Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app. We begin this out
Speaker 2: with the equity market rarely losing some steam as President
Speaker 2: atlect Donald Trump's tarif escalation fuel's dollar strength. Stuart Kaiser
Speaker 2: city right in the following. The focus of markets has
Speaker 2: been Trump policy and geopolitical events that have shifted risk
Speaker 2: specific pricing, but not reached critical mass to drive broad
Speaker 2: based de risking. Stuart joined us. Now for more, Stuart
Speaker 2: and Mornick. You see evidence of that again this morning.
Speaker 3: Well, I mean this is what we'll see how futures react,
Speaker 3: you know, to the tariff announcements. The market's kind of
Speaker 3: been on top of this. If you look a whare volatility.
Speaker 3: Marks has been pricing risk premiums. It's been in precious metals,
Speaker 3: it's been in you know, China exposed equities, and it's
Speaker 3: been in the currencies. So I think the market has
Speaker 3: kind of viewed those as key sort of pockets of risk,
Speaker 3: and you know, they're going to be surprised, I think
Speaker 3: by the magnitude of tyrists proposed on what for what
Speaker 3: we're former NAFTA, you know, kind of trade members. So
Speaker 3: without a doubt, you know what, We'll see how the
Speaker 3: futures react, but you know, this is this is what
Speaker 3: we're in for. I think for the next couple of months.
Speaker 2: How credible do you think the threats is additional ten
Speaker 2: percent on China, twenty five percent on Mexico and Canada.
Speaker 2: How credible is that?
Speaker 3: I mean you have to read it as credible. I mean,
Speaker 3: this is the president of the United States. He increased
Speaker 3: tariffs in his in his first h you know, his
Speaker 3: first term, and this was you know, part of his campaign,
Speaker 3: So I think you have to view them as credible.
Speaker 3: You know, I think some of his some of his
Speaker 3: inner circle has talked about these being negotiating tactics, and
Speaker 3: I think that's that's potentially true, but I mean a
Speaker 3: negotiating tactic is only effective if you're willing to use it,
Speaker 3: So I think you have to have to view them
Speaker 3: as as credible threats yet, which is the reason.
Speaker 1: Why line risk is real and the reason why you're
Speaker 1: seeing people trade on this, even if that trade gets
Speaker 1: faded in a couple of hours because of another headline
Speaker 1: that comes out. Is a good time or a bad
Speaker 1: time to be a trader?
Speaker 4: It's a hard time to be a trader.
Speaker 3: I would say, Look, I think it's a good time
Speaker 3: in the sense that you know, good traders like.
Speaker 4: A little bit of market volatility.
Speaker 3: I think the hard part about these type of things
Speaker 3: is just the unpredictability of it. It's not you know,
Speaker 3: payrolls are going to be released at a thirty am
Speaker 3: on December sixth, and I can kind of position and.
Speaker 4: Trade around that.
Speaker 3: You know, this is a little more you know, kind
Speaker 3: of random in terms of timing, and also you know,
Speaker 3: coming to you from.
Speaker 4: A lot of directions.
Speaker 3: Right, you have traders that are trying to deal with
Speaker 3: potential impact on healthcare policy, potential impact on food policy,
Speaker 3: and put potential impact on tariffs, et cetera.
Speaker 4: Et cetera. I mean, nobody can say this is totally surprising.
Speaker 3: Again, these were all things that were discussed during the
Speaker 3: election as priorities to deal with.
Speaker 4: But no, it's a.
Speaker 3: Difficult time, I think to be a trader unless you
Speaker 3: get it right.
Speaker 5: To build on that.
Speaker 1: You're talking about how there are specific headlines that have
Speaker 1: affected healthcare and appointments that have affected health care sector
Speaker 1: in particular, and you had a great note talking about
Speaker 1: how different sectors have traded differently from the overall headline
Speaker 1: in tandem with people's belief. Do you think that one
Speaker 1: of those moves is stickier than the other in terms of, say, healthcare,
Speaker 1: given the fact that some of the potential nominees for
Speaker 1: cabinet positions have talked about really disrupting healthcare in America.
Speaker 3: Yeah, I think, you know, toscoing into the election, two
Speaker 3: of the sectors that were a little bit like WILDCARDI
Speaker 3: would have been healthcare and energy, just in the sense
Speaker 3: that it's hard to decide what's going to go on
Speaker 3: at like the gigs level one sectoral level you almost
Speaker 3: have to go down a level, and even within healthcare
Speaker 3: that's the case. You know, do you have pharma being
Speaker 3: impacted in one direction, but then you have biotech potentially
Speaker 3: benefiting from M and A, and then people are trying
Speaker 3: to hide out and bed tech for instance. So it's
Speaker 3: a very complicated sector in terms of the policies that
Speaker 3: are being proposed impact different levels of it. As you
Speaker 3: go around energy, I would say, same way, We're going
Speaker 3: to drill a lot. That might be good for let's
Speaker 3: say pipelines, but it might push the price of oil lower.
Speaker 3: So I think those two sectors in particular are very
Speaker 3: complex right now, going to be very, very difficult to trade.
Speaker 3: In terms of persist I think the markets are telling
Speaker 3: you they think banking is persistent. So I think, you
Speaker 3: know that is the one that people were comfortable being
Speaker 3: long even in a down week.
Speaker 4: Those the banks are rallying.
Speaker 3: But I think healthcare and energy of the two that
Speaker 3: are going to be a little bit more more pulled
Speaker 3: than in multiple directions at the same time.
Speaker 6: When it comes to healthcare, though, changing policy in Washington,
Speaker 6: d C. Is like moving a massive tank. It takes
Speaker 6: a really long time. Would now potentially be a good
Speaker 6: entry point given how they have fallen with some of
Speaker 6: these announcements.
Speaker 4: You know it's possible.
Speaker 3: I think, you know, our view on healthcare has been
Speaker 3: that it was going to be difficult trade goingty election.
Speaker 3: We do think it's a beneficiary of M and A.
Speaker 3: I think at the top one of the question is
Speaker 3: in this in you know, the releatant for the credibility
Speaker 3: question is you know, how much of this stuff is
Speaker 3: is sort of more pie in the sky or maybe
Speaker 3: RF kids, you and your personality, things you'd like to
Speaker 3: get done, versus what are.
Speaker 4: They actually going to kind of push through.
Speaker 3: I think there is potentially the you know, the there's
Speaker 3: going to be a time to fade this stuff. I
Speaker 3: think right now, when things are just kind of so
Speaker 3: kind of uncertain and more of I don't know, wish
Speaker 3: lists that actual policy might not be the time. I think,
Speaker 3: you know, argue on the election. It's three stages. It's
Speaker 3: the initial risk on reaction to the election. Then you
Speaker 3: have what we're in now, which is nominees and policy proposals.
Speaker 3: Then you have phase three, which is probably next year,
Speaker 3: which is actually policy implementation. I think as we get
Speaker 3: closer to that is when you can think about kind
Speaker 3: of fading some of these things.
Speaker 6: Well in this phase to this transition, Why are US
Speaker 6: markets taking it and shried, and European markets are down
Speaker 6: across the board.
Speaker 4: That's a great question.
Speaker 3: US markets are, I think, are still benefiting from like
Speaker 3: the risk on repositioning part. I think a lot of
Speaker 3: the policies we've discussed, particularly on the tariff side, are
Speaker 3: viewed as more you know, pro us and and kind
Speaker 3: of hurt your you know, to some extent. And then
Speaker 3: you have the geopolitical risk you know, coming out of
Speaker 3: coming out of both the Middle East and Russia Ukraine.
Speaker 3: So look, I mean, if there's one thing that Trump
Speaker 3: administration is probably focused on is domestic growth, right America
Speaker 3: first type situation. So if you believe he is going
Speaker 3: to be successful at that, then almost by definition, US
Speaker 3: markets should benefit a bit more.
Speaker 4: You know.
Speaker 3: Will that actually come out, you know, in the wash,
Speaker 3: We'll have to see, but I think that's part of it.
Speaker 4: Right now.
Speaker 2: What you'll read on domestic growth to retat, it's just
Speaker 2: reporting moments ago one is cast the other is best
Speaker 2: by both triming their roundlok down ground in their round block.
Speaker 2: What she'll read on things right now, I understand landmine
Speaker 2: big inventry problem. I've got that. You can sit here
Speaker 2: and say that's a target problem. What are you seeing
Speaker 2: across the other resat it's what are we learning about
Speaker 2: consumption and how good US growth actually is.
Speaker 4: I mean, it looks fairly solid.
Speaker 3: You know, our our retail folks, you know, did a
Speaker 3: big survey pre holiday spending. It looks like holiday season
Speaker 3: is going to look pretty solid. So that's that's a
Speaker 3: good story. On that side, I think was Williams and
Speaker 3: Oma actually put up put up pretty decent numbers on
Speaker 3: their earnings. So it looks like, you know, I think
Speaker 3: how it's been, which is the underlying growth momentum, seems
Speaker 3: pretty positive. But you're sort of at that level where
Speaker 3: you get some good news and bad news, and you know,
Speaker 3: I think because of that that the bad news stuff
Speaker 3: is getting punished pretty bad. So I think over the
Speaker 3: summer we were trading decelerating growth. I think you still
Speaker 3: have to be trading this as you are at a
Speaker 3: solid growth level, but you're close enough to borderlines that
Speaker 3: when you get bad news you get a ton of reaction.
Speaker 3: But payrolls are going to be massive. On December sixth,
Speaker 3: my read would be growth is solid, but you know,
Speaker 3: not exemplary, and we just kind of have to trade
Speaker 3: it that way, and in those environments you have a
Speaker 3: lot of kind of risk reward and volatility because you're
Speaker 3: close to you're close to trigger points in a lot
Speaker 3: of spots.
Speaker 1: You talk about how they're winners and losers, the winners
Speaker 1: being the Walmarts of the world, the winners being some
Speaker 1: of the big tech names. I want to read some
Speaker 1: of the commentary from.
Speaker 5: The Coal CEO.
Speaker 2: I thought this was interesting.
Speaker 1: We are approaching our financial outlook for the year more
Speaker 1: conservatively given the third quarter underperformance and our expectation for
Speaker 1: a highly competitive high holiday season.
Speaker 2: Is this a new time.
Speaker 1: Where the big are going to get bigger that anyone
Speaker 1: who has that platform to basically dominate when it comes
Speaker 1: to data, when it comes to some of the technological
Speaker 1: advancements and deliveries are going to outperform at a time
Speaker 1: where they can offer maybe better price, competitive competition than
Speaker 1: some of the other companies that haven't had the scope
Speaker 1: to really expand in that way.
Speaker 3: Yeah, I mean, I think that's true, and I think
Speaker 3: you know that also brings the tariff discussion into is
Speaker 3: you know, which are these bigger companies more better set
Speaker 3: up to deal with any potential tariffs than kind of
Speaker 3: smaller competitors. So yeah, I think, you know, the big
Speaker 3: winning you know, that's hard to say. You still have
Speaker 3: to get it right. I mean, Target's a big company
Speaker 3: and they clearly got something wrong, you know, just just
Speaker 3: based on the stock price reaction. So yeah, I think
Speaker 3: it gives maybe a wal Mart on Amazon a little
Speaker 3: bit of an advantage, but there's still execution risk, right,
Speaker 3: and you do need to do it and.
Speaker 4: Do it well.
Speaker 3: I mean, I don't I'm not under the impression that
Speaker 3: this is a more competitive holiday season than last holiday season,
Speaker 3: for instance. I mean, I feel like these things are
Speaker 3: always pretty competitive.
Speaker 4: But yeah, you know, there's inventors there.
Speaker 1: I guess that the question, the bigger question is how
Speaker 1: much of a macro tell are any of these stories
Speaker 1: given the fact that there are winners, but there are
Speaker 1: some pretty big losers who are appointing to competition, who
Speaker 1: are appointing to a real unwillingness for consumers to buy
Speaker 1: things if the prices are perceived as too higher of
Speaker 1: the quality isn't received as enough.
Speaker 3: Yeah, I think the macro reave has been really tricky.
Speaker 3: I think because you had a period last quarter when
Speaker 3: the dollar stores did really, really poorly, and that would
Speaker 3: seem to have reflected.
Speaker 4: Hey, you're having a lot of pressure on that lower
Speaker 4: end consumer.
Speaker 3: But that's saying in that same period Walmart did great,
Speaker 3: and you know they were you know, there was some discussion, well,
Speaker 3: that's just because people are trading down to Walmart, and
Speaker 3: that's that is actually all bad news.
Speaker 4: I have my lower and consumer under pressure.
Speaker 3: I've met medium and high income consumer having to trade
Speaker 3: down and didn't need to be worried about that. But
Speaker 3: then you get your retail sales numbers and they're okay.
Speaker 3: And I think this gets back to you know, you
Speaker 3: know John's question, which is economic growth is fine, but
Speaker 3: it is slowing down to a level where you're going
Speaker 3: to get some good results, you're going to get some
Speaker 3: bad results, and that's going to kind of create volatility
Speaker 3: in the market and you just kind of need to
Speaker 3: excuse me, you need to risk risk manage around that
Speaker 3: a little bit.
Speaker 6: Is there more though anecdotes that more and more consumers
Speaker 6: are trading down and potentially that's the start of something bigger.
Speaker 3: It does feel that way, but I mean I can
Speaker 3: think back to last all the previous to August August
Speaker 3: twenty twenty three, when you had some you know, weak
Speaker 3: data out of some of the retailers on their on
Speaker 3: their private label credit cards, and folks were saying, this
Speaker 3: is the moment. You know, these private level credit cards
Speaker 3: are under under pressure and credit balances are rising.
Speaker 4: So I mean the.
Speaker 3: Anecdotes, yes, they are stacking up, but I feel like
Speaker 3: people have been trying to fade this for an extended
Speaker 3: period of time, and it's always been a little bit
Speaker 3: too early. So you know, I think, yes, yes, yes,
Speaker 3: the anecdotes are stacking up, but I'm not sure that that's,
Speaker 3: you know, out of the blue. I think this is
Speaker 3: something people have been expecting. It has been kind of
Speaker 3: an ongoing process, and we're just gonna have to, I
Speaker 3: hate to say, just wait on the data.
Speaker 4: At this point.
Speaker 2: Jobless Claims has been a great example of the same thing.
Speaker 2: So many headfakes of the last compless summits. We're coming
Speaker 2: into September oc Tiber. Every single time we're waiting for
Speaker 2: this thing to slow down, and then it just doesn't happen.
Speaker 4: Too.
Speaker 2: It's good to see you. Thank you, have a happy
Speaker 2: thanksgiving you to catching up with this. Thank you, Stu.
Speaker 2: A kinds of that of City tending to Tenessla California Conveny,
Speaker 2: I can have a new some excluding Elon Musk Company
Speaker 2: from a proposal that would oft for EV rebates to
Speaker 2: buy us if a federal subsidy is repealed. Newsom's office
Speaker 2: telling Bloomberg it's due to the plan's market share limitations
Speaker 2: must call in the proposal insane. In a post on x,
Speaker 2: Danas of wet Buss saying this, with the majority of
Speaker 2: evs sold in California being Tesla's, this would be a
Speaker 2: risky political move in our view. Dan joins us from
Speaker 2: more thank in Morning Creazy to be here. Do you
Speaker 2: agree it's insane?
Speaker 7: Look, yeah, Jig, Paul and Tyson, now you got news
Speaker 7: and Musk. I mean, this is going to be a battle,
Speaker 7: right like, and.
Speaker 5: Ultimately it's a political battle.
Speaker 7: But the only evs that are made in California Tasselas.
Speaker 7: So if you ALTERO, if they actually go down this path,
Speaker 7: I believe this could be some threat to where more
Speaker 7: and more jobs moved from Freemont to sex Coustin.
Speaker 5: But at the end of the.
Speaker 7: Day, federal attacks, as we've talked about, that's going to
Speaker 7: get ripped away.
Speaker 5: That's bullsh for Tesla. You're just going to see this
Speaker 5: back and forth.
Speaker 2: Before we get into that, let's just take into this
Speaker 2: relationship what it's behind it. We know what was behind
Speaker 2: it with Biden. What this basically came down to was
Speaker 2: union workers not being a tenser in a way that
Speaker 2: they were at GM and Ford. What's this one about?
Speaker 7: Look, I think first of all, I mean Musk was
Speaker 7: iced out of the Biden administration per year.
Speaker 5: I was really focused on Detroit and from the GM four.
Speaker 7: Another's if you look here is that there's regulars. There's
Speaker 7: a beef qlearly between Musk Newsome. But essentially what this
Speaker 7: is really about is that you're going to have these
Speaker 7: tax pap from a federal perspective taken away. California clearly
Speaker 7: trying to do something.
Speaker 5: To stop there. But the reality is is that this ran.
Speaker 7: The money ran out on this program in California.
Speaker 2: So Dan, this is important. The support at a federal
Speaker 2: level is clearly with Elon Musk. At a state level,
Speaker 2: in places like California, it looks like because of this
Speaker 2: tension he's losing it. How important is that relationship of
Speaker 2: both the state and level when it comes to things
Speaker 2: like autonomus driving state.
Speaker 7: We view it as much less than from a federal
Speaker 7: perspective because the golden goose here is autonomous. You know,
Speaker 7: we believe the autonomous piece is worth a trillion dollars
Speaker 7: alone to Tesla. Federal regulatory spiderweb essentially gets ripped away,
Speaker 7: and I think that's significant. Now California, Newsom queerly will
Speaker 7: try to fight some of the autonomous, some of the
Speaker 7: unsupervised FSD, but this is going to be something that's
Speaker 7: really going to continue. But I believe Tesla is going
Speaker 7: to have significant sort of room to what I view
Speaker 7: is elevate themselves within autonomous and that's.
Speaker 5: Really what I believe is the key to this Tesla story.
Speaker 7: It's about AI and autonomous what Newsom's doing here when
Speaker 7: it comes to California, this is essentially almost a side
Speaker 7: show to the broader story here with Tesla, which is
Speaker 7: why it's really been a Cinderella story since Trump got
Speaker 7: in because of the must bet.
Speaker 6: But when it comes to autonomous driving and the federal regulations,
Speaker 6: it's a light switch.
Speaker 4: This has to go through Congress.
Speaker 6: Elon Musk and his proximity to power cannot just basically
Speaker 6: get this over the finish.
Speaker 7: Line of course not in itself, but could move it
Speaker 7: significantly toward the finish line. So okay, he gets into
Speaker 7: the two yard line. Right now, it's at the forty
Speaker 7: yard line. Okay, fifty midfield, so he gets to a
Speaker 7: two yard line. But that's also why with the red
Speaker 7: sweep and just relative to what we see with coming
Speaker 7: out of the beltwayh you know, being there over the
Speaker 7: last week, we feel like there's a ground swell for autonomous,
Speaker 7: but no doubt when it comes to EVS, you.
Speaker 6: Feel there's a ground swell in Congress as well.
Speaker 7: I believe there's a groundswell. For the reason I think
Speaker 7: there's a ground swell based on our of you and
Speaker 7: what we hear is because of what's happened in China,
Speaker 7: because China is now going so far ahead of the
Speaker 7: US when it comes to autonomous because of the lack
Speaker 7: of really.
Speaker 5: Regulatory spider web.
Speaker 7: That's why Trump, you have an ais are come in,
Speaker 7: But who's going to be From an AI's our perspective,
Speaker 7: Musk is going to have have a front row seat
Speaker 7: to really everything here. And that's why it continues to
Speaker 7: be the poker bet for the ages for Musk.
Speaker 5: You betting on Trump.
Speaker 1: So basically, and this sort of goes to the heart
Speaker 1: in some ways of the beef between Newsom and Musk.
Speaker 4: The idea that it's one thing to.
Speaker 1: Be transactional in your policies if you're in the White
Speaker 1: House in your Washington, DC. It's another for sitting at
Speaker 1: the state and the White House will probably trump that.
Speaker 1: There is just a question of how far that will go.
Speaker 1: Do you actually believe that there will be policies crafted
Speaker 1: specifically to benefit Tesla over some of the rivals in
Speaker 1: the United States because of Musk's closeness to the White House.
Speaker 7: I think, look clearly, well, Tesla is just a much
Speaker 7: different situation relative to Autonomous. So they at first that
Speaker 7: they have the scale and scope on EV so you
Speaker 7: pull the tax credit, gives them a huge advantage is
Speaker 7: relative to federal subsidies, but aren't autonomous.
Speaker 5: It's their world. Everyone else pays rent along with Weymouth.
Speaker 7: So when you look at this relative to other auto makers,
Speaker 7: they're essential almost going to have to license from Tessa
Speaker 7: when it comes to the state level. You look in Newsom,
Speaker 7: look does this end up in a UFC fight?
Speaker 4: I don't know.
Speaker 7: I mean, this is going to continue to play.
Speaker 5: Out between this beef Newsom and Musk.
Speaker 1: This goes beyond just Tesla. There was a report out
Speaker 1: of the Information saying that Google CEO called Donald Trump
Speaker 1: and Elon Musk was on the phone with him and he.
Speaker 5: Was surprised by that.
Speaker 4: You talk about.
Speaker 1: Space and some of the space exploration and what's going
Speaker 1: to happen with the NASA budget, how much can you
Speaker 1: extrapolate out that the Musk halo is really something that
Speaker 1: you have to sort of get on the bandwagon as
Speaker 1: as an investor, simply because there are going to be
Speaker 1: certain policies that will just to facto benefit him because
Speaker 1: of his closeness with the president.
Speaker 7: I mean, I think you said as best as I
Speaker 7: can say. I mean this Musk and Trump, this is
Speaker 7: not going away. I actually see this something that's going
Speaker 7: to continue to expand, and it's going to be from
Speaker 7: China tariff discussions.
Speaker 5: When you look musk.
Speaker 7: Ability in terms of President g and his relationship there,
Speaker 7: when it comes to AI, when it comes to autonomous EV's.
Speaker 5: That's why it comes down to Detroit. Musk, he wasn't
Speaker 5: at the cool kids table.
Speaker 7: Now there's a knock at the door at Delon and
Speaker 7: I think that's really the issue right now that's starting
Speaker 7: to happen is that everyone's starting to realize that this
Speaker 7: Musk Trump alliance is going to continue in a lot
Speaker 7: of ways. Newsom's clearly trying to get into that, but
Speaker 7: I continue to believe that's probably gonna be a battle
Speaker 7: he'll ultimately lose because you continue going down that path. Okay,
Speaker 7: more jobs go from Fremont to Austin. Oh and second thought,
Speaker 7: maybe we won't exclude him.
Speaker 2: So this is Tensa in California. You also come at GM.
Speaker 2: What's your reaction to the terrace that's been threatened on
Speaker 2: Mexico on Canada, given that we know that these automakers
Speaker 2: have kind of presence sounds of the border.
Speaker 7: I mean, if you're married right now, Mary Barr, I mean,
Speaker 7: here it is. You have Musk that's going to be
Speaker 7: front row on Trump. Now, you got these tariffs. I
Speaker 7: mean you took about heartburn from a GM perspective, Well
Speaker 7: for a company right now, that's actually I think it's
Speaker 7: some of the best execution that I've seen.
Speaker 2: You've still got an out perform on the stuff.
Speaker 7: Because because to me, if you look at execution, I
Speaker 7: still don't believe the stock is getting the right value relative.
Speaker 2: To how exposed are they vote to this tarrast story.
Speaker 2: And if it goes through with it, can you still
Speaker 2: put an outperform on that stuff?
Speaker 5: They're exposed. We got to see how as it all
Speaker 5: plays out.
Speaker 7: I continue to think that Bark will be a little
Speaker 7: worse than the bite, you know, in terms of as.
Speaker 5: It all plays out.
Speaker 7: But for GM, for a company that's humming right now,
Speaker 7: it's kind of been a little one two punch in
Speaker 7: that three wine three area.
Speaker 2: Coulde such a m the anymason I put up GM,
Speaker 2: it's not about a taris. It's about F one expanding
Speaker 2: the grid to an left of the team. You went
Speaker 2: to Venkas over the weekend. What was your impression of thinks?
Speaker 7: I mean, after my first F one so influence in
Speaker 7: the book that was that was just an epic we
Speaker 7: in terms of just being experienced F one being part
Speaker 7: of the Ferrari team there, it was just an unbelievable experience.
Speaker 7: I recommend everyone you know, I went from the Netflix.
Speaker 7: I went from Pharaoh to the Netflix shows an influencer.
Speaker 5: Now he's an isn't it. He's actually an F one influencer.
Speaker 7: So I went from Pharaoh to the Netflix show to
Speaker 7: go into a net forn race. Next thing, I know,
Speaker 7: I could be a monarcha you never know where that's
Speaker 7: gonna go.
Speaker 2: You was signed up member of the FOCI. Now you're
Speaker 2: a Ferrari fan.
Speaker 5: I am signed up Ferrari fan.
Speaker 7: Now it's and now it starts with Penn Steep.
Speaker 5: But now Ferrari is part of that.
Speaker 2: Okay, that's quite a contrast Penn state and it's.
Speaker 5: But you're talking about both.
Speaker 2: You bomb out, you barbel the strategy. Thank you, it's
Speaker 2: going to see it was a web past. Thank you, sir.
Speaker 2: Here's the lass this morning. Holiday shopping expected to break
Speaker 2: records this year, signaling just how much higher prices are
Speaker 2: impact and consumer spending. Neia Richardson of a DP Research institute, writing,
Speaker 2: high prices could dim holiday chap for a long time.
Speaker 2: Wage growth for hourly employees was outpaced by inflation. NATA
Speaker 2: joins us now for more NATA always great to see you,
Speaker 2: welcome back, thank you. What's the outlook suspending this holiday
Speaker 2: shop in season?
Speaker 8: Well, the outlook for spending is that record highs. The
Speaker 8: National Retail Federation expects consumers to spend nine hundred dollars
Speaker 8: per person per family this year. That's up like fifteen
Speaker 8: dollars from last year. So strong spending this year is expected.
Speaker 8: But the problem is we're on a knife edge when
Speaker 8: it comes to wage growth versus inflation. In fact, we
Speaker 8: only expect for hourly wages, hourly workers, which are the
Speaker 8: well sixty percent of the labor market, we only expect
Speaker 8: their wages to tread just above CPI inflation, So that's
Speaker 8: like thirty basis points. So as prices are going higher,
Speaker 8: wages aren't keeping up.
Speaker 2: How big is the spread between how consumers say they
Speaker 2: fail versus how much they do because how they fail
Speaker 2: has been pretty awful for quite a while now. But
Speaker 2: then I look at retoul sounds, and retail sounds are
Speaker 2: still really robust. What do you think explains that labor markets?
Speaker 8: Because even though wages are just keeping up with inflation
Speaker 8: right now, people are employed. If you look at layoffs,
Speaker 8: they're very, very low. There's not this threat and pending
Speaker 8: threat of doom when it comes to what's going to
Speaker 8: happen after the holidays, will they still have their jobs?
Speaker 8: For many workers, they still feel confident about the labor market.
Speaker 8: What they lack confidence is in prices. They keep going
Speaker 8: up higher and they're already at high levels, and that's
Speaker 8: what's changing the game in terms of sentiment.
Speaker 1: Has there been a behavioral shift or people are being paid,
Speaker 1: they are employed, and yet they're not levering up. The
Speaker 1: people still have the specter, whether it's the financial crisis,
Speaker 1: whether it's just simply this time of high inflation and
Speaker 1: feelings like you need to get your personal finances under control.
Speaker 1: You're not seeing credit card delinquencies pick up in a
Speaker 1: miss material way.
Speaker 8: Is or message from that I think they're as First
Speaker 8: of all, consumers are being a little sharper about their finances.
Speaker 8: But you know, we can't go too overboard and optimism
Speaker 8: with the low delinquencies relative to the past.
Speaker 5: We have to also look at savings.
Speaker 8: Rates, which are also low. So we're in this purgatory,
Speaker 8: if you will, in terms of consumer balance sheets. They're
Speaker 8: getting by, but they're living paycheck to paycheck. They're not
Speaker 8: putting away savings at the same rate that they used to.
Speaker 8: Credit Card delinquencies aren't picking up yet. So yes, this
Speaker 8: is a happy period for the consumer, but it is
Speaker 8: again a sensitive period. You don't know what could sway
Speaker 8: the consumer into more debt and into less savings than
Speaker 8: they have been.
Speaker 1: It's taken a long time for the average worker to
Speaker 1: catch up, to catch up to inflation, and they feel
Speaker 1: like they've been left behind, and we've seen that increasingly.
Speaker 1: John was talking about the sentiment surveys.
Speaker 5: Have people caught up?
Speaker 4: What would it take?
Speaker 2: So what would it take.
Speaker 1: For them to catch up in a mature way with
Speaker 1: wage gains that could put them at least on the
Speaker 1: same track they were or relatively close as pre pandemic.
Speaker 8: Look, we look at data all the time at ADP.
Speaker 8: We're looking at hourlay workers. I was just reviewing fourteen
Speaker 8: million hourly workers in their average pay. For the better
Speaker 8: part of the last four years, the worker has been underwater,
Speaker 8: meaning their wage growth is not keeping up with the
Speaker 8: inflation that they're seeing in retail, in consumer price inflation,
Speaker 8: So we haven't kept up in general as a workforce.
Speaker 8: There is pockets of light. Now we're finally starting to
Speaker 8: see a little bit of an increase in wage growth
Speaker 8: above CPI inflation, but it's tenuous, it's vulnerable, and anything
Speaker 8: could trigger a reversal in that wage growth versus CPI.
Speaker 8: So no, the worker is not keeping pace. Consumption is
Speaker 8: being led by wealthy, more affluent households, and the average
Speaker 8: worker is still trying to keep up. That's why you're
Speaker 8: seeing lower savings rates yet not spilling over into delinquencies.
Speaker 8: And that's going to be the barometer to watch about
Speaker 8: the health of the consumer.
Speaker 6: Yet they're spending more this holiday season and December last
Speaker 6: year inflation was north of three percent. The prior Christmas
Speaker 6: it was north of six percent. Is there this idea
Speaker 6: that the consumers also just getting more.
Speaker 2: Used to inflation.
Speaker 8: Well, they are certainly spending like it. I mean, they
Speaker 8: don't like inflation. They may rally against inflation when it
Speaker 8: comes to our sentiment severs, but it hasn't dented the
Speaker 8: enthusiasm in spending. What consumers want now is cheaper prices
Speaker 8: very quickly. Goods were used to real time consumption, and
Speaker 8: they're getting that right now after the holidays. It'll be
Speaker 8: a good benchmark for the real status of the consumer.
Speaker 8: People tend to go over their skis a little bit
Speaker 8: during the holidays. Will they pull back in January? Will
Speaker 8: companies pull back in January? That's what we'll be looking for.
Speaker 1: You said that some of the gains are really fragile
Speaker 1: and that they could be derailed.
Speaker 8: What would derail them well, higher prices, higher prices, and
Speaker 8: if consumers or businesses who are betting on lower interest
Speaker 8: rates going into the new year don't get that bet realized.
Speaker 8: There's indications that inflation is sticky. It's not moving down
Speaker 8: in the street line that was expected. If we see
Speaker 8: a stalling in the interest rates, if consumer credit becomes
Speaker 8: more expensive, if it costs more for consumers to borrow
Speaker 8: to buy cars, which are also seeing some price growth
Speaker 8: to fun purchases, then that could stall some of their
Speaker 8: spending behavior.
Speaker 2: Do you think the Fed hits pause? That's a no
Speaker 2: food question.
Speaker 8: I mean you're hearing a lot of FED speaks suggesting
Speaker 8: just that there's been no FED speaker that I've heard
Speaker 8: recently that has come out definitively and said inflation is
Speaker 8: going in the right track and we're confident enough that
Speaker 8: we will lower rates in December. There's still uncertainty around
Speaker 8: that decision.
Speaker 2: It's going to be an interest a few weeks, that's
Speaker 2: for sure. Native. It's good to see you. Nati Rich
Speaker 2: is in there of ADP. This is the Bloomberg Seventans podcast.
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