John P. Bryson
Hello, and welcome to the Portfolio Intelligence Podcast. I'm your host, John Bryson, head of investment consulting and education savings at Manulife John Hancock Investments. Today is June 9, 2025, and I thought it would be a good time to check in with both Emily Roland and Matt Miskin, our co-chief investment strategists here at Manulife John Hancock Investments. As we often talk about economies in markets around the world, I thought it'd be great to hear the latest insights from both Matt and Emily. Matt, Emily, welcome.
Emily R. Roland
Thanks for having us.
Matthew D. Miskin
Yeah, thanks for having us, John.
John P. Bryson
You got it. Excited to catch up. So, Matt, I'm going to start with you. Let's talk about the economic data that we're seeing here in the U.S. recently.
Matthew D. Miskin
Yeah. So Q1 in general was really marked by this massive import boom to get ahead of the tariffs. So, we imported a ton of stuff from Europe and Asia and that actually helped boost a bit of the economic growth numbers in other spots outside of the imports. But what we're seeing here as we got into May is a bit of a slowdown from that.
So after you buy a bunch of stuff because you want to get ahead of the tariffs, then you kind of slow down your buying. The employment picture is still holding up okay. It's showing there's job openings that are holding in okay. There are monthly job gains of about 150,000. That's okay. Initial jobless claims have come up a little bit but are still at a low level historically.
So, it's nothing to write home about of amazing growth, but it's not too slow either. And it's almost Goldilocks. We're almost back to the same macro regime we were actually pre-COVID a bit. And it looks like inflation's moderating. We almost kind of say it quite late because we don't want to let everybody know because it seems like no one's appreciating the slowdown in inflation. But the data’s showing it. And so, if inflation's coming down, growth is holding steady, you would think that would lead to better outcomes for markets. We have seen a huge recovery from the April lows, and I'm sure we'll talk about that more. But we think that the market's kind of hypnotized right now with politics and not focusing on the fundamentals or the economy, and that's what we're doing. So, we're sitting here kind of saying—hey, some of these market movements may have rotation or opportunities presenting themselves because the economy's holding up alright and inflation's been coming down.
John P. Bryson
All right. Great. And we often talk about trying to pay attention to the important information not the noise in the market. So, we'll continue that conversation. Hey Emily, I want to dig in on the bond market specifically and hear about how it's reacting to the type of information that Matt just talked about, and then walk us through, like what your expectations are for the Fed with all this information.
Emily R. Roland
Yeah, I mean, that just highlighted this idea that investors aren't really paying much attention to the fact that, you know, growth is slowly decelerating, and inflation is coming down and we would definitely put the bond market in that cap. Bonds aren't really sort of like getting the memo as it relates to the macro backdrop. Normally you would think that bond yields would be falling meaningfully as inflation comes down. We're not really seeing that. We're sort of chopping around in this sort of 4.50%-ish range. And bond yields actually backed up last week on that very slightly better than expected jobs report—I mean barely. It doesn't seem to take much for bond yields to move higher here as of late, as investors are concerned that inflation may be on the horizon given some of the dynamics around tariffs.
And we're actually watching the opposite. You know, we're talking about the shelter inflation a lot worse. You think about shelter—it represents almost half of CPI. It's a really, really critical component. That's the housing market. And what we're seeing is that the supply and demand dynamics are actually shifting pretty meaningfully right now as it relates to supply. Housing—existing homes for sale, for example—have risen the most, to the highest level since 2020.
We just saw the first month over month decline in home prices since January 2023. And that's just happening is, you know, demand is slowing in the face of continued unaffordability. People are a little bit more concerned about their jobs. That's causing demand to slow a bit. And supply is happening in areas that built up a lot during COVID.
We're also seeing, you know, everybody locked in those low mortgage rates five years ago. Well, a lot of stuff happens over the course of five years in terms of maybe you've got to move to for a job or changes to your life have happened. So, there's a lot more supply here, coming online and that's bringing inflation to the lowest levels that we've seen since 2021.
So that's a really notable dynamic that, again, is just not being picked up by the bond market. The bond market is just focused on other things right now. So, we would look to that is really, frankly, a gift. Any back up in bond yields that we're seeing—we would look at as an opportunity, frankly, to lock in this elevated yield as bonds just really aren't sniffing out this disinflationary and lower growth environment that we think unfolds as we head into the back half of 2025.
John P. Bryson
Okay. Very good. And let's continue to talk about looking forward. Matt, what are you keeping an eye on trying to separate the signals from the noise. What indicators are you looking at this week and beyond.
Matthew D. Miskin
So initial jobless claims come out every Thursday morning at 8:30 a.m. You ever want to know what I'm up to on a Thursday morning? That's what I'm doing. It's from the Department of Labor and I'm reading through that report. And so, this is the best real time labor market indicator. So, the jobs market is the foundation of the U.S. economy.
It is the most powerful pillar. If you have a job, it then enables you to, you know, spend money and pay off your debt and do all these things, you know. There's concerns with the consumer, but as long as they have jobs available and there's they're sturdy with their jobs, then it's okay. It's manageable. So, every week they there's a note of initial jobless claims, it's called it's you know, if you've lost a job you can apply for unemployment benefits. And if that rises significantly, that's been the best indicator of an economic contraction, an issue with the employment picture, jobs market. And that is about at 247,000. It got up to 260,000 twice over the last three years and then came back down.
So, it almost gave you a headache. Head fake, sorry. Maybe it was a bit of a headache as well. But the economic data has done this where it just, it keeps whipsawing you around. Where it looks like it's deteriorating and then it's like, just kidding—it's not that bad. It seems like there's going to be a recession—just kidding, not that bad.
So, to honest, you keep getting these false signals and we really need to be disciplined and wait till these indicators give us a sign of a more significant slowdown. If it's not, then things are fine. And so, it's that initial jobless claims will be watching.
We also do have CPI, you know, so Emily already did talk a good amount about inflation. So that is public enemy number one. That is, you know, what is going to be most important to the Fed, likely. But this could be the third month in the row of pretty low inflation. And if that does happen, then that to us is the bond market probably going to move on it. And so that's a secondary report.
But at the end of the day, the jobs data that weekly and unemployment claims is probably the number one thing I'm going to be watching.
John P. Bryson
All right. Very good. So great insights on the US economy and the information you're looking at. Emily, I want to stay on economic data but pivot overseas. What are we looking at over there.
Emily R. Roland
Yeah. So, Matt characterized economic data in the U.S. as like not that bad. I would call economic data in Europe kind of bad. We look at things like survey data, so PMI is Purchasing Managers Indices, that is really the most timely read that we can get on the health of an underlying economy. It's surveys that go out to manufacturing firms and services firms and ask, you know, how's hiring going, how are prices paid, how are new orders coming in. Anything over 50 means the economy is expanding, and anything below 50 means the economy is contracting. And you kind of think about this juxtaposition of, you know, last week we saw that Eurozone final manufacturing PMI, for the month of May, you know, came in at 49.4.
So not terrible. But you look at places like Germany at 48.3. Meanwhile, their stock market is absolutely soaring this year. Services side in the Eurozone a little bit better, just under 50. So, the composite where you combine manufacturing and services is like just above 50. But markets are acting like it's amazing growth, you know. European equities up 20% plus this year, really remarkable performance—we think really based on the sentiment or this idea of sell America and this huge amount of capital flows that are coming out of the U.S. and going overseas. And it's just really not justified, by the data. U.S. again, sort of really holding in the best, we're not great, but holding in the best around the world.
And you've seen really significant outperformance in many of these non-U.S. markets. Earnings—same thing—the U.S. holding up best around the world from an earnings perspective. We look at U.S. earnings growth for the first quarter around 13%. It was -6% for the MSCI EAFE. And again meanwhile U.S. markets underperforming. So again, it's been frustrating to see this almost sentiment driven rotation that's really playing out against a backdrop which suggests that the economic cycle and the earnings momentum is actually here in the United States.
John P. Bryson
Okay. And that's really interesting because we've talked about in the past, the economy is not the markets. They're different things. We've got this interesting dynamic going on right now. I want to dig into it a little bit deeper. Matt, Emily mentioned international markets are doing better than the U.S. markets. Dig a little deeper for us and help us understand what's driving that.
Matthew D. Miskin
Yeah. So, there's a couple main components to the international equity huge rally we're seeing this year. And the biggest one is actually currency. So, the dollar is down about 9% to 10% this year. So, when the dollar's down and you're investing in the foreign currency market unhedged, they call it, the net currency reflection is up 9% to 10%.
So, 9% to 10% of your return in non-U.S. equities this year is just currency. The other thing that has been driving it is called multiple expansion. So basically, have you ever heard internationals cheap? We've heard that for like 15 years.
John P. Bryson
Yeah. Pretty consistently.
Matthew D. Miskin
And this year we're getting an unlocking of value, if you will. The multiple on the market has gone up pretty meaningfully.
And so that's accounted for another, let's say, 5% to 10% in returns. The rest is earnings. So, let's say that the MSCI EAFE is up around 20% year to date. Half of it is basically currency. Another almost half is multiple expansion. There's been a little bit of a dividend yield, a little bit of earnings growth. But what's really challenging is at the end of the day, why are you paying up for businesses that are showing very modest earnings growth.
So as Emily highlighted actually it's negative earnings growth. It's hard to say I'm going to pay up for a business when the earnings are declining. Usually that doesn't happen in the United States. You know if your earnings are decline you get you might get you know hey well there's a there's a buyback or there's a dividend payout or there's some sort of catalyst to get a multiple higher…M&A.
If it's just a stock or companies that are declining their earnings, that usually deserves a lower multiple, frankly. And so, it's been an interesting year. It's really been driven, in our view, by politics and feelings versus facts. And the currency market, you know, we use interest rate differentials. The Fed is still the most hawkish in the world.
Our interest rates are 4.5%. The ECB, European Central Bank is cutting interest rates and cut them seven, nine times already. And yet usually that would create a weaker currency. Tariffs also used to create a much stronger dollar, or whoever's doing the tariffs would usually get a stronger currency versus the other currency. Because in essence, you're creating some inflation even though we don't think it's going to be that bad.
It also means, you know, that basically the foreign country has deflation because they're selling into this market that might not get as much demand because the tariff, and that's just totally academic, have been thrown out the window this year as it relates to tariffs and the impact on currency.
But so, look, we have a strategic asset allocation to international. We've been overweight value versus growth—that has worked. We've been overweight more or calling for more developed than emerging. That has worked. But it's just been hard to get as much enough on the ball or enough beta in our calls for international, given it's running on sentiment, we would want to see the fundamentals do better.
So we're still, you know, modest underweight tactically in our calls. We've got that strategic asset allocation that's paying off after years. But we're watching for the fundamentals to improve. And frankly, we're just not seeing it yet.
John P. Bryson
Gotcha. Gotcha. So, a little bit cautious on the international despite the run up. Do you have any advice for investors? And Emily, I'll ask you this if the theme continues longer. Right. If this this disconnect continues, launder any advice to investors, any ways to take advantage of any opportunities? There?
Emily R. Roland
Yeah. So, it's been really interesting, in previous periods, the last few years, when the dollar weakened, that was just a really an indication that anything risk on was rewarded and meant looser financial conditions, helped, with earnings of larger companies in the United States. The kind of the set of winners under a weaker dollar regime this year is a little bit more narrow, than it was before.
So, there's kind of the haves and have nots, in this weaker dollar environment. And Matt talked a lot about how the weaker dollar is accretive to your performance in international stocks, especially as an unhedged investor. There's a mechanical reason for that, which is that your returns are going to be worth more when they're converted back to U.S. dollars. So that's a really big help for a U.S. investor overseas.
But there's a couple other areas that have done well, things like gold in the weaker dollar regime, certainly that helps. Areas like infrastructure, global infrastructure indices have done really well in this environment as well. You know, looking within the United States, value related stocks, sectors like industrials and healthcare, they're less positively correlated to the dollar than growth stocks. So they may hold up a bit better in that environment as well. So, I think, you know, if momentum continues in this space, you may see some of those sort of cross asset momentum winners continuing to do well on a weaker dollar on a relative basis.
John P. Bryson
Okay. Very good. We've hit a lot. Emily, I'm going to stick with you. Are there any other final thoughts on portfolio positioning or a summary you'd want to leave our listeners with?
Emily R. Roland
Yeah, I mean, I think Matt really hit on this when he talked about the feelings versus the facts. And it's there's kind of this like epic battle that's going on between sort of the fundamental backdrop and the technical or momentum or sentiment driven, sort of a theme that's at play that's really pushing investors into riskier assets, you know, whether it's cryptocurrencies or sort of growth at any price type stocks.
And so, you know, it's a painful place to be if you're sort of not reaching to the riskiest, parts of the market and what we're doing, you know, you look at the momentum factor, which is that double digits, you know. And sometimes we want to remember that, that high momentum areas sometimes see these parabolic moves higher and then of course they see parabolic moves lower on the on the other end.
So, we want to be careful about chasing risk here. And we really want to think about you know, where is the value. Where can we find the best earnings growth on a relative basis? Where can we find parts of the market that are on sale?
It's allowing us to continue thinking about the quality factor and trying to find areas within quality where you're not overpaying for earnings growth. So, you know, it's leading us to continue to embrace things like tech, comm services, areas like utilities are still, on our list. Mid-cap stocks are still trading at a significant discount to their large cap counterparts.
So, there's certainly a lot of ideas across markets here. But again, we want to be careful about sort of being pushed into those more momentum driven areas of markets that are really just rallying on sentiment here.
John P. Bryson
All right. Very good. Great overview, great kind of coming up on a mid-year check in. Folks, the markets are always moving. The data is always changing. But Matt and Emily, they have their finger on the pulse. I saw a great video this morning from Matt. Keeping us up to speed on things. So definitely check them out on LinkedIn.
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