How do you read the result of the Fed policy because Donald Trump is demanding a reduction of 2.5% from the Fed. But the Fed verdict is to keep the rate unchanged. How do you read these rates for now and read instructions going on?
David Chao: Certainly no surprise on the result of the FOMC meeting yesterday. What was characteristic of the US economy’s Fed six weeks ago remains, the US economy is right, but still concerns about what the tariff can bring. Back in 2018, during the first tariff war, we really did not see any price level or inflation from the tariffs, and that was because companies had absorbed many tariffs instead of raising prices. But they also released some of their employees. So, as the tariff system continues their way through the system, there is a big question, will customers be the victim or will suppliers and stores do so?
I am interesting about the reaction of the world markets on what is going on in West Asia. They are getting away and ignoring what is happening. The only market that is most sensitive is crude and properly, but not equities.
David Chao: Well, I think what has been lost in the equity market has been withdrawn a lot and reflects the constant risk-feeling. Now, bond markets are more careful with the financial situation in the US and the potential steady winds facing the US economy. But we have just come out with our mid -year view and we’re asking for diversity. We think investors are overly open, the US The equity market or the US de Dollar Lar focuses overly in some wealth and we think there are currently brilliant opportunities in European equity or Asian credit.
Do you want to give you opportunities and of course, Asia’s detail in Europe?
David Chao: In Europe we continue more financial stimuli in places such as Germany, UK, and financial stimulation. The ECBA has recently reduced rates. The equity market should be accelerated at this further liquidity. The defense costs that Germany added are likely to flow towards factories and materials, construction and structural facilities. We mostly like European equity at this level.
In Asia, emerging markets have moved up developed markets over the past 10-15 years, while the US de Dollar Lar is weakening, local central banks reduce the rate and the oil is below $ 80. Therefore, it makes a good case for investors to invest in India. If the West Asia conflict spreads in the vast area and the oil goes up to $ 80, which can definitely upset the apple cart for Indian equity and Asian equity.
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When you talk about diversity, it is also about diversity in other property categories? Is it just regional Call or is it an asset class Call?
David Chao: This means that overwhelming focus is far away and we know that foreign investors in the U.S. Focus overly in equity. US for MSCI Global Index The market cap concentration in stocks is about 70-80%. The US economy is only 20% of the global economy. I think it makes sense to reduce concentration, and look at other places. I am not saying that investors should sell the US or the wealth of the US is becoming less attractive, I think widespread diversification in one’s property allocation is a sensible step, especially in this time of uncertainty.
When we look at some big signs, yes, the Iran-Israel conflict, the story is developing, the big event with the Fed that is now over, but the next event is a tariff deadline, maybe we are approaching July 9th. As we get closer to this date, do you believe that the markets can once again be instantaneous or the investors have digested that the worst in terms of tariffs?
David Chao: I think investors are a little more related to tariffs. I don’t think we are out of the woods on tariffs yet. We had to announce a deal every day during this 90-day reconsideration. We just got three. It is unlikely that most countries will be able to sign the deal before the deadline next month and that could mean more negative tariff headlines. But finally, I just want to remind everyone that the tariff is a near -term overhang that we are likely to move backwards this year. This is when investors will start focusing on fundamentals on corporate earnings. There are many bright spots in China, AI or Indian equity or European defense companies or Asian credit, there are brilliant opportunities.
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