide, even to put money to work on the equity side. What are you seeing in the credit space?

Well, listen, I think the bond market, you know, again, that was, I think, the big driver that, you know, got Wednesday's 90-day freeze. Because, again, you know, abnormal things happen in abnormal times. And, like, Wednesday was that, right? So, you know, market, you know,

market goes down rather on Tuesday. Usually you're seeing bond prices and yields move down on fixed income. That wasn't happening, dollar dropping as well. And I think a lot of that is just the overall concern from a lot of overseas buyers and holders of just the instability in the US right now. So the credit market was screaming out that there's a problem. There is a big problem here. And I think that finally got the president's attention. And I think that credit market

is a big barometer in terms of how those winds are going to be blowing. And I think you got to such an extent, and it got so much attention that it made the president pivot. And that was obviously extremely helpful for the markets on Wednesday when you saw these unbelievable increases.

The challenge, and what we try to remind everybody, is these huge increases on Wednesday, historically, they're bookended. So we go back in time, and you look at when you've seen those types of increases in percentage gain of the indexes. They've happened in 2020.

And they've happened back in 2000, I think it was 2008. So, you have to be very careful because none of us want to revisit those periods of time, but that's where you get these types of outsized moves in the market of when things have just been so crazy, so scary, and so volatile. So, I'm glad you brought up the notion of foreign investors buying U.S. Treasuries, and maybe what we saw last week was just a lack of confidence.

in a lot of the policies that the U.S. is putting forward on the trade side, obviously. But I'm wondering whether or not there has been a significant breakage right now, that maybe it's going to take a lot more to restore confidence. Is that a possibility?

I think it is. I mean, I think there's a lot of things that went into that big rise in the 10 year and the 30 year last week. It certainly oversees as part of it. But from everything we see, we haven't heard, nor have we heard from a lot of the folks that we work with that there's any mass selling going on. The huge hedge fund unwind of treasuries, the

the treasuries, hedge funds, et cetera, loaded up on treasuries with the thought that there'd be a little bit more control coming out of Washington. And that, sadly, when the tariff announcement was made on Liberation Day, at just those absurdly high rates, it just shook everything. So I think very few things end well when the sentence starts with

leverage trades being unwound. So, you know, that generally got us in a pretty bad place as well in terms of what was driving rates up. So I'm curious, how are you approaching the equity side right now in terms of an investment strategy? Are you staying along the sidelines maybe and just hoarding a little bit of cash at the moment, looking for maybe a little bit more of a pullback and another entry point here? Or is there something else that I should know about in terms of the way Chuck Camillo is approaching the market right now?

No, I think we've already had a pretty significant pullback in and of itself. And there's a tremendous amount of cash sitting on the sidelines. So I think for the average investor, and one of the things obviously that this type of period of time calls for is caution, right, and some patience and some prudence with how you're going to invest money. So certainly, I think dollar cost averaging into the market has made sense in the past. It tremendously makes sense right now.

But you also have to realize that these periods of time when the market does sell off like this for longer term investors, right, it is an opportunity. It's an opportunity where, listen, if your time frame is three or six months, you know, flip a coin. I couldn't begin to guess where it's going to be. But if you're going out longer, and I think history also shows us when you have this, I mean, you know, I think the VIX last week, I think I saw the highest it did.

57, I think it got to 60. But regardless, you look at these big sell-offs, these big corrections, that level of VIX, and you look out historically of market returns looking forward, they generally are very good. So we certainly have been putting some money to work, whether it's in ETFs or whether individual securities as well that now have come down to a point, especially some of these tech names,

where they're quite a bit more attractive than they were a few weeks ago. And again, we try to stress, you don't have to call the bottom. You don't have to get it perfect. So right now, there are some pretty attractive entry points in the equity market. But again, we're bracing and we're setting the expectation with clients. It is a volatile time. We expect the volatility to continue. But for a long-term investor, getting long-term above-average returns

is the volatility is the price you pay for that. A moment ago, we talked about the possibility of recession. I would imagine that for that reason, you want to avoid anything that is particularly economically sensitive. And I'm curious that you brought up tech because as part of this consumer electronics story that we've been talking about today,

And the pivot away from the latest reciprocal tariffs may be a little bit of a temporary reprieve here. But what has been very clear from the White House today is that a specific tariff on semiconductors is on the horizon, maybe the next month or two. So within tech, how do you even play it?

It's a great question and it's not for the faint of heart but keep in mind what came out of Washington this weekend versus what might come out of Washington Tuesday, Wednesday or Thursday could be two very different things. And so we're in the business of trying to build long term investment and wealth management plans for our clients and we've had shakes and shocks that the market has seen.

Now, thankfully, not to the extent like we've seen this past week and a half or so. But with technology, again, the way that the market has pulled back, there are some pretty attractive-- there can be some pretty attractive entry points. Now, we're not saying that you're buying now and you're going straight back up. No, no. These are for long-term investors. And if you've got a long-term time frame, listen, we might be looking at this market drop another 10% or 15%. If it does, we'll put a little bit more money to work at that time.

So looking forward, looking long term, these are the times where true wealth can be made.

Chuck, I'm curious as to whether or not you're seeing opportunities in the bond market. We were talking about the volatility in treasuries last week. Let's talk a little bit about what your expectations from the Fed might be and whether or not there are opportunities in credit. Yeah. Well, the Fed's in a tough spot, aren't they? So you've got inflation, you know, inflation, especially, you know, the most recent CPI, PPI numbers came down, you

But again, quite candidly, what the heck does that mean at this point, looking at

the tariffs that we might be dealing with in the future. And then again, you've got growth certainly slow. And so they're betwixt in between. I think in the fixed income space, you know, if you ask me this question about a week and a half ago, two weeks ago, you know, municipal bonds were doing just great. And then they completely blew up last week. And so we had a great municipal bond manager in the office last week, you know, talking to us about that. And listen, you can get close to 5% yields now on muni. So we certainly do think that there's an opportunity in the municipal bond space

But again, I think it's going to be volatile there as well. And here we go all the way back to what policy comes out of Washington is going to drive a lot of this kind of stuff. And if there is this continuing lack of confidence or this fear of instability in the U.S. system from overseas buyers, we're going to see more volatility in

in the 10 and the 30 year. So again, it's somewhat of a similar story of we're going to expect volatility. But again, diversifying, I think staying short to intermediate in duration is the way to go. Better credit quality. High yield acts more like equities in times like this. But again, similar story that it also provides an opportunity as you're looking to put some money to work. And quite candidly, now you're locking in some pretty attractive returns.

So it is, again, for the right buyer, an opportunity and good old cash is paying 4%. And so you're certainly getting paid to wait until eventually whenever and if the Fed does cut rates, you're at least getting 4% to sit in cash and ride this out. Chuck, thank you so much for joining us. Chuck Camillo there, President and CEO of Essex Financial Services, joining us here on the Daybreak Asia podcast. Want to understand trends shaping the global investment landscape?

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Asian equities have advanced after President Trump paused some import duties on a range of consumer electronics. This appears to be lifting sentiment a bit after a volatile week for markets last week. For more, we heard from Mark Matthews. He is head of Asia Research at the bank Julius Baer. He spoke with Bloomberg's Sherry Onn and Heidi Stroud-Watts. Very good.

Very hard to know what the direction will be because we just had Commerce Secretary Lutnick and the President himself saying these exemptions are not temporary. We will have permanent tariffs and so it's a ping pong ball. It's not being very well executed but

uh you never know what they could say at the end of this week i think last week what was encouraging in a strange way if you want to make a positive out of a negative is the bond market forced a reaction from the white house and so it might do that again and so may other markets like the currency market and the stock market and so uh it may be that uh

that tariffs that appear to be permanent now actually do become not permanent over the long term. But we don't know. And so in the absence of any certainty, I'm not surprised that central banks want to try to help economies along because it does look increasingly likely like the largest economy in the world is heading into a recession, the United States.

As you say, it's kind of interesting seeing the reaction that was prompted presumably by what was really, I guess, Trump's pain trade, what was happening in treasuries. Does that give you more confidence in terms of pivoting to the markets that the US has targeted? Europe, China, for example. Where do you see the diversification opportunities there now?

There are lots of good diversification opportunities because in those places, the authorities are starting to stimulate. And once again, you know, to make a positive out of a negative, I read somewhere, I can't remember who said it, I'm sorry, I can't give them credit, that Donald Trump and Vladimir Putin were the best thing that could have ever happened to Europe because they've shooken it out of its...

torpor and lethargy that it's been in for the last couple of decades. And so there is lots of good value in Europe. And now it seems like next year there's going to be some growth there, too, with Germany starting to stimulate its economy. And it has the resources to do that.

and there's lots of things that Germany can spend on which will not be wasteful spending. They actually could use a lot of new infrastructure and of course they'll be increasing their defense spending as well. And in China there's lots of room to stimulate the economy.

and in other parts of Asia as well. So, yes, there are things to do around the world, but what I have to say is, to the extent that the S&P 500 is the benchmark for the world, that index, we believe, is in a bear market, and I highly suspect it'll be lower at the end of this year than it was at the beginning of this year. And so that acts as a weight on risk assets generally.

Yeah, especially for countries perhaps that are not really headed towards the easing path like Japan, which is an anomaly sort of among advanced economies. There was a lot of optimism about Japanese equities, but could we continue to see that trend even when the BOJ is trying to normalize policy at a time when the external environment is so uncertain?

Yes, that's a very complicated situation. But I would say that I like Japan because within Asia, it's the only country that has really top quality global brand names. And the overall return on equity of Japan is very low. It's less than 10%.

because it's dragged down by conglomerates and banks. But because it's such a big market over, I believe, what, 7,000 listed companies, something like that, you can construct a portfolio of a dozen or more very high-quality global brand name, large and liquid companies with returns on equity

in the high teens or 20s. And that's the way I would approach Japan, because it does have these really high-quality companies that don't mean to be nasty about the rest of Asia, but the rest of Asia doesn't have that.

What about China? I mean, you mentioned earlier that Europe was really shaken into action because of this sense of crisis. Could we actually see Beijing now trying to really boost the economy and that stimulus measures really filtering through the stock market? But on the other hand, of course, you have all of this pressure coming from tariffs.

Yes, I think so. Well, the major Chinese industries are still well below their all-time highs. And when I say well below, I mean, you know, 30, 40, 50 percent. They're not expensive. The Hang Seng Index still has something like a 4.5 percent dividend yield.

You don't pay taxes on dividends, by the way, in Hong Kong. And I think the major thing was DeepSeek back in January, not only because it proved that China can operate at the forefront of high technology globally and offer very competitive products,

The government's response to that I thought was very good in that it had kind of been keeping the big technology stocks in the doghouse since Jack Ma's infamous speech

a few years ago. And it's clear now the government views the big technology companies and technology in general in China as a positive force, as a soft power for the world. So I think that mending offenses between government and big tech in China is also very important. That was Mark Matthews, head of research at the bank Julius Baer, speaking with Bloomberg's Sherry Yan and Heidi Stroud-Watts right 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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