00:00Pushping Singh is Managing Economist at the Centre for Economics and Business Research.
00:05Pushping, thanks for joining us on the programme.
00:08Many analysts say Europe diversifying away from America is impossible. Is it?
00:15Well, it's a big question, isn't it?
00:17And, well, you're starting to see a shift right now.
00:20I mean, what we're seeing in terms of the Danish pension funds,
00:24selling with Treasury, we're seeing China as well being a net seller for Treasury bonds as well
00:28over the last nine months, almost close to a year now.
00:31It's more of a structural shift away from the US being a safe haven more generally.
00:37So it's more of a repricing of a concentration and risk in light of what's happened over the last 12 months or so.
00:45But at the end of it, you know, the US is kind of the most in-depth, has the biggest capital depth.
00:50It's such a big economy as well.
00:52I suspect it's going to be a struggle for any continent, less so Europe as well,
00:56to divest away from the US entirely.
00:59Now, Donald Trump's saying the US has all the cards,
01:03but there was backtracking over their tariffs on Europe over Greenland.
01:08So does that suggest that the US is worried about a potential Europe sell-off?
01:14I wouldn't be surprised, actually.
01:16It's definitely there in the calculus of every decision-making that President Trump and his administration are doing.
01:21I mean, the tariffs have had a negative impact on the US economy.
01:25You might not see it in the headline growth rates, but you can see it in kind of the wider consumer metrics that you're seeing.
01:32Consumer confidence is low, prices are rising, and inflation is still elevated.
01:36And, you know, there will be a pushback in terms of the political game and the political side of things whereby,
01:41and we've seen it as well with the midterms, whereby the Republican Party lost out on quite a bit.
01:46So there is a concern on that end as well.
01:49So, and it doesn't surprise me that tariffs will roll back for Greenland.
01:53We've seen some examples of this sell America trend over the last few days.
01:58What are you hearing from investors about sentiment?
02:02I think very much broadly echoing my first point, actually.
02:05I think, as I mentioned, there definitely is a structural shift happening in the investment climate.
02:10I wouldn't necessarily say it's a shift away from America in terms of companies and investors are just moving to,
02:17looking to move out from America more generally.
02:19It's just a repricing of risk and concentration.
02:22You know, you're seeing a lot of uncertainty right now, and it's not uncertainty like you can, in a sense, that can be modeled.
02:27You know, you have almost erratic decision-making, tariffs being rolled out left, right, and center.
02:31And then along with that, you've got metrics like the U.S. dollar rising, treasury yields elevated,
02:37and almost a level seen at the global financial crisis.
02:41You know, all of these make up a very dangerous economic cocktail for risk premiums,
02:46whereas previously treasuries were considered safe haven.
02:49So it's no surprise to me that investors are looking to kind of shift away from this additional risk premium involved.
02:57That said, you know, you're seeing investors still putting in money in the AI rally as well.
03:01So there are certain pockets of the U.S. economy that are still doing, you know, tech stocks, Silicon Valley, et cetera.
03:06So it's one of those whereby, you know, investors are really just looking at the risk premium involved and the risk more broadly as well.
03:13And the U.S. is coming out as a much more riskier asset per se in terms of the grand scheme of things that are happening over the last 12 months.
03:20Thank you so much.
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