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Speaker 3: Here's the lead ist, Donald Trump, taking aim at Vice
Speaker 3: President Kamala Harris in a wide ranging conversation on X
Speaker 3: with Elon Musk. The conversation coming after Musk endorsed Trump
Speaker 3: last month, with Trump's campaign looking to curb a wave
Speaker 3: of momentum for Harris, Henrietta Trees and Beta Partners joins us. Now,
Speaker 3: Henrietta a lot of talk through about this particular discussion.
Speaker 1: I just want to start with what was your main takeaway?
Speaker 4: The main takeaway was that this was a great opportunity
Speaker 4: for X to promote spaces. I mean, over a million
Speaker 4: listeners at some point, but it was sort of two
Speaker 4: two and a half hours of two guys.
Speaker 5: In a room agreeing with one another.
Speaker 4: I wouldn't call it an interview, but more of a
Speaker 4: conversation that touched on all the hits that you hear.
Speaker 5: From a Trump rally or other.
Speaker 4: Press press briefings that the president and former president puts on.
Speaker 5: There wasn't a whole lot of new information there.
Speaker 4: The main takeaway for me was that Elon Musk is
Speaker 4: interested in getting further involved in the federal government, being.
Speaker 5: Part of a federal sort of.
Speaker 4: Task force to take on government spending and efficiency, as
Speaker 4: he calls it.
Speaker 5: But that was really the newsiest part of the interview to.
Speaker 6: Me, Henrietta, what I took away is that Musk was
Speaker 6: advocating for two key things. One to stop this demonization
Speaker 6: which I think someone of you is coming from the
Speaker 6: far right when it comes to sustainability and evs, but
Speaker 6: also deregulation, and he brought it up a number of times.
Speaker 6: Do you think he was successful Musk in convincing Trump
Speaker 6: potentially some Trump acolytes on that call.
Speaker 4: I think that there has been a history of Musk
Speaker 4: being able to move present former President Trump, specifically electric vehicles,
Speaker 4: government subsidies of that industry, in particular when it comes
Speaker 4: to deregulation. I think that's already a big part of
Speaker 4: the platform. When I speak with Republican staff, that's always
Speaker 4: a refrain. So I think there's a primed audience for
Speaker 4: that conversation that could certainly be receptive to that. What's
Speaker 4: obviously interesting about that is that you simultaneously don't have
Speaker 4: the votes to repeal the federal subsidies for all.
Speaker 5: Of those industries in the clean energy tech space.
Speaker 4: The manufacturing tax credits eighteen House Republicans to send a
Speaker 4: letter to Speaker Johnson saying, hey, we need those subsidies
Speaker 4: to continue going.
Speaker 5: They promote job growth in our districts.
Speaker 4: They're promoting you know, research and development, they're countering China.
Speaker 4: So I think they're going to have a lot of
Speaker 4: trouble actually governing on that agenda next year if former
Speaker 4: President Trump is reelected.
Speaker 6: So last night was pretty light on substance, but potentially
Speaker 6: from the Harris camp, we'll actually get some policies on Thursday.
Speaker 6: We have not seen a policy proposal yet from the
Speaker 6: Harris Walls campaign, and they're going to be coming out
Speaker 6: with this economic plan.
Speaker 1: What are you expecting, Yeah.
Speaker 4: We're expecting the plans to be rolled out around Thursday. Obviously,
Speaker 4: there are not a lot of heavy hitting interviews happening
Speaker 4: right now, last night being an example, So I don't
Speaker 4: know that the Harris Waltz team needs to get two
Speaker 4: in the weeds.
Speaker 5: My advice to clients is to focus on the bill that.
Speaker 4: The Houseways and Means Committee put out in twenty twenty one,
Speaker 4: which receives widespread support from the Democratic Conference.
Speaker 5: It includes a top corporate tax rate.
Speaker 4: Of twenty six and a half percent, it's graduated in
Speaker 4: and I think, overarchingly, whatever Harris does put out on Thursday,
Speaker 4: take that as the high watermark when you go into
Speaker 4: Congress next year in the off chance it's not a
Speaker 4: Republican controlled set, and you're going to have to thread
Speaker 4: the needle very very closely to get two hundred eighteen
Speaker 4: votes on anything in the House and fifty one or
Speaker 4: sixty in the Senate. It's going to be much more
Speaker 4: lenient than whatever a Democratic proposal comes out looking like
Speaker 4: on Thursday.
Speaker 7: In the meantime, Henrietta, we're about a month away from
Speaker 7: early voting starting, and by all accounts, this is going
Speaker 7: to be a lot of early voting compared with historical references.
Speaker 7: Is Donald Trump more or less out of time in
Speaker 7: trying to define Kamala Harris?
Speaker 4: I have two things to say on that. Number One,
Speaker 4: the most important thing that happened last night is that
Speaker 4: Arizona put the abortion issue on the ballot. That is
Speaker 4: something that got doubled the number of signatures that they need.
Speaker 5: They didn't bring abortion up once. That's the whole state
Speaker 5: of Arizona.
Speaker 4: If Democrats hold on to Arizona and pick up Nevada
Speaker 4: and keep it in the blue camp, that seriously undermines
Speaker 4: Trump's electoral college strategy.
Speaker 5: So they should be focusing on that.
Speaker 4: And I think time has run out on Trump being
Speaker 4: able to define himself in a way that's favorable to
Speaker 4: the majority of Americans on abortion, certainly with gdbans position. Secondarily,
Speaker 4: you mentioned early voting, seventy two percent of early mail
Speaker 4: in ballot requests in Pennsylvania came from the Democratic Party.
Speaker 4: What the Republican Conference led by Trump and sort of
Speaker 4: the concerns over election fraud have really driven is a
Speaker 4: material tactical disadvantage in denigrating mail in balloting, which allows
Speaker 4: the campaign to bank voters, Get those people off your
Speaker 4: roles once they've already voted, and focus.
Speaker 5: On the people you need to turn out on election day.
Speaker 4: It's a tactical disadvantage that I think the Republicans have
Speaker 4: been screaming about for several years, but to no avail
Speaker 4: at this point, Henry.
Speaker 7: But it also brings this possibility that Republicans can continue
Speaker 7: the line that they did at the last election, that
Speaker 7: it was rigged, that there were issues if it was
Speaker 7: all mail in ballots, that they weren't genuine. How concerned
Speaker 7: are you about a peaceful handover, not a handover, a
Speaker 7: peaceful continuation of power, I suppose if Kamala Harris is
Speaker 7: the president.
Speaker 4: You know what's really interesting, and I heard this from
Speaker 4: Republican staff as long as a year ago. Keep in
Speaker 4: mind why there was a delay twenty twenty and why
Speaker 4: there was a delay in calling Nevada and upending the
Speaker 4: Arizona turnout or decision making process.
Speaker 5: It was because who was in office at the time.
Speaker 4: When Biden is in office, which he will become this November,
Speaker 4: it's going to be a much more orderly process that
Speaker 4: adheres to what's actually.
Speaker 5: Happening on the ground.
Speaker 4: No one's going to be calling the governor of Georgia
Speaker 4: saying find me the votes. So I think who is
Speaker 4: actually in office right now materially impacts whether this will
Speaker 4: be a smooth transition.
Speaker 5: I expect that it will be.
Speaker 4: You can claim that there was broad but it's going
Speaker 4: to be certified, hopefully within the next day or two
Speaker 4: after November fifth, and.
Speaker 3: HATI, given the fact that we haven't gotten a lot
Speaker 3: of policy proposals that people actually are taking seriously and
Speaker 3: wondering how much you actually do, think that the Federal
Speaker 3: Reserve is going to avoid cutting rates too much or
Speaker 3: too soon in order not.
Speaker 1: To seem like a political agent.
Speaker 3: And I say this because in the absence of real policies,
Speaker 3: we have heard a lot from the Republican camp, from
Speaker 3: jad Vans as well as Donald Trump about having a
Speaker 3: more political hand in the Fed, whereas the Harris camp
Speaker 3: is talking.
Speaker 1: About not so much. How does that color your view
Speaker 1: of it.
Speaker 4: Well, I think we have to focus on what's going
Speaker 4: to be happening next year. Extending the twenty seventeen tax
Speaker 4: cuts is going to cost four.
Speaker 5: Point six trillion dollars.
Speaker 4: I'm getting a lot of inbound questions from clients about
Speaker 4: whether there will be deficit reduction next year.
Speaker 5: There's no scenario where the deficit is renewed. Next year.
Speaker 4: There will be substantial federal spending. It'll happen as soon
Speaker 4: as September thirtieth of this year.
Speaker 5: I expect we.
Speaker 4: Will continue to get aid to Ukraine, albeit a smaller
Speaker 4: and lower amounts, along with Israel. There will continue to
Speaker 4: be spending on par with what we've had in the past,
Speaker 4: which is about one point seven trillion dollars just to
Speaker 4: keep functionality. And then next year we have to keep
Speaker 4: the tax bill extended, and I suspect that almost none
Speaker 4: of those tax cuts will expire, So the FED is
Speaker 4: going to have to contend with some of the political stuff,
Speaker 4: but more importantly with just the fisful outlays that are
Speaker 4: going to be coming through, whether Democrats or Republicans win
Speaker 4: next year.
Speaker 5: So I think engaging with the FED and trying.
Speaker 4: To meddle from a perspective as somebody who's there when
Speaker 4: we did Tarp and the Auto Baila and that's not.
Speaker 5: What I want to see.
Speaker 4: You need the autonomy of the FED, and I think
Speaker 4: that they'll fight you the Neil for that.
Speaker 1: Henrita Trees and Veta Partners. Thank you so much.
Speaker 3: Four season CEO Alejandra right now saying his company is
Speaker 3: seen in strongest year ever, writing this short term uncertainty
Speaker 3: given the current geopolitical macroeconomic pressures are impacting traveler sentiment,
Speaker 3: but the luxury sent segment is more resilient, Alejandro joins us. Now, Alejandro,
Speaker 3: thank you so much for being with us. Pleasure to
Speaker 3: have you here in studio. I want to start there.
Speaker 3: Is it true that you're not seeing any slowdown whatsoever
Speaker 3: in the luxury element?
Speaker 8: Good morning, Thanks for having me. It's a pleasure to
Speaker 8: be here. And I love the fact that we're talking
Speaker 8: about in luxury hospitality. Yes, I mean, we had a
Speaker 8: really strong first half of the year compared to last year,
Speaker 8: much better. When I look into the booking trends for
Speaker 8: the second half of the year, even going on into
Speaker 8: twenty twenty five, they look very strong as well. You know,
Speaker 8: I think there's two things that are happening there. First,
Speaker 8: and for most, is that the luxury guest or the
Speaker 8: luxury consumer continues to be very resilient. They continue to spend.
Speaker 8: You know, that desire for experiences to explore continues to
Speaker 8: be there. But also I would say that from a
Speaker 8: four seasons angle and from a four season's point of view,
Speaker 8: we do offer a very clear value proposition to our guest.
Speaker 8: I mean, we do have very proud to say that
Speaker 8: we have the very best hotels in the best locations
Speaker 8: and we provide the best service to our guest. And
Speaker 8: when you have that as the brand proposition, and that's
Speaker 8: what we do at four seasons, there's a demand for that.
Speaker 8: And by the way, this is not new of this year.
Speaker 8: We've been operating down for sixty years and has been
Speaker 8: the constant all throughout the period.
Speaker 1: So what has changed?
Speaker 3: And I'm wondering not just from the consumer who's able
Speaker 3: to spend, but also from the employer, Yes, and who
Speaker 3: you're able to recruit. For a long time, there is
Speaker 3: this earth of people willing to work in hospitality in
Speaker 3: the direct aftermath of the pandemic. Do you see it
Speaker 3: as being much easier now to hire people and sort
Speaker 3: of easier to also retain them without massive price increases
Speaker 3: wage increases.
Speaker 8: Yes. I mean, obviously for us, a key component of
Speaker 8: what we do is through our people, and we are
Speaker 8: a service company and the most important asset is the
Speaker 8: people that we have with us. So we place a
Speaker 8: lot of emphasis in making sure that we are the
Speaker 8: employer of choice in every single market that we operate.
Speaker 8: We do spend a lot of time training people, developing
Speaker 8: them for us. We do measure employee engagement twice per year.
Speaker 8: We are at the two percent across all industries in
Speaker 8: terms of employee engagement. So it's a topic that we
Speaker 8: spend a lot of time because we do believe that
Speaker 8: we need to have the best and most engage employees
Speaker 8: with us. We haven't had. I mean, obviously after the
Speaker 8: pandemic there was a little bit of pressure from the
Speaker 8: labor point of view. We don't see that anymore, but
Speaker 8: again it's because of the air force that we place
Speaker 8: in making sure that we are the employer of choice
Speaker 8: in the marketing where we operate.
Speaker 7: I want to know about more about your customer, but
Speaker 7: specifically like the ultra luxury and there. I know you
Speaker 7: have a private jet service something like one hundred and
Speaker 7: fifteen thousand dollars for charter a day.
Speaker 9: How much demand is there for that?
Speaker 8: Yes, you know, it's interesting And just to give you
Speaker 8: the context of this is obviously Four Seasons started as
Speaker 8: a hotel and a resource company, and we are now
Speaker 8: the leading luxury hospitality company and that's where our guests
Speaker 8: experience the brand. What we found over time is that
Speaker 8: because our second business is the residential brand, the residential
Speaker 8: so guests they stay with us, they experience the brand,
Speaker 8: and then they are willing to buy a residence with us.
Speaker 8: So that's sort of the journey that they start experiencing
Speaker 8: with four seasons. And the third piece is what you
Speaker 8: just said is the journey's experience based travel that we
Speaker 8: promote as a third line of business. So if you
Speaker 8: think about the whole analogy, guests they stay with us,
Speaker 8: they live with us, and they travel with us. They
Speaker 8: developed such a comfort with the brand and with the
Speaker 8: brand promise and the brand proposition that they're willing to
Speaker 8: spend that amount of money in traveling for twenty days
Speaker 8: through ten four seasons in Africa, in Europe and so forth.
Speaker 8: So for us, it's been more around creating this lucture
Speaker 8: ecosystem for four seasons that our guests are eager to travel.
Speaker 8: By the way, we have all the intineraries for this
Speaker 8: year sold out for the rest of the year, so
Speaker 8: it's a very successful product and it taps into that
Speaker 8: desire to experience, to explore that we find in our guests.
Speaker 7: You're saying we're too late for it, then.
Speaker 8: Yeah, twenty twenty five, we're opening the.
Speaker 7: Good To keep in mind, I mean just talking about
Speaker 7: the different mix of your businesses.
Speaker 1: Only one doing in this.
Speaker 7: Space, and it obviously is an exclusive space of those
Speaker 7: who can offer this, but you think of the online
Speaker 7: resources also trying to give also experiences to What does
Speaker 7: competition look like right now?
Speaker 8: Well, competition because of the attractiveness of the luxury space,
Speaker 8: there's a lot of competitors coming in. I think we
Speaker 8: have as a Four Seasons the advantage of the brand.
Speaker 8: I mean, we are the most We continuously measure brand preference,
Speaker 8: brand awareness in terms of our brand, and we continue
Speaker 8: to be the number one luxury hospitality brand, and I
Speaker 8: think that carries a lot of weight. But it's because
Speaker 8: at the end of the day, we're able to deliver
Speaker 8: that value proposition to our guest. I mean when it's
Speaker 8: interesting because I do interact with a lot of our
Speaker 8: guests and when I ask them what do they like
Speaker 8: about the Four Seasons, the first thing they tell me
Speaker 8: is that I know what to expect and I've been
Speaker 8: able as a guest to explore remote destinations. So for example,
Speaker 8: I've been able to go to Garabora. But because there's
Speaker 8: the Four Seasons, I feel comfortable because I know what
Speaker 8: to expect and to have that level of conceit extensy
Speaker 8: and that brand power is very, very unique. So I
Speaker 8: think we're uniquely a very well positioned.
Speaker 6: Where do you see the demand right now in terms
Speaker 6: of the hot spots top five people are traveling too.
Speaker 8: Yeah, you know, it's interesting because and I'm going to
Speaker 8: say something which is a little bit of contrariant. When
Speaker 8: I look into the history of Four Seasons over the
Speaker 8: last years, travel patterns haven't changed much. For example, fifty
Speaker 8: five percent of our revenues come from the Americas, the
Speaker 8: majority of in the US. More than fifty percent of
Speaker 8: our guests, they are from the US. And whether they
Speaker 8: travel to the US right now during the summertime, they
Speaker 8: travel to our South Florida collection, they go to Hawaii.
Speaker 8: Beyond the US, they go to Mexico and then Europe.
Speaker 8: The fact is that this has happened for many, many years.
Speaker 8: Americans are going to go to Europe probably once a
Speaker 8: year every summer. I mean, that's so, and we're seeing
Speaker 8: that again this summer, but it happened last year, prior year,
Speaker 8: prior year. But again America representing fifty five percent of
Speaker 8: revenues for US in the Europe and the Middle East
Speaker 8: represents twenty five percent of the revenues, and there the
Speaker 8: dynamics are similar. Europeans they mostly stay within Europe. They
Speaker 8: ventured into the Middle East or Africa. And then we
Speaker 8: have APAC, which is twenty percent of our business. Three
Speaker 8: percent is only China and that's mainly regional travel.
Speaker 6: Do you still see the Chinese consumers spending as much
Speaker 6: in luxury hotels the same way the US consumers.
Speaker 8: No, they have not come back. I mean when I
Speaker 8: look into what was spending prior to the pandemic is less.
Speaker 8: It's interesting because they are spending less in China, so
Speaker 8: we still don't have the same race that we used
Speaker 8: to have prior to the pandemic in China. But they're
Speaker 8: starting to spend more internationally, but internationally within the region
Speaker 8: meaning Japan for the most part, because of visa issues
Speaker 8: and many other things. They still have not come back
Speaker 8: to Europe or the US, which is where we saw
Speaker 8: them prior to the pandemic.
Speaker 3: There's real question here about how much and towards is
Speaker 3: slow of Apollo called us out for us this morning.
Speaker 3: He said, all you people in media, and I'm paraphrasing,
Speaker 3: just keep using everyone as an anecdote to try to
Speaker 3: paint a macro picture. Your company has been around for
Speaker 3: sixty years. How independent of the macrocycle is it?
Speaker 9: Right?
Speaker 1: I mean, we're talking about something that.
Speaker 3: Is a complete microcosmon to itself of people who have
Speaker 3: disposable wealth and are going to travel no matter what,
Speaker 3: versus a company that does have some sort of sensitivity
Speaker 3: to what's going on in the underlying consumer centimacy.
Speaker 8: I mean, I would be lying if I would say
Speaker 8: that we are immune to any microeconomic geopolitical impacts, because
Speaker 8: we are. I mean, at the end of the day,
Speaker 8: that uncertainty impacts travel or sentiment, and people don't travel
Speaker 8: because of that. But obviously we've been operating for sixty years.
Speaker 8: Have We've gone through these cycles and they go away,
Speaker 8: and at the end of the day, what we see
Speaker 8: in is year or year that the market continues to grow.
Speaker 8: I mean, trouble and torurism has been growing for many
Speaker 8: years now, that desire to experience, to explore, continues to
Speaker 8: be there. I think it's really interesting when you look
Speaker 8: into the luxury consumer that our composition of guests about
Speaker 8: twenty percent are boomers, forty five percent are Gen X,
Speaker 8: thirty five percent already are millennials, so that transfer of
Speaker 8: wealth is starting to happen, but we're not losing the boomers,
Speaker 8: so it means that the market is expanding. So always
Speaker 8: year and year, there's going to be more demand, more growth,
Speaker 8: and at the end of the day as well, we
Speaker 8: as as a hotel and restore company, need to be
Speaker 8: at the forefront in terms of creating amazing experiences so
Speaker 8: we can satisfy the demand. So I don't think at
Speaker 8: the end of the day that the demand just comes
Speaker 8: by itself. We need to have, like we do, a
Speaker 8: very special product, a very special service proposition to our guests,
Speaker 8: so at the end of the day, they are eager
Speaker 8: to come to a four seasons.
Speaker 1: So you're doing great with the baby class.
Speaker 3: I hear that you really crushing it, you know, particularly
Speaker 3: south of the US.
Speaker 1: Paid actor.
Speaker 8: No, it was, you know, but that's one. It's a
Speaker 8: tremendous learning experience because sometimes we so much more you're
Speaker 8: marketing that doesn't provide any outcomes, But then these special
Speaker 8: authentic moments are the ones that the consumers value the most.
Speaker 8: This was a complete viral moment, but it was completely authentic.
Speaker 8: We had nothing to do with it. In the end,
Speaker 8: we have more than three hundred million views through various
Speaker 8: digital platforms on the four Seasons Baby. Obably, we got
Speaker 8: a spike on on searches on four Seasons Orlando, so
Speaker 8: it was very good. But again it was very authentic,
Speaker 8: which ultimately is what.
Speaker 9: People like I love it.
Speaker 3: I wonder how many board meetings for about the four
Speaker 3: seasons Baby. All right, now four Seasons, CEO, thank you
Speaker 3: so much for being.
Speaker 1: Joining us. Now I'm so pleased to say it's now
Speaker 1: Leazei of.
Speaker 3: Deutsche Bank, and I want to start thank you so
Speaker 3: much for being here. Matt, I want to start with
Speaker 3: your impression of how predictive to Danny's this PPI print
Speaker 3: is for tomorrow's CPI.
Speaker 10: Yeah, I would agree with Mike that not very Usually
Speaker 10: what we look at are the few components that go
Speaker 10: into PC the form the inflation gage that the FED
Speaker 10: focus is on, so their portfolio management, healthcare, a few
Speaker 10: of the other airfares or used car prices are most important.
Speaker 10: I would downplay, you know, what we're seeing in the
Speaker 10: headline or the core just for that reason. I think,
Speaker 10: you know, we have to go through some of the details.
Speaker 10: There are some reasons to think that some of those
Speaker 10: components could have been stronger, so portfolio management. Inflation one
Speaker 10: tends to lag the market. So the strength we had
Speaker 10: in markets and prior months should actually lift that inflation component.
Speaker 10: But I think ultimately as little feed through into how
Speaker 10: we think about the CPI beyond those components that matter
Speaker 10: for the pc I wouldn't change too much of how
Speaker 10: we're thinking about the CPI tomorrow. But the market is lean,
Speaker 10: I think in a very doughest direction from a CPI perspective.
Speaker 10: You know, the market pricing is around a zero point
Speaker 10: one percent core CPI print, below what consensus is expecting.
Speaker 10: So the market is kind of anticipating soft inflation numbers
Speaker 10: which allow the Fed begin to cut rates.
Speaker 3: And this really is basically feeding into that kind of
Speaker 3: coiled spring that we've got coming into tomorrow. In terms
Speaker 3: of that dubvish positioning, Is there anything that you're seeing
Speaker 3: in the data that should push back against that because
Speaker 3: at one point you are more dubbish than the market
Speaker 3: in terms of rate cut calls.
Speaker 1: Now you're actually more hawkish.
Speaker 3: Than the market with three rate cuts for the remainder
Speaker 3: of this year. So is there anything in this data
Speaker 3: that would give you pause before throwing your hat in
Speaker 3: the ring and saying you know.
Speaker 1: What, market? You're right?
Speaker 10: Yeah, thinks changed quickly, you know, as you mentioned about
Speaker 10: a month ago, we shifted to three twenty five basis
Speaker 10: point back to back to back cuts and was viewed
Speaker 10: as aggressive at that point in time. You know, I
Speaker 10: think from the Fed, what we've heard from them is
Speaker 10: wanting to kind of take a step back, be able
Speaker 10: to see the data.
Speaker 9: You know.
Speaker 10: I think my read on the data is you have
Speaker 10: a clear slowing, including in the labor market, but it's
Speaker 10: not recessionary at this point in time. You still do
Speaker 10: have inflation that's above target, but I think inflation risks
Speaker 10: have really dissipated, and so I think the Fed should
Speaker 10: be very comfortable cutting rates should they go by fifty
Speaker 10: basis points. You know, the market has been priced kind
Speaker 10: of fifty to fifty for that at this point in time,
Speaker 10: I think the data will determine it. So if we
Speaker 10: get confirmation in the next job support that the latest
Speaker 10: weakness was real, then I think it could be quite
Speaker 10: likely that the FED cuts by fifty basis points. If
Speaker 10: you see a reversal of some of that weakness, which
Speaker 10: is my baseline expectation, if you have the continer to
Speaker 10: consumer continue to come in resilient, then I think that
Speaker 10: the Fed can have a path here of going by
Speaker 10: twenty five basis points at each meeting.
Speaker 7: Can you just break down with the difference of going
Speaker 7: twenty five and fifty is on impact? Is it signaling
Speaker 7: or is there actual economic legs up that they give
Speaker 7: the economy by going by fifty instead of twenty five.
Speaker 10: Yeah, so at the moment, a lot of this is
Speaker 10: already priced into the market, right, So two year yields
Speaker 10: are reflecting an aggressive rate cutting cycle, a little bit
Speaker 10: more aggressive than we're anticipating. I think markets are reflecting
Speaker 10: that at this point in time. So if the Fed
Speaker 10: were to go by twenty five basis point increments rather
Speaker 10: than that, yields would rise, maybe you see equities come.
Speaker 9: Down a little bit. But I'm skeptical that the Fed
Speaker 9: being a.
Speaker 10: Little bit more hawkish is going to tighten financial conditions aggressively,
Speaker 10: And the reason is the only way that they would
Speaker 10: do that is if the economy is looking resilient, and
Speaker 10: I think the market is highly leveraged to negative news
Speaker 10: on the economy, as I saw with the jobs report.
Speaker 9: Anything that looks like it's a downside risk.
Speaker 10: So I think if we get resilient news on the
Speaker 10: labor market and consumer financial conditions can remain easy even
Speaker 10: if the FED only goes by twenty five basis point.
Speaker 7: Clip, are you surprised or even maybe concerned the Fed
Speaker 7: hasn't given themselves that optionality, announced that optionality of doing
Speaker 7: fifty basis points that at the moment they're still discussing
Speaker 7: whether or not to do even just twenty five.
Speaker 10: Yeah, I think you know what we will often hear
Speaker 10: they make decisions at a meeting, and it's only for
Speaker 10: that meeting. I think what we've heard from FED officials
Speaker 10: since the jobs report and since market volatility has been
Speaker 10: entirely appropriate, which has been Yes, there was some weakness
Speaker 10: in the labor market data, but they are not overly
Speaker 10: worried about it. They're not worried that it was signaling recession.
Speaker 10: I think what they were seeing in markets, they thought
Speaker 10: was being driven by technicals and positioning in a nonwind
Speaker 10: of positioning, and so I far I think that's played out,
Speaker 10: and the market went from pricing over one hundred and
Speaker 10: twenty five basis points this year down to less than
Speaker 10: one hundred. And if you get good data, I think
Speaker 10: it'll give them the optionality. So I think they're in
Speaker 10: a fine place at this point time, and chair pal
Speaker 10: at Jackson Hole can help guide guide us on how
Speaker 10: they're thinking.
Speaker 1: Matt, you say the consumer's resilient.
Speaker 6: What do you make of what Home Depot said this morning,
Speaker 6: which is that they're in this deferral mindset that they're
Speaker 6: waiting to make big purchases.
Speaker 10: Yeah, I think resilience is definitely different than kind of
Speaker 10: robustness or strength, and so I think we're coming from
Speaker 10: a consumer environment where you just had a very robust
Speaker 10: consumer over the course of twenty twenty three, and it
Speaker 10: was across the income distribution. It was kind of hard
Speaker 10: to find pockets of weakness. You now do have some
Speaker 10: pockets of weakness. You do have some pockets of softness.
Speaker 10: I think it's more reflecting of a normal type of
Speaker 10: an environment, you know that said the labor market data
Speaker 10: does have some risks to it. Job gains did slow,
Speaker 10: we think some of it was due to hurricane effects,
Speaker 10: but they have the uneployment rate has risen up to
Speaker 10: four point three percent, and job gains remain resilient only
Speaker 10: because layoffs remain low. So if there are risks that
Speaker 10: I am looking at, it is that that layoff picture
Speaker 10: changes and that would clearly undermine the consumer in a
Speaker 10: way that turns it into it kind of a more
Speaker 10: negative dynamic.
Speaker 6: If we are now at full three percent of the
Speaker 6: uneployment rate is basically what the Fed wants to be
Speaker 6: at the end of the year. Does that in itself
Speaker 6: signal that they are behind the curve.
Speaker 9: I don't think it's signals that they're behind the curve.
Speaker 10: I think it's signals that their dot plot in June
Speaker 10: is not appropriate at this point in time. So when
Speaker 10: they set that forecast with that unemployment rate, they had
Speaker 10: one rate cut this year. I think that no longer
Speaker 10: is a reasonable view at this point. I think it's
Speaker 10: more likely that the debate is between going twenty five
Speaker 10: or fifty basis points, and I think that will be
Speaker 10: a real debate. I think it'll be dictated by the
Speaker 10: data I honestly think that there's compelling arguments on both sides.
Speaker 9: They are restrictive.
Speaker 10: The inflation data is telling them that there's not as
Speaker 10: much upside inflation risks, and then it depends on whether
Speaker 10: not the economy is actually as resilient as we think.
Speaker 10: If it is, then I think that they should go
Speaker 10: by twenty five basis points, and I think they probably will.
Speaker 10: But if we get kind of confirming evidence on the
Speaker 10: labor market front, that gives them scope to go more.
Speaker 3: Aggressively, giving some credence to that fifty basis point a
Speaker 3: rate cut thesis.
Speaker 1: If you are just joining us, we did just.
Speaker 3: Get that PPI number and did come in softer than
Speaker 3: expected inflation, then not necessarily the concern and opening the
Speaker 3: door really to the Fed to cut rates perhaps even
Speaker 3: more aggressively. Zero point one percent was PPI final demand
Speaker 3: versus the expectation of zero point two percent.
Speaker 1: That leaves the year over year final.
Speaker 3: Demand at two point two percent versus the expected two
Speaker 3: point three percent.
Speaker 1: Pretty much across the board, it seems softer.
Speaker 3: What you see in markets is pretty much a collective cheer.
Speaker 3: You see across the board, stocks rally much more aggressively
Speaker 3: led by the Nasdaq one hundred.
Speaker 1: You also have bonds.
Speaker 3: Rallying, as you see two year yields fall below four
Speaker 3: percent solidly. So although we're tracing some of the earlier
Speaker 3: rally that we saw three ninety six sixty eight, it's
Speaker 3: pretty much across the board. The biggest bid though into
Speaker 3: the two year, and if you bleed that through foreign exchange,
Speaker 3: you see the dollar softer as you expect some sort
Speaker 3: of rate cutting cycle to commend, certainly in September. A
Speaker 3: question now the depth of it, the yeurogaining versus the
Speaker 3: dollar one oh nine forty five. Michael mckeis still with
Speaker 3: us here. Our economics corresponded, what are you seeing in
Speaker 3: the details of this?
Speaker 11: Well, the big change, as I mentioned earlier, was that
Speaker 11: services prices went down, while goods prices went up, largely
Speaker 11: because of gasoline, but we also saw passenger car prices
Speaker 11: fall two tents. Health Care prices were basically flat, insurance
Speaker 11: prices basically flat. The big increase in the numbers came
Speaker 11: from portfolio management. Matt Lizzetti's colleagues are causing inflation at
Speaker 11: this point. Portfolio management prices rose two point three percent,
Speaker 11: one of the biggest moves in the whole PPI. So
Speaker 11: the fact that you get paid either.
Speaker 9: Way works out well.
Speaker 1: Melazetia is still with us and can responding. What do
Speaker 1: you make of the details.
Speaker 10: Yeah, so portfolio maagement rose as I kind of signaled.
Speaker 10: I think actually, I think maybe the most important thing
Speaker 10: was healthcare being flat. So healthcare in the PC is
Speaker 10: twenty percent of.
Speaker 9: The core PC index.
Speaker 10: It's basically as important as rent and know we are.
Speaker 10: We've been signaling some upside risks to that because it
Speaker 10: tends to be leveraged on healthcare wage growth, and that's
Speaker 10: been very strong. You got a soft print there, so
Speaker 10: that is as a read through to core PC. It's
Speaker 10: a very good indicator for the Fed.
Speaker 7: Matt. Just while you've been talking, I've been looking at
Speaker 7: the interest rate probability tick lower and lower. I mean
Speaker 7: not a dramatic move, but you were saying it's about
Speaker 7: fifty to fifty. It's now more than fifty percent chance
Speaker 7: that they go fifty basis points.
Speaker 9: The next meeting.
Speaker 7: Are we putting too much weight on each individual data
Speaker 7: point as this market rolls on?
Speaker 10: Yeah, you know, the market is highly sensitive to each
Speaker 10: data point.
Speaker 9: I think just seeing some big moves.
Speaker 10: It doesn't take much to move, you know, by ten
Speaker 10: percent for a cut. It's only two BIPs on in
Speaker 10: terms of the pricing.
Speaker 9: But you know, it makes sense. We're in an uncertain.
Speaker 10: Environment at this point in time, and the FED is
Speaker 10: providing little for guidance. I think appropriately, if the FED
Speaker 10: is providing little for guidance, then it means the FED
Speaker 10: is data dependent and we should be sensitive to those moves.
Speaker 10: I do think the healthcare component here is important. That
Speaker 10: being flat rather than strong is a Dubbs signal for
Speaker 10: the core PC.
Speaker 9: We'll have to wait what we get from the CPI tomorrow.
Speaker 3: Mat Is that a really really smart Thank you so much,
Speaker 3: As always, Mount Assadi of George.
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