World Braces for Iran's Response After US Strikes
18:35 Share

This is an iHeart 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. Bloomberg Audio Studios. Podcasts. Radio. News.

Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Iran is facing its most perilous moment in decades, this after the U.S. and Israel attacked Iran's nuclear facilities. It was Saturday night in the U.S. President Trump authorized a massive strike, even though he previously hinted at a delay. Here is Trump as he addressed the nation in televised remarks late Saturday. Iran's key nuclear enrichment facilities have been completely and totally obliterated.

Iran, the bully of the Middle East, must now make peace. If they do not, future attacks will be far greater and a lot easier. The mission was dubbed Operation Midnight Hammer. It used B-2 stealth bombers, Tomahawk missiles, and precision-guided weapons to disable three Iranian nuclear facilities. In a moment, we'll take a look at market implications of the strikes. I'll be joined by Gene Goldman. He is the chief investment officer at Cetera Financial Group.

But we begin in Washington, where we heard earlier from John Bolton, former U.S. ambassador to the United Nations. He spoke with Bloomberg's Balance of Power host, Joe Matthew and Kayleigh Lyons. I don't know what you make of this rhetorical dance that we're hearing about the extent of damage, starting with President Trump suggesting that Fordow was obliterated. We've heard more tempered comments from the chairman of the Joint Chiefs and other analysts who are looking at this, including the IAEA. Did we go far enough?

Well, I don't think the job is finished. I think it's very difficult to make evaluations of how effective we've been, for example, at Fordow, which by definition was under a mountain. And it's very difficult to see inside. But my guess is that what the chairman of the Joint Chiefs, General Cain, said is accurate, that there was severe damage. We'll be checking further and seeing what happened.

There are a lot of other pieces, though, that need to be put into play here. We know -- we have seen from overhead photographs that during the 60-plus days of negotiation that President Trump offered, the Iranians did a fair amount of work trying to move perhaps uranium stockpiles, perhaps sensitive machinery out of some of these key target areas. We may or may not know where that is, but I don't think this is over yet. Just on the mission

destroying these three sites. Well, and on that mission, administration officials have maintained today that the objective was solely to focus on Iran's nuclear capabilities, that this objective was not regime change. But, sir, even if it wasn't the objective, could that still be the end result? And how?

Well, exactly. And even as we just heard, the president has been tweeting about regime change. I mean, I think regime change has to be the objective, because the ayatollahs are never going to give up their pursuit of nuclear weapons. They have to be forced out of power. That's the only shot we have at really lasting peace and security in the Middle East. And a strike like this and potentially others and certainly Israel's ongoing attacks, I

can disrupt the regime, can destabilize it. Look at the choice that the top military officials and key ayatollahs now have to face after the U.S. attack. They've been beaten badly by the Israelis ever since Hamas' attack

attack on -- out of Gaza on October the 7th, 2023. Now they have to make a choice. Do they want to take on a second military adversary in the form of the United States? They may well do it. Look, it's a regime run by medieval religious fanatics. They may well retaliate against the United States, but they would be making a big mistake from the point of view of regime survival.

Well, when we consider the day after, whether it's an attack on the Al-Assad air base, as we saw after the killing of Qasem Soleimani, maybe against Bahrain, the home of the Fifth Fleet, maybe it's something we're not thinking of here. What would be the U.S. response? What should it be?

Well, I think there are three categories of possible targets. One, obviously, is more attacks on Israel. Second would be attacks against the Gulf Arab states, the oil-producing nations of the Gulf. And third, on the U.S., deployed military forces, our consulates, our embassies, private American citizens in the region, and terrorist attacks against Americans and others around the world, including in this country.

Obviously, our first concern is the Americans, but we're going to do everything we can to defend Israel. And I think we should make it clear to the Gulf Arab states and Jordan and Egypt that we'll be defending them, too. We have a common interest against this Iranian threat. And it really, at this point, is much harder for Iran to do what they might like to do, given the

pounding that they have been taking from Israel, given that their terrorist proxies, Hamas and Hezbollah, have been badly beaten. Their key ally, the Assad regime in Syria, has fallen. This is not the Iran it was on October the 6th, 2023. That's for sure.

Well, as we consider what capabilities Iran may have to retaliate militarily, what if it just is in the form of Iran no longer cooperating or participating in, say, the nuclear nonproliferation treaty, no longer allowing IAEA inspectors to monitor what Iran is doing? Even if we may have diminished the threat of Iran's nuclear capability in the short term, does that not potentially risk, if they were to exit that agreement, much greater danger in the long term?

No, it wouldn't make any difference at all. They've been violating the Nuclear Nonproliferation Treaty for 25 or 30 years, as it is now, because their commitment under that treaty was not to seek nuclear weapons in any form. And that's exactly what they've been doing. So withdrawal from the treaty is just meaningless. And as for the IAEA, look, it's been excluded from key sites, the weaponization activities and many others,

for quite some time. IAEA is a good agency. I have a lot of respect for it. But it's not an intelligence agency. Frequently, the most important information that the IAEA deals with, we have given them. Iran's parliament has voted to close the Strait of Hormuz, as you've heard. You may not take that seriously, John Bolton, but I wonder what our capability would be. If we see Iran begin to lay mines, could we stop that? Or is there another way that they could close the Strait?

Well, there are a number of ways they could try and do it, and that's why we have put substantially greater naval assets in the region more on the way. This is something I think that may be more bluster than anything else. It can raise the level of danger.

But we're fully aware that this has been a possibility. And if they try it, it won't simply be clearing mines away from the Strait of Hormuz that we do. I expect we would put much of the Iranian Navy on the bottom of the Red Sea and we would be striking other targets inside Iran. This is a no-win proposition for them if they up the stakes that way. All right. John Bolton, former U.S. ambassador to the U.N. and former national security advisor under the first Trump administration. Thank you.

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. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place, from office supplies to IT essentials and maintenance tools.

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.

Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. We're seeing market reaction to the U.S. attack on Iran's three main nuclear sites. Stock index futures are down, crude oil prices are higher, and treasury bonds are being boosted by some haven buying. For a closer look at market action, I'm joined now by Gene Goldman. He is the chief investment officer at Cetera Financial Group. Gene joins us here in our New York studio. Now,

Nice of you to drop by on a Sunday in the U.S. We're focused very much on the developments with respect to these U.S. strikes on nuclear targets in Iran. I'm curious as to how you're thinking about this right now. Sure. I think if you think about the weekend, obviously the U.S. hit Iran and investors are hitting the brakes on the markets right now.

And this is for us, we're not saying this is any type of, you know, this is just a detour, not any type of derailment. What I mean by that is, yes, this what we're seeing play out is a classic market playbook. We're seeing, you know, safe haven investments rise, gold, dollar, for example, U.S. equities are weaker. We see some overnight futures, of course. We also see treasuries. We do think the

The yield curve will flatten a bit. We especially saw upward pressure in short-term yields. Downward pressure as potential recession worries start to push down lower yields. Oil, of course, up 2% to 3%. Everything is playing out as we expect. The big question is what's next? What's going to happen after this? Does Iran shut down the Strait of Hormuz? I mean, I don't think they will. I mean, 20% of oil goes through that Strait of Hormuz. China is going to push back politically. The U.S. will push back militarily or politically.

Does Iran attack U.S. interests in the Middle East? With all that said, though, we do think any pullback is going to be a buying opportunity. Because you think about this, we've pretty much eliminated a terrorist threat. We've pretty much eliminated a nuclear threat. And you take all this together, if you look at the fact that geopolitical risks and geopolitical uncertainty in the last nine big events

The S&P 500 was positive about a year later in seven of the nine. We're not too worried. We're taking this as a buying opportunity if markets modestly pull back. So do we have to be prepared for oil prices remaining at higher levels? And if you look at that in concert with...

the inflationary risk, let's say, of tariffs. Are we in an environment right now where stagflation is still a threat, which is to say that we could see an upward tick in inflationary pressures and maybe declining growth or no growth? That's a great question because we do think inflation is going to rise. I mean, we haven't seen the effect of tariffs yet in terms of economic data. We have seen, as you know, when tariffs first come out, they tend to be

pretty much deflationary because you have demand destruction and you have pressure on economically sensitive commodities, oil, copper, for example. But now this puts a little bit put upward pressure on oil to an extent. But remember, we have significant capacity in terms of oil. You know, you look at, you know, the amount of oil that we are producing, the amount of oil that we're drilling, the amount of oil we can export. So I'm not too worried about this. Plus, if you look at the U.S. strategic reserves, we bought a lot of oil over the last few months in anticipation of this. So there was some, I think, advance warning in terms of we were buying a lot of oil in advance.

All this together, we do think inflation does rise. Because I do think, as Powell said last week in his press conference, he said that we're going to get some data in July in terms of where inflation is headed. And I do think some of those July data points will be a little bit higher than expected. Not the headline inflation, but more the core inflation when you take out food and energy. I do think the tariffs will finally work their way in. And at the end of the day, one of our key themes is that we've said throughout the year, we don't think the Fed cuts everything.

as rates as much as they said they would. So right now they're pricing in two, the market's pricing in two. We think zero one for this year. They should because the economy is weakening. We get that, but the inflation is a bigger worry. So we heard from Fed Governor Chris Waller last Friday. He seemed to set the table for the possibility of a July cut. Is that premature, do you think? That's way premature. I think, think about, you know, while obviously I'm going to keep Paul in this a little bit. I mean, he's grappling to be the next Fed chair.

And if you look at some of the odds, there's an 80% chance he becomes a Fed chair to replace Powell next May. At the end of the day, though, he's one person, one vote. And I do think even you saw

Daily San Francisco's daily came out Friday She also said we need to wait on data and if you listen to the J Palace press conference all his key points were we need to wait we need to be very data dependent they analyze the data focus and wait because I as I do believe I know the Fed has made a lot of mistakes and I've called them out a few times I do believe that they get this right that inflation is actually rising and the Fed can't cut races in this environment so fear mentality right now is by the dip and

Are there things on your shopping list, if there is a significant pullback in a sector or an industry group, that you would be a buyer? Yeah, I think if you take a step back, how do you get yourself set up for it to be in a good place when markets are volatile like this? Number one, be diversified. Number two, focus on fundamentals. So fundamentals, focus on secular themes. Number three, focus on active money management, especially during volatile periods.

And four, as an investor, focus on policy shifts. That's how you should be situated in an uncertain environment. Now, how do you take advantage of this? To your question, our favorite sectors include technology. I mean, really, technology, especially AI, artificial intelligence, especially cybersecurity, all those events are going to be driving earnings growth on a go-forward basis. Financials, we do think the economy, yes, there's some weakness in the economy, but I think it's a little over-exaggerated in some of the banking numbers.

And lastly, industrials. We've liked industrials for a long time. Geopolitical risk is increasing. It's a good opportunity for industrials. - How are you exposed offshore, if at all, right now? - Yeah, we have non-US exposure through some international growth, international value, and some emerging markets.

Those are more diversifiers. The whole thought that the US is, the US exceptionalism is dying, we don't believe that. The US is gonna be the biggest, the best, I guess, I'm really bad with mixed metaphors. It's the best house in a terrible neighborhood. We have high valuations, all that stuff taken together. I think it's exaggerated in terms of the US exceptionalism actually weakening. I know the dollar has weakened about 12, 13% this year,

But if you think about next year, our earnings growth, our economic growth looks better than Europe, looks better than Asia, especially Japan. If you look at...

Our average age, our average age is younger than Europe, than also in Japan. And also at the end of the day, you have better economic growth. And I do think, I've talked about this when I was on your show last time, we do think we win the tariff war. We do think we win the tariff war against the other country. At the end of the day, you think about this, you look at tariffs. We are not going to get the full, you know, tariff surplus that, you know, President Trump want. But at the end of the day, we'll be in the right direction. And those less tariffed

rates will actually help our economy. And if you look at 2026 earnings growth estimates for the S&P 500, they're actually rising in this whole environment. This is the fact that we do think a better tariff environment for U.S. companies. So I hear the case that you're making to be long U.S. equities right now. Are you avoiding the bond market? Yeah.

Are there opportunities there? Oh, no. So let's just say for a 60-40 portfolio, we have 40% fixed income. But what we are avoiding, we're avoiding high yield. We think high yield is super expensive. Spreads are super narrow, not pricing any bad news. Within fixed income itself, we love duration. We love high quality treasuries, high quality corporates. The reason we do is that we do think the treasury yields are going to stay between, say, 4% to 5% for some time.

the peak for treasury should be about the year-over-year nominal gdpus growth that's about 507 last time i checked and that's sort of the peak in terms of where rates should be for the 10-year treasury you know we're hovering around there right now we'll see i mean and also we do think we've increased duration we do think yields are going to come back down eventually we also think that the fed

maybe come a little bit too, you know, they've said they're very, not no longer preemptive, but much more reactive. That puts the question of a potential need to accelerate rate cuts next year. I know the Fed came out in their dot plot and said, we cut rates only once and they reduced that from two to one. I do think they cut more next year and less this year. That's a good play for duration. - I'm wondering if you're focused at all on the fiscal situation in Washington, the big beautiful bill. Right now it's being hammered out in the Senate.

This may be something that misses the July 4th deadline. I think that's highly probable right now. Is it part of the conversations that you're having at your firm, whether or not we get the kind of tax cuts to the extent that the market was preparing for? Is there anything in this bill that you're concerned about? Well, I mean, obviously the big sticking point is assault tax. We're watching that very carefully. We're also watching where do

the Republicans and Democrats pay for this. Where does it get paid for? But the good news is that if you look at tariff revenues, tariff revenues are likely to be between 250 to 400 billion dollars. That's a good sort of pro-growth opportunity. And if those tariff revenues are recycled back into the economy in pro-growth areas like tax cuts or like some type of stimulus,

That's good. That helps us avoid any type of recession. We're optimistic about that. And we do think you combine a potential for a big, beautiful bill plus second half deregulation that goes back to one of our favorite sectors, financials. Deregulation will definitely help financials and help our whole industry.

But it was only a couple of weeks ago that there was a tantrum of sorts in the bond market on concern about higher deficits. That doesn't trouble you at all? It doesn't trouble us right now. I mean, unfortunately, just like infrastructure spending, just like deficit, this will continue to be kicked down the road, unfortunately. We're watching it carefully, but at the end of the day, this will continue to be kicked down the road. Unfortunately, I don't think this gets solved anytime soon. What is the biggest concern that you are hearing from your clients right now?

Biggest concern is valuations. How do you invest in the stock market trading 22 and a half times forward earnings? And we tell our clients and our advisors, listen, everything is priced to perfection. Any type of hiccup, any type of Fed uncertainty, any type of misstep from J-PAL or from a geopolitical risk.

it's saying the market is setting itself up for a pullback for a maybe another correction. But what we also say is, listen, we're continuing to buy the dips because you think about our economy, we have potentially 9% earnings growth. We also have the Fed not raising rates. Fed is on our side. We also have the fact that we have a

pretty solid labor market. I know it's slowing down. A solid labor market with the fact that you have global stimulus in our global economy and you have inflation moderating to an extent. Take that together. We do believe that stocks will be higher a year than they are right now. We'll leave it there, Gene. It's always a pleasure. Thank you so much. Gene Goldman there. He is the chief investment officer at Cetera Financial Group, joining us here in New York City 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.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Hiring is about people, not just algorithms and online searches.

And with more than 870 locations, the people in your local Express Employment Professionals office are ready to support your workforce. Visit ExpressPros.com. Whether you need contract workers to keep up with changing demands or your next full-time team member, Express has a network of candidates ready to work. Go to ExpressPros.com to find a location near you. This is an iHeart Podcast.