Daybreak Weekend: US CPI, Paris Nuclear Talks, Vietnam Elections

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This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we
looked to some key inflation data and the US. I'm
Nathan Hager in Washington.
I'm Caroline Hepkit in London, where we're looking ahead to
talk in Paris about sharing France's nuclear capabilities with other
European countries.
I'm Doug Chrisner looking ahead to legislative elections in Vietnam.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Good day to you. I'm Nathan Hager. We begin today's
program with some key inflation data in the US. The
Consumer Price Index for the month of February comes out
on Wednesday at eight thirty am Wall Street Time. For
a look ahead to the numbers and what they could
mean for Fed policy. We're joined by Bloomberg News senior
strategist Edward Harrison, the author of Bloomberg's The Everything Risk newsletter.
Ed It's great to speak with you, And of course,
after we just got that big surprise on February jobs,
what's the risk of a market surprise on the inflation front?
Hey, Nathan, I think the risk is there. Certainly, the
risk is probably less there for CPI than it is
for the PCE index, which is the one that the
Fed really tracks more closely. Given the fact that we
have this war in Iran, I think they might look
through some of the gasoline prices and look towards the core,
you know, not including food, not including energy. And so
the numbers to look.
For are the core for.
CPI, which is the Bloomberg Economist estimate is at two
point four percent on average, and the estimates that we
have for the PCE core, however, are three point one percent.
So that's the number that to key in on for
this week, because that's the highest number of the numbers
that we're looking at.
Why are we seeing that dispersion ed between what the
FED keeps its zion and what really matters to the
American consumer. The CPI number that we're getting this week.
Yeah, well, you know, I think a lot of it
has to do with the different measures of that go
in that play into those particular indices. And what the
FED said in the past is that the PCE number
is more reflective of the overall trend of the economy.
And one of the reasons that they're using the core
as the number that they're watching more closely is to
rule out vital food and energy prices that irrespective of
what's happening in Iran, are going to move around irrespective
and so you know, they want to look at what's
the trend level. And if the trend levels three point
one percent it was three percent in the in December,
which is the last reading that we got for PCE,
then that's really not a level at which they would
feel comfortable cutting interest rates. Suddenly we're starting to think about,
you know, an extended hold and potentially the next move
being a rate hike, not a cut.
Even after that surprise drop in jobs numbers that we
saw just this past week in the February number.
Yeah, so that number that we saw this past week,
it points to what I would called stagflation light. That
means that not only do we have inflation, but we
also have slowing growth. And this is something that's very
difficult for the FED to deal with because you know,
they're looking at inflation and their ability to stop inflation,
but then when growth is slowing at the same time,
their hands are tied because the inflation is already elevated.
If we do continue to see a prolonged conflict in
the Middle East, could that have knock on effects on
overall inflation if we continue to see energy prices elevated
like they are right now.
Yes, I think it could, Nathan, I think that if
you have a protracted conflict, it could add to inflation expectations,
not just for the next year, but it could get
you a sense that inflation is trending higher. Since we
already have this core PCE number that I've been talking
about at three percent, suddenly, you know, mindsets change and
people start thinking this could be in for the long
haul as sort of an inflationary number that we're going
to have. Let me just say, by the way, that
we've been above the fed's target for five years now,
so we're getting to a point where that inflationary mindset
starts to creep.
In, which raises the question I think you're alluding to
about whether inflation expectations may be coming unanchored now, Is
that what you're getting at?
Yeah, that's exactly what I'm getting at. What we've seen
thus far is that inflation expectations haven't been unanchored. That
even in the beginning stages of this particular conflict in
the Middle East. You know, if you look at break evens,
that's the number that gets you between inflation protected securities
and treasuries. And if you look at swaps rates in
the market that show you, you know, what expectations are
in two years or five years. You know, the longer
term ones, five years, ten years, those expectations have remained
a solid It's when those go off that the FED
is most concerned.
Thank you, Ed, As always, that's Edward Harrison, senior strategist
at Bloomberg News, author of Bloomberg's The Everything Risk newsletter.
Let's take a look now at some stocks making news
in the week ahead. I'm Nathan Hager, joined by Bloomberg
Equities reporter Matthew Griffin. On another week where we're going
to see some pretty big names reporting earnings starting on Tuesday,
when we'll be in the cloud with Oracle. Could we
see a benefit for Oracle from the AI spending boom, Matthew.
Well, Nathan, I think that is the question that is
going to be front and center of investors' minds because
the huge outlays on AI from Oracle have been greeted
enthusiastically on Wall Street in the past and have been
punished on Wall Street. I mean, you just look at
what the stock did in twenty twenty four, up sixty
one percent, a twenty percent boost last year. All of
this AI spending, their move to position themselves as an
AI cloud provider, made Oracle a darling on Wall Street.
But after that you have had questions arise about what
the return is going to be on this spending. The
stocks now down about fifty percent from its September record high,
and you actually saw the shares plunge in December after
the company raised its spending on data centers. So they're
reporting in a moment where this is really a question.
And the reporting in a moment where we've just heard
in the last few days that Oracles has plans to
cut thousands of jobs just ahead of this earnings report,
what more do investors want to see from Larry Ellison's company?
Matthew, Yes, I think they're going to be looking again
at this cost benefit payoff. I mean, you have analysts
looking for revenue growth here they see just under sixteen
billion dollars of revenue versus fourteen billion in the year
ago quarter. And I think that's also at the heart
and center of whether these tens of billions of dollars
of capital expenditure are going to pay off on the
top and ultimately the bottom line. You see that in
the reports of some of the Magnificent seven companies this quarter,
where again it's it's the question not just of are
you spending are you an AI player, but are you
generating revenue to fund those expenditures. The job cuts are
actually aimed at freeing up money to pay for capital
expenditures for the AI boom. That's what people familiar with
the matter have told us. So again, I think investors
are going to be looking for both sides of the
ledger there.
And we're gonna hear another side of the AI story.
I think probably on Thursday when Adobe reports. I gotta
think this is one of those stocks that's been caught
up in the question about whether software companies are going
to be hit by the AI disruption.
Yes, Nathan, Adobe shares have tumbled actually during what investors,
the atalysts have started to call these SaaS apocalypse, this
giant selloff in software stocks. Adobe's shares again, you think
about this happening in the last couple of months, but
these concerns have really been swirling for a while. Adobe
down about twenty percent year to date, but actually got
a really lukewarm reception on Wall Street back in December,
even though they had a pretty upbeat forecast, because you
already had people questioning do the numbers matter now if
what you do can be replicated by cheap AI tools?
So the commentary on that may be as important, you know,
whether the company sees itself as shielded as any actual
number they report.
And has there been a question as well about whether
the AI tools that Adobe says it has are going
to have their own payoff. It's been kind of dealing
with that struggle as well, hasn't it.
Yes, absolutely so. I was looking at what analysts were saying,
and what Piper Sandler says is investors are going to
be honing in on metrics related to how much money
the company is making from AI. Now, they do see
that the stock may be de risked here. The company
has given guidance, you know, taking a step back again.
The shares have slid, and so they actually see that
there could be some upside here if AI adoption is
better than expected. But yes, I think you're absolutely right.
That's a key question for investors.
And along with those marquee names in the tech space,
we're going to hear from a big name in retail
when Cole's opens its books. I guess the question here
is how's the consumer doing?
Yes, absolutely, Cole's is the latest big consumer name. They
are estimated to report next week. And you know, the
question of the health of the American consumer is really
another thing that's front and center for investors' minds. As
if they didn't have enough to think about, you know,
you think about us unexpectedly shedding jobs. You've had this
idea that consumers are trading down, but actually Coals so
far has held up against this backdrop. They raised their
full year outlook in November because consumers had shown that
they were willing to spend on brands that they really wanted.
And so again, so far Cole's has been a relative
winner here. But I don't think investors see that as
a guarantee, and they're going to be looking closely at
consumer and I think again at the commentary from executives
about whether the consumer's under pressure, what that looks like.
Yeah, another a very busy week once again on the
earnings front. Thank you for this, Matthew, great having you
on with us. That's Bloomberg Equities reporter Matthew Griffin, And
coming up on Bloomberg day Break weekend, we'll look ahead
to Tuks in Paris on spreading France's nuclear umbrella across Europe.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Nathan Hager
in Washington. Up later in our program, we look ahead
to legislative elections in Vietnam. But first, Europe's defense debate
is entering a new phase. For decades, the continent has
relied on the US nuclear umbrella, but with war on
Europe's borders, escalating tensions in the Middle East, and growing
uncertainty about America's long term commitments that calculation is shifting.
It's a conversation that exposes deep divisions across the block
over defense spending, strategic autonomy, and how far Europe should
go to secure itself. On one hand, countries like Poland
want to ramp up efforts aggressively, whereas Spain sees no
need to meet US set NATO targets. Next week, European
diplomats gather in Paris to discuss whether France's nuclear deterrent
could play a broader role, including the possibility of stationing
nuclear capable jets in allied countries. Let's get more from
Bloomberg Daybreak Europe anchor Caroline Hepger in London, Nathan.
In Europe, only France and Britain have access to nuclear weapons,
but that may be about to change. The wars in
the Middle East and in Ukraine, and Europe's relationship with
the United States has made other countries think again about
their nuclear options. Next week, talk start in Paris about
hosting nuclear capable jets in allied European countries. It's part
of a wider conversation about how Europe defends itself. Those
discussions have only been accelerated by events in Iran. We'll
joining me now to discuss but INDs Pyotr Skolamowski, who
runs our coverage of economies and governments in Central and
Eastern Europe, from Warsaw and Rodrigo Arijuela, our bureau chief
in Spain. Welcome to both of you. Thank you for
being with me. I want to get a sense of
how your two different countries represent really opposite sides of
the debate inside the EU on defense spending. Pyota, Poland
has expressed this wish for more autonomous capabilities. Does that
mean nuclear weapons?
Yes? Indeed, so that's probably what Polish leaders have been
trying to say, and we've been hearing it for quite
some time. So even the previous president Andre Duda expressed
this interest in Poland acquiring or taking part in what's
called nuclear sharing program with the US. The idea was
rebuff but then now coming back and the new president
said just last month that that he would be in
favor of Poland looking and developing its nuclear weapons. We
heard from Prime Minister Tusk as well earlier this month,
pretty much saying we eventually Poland will look at developing
these autonomous capabilities, meaning nuclear bomb Whether and when it's
going to happen, it's obviously nothing imminent at this point.
What Poland is looking at, that's what the government seems
to be focused on, is is working with France. They
already have a treaty with France that was signed last
last year that sort of stipulates the possibility of working
together in sharing capabilities. And Tusk was really enthusiastic right
from the start when when Marc Kron floated this idea
and again repeated it now during recently that that that
France will be willing to share it's its nuclear capable
jets and stationed in another count. So they're definitely willing
to take part in that in that endeavor.
And of course this is as Poland spends a great deal,
is a significant defense spender in Europe.
Yes, indeed, so obviously that comes on top of the
fact that that Poland is spending almost five percent of
GDP on defense. There is obviously a certain differensive opinion
between the President and the Prime Minister how the money
should be spent. Polish president is very much in favor
and he's been endorsed by Donald Trump. He's very close
to Tumaga movement in the US, and he's all in
favor of Poland spending money in the US as it
has been spending previously to buy weapons. On the other hand,
Polish Prime Minister is definitely gravitating towards some form of
European solution when it comes to defense spending, and he
thinks in terms of if US is really diverging and
trying to the couple from from Europe, then Poland should
take part in trying to work on some form of
joint solutions when it comes to defense in Europe. So
that's where the differences are, but it does not impact
the fact that, you know, where we have the consensus
of the fact that we need to spend more and more.
Yeah, indeed, it's quite a different picture, though with different ideas.
In Spain, Rodrigo, Spain's leader Pedro Sanchez, is increasingly seen
as one of the most aggressive voices pushing back against
the war in Iran. I suppose I'd like to understand
from you, firstly why that position that Spain has taken.
So that position is not totally surprising given his position
on other issues in recent years. He also took a contrarian,
if you want, position compared to other Western countries when
it came to Israel and Gaza, and he his government
also took a very strong position against increasing the NATO
spending targets. So this is kind of, you could say,
the third within that trend, the third time he does
something like this. In this specific case, what the government
has argued is that the military basis that the US
operates from in Spain, there are two of those, They've
been used for over fifty years, and there are many
used as a logistics supports, bases for refueling and things
like that, and the government has the Spanish government has
said those bases cannot be used for any attack operations.
So they don't want the basis to be used for
American military to use as a touching stone to attack Iran. Now,
what is the argument to justify that. What they're saying
is that the attack against Iran has been unilateral from
the attackers Israel and the US, and that it has
not been formed within the UN Charter or any international laws.
And so they are saying that any operations of this scale,
any wars of these of the scale, have to follow
international law and that they cannot allow their bases to
be used in operations that are outside the international order.
And that is the government's official line on this issue,
that they want to follow the rules and that the
Americans are not following them and therefore they cannot partner
with them.
Okay, I mean there has been in some sense is
a similar sort of difficulty for the UK kids some
of the Prime minister here talking about allowing US military
to use British basis for defensive strikes against ira a
debate about what that actually means. Look in terms of Spain,
I mean again, Pedro Sanchez's views sort of chimes also
with the fact that Spain has not really galvanized defense spending.
It's been quite resistant to that idea of spending a
deal more, which has been what President Donald Trump has wanted.
Why that thinking, do you think in Spain?
Where do we go?
Yes, I mean quite resistant. I think is in fact
an understatement, because they are the only NATO member that
has said we are not going to do this, and
there is no way we're changing our position. And while
everybody else has gone to the five percent target that
the Americans came up with, they have said that they
were sticking to two point one percent. There are two
arguments for this are one that with two point one
percent they can meet all the demands and all the needs,
all the requirements for defensive spending. What they are saying
is that the five percent number was kind of pulled
out of the blue and that there is no actual
justification for it. There is no explanation as to why
that's the magic number, and that if you look at
the military needs, at weapons and all other kind of
military needs, you can cover. I was with two point
one percent in Spain's case, and that's the main one.
The other one is that if you go up to
five percent, you have to start pulling money out of
other expenses, other parts of your budget, and that going
up to five percent without an explanation as to why
you're going to that number, means that you'll have less
money for things such as social welfare, healthcare, education.
That is the.
Government's official line on this, and that is their position.
If we have to put money into this, we'll have
to take it out of other places, and there is
no reason that has been given to us as to why.
We have to do that. Okay, so that's the Spanish view.
Meanwhile, back to Poland Pyota and what about these nuclear
power jets, because there's discussion about having nuclear capable fighter
jets being stationed elsewhere in Europe, not for Spain, but Germany,
the UK, Belgium, other countries and also Poland are looking
at this. You know, Manue Macaw has been talking about
and there's going to be a meeting to discuss this,
and what do you think might emerge from that?
Yes, indeed, so Tusk has been very keen on the
idea right from the start when it was first floated
i believe last year, and then obviously now officially sort
of communicated by by Macron. So indeed there's a there's
a meeting in Paris nuclear about nuclear energy. But what
Tusk also said is that we assume on on the
sidelines of that meeting there's going to be more consultations
going on about about this idea. He also mentioned that
when it comes to this this plan, he will be
in touch or or will be communicating with other allies,
especially from the Nordic region, where cooperation between Poland and
Nordics and all the countries around the Baltics have been
growing tighter there's definitely willingness on the on the Polish
side to to engage in that that plan. Clearly, the
experience that they had with the previous idea of nuclear
sharing with the US, which was rebuffed, told them that
at least that route is closed. And it sort of
speaks or fits very nicely in how the government sees
its cooperation and how it wants to build its its defense.
It sees the US sort of disengaging, although it wants
to keep US close. Still, Poland still hosts ten thousand
around ten thousand troops on its soil, but it wants
to have or be part of the of the cooperation
with Europe and and sort of the fact that these clear,
enabled or capable jets will be stationed in Poland is
very much something that that Pland will be keen on it.
But obviously the devil is in the details. It's it's
hard to say how quickly it could be done. And
the other question is purely political in that sense. Obviously,
France is going into election next year, a Manual Macron
is not running in this election, and the post show
that the fire Right could take power, and that's a
big question mark for everyone in Eastern Europe as a
matter of fact. So if we commit to that idea,
what happens next after the macron is gone, and would
that plan change? And if we over commit, would that
mean US will not be willing to work with us
on that project in the future. So there's a lot
of issues here to consider before it all happens.
Yeah, I think it's going to be interesting to see
where this issue leads. Thank you so much to both
of you for joining me. Bin Begs, Rodrigo Olijuera are
bureau chief in Spain, and Peot Scolimouski, who runs our
coverage of economies and government in Central and Eastern Europe,
are joining me from WARSAW. Really appreciate your time, as
will bring you full coverage then of what happens next
with the discussions around this advanced deterrence, the idea of
these nuclear capable fighter jets maybe being stationed across Europe,
not just in France. We'll see where those discussions lead.
I'm Caroline Hepkee here in London. You can catch us
every weekday morning for Blueberg Daybreak Europe, beginning at six
am in London.
That's one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg day Break weekend,
we turned to Vietnam, where legislative elections are set to
take place. I'm Nathan Hagar, and this is Bloomberg. This
is Bloomberg Daybreak Weekend, our global look ahead at the
top stories for investors in the coming week. I'm Nathan
Hager in Washington. We go to Vietnam next where legislative
elections are set to take place. For more, Let's check
in with Doug Krisner, host of the Bloomberg Daybreak Asia podcast.
Thanks Nathan. Next weekend, voters across Vietnam will be going
to the polls and they will elect deputies to the
sixteenth National Assembly along with members of the People's Concils.
And then on April sixth, Vietnam's National Assembly will convene.
To help us understand what to look for. I'm joined
by Bloomberg's Francesca Stevens. She is our Vietnam Bureau chief.
And Francesca joins us from Hanoi. Thank you so much
for being here. As we know, Vietnam is a communist
country with one party rule, not unlike China. Help us
understand what this election means for Vietnam.
So the background to this is in January we had
the Communist Party Congress and that was when to Lamb
the Party Chief, got elected for a full five year
term as Party chief, and we also understood the Party
Congress that was when he was put forward to take
the position of president as well. And so what we'll
be watching for when the National Assembly meets is if
that dual position is confirmed, and that will be a
significant move for Vietnam, the first time in many years
that the president and Party chief has been put forward
at Congress and then backed by the National Assembly. So
to Lem had previously held the presidency and the party
chief position, but only on a temporary basis, and his
predecessor in Winfu Chong had also held it on a
temporary basis. So that's one of the big things that
we're watching out for when the National Assembly meets, but
it's also when we'll find out who the new Prime
Minister will be again. At Party Congress in January, we
had heard that Layminghun had been tipped to be the
new Prime minister, and he's currently head of the Central
Organization Committee, So we're watching to see if that position
is confirmed as well. Before Christmas, there were many different
rumors flying around in Hanoi as to who would be
getting the different positions. But as we get closer to
April the sixth, we're all watching to see what happens there,
and then once the National Assembly confirms who's in the
top positions, will start to see more of the policy
steps unfold for Vietnam over the next next few months.
I'm curious about the way in which the economy has
been impacted by US tariff policy and whether that has
necessarily been a negative. I know that over the years
a lot of manufacturing moved out of China into places
like Vietnam, and for a while it seemed as though
Vietnam's economy was a beneficiary of that de risking from China.
Can you talk about the overall impact and what it's
been like for the Vietnamese economy.
It was a rollercoaster for Vietnam trade talks last year.
We were all shocked when we saw the forty six
percent tariff that was first announced, but Tolan one applawed
it here for his quick response and jumping on the
phone with Donald Trump, and then we saw that reduced
to a twenty percent deal announced Donald Trump on his
Truth Social in July, but crucially with a forty percent
tariff on any goods deemed to be transhipped through the country.
All through the year, the uncertainty over what was happening
with the trade talks and how that would impact exporters
was the key economic theme here. There were at least
six rounds of trade talks, with teams of negotiators flying
out to DC on a fairly regular basis, and Vietnam
making multiple pledges to buy more American goods in an
effort to reduce the trade gap between the two. The
two sides were said to have moved on from the
initial sticking points, which were around transhipment and how you
define that and rules of origin, and we understood that
the focus had moved to areas such as intellectual property,
sovereignty enforcement. We also saw the trade minister replaced in
the process of the talks, in a sign of the
frustration in Hanoi at how they were going. But despite
all of that, Vietnam's exports to the US only continued
to grow last year, and the massive trade gap that
had initially caught Donald Trump's eye and continued to get bigger.
So on the trade deal front, we now expect to
see a long slow walk on that front. I mean
it's actually hard to see whether one will now materialize
after the US Supreme Court's decision. And so from the
economic perspective, you know, we were expecting to see exports
slow down and actually, in contrast, Vietnam defied that.
So what's the picture on sentiment right now? Is there
a sense of optimism?
There is this huge growth story, and even if it
doesn't reach ten percent, I think that the trajectory for
Vietnam over the next few years still looks hugely positive.
I mean last year it was eight point zero two percent,
and we see so much manufacturing activity in the northern provinces.
Got your fox conno luctuare yu Go Tech making Apple
AirPods I've heard, and watches and you know, Samsung making
and around sixty percent of its phones here. So there
is this sort of huge boom in activities. There is
a lot of bullishness around the direction that Vietnam is
going in from an economic perspective and the growth potential here.
But of course we are also at risk from what
happens in the rest of the world, and you know,
seeing what's happening in the Middle East at the moment,
you know how that's going to trickle through and impact
us here. What happens in the US has a has
a huge impact on what happens here in Vietnam. It's
the biggest export market for Vietnam, and exporters and the
business community know that Vietnam needs to keep that keep
that market open, but also manage relations with China. It's
you know, it's just over the border in the north.
Vietnam imports a huge, huge amount of its raw materials
and production components from China. In fact, it's you know,
it's Vietnam's largest trading partner. So it's heavily reliant on
China for maintaining its manufacturing driven growth as well. So
there's just this this fascinating story here around this domestic
growth story, but also a nation that really sort of
sits in this kind of key geo political position, which
is a position that it wants to expand further as well.
I think what about the equity market in Vietnam. Last October,
as I recall, foot Sea Russell upgraded Vietnam's market from
frontier to secondary emerging status. How is that expected to
impact the market.
Yes, so the decision was announced last year, but it
doesn't actually come into effect until September this year, and
in fact there is actually an interim review taking place
in the next few weeks. We don't expect there to
be any shoes with that interim review. The government has
taken a lot of different steps to try and make
sure that that process goes through. In just a few
weeks ago, the government moved to allow foreign investors to
trade through global brokerages directly instead of with local firms,
and again that was one of the steps that Footsie
Russell had been looking for from the government. Here. It's
been quite the weight for Vietnam to get here. They
were first added to the watch list for potential reclassification
back in September twenty eighteen, but since then big steps
had been taken to bring the market into line with
global standards. That's included things like removing the requirement for
overseas investors to fully prefund equity trades and establishing a
formal process for handling failed trades. So there are various
estimates of how much foreign capital that should attract when
the decision goes through in September. Various estimates from around
three to five or six billion in foreign capital inflows,
but obviously we're waiting to see what happens when that
upgrade happens in September.
Francesca will leave it there, Thank you so very much.
Francesca Stevens is Bloomberg's Vietnam bureau chief. Joining from Hanoi,
we go to Australia next where in the last week
Goldmunt Sachs held its Australia Week Alternatives and Macro Summit.
It was there that we caught up with Goldman CEO
David Solomon. He spoke with Bloomberg's Heidi Stroud Watts. Heidi
began the conversation by asking Solomon for his views on
the Chinese markets. Here's what he had to say.
Chat is one of the.
Largest economies in the world. That's going to continue to
be one of the largest economies in the world.
You know.
At the moment, I'm very focused on the bilateral relationship
between the US and China. I'm looking forward to President
Trump's visit with President chief Its planned for later this month,
the beginning of April. It'll be interesting to see what
come out of that, and you know, whether or not
China and the US can make more progress, you know,
on their bilateral relationship. I think that's important for growth
in the world, and I think it's important for both
the US and China, and I think at the moment
that's fragile, and so I'm very curious to see, you know,
how that progresses. In the meantime, Chinese markets have done
very well in the last twelve months. That's increased capital flows,
you know, into the region. We obviously participate in that,
but we're going to watch those bilateral meetings and progress
in the biladderal relationship very closely.
What would you like to come out in terms of
deliverables from.
I'd like to see, you know, more certainty and clarity
around how the bilateral relationship will work going forward. I
think there are things that the US wants and things
that China wants. I'd like more clarity around what that's
going to look like, you know, not just in twenty
twenty six, but you know, over the coming years. And
I think that's still relatively uncertain.
What are we not talking about enough? I know we've
talked a little bit about private credit.
You don't think it's sort of a systemic.
Risk at this point. I think credit formation around the
world is really correlated to economic growth and economic activity.
I do think that we've gone if I just look
at the US market, which is obviously very when you
talk about private credit, a very very large market the
context of private credit, we've gone a long time without
a credit cycle. We've gone a long time without a recession.
I do think when you have these long dated cycles,
they're a variety of things that happen. One, credit spreads narrow.
Two lending standards. People have more capital deploy they get aggressive,
lending standards deteriorate a little bit due diligent standards deteriorate,
And so we're watching very closely to see if there's
been a little bit too much aggression frothiness in those markets.
But fundamentally, when you look at the underlying credit portfolios,
particularly below investment grade credit, while there have been a
bunch of idiosyncratic events where there have been problems, the
broad portfolios are performing reasonably well. Why are they performing
reasonably well because the economy is doing fine, and it's
very hard to have broad underperformance and a broad diversified
credit portfolio. If the economy is doing well. When we
do have a slow down in the economy, you will
see it. I think because of the length of the cycle,
you probably will find places where the losses are higher
than people expect. We're very, very focused on back leverage
and things that could affect or amplify in a more
difficult economic environment, you know, credit deployment. But at the moment,
when you look broadly across portfolios, we're not seeing things
that are super concerning. That's a completely different issue than
retail participation and retail investors wanting liquidity from what are
fundamentally illiquid products, and so that's getting a lot of attention,
but that's different than the underlying credit portfolios. But I
do think that when there is a slowdown in the
economy or we do get to a place where we have,
you know, a recession, you're going to see losses and
credit portfolios, and you know those losses could be meaningful,
but you know, we'll watch that closely while the economy
is jugging along. You know, that's that's not the primary focus.
That was David Solomon Goldman Sachs CEO, speaking with Bloomberg's
Heidies Stroud Watts in Sydney. I'm Doug Prisner. You can
catch us weekdays for the Daybreak Asia podcast. It's available
wherever you get your podcast.
Nathan, Thanks Doug, and that does it for this edition
of Bloomberg Daybreak Weekend. Join us again Monday morning at
five am Wall Street Time for the latest don markets,
overseas and the news you need to start your day.
I'm Nathan Hagar.
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