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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 3: Joining us now is someone who really has inside knowledge
Speaker 3: and is a wonderful macro investor who has a ton
Speaker 3: of respect. Keysquare Group founder and CEO, Scott Besson.
Speaker 1: Scott, thank you so much for being with us. I
Speaker 1: want to start with that the idea of.
Speaker 3: The Federal Reserve and it's independence. What do you make
Speaker 3: of this actually being such a hot topic on the
Speaker 3: presidential campaign trail?
Speaker 4: Well, I think it's kind of a canard. The final
Speaker 4: Joel Press is blown up. You know, all all presidents
Speaker 4: want a say, and I think they have a right.
Speaker 4: You know, Donald Trump is going to make his opinions known.
Speaker 4: I think Senator Warren before the FED decision, they recently
Speaker 4: the day before said they should cut. The day after,
Speaker 4: she came out and said they made a big mistake
Speaker 4: not cutting. And I think that's within her right. And
Speaker 4: you know, I'm not sure you know what all this
Speaker 4: is you know, or what this allegedly means that you know,
Speaker 4: Donald people are saying Donald Trump thinks he should be
Speaker 4: in the room. Is you know, he's if he wins,
Speaker 4: he will get to choose a new FED chair. The
Speaker 4: Treasury Secretary meets on behalf of the administration with the
Speaker 4: FED chair every week, so the administration's opinion is known.
Speaker 4: And you know, I've written and talked quite a lot
Speaker 4: about I already think politics are in the FED because
Speaker 4: I think Jennet Yellen's taken over the FED.
Speaker 5: Well, Scott though, when it comes to what Trump is saying,
Speaker 5: and Evans really doubled down this yesterday and CNN, he
Speaker 5: said that fundamentally it should be a political decision, agree
Speaker 5: or disagree. Doesn't that thwart the independence.
Speaker 1: Of this institution?
Speaker 5: And have we seen that in the pants pass under
Speaker 5: Nixon and it didn't exactly work.
Speaker 4: Well, I think again, I think it's all up to
Speaker 4: the FED chair. And you know, again, the president he
Speaker 4: or she always has input. You know, we saw from
Speaker 4: Joe Biden State of the Union, I expecting a FED cut.
Speaker 4: We saw a week later in Philadelphia. I'm expecting a
Speaker 4: FED cut. Then the inflation numbers got hot. I'm expecting
Speaker 4: a FED cut just a little later. So you know, again,
Speaker 4: presidents make their wishes known. And you know, I do
Speaker 4: want to comment. I think this Wall Street Journal piece
Speaker 4: that referenced a ten page document, I would challenge them
Speaker 4: to produce that ten page document. I do not believe
Speaker 4: that document exists.
Speaker 3: Okay, Well, I just want to dig into something that
Speaker 3: you said. You think that Jenny Yellen has already taken.
Speaker 6: Over the FED.
Speaker 3: I how much this is really in reference to the
Speaker 3: fact that the Treasure Department has been selling a disproportionate
Speaker 3: amount of tea bills, so people say it's been offsetting
Speaker 3: some of the quantity of tightening, as well as what
Speaker 3: we're seeing with respect to rate hikes over the past
Speaker 3: few years.
Speaker 1: How much do you believe that the FED is.
Speaker 3: Way more political than people expect and that that is
Speaker 3: something that you can trade around.
Speaker 4: Even Well, look what I've been able to trade around,
Speaker 4: and we'll go back your question on Yellen Treasury highly political. Unfortunately,
Speaker 4: Secretary Yellen has thrust herself into the middle of campaign
Speaker 4: in a very inappropriate way. She gave a highly politicized
Speaker 4: speech in Arizona a couple of months ago. She was
Speaker 4: standing on stage with the governor of Pennsylvania campaigning for
Speaker 4: Kamala Harris, who is not even her president. Two weeks ago,
Speaker 4: so it is politicized. The quarterly refunding schedule was changed
Speaker 4: for the first time ever. They gave Ford guidance. So
Speaker 4: how do you know what the conditions are going to be?
Speaker 4: Why do you have a treasury borrowing committee if you
Speaker 4: are going to give forward guidance?
Speaker 6: So to come back to the FED.
Speaker 4: Look, you know the FED, I think they try to
Speaker 4: keep politics out of it.
Speaker 6: We all have biases.
Speaker 4: Ninety three percent of this people at the FED or
Speaker 4: registered Democrats. But you know, I think in general that
Speaker 4: you know, they are doing what they can with what
Speaker 4: they've got. You know, your question in terms of you know,
Speaker 4: how do I trade around that. I've actually had very
Speaker 4: good luck this year trading against the FED that anytime
Speaker 4: they publish their so called dot plot, the SEP, the
Speaker 4: summary of economic projections, they've been wrong. So for all
Speaker 4: year they had three rate cuts. They know, ident think
Speaker 4: be three rate cuts. Then at the GYM meeting they
Speaker 4: published that there would only be one rate cut, and
Speaker 4: they we traded against that, and that's proving to be
Speaker 4: wrong because now the market's pricing in three, you know,
Speaker 4: maybe three jumbo rate cuts.
Speaker 5: Scott, if we could look into some policy that has
Speaker 5: to do with the Fed and the Treasury, it's well
Speaker 5: known that you're one of these individuals that talks to
Speaker 5: the former president potentially could be part of his future
Speaker 5: team if there's Trump two point zero. He gave an
Speaker 5: interview a business week and talked about a week or dollar.
Speaker 5: How would he see that through?
Speaker 4: Look, I think that's a preference, not a goal that
Speaker 4: I think he believes. And again, you know, I think
Speaker 4: about it more in terms of our other currencies undervalued.
Speaker 4: You know, is there some kind of a manipulation you know,
Speaker 4: i e. The Bank of Japan running excuse me, ultra
Speaker 4: loose monetary pol se for twelve years and doing a
Speaker 4: gigantic appreciation of the yen where it goes to a
Speaker 4: fifty year under evaluation. Is there something that the Chinese
Speaker 4: are doing with their trade policy that is causing an
Speaker 4: artificially weak the RMB, you know, versus a strong dollars. So,
Speaker 4: you know, I think remedying these under evaluations as opposed
Speaker 4: to remedying a strong dollar is a better way to
Speaker 4: think about it.
Speaker 7: Well, probably no one would like that more than Japan.
Speaker 7: I mean, they have not liked the weakness that they've
Speaker 7: seen in their currency. So do you foresee something like
Speaker 7: Applaza accord? Is that what we should be looking at?
Speaker 7: Should there be a Trump administration with these against specific currencies?
Speaker 7: Remember en to right size some of the equilibrium that
Speaker 7: you're talking about?
Speaker 6: Well, is your question? Should there be a mar Lago accord?
Speaker 6: So we can call it that way?
Speaker 4: Not?
Speaker 6: Well, I think that's what it would be called. That I.
Speaker 4: Could see, you know, something or a policy specifically targeted
Speaker 4: at the different countries that are in violation, you know,
Speaker 4: maybe rather than a global thing like Plasa loub was.
Speaker 4: You know, if you go back and look, I've studied
Speaker 4: this a lot. What's different this time is if you
Speaker 4: go back and look at the history of the Plaza
Speaker 4: coord the Lover accord, Soviet Union was never mentioned because
Speaker 4: their economy was so small, you know, so you had
Speaker 4: a security threat and then an economic threat. Now with China,
Speaker 4: I think we should view China as both a security
Speaker 4: threat and an economic threat. And it is going to
Speaker 4: require a lot more finesse with them just because they
Speaker 4: are such a big part of the global economy. So
Speaker 4: you don't want to upset the apple cart, but you
Speaker 4: want to be proven in terms of supply chains and
Speaker 4: national security.
Speaker 5: How do you then view a week dollar though, if
Speaker 5: Trump is saying that he's going to put the walls
Speaker 5: for the tariffs ten percent ring around the United States,
Speaker 5: sixty percent of imports coming from China, as well as
Speaker 5: what he says mass deportations.
Speaker 4: Right, So, I think we've discussed this before. President Trump
Speaker 4: speaks in a different way than many politicians. He speaks
Speaker 4: like a New York City real estate developer, and I
Speaker 4: think that is the opening the gambit. You know, I've
Speaker 4: used the term it is a maximalist negotiating position. I
Speaker 4: think a lot of the analysis around this in terms
Speaker 4: of inflation has been quite sloppy. You know, at our firm,
Speaker 4: we try to have better models, and you know our
Speaker 4: models show that a those are maximalist positions and be
Speaker 4: everything that I've seen, you know, in cell Side Research
Speaker 4: and other firms and commentators, you know, assumes that there
Speaker 4: is a jump on day one, which will not happen.
Speaker 6: You know.
Speaker 4: I have been spoken to the President, spoken to his team,
Speaker 4: and I think everyone is on board with a kind
Speaker 4: of Ford guidance or a phased in tariff. So, you know,
Speaker 4: here's president she Here's sixty percent, might be two and
Speaker 4: a half percent a month for twenty four months, tell
Speaker 4: us when you've had enough, and you know, at the
Speaker 4: end of the day, I think that Donald Trump views
Speaker 4: tariffs as a way not to you know, as an
Speaker 4: ind too free trade. You know, if you bring down
Speaker 4: your tariffs, we will bring down ours.
Speaker 6: You know.
Speaker 4: Recall that at the G seven meeting when he was president,
Speaker 4: he left Ottawa to go to North Korea, and on
Speaker 4: the way out the door he said to all the leaders,
Speaker 4: I'll get rid of my terraffs if you get rid
Speaker 4: of yours.
Speaker 6: So I think he views like the terraffs.
Speaker 4: As you know, kind of negotiating is almost almost like
Speaker 4: a sanctions policy.
Speaker 3: Well, Scott Besant of Key Square Group, will you be
Speaker 3: living in Connecticut or will you be living in Washington,
Speaker 3: d C. Next year we will find out Scott best.
Speaker 1: You'll have to come back of Key Square Group.
Speaker 3: Eric Resdant, co founder of KSL Capital Partners, is focusing
Speaker 3: on the consumer and the outlook for travel and joins
Speaker 3: us now and Eric first, so.
Speaker 1: Great to have you on the show. Thank you for
Speaker 1: being here. Thank you and your firm.
Speaker 3: Overseas tons of some of the most popular names that
Speaker 3: people go and visit, whether it is you know, the
Speaker 3: Icon Passes of ski Lovers, or whether it is the
Speaker 3: Marriott's and the Riz Carlton's and the Four Seasons that
Speaker 3: people attend. Do you think that there is too much
Speaker 3: pessimism right now about this sort of pace of spending,
Speaker 3: particularly on the discretionary front.
Speaker 8: I think there's too much reaction, too much reaction, reactionary
Speaker 8: thoughts happening based upon short term data when you look
Speaker 8: long term. And I'm really here to thank you for
Speaker 8: being a customer of the Icon Pass.
Speaker 9: I'm on a swing.
Speaker 8: I'm on a swing thanking each one of our customers personally,
Speaker 8: and this is my morning to thank you.
Speaker 3: You can call him up if you've got an icon
Speaker 3: past and that's right, I'm here.
Speaker 9: Feel free to call me, no problem at all.
Speaker 8: Okay, but the long term trends for travel are really positive.
Speaker 8: People don't realize how actually resilient travel is even in
Speaker 8: the face of economic volatility.
Speaker 9: We make what you were just saying, we have to
Speaker 9: embrace the mess.
Speaker 8: Life's messy, as you were saying, and the reality is
Speaker 8: in that mess, what do you want to do? You
Speaker 8: want to escape, You want to be able to have
Speaker 8: special memories and experiences with your friends and family. So
Speaker 8: we see the long term trends being favorable, we do
Speaker 8: see the same type of softening of trends.
Speaker 9: Still fine, still.
Speaker 8: Good, but it's not as robust growth in some of
Speaker 8: the segments that we invest in that we saw over
Speaker 8: the last two years coming out of COVID.
Speaker 1: I guess there's a bigger question.
Speaker 3: We were talking about this with Neila Richardson of ADP.
Speaker 1: Earlier this morning, and she.
Speaker 3: Was talking about how the pace of job creation is
Speaker 3: actually still above twenty nineteen. You can point to similar
Speaker 3: types of trends and travel. People still spending more on
Speaker 3: travel now than say twenty nineteen. Is this the new
Speaker 3: normal where we can expect more spending and an accelerated pace,
Speaker 3: or are we going back to the old normal where
Speaker 3: people actually had to work, well, they have.
Speaker 9: To work things an interesting one.
Speaker 8: I do think that the trend of remote work, of
Speaker 8: people having leisure trips. We were just talking about this
Speaker 8: on the break, combining purposes of trips. I think that's
Speaker 8: all positive for travel because when you want to combine things,
Speaker 8: what do you tend to do. You're combining something that's
Speaker 8: vacation oriented or recreation oriented with what you're doing at work.
Speaker 8: So we see skier visits, for example, are growing more
Speaker 8: rapidly midweek than they are on the weekends.
Speaker 9: Well, that's a.
Speaker 8: Better experience for the guests, it's better for everybody.
Speaker 9: I'm not sure about people saying.
Speaker 8: They're working from home on Friday if we know that
Speaker 8: skier visits are op disproportionately on Fridays.
Speaker 9: But be that as it may, we're pro that.
Speaker 8: So I think the new normal is, you know, we're
Speaker 8: all on all the time. We want to combine purposes
Speaker 8: and be more efficient with what we do. So I
Speaker 8: think in the end that's probably good. It probably creates
Speaker 8: more balance for people and for us. It creates more
Speaker 8: opportunity for them to vacation and recreate and do those
Speaker 8: things that we certainly like to invest behind.
Speaker 7: So the vision of someone like with their laptop on
Speaker 7: a ski lift, blurring out the background, saying don't pay
Speaker 7: attention to the wings, the winds swinging back and forth,
Speaker 7: and what you're saying. Okay, so you're talking about this
Speaker 7: the trend and the spend and how much that is normalizing.
Speaker 7: What about just what people expect when they go to
Speaker 7: a luxury hotel. Has something fundamentally changed after the COVID
Speaker 7: era of not being able to get it out and
Speaker 7: they now want something different with their hotel experience that
Speaker 7: they didn't before.
Speaker 9: I think that's fair.
Speaker 8: I think they want to have more than just your
Speaker 8: basic hotel experience. During COVID, we saw an expectation that
Speaker 8: it's okay to reduce services at hotels. Right We couldn't staff,
Speaker 8: we didn't want to have physical contact, so we eliminated
Speaker 8: some of those things. That type of expectation has now
Speaker 8: come back. But the guest wants more than that. They
Speaker 8: want to be able to go on a trip. Business
Speaker 8: travel is different, but for leisure travel, they want to
Speaker 8: be able to go on a trip and have more meaning.
Speaker 8: So for some that meaning is well and it's oriented
Speaker 8: and they want to do it could be as simple
Speaker 8: as a spot treat mean, it could be something that's
Speaker 8: more holistic in terms of in terms of mental health,
Speaker 8: or it could be something physical. Right, So I think
Speaker 8: the consumer they just want more.
Speaker 9: Out of everything that they do.
Speaker 8: They want to feel that that's value.
Speaker 7: What does that mean for the Airbnbs of the world.
Speaker 7: Where do they fit into that? Because they're not exactly
Speaker 7: providing that kind of service.
Speaker 9: They're not.
Speaker 8: I mean those look Airbnb and others in that business.
Speaker 8: They are trying to wrap around experiences. And you see,
Speaker 8: experiences is a watchword that you hear on whether it's
Speaker 8: earnings calls, or you see in consumer conversations. But I
Speaker 8: think Airbnb has that challenge, which is it's great if
Speaker 8: you're in a city because I don't need the restaurant
Speaker 8: necessarily or retail experience to be in my hotel in
Speaker 8: New York City. It's the city is my is my canvas,
Speaker 8: is my resort. But you know, if you're in a
Speaker 8: resort destination, you want those amenities that you know. On
Speaker 8: the one hand, Airbnb offers wonderful value because you're getting
Speaker 8: more space and you can cook your own meals.
Speaker 9: And congregate easily at your home, but it doesn't have
Speaker 9: the amenities.
Speaker 8: And I think they're trying to address that and I
Speaker 8: think I think they'll have some success doing that, which
Speaker 8: is which is good for the consumer and I think
Speaker 8: good for the business.
Speaker 1: Where travelers going right now.
Speaker 8: I mean you're seeing a bit of an ecotomy and
Speaker 8: that Europe is hot, Japan is hot. Recurrency is part
Speaker 8: of that. Part of that is you took international away.
Speaker 8: What happens when you take something away from someone, you know,
Speaker 8: I mean, if you have if you're a parent of teenagers,
Speaker 8: you realize this, you take something away, they want it more.
Speaker 8: And COVID took international travel, especially away from US. And
Speaker 8: with currency being or the US dollar being strong and
Speaker 8: foreign currency is being a bit weaker, combined with coming
Speaker 8: out of COVID, you're seeing a lot of the luxury consumer.
Speaker 9: Want to go to Europe, want to go to Japan.
Speaker 8: And so that's creating, you know, kind of a normal
Speaker 8: or not yet a normalization of travel patterns. I expect
Speaker 8: that you'll we're seeing in some segments, but thensumers, you know,
Speaker 8: the affordable, the more budget contrast consumer is cutting back
Speaker 8: a bit more right now. The luxury consumer is going
Speaker 8: more abroad. Witness at least going abroad last week, but.
Speaker 9: Not out.
Speaker 1: You're there, But it's okay, everyone's doing it this morning, so.
Speaker 9: Why not can stay back to vacation. It's what we
Speaker 9: all do, okay.
Speaker 5: So you're seeing a real bifurcation and where consumers are
Speaker 5: going a bit.
Speaker 8: If you look at like select service spending for hotels,
Speaker 8: those trends are a bit softer than the higher end.
Speaker 8: In the last year, you saw red par for more
Speaker 8: luxury travel to be positive still three four percent, while
Speaker 8: select service red pars down. I think that's indicative of that.
Speaker 8: But again, it's not dramatic, right These are evolutionary, not
Speaker 8: revolutionary shifts and consumer behavior that we're seeing normal normal volatility,
Speaker 8: not abnormal volatility.
Speaker 3: One thing that you have is a really good lens
Speaker 3: on what the balance sheet equation really looks like right now,
Speaker 3: especially at a time where we are talking about.
Speaker 1: Increasing oil prices.
Speaker 3: Maybe on the margins you see increasing commodity prices. You
Speaker 3: talk about how suddenly workers and that sort of consumer
Speaker 3: experience is much more important how much a margin's getting squeezed.
Speaker 8: If if you look over the last four years or
Speaker 8: I guess now five years since pre COVID twenty nineteen,
Speaker 8: margins for our margins are up.
Speaker 9: We've been able to We've been able to move.
Speaker 8: Price more than our costs, even though costs are up
Speaker 8: a lot, right, I mean, the average worker wages in
Speaker 8: our sector are probably twenty percent in the last four years,
Speaker 8: which is a lot. A price is up twenty to
Speaker 8: twenty five percent, so that equation still works. I think
Speaker 8: if you have less distinctive properties or less distinctive experiences,
Speaker 8: you don't have that same pricing power, and margins are
Speaker 8: being hit more.
Speaker 9: And that's a challenge.
Speaker 8: I think right now, if you look at urban hotels,
Speaker 8: their margins are under a lot of pressure. Still it's
Speaker 8: getting better as the business traveler has.
Speaker 9: Been coming back, but it's something to watch out for.
Speaker 7: Are you seeing hotels trying to spend to be able
Speaker 7: to deliver that and then what does that mean for margins?
Speaker 7: If in order to get the larger margins you need
Speaker 7: to have this all around experience, But to get the
Speaker 7: all around experience, you have to build a lot of capability.
Speaker 8: Like everything, it's a paradox in life. I mean, you
Speaker 8: have to be able to do two things at once, right,
Speaker 8: And so I think hotels that have the ability to
Speaker 8: spend on the consumer experience to create more differentiation and
Speaker 8: therefore justify a higher price to that consumer because they're
Speaker 8: providing that value.
Speaker 9: They're doing that. I think you see that.
Speaker 8: But other hotels that don't have that ability, I think
Speaker 8: they're seeing more more challenges. We're seeing that. We've got
Speaker 8: some wonderful resorts in Italy and St. Bart's that they
Speaker 8: put tremendous emphasis on the consumer and guest experience, investing
Speaker 8: in SPA programming, wellness, off site activities, picking up from
Speaker 8: the airport and with a great car.
Speaker 9: Those types of things.
Speaker 8: At the luxury end, right, they're seeing prices that are
Speaker 8: exceptionally high and still able to push prices at the
Speaker 8: other end, you know, if you're a non more nondescript hotel.
Speaker 8: I mean, it's tougher today because the consumer is being
Speaker 8: more discerning and how they spend their money.
Speaker 3: So you talk about bleasure, which is a difficult word
Speaker 3: for me to get my head around.
Speaker 1: Bleasure, it's fun to say, actually, and how.
Speaker 3: Increasingly businesses are mixing business with leisure.
Speaker 1: What's your life like?
Speaker 3: I mean, do you basically just go around and just
Speaker 3: experience the different experiences that you're properly and you just
Speaker 3: basically go there and you say, you know, I need
Speaker 3: a spa treatment to really understand the value that you're providing.
Speaker 9: That massage wasn't quite as good as it should have been.
Speaker 9: I need to do another one, exactly. Yeah, it's a
Speaker 9: lot of that.
Speaker 8: Yeah, it's not as interesting, just as you would like
Speaker 8: to believe. Business trips do tend to be to probably
Speaker 8: some more leisure arning to destinations than most.
Speaker 9: So it's fortunate in that regard.
Speaker 8: I spent a lot of time talking to the leaders
Speaker 8: of our businesses. We have about twenty five business leaders
Speaker 8: across our portfolio. I spent a lot of time meeting
Speaker 8: with investors, meeting with other owners or constituents in the
Speaker 8: travel leisure business. It's a large and growing sector. It's
Speaker 8: a third larger sector of the global economy. It's ten
Speaker 8: percent of global GDP, ten percent of global employment. But
Speaker 8: you have to stay connected to the round of what
Speaker 8: actually is happening. Not quite the massage, the massage in
Speaker 8: the spa, although I tried ever taken that once in
Speaker 8: a while, but I try to get a sense of
Speaker 8: what the consumers is looking for, and so I spent
Speaker 8: a lot of time on the road and a lot
Speaker 8: of time trying to understand consumer trends, investor trends, and
Speaker 8: the mindset of our management teams and the challenges that
Speaker 8: they deal with day to.
Speaker 3: Day, and on the ski slope on a Friday to
Speaker 3: see how many people are auditating from working from the slopes.
Speaker 3: Eric Resnik of KSL Capital Partners, thank you so much
Speaker 3: for being with us.
Speaker 1: Truly a pleasure having you here.
Speaker 9: Thank you, Thank you all for.
Speaker 1: Sticking with retail.
Speaker 3: Danielle Bretdauer of HSBC maintaining her reducing rating on a
Speaker 3: home depot, but lowering her price target to three hundred
Speaker 3: and eighteen dollars, citing the pressure of higher interest rates
Speaker 3: and lingering pandemic effects with do it yourself customers stuck
Speaker 3: on the sidelines.
Speaker 1: Daniella joins us. Now, Daniella, thank you so much for
Speaker 1: being with us. Just an overview.
Speaker 3: Level, where are we in terms of the normalization post
Speaker 3: pandemic where everyone went to sort of shore up their
Speaker 3: homes because they were going to be stuck there for
Speaker 3: the foreseeable future.
Speaker 10: Hi, good morning everyone, Thanks for having me on the show.
Speaker 9: Let me begin by.
Speaker 10: Sharing you our base case scenario for the US economy,
Speaker 10: which stands the FAD should start easing in September and
Speaker 10: the US economy avoids the recession. So that's HSBC base
Speaker 10: case scenario for the economy. And according to our regression models,
Speaker 10: currently the market is pricing a thirty percent chance of
Speaker 10: our recession, up from ten percent of the risk of
Speaker 10: our recession last week. So with this easing, the US
Speaker 10: economy would avoid a recession. And we recently increased the
Speaker 10: number of rate cuts this year to three twenty five
Speaker 10: basis points to a relative cut of seventy five bibs.
Speaker 10: And with regards to Home Depot, the current rise is
Speaker 10: broadly in line with the stocks value. In the last
Speaker 10: six months, it has been a favorite name for income investors,
Speaker 10: investors that look for give the youth. We have a
Speaker 10: two and a half percent give danude for Home Depot.
Speaker 10: But you know, Home Depot has missed Wall Streets revenue
Speaker 10: estimates three times over the last two years, and we
Speaker 10: consumer spending, higher interest rates and the economic downturn recently
Speaker 10: could hinder sales recovery for the home improvement projects and
Speaker 10: negatively impact Home Depot's growth.
Speaker 7: Danielle, We've been talking a lot about the bifurcated consumer
Speaker 7: that you're seeing weakness on the low end. Is there
Speaker 7: any sign in any of these earnings that it is
Speaker 7: starting to migrate upwards?
Speaker 10: So yeah, thanks, great question, because over the past few
Speaker 10: months we saw more evidence of a tired consumer. Large
Speaker 10: cap names such as Walmart that operate in a more
Speaker 10: defensive sector of consumer staples tend to outperform under risk
Speaker 10: of scenario and Walmart which reports on Thursday, it's usually
Speaker 10: perceived as a good proxy to the state of the US.
Speaker 1: Consumer, Danielle.
Speaker 5: Though it's not just a good proxy for the US
Speaker 5: consumer according to on the lower end. According to Walmart's
Speaker 5: last earnings report, they talked about wealthier consumers trading in
Speaker 5: trading down. So is this just say something about the
Speaker 5: consumer as a whole, or is it about Walmart taking
Speaker 5: market share from other players.
Speaker 10: So the takeaways from the Walmart quarterly results are one,
Speaker 10: consumer wallets remained stretched, but they responded well to Walmart's
Speaker 10: strong value proposition. Second, food inflation continues to moderate. It's
Speaker 10: down from where it was at the end of least quarter,
Speaker 10: and it should stay at low single digit rates. For
Speaker 10: the rest of twenty twenty four. And third, the US consumer,
Speaker 10: even the wealthiest one, is now shopping at Walmart, so
Speaker 10: they do have reported market share gains among higher income consumers.
Speaker 3: Just quickly, Daniello, is there anything in the earnings or
Speaker 3: some of the commentary that you've been really focused on
Speaker 3: that suggests that we're headed into about of real consumer
Speaker 3: spending weakness beyond what people are expecting.
Speaker 10: No, I think that it has, as you put it,
Speaker 10: it has been biffurcated since the beginning of this year.
Speaker 10: So consumers are spending more on travel and you know,
Speaker 10: other discretionary purchases rather than complex housing projects or remodelings
Speaker 10: of their homes. So I think this scenario until we
Speaker 10: get again a clear picture from the fat But even
Speaker 10: if we do get the K cuts this year, it's
Speaker 10: something that only in twenty twenty five, given the new
Speaker 10: government and the results of the election, then I think
Speaker 10: that's where we'll get more defined scenario for the US consumer.
Speaker 3: Danielle read our HSBC Thank you so much for being
Speaker 3: with us.
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