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Speaker 3: We've just seen, certainly, you know, Stock's struggle. We're at
Speaker 3: the tail end of earnings. Although we've got a couple
Speaker 3: of earnings that certainly we're key in today's trade, and
Speaker 3: a couple of big ones that we continue to get
Speaker 3: to fill in the earnings picture. But this is so important,
Speaker 3: and we're getting stories of concerns about or i should
Speaker 3: say the c suite talking about uncertainty, economic uncertainty in
Speaker 3: terms of the outlook, you know, pointing to things like trade, sentiment.
Speaker 3: These are things that you know, especially sentiment.
Speaker 4: It's just a.
Speaker 3: Way people feel, whether it's about shopping, spending, or what
Speaker 3: they feel about the market. But sentiment can turn into reality,
Speaker 3: and so that's why we pay so close attention to it,
Speaker 3: especially when we think about what might happen. I mean,
Speaker 3: we're almost halfway through this year. I know, we still
Speaker 3: have a couple of months.
Speaker 4: But I know, no, but it's kind of.
Speaker 5: Let's say we're almost a quarter the way through this year.
Speaker 3: Let's say that, all right, a quarter a quarter technically correct,
Speaker 3: but it feels like a lot more.
Speaker 5: It does feel like a lot.
Speaker 6: Look.
Speaker 5: I talked to some market observers this week who repeated
Speaker 5: this idea that once we do get regulatory clarity on tariffs,
Speaker 5: which supposedly is coming April second the President keeps reminding us,
Speaker 5: then we will see things settle down a bit. I
Speaker 5: don't know, Carol, I'm not so sure.
Speaker 3: I got to say, if that's it, yes, if more
Speaker 3: tariffs possibly come, or we continue to hear it in
Speaker 3: the narrative out of the White House, that could be problematic. Hey, listen,
Speaker 3: another great bell Weather economic, bell Weather Market, Bellweather is FedEx.
Speaker 4: We got their earnings last night. Stock at it's lows.
Speaker 3: Today down almost twelve percent right now down about six
Speaker 3: point three percent. Company did lower its full year guidance
Speaker 3: for our third consecutive quarter, citing inflation and citing uncertain
Speaker 3: demand for shipment. So let's get back to Lee Klascow.
Speaker 3: He was with us as we were breaking down those
Speaker 3: earnings last night. He Bloomberg Intelligence senior Transport, Logistics and
Speaker 3: shipping analysts. He joins US from BI headquarters in Princeton,
Speaker 3: New Jersey. So, Lee, did we get more from the
Speaker 3: company following earnings about that cut in its full year
Speaker 3: guidance for the third quarter?
Speaker 7: Yeah, I think you know, what it pointed to is
Speaker 7: a weaker industrial economy and a weaker B to B
Speaker 7: demand or business to business demand. So obviously not the
Speaker 7: home deliveries, it's just parcels between companies, so think of
Speaker 7: lawyers and things of that nature. That's been much weaker
Speaker 7: than I think they expected. And as you mentioned, we're mentioning,
Speaker 7: you know, the whole uncertainty that's swirling around the economy
Speaker 7: really is making it hard not only for people like
Speaker 7: me to kind of figure out, you know, where things
Speaker 7: are heading, but also the C suite to kind of
Speaker 7: give guidance that that's going to come in within range.
Speaker 7: So there's a lot of risks to guidance going forward
Speaker 7: for not only fed X, but for a lot of
Speaker 7: companies in the space because if the risk or if
Speaker 7: actual tariffs are going to hurt demand and be inflationary,
Speaker 7: that is going to really hurt the freight economy recovery,
Speaker 7: which is something we're really hoping for in twenty twenty five.
Speaker 7: But it seems that that recovery is getting pushed out
Speaker 7: further and further.
Speaker 5: Lee, how much further do you think that recovery is
Speaker 5: getting pushed out.
Speaker 7: Well, we're seeing, like you know, certain aspects of the market.
Speaker 7: So like the rail industry. The rail industry is showing
Speaker 7: volume growth, which is good, but some might argue a
Speaker 7: lot of that growth is just pull forward demand less
Speaker 7: than truckload carriers, which FedEx is actually the largest provider
Speaker 7: of that kind of service LTL service and their FedEx
Speaker 7: freight business. You know that's been down. We've seen you know,
Speaker 7: tonnage down from FedEx from its competitors, down by mid
Speaker 7: to high single digits. And that business is really tied
Speaker 7: to the industrial economy, so that business will go as
Speaker 7: the ism goes, which is a good leading indicator. And
Speaker 7: while that's been positive for the last two months, it's
Speaker 7: been barely in expansion mode. So you know that recovery
Speaker 7: is extremely.
Speaker 5: Fragile, is there. I mean, are you are you taking
Speaker 5: any signs from this report, from the commentary that we
Speaker 5: got on the call, Lee about this being an economic
Speaker 5: bell weather for how the economy is doing. You did
Speaker 5: say that, you know that B to B communication that
Speaker 5: typically happens with FedEx, less of that is happening. How
Speaker 5: are you reading into that?
Speaker 7: Yeah, So I think with FedEx, it's two things. So
Speaker 7: some things are very FedEx specific in terms of their
Speaker 7: earnings announcement and their lower expectations, and some things are
Speaker 7: just the just the macro for the FedEx specific stuff.
Speaker 8: You know.
Speaker 7: There they are walked away from their contract with the
Speaker 7: US postal business because it was low margin business and
Speaker 7: they wanted to restructure their networks. They didn't have as
Speaker 7: many planes in the air because that's very expensive to operate.
Speaker 7: So they're they're kind of decided not to renew that business. Uh,
Speaker 7: and they're restructuring their business. And FedEx is also a
Speaker 7: company that was extremely bloated, uh you know, call it
Speaker 7: five six years ago and it's uh, you know now
Speaker 7: they're really doing the hard work of the productivity improvements
Speaker 7: that we're seeing within whether it's their driving initiative or
Speaker 7: some of their other initiatives that are really good to
Speaker 7: drive margin improvement. The problem is is that you know,
Speaker 7: you need more growth on the volume side to really
Speaker 7: see those margins improve, and a lot of that growth
Speaker 7: has to be on the B to B side. And
Speaker 7: so to answer your question, you know, yes, it is.
Speaker 7: They are telling us that the the industrial economy is
Speaker 7: a lot weaker. The consumer is, you know, somewhat resilient.
Speaker 7: But that resiliency again, you know, I think the two
Speaker 7: words that we're playing a drinking game would be fragile
Speaker 7: and uncertainty. Uh, you know, every time someone said that
Speaker 7: you have to take a drink. I think that, you know,
Speaker 7: depending on how inflationary tarists are, you know, could have
Speaker 7: a really big packed on consumers. And as you noted
Speaker 7: earlier before I came on that, you know, the consumer
Speaker 7: confidence is kind of like, you know, stumbling along and
Speaker 7: it's been moderating since the beginning of the year.
Speaker 3: Well, that drinking game made its way to our makeup room,
Speaker 3: where they actually said tariffs would be another one where
Speaker 3: it would put you on the floor because we say
Speaker 3: it so much.
Speaker 4: Hey, one thing I want to ask you.
Speaker 3: We had a couple of analysts cut their price targets
Speaker 3: on FedEx today.
Speaker 4: One downgrade.
Speaker 3: I'm looking at MarketWatch, who actually noted that Loop Capital
Speaker 3: downgrade the stock to sell from hold due to the
Speaker 3: company's vulnerability to an economic downtur What they said is
Speaker 3: with economists wratching up US recession risk, be aware that
Speaker 3: FedEx is a really bad recession stock because thin express
Speaker 3: margins amplify the earnings hit whenever there's pressure on the
Speaker 3: top line. It's not when you want to own if
Speaker 3: things go south your own analysis. If things go south,
Speaker 3: you know, there's uncertainty, and then there's recession, which is
Speaker 3: a recession problematic for FedEx.
Speaker 4: If indeed that happens, well.
Speaker 7: We don't do bihole cell now I know, I know,
Speaker 7: So just just sit that. You know, the probability of
Speaker 7: a recession I think on the Bloomberg terminals twenty five percent,
Speaker 7: and that's up from a low of twenty percent, So
Speaker 7: the probability has increased, but it's still extremely low. The
Speaker 7: US consumer has been resilient. I tend not to bet
Speaker 7: against the US consumer. I am concerned that they maybe
Speaker 7: they'll spend less, but I would never really bet against them.
Speaker 7: And when you're looking at FedEx as a company, they
Speaker 7: are finally in the midst of a transformation that was
Speaker 7: well overdue, and I think once they come out of this,
Speaker 7: and there's a better backdrop the benefits to the transformation
Speaker 7: and the cost cutting that they've been doing is really
Speaker 7: going to create a more flexible, more productive, and more
Speaker 7: profitable network. So I think I think, you know, FedEx
Speaker 7: is a very interesting name, not in the near term
Speaker 7: because they're still trying to figure things out, but looking
Speaker 7: past the noise of tariffs.
Speaker 3: Lee, we'd be remissed not to ask you about UPS.
Speaker 3: Just quickly twenty seven seconds. UPS is also down about
Speaker 3: two point two percent today. I know they're different models,
Speaker 3: different companies, but they do all work in the delivery space.
Speaker 3: What does it say about UPS or does it say
Speaker 3: nothing in terms of what we got from FedEx?
Speaker 7: So UPS sold their less than truckload business in twenty
Speaker 7: twenty one, so they don't have that that that larger
Speaker 7: exposure to the industrial economy that's that FedEx does. And
Speaker 7: then also I would say that you know, UPS is.
Speaker 6: B to B.
Speaker 7: Exposure is around thirty to thirty five percent. Don't quote
Speaker 7: me on that. It was around that in their US
Speaker 7: domestic business. So it's a it's not a huge portion
Speaker 7: of their overall business. You know, B two C is
Speaker 7: more important for them right now. And I would say
Speaker 7: UPS is probably like two or three years ahead of
Speaker 7: FedEx in terms of restructuring itself to deal with the
Speaker 7: fact that, you know, R e commerce growth is really
Speaker 7: going to drive their growth, not.
Speaker 6: B to B.
Speaker 3: All right, good stuff as always, Thanks again for that
Speaker 3: doing double duty with us over the last twenty four hours.
Speaker 3: Lea Clascow Isloomberg Intelligence Senior Transport, Logistics and Shipping Alice
Speaker 3: joining us from BI headquarters in Princeton, New Jersey.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: There was one story that caught our attention today.
Speaker 3: Actually, one of our producers, Elizabeth, pointed it out because
Speaker 3: it just seemed to tie in so well with our
Speaker 3: next guest, Astra. Zeneca will invest two and a half
Speaker 3: billion dollars in a new research center in Beijing in
Speaker 3: a major show of commitment to China, just months after
Speaker 3: that company's top executive there was detained by authorities. We
Speaker 3: know it is so complicated doing business globally. Today, our
Speaker 3: next guest has separate supply chains for China and Asia
Speaker 3: and their Western clients, which safe to say comes in
Speaker 3: pretty handy right now. Here to talk about that and
Speaker 3: more is Siemens Healthenier's chief financial officer Jahan Schmidts, who
Speaker 3: is featured in this Sunday's Bloomberg CFO Briefing newsletter. Jahan
Speaker 3: joins us from Munich along with our own in a treatment.
Speaker 3: She's here in our studio. She's senior editor at Bloomberg News,
Speaker 3: author of the CFO Briefing newsletter, which you can sign
Speaker 3: up for at Bloomberg dot com slash CFO Briefing.
Speaker 4: Johan. Great to have you here with us. There's a
Speaker 4: lot to talk about.
Speaker 3: I do want to start with supply chains because I
Speaker 3: feel like that and tariffs and globalization is so much
Speaker 3: front and center right now. Talk to us about how
Speaker 3: you manage it, build it, think about it, and how
Speaker 3: what you have today came together.
Speaker 9: Yeah, thank you very much first for having me. I'm
Speaker 9: when I think about our global value add footprint. We
Speaker 9: have as you right for you said in the beginning,
Speaker 9: we have so we say a two site so to say,
Speaker 9: two side strategy. We manufacture and develop everything for China
Speaker 9: and for the China block out of China, and we
Speaker 9: manufacture and develop everything else in the also in the
Speaker 9: Western world. That means we have relatively detached two value
Speaker 9: chains in place. Now, this is a Karlie I would say,
Speaker 9: for the current situation, kind of a comfortable setup because
Speaker 9: we are not affected, so to say, too much by
Speaker 9: the geopolitical or teriff discussion between so far between the
Speaker 9: United States and China. And when we look at our
Speaker 9: global footprint in the Western world, twenty five percent of
Speaker 9: our employees are in the United States. We have four segments.
Speaker 9: Two of the segments are headquartered or the United States,
Speaker 9: or seventeen thousand total employees seventeen thousand. As I said,
Speaker 9: twenty five percent are in the United States. So we
Speaker 9: are well spread across the world. And this gives us
Speaker 9: a decent resilience. Yeah, but it does not make us
Speaker 9: immune against global trade wars. And I would to say this.
Speaker 10: Yeah, to follow up on that, Johan, thanks for for
Speaker 10: joining us talk to us about the Trump terraffs. Of course,
Speaker 10: a lot of moving parts, but how do you think
Speaker 10: about those and could there be an impact on your
Speaker 10: business given that you have a strong US footprint.
Speaker 9: First of all, let me look at what is currently
Speaker 9: in place the Mexico, Canada, and China additional terrorists. As
Speaker 9: I said, China is not a major topic for US
Speaker 9: because the latest since Trump one or zero, we change
Speaker 9: our supply chains so that they are detached from each other.
Speaker 9: We have i would say, some impact from some sub
Speaker 9: supply from Mexico into the United States for one of
Speaker 9: our two headquartered business in the United States or wear
Speaker 9: in business at the West Coast. This is I would say,
Speaker 9: the major impact. But it's not a huge topic. It's
Speaker 9: a so far small topic Canada, US so far not
Speaker 9: a big topic for US.
Speaker 10: And to follow up on that, have you had any
Speaker 10: sort of conversations with the administration to see if if
Speaker 10: you could be exempt from any tariffs? I know that
Speaker 10: sort of. Beijing, for example, in its retaliatory tariffs on
Speaker 10: US goods, has excluded healthcare.
Speaker 9: Yeah, and obviously we are trying to get healthcare and
Speaker 9: together with other companies in the healthcare sector out of
Speaker 9: exempt from from terraffs. I think that makes a lot
Speaker 9: of things sense because when you think about terraffs, what
Speaker 9: do they do? They will limit the flow of products
Speaker 9: and services across across the world on the one hand,
Speaker 9: but they're also will will limit the flow of knowledge
Speaker 9: and that is to the detment of patience.
Speaker 2: Yeah.
Speaker 9: Therefore, when you look at comparable situations like sanctions or others,
Speaker 9: normally healthcare gets exclude it over time. And I'm I'm
Speaker 9: hopeful that this will also get into into play in terror,
Speaker 9: hopefully sooner than later.
Speaker 5: Jagom, How do you think about this administration as president
Speaker 5: versus other world leaders that you've dealt with? How is
Speaker 5: he different to deal with? How is this administration different
Speaker 5: to deal with?
Speaker 9: Yeah, I mean normally, to be honest, when we in
Speaker 9: the particular in the United States, we do not have
Speaker 9: a lot of business with government because the prior, the
Speaker 9: healthcare system in the United States is primarily a private
Speaker 9: a private system. Therefore, where we look at changes in
Speaker 9: the administration in the United States, the impact in general
Speaker 9: on our business on the healthcare markets are for us
Speaker 9: relatively limited. Yeah, and our current assumption as we see
Speaker 9: it is also with regard to the WES market, we
Speaker 9: don't see significant disruption at the horizon in this regard now.
Speaker 9: And obviously when we look at the Trump administration, it's
Speaker 9: from it. It's not a surprise what is happening. It
Speaker 9: was clear. It was also mentioned in the campaign that
Speaker 9: things like this might happen. From a strategic standpoint, we
Speaker 9: need to stay flexible edgile because we cannot plan for everything.
Speaker 9: Will there will be surprises, and we need to try
Speaker 9: to deal with this as as rapidly as possible.
Speaker 4: I am curious.
Speaker 3: You know. There was a story out today actually from
Speaker 3: Dow Jones that talked about how you guys are setting
Speaker 3: up to cancer research centers in Alberta, Canada, focusing on
Speaker 3: oncology training and artificial intelligence and machine learning. And I
Speaker 3: guess what I want to ask you is do you
Speaker 3: see because it does feel like for so long or
Speaker 3: the last couple of months, we talked about American exceptionalism
Speaker 3: doing so well, growth and still investment coming in. But
Speaker 3: I do wonder do you think that the you, as
Speaker 3: a result of this administration and the policies that are
Speaker 3: coming out, is potentially putting an end to that exceptionalism
Speaker 3: and maybe cutting the US off from collaborations, whether it
Speaker 3: might be with your company or with healthcare in general,
Speaker 3: or research, whether it's AI, whether it's in healthcare, and
Speaker 3: so on.
Speaker 9: My personal opinion is basically answer is no, this will happen.
Speaker 9: From my standpoint, we also do not see this currently.
Speaker 9: First of all, we are a huge company in the
Speaker 9: United States. As I said, we have two or more
Speaker 9: segments in the United State States. We have more than
Speaker 9: seventeen thousand employees in the United States. We run here,
Speaker 9: of other United States, I would say, the by far
Speaker 9: most successful global variation therapy company in the world variant
Speaker 9: and we have a very very strong lab diagnostic business
Speaker 9: out of Tearytown, New York. So I think we are
Speaker 9: very us Ish also like we are very European, like
Speaker 9: we are very Chinese. We are really a global company
Speaker 9: with a very well spread global footprint. And I can't
Speaker 9: imagine that the United States will harm their people to
Speaker 9: that extent that they will cut off research in healthcare
Speaker 9: and and really do crazy things in this regard, because
Speaker 9: as I said in the beginning, this will all ultimately
Speaker 9: would go to the detriment of passions and that will on't.
Speaker 3: So just to clarify this idea of American exceptionalism being
Speaker 3: done being gone dead, if you will you don't agree
Speaker 3: with that.
Speaker 9: Yeah, I don't agree.
Speaker 6: Will okay?
Speaker 9: To follow up.
Speaker 10: You're based in Germany, A fair amount of your value
Speaker 10: creation is there, but only only I think forty five
Speaker 10: percent of your revenue comes from there. Talk to us
Speaker 10: a little bit about the changing government that we're expecting
Speaker 10: and how far you're seeing that. Potentially improving competitiveness in Germany,
Speaker 10: a topic that you and I have talked about in
Speaker 10: the past.
Speaker 9: Yeah, as you right, for we said the German market
Speaker 9: persist for us is not unimportant, but it's not super
Speaker 9: super critically ivispot to five percent of revenue. When we
Speaker 9: look at Germany as a country, I think we need
Speaker 9: to have a change in how we administer this country.
Speaker 9: I think the first steps we have seen here are promising.
Speaker 9: There were at least decision making, pragmatic decision making. The
Speaker 9: supposed to be new government establish itself. I call it
Speaker 9: a very nice credit line of one thousand billion euros.
Speaker 9: But this is I would say, very comfortable to have.
Speaker 9: On the one hand, on the other hand, it does
Speaker 9: not release this government from making tough decisions on leaning
Speaker 9: on leaning up the bureaucracy in the country and reforma things,
Speaker 9: so to say that the social systems, because otherwise, also
Speaker 9: this nice investment program will not find its way or
Speaker 9: will not pave the way to sustainable growth.
Speaker 10: So that means you'll hold off for now with new
Speaker 10: investment decisions for Germany or sort of what's your take
Speaker 10: on that.
Speaker 9: No, that's not the case. I mean for us, we
Speaker 9: have a significant value act in Germany. We see the
Speaker 9: circumstances for us in Germany as as a value at
Speaker 9: the location still very positive. We have maybe also because
Speaker 9: of the industry we get very good people. The education
Speaker 9: system is still attractive to to what we for what
Speaker 9: we need, and I think we are ongoing well. We
Speaker 9: will continue to invest. We have invested in the last
Speaker 9: three to four years, about three to five years, about
Speaker 9: six and fifty million euros a billion euros in Germany
Speaker 9: and this is a significant investment a million euros.
Speaker 3: Thirty seconds, very quickly, John, Yeah, I wonder what's the
Speaker 3: biggest kind of interesting trend disruption that's going on in
Speaker 3: your industry right now?
Speaker 4: And I do have to ask you to be very
Speaker 4: quick mhm.
Speaker 9: I think our industry is not an industry which is
Speaker 9: driven by disruption, because it's about the I would say
Speaker 9: the health of patients. Obviously, AI will play a constantly
Speaker 9: more important role, and those who do not build their
Speaker 9: case on AI will not succeed.
Speaker 3: Important well, super interesting and so appreciate your time. We
Speaker 3: coverage so much ground Johann Schmidtz, CFO of Semen's Healtheneers,
Speaker 3: and of course our Nina Trentman, Senior editor at Bloomberg News.
Speaker 3: Be sure to check out the CFO Briefing newsletter. A
Speaker 3: new one comes out on Sunday.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 2: York station, Just Say Alexa played Bloomberg eleven thirty Well, Carnival.
Speaker 3: Reported earnings, and the stock at one point sold off
Speaker 3: more than six percent on the news. This after a
Speaker 3: key quarterly earnings forecast trailed estimates, adding to worries that
Speaker 3: a travel slowdown has spread to even the most robust
Speaker 3: corner of the market. However, Carnival did boost full year
Speaker 3: profit expectations, beating Wall Streets view, suggesting any slow down
Speaker 3: may prove transitory. Do you want to point out too?
Speaker 3: The stock is down about fifteen percent so far here
Speaker 3: in twenty twenty five. Let's get some context and more
Speaker 3: detail around at the company's quarterly update. Great to have
Speaker 3: back with us, Josh Weinstein. He's president, CEO, and Chief
Speaker 3: Climate Officer of Carnival Corporation, and he joins us from
Speaker 3: Carnival's headquarters in Miami.
Speaker 4: Josh, great to be talking with you. How are you
Speaker 4: very well?
Speaker 6: Thank you? How are you doing?
Speaker 4: Doing okay?
Speaker 3: Trying to keep up with everything that's coming at us
Speaker 3: on a daily basis, And I kind of want to
Speaker 3: start there because there is a lot coming at anyone
Speaker 3: who's running a big company like yours today, whether it's
Speaker 3: out of Washington, whether it's out of how the consumer
Speaker 3: is feeling. How would you describe the crew's business and
Speaker 3: how it compares from your last quarterly update?
Speaker 4: What has changed at all?
Speaker 3: Because I know you have been very optimistic and it
Speaker 3: seems like you're still optimistic about the business based on
Speaker 3: the releases.
Speaker 11: Yeah, yeah, absolutely, So the thing that's changed from December
Speaker 11: to today is, well, we just completed our first quarter
Speaker 11: and instead of yields being up four point seven percent,
Speaker 11: which is what we guided to, they were up seven
Speaker 11: point three percent, and so clearly things went very very
Speaker 11: well in the first quarter. Consumers love to and we've
Speaker 11: got eight brands that are purposely tied to particular demographics,
Speaker 11: particular national markets, and it serves us very very well.
Speaker 11: And so what we see is enough strength in that
Speaker 11: first quarter that we can raise our yields for the
Speaker 11: year for our full year guidance, and that's basically saying
Speaker 11: that we're we're content to keep four percent plus yields
Speaker 11: for the remaining three quarters of the year, despite the
Speaker 11: fact that there is you know, geopolitical macroeconomic uncertainty, which
Speaker 11: certainly wasn't on the radar when we came up with
Speaker 11: our guidance to begin with in December.
Speaker 3: And yet investors seem to be at least initially disappointed
Speaker 3: over your second quarter even a forecast. Your forecast was
Speaker 3: one point three to two billion in the second quarter,
Speaker 3: as it expected one point three.
Speaker 4: To five billion. Should they be disappointed?
Speaker 11: You know what, I guess I'll answer by saying, our
Speaker 11: December guidance was basically saying we're going to be about
Speaker 11: was it a buck seventy give or take for the
Speaker 11: year on EPs. We just came out with guidance, said
Speaker 11: Buck eighty three. We all performed on revenue yields on board.
Speaker 11: On board trends are really really healthy with our consumers.
Speaker 11: So I would argue that we should be higher than
Speaker 11: where we were in December since our results are better
Speaker 11: than where we were in December.
Speaker 6: But that's really up to up to the street.
Speaker 11: Our job is to deliver and hopefully over deliver, which
Speaker 11: is what we did in the first quarter.
Speaker 5: So Josh, let's talk a little bit more about that
Speaker 5: consumer because in the press release you noted that Carnival's
Speaker 5: not completely immune from heightened macroeconomic and geopolitical volatility, and
Speaker 5: you're still taking up earnings expectations for the year. You
Speaker 5: remain on track to have another stellar year across the
Speaker 5: entire brand of cruises. Why are we hearing, then from
Speaker 5: airlines that consumers are pulling back? Why are we not
Speaker 5: seeing that in your business?
Speaker 11: Well, I think there's a couple of things to differentiate.
Speaker 11: First of all, airlines aren't just for holidays. Airlines are business.
Speaker 11: It is holidays, it's conferences, it's government travel. We are
Speaker 11: really holidays, we are vacations. So we're in a different
Speaker 11: bucket than than where Airlines are.
Speaker 6: You know, we came in to twenty twenty.
Speaker 11: Five, the best book position we've ever been in at
Speaker 11: higher prices. We came out at the end of the
Speaker 11: first quarter still being in line with record occupancy percentage
Speaker 11: and price is still nicely higher. We're eighty percent book
Speaker 11: for the year, and so we have relatively limited inventory
Speaker 11: to sell when it comes to twenty twenty five. At
Speaker 11: the same time, our guests and our brands aren't just
Speaker 11: focused on in year. You know, we just came out
Speaker 11: of the first quarter of the wave period, which is
Speaker 11: considered the traditional big push for selling, and we set
Speaker 11: a record for the most volume we've ever done during
Speaker 11: wave for future years out. So people aren't just thinking
Speaker 11: about the short term, they're thinking about the long term,
Speaker 11: which is exactly what we're doing as a company.
Speaker 5: But are you noticing any change in the tone of
Speaker 5: the bookings, of the bookings or perhaps even people canceling
Speaker 5: because of their own uncertainty. I understand there's this difference
Speaker 5: between discretionary spend and business spend, but after all, discretionary
Speaker 5: is discretionary, and that's often the first thing to go
Speaker 5: if people are feeling uncertain.
Speaker 11: Yeah, you know, we haven't seen any noticeable change in
Speaker 11: trends on cancelations, certainly, as we mentioned on the call,
Speaker 11: you know, there were ups and downs over the first quarter.
Speaker 11: There's ups and downs all the time, but we got
Speaker 11: through our period exactly at pretty much the highest point
Speaker 11: that you can get at at least for us in
Speaker 11: our history, and we feel good about.
Speaker 6: The position that puts us in.
Speaker 11: Like I said, onboard spending, you know, it's up about
Speaker 11: ten percent year over year in the first quarter. That's
Speaker 11: an acceleration of year over year performance versus where we
Speaker 11: were in the fourth quarter, and at least into the
Speaker 11: first couple of weeks of March. With cruises that have ended,
Speaker 11: we really haven't seen a slowdown in that consumer behavior
Speaker 11: that onboard spending. And so you know, at the end
Speaker 11: of the day, people in good times and bad times,
Speaker 11: they take holiday, they take a break.
Speaker 6: They need a break.
Speaker 11: You could argue in bad times they need that break
Speaker 11: even more than they do in the good times.
Speaker 6: And that's what cruising is. It's a break.
Speaker 11: It's a way to relax, to get away from things,
Speaker 11: enjoy time with friends and family. That's what people pay
Speaker 11: for now and when you line up cruise versus other
Speaker 11: vacation alternatives frustrating as it is for me as the
Speaker 11: CEO of a cruise company. We're a great value and
Speaker 11: the fact is, if people are getting concerned, if there's uncertainty,
Speaker 11: if there's noise in the background, people are searching for
Speaker 11: more value for their money. And that's exactly what we do.
Speaker 11: So it plays very well into our strength.
Speaker 3: So just for the record, I could go on a
Speaker 3: cruise for about a month right now because I need
Speaker 3: a break, but.
Speaker 4: I'd love to have you.
Speaker 6: We'd love to have you.
Speaker 3: Having said that, what about in terms of pricing, are
Speaker 3: you guys able to maintain pricing? Nothing changing in that
Speaker 3: regard either for the first quarter or even for the
Speaker 3: outlook for the second quarter.
Speaker 11: Yeah, you know, so, like I said, the first quarter,
Speaker 11: you know, are you year over year we're up over
Speaker 11: seven percent and over a two year period, we're talking
Speaker 11: about twenty four percent higher yields.
Speaker 6: Yeah, for the first quarter.
Speaker 11: When we look at the rest of the year Ques
Speaker 11: two through four, we're projecting a little bit over four
Speaker 11: percent yield improvement year over year for that nine month
Speaker 11: period remainder of the year. So you know, look, it's
Speaker 11: hard going right it's not like anything is easy, and
Speaker 11: we got to work hard.
Speaker 6: Our brands work hard.
Speaker 11: To make that become a reality, and they do it
Speaker 11: through good revenue management techniques, through the great advertising that
Speaker 11: they're doing, and then ultimately delivering onboard experiences that people
Speaker 11: want to pay for. And then they get off of
Speaker 11: our ships and they tell their friends and family how
Speaker 11: amazing it is, and we get more.
Speaker 3: Hey, one of the things we wanted to ask you
Speaker 3: is something that in late February, the US Commerce Secretary
Speaker 3: of Howard Lutnik, he made some comments about how US
Speaker 3: based cruise companies Josh should be paying taxes even on
Speaker 3: ships that are registered abroad. We saw your stock, along
Speaker 3: with everybody in the major crew space, sell off on
Speaker 3: his words, even though analysts indicated the worry may be overblown.
Speaker 3: They said, we've heard this before over the years. Is
Speaker 3: it overblown? Are you talking with a Trump administration about this?
Speaker 3: And if there was a US registration change, what would
Speaker 3: that mean for you guys.
Speaker 11: So clearly we're operating in the confines of US laws
Speaker 11: as well we should shipping. International shipping is based on
Speaker 11: very specific tax regimes that are set up in the
Speaker 11: US and all over the world, and effectively it's based
Speaker 11: on reciprocity, So we feel like we're in a good place.
Speaker 6: We're doing what we should be doing.
Speaker 11: Having said that, anything out of the administration, including Secretary Lutnik,
Speaker 11: we certainly take seriously, and we're working hard to understand
Speaker 11: what the concerns are and how we can address them.
Speaker 11: If any there's really nothing, there's nothing to report on
Speaker 11: from my perspective as far as you know what that
Speaker 11: means or where things could be going. But we'll stay
Speaker 11: on our guard and do whatever we need to do
Speaker 11: to make sure we're staying on the right side of policy.
Speaker 5: Josh, why don't you register in the US? Is it
Speaker 5: regulatory reasons? Is it tax reasons? Is it labor reasons?
Speaker 5: Is it all of the above? Why don't you register
Speaker 5: in the US?
Speaker 6: Yeah, it's just not that simple.
Speaker 11: You don't just take a ship and all of a sudden,
Speaker 11: ship you can't just switch to US registry.
Speaker 6: It's it's just not that simple. And and really it's.
Speaker 11: A it's a it's a people to go to school
Speaker 11: for classes for this right about international shipping and what
Speaker 11: what it means, how it works. Uh, And it's been
Speaker 11: in place for much longer than I've been alive. Uh
Speaker 11: and and so you know, we could we could do
Speaker 11: a separate session on that. But but suffice it to say,
Speaker 11: it's a regime that is that is well founded and
Speaker 11: and it's where we are.
Speaker 3: Right now, all right, So it's not something that we
Speaker 3: should think about. I mean, it can be done, though.
Speaker 9: Right.
Speaker 3: What what is the it in terms of registering in
Speaker 3: the United States?
Speaker 11: It's honestly not that simple based on how US law works.
Speaker 6: It's it's just not that simple.
Speaker 4: Okay.
Speaker 3: Would that be a conversation though, then to have with
Speaker 3: the Trump administration Josh and say, listen, guys, if it
Speaker 3: was simpler, I mean, they're all about making things simpler,
Speaker 3: right efficient. Is there a conversation to be had?
Speaker 6: Oh, We're happy to talk to the administration truly.
Speaker 4: Okay, Okay, hey, listen.
Speaker 3: One of the things we wanted to talk to you
Speaker 3: about in a big way, and I've seen it firsthand,
Speaker 3: is the island destinations that you guys have and it
Speaker 3: seems to be a continued, you know, move for you
Speaker 3: guys and expansion. You open celebration key this July. This
Speaker 3: is in Grand Bahama Island. How do these island destinations.
Speaker 3: We've talked to you about it, but it continues to
Speaker 3: be something we find really interesting. How does it fit
Speaker 3: into the North American crew strategy and how important it
Speaker 3: is I always think about to the top line, the
Speaker 3: profitability picture.
Speaker 11: Yeah, So for us, what we're doing with Celebration Key,
Speaker 11: which opens in July, it's a bit of a first
Speaker 11: for us. Even though we have a wonderful footprint around
Speaker 11: the Caribbean, we've really we've we've built and created these
Speaker 11: destinations really as a service to our brands and something
Speaker 11: that's supportive of and really supplemental to what brands are
Speaker 11: doing and leading with with a cruise experience that makes
Speaker 11: them so loved. What we're doing with Celebration Key, which
Speaker 11: doesn't even exist yet and yet it's captivated the audience
Speaker 11: and captivated the imagination of Carnival cruisers and others, is
Speaker 11: we want to also lead with destination as a driver
Speaker 11: of consideration, of a driver for people saying I need
Speaker 11: to go on Carnival Cruise Line because I'll get to
Speaker 11: go to Celebration Key, or because I'll get to go
Speaker 11: to relax Away Half Moon Key, because it's the only
Speaker 11: way to get there, and so We believe that there's
Speaker 11: a tremendous amount of untapped value there in revenue generation,
Speaker 11: as well as the fact that these destinations are built
Speaker 11: close to the United States. Hence we consume less fuel
Speaker 11: in order to get there, which saves money is obviously
Speaker 11: good for the planet.
Speaker 3: Hey listen, twenty seconds left here. What is your most
Speaker 3: popular destination? Where do most people want to go and
Speaker 3: what kind of trip?
Speaker 11: Wow, we carryllion people last year. They want they want
Speaker 11: to go to a lot of places. I'd say, if
Speaker 11: you're going to ask me what's my top that I've
Speaker 11: ever been to, I got to say, you got to
Speaker 11: go on a cruise to Alaska, and you gotta go
Speaker 11: with Princess Hall in America or a carnival because they
Speaker 11: do it in an amazing way and qn R for
Speaker 11: those who are looking for the for the luxury end.
Speaker 6: But if you want to see the.
Speaker 11: Great State, the only way to do it is with
Speaker 11: a great brand that can take you on both c
Speaker 11: and with our land experiences. Because we've got hotels and
Speaker 11: motor coaches and Glasstone railcars and you name it.
Speaker 6: We got it up in Alaska.
Speaker 3: I just want to go somewhere where I get a
Speaker 3: cocktail with like a little umbrella in it.
Speaker 11: I just I'm that we also serve cocktails with them
Speaker 11: when we go to Alaska.
Speaker 3: Josh, thank you so much. I always appreciate the time
Speaker 3: you give us.
Speaker 9: Be well.
Speaker 6: Be well.
Speaker 3: Josh Weinstein, President, CEO, and Chief Climate Office of Carnival Corporation,
Speaker 3: joining us from Carnival's headquarters in Miami.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from two to five e's during Listen
Speaker 1: on Applecarplay and Android Atto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 5: Where we spent a lot of time this week talking
Speaker 5: about Nvidia GtC. It's the annual developers event in San Jose.
Speaker 5: It's been dubbed the super Bowl of AI. Ironian King
Speaker 5: writes today that Nvidia CEO Jensen Wong's presentation there was
Speaker 5: all about how to get a return on the expensive
Speaker 5: gear being installed now, and he spent a good rest
Speaker 5: of the week reinforcing his message designed to counter increasing
Speaker 5: concerns that the sustainability of spending and encourage executives in
Speaker 5: the broader economy to join his vision for the future.
Speaker 5: One executive who was there was Antonio Neary, the president
Speaker 5: and CEO of HPE. Antonio joins us from HPE's headquarters
Speaker 5: in Spring Texas. Antonio, good to see you, Welcome back
Speaker 5: to the program. You spoke with Jensen earlier this week
Speaker 5: at the event. What was your big takeaway? What did
Speaker 5: you learn, because investors certainly weren't as impressed as they
Speaker 5: have been in the past couple of years.
Speaker 12: Well, good afternoon, and thank you for having me back.
Speaker 12: It was a fantastic event. Obviously, you can look at
Speaker 12: from many different perspective. Number one, the innovation front. I
Speaker 12: have to tell you, I've never seen such an innovation
Speaker 12: at the speed that we are all experiencing. You know,
Speaker 12: two years ago we were talking about the boom of
Speaker 12: generative AI. Now we're talking about physical AI, robotics and
Speaker 12: what can do for manufacturing in other industries. On the
Speaker 12: other hand, obviously you talk about what this can do
Speaker 12: for the enterprise and the enterprise. What I see, particularly
Speaker 12: in the last ninety days or one hundred and eighty days,
Speaker 12: is an accelerational deployment because they all realize that AI
Speaker 12: has a tremendous potential to improve productivity, to improve business
Speaker 12: processes and deliver value to each of the businesses and
Speaker 12: the last but a list obviously what they can do
Speaker 12: for society.
Speaker 6: And if you think about the.
Speaker 12: Opportunity to address some of the societal challenges, whether it's
Speaker 12: finding new cures through you know, molecular docking research or
Speaker 12: weather forecasting and any other type of use cases is
Speaker 12: all there. Now we have to see it, we have
Speaker 12: to build it, and we need to see it through
Speaker 12: the benefit of it over a period of time that
Speaker 12: people need to live with.
Speaker 5: Well, we also heard Antonio this promise of physical AI.
Speaker 5: That was one of the big themes that emerged. And look,
Speaker 5: I'm in San Francisco right now, so I get to
Speaker 5: see the waymos driving around a little peek into the future.
Speaker 5: But from your perch at HPE, what's the future that
Speaker 5: you see? What's the future that you envision with physical AI?
Speaker 12: Well, I see a world where basically we can remove
Speaker 12: the humans that they are in the loop and be
Speaker 12: on the loop, where some of these physical AI, robotics
Speaker 12: and other type of applications can do the basic task
Speaker 12: that we are totally automated, where we can use ourselves
Speaker 12: the humans for other more interesting and value other tasks
Speaker 12: and that will drive a level of product activity we
Speaker 12: haven't seen before. And that applies to every industry. You
Speaker 12: talked about autonomous cars obviously that that includes a lot
Speaker 12: of artificial intelligence, machine learning, and other techniques. Well, when
Speaker 12: I think about the old industries, the potential is enormous. Now,
Speaker 12: not everything will be applicable, but I think, you know,
Speaker 12: we see a world where AI will be embedded in
Speaker 12: everything we do.
Speaker 3: One of the things I wanted to follow up on,
Speaker 3: you know, and you guys made it actually an announcement
Speaker 3: kind of off of this event about you and video
Speaker 3: coming up with some new enterprise AI solutions working on
Speaker 3: this together. Antonio, what I wanted to follow up on,
Speaker 3: though you said we have to build it, we have
Speaker 3: to see it and to see what.
Speaker 4: The payoff really is.
Speaker 3: That's what like the last couple of years, right have
Speaker 3: been about this build out, this spend, and we continue
Speaker 3: to see partnerships to continue the spend. But how long
Speaker 3: do you think it will be until companies really have
Speaker 3: an idea of what payoff they get for their investment.
Speaker 12: Well, look, I mean I see already today in our
Speaker 12: own company, we deploy AI in many of our business
Speaker 12: processes across finance, digital marketing, customer service, forecast planning and
Speaker 12: the like and even on they are in D side.
Speaker 12: You know, our level of productivity in our software development
Speaker 12: process has improved by thirty percent. So the learning hit
Speaker 12: is that first of all, it takes time to build infrastructure,
Speaker 12: but for enterprise is not a big of a lift
Speaker 12: from an infrastructure perspective. I can tell you in my
Speaker 12: own company, I have only a couple of hundred GPUs
Speaker 12: and it's plenty for what I need to do compared
Speaker 12: to the service providers, the model builders that many tens
Speaker 12: of thousands, of hundreds of thousands for the matter to
Speaker 12: bid these large language models which are very sophisticated from
Speaker 12: what I call generality to agentic to reasoning and eventually
Speaker 12: these models that will do the robotics side the physical AI.
Speaker 12: But inside the enterprise we really see the benefits. And
Speaker 12: I spent more than fifty percent of my time talking
Speaker 12: to customers and they are going from the experimentation phase
Speaker 12: to more deployment side.
Speaker 6: And that's why the last quarter that.
Speaker 12: We saw a forty percent increase on a year over
Speaker 12: year basis, the demand for enterprise AI solutions and obviously
Speaker 12: for US was the deep partnership with Nvidia, where we
Speaker 12: took their software stack, the famous Kuda environment with the
Speaker 12: names and ergentic approaches including only partners with our infrastructure
Speaker 12: and our own software and the cloud, and there is
Speaker 12: all about time to value. Basically, we made the so
Speaker 12: simple tree clicks less than thirty seconds, you can deploy
Speaker 12: an environment for your developers to rag or find you
Speaker 12: in a model with your data, or to deploy inferencing.
Speaker 12: And that's where the acceleration is going to come. The
Speaker 12: simplicity of deployment with the use cases that can return
Speaker 12: that investment very very quickly.
Speaker 3: It's all just kind of really really cool stuff and
Speaker 3: something we think about so much. It's happening now, but
Speaker 3: really kind of what the future means and the impact.
Speaker 3: I do want to ask you though about today's environment.
Speaker 3: There's so much coming at CEOs, the C suite of companies,
Speaker 3: a lot of stuff out of Washington, and we continue
Speaker 3: to watch this spending when it comes to it, given
Speaker 3: some of the recession fears that are out there.
Speaker 4: What has your conversations with.
Speaker 3: CEOs revealed on the spending environment, any signs of pullback,
Speaker 3: any signs that a recession might be coming. What color
Speaker 3: can you give us about that?
Speaker 12: Well, up to our Q one which ended in generary
Speaker 12: thirty first, the demand has been very strong.
Speaker 6: In fact, if you look.
Speaker 12: At our own demand for a moment for our networking business,
Speaker 12: our hybrid cloud business, and our AI business, which are
Speaker 12: the three paillars of our company, we saw double digits
Speaker 12: or the growth demand for every solution that we have
Speaker 12: in the available today in the market. Now that said,
Speaker 12: you know the conversation today in the market about tariffs,
Speaker 12: some of the geopolitical tention, the work that the United
Speaker 12: States doing to control spend obviously is causing a little
Speaker 12: bit of uncertainty. But I do believe it is one
Speaker 12: of those areas where spend will be protected because ultimately,
Speaker 12: whether you think about position yourself for the next wave,
Speaker 12: or the supply chain through digitization and automation as you
Speaker 12: rebalance the supply chain where it makes sense for you,
Speaker 12: or whether you think about using your data to your
Speaker 12: advantage as a good example, using AI, or whether it's
Speaker 12: to simplify your processes, it will require it. And that's
Speaker 12: why I continue to be positive about the spend of it.
Speaker 12: As we think about the next few years, because it
Speaker 12: will grow in my mind faster than GDP.
Speaker 4: All Right, we're going to have to leave it there.
Speaker 3: Antonio, thank you so much for giving us some time.
Speaker 3: We greatly appreciate it. Thanks to Antonio Neari, he's president's
Speaker 3: CEO of HPE. Of course, as you know, stock right now,
Speaker 3: today's session just down about one point three percent, has
Speaker 3: had a lot of pressure on it though this year
Speaker 3: down about twenty five percent here in twenty twenty five.
Speaker 3: Company did report earnings back in March March seventh, earlier
Speaker 3: this month, and there were some concerns about the week
Speaker 3: profit outlook. But you can certainly read a little bit
Speaker 3: more if you want at Bloomberg dot com and of
Speaker 3: course on the Bloomberg terminal.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 4: We have talked about some big global macro issues.
Speaker 3: We've talked to a lot of folks in the C
Speaker 3: suite here on Business Week. On this Friday edition, we've
Speaker 3: talked a lot about supply chains and there is some
Speaker 3: news in the complicated, as you know, but exciting world
Speaker 3: of supply chains. Today.
Speaker 4: We love to follow supply chains logistics.
Speaker 3: US officials Tim talked about this earlier, have asked Italian
Speaker 3: producers if they can help secure egg supplies amid shortages
Speaker 3: and upcoming holidays, including Eastern Passover.
Speaker 4: I don't know about you, Tim, but I grew up,
Speaker 4: you know, taking eggs and.
Speaker 3: Dyeing them and coloring them and like it's an important
Speaker 3: part of the holiday.
Speaker 5: Yeah, we'll see if they're a plastic this year or
Speaker 5: if they're real eggs. Also next week, the supplier chain
Speaker 5: relationships of a Dollar Tree will be in focus when
Speaker 5: the company reports earnings. Supply chains coming under increased focus
Speaker 5: given the tariff back and forth the White House. Remember
Speaker 5: fresh US tariffs are set to land on April second.
Speaker 5: Jeremy Jansen watches supply chains closely. He's managing director of
Speaker 5: supply chain Finance at Wells Fargo. He joins US from Atlanta. Jeremy,
Speaker 5: I want to start big picture. Somebody might hear supply
Speaker 5: chain finance and Wells Fargo and think what the heck
Speaker 5: is Wells Fargo doing with supply chains? So what do
Speaker 5: you and your team do.
Speaker 8: Yeah, sure, thanks and thanks for having me, guys, it's
Speaker 8: a pleasure to be here. So quite simply, we provide
Speaker 8: working capital and supply chain financing to Wells Fargo commercial clients.
Speaker 8: We establish traditional supply chain financing programs between buyers and
Speaker 8: their suppliers, and we also provide by letters of credit,
Speaker 8: import export letters of credit and very traditional trade finance
Speaker 8: type products.
Speaker 3: So interesting, all right, So tell us what you are
Speaker 3: seeing in particular when it comes to the supply chain narrative.
Speaker 3: We've talked a lot about it just in today's edition
Speaker 3: because we've been talking to folks from the C suite
Speaker 3: who are dealing with some of those issues. And so
Speaker 3: what are you seeing our companies making changes? Were they
Speaker 3: already from our undestanding They were already making changes coming
Speaker 3: off of COVID. But what can you tell us in
Speaker 3: terms of the macro and the narrative here?
Speaker 8: Yeah, so thanks Carol. I think first thing I'd like
Speaker 8: to say is fundamentally, the supply chain itself logistically remains
Speaker 8: very healthy when you look at key indicators shipping costs,
Speaker 8: port congestion, port job vacancies, inventory to sales ratios, all
Speaker 8: those dials in the cockpit are still at at a
Speaker 8: really nice level, and to your point, somewhat at pre
Speaker 8: COVID levels. But the US trade policy it could remain
Speaker 8: dynamic for quite some time. And how our business is
Speaker 8: reacting to this. Many management teams that we speak to
Speaker 8: are taking somewhat of a wait and see posture publicly,
Speaker 8: but behind the scenes in closed doors, they're working out
Speaker 8: many different scenarios. As you also mentioned, this is not
Speaker 8: the first time. Our clients have been here. In twenty
Speaker 8: eighteen and twenty nineteen with tariffs that came in at
Speaker 8: that time, they built some playbooks, right, so they have
Speaker 8: a pretty good roadmap on how on how to navigate this.
Speaker 5: Is this different, though, Jeremy, because we're sort of going global,
Speaker 5: or the Trump administration seems to be going global. We'll
Speaker 5: kind of find out all the details on April second, Yeah,
Speaker 5: Liberation Day. But is this a little different?
Speaker 8: It's a little too soon to tell from my perspective.
Speaker 8: I don't want to speculate, but certainly the discussions are
Speaker 8: very similar, right and our clients, our clients do have
Speaker 8: a pretty strong playbook and a pretty strong roadmap on
Speaker 8: how to handle this. Perhaps it's a two way share
Speaker 8: between the supplier and the importer. Perhaps it's a three
Speaker 8: way share between the supplier, the importer and the customer.
Speaker 8: We're seeing all of those, all of those strategies play
Speaker 8: out again behind closed doors and even publicly. Right you're
Speaker 8: starting to see some companies come out and talk about
Speaker 8: the impacts that it could have on their costs for
Speaker 8: the year or maybe give some glimmer of how they
Speaker 8: may pass that through onto the consumer.
Speaker 3: Yeah, it's certainly important issues as we continue to track
Speaker 3: all of the companies, certainly the publicly held, and something
Speaker 3: that we continue to look for when they are reporting
Speaker 3: earnings and will continue.
Speaker 4: To do so what they have to say about it. Hey, listen,
Speaker 4: thank you so much.
Speaker 3: Jeremy important angel certainly someone that we're covering here at Bloomberg.
Speaker 3: Jeremy Jannsen. As we mentioned, he watches supply chains very closely.
Speaker 3: Managing director of Supply Chain Finance over at Wells Fargo.
Speaker 3: Joining us from Atlanta on this Friday.
Speaker 4: Bromc, I'll bet you let me drive.
Speaker 5: Oh no, no, no, no, this is not a toy.
Speaker 2: Who's going to judge, honey?
Speaker 10: Please?
Speaker 6: How do the riding gravels?
Speaker 5: Let's wat I want to drive.
Speaker 4: It's a good question.
Speaker 1: Good drive.
Speaker 2: This is the drive to the clothes.
Speaker 6: Plung's commuting well, Brikelvin.
Speaker 2: Down on Bloomberg Radio.
Speaker 3: All right, everybody coming up on eighteen minutes to go
Speaker 3: to wrap up the trade. We are definitely holding on
Speaker 3: to our better levels of the session. We were down
Speaker 3: a lot more earlier on. You just heard Charlie and
Speaker 3: Bill Maloney breaking it all down. We'll see if it holds,
Speaker 3: whether or not we see some selling into the clothes here.
Speaker 3: We do have some expirations and so in terms of options,
Speaker 3: so whether or not that will be a factor, but
Speaker 3: nonetheless holding on some gains.
Speaker 4: So let's get to it. It's been another full week,
Speaker 4: to say the least.
Speaker 3: Marta Norton is chief investment strategist at Empower, joining us
Speaker 3: from Chicago. Hey Marda, good to have you here with
Speaker 3: Tim and myself. We are so familiar with your company.
Speaker 3: You guys administer the Bloomberg four.
Speaker 4: Oh one K plan. We'd like to be transparent.
Speaker 5: You talk, Carol, You've been talking a lot about your
Speaker 5: furroh one k this week.
Speaker 3: It's been kind of terrifying, you know, and I have
Speaker 3: to be honest with you, I was looking at making
Speaker 3: some changes a little while ago because we've all been
Speaker 3: talking about the European markets doing so much better. You guys, though,
Speaker 3: are the second largest retirement plan provider in the United States.
Speaker 3: Talk to us about what your role is and what
Speaker 3: you see to get an idea of what's on.
Speaker 4: The minds of investors and what's going on.
Speaker 11: Yeah.
Speaker 13: Sure, so my role at Empower, and of course Empower
Speaker 13: has that retirement business, it also has a wealth business,
Speaker 13: and so my goal is to really formulate that markets
Speaker 13: and economic point of view across both our retirement business
Speaker 13: our wealth business and provide that perspective to our clients
Speaker 13: to financial media. And I think one of the things
Speaker 13: that of course is top of mind, and you've kind
Speaker 13: of alluded to it already, is this idea of whether
Speaker 13: we're going to see some sort of capitulation in how
Speaker 13: investors are positioned, and of course that ever important retirement investor.
Speaker 13: And I think at this point, you know, we've had
Speaker 13: that technical correction in the S and P. Five hundred,
Speaker 13: and I think you see a little bit of pickup
Speaker 13: of nerves I guess, I would say in the retirement space,
Speaker 13: but not massive shifts in terms of how people are positioned.
Speaker 13: So you see some movement on the margin, but nothing
Speaker 13: that would suggest that investors are, you know, frantically moving
Speaker 13: things around in their retirement accounts Marta.
Speaker 5: It looks like in the notes that our producer Paul
Speaker 5: Brennan sent us you you argue that the market's not
Speaker 5: fully understanding the extent of tariffs. What do you mean
Speaker 5: by that.
Speaker 13: Well, you know, and this is we're doing scenario analysis here.
Speaker 13: Of course, in the future is uncertain. There's a range
Speaker 13: of outcomes here. But I think when you take a
Speaker 13: look at what the tariffs could look like, you know immediately.
Speaker 13: You know, in twenty twenty five, as we saw those
Speaker 13: initial forays with Canada and Mexico, the general narrative was
Speaker 13: that those were largely negotiating tactics. And I think there's
Speaker 13: good reason to think that there's a certain level of
Speaker 13: negotiation when it comes to a lot of this tariff talk.
Speaker 13: But when you look at the broader picture of what
Speaker 13: President Trump has talked about, both on the campaign trail
Speaker 13: and more recently, when it comes to tariffs, he's focusing
Speaker 13: on raising revenue for the federal government. He talks about
Speaker 13: establishing a US manufacturing base. He talks about trade deficit,
Speaker 13: and I think as you look at those objectives, you
Speaker 13: have to entertain the notion that tariffs could be both
Speaker 13: broad based and long lasting. And the market I think
Speaker 13: has begun to grapple with that idea, but I don't
Speaker 13: know if it's a really common full force when you
Speaker 13: think about what that impact could be, both on the
Speaker 13: costs on companies, businesses, and then potentially from a retaliatory
Speaker 13: perspective on the revenue. And I say that especially because
Speaker 13: where we look at where evaluations are, earnings expectations, it
Speaker 13: just doesn't look like there's been a massive recalibration.
Speaker 3: Can I ask you, is it really hard to figure
Speaker 3: out what's next for the markets? I mean, even Bill Dudley,
Speaker 3: formerly of the New York FED, was kind of saying
Speaker 3: it's really hard for the VEED, the US Central Bank
Speaker 3: to kind of figure out the outlook right now, kind
Speaker 3: of flying blind at this point.
Speaker 4: So it's kind of hard right now, isn't it.
Speaker 3: I Mean I feel like we could go we could
Speaker 3: either really recover if certain policies come out of Washington
Speaker 3: that'll be really supportive to business and to the markets.
Speaker 3: And to investors, and then there are policies that if
Speaker 3: they stick, will not be How difficult is it to
Speaker 3: predict right now?
Speaker 13: Well, I think if there was one word, and of
Speaker 13: course I didn't do kind of a word count with
Speaker 13: Powell's comments, but if there was one word that jumped
Speaker 13: out over and over again, it was that theme of uncertainty.
Speaker 13: So we heard that from Powell as he talked about
Speaker 13: Certainly there was a directionality in the summary of economic projections,
Speaker 13: growth coming down, unemployment edging up, inflation edging up, at
Speaker 13: least for twenty twenty five, So you had that directionality,
Speaker 13: but there was this real sense of uncertainty there, and
Speaker 13: then you see it in the Economic Policy Uncertainty Index,
Speaker 13: you see it in consumer sentiment, you have a little
Speaker 13: bit of a read from businesses in that regard. So
Speaker 13: I think there's really been coming out of Washington, this
Speaker 13: fiscal directional switch on a lot of different policies, from
Speaker 13: regulation to taxes, to immigration, and then within trade of course,
Speaker 13: maybe not a directional shift, but a magnitude shift. And
Speaker 13: so trying to understand how that plays out and what
Speaker 13: the market implications are I think is pretty meaningful.
Speaker 12: Now.
Speaker 13: I think as we look back at kind of where
Speaker 13: are we starting from a foundational level. There's a few
Speaker 13: things we know. We know the economy is cooling but
Speaker 13: is still generally strong, and we know valuations are high,
Speaker 13: so that gives us a little bit of sense ato
Speaker 13: how to take everything in. But yeah, you're right, I
Speaker 13: think it's maybe trickier than usual.
Speaker 5: Well, what would change your mind? Like, what would make
Speaker 5: you less cautious? Because you do seem cautious. You say,
Speaker 5: this isn't necessarily a by the dip moment unless investors
Speaker 5: were on the sidelines with you know, overweight cash, or
Speaker 5: they were you know, under exposed to equities. Is perhaps
Speaker 5: another way to say what would make you change your
Speaker 5: mind and say, Okay, now I'm feeling more comfortable about
Speaker 5: getting into this market.
Speaker 13: Well, there's a few things. I think if we had
Speaker 13: greater certainty on the policy front as it comes to tariffs,
Speaker 13: I think that would be helpful. I think also if
Speaker 13: we were to see valuations look a little bit more attractive.
Speaker 13: Sometimes I think people focus a lot on price movement
Speaker 13: to determine you know, those by the dip moments, But
Speaker 13: I think you really want to look beyond price movement
Speaker 13: to where valuations actually sit, and as you get those
Speaker 13: on your side, then you can have a little bit
Speaker 13: more of a margin of safety and expect maybe a
Speaker 13: better you know, three year outlook when it comes to returns.
Speaker 13: So having valuations on your side, getting clarity on a
Speaker 13: policy standpoint, I think that would help. But I'm not
Speaker 13: you know, as a I certainly am cautious, but I
Speaker 13: want to clarify that I'm not necessarily calling for, you know,
Speaker 13: a recession, and that ilk I think that we can
Speaker 13: see a growth slowdown certainly as uncertainty picks up, alongside
Speaker 13: the fact that we were already seeing some cooling in
Speaker 13: the market, But I don't know if that would necessarily
Speaker 13: tip us into a recession. So I think there's there's
Speaker 13: news that we have to navigate, But I don't know
Speaker 13: if we should put our head in our hands and
Speaker 13: cry in a corner.
Speaker 4: All right, we're gonna have to leave it there. Hey, listen,
Speaker 4: thank you so much. I'm glad to hear that.
Speaker 5: Or have a glass, have.
Speaker 4: A glass of wine or two on the weekend. Marta Norton.
Speaker 3: She's chief investment strategistic Empower joining us from Chicago.
Speaker 4: Marta, thanks so much.
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