WEBVTT - Bloomberg Surveillance TV: May 14, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.480 Bloomberg Terminal and the Bloomberg Business app. Wiley of black 0:00:37.600 --> 0:00:39.960 Rock Rights in the following we still see tariffs causing 0:00:40.000 --> 0:00:44.120 further contractions in cordly activity, but the cumulative impact may 0:00:44.159 --> 0:00:46.519 be more limited. We stay risk one way. Joins us 0:00:46.520 --> 0:00:48.640 now for more waken morning, Good morning. I might pick 0:00:48.720 --> 0:00:51.600 up on that line, the cumulative impact, How are you 0:00:51.640 --> 0:00:52.240 measuring that? 0:00:53.159 --> 0:00:56.640 Well, there are two potential templates that we can mirror 0:00:56.680 --> 0:01:00.360 what's happening by now. One is COVID, the pandemic. You 0:01:00.480 --> 0:01:02.600 switch off and you switch on, But in your case 0:01:02.600 --> 0:01:04.240 you're saying that you can switch off again and switch 0:01:04.280 --> 0:01:06.280 on again. But we're talking about kind of being able 0:01:06.319 --> 0:01:08.760 to switch it back on quite quickly. The other template 0:01:08.840 --> 0:01:12.399 is Brexit, where you have multiple kind of years of 0:01:12.760 --> 0:01:17.319 commulative scarring, where you have the economy below trend even today. 0:01:17.680 --> 0:01:21.400 So right now, given how quickly we have seen walk back, 0:01:21.760 --> 0:01:27.280 maybe the COVID type of template is appropriate in terms 0:01:27.319 --> 0:01:30.440 of structure or scarring. But we're already seen some sort 0:01:30.440 --> 0:01:34.039 of contraction, and I think technical contraction in the future 0:01:34.120 --> 0:01:36.639 is not off the cards. It's not off the table, 0:01:36.959 --> 0:01:41.679 but chances have been lessened because of the immutable or 0:01:41.720 --> 0:01:45.120 seemingly at work to guide the destination of where we 0:01:45.319 --> 0:01:45.679 end up. 0:01:45.800 --> 0:01:48.160 When you say we stay risk on, what does that 0:01:48.240 --> 0:01:49.920 mean in today's market? 0:01:50.240 --> 0:01:54.720 It means positive on US equities and corporate in terms 0:01:54.760 --> 0:01:57.960 of credit over US government bonds. I think what we 0:01:58.040 --> 0:02:01.800 have seen so far this year, especially this week, is 0:02:01.840 --> 0:02:07.040 that greater uncertainty doesn't mean greater certainty of a bad outcome. 0:02:07.240 --> 0:02:09.720 People make false equivalents between the two, but there is 0:02:09.760 --> 0:02:12.280 a huge, a huge difference. So when we talk about 0:02:12.400 --> 0:02:16.000 kind of us that arithmetics, when we talk about supply 0:02:16.200 --> 0:02:20.480 chain dependency, this full government, how quickly decoupling can happen, 0:02:20.760 --> 0:02:22.919 if at all, which is why we are able. 0:02:23.080 --> 0:02:24.600 We were able to stay. 0:02:24.440 --> 0:02:28.639 Risk on despite elevated uncertainty in terms of policy making. 0:02:28.919 --> 0:02:31.359 I would also say, you know, we talk about US 0:02:31.440 --> 0:02:34.720 equity is recovering year today, US aquity is more than 0:02:34.760 --> 0:02:39.720 recovering the draw down since a pro second, but US 0:02:39.840 --> 0:02:42.720 government bonds haven't turn Premier went from thirty five basis 0:02:42.720 --> 0:02:46.239 point on April second to seventy basis point. Dollar hasn't 0:02:46.240 --> 0:02:49.720 recovered fully. So there is something more exceptional about US 0:02:49.840 --> 0:02:52.400 equities than US corporates, and this is what we are 0:02:52.560 --> 0:02:54.639 focused on in terms of our risk on strategy. 0:02:54.800 --> 0:02:56.639 This is something a number of people have put up 0:02:57.639 --> 0:03:00.840 talked about the fact that US exceptionalism still lies with 0:03:01.040 --> 0:03:02.959 US big tech, and it still lies with some of 0:03:03.000 --> 0:03:04.720 the mega trends as you've put them out there. It 0:03:04.720 --> 0:03:08.640 doesn't lie necessarily with the dollar and US assets per se, 0:03:08.680 --> 0:03:10.799 just by virtue of the US's position in the world. 0:03:11.080 --> 0:03:12.360 I want to stick with tech. 0:03:12.600 --> 0:03:14.240 This has been a bit of yours and sort of 0:03:14.240 --> 0:03:18.079 structural theme just on a tactical level. Has the rally 0:03:18.120 --> 0:03:22.040 already taken back all of the bullishness that you feel, 0:03:22.160 --> 0:03:24.640 and for now it feels like maybe it's going to 0:03:24.639 --> 0:03:26.720 take a breather. Even with some of these deals going 0:03:26.720 --> 0:03:27.520 on in the Middle East. 0:03:27.840 --> 0:03:31.440 Well tech has taken a blunt of market correction since 0:03:31.520 --> 0:03:32.440 beginning of the year. 0:03:32.720 --> 0:03:34.120 We think that there is more to go. 0:03:34.280 --> 0:03:37.480 If you look at their guidance, they have all committed 0:03:37.560 --> 0:03:42.840 to their previous copex spent, if not increasing. Broadly, companies 0:03:42.920 --> 0:03:48.000 are guiding down their copex expectations. For hyperscalers, they continue 0:03:48.040 --> 0:03:52.120 to be all in AI transformation, and multiples now look 0:03:52.160 --> 0:03:56.040 a bit more attractive compared to beginning well compared to 0:03:56.120 --> 0:03:58.080 before the cell off, right, So we do think that 0:03:58.120 --> 0:04:01.119 there is more to go now. Bigger picture, we talked 0:04:01.120 --> 0:04:05.320 about the walk back and how markets are kind of 0:04:05.440 --> 0:04:09.400 jumping on incremental positive development, But the bigger picture is 0:04:09.440 --> 0:04:12.320 we're still talking about a landing zone or for you, 0:04:12.400 --> 0:04:16.200 as effective tariffs somewhere between ten to fifteen percent, there 0:04:16.240 --> 0:04:19.760 is still five times more than the levels at the 0:04:19.800 --> 0:04:24.600 beginning of the year, and everything considered, we're still talking 0:04:24.640 --> 0:04:27.599 about an environment where we have higher tariffs, potentially lower 0:04:27.640 --> 0:04:31.039 growth because of that, and potentially higher inflation because of that. 0:04:31.160 --> 0:04:33.640 So I think that big picture is important to bear 0:04:33.680 --> 0:04:36.200 in mind as we think about portfolio construction, and I 0:04:36.200 --> 0:04:41.120 think markets jumping just to incremental positive news development is 0:04:41.160 --> 0:04:44.520 a typical case of behavior buiers of anchoring. We just 0:04:44.560 --> 0:04:47.080 look at kind of the incremental pieces, but the big 0:04:47.080 --> 0:04:50.960 picture has you know, Tarraff represents us that inflationary shock, 0:04:51.320 --> 0:04:53.720 and we still have higher tariffs compared to before. 0:04:53.520 --> 0:04:56.960 Which feaks sort of the divergence between tech exceptionalism and 0:04:57.000 --> 0:04:59.120 the rest of the universe. And I just wonder how 0:04:59.200 --> 0:05:03.360 pressure the rest the universal stocks you see as really feeling, 0:05:03.520 --> 0:05:06.800 especially if you do see potential risk to government bond 0:05:06.839 --> 0:05:08.120 markets going forward. 0:05:08.600 --> 0:05:12.960 Which is why we definitely prefer TAG and financials that 0:05:13.080 --> 0:05:16.480 have been leading in the latest earning season compared to 0:05:16.520 --> 0:05:20.640 the rest of the market, compared to small caps for examples. 0:05:20.640 --> 0:05:24.480 So we see TAG as the drivers of US exceptionalism 0:05:24.560 --> 0:05:26.760 in terms of US corporates, and maybe the rest of 0:05:26.760 --> 0:05:32.320 the markets is passengers of US exceptionalism wave. And especially 0:05:32.320 --> 0:05:35.920 at times like this where we're still talking about higher rates, 0:05:36.000 --> 0:05:38.400 high for longer central banks not able to come to 0:05:38.480 --> 0:05:41.839 the rescue of the economy as they were before. We 0:05:41.920 --> 0:05:44.680 still want to focus on companies that can grow their margin, 0:05:44.920 --> 0:05:47.640 that can grow their profitability. And if you look at 0:05:47.760 --> 0:05:52.280 the latest earning season and also previously, TAG and financials 0:05:52.279 --> 0:05:54.400 remain those sectors that we want to focus on. 0:05:54.520 --> 0:05:56.080 What happened to the European trade? 0:05:56.800 --> 0:06:00.440 Where is it now while we close the European underway 0:06:00.600 --> 0:06:04.120 to lean into the European trade, But we're just neutral, 0:06:04.360 --> 0:06:05.560 not positive. 0:06:05.680 --> 0:06:06.880 What's holding your Backstille? 0:06:07.000 --> 0:06:10.120 What's holding us back? Well, what we have seen so 0:06:10.200 --> 0:06:12.320 far if you look at the rally back from the 0:06:12.400 --> 0:06:17.000 lows posts April second, is that our performance of Europe 0:06:17.120 --> 0:06:21.880 over US has stopped us started catching up now and 0:06:21.920 --> 0:06:24.960 if you look at the hoops that mrs has to 0:06:25.080 --> 0:06:29.320 jump through to get confirmed, there remains risks around implementation 0:06:29.960 --> 0:06:33.840 of all these ambitious policies and reform targets. So we 0:06:33.920 --> 0:06:40.400 do want to see more kind of clarity around the 0:06:41.080 --> 0:06:44.880 ambitious targets for us to be positive across the board. 0:06:44.920 --> 0:06:48.080 But we have liked European financials for a long time. 0:06:48.120 --> 0:06:50.800 That have been our performing we have. We also see 0:06:50.800 --> 0:06:54.960 opportunities in defense as a sector given the future spent 0:06:55.320 --> 0:06:58.120 and lack of capacity in that in that space, So 0:06:58.320 --> 0:07:02.719 being selective on European aqulities, definitely seeing a lot more 0:07:03.400 --> 0:07:06.440 opportunities compared to the beginning of the year. But the 0:07:06.480 --> 0:07:09.279 market has come a long way so I think you know, 0:07:09.320 --> 0:07:11.920 one thing that we have seen so far is reversal 0:07:12.040 --> 0:07:16.800 strategy as a near term way of navigating market volatility 0:07:16.840 --> 0:07:19.880 has worked, and right now reversal strategy seems to support 0:07:19.920 --> 0:07:20.560 you as. 0:07:20.840 --> 0:07:23.520 There's this reason why people are sort of saying pass 0:07:23.600 --> 0:07:26.320 to Europe, just want to finish up with China. Do 0:07:26.360 --> 0:07:28.480 you think that there is morcos there given the fact 0:07:28.600 --> 0:07:31.840 that it seems like there isn't a full scale decoupling, 0:07:31.920 --> 0:07:35.040 and it does appear to be supported by some fiscal 0:07:35.120 --> 0:07:35.480 as well. 0:07:36.120 --> 0:07:36.280 Well. 0:07:36.280 --> 0:07:39.920 We're also selective in China. We're neutral more broadly across 0:07:39.960 --> 0:07:43.720 the Chinese acoli market, but we like technology in China 0:07:43.800 --> 0:07:47.680 because of the innovation potential as well as China TAP 0:07:47.760 --> 0:07:51.320 potentially going a bit more globally. And we also like 0:07:51.400 --> 0:07:55.320 financials in China because of the national team's support as 0:07:55.320 --> 0:08:01.200 well as funds closing there underweight. The reaction of Chinese 0:08:01.200 --> 0:08:04.080 market to the latest development has been somewhat mixed because 0:08:04.320 --> 0:08:08.280 the more we see kind of progress on the trade front, 0:08:08.440 --> 0:08:12.680 the less likelihood there is for more support on the 0:08:12.720 --> 0:08:15.760 policy side to come through. So now there is definitely 0:08:15.800 --> 0:08:18.800 a positive momentum in that Previously people are talking about 0:08:18.800 --> 0:08:21.960 maybe three handle for Chinese growth this year because of 0:08:22.000 --> 0:08:26.800 the tariffs implication. But now people are very quickly upgrading 0:08:26.840 --> 0:08:31.320 their forecast for Chinese growth this year, so selectively optunistic 0:08:31.440 --> 0:08:35.160 and positive on Chinese Accoudis is our near term tactical view. 0:08:35.200 --> 0:08:37.679 But over the longer term structural constraints around kind of 0:08:37.679 --> 0:08:40.520 agent population lower growth that hasn't changed. 0:08:40.679 --> 0:08:42.600 So those estimates revised herds are close to the five 0:08:42.600 --> 0:08:44.760 percent already this week. Why it's going to say, why 0:08:44.800 --> 0:08:47.080 so why? Thanks for dropping by? Thanks welly, that of. 0:08:47.160 --> 0:08:47.880 Black Crock. 0:08:57.040 --> 0:09:00.640 Against Notixanta has been varied on the dollars, and writes 0:09:00.679 --> 0:09:03.000 the following, it's likely that we're at a multi year 0:09:03.040 --> 0:09:06.439 turning point. I think the dollar should be moving substantially 0:09:06.720 --> 0:09:08.520 Jensen's and that joins us now for more. Yeah, it's 0:09:08.520 --> 0:09:10.679 good to see it, sir, and too long. Thanks for 0:09:10.760 --> 0:09:12.440 dropping by. We've got some time to work through this. 0:09:13.040 --> 0:09:15.760 You're looking at potentially a system level shark that leads 0:09:15.800 --> 0:09:18.800 to a strategic reallocation of the US dollar away from 0:09:18.840 --> 0:09:21.040 the US dollar to other currencies. Can you just set 0:09:21.080 --> 0:09:23.240 the scene for us from thirty five thousand feet? What 0:09:23.280 --> 0:09:24.240 do you think is happening here? 0:09:25.320 --> 0:09:28.080 We've really been on a strong dollar trend since the 0:09:28.120 --> 0:09:33.000 summer of twenty fourteen, right, So we've had this incredible 0:09:33.040 --> 0:09:36.000 run in US equities, We've had US yields that were 0:09:36.000 --> 0:09:41.280 generally higher than other places around the world, and investors 0:09:41.360 --> 0:09:44.800 from Europe to Canada, Australia, Japan have been very comfortable 0:09:44.840 --> 0:09:51.400 building up really big allocations to the US, unprecedented high locations. 0:09:51.480 --> 0:09:51.680 Right. 0:09:51.720 --> 0:09:53.520 And now we're coming into this year. A lot of 0:09:53.559 --> 0:09:57.160 people were expecting, Oh, okay, Trump two is going to 0:09:57.240 --> 0:09:58.760 smell a bit like Trump one. 0:10:00.360 --> 0:10:01.920 People actually added. 0:10:01.640 --> 0:10:04.920 Aggressively to their equity exposure into this year, right, and 0:10:04.960 --> 0:10:07.559 then it has turned out that Trump two was not 0:10:07.640 --> 0:10:11.959 really anything like Trump one, and a lot of people 0:10:12.320 --> 0:10:16.920 are rethinking those allocations. And it's not just about the terriffs, right, 0:10:17.720 --> 0:10:22.119 It's about what's happening with foreign policy, who are allies, 0:10:22.520 --> 0:10:25.120 what's the natal arrangement going to be. There's a whole 0:10:25.120 --> 0:10:28.520 host of issues, right. That means that a lot of 0:10:28.520 --> 0:10:34.440 people are thinking about is it really prudent as somebody 0:10:34.440 --> 0:10:39.679 who's allocating globally to have such incredible overweight in the 0:10:39.800 --> 0:10:42.640 United States, so not talk about is the reserve currency 0:10:42.640 --> 0:10:46.400 status going to disappear. But talk about people who've been very, 0:10:46.480 --> 0:10:49.680 very overweight. Are they going to do some risk management 0:10:50.000 --> 0:10:52.760 and take their allocation down? And I think the feedback 0:10:52.800 --> 0:10:55.760 we get from speaking to chief investment officers all around 0:10:55.800 --> 0:10:59.760 the world is that it takes a lot to shock them, 0:11:00.320 --> 0:11:03.880 but they are shocked and they want to change the allocations. 0:11:04.000 --> 0:11:06.320 To your point, this has been building for a decade, 0:11:06.320 --> 0:11:10.240 a decade plus of dollar longs building across all asset classes. 0:11:10.640 --> 0:11:12.600 What we're trying to understand now is, as we take 0:11:12.640 --> 0:11:14.280 some of the air out of that trade, what are 0:11:14.320 --> 0:11:16.400 the policies that you see that make the shift away 0:11:16.400 --> 0:11:19.280 from the US dollars sustainable, durable, beyond just the chaos 0:11:19.320 --> 0:11:21.280 of the last month or so. How do you think 0:11:21.280 --> 0:11:23.280 about that at the moment? And do you consider them 0:11:23.400 --> 0:11:26.360 a push dynamic bad policies in the US pushing capital out, 0:11:26.480 --> 0:11:28.960 or a pull dynamic better policies elsewhere sucking capital in 0:11:29.040 --> 0:11:29.719 which one is it? 0:11:30.360 --> 0:11:30.520 Yes? 0:11:30.840 --> 0:11:33.319 So the first thing I would say is that we 0:11:33.880 --> 0:11:37.800 have a list of US polishes sharks, and that list 0:11:37.840 --> 0:11:41.240 of policy shocks is actually generating polisher sharks elsewhere. Right. 0:11:41.320 --> 0:11:44.559 So in Europe we've had now a historical change in 0:11:44.640 --> 0:11:47.520 physical policy where essentially the physical rules have been rewritten. 0:11:47.640 --> 0:11:49.640 Right, The rules that underpin. 0:11:49.400 --> 0:11:51.760 The euro have now been changed in a way where 0:11:52.320 --> 0:11:56.120 you can invest more effectively. Right, That's a big change. 0:11:56.200 --> 0:11:59.679 So that's important for growth out look in Europe. We're 0:11:59.720 --> 0:12:03.040 just talked about, as you mentioned, right, the NATO budget 0:12:03.080 --> 0:12:06.719 potentially also totally different. Right, five percent numbers We used 0:12:06.720 --> 0:12:08.520 to talk about whether we can get to two, right, 0:12:08.600 --> 0:12:13.600 So big, big changes. So that's that's something that underpins 0:12:13.640 --> 0:12:17.080 this idea that there are other places because if you 0:12:17.200 --> 0:12:20.840 have more investment in Europe, you also have more bond issues, right, 0:12:21.280 --> 0:12:23.760 So the whole supply and demand dynamic is changing. It 0:12:23.840 --> 0:12:25.319 used to be the case that there was actually very 0:12:25.320 --> 0:12:28.080 few assets to buy in Europe, and that's changing too. 0:12:28.640 --> 0:12:32.040 If you look at the comparison between international investors and 0:12:32.440 --> 0:12:37.600 US investors, in the US, you have an incredible home bias. 0:12:37.720 --> 0:12:39.000 That's the other part of the story. 0:12:39.080 --> 0:12:41.760 Right. If you look at all ehtfs that are issued 0:12:41.800 --> 0:12:44.679 in fixed income in the US one point seven trillion, 0:12:45.160 --> 0:12:48.439 there's only half a percent that has any foreign currency exposure. 0:12:48.520 --> 0:12:51.400 So it can only go one way from here. That's 0:12:51.400 --> 0:12:53.120 not going to be quick, but over time it will happen. 0:12:53.160 --> 0:12:54.960 There's an important point here. You said that this isn't 0:12:54.960 --> 0:12:57.800 necessarily the loss of the dollar as being a reserve currency. 0:12:58.080 --> 0:13:01.680 This is just simply innormalization and diversifying away. 0:13:01.360 --> 0:13:02.439 From the dollar. 0:13:02.640 --> 0:13:04.200 Some people might say that this is a feature, not 0:13:04.240 --> 0:13:06.400 a bug, of this administration, that they want a weaker 0:13:06.520 --> 0:13:09.480 dollar in order to increase exports. And actually we're going 0:13:09.559 --> 0:13:12.840 to see this increasingly as a part of policy, not 0:13:13.080 --> 0:13:14.680 just as a potential consequence. 0:13:14.800 --> 0:13:16.600 Yeah, I think you're right. 0:13:16.720 --> 0:13:18.359 We certainly have. 0:13:20.160 --> 0:13:24.319 People within the cabinet Scott Beston included right, that I 0:13:24.480 --> 0:13:28.280 have a different nuance to dollar policy compared to the past. 0:13:28.480 --> 0:13:31.320 There's always this focus on okay, how do we insource 0:13:31.400 --> 0:13:33.719 some manufacturing and a week of dollars certainly would be 0:13:33.760 --> 0:13:34.760 helpful in that regard. 0:13:35.400 --> 0:13:35.880 And you're right. 0:13:35.920 --> 0:13:37.920 I think if you look at the price action today, 0:13:38.360 --> 0:13:41.679 it is influenced by these let's call it Bloomberg headlines 0:13:41.720 --> 0:13:47.080 about career trade deals so and currency deals. So there's 0:13:47.080 --> 0:13:49.840 an element of that. So nobody is going to be 0:13:49.880 --> 0:13:54.920 fighting this trend. If the dollar is going gradually weaker. 0:13:54.800 --> 0:13:56.040 How much more weakness is there? 0:13:56.160 --> 0:13:58.520 And potentially do you see the euro as the biggest winner. 0:13:59.559 --> 0:14:05.080 So again, we've literally been going in one direction for 0:14:05.920 --> 0:14:09.000 eleven years on a trend basis, right, So we've just 0:14:09.120 --> 0:14:13.600 started and if we have a big asset location shift, 0:14:13.600 --> 0:14:16.160 it's something that can play out over a six to 0:14:16.280 --> 0:14:20.120 nine month horizon and we can easily have, you know, 0:14:20.960 --> 0:14:24.120 a five percent move down in the dollar index, right, 0:14:24.160 --> 0:14:26.840 And then then we get to these questions, so, Okay, 0:14:27.040 --> 0:14:28.920 is it going to be orderly or could there be 0:14:28.960 --> 0:14:33.280 something that's more dramatic? Right, And what we had in 0:14:33.320 --> 0:14:38.920 April I have never seen. I've been doing currency analysis 0:14:38.960 --> 0:14:41.640 since two thousand, effectively, right, what we saw on April 0:14:41.680 --> 0:14:44.040 we have never seen before, right where used bonds are 0:14:44.080 --> 0:14:48.280 selling off, equity is selling off, and the dollar trades down. 0:14:49.240 --> 0:14:52.960 So I think that was only for not that many 0:14:53.000 --> 0:14:55.120 trading sessions, but it's still a warning sign that that 0:14:55.160 --> 0:14:58.640 can happen, right, So I am in addition to what 0:14:58.680 --> 0:15:01.240 we just spoke about, I think there's some addicial tail 0:15:01.360 --> 0:15:05.720 risk that if the budget process is not one that 0:15:05.800 --> 0:15:09.520 investors are comfortable with, I worry that we can have 0:15:09.640 --> 0:15:12.040 some of the same dynamics as we had in April. 0:15:12.160 --> 0:15:15.400 So that wouldn't be my central case, but the people 0:15:15.400 --> 0:15:20.040 who are involved in these budget negotiations have to remember 0:15:20.080 --> 0:15:23.760 what happened in April. The US bond market is not 0:15:24.880 --> 0:15:29.800 a kind of indisputable safe haven anymore, and what happens 0:15:29.800 --> 0:15:31.440 with the budget is absolutely gonna matter. 0:15:31.520 --> 0:15:34.480 There's evidence that speaked not only investors, but also the 0:15:34.520 --> 0:15:36.640 White House in the last month as well. 0:15:36.720 --> 0:15:40.040 Yeah, you said yesterday, who's the bigger arbiter, Republicans or 0:15:40.080 --> 0:15:41.440 the bond market? And I think a lot of people 0:15:41.480 --> 0:15:42.560 are watching the bond market very. 0:15:42.480 --> 0:15:44.360 Closely based on this conversation. It might be the bond 0:15:44.400 --> 0:15:46.080 market again. It's going to see it. It's been too long. 0:15:46.200 --> 0:15:57.760 Thanks for dropping by again to not if Alexante Data 0:15:59.040 --> 0:16:02.480 Retail annings up with Walmart reporting on Thursday, offering another 0:16:02.480 --> 0:16:04.480 read on the US consumer. The team at Bank for 0:16:04.520 --> 0:16:08.440 America writing the following, spending momentum remains, though it's moderating. 0:16:08.520 --> 0:16:11.280 Consumers appear to be pulling bank, particularly on bigger ticket 0:16:11.560 --> 0:16:16.240 discretionary services like airline tickets and lodging. Holly O'Neil is 0:16:16.280 --> 0:16:18.160 the president of Retail Banking and Bank for America, and 0:16:18.200 --> 0:16:20.000 place is sayety joined us now, Holly, welcome back to 0:16:20.040 --> 0:16:21.560 the program. I want to talk a little bit about 0:16:21.560 --> 0:16:23.520 the consumer, and then we can get to what you're 0:16:23.520 --> 0:16:25.880 doing operationally. But let's start with the consumer if we can. 0:16:26.200 --> 0:16:28.160 What are you noticing and how is that different to 0:16:28.200 --> 0:16:30.600 what we've seen previously over the past few years. 0:16:32.520 --> 0:16:37.760 Well, the consumer appears to be continuing to spend. They're 0:16:38.000 --> 0:16:42.360 very healthy. And you had the headline they spent in 0:16:42.400 --> 0:16:44.920 April at a rat of about one percent and that's 0:16:44.960 --> 0:16:48.880 our credit and debit data, and that was just slightly 0:16:49.080 --> 0:16:52.600 cooler than they spent in March at one point one 0:16:52.640 --> 0:16:57.120 percent growth year over year. So they have momentum, but 0:16:57.240 --> 0:17:00.280 it's moderating a little bit, and I think the driver 0:17:00.440 --> 0:17:03.880 of that is that they're supported by continued wage growth. 0:17:04.280 --> 0:17:07.800 So we saw good wage growth in April, both in 0:17:07.880 --> 0:17:11.320 higher income and lower income, though it is moderating a 0:17:11.320 --> 0:17:15.960 little bit, So that theme is still healthy, but moderating. 0:17:15.640 --> 0:17:17.640 Ollie, and please you broke up the income groups, because 0:17:17.640 --> 0:17:19.560 we sit on that just for a bat. The low 0:17:19.640 --> 0:17:21.680 income group have been squeezed for a while. We've seen 0:17:21.720 --> 0:17:24.119 that in data repeatedly throughout this cycle coming out of 0:17:24.119 --> 0:17:26.159 the pandemic. Do you see any stress coming up to 0:17:26.160 --> 0:17:27.440 the upper income cohorts? 0:17:29.640 --> 0:17:32.439 No, So the lower income household wage growth, just to 0:17:32.440 --> 0:17:34.960 give you the numbers picked up by about one point 0:17:35.000 --> 0:17:38.400 five percent in April, and that was that was stronger 0:17:38.440 --> 0:17:41.480 than March. So March was one point four percent, So 0:17:41.560 --> 0:17:44.879 that wage growth in the lower income cohort increased a 0:17:44.920 --> 0:17:48.560 little bit. And I think that wage growth is continuing 0:17:48.600 --> 0:17:52.159 to support the consumer and the consumer spending. When you 0:17:52.240 --> 0:17:55.000 get deeper into the data, some of the credit data, 0:17:55.040 --> 0:17:59.639 as an example, the lower income households are continuing to 0:17:59.720 --> 0:18:03.880 hold up. Overall. We've seen thirty day delinquencies come down 0:18:04.080 --> 0:18:08.360 a tad, so I think that consumer still is showing 0:18:08.520 --> 0:18:09.760 signs of good health. 0:18:10.000 --> 0:18:11.960 This really raises a question, Holly, about how much we 0:18:12.000 --> 0:18:14.440 can really count on some of the soft data, which 0:18:14.520 --> 0:18:19.840 indicated an incredible amount of nervousness and pessimism among consumers 0:18:19.880 --> 0:18:22.240 in the United States during the month of April, in 0:18:22.280 --> 0:18:25.520 particular after April second, are you saying you're just not 0:18:25.600 --> 0:18:28.080 seeing it? But frankly, people can go out and gripe 0:18:28.119 --> 0:18:30.720 about how concerned they are about the future of the world, 0:18:30.800 --> 0:18:32.520 but then they go out in a spending spree. 0:18:35.080 --> 0:18:37.680 We're not seeing it. And I think we often talk 0:18:37.840 --> 0:18:41.480 internally about you know, you have to separate what consumers 0:18:41.520 --> 0:18:44.719 are saying versus what they're doing, what we're seeing in 0:18:44.760 --> 0:18:48.119 our data, and that data is telling us that they're 0:18:48.160 --> 0:18:53.160 continuing to spend, although it is moderating. And so we 0:18:53.240 --> 0:18:57.720 saw in April restaurants good spending there, but we did 0:18:57.760 --> 0:19:01.679 see a dip down in airline and lodging, leisure travel 0:19:01.760 --> 0:19:05.960 a little bit. So consumers are adjusting slightly, which leads 0:19:06.000 --> 0:19:10.159 to that the momentum is dipping just slightly. But you 0:19:10.320 --> 0:19:13.760 really do have to separate what consumers are saying in 0:19:13.840 --> 0:19:17.120 a lot many of the confidence and sentiment numbers versus 0:19:17.160 --> 0:19:19.840 what they're doing, what we're seeing in our data, whether 0:19:19.920 --> 0:19:23.280 it's spending data, payment data, or credit data. 0:19:23.760 --> 0:19:27.600 Holly, I want to congratulate you. You have basically just received 0:19:27.600 --> 0:19:30.199 a pretty big promotion. You're running much more of the 0:19:30.240 --> 0:19:33.240 consumer bank, and you come at a time when there's 0:19:33.280 --> 0:19:36.720 a real question around how different the scenario is in 0:19:36.760 --> 0:19:38.959 different parts of the United States, how it's not a 0:19:39.000 --> 0:19:42.280 monolithic story at all, and how different regions are feeling 0:19:42.359 --> 0:19:46.040 very different realities depending on what their local economies really 0:19:46.040 --> 0:19:50.000 depend on. How different is the scenario that you're looking 0:19:50.040 --> 0:19:52.680 at in the United States right now, depending on which 0:19:52.720 --> 0:19:53.400 region you're in. 0:19:55.520 --> 0:20:00.520 So we obviously have across the country foot and we 0:20:00.560 --> 0:20:03.320 have thirty seven hundred financial centers in all of these 0:20:03.359 --> 0:20:06.840 local communities. So you know, our goal is to really 0:20:06.960 --> 0:20:10.720 deliver for our consumer clients, you know, approximately seventy million 0:20:10.760 --> 0:20:14.800 of them uniquely to what their situation is, whether that's 0:20:14.880 --> 0:20:19.280 geographic or that's individual. So you know, we are there 0:20:19.400 --> 0:20:22.600 to adjust and course correct based on what our clients 0:20:22.640 --> 0:20:24.880 are telling us and based on what they need. 0:20:25.400 --> 0:20:28.800 Ollie, how are the interactions changing between customers? How different 0:20:28.840 --> 0:20:30.760 are they now and how does that change what you 0:20:30.800 --> 0:20:32.160 need out of your physical footprint. 0:20:34.359 --> 0:20:38.240 So our physical our strategy is all about physical footprints 0:20:38.280 --> 0:20:42.000 supported by digital and it's really the combination of the 0:20:42.000 --> 0:20:44.280 boats that I think lead to the power of how 0:20:44.320 --> 0:20:47.480 we can deliver for the consumer clients. So those thirty 0:20:47.520 --> 0:20:52.280 seven hundred financial centers in local communities coupled with world 0:20:52.400 --> 0:20:57.520 class digital capabilities, those digital capabilities continue to grow, they 0:20:57.560 --> 0:21:02.920 continue to advance, and consumers love them. At the same time, 0:21:03.200 --> 0:21:06.720 it does not substitute for face to face interaction that 0:21:06.760 --> 0:21:10.000 we get in our financial centers. When a consumer client 0:21:10.160 --> 0:21:15.199 really wants advice and guidance in their financial position. So 0:21:15.680 --> 0:21:18.600 it's the combination of the two that I think really 0:21:18.640 --> 0:21:20.760 deliver the power for our consumer clients. 0:21:20.880 --> 0:21:22.600 Allie, how much have you been able to expand the 0:21:22.600 --> 0:21:25.560 physical footprint in part because of the turmoil that happened. 0:21:25.880 --> 0:21:26.919 It feels like ten. 0:21:26.840 --> 0:21:30.040 Years ago, but not that long ago. I guess March 0:21:30.080 --> 0:21:33.080 twenty twenty three in terms of some of the regional 0:21:33.119 --> 0:21:35.920 banking turmoil. How much of this has just accelerated since 0:21:35.960 --> 0:21:37.879 then as you look to take market share. 0:21:39.840 --> 0:21:43.879 So we continue to expand into new markets. We continue 0:21:43.920 --> 0:21:47.680 to build new financial centers in communities where we need them, 0:21:48.119 --> 0:21:53.679 so we will continue to advance that agenda across the 0:21:53.720 --> 0:21:58.600 country new markets. Idaho is a recent new market that 0:21:58.640 --> 0:22:03.560