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 Bromwoz 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. I pleased to say
Speaker 2: that joining us around the table is the CEO of
Speaker 2: Barclay's cs Van Kama Krishnan Benkat. Great to see you, sir,
Speaker 2: Very good to see you, particularly here in New York City.
Speaker 2: The stock is doing really nicely, so let's start with
Speaker 2: some good news. We've rallied since the mid of February
Speaker 2: pretty aggressively, I would say, up by something like twenty
Speaker 2: percent last time I looked yesterday evening. Do you think
Speaker 2: that's evidence that shareholders are buying into your vision.
Speaker 3: It's the earliest stage of that evidence. What's most important
Speaker 3: for us is this plan, and it's a plan to
Speaker 3: increase our rote to twelve percent from the tennis it
Speaker 3: is now. It's a plan to return about ten billion
Speaker 3: pounds to shareholders and capital distributions, and it's a plan
Speaker 3: to have a broad diversified bank that's a global banking
Speaker 3: leader centered in the UK, with an investment bank that
Speaker 3: is going to fifty percent of the bank from around
Speaker 3: the sixty percent it's now. So our job is to
Speaker 3: having created the plans to execute it, and the share
Speaker 3: price hopefully will follow.
Speaker 2: Can we get into the investment bank and you talk
Speaker 2: about diversifying revenue and leaning maybe more into advisory phase.
Speaker 2: Is the talent there on board in the investment bank
Speaker 2: all ready to make that shift or do you need
Speaker 2: to hire to make that happen?
Speaker 3: It is substantially there. You know, we made some organizational
Speaker 3: changes last year. We have new leadership in the investment bank.
Speaker 3: We hired a bunch of very you know, very skilled
Speaker 3: bankers in healthcare, in technology, in the energy transition, and
Speaker 3: that has already started to have its effect. Last week
Speaker 3: we announced eqt's sale. We advised EQT on its sale
Speaker 3: to ecuotrans ecotansit and its sale to EQT and so
Speaker 3: we're beginning to feel the momentum from those HighRes.
Speaker 4: What do you think it is about investment banking in
Speaker 4: and of itself that makes it a less attractive proposition
Speaker 4: to remain it the same size versus say, advisory fees.
Speaker 3: Well, one of the things is when you move into
Speaker 3: advisory fees, you start getting a better return on your
Speaker 3: capital because you're not outlaying as much capital per unit
Speaker 3: of revenue as you do if you're purely lending. Now,
Speaker 3: lending is an important part of what we do. We
Speaker 3: are a very big player in the fixed income markets,
Speaker 3: in the debt capital markets as well as fixed income trading,
Speaker 3: So lending is a part of what we do, but
Speaker 3: we are just trying to broaden it into more advisory
Speaker 3: and more equity related revenues.
Speaker 4: How much is this sort of a new model of
Speaker 4: banking that's basically taking all of Wall Street and a
Speaker 4: lot of the global banks too, which is trying to
Speaker 4: cater to the whole client rather than say, go after
Speaker 4: specific deals and be focused on, for example, being at
Speaker 4: the top of a league table.
Speaker 3: Yeah, I think it's an important part of the shift
Speaker 3: that's happening, and it's happening because Previously in the investment
Speaker 3: banking side, we were working with corporations, and since then
Speaker 3: we still work with corporations in a very big way.
Speaker 3: But in addition to that, you've got the financial sponsors
Speaker 3: and the sovereign wealth funds, So the growth of concentrated
Speaker 3: pools of capital makes it important to have that full
Speaker 3: relationship with those players in the market.
Speaker 2: Every time we sit across the Barclay spouse, I think
Speaker 2: we asked the same question. I can think of that
Speaker 2: when Bob Diamond left that morning. Then Anthony Jenkins came
Speaker 2: in our Remember I was actually at Barclay's HQ the
Speaker 2: morning Jenkins got fired. I was sitting down with the chairman,
Speaker 2: and we talked about the same thing, the investment bank,
Speaker 2: the future of the investment bank. Do you find that's
Speaker 2: more of a media obsession than it is an obsession
Speaker 2: with investors. Where does that question come from?
Speaker 3: It's a legitimate question, and in our Invested Day four
Speaker 3: weeks ago, I tried to address it directly as well.
Speaker 3: I think, first of all, it's important for Barclays to
Speaker 3: have an investment bank. We are good at it. We
Speaker 3: are the largest investment bank outside the top five in
Speaker 3: the US. I think it's an important for the world
Speaker 3: to have a counterparty that's not just a US bank,
Speaker 3: and they would prefer a UK bank when they do it.
Speaker 3: It's an important source of revenue for US, and as
Speaker 3: I said, we are good at it.
Speaker 2: Why is it important and why do they prefer a
Speaker 2: UK bank? Why is it important to have a bank
Speaker 2: outside of the US. What are the benefits of that?
Speaker 3: Well, you're diversifying your counterparty exposure in a national way
Speaker 3: as the world is becoming a little more deglobalized. You know,
Speaker 3: London has been historically a great financial center and remains one,
Speaker 3: so and it's a very important one. And then UK
Speaker 3: law governs a lot of financial contracts. So all those
Speaker 3: three things make it very attractive to work with a
Speaker 3: UK bank.
Speaker 4: Does it also make it incredibly difficult to compete outside
Speaker 4: of the UK, or say in the US, when you've
Speaker 4: got a JP Morgan that's dominating absolutely everything.
Speaker 3: Well, look, there are very large banks that are in
Speaker 3: the US. The world is big enough for all of us.
Speaker 3: We act like a US bank when we are in
Speaker 3: the US.
Speaker 4: Well, when you act like a US bank with a
Speaker 4: very specific focus you've talked about in the Pillars the
Speaker 4: five pillars in reorganization, the importance on focusing on consumer
Speaker 4: lending consumer spending. Recently, you offset some risks from your
Speaker 4: credit card portfolio. There is a real question here about
Speaker 4: where you see an opportunity to consumer to lend in
Speaker 4: the consumer space at a time of uncertainty in the cycle.
Speaker 3: So we view the consumer space in two ways. In
Speaker 3: the US, we've got a great credit card for business,
Speaker 3: but it's very specialized on partnership cards. We've got twenty
Speaker 3: corporate partners, very blue chip corporations, twenty million underlying customers.
Speaker 3: We're looking to continue to grow that partnership card business
Speaker 3: in the US in a measured way because it has
Speaker 3: great synergies with our investment bank and a great overall
Speaker 3: business for US. In the UK, we have strength across
Speaker 3: the consumer franchise and in small business banking, in corporates
Speaker 3: and there it's sort of you know, it's our homeland,
Speaker 3: it is our home turf, and we are very strong
Speaker 3: and we look to increase that strength.
Speaker 4: Well, I guess here's a question. Is there basically more
Speaker 4: emphasis on growing in the United Kingdom outside of the US,
Speaker 4: and the US effort is going to be much more
Speaker 4: bespoke focused on very clear sort of verticals rather than
Speaker 4: the whole picture in the same kind of way as
Speaker 4: the UK or elsewhere.
Speaker 3: Yeah, So the way I think about it is that
Speaker 3: we've got a complete banking presence in the UK, touching
Speaker 3: customers from the very largest corporations down to individuals and
Speaker 3: offering them the full range of financial services. In the
Speaker 3: US we offer investment banking services very well trading and
Speaker 3: for banking, and as I said, a very good specialized
Speaker 3: partnership credit card business.
Speaker 2: We had a right shock big time on both side
Speaker 2: of the Atlantic in the last twelve eighteen months. What
Speaker 2: we haven't seen is the credit stress off the back
Speaker 2: of that. As you look across the business at the moment, corporates, consumers,
Speaker 2: the US, the UK, you see any of that emerge
Speaker 2: at all.
Speaker 3: You're seeing small signs of it in the consumer side,
Speaker 3: with just a take up of delinquencies off the COVID lows.
Speaker 3: And I think, look, employment remains extremely strong or unemployment
Speaker 3: is low. You're seeing the effects of inflation, and you're
Speaker 3: seeing the effects of the r you know, the wearing
Speaker 3: off of the consumer stimulus that you had during COVID,
Speaker 3: and so you're seeing a small increase in delinquencies in
Speaker 3: the consumer business.
Speaker 2: It's the a popular risk that you're being super vigilant
Speaker 2: at about at the moment that maybe you're pulling back
Speaker 2: on lending around that particular area of the economy.
Speaker 3: Not really. I mean, I think as an overall matter,
Speaker 3: taking the very big picture, the economy is stabilizing. It
Speaker 3: looks like on both sides of the Atlantic you're having
Speaker 3: a softish landing. Uh employment, as I said, remains strong
Speaker 3: in overall credit statistics and the corporate it's remained strong.
Speaker 3: So generally we are constructive towards lending.
Speaker 2: I wanted to finish on the City of London if
Speaker 2: I can, if you'll indulge me. Barclay's and its roots
Speaker 2: of Barclays go all the way back to the late
Speaker 2: sixteen hundreds, early seventeen hundreds. We're talking about centuries the
Speaker 2: city of London for a long long time. It's been
Speaker 2: at the epicenter of global finance. Do you see that
Speaker 2: as under threat in any way, shape or form. Do
Speaker 2: you think the UK has taken that for granted over
Speaker 2: the last several years.
Speaker 3: I don't think the UK has taken it for granted.
Speaker 3: I think it's very important for the UK. I think
Speaker 3: the UK understands that. I think politicians on both sides
Speaker 3: in the UK understand that extremely well. So No, I
Speaker 3: think there's a lot of support for the City of London.
Speaker 4: This raises a question of where we are in the
Speaker 4: economic cycle, where it is strongest, and this week would
Speaker 4: you get a Bank of England decision is it beneficial
Speaker 4: of rate stay higher for longer or do you want
Speaker 4: them to come down to support the economic growth and
Speaker 4: maybe some of the engine that John was talking about.
Speaker 3: So ultimately that's a decision they have to make. It's
Speaker 3: very important to balance, you know. I actually think, I
Speaker 3: actually think a little prudence and waiting a little is
Speaker 3: not a bad thing.
Speaker 2: You think there is an option that's a wait a
Speaker 2: little longer than why do you think? So why is
Speaker 2: the bigger risk? Maybe the cut too soon and not
Speaker 2: to hold too long.
Speaker 3: Well, I think that the economy is stabilizing, employment is
Speaker 3: still robust, inflation is coming down, so I think on
Speaker 3: the balance it might be more prudent to wait a
Speaker 3: little longer. Now our house view and that of many others,
Speaker 3: is for more rate cuts over.
Speaker 2: This year, with the same applied to the US the
Speaker 2: same characterization of the situation.
Speaker 4: I think so yeah, but just would that be good
Speaker 4: for you? Are high rates good for banks or are
Speaker 4: they bad for banks? This has been a preennial question.
Speaker 3: Stable rates are good for banks.
Speaker 2: Thank camp, very diplomatic. We appreciate your time. So it's
Speaker 2: fantastic catch up and thank you see here in New
Speaker 2: York City. Thanks for being able to see you, Baby
Speaker 2: Morgan's Monica to sense so saying this, we need to
Speaker 2: acknowledge the strong starts of the year, with the S
Speaker 2: and P five hundred now only a few percent away
Speaker 2: from our year round twenty twenty four price target. This
Speaker 2: also argues for more selectivity and being thoughtful if you
Speaker 2: are still sitting on too much cash. We believe stocks
Speaker 2: will continue to make new highs. Monica joins us now
Speaker 2: in New York. Monica cand morning to year warning, we
Speaker 2: will make new highs in this sancraity market. Talk to
Speaker 2: me about how you put cash to work right now?
Speaker 1: Then, the challenge has been everyone's waiting for certainty. You
Speaker 1: just talked about that. I don't think we're going to
Speaker 1: get it. The FED is never going to tell us
Speaker 1: what the path is going to look like, and so
Speaker 1: the challenge becomes, then what do I do do I
Speaker 1: wait for certainty? Well, anyone who tried that the last
Speaker 1: couple of years has missed out on a massive rally.
Speaker 1: And so what we've been advocating to clients is just
Speaker 1: look at what we can see earnings inflecting right. Put
Speaker 1: the mag seven aside. The other four ninety three earnings
Speaker 1: were down last year. We think they'll be up this year.
Speaker 1: You do have a modist inflictioneryronment, probably some cuts at
Speaker 1: some point. That is all good for stocks.
Speaker 3: Now.
Speaker 1: I don't think it means another twenty five percent rally,
Speaker 1: but it is the path to saying maybe five six
Speaker 1: seven percent from here, which is pretty good after we've
Speaker 1: already run something.
Speaker 2: How would you play that? Is that an equal way?
Speaker 2: SMP five hundred? Is there a sect the preference underpinning
Speaker 2: that in any hy shape or form.
Speaker 1: I mean, the temptations to say we'll see the broadening
Speaker 1: you've got to go outside of the magnificent seven. I
Speaker 1: think it depends where you're starting from. Many people just
Speaker 1: don't have enough risk on full stop. So if you
Speaker 1: don't have an ef equities full stop, you should be
Speaker 1: buying broad. If you are over levered to tech, then
Speaker 1: that's where I start looking to things like MidCap, where
Speaker 1: you have valuations that are significantly lower than the SMP
Speaker 1: and you have better earnings growth always you've leverage to
Speaker 1: things like industrials.
Speaker 4: I was looking at your notes and it was amazing
Speaker 4: because there's sort of this clarion call from all different
Speaker 4: financial advisors saying.
Speaker 5: Get out of your cash. Why are you in so
Speaker 5: much cash?
Speaker 4: Rotate out? You're going to miss out. But you talk
Speaker 4: about keeping a buffer. What's the buffer?
Speaker 1: It depends on what your goals are, right, Like, I
Speaker 1: work with clients across the wealth spectrum, and so you
Speaker 1: have to just have a plan. I think that's the
Speaker 1: biggest challenge. Has felt good, but the problem is I've
Speaker 1: seen balance is go twenty thirty percent plus of a portfolio.
Speaker 1: I think that's too much really, whoever you are, and
Speaker 1: so it comes down to what is my plan. If
Speaker 1: I'm trying to work towards a ten percent buffer, you
Speaker 1: probably have some wood to chob most people. I would
Speaker 1: also argue, you look at what the market's giving you.
Speaker 1: Volatility is still exceptionally low. So if you're really that
Speaker 1: scared about going into equities and risk assets. I would say,
Speaker 1: dip a toe in and then buy a little protection.
Speaker 1: You're earning a lot on your cash, spend a little
Speaker 1: bit of that to buy some pots or something like that,
Speaker 1: just to keep you invested.
Speaker 4: There is this issue that the winners have won a lot,
Speaker 4: the losers really haven't gone anywhere. You start looking at
Speaker 4: the winners. I think, for example, Japanese equities, do you
Speaker 4: pile on or do you sort of say, you know,
Speaker 4: there's more downside risk here just based on potential surprises
Speaker 4: in the Bank of Japan and elsewhere.
Speaker 5: You know.
Speaker 1: It's funny at the beginning of the year we did
Speaker 1: see some rotation out of Japan into areas that looked cheap,
Speaker 1: like China. I get that just as a tactical trade.
Speaker 1: But if you are heavily levered to the US from
Speaker 1: a risk asset standpoint, and Japan has been underinvested in
Speaker 1: for decades, I think it's okay to say and need
Speaker 1: to have a little bit of Japan as a longer
Speaker 1: term bet. Hard to make a call for one to
Speaker 1: two weeks or even a couple months, but I do
Speaker 1: think there's some reasons to own Japan again. Very cheap valuations.
Speaker 1: I think it's like twenty five percent of the topics
Speaker 1: is under one times book value, which seems kind of crazy.
Speaker 1: And then obviously you have policy shifts coming, reforms coming. Again,
Speaker 1: that doesn't happen overnight, but it's a reason to have
Speaker 1: some allocation.
Speaker 2: We've been trying to work out what happens to Japanese
Speaker 2: equities if you do get this move in the Japanese
Speaker 2: Yet certainly things have been pretty contained because we've had
Speaker 2: five days of again weakness going and gets to this decision.
Speaker 2: Dolly En is still in and around one fifty. But
Speaker 2: just a little bit of scenario analysis, what would happen
Speaker 2: if we went from one to fifty forty one thirty
Speaker 2: one twenty Where does that leave equacies?
Speaker 1: Yeah, that is clearly a more challenging backdrop, and I
Speaker 1: think that's the risk, and so some of our clients
Speaker 1: have been doing this trying to hedge out the currency
Speaker 1: exposure really have been added to Japan. That's a little bit
Speaker 1: more complicated, but again I think that's why the Japan
Speaker 1: call can't be a one month or two month trade.
Speaker 1: You have to say I want to have an allocation
Speaker 1: intermediate to longer term to something outside of the US,
Speaker 1: and I think Japan does look relatively more interesting than see.
Speaker 5: You're right now, there's.
Speaker 4: This question right now, just taking a step back, whether
Speaker 4: there's a shift going on under the surface. We saw
Speaker 4: it last week with commodity stocks outperforming dramatically, and it
Speaker 4: makes me wonder whether we are on the precipice of
Speaker 4: a reinflating of goods and whether you see that from
Speaker 4: the increase in activity not only Japan, but also to
Speaker 4: some degree on the march is China and around the
Speaker 4: rest of the world.
Speaker 5: Do you lean into that or do.
Speaker 4: You see that as something that has a sort of
Speaker 4: self limiting aspect to it.
Speaker 1: We do think, I mean our outlook for presable brent.
Speaker 1: We do think you can see brents like mid eighties
Speaker 1: to low nineties. So that does suggest a bit higher
Speaker 1: from here that probably is supportive for energy equities. I
Speaker 1: would remind you energy equities underperformed last year. That was
Speaker 1: the one sector that did not do well, and so
Speaker 1: I think you could see some rebalancing some addition back there.
Speaker 1: There's always this struggle to people who want to get
Speaker 1: on board with the ev revolution, but then you realize
Speaker 1: we still need oil in the near to intermediate term,
Speaker 1: and so I think that makes sense to have some
Speaker 1: allocation there, especially as we figure out what that transition
Speaker 1: looks like. But I'm not overly worried that we're going
Speaker 1: to see oil north of a hunt barring some big
Speaker 1: geopolitical shock, and so I think that from an inflationary standpoint,
Speaker 1: is a little bit less of a risk.
Speaker 4: To wrap it all up, I am wanting to know
Speaker 4: what your take is on Ben Ladler's points that he
Speaker 4: made earlier this morning. He kind of kicked off the
Speaker 4: show at the same where he thinks that in Vidia's
Speaker 4: conference Developer conference is going to be more important than
Speaker 4: Ja Powell's speech. Do you think that that's true, especially
Speaker 4: because in some ways the FED can't tell us all
Speaker 4: that much because they don't really have a crystal ball.
Speaker 1: I think it's probably true for equities this week. If
Speaker 1: something cataclysmically negative were to happen today, you would see
Speaker 1: some rotation out of some of these names that have
Speaker 1: been so heavily owned. That said, I actually think the
Speaker 1: tone is probably going to be pretty positive, and you're
Speaker 1: going to hopefully hear some commentary about how this is
Speaker 1: not just an Nvidia story. It's a broad story for
Speaker 1: the market, for the S and P for companies that
Speaker 1: will become more efficient. I know as a JP Morgan
Speaker 1: we're using AI everywhere. It's a huge part of all
Speaker 1: of our conversations and how we can become better advisors,
Speaker 1: more efficient, quicker, faster. Doesn't mean we're not hiring. It
Speaker 1: just means hopefully I'll get better at my job and
Speaker 1: I can do more.
Speaker 2: I think it ends capitalized, not today, no.
Speaker 1: Tomorrow, longer term than it's a different question, but we'll
Speaker 1: still be here next week.
Speaker 2: Want I have it's going to see it. I want
Speaker 2: to cut a sense of JP morcom Private Bank, former
Speaker 2: fed aclumist Cladia Sal'm a good friend of this program
Speaker 2: over the years. Joined just now for more, Claudia, I
Speaker 2: want to put a catch up with you. As you've said,
Speaker 2: maybe a challenge for chairman power this week is to
Speaker 2: make sure that everyone stays around the three implied in
Speaker 2: the Median dog. Can we just start with the dots themselves?
Speaker 2: Because I know you have thoughts on this. When can
Speaker 2: we and how can we get away from this?
Speaker 5: It's hopeless at this point. I mean, everyone wants some
Speaker 5: scrap of certainty and they look at the FED and
Speaker 5: have a very misguided belief that the Fed is going
Speaker 5: to give that to us. The FED would really like
Speaker 5: a scrap of certainty about what they're going to do
Speaker 5: later this year. My hope for this meeting. It is
Speaker 5: the most boring meeting ever. And you have traders to
Speaker 5: sleep at their desk, like, we know they're not going
Speaker 5: to cut this week, and we better not see anything
Speaker 5: material change on that summary of economic projections, in particular
Speaker 5: the are we looking at likely three cuts or two cuts?
Speaker 5: Jay is absolutely my reading of what he has said,
Speaker 5: he is a let's cut in June. He's got to
Speaker 5: keep it together. If those dots move towards July, which
Speaker 5: I actually think that's not likely, or the longer run
Speaker 5: estimate of where the rate should be the infamous r star,
Speaker 5: either of those two could get people and see and
Speaker 5: push the expectations to July in the markets.
Speaker 4: I am a longstanding hater of the dot plot. I
Speaker 4: love the way you write. Thank you for that, Claudia.
Speaker 4: I am curious whether you think it's a liability though,
Speaker 4: that the Federal Reserve isn't operating with some sort of
Speaker 4: overarching thesis of where the economy is right now post pandemic,
Speaker 4: about whether it is sort of a hotter and higher
Speaker 4: inflation regime or if it is going to revert back
Speaker 4: to something more of what we were customed to pre pandemic.
Speaker 5: My expectations of what the Fed is on track to
Speaker 5: do did not change. Last week. We did we had
Speaker 5: the second disappointing read on inflation. We also had this
Speaker 5: second disappointing read on retail sales. And Pale has talked
Speaker 5: about multiple times that the risk to the two sides
Speaker 5: of the mandate, the stable prices and the maximum employment,
Speaker 5: those risks are coming into balance, and we saw that
Speaker 5: last week, right, that nailed the balance of Yeah, inflation
Speaker 5: has been not so good, and really January clearly from
Speaker 5: the February looks pretty fluky with owner's equivalent rent coming
Speaker 5: back down and those retail sales those are not good numbers.
Speaker 5: I mean, I did consumer spending at the FED. Those
Speaker 5: are not good numbers. So that should maintain the quote
Speaker 5: unquote coming into balance.
Speaker 4: Well, can you elaborate a little bit on why those
Speaker 4: are not good numbers and why that's important Because we
Speaker 4: were hearing earlier this morning from Lindsay Piagsa that they
Speaker 4: weren't that bad and that you're seeing a deceleration, but
Speaker 4: overall there still is quite a bit of spending and
Speaker 4: you can tell that balance seats aren't terrible.
Speaker 1: Why are they terrible?
Speaker 5: So in terms of the retail sales, I mean these
Speaker 5: were the clients, right, like, these aren't good numbers. And yes,
Speaker 5: a acceleration was what we were looking for, but we
Speaker 5: know and the flip side is the acceleration worries on inflation.
Speaker 5: We know, once things get going, it's kind of like
Speaker 5: the snowball. Right, this is a big economy. It takes
Speaker 5: some work to get it going, and then you can
Speaker 5: end up with like a really big snowball that's like
Speaker 5: crushing us and bringing down the economy. So once you
Speaker 5: start going in a direction, there is a danger that
Speaker 5: you build up speed in that direction for the economy.
Speaker 5: For the spending side, that would be a contraction in spending.
Speaker 5: That's a recession if we get there. And on the
Speaker 5: inflation side, if that not just sticks but kind of
Speaker 5: gets you know, going, that's that's a big problem too. Right,
Speaker 5: So they have the potential for two big problems, which
Speaker 5: speaks to don't do anything. Just let us.
Speaker 2: See Claudia, I'd love you though, is just to wrap
Speaker 2: things up on inflation as well. We had a hot
Speaker 2: CPI print relative to expectations likewise on PPI, where the
Speaker 2: components of that that gave you encouragement, maybe even made
Speaker 2: you uncomfortable about the path I've head had. What were
Speaker 2: you focused on?
Speaker 5: Well, first the encouragement. We did see the owner's equivalent rent,
Speaker 5: which had come in really hot and inexplicable in January,
Speaker 5: that did cool back off. So that tells us a
Speaker 5: lot that that piece, which was very important in CPI
Speaker 5: and important in PCE, that was something Pluchy in all likelihood.
Speaker 5: Now the discouraging part is what we've gotten into in
Speaker 5: the core services outside of shelter, the supercore. The stickiest
Speaker 5: part in there is motor vehicle insurance and the homeowners
Speaker 5: insurance is in there too. That is not about the
Speaker 5: FED the motor vehicle that is a knock on effect
Speaker 5: of the used car prices. The car prices were high,
Speaker 5: they're making up for repair costs. There's really hot relief
Speaker 5: on the horizon for that piece until later in the year.
Speaker 5: That's an unfortunate part of inflation for us US to
Speaker 5: latch onto the FED to wait on, and yet it's
Speaker 5: in there. I mean, it is making a contribution, and
Speaker 5: it is outsized from before the pandemic, and it ain't
Speaker 5: going away, probably for a little while.
Speaker 2: You know, the enner workings of the feder reserve better
Speaker 2: than mouse quadia. How do you think they would deal
Speaker 2: with that around the table this week? And how do
Speaker 2: you think cham and Powell will address the topic in
Speaker 2: the news conference.
Speaker 5: I go on the news conference to get Marcus to
Speaker 5: kind of stay where they are, and we're this rare
Speaker 5: moment that the FED is kind of lined up with markets,
Speaker 5: you know, this June cut and probably where Jay Powell is.
Speaker 5: So I think it's reinforcing you have a balance of risk.
Speaker 5: If we don't see retail sales mentioned in the statement,
Speaker 5: then that's a sign they have gotten more hawkish. You know,
Speaker 5: there are all these details under the hood, like motor
Speaker 5: vehicle insurance. Yeah, that's wonky, and yet it gives hawks.
Speaker 5: I mean, if you look at the top line, it
Speaker 5: gives them cover to push out to July. Frankly, I
Speaker 5: think they're going to win. July is my baseline. And
Speaker 5: so it's the messaging, you know. So, but the FED
Speaker 5: knows better, like they know what's under the hood. It's
Speaker 5: just a question of can they look past it or
Speaker 5: are they gonna get antci like sometimes they do.
Speaker 2: Interesting Claudia, you're one of the very best, and we
Speaker 2: always appreciate your time. Thanks for being with us. Cludia, Sam,
Speaker 2: there of sum consulting on the Federal Reserve. This is
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