US Jobs Report Buoys Sentiment; Treasury Secretary Scott Bessent
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. So President Trump's big, beautiful bill was passed today by the House. It will be signed into law on the 4th of July. And in a moment or two, we'll bring you a conversation on the bill's impact on the

with U.S. Treasury Secretary Scott Besant. But we begin with markets and record highs today for both the S&P 500 and the Nasdaq Composite. The monthly employment report was stronger than forecast. It tempered worries over a slowing economy, and it also reduced speculation on the Fed cutting its policy rate anytime soon. Joining me now for a look at the price action and the overall macro is Rob Hayworth.

He is Senior Investment Strategy Director at U.S. Bank Asset Management. Rob is on the line from Seattle, Washington. Thank you for making time to chat with me. Can I begin by getting your reaction to the jobs data? Absolutely, yeah. The jobs data today was certainly, I think, a surprise, surprisingly strong, even though 147,000 new payroll jobs is not

The highest we've seen of late, it is much stronger than people expected. And I think that tells us we're seeing a resilient economy, which is some of what we saw in the PMI data, some of what we saw in the job openings data today as well this week. And the market certainly reacted that way. Where does it leave the Fed, do you think? I mean, July, obviously, at least in the market's view, is off the table for a rate cut. Perhaps the first move is in September. Is that about right?

Yeah, I think it leaves the Fed in their wait and see mode, as Chair Powell even hinted at the Cintra conference in Europe this week. And that maybe means they'll get to two cuts this year. It's what they're expecting. It's what the market expects. But we'll have to see how the data unfolds. We still really haven't seen much impact one way or the other, whether it's inflation or profit margin pressure from tariffs just yet.

And when it comes to the reconciliation bill that just passed and the president will likely sign tomorrow, the benefits of that to the economy are probably not until late this year, early next year. So there's probably some tough sliding ahead that gives the Fed room

to cut rates. So we have the big, beautiful bill that will become law as of July 4th. One of the things that the Congressional Budget Office is quick to point out, it will add about $3.4 trillion to the U.S. deficit over the next 10 years. Is that problematic for you?

I think it's something we're watching and the bond market is watching closely. And that's what we're watching to tell us if it's problematic. Right now, with the 10-year Treasury below 4.5%, we'd say the bond market is a little sanguine about it at the moment. And certainly, over the next 10 years, there's a lot that can change when it comes to the U.S. debt burden.

But it's something that could be a problem. We think the signal for that to us would be if we start seeing the 10-year Treasury yield get closer to 5%, that may be the market either having some trouble with a growing debt burden here in the U.S. One of the things I think that's been a little confounding, the impact of tariffs recently.

really hasn't shown up to be kind of an inflationary problem at this point anyway. I think to go back to your point about the Fed being in a wait-and-see mode, I think that that's perhaps one of the things that is really causing them to tread water at the moment. Today, the president said the administration may begin sending out letters to trading partners on those so-called unilateral tariffs ahead of the July 9th deadline for more trade negotiations.

Do you think that the situation with tariffs has the potential to worsen in a way that we could, in fact, see an inflationary effect? I think what will happen with tariffs is one of two things, right? Either consumers will have to pay for them. That will be inflationary. And we'll see that in a one time bump to inflation where businesses will have to pay for them, whether here or abroad. And that will come out of profit margins. That means that.

a tougher road for labor. So I think the challenge will be there is a cost somewhere to this economy. It's probably a bit of both, and that's what we'll have to watch out for. And I think that's maybe the biggest kind of headwind for the market in time, which is not our base case, but it is that companies may not be able to grow quite as quickly as they'd hoped.

And consumers will face some bump in inflation, which could slow activity here for a little bit. And when we look at kind of average growth over the course of 2025, we certainly that's really what we're seeing in the consensus economist data around one, one and a half percent.

is they're expecting that hit from either a slower consumer because they're facing some inflationary pressure, or slower corporate spending because they're facing some profit margin pressure from the tariffs. One of the other things that has shown up here is dollar weakness, particularly since the beginning of the year. Some of this has to do, obviously, with the tariff story. I think that the dollar has weakened by roughly 10%.

over the first half of the year. And I'm wondering whether or not that may have a little bit of a positive impact for some of the big U.S. multinationals, or maybe that won't manifest because of this trade tension. I mean, how do you see the role of the dollar's position in kind of global markets right now?

Yeah, I think certainly the way tariffs are positioning it is there's not as much demand for the dollar as we may have seen. We're hearing and we've had some reports that exporters to the U.S. are demanding payment in their currency rather than dollars, which is probably putting a little downward pressure on the dollar.

the fact that the feds on hold isn't really helping the dollar at this point even though you've had the european central bank and the bank of england cutting interest rates but i think the good news is you're not seeing it show up in financial flows meaning we're not seeing foreign sales of of treasuries at this point so

This weakness in the dollar maybe reflects some concern that the U.S. may not be getting as demanding as much from the rest of the world as we try and reshore goods. And so that's going to keep a little pressure on the dollar. I think for multinationals, the hope is that it's making their goods cheaper when they look to export overseas.

And maybe that will help. Certainly, if we think about the trade deal with Vietnam, the fact that U.S. exporters face no tariffs headed into Vietnam could help, although Vietnam is such a small economy. And really what we need to be selling into is some of the larger economies and some of our largest trading partners, Canada, Mexico, China and Europe.

So, I mentioned earlier that the equity market closed at record highs today for the S&P and the NASDAQ comp. We know that valuations are elevated, maybe a bit stretched in some cases. Are you left to conclude that there is still opportunity here in stocks? Are you still constructive on the market, or are you getting a little worried?

No, we're still actually glass half full, but it's a glass that I think we're worried that there's not a lot of margin for error in this. I think that the constructive things fundamentally are, one, the consumer is still spending money. They may not be able to grow rapidly, but

wage growth and low unemployment are keeping the consumer able to spend money, so that should support the economy. Two, corporate earnings growth is remaining positive, so that should help. But the challenge is with valuations at these levels,

the margin for error is quite slim. So if we start to see some faltering, that could take a little something out of the market. But for now, we think it looks like the economy can thread this needle, especially if tariffs are maybe not as bad as people had hoped. And we come in in this 10% to 20% range of tariffs, we may be able to kind of

companies may be able to handle that consumers may be able to handle that and the economy can kind of continue to grow so we'd be a little more constructive here but we still would emphasize diversification and portfolios so looking beyond the U.S uh for for opportunities particularly because valuation is cheaper there and then within the U.S markets looking for more diversification away from what the last couple of years has been lots of strong tech

performance. We'd look into other segments of the market. You're seeing stronger performance from industrials and financials, and certainly we'd point to utilities as the next beneficiary from this artificial intelligence spending boom. So before I let you go, Rob, so far this year, the S&P is up nearly 7%. So for the remainder of 2025, will that return kind of be equivalent to what we have seen so far, or could we be in for some choppy waters ahead?

We'll look to reevaluate our S&P 500 forecast as we get through second quarter earnings season. I think we see a more modest bump relative to our forecast at this point. But if things actually come out a little better, if some of this uncertainty goes away, I think there's room for an equal increase.

Rob, we'll leave it there. Thank you so very much. Rob Hayworth there. He is Senior Investment Strategy Director at U.S. Bank Asset Management Group, joining from Seattle here on the Daybreak Asia podcast.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So as mentioned earlier, the House did pass President Trump's sweeping budget and tax bill. Now, this includes tax cuts. It also curtails spending on safety net programs, and it reverses much of the previous administration's move toward a clean energy economy. Before the vote, we caught up with Treasury Secretary Scott Besant.

This was a wide-ranging interview. Besson discussed the possible economic impact of the bill, as well as the Treasury's financing needs and the recent decline that we have seen in the U.S. dollar. Here is part of Besson's conversation with Bloomberg's Romain Bostic and Matt Miller. There's a lot of concern about that addition to the federal deficit, the idea of a widening of that deficit because of some deficiencies in paying for some of those tax cuts. What is your message to the market?

Well, Romain, I'm not quite sure what you mean because stock market's at a new high and the bond market just had its best six months in five years. So I disagree with that. So I think the markets are telling us that they like the bill and that they believe that it is fiscally prudent and stimulative for growth.

And importantly, I think we can get back to the kind of growth that we saw in President Trump's term, 2.8%, 3.2%, noninflationary growth, which the Biden administration was not capable of. Mr. Secretary, Matt Miller here. I'm wondering, as someone who grew up with Alex P. Keaton, watching Milton Friedman on Phil Donahue and always thinking we were on the wrong side of the Laffer curve, why

Why haven't these kind of massive tax cuts worked to really stimulate growth in the past? And they certainly haven't worked to replace the amount of revenue that's taken out. We didn't see that with the Reagan tax cuts. It didn't work out with the Bush tax cuts, and it didn't work out with the TCJA in 2017 either. Why is it going to work now?

Well, I would disagree with TCJA. TCJA was a work in progress, and then we hit COVID. And I think what's different here also is we're going to be constraining spending. I spent a lot of time with the Freedom Caucus members, and their constituents should be very proud of them. They should be very proud of themselves. They changed the center of gravity of the debate.

So we are both going to stimulate the economy, pick up tax revenues, but more importantly, constrain and pull down spending. So far, though, it looks like we're going to boost deficits up to 7%. You ran on this 3-3-3 plan, 3% deficit, 3% economic growth, and an increase of 3 million barrels of oil a day in the U.S. Do you expect to get to that by the end of President Trump's term?

I do. And I'm not sure where the 7 percent number is coming from, right? Because I reject the CBO scoring. But on the other side, the CBO also scored tariff income at $2.8 trillion. So, you know, that substantially increases government revenues. I think the growth is going to be much higher. And I believe that what we've done in

CONSTRAINING SPENDING HERE IS JUST THE FIRST BITE OF THE APPLE. DO YOU ANTICIPATE, MR. SECRETARY, THAT THE U.S. GOVERNMENT'S FINANCING NEEDS, THE TREASURY'S FINANCING NEEDS WILL INCREASE OVER THE NEXT COUPLE OF YEARS? I THINK THAT

We will see what happens to interest rates. And there could be an increase in financing needs based on yields. But everything that I'm seeing says that inflation is under control and likely coming down.

There's, of course, the cost to finance that. And we look at where yields have been and we know there's been a lot of volatility there, some stability in recent weeks, partly because of some of the things that you've done and said publicly. But we've also seen a little bit of reticence to buy into longer dated U.S. treasuries. I know you have been public about the idea, at least in the short term, of relying a little bit more on shorter term treasury issuance. Do you anticipate that will continue?

Well, I think what we're going to see is one of the underreported things of the one big beautiful bill is it also gets us away from this terrible debt ceiling dilemma. And because of that, we've had to constrain issuance. So it's likely that initially we will use bills to refill the Treasury general account. Do you worry about any potential rollover risk in that strategy?

No, I don't. We've seen very durable and robust treasury auctions. I see who the buyers are. I think that we are going to see U.S. banks take up more of the debt issuance because of the supplementary leverage ratio reliefs that they're going to be getting. And we're going to

Pass the bill today. President Trump's going to sign that tomorrow and then probably the following week. We're also going to have the stable coin legislation, which I think could create at least two trillion in demand for Treasury bills.

So Mr. Secretary, I do want to get your thoughts about just broader policies coming out of this administration beyond just this one big beautiful bill that is now appears to be advancing in Congress. There's been a lot of questions in the market about what the administration's stance is on the dollar, whether there truly is a strong dollar policy or whether that policy, a long term policy of strong dollar support has shifted to something else.

I'm not sure why that is in the market. The price of the dollar has nothing to do with a strong dollar policy. Current currencies move up and down based on a variety of factors. But a strong dollar policy means several things. One is

what it what is the dollar strong against or is the other is another currency stronger higher in price at the moment that doesn't have anything to do with a strong dollar policy the strong dollar policy is are we doing the things over the long term to ensure that the u.s dollar remains the reserve currency of the world and

We are. We are setting the stage for economic growth. We are constraining inflation. We are making the United States the best destination for global capital. And I think that's going to continue to happen. I think, as I said,

You know, many times over since World War Two, the demise of the dollar as reserve currency has been predicted. And I think once again, the skeptic is going to be wrong. But there is there is no change in policy. Fair enough. But I'm sure you understand that the weakness that we've seen in the dollar to start the year.

is something we have not seen in decades. And there are other countries that have been trying to take advantage of it. In a speech just this week, we heard from the Chinese central bank governor who really laid out at least their vision, their Chinese vision, for a new global currency order, which would, of course, mean a reduced rule for the dollar and, in their view, a greater rule for the yuan. Now, regardless of whether that is a viable plan, I am curious as to what you think about the idea that this is even being spoken about publicly.

Well, I mean, look, what are the Chinese going to say? And by the way, it's a complete fallacy. They have a non-convertible currency. So how are they going to be a reserve currency? They also have 1.4 billion people who want to get their money out of China. They have capital constraints on taking out money.

sine qua non for a reserve currency is that it trades freely. And I saw my friend Christian Lagarde president of the ECB the other day said that maybe this is the euro's moment. But I can tell you if the euro hits 120 Europeans are going to be squawking that it is too strong. They are an export economy. So

you know, let's see what happens. They should be careful what they wish for. Whereas in the United States, we recognize the responsibility that comes with being a reserve currency. Mr. Secretary, I am curious about what comes next after this. We know that we ostensibly have this July 9th deadline on trade, and I know it's going to take several weeks, if not months,

following that to really start to hammer out some of these deals. Do you anticipate that we're going to see additional deals and more substantive deals pretty soon within the next few weeks? I think we're going to see a flurry of deals before July 9th. We'll see how the president wants to treat those who are negotiating, whether he's happy that they're negotiating in good faith. I think that we're going to see about 100 kind

countries who just get the minimum 10 percent of reciprocal tariff and will go from there. So I think we are going to see a lot of action over the coming days. Have you been directly involved in any of those negotiations? And if so, are there specific provisions that those other countries have been asking the U.S.?

Well, I'm not going to negotiate on international television, but I will say... You don't have to negotiate. Just tell us. Well, yeah, sorry. What I would say is some...

countries have come with or trading blocks have come with good deals. Some have come with OK. Some have come with deals that are unacceptable. And we are going to be announcing several deals. The president has the final say. And what I can tell you is that the career staff, whether it's a treasury commerce or

USTR are all saying that they can't believe that these countries are giving up things that they haven't seen them offer in the past two or three decades. So this is a win for the American people. It's a win for fair trade. Can I ask just finally about the pressure the president and others in the administration have put on Jerome Powell to cut rates? President Trump has

ask now for three full percentage points of cuts, 300 basis points. And it strikes me that that would either overheat the economy or cause absolute chaos in the Treasury market. Don't you think it's important that the Federal Reserve operate with an amount of independence?

Well, the Federal Reserve does operate with an amount of independence, just like a referee does out on the floor of the basketball court. They're independent, but the coaches work the ref.

all the time. President Trump is the most sophisticated president economically, perhaps in the past hundred years, perhaps ever. I will note that in his first term, he was more right than the Fed was on when it was time to cut rates. Fed normally followed later on. So I think he's going to make his

views known. And I would also point out that the market agrees with President Trump in terms of the direction, if not the magnitude of the cuts. Do you agree with President Trump that the Fed should cut by 3% in July?

I believe that I followed the market and the market both for the rest of the year and the two year market is signaling cuts. That is Treasury Secretary Scott Besant there speaking with Bloomberg's Romain Bostic and Matt Miller 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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