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Speaker 1: Now, US data has been in the spotlight in recent

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Speaker 1: weeks and we've got more signs things could be turning.

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Speaker 1: Question is is it about to get worse or inflex

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Speaker 1: and with US now, as Brendan Larson of Milford Asset Management, Hey, Brendan,

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Speaker 1: good evening, how are you interpreting the data?

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Speaker 2: Look, it's fair to say we are on a bit

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Speaker 2: of a knife s edge now with regards to the

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Speaker 2: US economy, Heather, We're getting some quite conflicting data that

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Speaker 2: is making it quite difficult to have conviction in the

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Speaker 2: overall direction of the economy. Labor market data last week

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Speaker 2: was undoubtedly weak, including negative revisions. Since May, payrolls have

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Speaker 2: averaged just twenty seven thousand per month, so since two thousand,

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Speaker 2: that's actually the weakest four month trend outside of recession periods.

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Speaker 2: So the question around the labor market is whether this

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Speaker 2: reflects delays in hiring during those turbulent months given that

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Speaker 2: tarif uncertainty we had, or if that reflects a real

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Speaker 2: flowing in demand in the economy. A fair reason to

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Speaker 2: think it may be the latter is that growth indicators

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Speaker 2: are still not showing signs of falling off a cliff

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Speaker 2: yet the ISM and PMI reports actually indicated that new orders,

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Speaker 2: which is a leading indicator for demand, actually surge last month,

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Speaker 2: and so the question is whether that translates into an

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Speaker 2: inflection and labor demand again.

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Speaker 1: So is it possible that that weaker labor market is

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Speaker 1: why markets are pricing in a lot more cuts.

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Speaker 2: Yeah, I think that's right. So I think markets had

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Speaker 2: been pre empting the Federal Reserve becoming more dubvish. So

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Speaker 2: the market is now actually pricing around three cuts this

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Speaker 2: year and just over five over the next twelve months.

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Speaker 2: The issue here is that the Fed may be cutting

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Speaker 2: into rising inflation. We get more clarity on this later

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Speaker 2: this week, but core inflation is expected to increase from here.

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Speaker 2: High frequency data does suggest the RI is scope for

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Speaker 2: meaningful increases in core goods prices in coming months. One

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Speaker 2: potential offset to that is that US rents now look

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Speaker 2: to be falling meaningfully and that may help drive shelter disinflation.

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Speaker 1: So, if you've got the concerns around the labor market,

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Speaker 1: the inflation risks, what about the US consumer because they

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Speaker 1: have been really key for the economy there, haven't they.

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Speaker 2: Yeah, it's a really good The US consumer really was

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Speaker 2: underpending that really strong US economy. What we are still

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Speaker 2: seeing though, is a really K shaped economy, and what

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Speaker 2: that means is that the top quartile is doing really

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Speaker 2: well still, but the lower end is hurting. One thing

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Speaker 2: to keep in mind as we go into next year, though,

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Speaker 2: is that the big beautiful bill that was passed earlier

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Speaker 2: this year will provide meaningful stimulus early next year, and

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Speaker 2: so that is a potential positive for growth as we

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Speaker 2: sort of get into twenty twenty six.

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Speaker 1: Yeah, it's pretty tricky stuff. So what does that mean

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Speaker 1: for the markets?

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Speaker 2: Yeah, it is tricky, I think, particularly when you add

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Speaker 2: in that sort of fiscal overreach that we've discussed with

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Speaker 2: you over recent weeks. And so the US administration is

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Speaker 2: continuing to creep closer to fiscal dominance and potentially undermining

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Speaker 2: the FEDS inflation targeting mandate. And so if we couple

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Speaker 2: that with potentially rising core inflation as tariffs show through,

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Speaker 2: and a federal reserve who are cutting raids, the outcome

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Speaker 2: is actually quite positive for stores of value. So gold

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Speaker 2: is the clearest example of this store of value, and

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Speaker 2: investors have really been piling and gold is up forty

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Speaker 2: five percent over the last year versus the S and

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Speaker 2: P five hundred, up just nineteen percent over that same

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Speaker 2: time period. For interest rate markets, clearly the bias for

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Speaker 2: short term interest rates in the US is lower, but

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Speaker 2: with potential inflation risks, there is scope for longer term

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Speaker 2: interest rates to remain a little bit more elevated. We

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Speaker 2: think this could way on share markets, especially given a

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Speaker 2: strong run they've had and quite elevated investor positioning.

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Speaker 1: Hey, thank you, Brandon, really good to talk to you.

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Speaker 1: Brendan Larson. Milford Asset Management ETS auction failed again today.

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Speaker 1: This is the third time it's failed this year, and

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Speaker 1: it's the third time it's run. So basically all three

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Speaker 1: have failed. Now let me just run, so this will

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Speaker 1: start it at the end of twenty twenty two. The

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Speaker 1: first one that failed, as far as I can remember,

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Speaker 1: was the start of twenty three. So this is what's

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Speaker 1: happened in twenty three, twenty four to twenty five. All

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Speaker 1: four failed in twenty three. Three out of the four

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Speaker 1: failed last year. Three this year have failed. So that

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Speaker 1: means in three years out of the eleven only one

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Speaker 1: has partially sold. That's not good.

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Speaker 2: A for more from hither Duplessy Allen Drive listen live

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Speaker 2: to News Talk Set B from four p m. Weekdays,

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