By coinnews 
00:00 Speaker A
Stocks soaring today in the wake of that US-China trade truce. For more on the rally and what it does mean for investors moving forward, let’s welcome in now, Christian Chan, Asset Mark chief investment officer. Christian, great to see you on set.
00:12 Christian Chan
Thanks for having me.
00:13 Speaker A
So, the US-China trade truce we’ll call it, Christian. I mean the markets clearly very happy about it. Are you as excited about what you’re reading today, the headlines, the reports, Christian?
00:21 Christian Chan
You know, I am cautiously optimistic on what this means. And in my view, what this really means for markets is that the worst-case scenario is largely taken off the table. And when I think about market expectations, I really do think about the probability weighted view of what might happen. And if that worst case is off the table, then I think there’s really good reason to rally.
00:41 Speaker A
But rally from here, I mean, as I was talking about earlier, if you look at the year to date now for the S&P 500, we’re not much changed. We’re down like less than a percent. So, yes, the worst-case scenario is off the table. But if you look at where we were January 1st, there are now 30% tariffs on China, there are 10% tariffs on everywhere else in the world. So does a 1% decline in the S&P 500 year to date price that in?
01:08 Christian Chan
You know, I I think it actually prices in, um, a potential, you know, a potential range of outcomes. And when I kind of think about what happened over the weekend, again, that worst case is off the table. And as long as companies can adjust their supply chains over time, um, I think they’ll continue to be able to grow earnings and that I think provides a little bit of a an off ramp if you will for the equity markets in order to continue to grind higher. So when I think about tariffs, yes, we were at call 25% before this weekend and now we’re at roughly 10% kind of a weighted average tariff, if you will, and from the US perspective. All of last year, we were at about two and a half percent. So there’s definitely an increase, um, at the impulse of stagflation, right? Lower lower growth, higher inflation, but I think the economy and the data so far has shown us the economy coming into this year, coming into Liberation Day was strong enough, I think, that we’ll be able to avoid a recession, or at least a deep one. And I think a deep recession is is almost off the table if we can get an agreement hammered out with China.
02:24 Speaker A
So, Christian, when you when you saw those reports today, did that change in any way or affect your views of the Fed, how many times they cut, and when they cut?
02:37 Christian Chan
Not for me, but I think markets clearly, you know, I think we were pricing at four cuts as, you know, as recently as two or three weeks ago. Now we’re at about two cuts, which is what the Fed forecasted all along. And our read of last week’s, uh, you know, conversation at the press conference with Powell was that they were going to be very patient in terms of of of cutting rates and using really all three mechanisms. And I think Did that did that did that decision make sense to you? Did you think that was the right one? Yeah, I think it did. I think it did, because you never know what’s going to happen in these negotiations. I don’t think anybody thought that this would necessarily happen, um, you know, in in the subsequent weekend. Um, but I think you know Chairman Powell will not only decide, you know, to raise or to lower, but he’ll also think about the pacing, right? How long he waits between each Fed action. And then also the magnitude. Is it one or is it two?
04:00 Speaker A
Um, so if you’re looking at where to position in the markets right now and you’re looking at some of the groups that are rising today because they’re not going to be as severe an outcome as thought, you know, retailers we’ve been seeing, tech we’ve been seeing. Do you go into those areas today given that there’s relief on some of them, or do you sort of position not trying to guess what’s going to happen with the tariffs?
04:28 Christian Chan
Yeah, I would be inclined to lean into some of those areas, including technology and semis that rallied really strongly on the news today because not only do we have potentially some trade tension relief, but we also have tailwinds that we saw, um, throughout the first quarter. So when you look at the first quarter GDP report, we saw good investment spending on largely technology and AI development, which I think will be a great tailwind for those types of companies.
04:55 Speaker A
What about the sell America theme, Christian? I was hearing so much about that just a few weeks ago. Were you ever a believer in that?
05:03 Christian Chan
Um, you know, at the margin, I was more a believer of a a very gentle rebalancing of dollar-based assets around the world. If you look at central banks around the world, they’re overly allocated to US dollars, I think, from most people’s perspective. Um, so what we’ve seen really over the last five years is just a rebalancing away from being overweight to the US dollar for a lot of reasons.