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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App.

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Speaker 3: Joining us now is someone who really has inside knowledge

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Speaker 3: and is a wonderful macro investor who has a ton

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Speaker 3: of respect. Keysquare Group founder and CEO, Scott Besson.

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Speaker 1: Scott, thank you so much for being with us. I

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Speaker 1: want to start with that the idea of.

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Speaker 3: The Federal Reserve and it's independence. What do you make

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Speaker 3: of this actually being such a hot topic on the

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Speaker 3: presidential campaign trail?

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Speaker 4: Well, I think it's kind of a canard. The final

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Speaker 4: Joel Press is blown up. You know, all all presidents

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Speaker 4: want a say, and I think they have a right.

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Speaker 4: You know, Donald Trump is going to make his opinions known.

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Speaker 4: I think Senator Warren before the FED decision, they recently

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Speaker 4: the day before said they should cut. The day after,

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Speaker 4: she came out and said they made a big mistake

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Speaker 4: not cutting. And I think that's within her right. And

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Speaker 4: you know, I'm not sure you know what all this

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Speaker 4: is you know, or what this allegedly means that you know,

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Speaker 4: Donald people are saying Donald Trump thinks he should be

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Speaker 4: in the room. Is you know, he's if he wins,

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Speaker 4: he will get to choose a new FED chair. The

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Speaker 4: Treasury Secretary meets on behalf of the administration with the

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Speaker 4: FED chair every week, so the administration's opinion is known.

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Speaker 4: And you know, I've written and talked quite a lot

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Speaker 4: about I already think politics are in the FED because

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Speaker 4: I think Jennet Yellen's taken over the FED.

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Speaker 5: Well, Scott though, when it comes to what Trump is saying,

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Speaker 5: and Evans really doubled down this yesterday and CNN, he

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Speaker 5: said that fundamentally it should be a political decision, agree

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Speaker 5: or disagree. Doesn't that thwart the independence.

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Speaker 1: Of this institution?

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Speaker 5: And have we seen that in the pants pass under

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Speaker 5: Nixon and it didn't exactly work.

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Speaker 4: Well, I think again, I think it's all up to

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Speaker 4: the FED chair. And you know, again, the president he

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Speaker 4: or she always has input. You know, we saw from

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Speaker 4: Joe Biden State of the Union, I expecting a FED cut.

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Speaker 4: We saw a week later in Philadelphia. I'm expecting a

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Speaker 4: FED cut. Then the inflation numbers got hot. I'm expecting

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Speaker 4: a FED cut just a little later. So you know, again,

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Speaker 4: presidents make their wishes known. And you know, I do

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Speaker 4: want to comment. I think this Wall Street Journal piece

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Speaker 4: that referenced a ten page document, I would challenge them

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Speaker 4: to produce that ten page document. I do not believe

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Speaker 4: that document exists.

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Speaker 3: Okay, Well, I just want to dig into something that

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Speaker 3: you said. You think that Jenny Yellen has already taken.

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Speaker 6: Over the FED.

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Speaker 3: I how much this is really in reference to the

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Speaker 3: fact that the Treasure Department has been selling a disproportionate

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Speaker 3: amount of tea bills, so people say it's been offsetting

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Speaker 3: some of the quantity of tightening, as well as what

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Speaker 3: we're seeing with respect to rate hikes over the past

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Speaker 3: few years.

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Speaker 1: How much do you believe that the FED is.

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Speaker 3: Way more political than people expect and that that is

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Speaker 3: something that you can trade around.

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Speaker 4: Even Well, look what I've been able to trade around,

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Speaker 4: and we'll go back your question on Yellen Treasury highly political. Unfortunately,

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Speaker 4: Secretary Yellen has thrust herself into the middle of campaign

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Speaker 4: in a very inappropriate way. She gave a highly politicized

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Speaker 4: speech in Arizona a couple of months ago. She was

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Speaker 4: standing on stage with the governor of Pennsylvania campaigning for

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Speaker 4: Kamala Harris, who is not even her president. Two weeks ago,

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Speaker 4: so it is politicized. The quarterly refunding schedule was changed

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Speaker 4: for the first time ever. They gave Ford guidance. So

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Speaker 4: how do you know what the conditions are going to be?

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Speaker 4: Why do you have a treasury borrowing committee if you

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Speaker 4: are going to give forward guidance?

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Speaker 6: So to come back to the FED.

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Speaker 4: Look, you know the FED, I think they try to

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Speaker 4: keep politics out of it.

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Speaker 6: We all have biases.

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Speaker 4: Ninety three percent of this people at the FED or

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Speaker 4: registered Democrats. But you know, I think in general that

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Speaker 4: you know, they are doing what they can with what

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Speaker 4: they've got. You know, your question in terms of you know,

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Speaker 4: how do I trade around that. I've actually had very

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Speaker 4: good luck this year trading against the FED that anytime

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Speaker 4: they publish their so called dot plot, the SEP, the

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Speaker 4: summary of economic projections, they've been wrong. So for all

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Speaker 4: year they had three rate cuts. They know, ident think

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Speaker 4: be three rate cuts. Then at the GYM meeting they

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Speaker 4: published that there would only be one rate cut, and

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Speaker 4: they we traded against that, and that's proving to be

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Speaker 4: wrong because now the market's pricing in three, you know,

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Speaker 4: maybe three jumbo rate cuts.

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Speaker 5: Scott, if we could look into some policy that has

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Speaker 5: to do with the Fed and the Treasury, it's well

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Speaker 5: known that you're one of these individuals that talks to

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Speaker 5: the former president potentially could be part of his future

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Speaker 5: team if there's Trump two point zero. He gave an

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Speaker 5: interview a business week and talked about a week or dollar.

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Speaker 5: How would he see that through?

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Speaker 4: Look, I think that's a preference, not a goal that

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Speaker 4: I think he believes. And again, you know, I think

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Speaker 4: about it more in terms of our other currencies undervalued.

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Speaker 4: You know, is there some kind of a manipulation you know,

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Speaker 4: i e. The Bank of Japan running excuse me, ultra

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Speaker 4: loose monetary pol se for twelve years and doing a

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Speaker 4: gigantic appreciation of the yen where it goes to a

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Speaker 4: fifty year under evaluation. Is there something that the Chinese

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Speaker 4: are doing with their trade policy that is causing an

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Speaker 4: artificially weak the RMB, you know, versus a strong dollars. So,

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Speaker 4: you know, I think remedying these under evaluations as opposed

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Speaker 4: to remedying a strong dollar is a better way to

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Speaker 4: think about it.

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Speaker 7: Well, probably no one would like that more than Japan.

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Speaker 7: I mean, they have not liked the weakness that they've

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Speaker 7: seen in their currency. So do you foresee something like

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Speaker 7: Applaza accord? Is that what we should be looking at?

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Speaker 7: Should there be a Trump administration with these against specific currencies?

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Speaker 7: Remember en to right size some of the equilibrium that

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Speaker 7: you're talking about?

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Speaker 6: Well, is your question? Should there be a mar Lago accord?

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Speaker 6: So we can call it that way?

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Speaker 4: Not?

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Speaker 6: Well, I think that's what it would be called. That I.

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Speaker 4: Could see, you know, something or a policy specifically targeted

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Speaker 4: at the different countries that are in violation, you know,

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Speaker 4: maybe rather than a global thing like Plasa loub was.

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Speaker 4: You know, if you go back and look, I've studied

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Speaker 4: this a lot. What's different this time is if you

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Speaker 4: go back and look at the history of the Plaza

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Speaker 4: coord the Lover accord, Soviet Union was never mentioned because

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Speaker 4: their economy was so small, you know, so you had

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Speaker 4: a security threat and then an economic threat. Now with China,

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Speaker 4: I think we should view China as both a security

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Speaker 4: threat and an economic threat. And it is going to

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Speaker 4: require a lot more finesse with them just because they

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Speaker 4: are such a big part of the global economy. So

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Speaker 4: you don't want to upset the apple cart, but you

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Speaker 4: want to be proven in terms of supply chains and

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Speaker 4: national security.

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Speaker 5: How do you then view a week dollar though, if

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Speaker 5: Trump is saying that he's going to put the walls

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Speaker 5: for the tariffs ten percent ring around the United States,

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Speaker 5: sixty percent of imports coming from China, as well as

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Speaker 5: what he says mass deportations.

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Speaker 4: Right, So, I think we've discussed this before. President Trump

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Speaker 4: speaks in a different way than many politicians. He speaks

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Speaker 4: like a New York City real estate developer, and I

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Speaker 4: think that is the opening the gambit. You know, I've

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Speaker 4: used the term it is a maximalist negotiating position. I

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Speaker 4: think a lot of the analysis around this in terms

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Speaker 4: of inflation has been quite sloppy. You know, at our firm,

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Speaker 4: we try to have better models, and you know our

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Speaker 4: models show that a those are maximalist positions and be

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Speaker 4: everything that I've seen, you know, in cell Side Research

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Speaker 4: and other firms and commentators, you know, assumes that there

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Speaker 4: is a jump on day one, which will not happen.

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Speaker 6: You know.

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Speaker 4: I have been spoken to the President, spoken to his team,

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Speaker 4: and I think everyone is on board with a kind

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Speaker 4: of Ford guidance or a phased in tariff. So, you know,

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Speaker 4: here's president she Here's sixty percent, might be two and

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Speaker 4: a half percent a month for twenty four months, tell

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Speaker 4: us when you've had enough, and you know, at the

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Speaker 4: end of the day, I think that Donald Trump views

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Speaker 4: tariffs as a way not to you know, as an

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Speaker 4: ind too free trade. You know, if you bring down

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Speaker 4: your tariffs, we will bring down ours.

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Speaker 6: You know.

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Speaker 4: Recall that at the G seven meeting when he was president,

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Speaker 4: he left Ottawa to go to North Korea, and on

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Speaker 4: the way out the door he said to all the leaders,

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Speaker 4: I'll get rid of my terraffs if you get rid

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Speaker 4: of yours.

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Speaker 6: So I think he views like the terraffs.

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Speaker 4: As you know, kind of negotiating is almost almost like

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Speaker 4: a sanctions policy.

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Speaker 3: Well, Scott Besant of Key Square Group, will you be

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Speaker 3: living in Connecticut or will you be living in Washington,

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Speaker 3: d C. Next year we will find out Scott best.

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Speaker 1: You'll have to come back of Key Square Group.

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Speaker 3: Eric Resdant, co founder of KSL Capital Partners, is focusing

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Speaker 3: on the consumer and the outlook for travel and joins

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Speaker 3: us now and Eric first, so.

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Speaker 1: Great to have you on the show. Thank you for

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Speaker 1: being here. Thank you and your firm.

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Speaker 3: Overseas tons of some of the most popular names that

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Speaker 3: people go and visit, whether it is you know, the

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Speaker 3: Icon Passes of ski Lovers, or whether it is the

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Speaker 3: Marriott's and the Riz Carlton's and the Four Seasons that

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Speaker 3: people attend. Do you think that there is too much

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Speaker 3: pessimism right now about this sort of pace of spending,

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Speaker 3: particularly on the discretionary front.

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Speaker 8: I think there's too much reaction, too much reaction, reactionary

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Speaker 8: thoughts happening based upon short term data when you look

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Speaker 8: long term. And I'm really here to thank you for

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Speaker 8: being a customer of the Icon Pass.

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Speaker 9: I'm on a swing.

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Speaker 8: I'm on a swing thanking each one of our customers personally,

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Speaker 8: and this is my morning to thank you.

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Speaker 3: You can call him up if you've got an icon

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Speaker 3: past and that's right, I'm here.

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Speaker 9: Feel free to call me, no problem at all.

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Speaker 8: Okay, but the long term trends for travel are really positive.

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Speaker 8: People don't realize how actually resilient travel is even in

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Speaker 8: the face of economic volatility.

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Speaker 9: We make what you were just saying, we have to

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Speaker 9: embrace the mess.

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Speaker 8: Life's messy, as you were saying, and the reality is

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Speaker 8: in that mess, what do you want to do? You

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Speaker 8: want to escape, You want to be able to have

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Speaker 8: special memories and experiences with your friends and family. So

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Speaker 8: we see the long term trends being favorable, we do

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Speaker 8: see the same type of softening of trends.

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Speaker 9: Still fine, still.

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Speaker 8: Good, but it's not as robust growth in some of

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Speaker 8: the segments that we invest in that we saw over

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Speaker 8: the last two years coming out of COVID.

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Speaker 1: I guess there's a bigger question.

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Speaker 3: We were talking about this with Neila Richardson of ADP.

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Speaker 1: Earlier this morning, and she.

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Speaker 3: Was talking about how the pace of job creation is

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Speaker 3: actually still above twenty nineteen. You can point to similar

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Speaker 3: types of trends and travel. People still spending more on

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Speaker 3: travel now than say twenty nineteen. Is this the new

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Speaker 3: normal where we can expect more spending and an accelerated pace,

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Speaker 3: or are we going back to the old normal where

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Speaker 3: people actually had to work, well, they have.

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Speaker 9: To work things an interesting one.

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Speaker 8: I do think that the trend of remote work, of

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Speaker 8: people having leisure trips. We were just talking about this

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Speaker 8: on the break, combining purposes of trips. I think that's

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Speaker 8: all positive for travel because when you want to combine things,

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Speaker 8: what do you tend to do. You're combining something that's

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Speaker 8: vacation oriented or recreation oriented with what you're doing at work.

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Speaker 8: So we see skier visits, for example, are growing more

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Speaker 8: rapidly midweek than they are on the weekends.

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Speaker 9: Well, that's a.

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Speaker 8: Better experience for the guests, it's better for everybody.

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Speaker 9: I'm not sure about people saying.

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Speaker 8: They're working from home on Friday if we know that

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Speaker 8: skier visits are op disproportionately on Fridays.

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Speaker 9: But be that as it may, we're pro that.

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Speaker 8: So I think the new normal is, you know, we're

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Speaker 8: all on all the time. We want to combine purposes

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Speaker 8: and be more efficient with what we do. So I

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Speaker 8: think in the end that's probably good. It probably creates

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Speaker 8: more balance for people and for us. It creates more

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Speaker 8: opportunity for them to vacation and recreate and do those

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Speaker 8: things that we certainly like to invest behind.

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Speaker 7: So the vision of someone like with their laptop on

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Speaker 7: a ski lift, blurring out the background, saying don't pay

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Speaker 7: attention to the wings, the winds swinging back and forth,

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Speaker 7: and what you're saying. Okay, so you're talking about this

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Speaker 7: the trend and the spend and how much that is normalizing.

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Speaker 7: What about just what people expect when they go to

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Speaker 7: a luxury hotel. Has something fundamentally changed after the COVID

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Speaker 7: era of not being able to get it out and

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Speaker 7: they now want something different with their hotel experience that

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Speaker 7: they didn't before.

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Speaker 9: I think that's fair.

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Speaker 8: I think they want to have more than just your

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Speaker 8: basic hotel experience. During COVID, we saw an expectation that

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Speaker 8: it's okay to reduce services at hotels. Right We couldn't staff,

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Speaker 8: we didn't want to have physical contact, so we eliminated

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Speaker 8: some of those things. That type of expectation has now

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Speaker 8: come back. But the guest wants more than that. They

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Speaker 8: want to be able to go on a trip. Business

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Speaker 8: travel is different, but for leisure travel, they want to

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Speaker 8: be able to go on a trip and have more meaning.

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Speaker 8: So for some that meaning is well and it's oriented

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Speaker 8: and they want to do it could be as simple

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Speaker 8: as a spot treat mean, it could be something that's

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Speaker 8: more holistic in terms of in terms of mental health,

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Speaker 8: or it could be something physical. Right, So I think

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Speaker 8: the consumer they just want more.

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Speaker 9: Out of everything that they do.

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Speaker 8: They want to feel that that's value.

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Speaker 7: What does that mean for the Airbnbs of the world.

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Speaker 7: Where do they fit into that? Because they're not exactly

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Speaker 7: providing that kind of service.

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Speaker 9: They're not.

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Speaker 8: I mean those look Airbnb and others in that business.

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Speaker 8: They are trying to wrap around experiences. And you see,

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Speaker 8: experiences is a watchword that you hear on whether it's

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Speaker 8: earnings calls, or you see in consumer conversations. But I

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Speaker 8: think Airbnb has that challenge, which is it's great if

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Speaker 8: you're in a city because I don't need the restaurant

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Speaker 8: necessarily or retail experience to be in my hotel in

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Speaker 8: New York City. It's the city is my is my canvas,

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Speaker 8: is my resort. But you know, if you're in a

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Speaker 8: resort destination, you want those amenities that you know. On

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Speaker 8: the one hand, Airbnb offers wonderful value because you're getting

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Speaker 8: more space and you can cook your own meals.

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Speaker 9: And congregate easily at your home, but it doesn't have

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Speaker 9: the amenities.

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Speaker 8: And I think they're trying to address that and I

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Speaker 8: think I think they'll have some success doing that, which

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Speaker 8: is which is good for the consumer and I think

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Speaker 8: good for the business.

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Speaker 1: Where travelers going right now.

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Speaker 8: I mean you're seeing a bit of an ecotomy and

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Speaker 8: that Europe is hot, Japan is hot. Recurrency is part

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Speaker 8: of that. Part of that is you took international away.

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Speaker 8: What happens when you take something away from someone, you know,

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Speaker 8: I mean, if you have if you're a parent of teenagers,

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Speaker 8: you realize this, you take something away, they want it more.

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Speaker 8: And COVID took international travel, especially away from US. And

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Speaker 8: with currency being or the US dollar being strong and

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Speaker 8: foreign currency is being a bit weaker, combined with coming

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Speaker 8: out of COVID, you're seeing a lot of the luxury consumer.

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Speaker 9: Want to go to Europe, want to go to Japan.

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Speaker 8: And so that's creating, you know, kind of a normal

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Speaker 8: or not yet a normalization of travel patterns. I expect

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Speaker 8: that you'll we're seeing in some segments, but thensumers, you know,

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Speaker 8: the affordable, the more budget contrast consumer is cutting back

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Speaker 8: a bit more right now. The luxury consumer is going

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Speaker 8: more abroad. Witness at least going abroad last week, but.

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Speaker 9: Not out.

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Speaker 1: You're there, But it's okay, everyone's doing it this morning, so.

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Speaker 9: Why not can stay back to vacation. It's what we

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Speaker 9: all do, okay.

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Speaker 5: So you're seeing a real bifurcation and where consumers are

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Speaker 5: going a bit.

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Speaker 8: If you look at like select service spending for hotels,

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Speaker 8: those trends are a bit softer than the higher end.

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Speaker 8: In the last year, you saw red par for more

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Speaker 8: luxury travel to be positive still three four percent, while

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Speaker 8: select service red pars down. I think that's indicative of that.

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Speaker 8: But again, it's not dramatic, right These are evolutionary, not

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Speaker 8: revolutionary shifts and consumer behavior that we're seeing normal normal volatility,

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Speaker 8: not abnormal volatility.

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Speaker 3: One thing that you have is a really good lens

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Speaker 3: on what the balance sheet equation really looks like right now,

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Speaker 3: especially at a time where we are talking about.

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Speaker 1: Increasing oil prices.

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Speaker 3: Maybe on the margins you see increasing commodity prices. You

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Speaker 3: talk about how suddenly workers and that sort of consumer

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Speaker 3: experience is much more important how much a margin's getting squeezed.

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Speaker 8: If if you look over the last four years or

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Speaker 8: I guess now five years since pre COVID twenty nineteen,

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Speaker 8: margins for our margins are up.

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Speaker 9: We've been able to We've been able to move.

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Speaker 8: Price more than our costs, even though costs are up

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Speaker 8: a lot, right, I mean, the average worker wages in

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Speaker 8: our sector are probably twenty percent in the last four years,

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Speaker 8: which is a lot. A price is up twenty to

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Speaker 8: twenty five percent, so that equation still works. I think

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Speaker 8: if you have less distinctive properties or less distinctive experiences,

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Speaker 8: you don't have that same pricing power, and margins are

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Speaker 8: being hit more.

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Speaker 9: And that's a challenge.

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Speaker 8: I think right now, if you look at urban hotels,

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Speaker 8: their margins are under a lot of pressure. Still it's

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Speaker 8: getting better as the business traveler has.

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Speaker 9: Been coming back, but it's something to watch out for.

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Speaker 7: Are you seeing hotels trying to spend to be able

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Speaker 7: to deliver that and then what does that mean for margins?

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Speaker 7: If in order to get the larger margins you need

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Speaker 7: to have this all around experience, But to get the

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Speaker 7: all around experience, you have to build a lot of capability.

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Speaker 8: Like everything, it's a paradox in life. I mean, you

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Speaker 8: have to be able to do two things at once, right,

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Speaker 8: And so I think hotels that have the ability to

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Speaker 8: spend on the consumer experience to create more differentiation and

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Speaker 8: therefore justify a higher price to that consumer because they're

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Speaker 8: providing that value.

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Speaker 9: They're doing that. I think you see that.

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Speaker 8: But other hotels that don't have that ability, I think

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Speaker 8: they're seeing more more challenges. We're seeing that. We've got

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Speaker 8: some wonderful resorts in Italy and St. Bart's that they

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Speaker 8: put tremendous emphasis on the consumer and guest experience, investing

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Speaker 8: in SPA programming, wellness, off site activities, picking up from

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Speaker 8: the airport and with a great car.

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Speaker 9: Those types of things.

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Speaker 8: At the luxury end, right, they're seeing prices that are

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Speaker 8: exceptionally high and still able to push prices at the

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Speaker 8: other end, you know, if you're a non more nondescript hotel.

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Speaker 8: I mean, it's tougher today because the consumer is being

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Speaker 8: more discerning and how they spend their money.

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Speaker 3: So you talk about bleasure, which is a difficult word

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Speaker 3: for me to get my head around.

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Speaker 1: Bleasure, it's fun to say, actually, and how.

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Speaker 3: Increasingly businesses are mixing business with leisure.

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Speaker 1: What's your life like?

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Speaker 3: I mean, do you basically just go around and just

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Speaker 3: experience the different experiences that you're properly and you just

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Speaker 3: basically go there and you say, you know, I need

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Speaker 3: a spa treatment to really understand the value that you're providing.

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Speaker 9: That massage wasn't quite as good as it should have been.

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Speaker 9: I need to do another one, exactly. Yeah, it's a

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Speaker 9: lot of that.

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Speaker 8: Yeah, it's not as interesting, just as you would like

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Speaker 8: to believe. Business trips do tend to be to probably

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Speaker 8: some more leisure arning to destinations than most.

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Speaker 9: So it's fortunate in that regard.

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Speaker 8: I spent a lot of time talking to the leaders

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Speaker 8: of our businesses. We have about twenty five business leaders

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Speaker 8: across our portfolio. I spent a lot of time meeting

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Speaker 8: with investors, meeting with other owners or constituents in the

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Speaker 8: travel leisure business. It's a large and growing sector. It's

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Speaker 8: a third larger sector of the global economy. It's ten

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Speaker 8: percent of global GDP, ten percent of global employment. But

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Speaker 8: you have to stay connected to the round of what

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Speaker 8: actually is happening. Not quite the massage, the massage in

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Speaker 8: the spa, although I tried ever taken that once in

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Speaker 8: a while, but I try to get a sense of

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Speaker 8: what the consumers is looking for, and so I spent

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Speaker 8: a lot of time on the road and a lot

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Speaker 8: of time trying to understand consumer trends, investor trends, and

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Speaker 8: the mindset of our management teams and the challenges that

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Speaker 8: they deal with day to.

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Speaker 3: Day, and on the ski slope on a Friday to

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Speaker 3: see how many people are auditating from working from the slopes.

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Speaker 3: Eric Resnik of KSL Capital Partners, thank you so much

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Speaker 3: for being with us.

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Speaker 1: Truly a pleasure having you here.

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Speaker 9: Thank you, Thank you all for.

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Speaker 1: Sticking with retail.

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Speaker 3: Danielle Bretdauer of HSBC maintaining her reducing rating on a

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Speaker 3: home depot, but lowering her price target to three hundred

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Speaker 3: and eighteen dollars, citing the pressure of higher interest rates

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Speaker 3: and lingering pandemic effects with do it yourself customers stuck

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Speaker 3: on the sidelines.

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Speaker 1: Daniella joins us. Now, Daniella, thank you so much for

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Speaker 1: being with us. Just an overview.

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Speaker 3: Level, where are we in terms of the normalization post

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Speaker 3: pandemic where everyone went to sort of shore up their

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Speaker 3: homes because they were going to be stuck there for

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Speaker 3: the foreseeable future.

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Speaker 10: Hi, good morning everyone, Thanks for having me on the show.

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Speaker 9: Let me begin by.

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Speaker 10: Sharing you our base case scenario for the US economy,

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Speaker 10: which stands the FAD should start easing in September and

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Speaker 10: the US economy avoids the recession. So that's HSBC base

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Speaker 10: case scenario for the economy. And according to our regression models,

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Speaker 10: currently the market is pricing a thirty percent chance of

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Speaker 10: our recession, up from ten percent of the risk of

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Speaker 10: our recession last week. So with this easing, the US

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Speaker 10: economy would avoid a recession. And we recently increased the

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Speaker 10: number of rate cuts this year to three twenty five

445
00:21:58,280 --> 00:22:03,360
Speaker 10: basis points to a relative cut of seventy five bibs.

446
00:22:04,280 --> 00:22:08,760
Speaker 10: And with regards to Home Depot, the current rise is

447
00:22:08,800 --> 00:22:12,240
Speaker 10: broadly in line with the stocks value. In the last

448
00:22:12,240 --> 00:22:18,920
Speaker 10: six months, it has been a favorite name for income investors,

449
00:22:18,920 --> 00:22:21,520
Speaker 10: investors that look for give the youth. We have a

450
00:22:21,560 --> 00:22:25,800
Speaker 10: two and a half percent give danude for Home Depot.

451
00:22:26,440 --> 00:22:31,119
Speaker 10: But you know, Home Depot has missed Wall Streets revenue

452
00:22:31,240 --> 00:22:35,879
Speaker 10: estimates three times over the last two years, and we

453
00:22:36,080 --> 00:22:41,600
Speaker 10: consumer spending, higher interest rates and the economic downturn recently

454
00:22:41,760 --> 00:22:46,399
Speaker 10: could hinder sales recovery for the home improvement projects and

455
00:22:46,520 --> 00:22:48,720
Speaker 10: negatively impact Home Depot's growth.

456
00:22:49,440 --> 00:22:52,760
Speaker 7: Danielle, We've been talking a lot about the bifurcated consumer

457
00:22:52,800 --> 00:22:54,840
Speaker 7: that you're seeing weakness on the low end. Is there

458
00:22:54,880 --> 00:22:57,280
Speaker 7: any sign in any of these earnings that it is

459
00:22:57,320 --> 00:22:58,760
Speaker 7: starting to migrate upwards?

460
00:23:00,760 --> 00:23:04,840
Speaker 10: So yeah, thanks, great question, because over the past few

461
00:23:04,880 --> 00:23:10,320
Speaker 10: months we saw more evidence of a tired consumer. Large

462
00:23:10,400 --> 00:23:14,000
Speaker 10: cap names such as Walmart that operate in a more

463
00:23:14,040 --> 00:23:21,000
Speaker 10: defensive sector of consumer staples tend to outperform under risk

464
00:23:21,200 --> 00:23:27,639
Speaker 10: of scenario and Walmart which reports on Thursday, it's usually

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00:23:27,680 --> 00:23:31,480
Speaker 10: perceived as a good proxy to the state of the US.

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Speaker 1: Consumer, Danielle.

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00:23:33,600 --> 00:23:35,720
Speaker 5: Though it's not just a good proxy for the US

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00:23:35,760 --> 00:23:39,000
Speaker 5: consumer according to on the lower end. According to Walmart's

469
00:23:39,080 --> 00:23:43,040
Speaker 5: last earnings report, they talked about wealthier consumers trading in

470
00:23:43,240 --> 00:23:46,760
Speaker 5: trading down. So is this just say something about the

471
00:23:46,800 --> 00:23:49,879
Speaker 5: consumer as a whole, or is it about Walmart taking

472
00:23:49,920 --> 00:23:51,440
Speaker 5: market share from other players.

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00:23:53,320 --> 00:23:59,920
Speaker 10: So the takeaways from the Walmart quarterly results are one,

474
00:24:00,119 --> 00:24:05,040
Speaker 10: consumer wallets remained stretched, but they responded well to Walmart's

475
00:24:05,040 --> 00:24:11,280
Speaker 10: strong value proposition. Second, food inflation continues to moderate. It's

476
00:24:11,359 --> 00:24:14,840
Speaker 10: down from where it was at the end of least quarter,

477
00:24:15,400 --> 00:24:19,000
Speaker 10: and it should stay at low single digit rates. For

478
00:24:19,080 --> 00:24:23,040
Speaker 10: the rest of twenty twenty four. And third, the US consumer,

479
00:24:23,400 --> 00:24:27,080
Speaker 10: even the wealthiest one, is now shopping at Walmart, so

480
00:24:27,200 --> 00:24:31,800
Speaker 10: they do have reported market share gains among higher income consumers.

481
00:24:32,160 --> 00:24:34,800
Speaker 3: Just quickly, Daniello, is there anything in the earnings or

482
00:24:34,840 --> 00:24:37,480
Speaker 3: some of the commentary that you've been really focused on

483
00:24:38,119 --> 00:24:41,360
Speaker 3: that suggests that we're headed into about of real consumer

484
00:24:41,359 --> 00:24:43,960
Speaker 3: spending weakness beyond what people are expecting.

485
00:24:47,240 --> 00:24:50,760
Speaker 10: No, I think that it has, as you put it,

486
00:24:50,760 --> 00:24:54,879
Speaker 10: it has been biffurcated since the beginning of this year.

487
00:24:55,520 --> 00:25:00,760
Speaker 10: So consumers are spending more on travel and you know,

488
00:25:00,880 --> 00:25:09,440
Speaker 10: other discretionary purchases rather than complex housing projects or remodelings

489
00:25:09,480 --> 00:25:13,639
Speaker 10: of their homes. So I think this scenario until we

490
00:25:13,760 --> 00:25:16,960
Speaker 10: get again a clear picture from the fat But even

491
00:25:17,040 --> 00:25:20,000
Speaker 10: if we do get the K cuts this year, it's

492
00:25:20,040 --> 00:25:23,040
Speaker 10: something that only in twenty twenty five, given the new

493
00:25:23,119 --> 00:25:26,680
Speaker 10: government and the results of the election, then I think

494
00:25:26,720 --> 00:25:31,120
Speaker 10: that's where we'll get more defined scenario for the US consumer.

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Speaker 3: Danielle read our HSBC Thank you so much for being

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Speaker 3: with us.

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00:25:38,640 --> 00:25:41,960
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