WEBVTT - US Inflation Ebbs for First Time in Six Months in Relief for Fed 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.320 --> 0:00:29.880 All right, let's get back to today's economic news. We've 0:00:29.880 --> 0:00:32.519 been waiting for it all week long. A measure of 0:00:32.560 --> 0:00:34.800 underlying US inflation cooling in the month of April for 0:00:34.840 --> 0:00:37.280 the first time in six months. A small step in 0:00:37.320 --> 0:00:39.640 the right direction for Fed officials who are looking to 0:00:39.800 --> 0:00:42.519 start cutting interest rates this year, at least some of them, maybe. 0:00:42.880 --> 0:00:46.200 So called Core consumer Price Index ex Food and energy 0:00:46.200 --> 0:00:48.840 cost climbing three ten percent in the month of March, 0:00:48.840 --> 0:00:51.839 snapping a streak of three above forecast readings. That's a 0:00:51.880 --> 0:00:54.320 trend line, by the way, which spurred concern that inflation 0:00:54.440 --> 0:00:57.200 was becoming entrenched. The year over year measured tim cooling 0:00:57.200 --> 0:00:58.960 to the slowest pace in three years. 0:00:59.040 --> 0:01:01.960 Okay, not adjust THECPI data, but we also got the 0:01:01.960 --> 0:01:05.240 retail sales data stagnating in April after it downwardly revised 0:01:05.240 --> 0:01:08.039 gains in the prior two months. Indicating high borrowing costs 0:01:08.040 --> 0:01:12.400 and mounting debt are encouraging greater prudence among shoppers. All 0:01:12.440 --> 0:01:15.280 of it is seeing that, you know, equities higher, bond 0:01:15.360 --> 0:01:17.640 yields lower on the day today. So let's get to 0:01:17.680 --> 0:01:20.200 Molly Smith. Now, she's the Bloomberg News economics editor. She's 0:01:20.240 --> 0:01:24.119 here in the studio. So Molly Carol said, a trend 0:01:24.200 --> 0:01:27.160 is what we were seeing when it came to previous months reports. 0:01:27.680 --> 0:01:32.600 Does one Fed friendly report make a new trend, because 0:01:32.640 --> 0:01:34.400 it certainly seems like that's how the market's reacting. 0:01:34.520 --> 0:01:36.000 Yeah, and I think a lot of people tell you 0:01:36.040 --> 0:01:39.600 the market is overreacting in that perspective, and that one 0:01:39.680 --> 0:01:42.319 print absolutely does not make a trend, and that very 0:01:42.360 --> 0:01:46.560 much remains to be seen if inflation is sustainably retreating 0:01:46.720 --> 0:01:49.480 or resuming again that downward trend. And by the way, 0:01:49.520 --> 0:01:51.840 three tenths of a percent. Sure it's better than three 0:01:51.880 --> 0:01:55.080 straight months of zero four, but zero three on an 0:01:55.120 --> 0:01:58.280 annualized basis still well above the two percent goal. That's 0:01:58.320 --> 0:02:00.800 not what the Fed is looking for. Maybe you start 0:02:00.840 --> 0:02:02.360 to get a string of increasing. 0:02:02.200 --> 0:02:05.400 At three point four percent year over year, right headline. 0:02:05.280 --> 0:02:08.200 Yes, and the core at three point six that's the 0:02:08.200 --> 0:02:10.600 one that was the lowest in three years. So of course, yeah, 0:02:10.680 --> 0:02:13.600 you like to see that this direction is starting to 0:02:13.639 --> 0:02:16.760 happen again. But one month certainly doesn't indicate that it's 0:02:16.800 --> 0:02:18.000 going to happen again. 0:02:18.160 --> 0:02:21.160 The devil's in the details. We've been hearing everybody talk about, 0:02:21.200 --> 0:02:23.760 you know, high shelter costs and so on and so forth. 0:02:24.680 --> 0:02:27.000 We look at different things like energy, you know, the 0:02:27.080 --> 0:02:30.480 details within the report, anything significant there that maybe says, oh, 0:02:30.600 --> 0:02:32.680 maybe something different is happening. 0:02:32.360 --> 0:02:32.760 Well with it? 0:02:32.960 --> 0:02:36.119 Not? Yeah, I mean within shelter some promising signs there, 0:02:36.120 --> 0:02:39.000 and our upcoming guest, perhaps we'll have some things to 0:02:39.040 --> 0:02:39.720 say about. 0:02:39.520 --> 0:02:43.720 That, bringing him in maybe other thing? Can I do that? 0:02:44.000 --> 0:02:44.760 Joining us now? 0:02:45.639 --> 0:02:49.080 Joining us now is two fall Bloomberg Economics economists with 0:02:49.160 --> 0:02:51.440 us here in the Bloomberg Interactive Broker Studio ASTU. 0:02:52.040 --> 0:02:53.520 Do you want to talk about housing inflation? 0:02:53.720 --> 0:02:54.760 Sure, so we did see that. 0:02:54.960 --> 0:02:56.840 We did see rent step down a little bit too, 0:02:56.880 --> 0:02:59.760 that zero point three five percent month on month. Oh, 0:03:00.080 --> 0:03:02.200 are the owner's equivalent of RIND is still a bit stubborn, 0:03:02.240 --> 0:03:04.760 staying above zero point four percent on the month, Carol. 0:03:04.800 --> 0:03:06.720 If we're looking at some of the other items under 0:03:06.760 --> 0:03:09.000 the hood. I think that it's the lack of change 0:03:09.000 --> 0:03:11.320 that we actually see on the month that's the most interesting. 0:03:11.760 --> 0:03:17.000 Excluding autos, core goods prices are still rising. That's pretty atypical. 0:03:16.480 --> 0:03:18.040 Good shop and you feel it, You. 0:03:18.000 --> 0:03:20.160 Definitely feel it. And if you look at autos, you 0:03:20.240 --> 0:03:22.720 might have been surprised to see auto prices declining on 0:03:22.760 --> 0:03:25.320 a seasonally adjusted basis one point four percent. That's because 0:03:25.360 --> 0:03:27.280 of about two thirds of that decline is really the 0:03:27.280 --> 0:03:29.880 seasonal adjustment factor. It's not what you're seeing when you 0:03:29.960 --> 0:03:32.160 walk on the lot to buy a car. And then 0:03:32.200 --> 0:03:35.640 if you're looking at the prices of some discretionary services categories, 0:03:35.680 --> 0:03:40.000 things like recreational services, prices are still increasing, still increasing 0:03:40.000 --> 0:03:40.680 too fast. 0:03:40.440 --> 0:03:43.120 For the fed and also the non recreational services. I 0:03:43.120 --> 0:03:46.440 think the ones that you really can't avoid, like car 0:03:46.480 --> 0:03:49.560 insurance huge that's still rising at like the fastest annual 0:03:49.640 --> 0:03:50.720 rates since the seventies. 0:03:50.840 --> 0:03:52.680 That's not just that if you have a teenager in 0:03:52.720 --> 0:03:53.680 the house that it's expensive. 0:03:53.760 --> 0:03:56.040 It's expensive, right, Yeah, for the rest of us too, 0:03:56.560 --> 0:03:59.200 So car insurance a big one, medical care big one. 0:03:59.320 --> 0:04:01.120 I mean, these are things that you just can't avoid. 0:04:01.160 --> 0:04:03.160 But yeah, the recreation ones for sure, if you want 0:04:03.160 --> 0:04:03.640 to go out. 0:04:03.520 --> 0:04:04.119 And have some fun. 0:04:04.240 --> 0:04:05.800 The two of you are painting a picture for us 0:04:05.840 --> 0:04:08.360 that doesn't necessarily go in line with what we're seeing 0:04:08.360 --> 0:04:10.960 in the equity and the bond market today. And I'm wondering, Stuart, 0:04:11.000 --> 0:04:14.040 if you absolutely think that at least the equity market 0:04:14.040 --> 0:04:15.320 is overreacting. 0:04:15.720 --> 0:04:18.279 Perhaps a little bit. Perhaps it's the markets are looking 0:04:18.400 --> 0:04:22.600 at retail sales number that were pretty dismal. Just across 0:04:22.600 --> 0:04:25.200 the board, retail sales surprise to the downside, So that 0:04:25.279 --> 0:04:29.000 would warrant some expectation for perhaps a second FED rate 0:04:29.040 --> 0:04:31.919 cut this year. There was just one full cut price 0:04:31.960 --> 0:04:34.600 before this morning. Now we're seeing two full cut priced 0:04:35.480 --> 0:04:38.120 But yeah, across the board, retail sales are pretty dismal. 0:04:38.320 --> 0:04:42.040 If we were just to exclude gasoline prices, we would 0:04:42.040 --> 0:04:45.320 have had a negative headline print headline just held flat 0:04:45.360 --> 0:04:47.800 on a nominal basis. On a real basis, we're seeing 0:04:47.839 --> 0:04:48.960 declining retail sales. 0:04:49.080 --> 0:04:51.320 That's a bummer. We've talked about how important consumers are 0:04:51.400 --> 0:04:52.120 to the economy. 0:04:52.160 --> 0:04:55.680 Correct, Yeah, absolutely, And if we're kicking off Q two data, 0:04:56.080 --> 0:04:59.320 we are getting our first print, our first hint at 0:04:59.360 --> 0:05:01.400 what consumers spending is going to be for the second quarter. 0:05:01.600 --> 0:05:03.400 It's going to be a material slow down in real 0:05:03.480 --> 0:05:05.400 terms from the two and a half percent annual basis 0:05:05.400 --> 0:05:06.400 that we've printed in Q one. 0:05:06.560 --> 0:05:08.839 All Right, So got to bring an Ira Jersey because 0:05:08.839 --> 0:05:10.840 we are now talking about the markets and we want 0:05:10.839 --> 0:05:12.520 to get to the bond market and the rates curve. 0:05:12.839 --> 0:05:15.839 Ira Jersey, Chief US Interest Rates Strategies at Bloomberg Intelligence 0:05:15.880 --> 0:05:18.640 at BI headquarters out there in Princeton, New Jersey. I mean, 0:05:18.640 --> 0:05:20.880 I'm looking at a ten year at four thirty four, 0:05:21.680 --> 0:05:23.520 a two year note at four seventy three. I mean, 0:05:23.560 --> 0:05:27.080 we've seen a dramatic move down here. Ira, walk us 0:05:27.160 --> 0:05:29.159 through it and what it says to you and the 0:05:29.200 --> 0:05:30.520 significance of the moves. 0:05:31.000 --> 0:05:31.200 Yeah. 0:05:31.240 --> 0:05:33.719 So I think that the market had to reprice the 0:05:33.800 --> 0:05:36.520 idea that the Fed might not be cutting as aggressively 0:05:36.600 --> 0:05:39.720 as they thought earlier in the year, and the market, 0:05:39.920 --> 0:05:41.960 you know, the bond market tends to overshoot a little bit, right. 0:05:41.960 --> 0:05:44.840 You get a lot of positions positioning where cleeople are 0:05:44.880 --> 0:05:46.720 long they get out of those positions, there's not a 0:05:46.760 --> 0:05:49.360 lot of liquidity. Then people are fearing that you know, hey, 0:05:49.400 --> 0:05:51.440 maybe the FED might even hike this year, so they 0:05:51.480 --> 0:05:53.520 wind up maybe even getting. 0:05:53.240 --> 0:05:53.839 A little short. 0:05:53.839 --> 0:05:56.120 So I think we're trying to find an equilibrium here. 0:05:56.680 --> 0:05:59.000 Four to thirty five was a pretty important technical level. 0:05:59.120 --> 0:06:01.920 If we close the below that, then that could set 0:06:01.960 --> 0:06:04.400 us up for a little bit more of a little 0:06:04.400 --> 0:06:06.440 bit more of a rally here in the long end 0:06:06.440 --> 0:06:09.640 of the yield curve. But you know, I think probably 0:06:09.640 --> 0:06:11.440 low four, you know, call it four twenty five to 0:06:11.480 --> 0:06:14.480 four fifty might ultimately be a range that we stay 0:06:14.520 --> 0:06:16.680 in until we get more convincing data one way or 0:06:16.680 --> 0:06:18.479 the other that either the Fed's going to be on 0:06:18.520 --> 0:06:20.920 hold for the entire year and into twenty twenty five, 0:06:21.279 --> 0:06:24.719 or maybe they actually factually will cut And if we 0:06:24.760 --> 0:06:28.640 start to price that higher probability of those more cuts in, 0:06:28.920 --> 0:06:31.360 then obviously the market will rally a little bit more. 0:06:31.360 --> 0:06:33.600 Well, it's interesting, Eric, because we're seeing quite a reaction, 0:06:33.880 --> 0:06:36.240 as Carol has talked about, as you've just talked about it, 0:06:36.200 --> 0:06:39.200 and I'm wondering if this to you says that wait 0:06:39.240 --> 0:06:42.000 a second, the worst in terms of where we think 0:06:42.000 --> 0:06:44.720 that rates are going to go is actually behind us 0:06:44.720 --> 0:06:47.280 this year? Is that what the bond market's telling us. 0:06:47.680 --> 0:06:48.880 Well, I think there's two pieces too. 0:06:48.960 --> 0:06:50.640 I think one is that there were people who are 0:06:50.640 --> 0:06:53.560 fearful that the data would that the inflation data in 0:06:53.560 --> 0:06:56.080 particular would come out a little bit hotter than expected, 0:06:56.120 --> 0:06:58.800 so they came in short and shorts had built over 0:06:58.839 --> 0:07:00.920 a while, so I think part of this suggests positioning 0:07:00.960 --> 0:07:03.760 and like I said, a relief rally. And the retail 0:07:03.839 --> 0:07:07.479 sales numbers, as Stewart and you guys just mentioned, were 0:07:07.480 --> 0:07:11.000 not particularly good, although you know, if there's some oddities 0:07:11.000 --> 0:07:12.920 sometimes and when you have a good print like we 0:07:13.000 --> 0:07:14.920 had in March April can be a little bit weaker. 0:07:14.960 --> 0:07:17.400 So if you look at longer term averages that those 0:07:17.440 --> 0:07:19.600 that haven't changed a whole heck of a lot. But 0:07:19.640 --> 0:07:22.120 the market, I think was relieved that you didn't have 0:07:22.200 --> 0:07:25.440 stronger data, and because of that, there were people who 0:07:25.480 --> 0:07:28.400 are comfortable just getting long at four point four four 0:07:28.440 --> 0:07:30.520 and a half percent, depending on where in the curve 0:07:30.560 --> 0:07:34.040 you're talking about, and just holding that and thinking, okay, look, 0:07:34.080 --> 0:07:36.040 my risk reward seems to be decent. 0:07:36.120 --> 0:07:36.360 Now. 0:07:36.680 --> 0:07:38.720 Being short is hard now, too, right, Because if you're 0:07:38.760 --> 0:07:42.000 short the market, your carry, so the amount that you 0:07:42.040 --> 0:07:44.960 have to pay to be short continues to go up 0:07:45.720 --> 0:07:48.320 a little bit and because of that, it's just hard 0:07:48.320 --> 0:07:49.240 to stay short. 0:07:49.000 --> 0:07:50.080 For a long period of time. 0:07:50.200 --> 0:07:53.360 So one reason why you know, people just get out 0:07:53.400 --> 0:07:56.640 of these things is is because tail risks are going away. 0:07:56.880 --> 0:07:57.080 Right. 0:07:57.680 --> 0:08:00.160 Interesting though, if I look at retail sales, I mean, 0:08:00.200 --> 0:08:03.360 we did see revisions for the prior month, for the 0:08:03.360 --> 0:08:05.160 month of March. But you do make a good point, Ira, 0:08:05.240 --> 0:08:08.080 and let me bring in you guys, Molly and Stewart, 0:08:08.280 --> 0:08:10.400 in terms of we did have a strong month the 0:08:10.440 --> 0:08:13.560 month before, and so we saw it's a very different 0:08:13.600 --> 0:08:16.920 story this month. Is there something you know to what 0:08:17.040 --> 0:08:18.680 IRA's saying that when you have a strong month, you 0:08:18.720 --> 0:08:20.080 see some weakness the following month. 0:08:20.320 --> 0:08:22.440 There typically is some of a there's a little bit 0:08:22.440 --> 0:08:24.680 of a gift back. IRA's right there. The thing that 0:08:24.720 --> 0:08:26.400 I like to think about under the hood, though, especially 0:08:26.400 --> 0:08:28.960 when we're looking at retail sales, all the figures are nominal. 0:08:29.040 --> 0:08:30.920 So even in the pockets of strength that we did 0:08:30.960 --> 0:08:34.720 see in this report, something like clothing, which which spending 0:08:34.720 --> 0:08:37.920 on clothing rose about one and a half percent, prices 0:08:37.960 --> 0:08:40.880 were also rising in clothing right about one point two 0:08:40.920 --> 0:08:44.480 percent on the month. So IRA's right, when you do 0:08:44.559 --> 0:08:46.640 look at trends, it's not as bad as a single 0:08:46.679 --> 0:08:49.000 month may make. It seem there's a little bit of 0:08:49.080 --> 0:08:51.520 give back this month, but under the hood, it's just 0:08:51.600 --> 0:08:54.440 not a very good report. And when we are kicking 0:08:54.480 --> 0:08:56.600 off the second quarter, I think it's important to mark 0:08:56.640 --> 0:08:59.640 the change that the change in momentum, or at least 0:08:59.640 --> 0:09:00.800 the waning momenta. 0:09:00.880 --> 0:09:02.600 Well, it does feel right it just like you look 0:09:02.600 --> 0:09:05.160 at the numbers. The contrast Molley is pretty pretty strong. 0:09:05.320 --> 0:09:07.600 Yeah, I mean that point on clothing that just made 0:09:07.679 --> 0:09:08.240 us a good one. 0:09:08.600 --> 0:09:10.679 Like the whole point of like when we're saying that 0:09:10.880 --> 0:09:13.920 these sales are nominal versus inflation adjusted, is that you 0:09:13.960 --> 0:09:16.800 can't tell that a percent increase in a category like 0:09:16.840 --> 0:09:19.840 apparel is due to higher prices or due to actual 0:09:19.920 --> 0:09:21.040 more spending activity. 0:09:21.160 --> 0:09:23.480 So that's what makes this difficult to interpret. 0:09:23.480 --> 0:09:26.480 But when there is a period like this where clothing 0:09:26.520 --> 0:09:28.880 prices did rise in the month, of course makes you 0:09:28.920 --> 0:09:31.280 think that, like maybe it is more price driven than 0:09:31.440 --> 0:09:34.000 spending driven. So that's the thing about retail sales that 0:09:34.240 --> 0:09:36.560 it's difficult to parse through this report and make like 0:09:36.600 --> 0:09:40.120 strong conclusions about what's actually happening. But we do know 0:09:40.160 --> 0:09:42.440 that household debt reached a record high in the first 0:09:42.480 --> 0:09:45.080 quarter of this year. We do know that consumer credit 0:09:45.120 --> 0:09:48.880 has generally been weakening, that delinquencies are still pretty low 0:09:48.920 --> 0:09:52.200 but are rising, so maybe says a little bit more 0:09:52.240 --> 0:09:54.360 discretion among consumers in that sense. 0:09:55.240 --> 0:09:56.560 I was gonna say, Carol, you and I were having 0:09:56.600 --> 0:09:58.160 a chat a little earlier as we were preparing for 0:09:58.160 --> 0:10:03.600 the program about CPI versus PCE and the idea that Okay, 0:10:03.800 --> 0:10:05.720 come on, guys, I thought this cares. 0:10:05.760 --> 0:10:07.240 I thought, I don't care, car. 0:10:07.600 --> 0:10:10.800 No, he cares CPI I thought. I thought PCE was 0:10:10.840 --> 0:10:14.320 the preferred method of the preferred measure of inflation for 0:10:14.360 --> 0:10:14.720 the FED. 0:10:14.920 --> 0:10:17.040 It is, but it doesn't come out for another two weeks. 0:10:17.080 --> 0:10:17.480 It doesn't. 0:10:17.480 --> 0:10:20.199 But we put so much stock in this until until 0:10:20.240 --> 0:10:20.800 that comes. 0:10:20.640 --> 0:10:23.360 Out because it is the single biggest market moving event 0:10:23.480 --> 0:10:25.840 of the month, and I think that's I mean, that's 0:10:25.840 --> 0:10:27.840 going to probably remain that way for some time. 0:10:27.880 --> 0:10:29.640 I mean, remember this, before you. 0:10:29.600 --> 0:10:31.960 Know, inflation really got to where it was. In twenty 0:10:32.000 --> 0:10:34.600 twenty two, the biggest market moving event of the month 0:10:34.679 --> 0:10:37.240 was the job's report, and that is very much shifted 0:10:37.280 --> 0:10:37.840 to the CPI. 0:10:38.000 --> 0:10:39.800 Well, it makes me think about IRA. Come on back 0:10:39.800 --> 0:10:41.400 in here, and we always talk about you about the 0:10:41.480 --> 0:10:43.480 kind of focal points for the market and certainly for 0:10:43.720 --> 0:10:46.720 treasury traders and watching what goes on with rates. I mean, 0:10:46.760 --> 0:10:48.719 you've got what a job's market, a job's report in 0:10:48.720 --> 0:10:51.360 a couple of weeks or so. I'm thinking about the 0:10:51.400 --> 0:10:54.320 next FED meeting June twelfth, not so far off, about 0:10:54.320 --> 0:10:55.800 a month a little bit less than a month away, 0:10:55.800 --> 0:10:57.400 and I believe we get do we get a CPI 0:10:57.520 --> 0:10:59.240 print also on that. 0:10:59.120 --> 0:11:01.959 FED days get updated projections. 0:11:01.400 --> 0:11:05.680 And updated So so as you watch the rates curve, 0:11:05.800 --> 0:11:07.600 is it just pretty quiet until we just kind of 0:11:07.840 --> 0:11:09.720 trade around those key metrics again? 0:11:10.400 --> 0:11:12.880 Oh no, I think that we'll have more volatility at 0:11:12.920 --> 0:11:15.360 just about every data print that comes up, particularly the 0:11:15.360 --> 0:11:18.360 inflation one. So actually for the rates market, Uh, the 0:11:18.679 --> 0:11:21.520 the payrolls report is still the granddaddy of all economic 0:11:21.600 --> 0:11:22.160 data where. 0:11:22.040 --> 0:11:23.240 You see rates move. 0:11:23.559 --> 0:11:26.440 Today's move wasn't because of CPI, right, Like it's pretty 0:11:26.440 --> 0:11:30.080 clear because the miss on CPI was minute, So it 0:11:30.120 --> 0:11:33.000 was actually something else that moved the market today. But 0:11:33.040 --> 0:11:35.880 CPI is obviously really important. So will the GDP report 0:11:35.880 --> 0:11:38.200 in a couple of weeks, and so will you know 0:11:38.200 --> 0:11:41.120 the revision to that as well? As obviously the April UH, 0:11:41.200 --> 0:11:44.600 the April income and spending and therefore the inflation report. 0:11:44.640 --> 0:11:48.120 All of those things are going to matter the the trends, 0:11:48.160 --> 0:11:49.920 and if there is a shift in trend, you'll wind 0:11:50.000 --> 0:11:53.080 up seeing that in things like the personal the personal 0:11:53.080 --> 0:11:55.600 spending report, because that's a broader report than the retail 0:11:55.640 --> 0:11:57.800 sales report. Right, and you know Stewart can talk more 0:11:57.800 --> 0:12:00.520 about this, but but from a long term trend perspective, 0:12:00.559 --> 0:12:02.400 like the market tends to focus on these very high 0:12:02.400 --> 0:12:05.400 frequency data, but when you look at the longer term 0:12:05.440 --> 0:12:07.800 trends and look for turns, you have to take the whole, 0:12:08.080 --> 0:12:10.480 you know, the entire story, and the build a whole 0:12:10.480 --> 0:12:13.920 mosaic around all of the incoming information that that's coming 0:12:13.960 --> 0:12:15.200 in and see if things. 0:12:15.080 --> 0:12:15.760 Are going to shift. 0:12:15.800 --> 0:12:19.000 And the bond market tends to do that exceptionally quickly 0:12:19.040 --> 0:12:20.440 and a lot of times incorrectly. 0:12:20.559 --> 0:12:20.719 Right. 0:12:20.760 --> 0:12:23.880 It focuses on one thing that ultimately turns out to. 0:12:23.880 --> 0:12:24.880 Be a false indicator. 0:12:24.920 --> 0:12:27.840 And we used to move a lot on ISM reports, 0:12:27.880 --> 0:12:31.200 and ISM has been wrong basically for the last six months. 0:12:31.760 --> 0:12:33.800 So the market's now ignoring a lot of the survey 0:12:33.880 --> 0:12:36.439 data and using the hard data like the retail sales 0:12:36.520 --> 0:12:39.600 like CPI, like the growth GDP report. Those are the 0:12:39.600 --> 0:12:42.480 things that the market's focused on now, not ism, not 0:12:42.600 --> 0:12:44.240 consumer confidence, and none of that stuff. 0:12:44.320 --> 0:12:47.560 Hey start come on in. I would certainly name checked 0:12:47.559 --> 0:12:49.240 you there, and I want to know what goes into 0:12:49.280 --> 0:12:51.920 building your mosaic when you're thinking about the data that 0:12:51.960 --> 0:12:53.200 we're getting in the coming winks. 0:12:53.520 --> 0:12:56.320 So just broadly, if we just look at a broad 0:12:56.320 --> 0:12:57.720 spot of data and we look at some of the 0:12:57.720 --> 0:13:00.760 surprises that we've seen, prices have been surprised to the upside, 0:13:00.840 --> 0:13:03.559 excluding what we saw in headline CPI today again out 0:13:03.559 --> 0:13:06.120 of the hood, though still a lot of persistent inflation 0:13:06.200 --> 0:13:09.560 going on. Indicators of growth is a bit more mixed, 0:13:09.840 --> 0:13:13.840 But generally speaking, it's just too strong of an economic 0:13:13.920 --> 0:13:18.760 environment to encourage retailers to encourage folks to start cutting 0:13:18.840 --> 0:13:21.400 prices to get the deflation the disinflation that we would 0:13:21.440 --> 0:13:23.679 need for the FED to then get to its point 0:13:23.679 --> 0:13:26.920 that it would be comfortable pivoting with policy rates. And 0:13:26.960 --> 0:13:31.840 if that's the case, again, one downside surprise in the 0:13:31.880 --> 0:13:34.360 headline CPI is not going to do it. The headline. 0:13:34.720 --> 0:13:38.040 So to IRA's point, a lot of these high frequency 0:13:38.120 --> 0:13:41.800 data will matter for markets, but and it will matter 0:13:41.880 --> 0:13:44.840 for even getting the timing of the first FED rate cut, right. 0:13:45.520 --> 0:13:47.920 Is it possible that we get something in July. Maybe, 0:13:47.960 --> 0:13:50.760 But in terms of determining the economic landscape and the 0:13:50.760 --> 0:13:53.200 trajectory over the next year, it's not going to matter 0:13:53.280 --> 0:13:55.560 much of its July or September, or even if they 0:13:55.640 --> 0:13:59.160 just get one off in December, which I think, frankly 0:13:59.240 --> 0:14:00.800 is an increasingly likely case. 0:14:00.679 --> 0:14:03.080 Real quickly. Ira twenty second. So in terms of a 0:14:03.160 --> 0:14:06.120 ten year I mean, do we will take five percent 0:14:06.240 --> 0:14:08.360 off the table at this point or five and a quarter? 0:14:08.440 --> 0:14:10.320 I mean, it's just amazing the swings that we've seen 0:14:10.320 --> 0:14:10.720 this year. 0:14:11.280 --> 0:14:13.520 Yeah, I think that we've seen the cycle high in 0:14:13.600 --> 0:14:16.000 terms of the ten year yield. That doesn't mean we 0:14:16.000 --> 0:14:18.319 can't go back to four seventy four seventy five if we, 0:14:18.640 --> 0:14:21.080 you know, do price out like like Stuart just said, 0:14:21.120 --> 0:14:23.680 another cut this year or maybe another cut next year, 0:14:23.680 --> 0:14:26.040 but the market's still going to think they're going to 0:14:26.120 --> 0:14:26.760 cut at some point. 0:14:26.800 --> 0:14:28.840 So therefore, you know, rates don't have to go out 0:14:28.920 --> 0:14:29.720 much higher. 0:14:29.960 --> 0:14:33.600 Not not if just when we're still data dependent. Molly 0:14:33.640 --> 0:14:35.000 really quick all day, all. 0:14:34.960 --> 0:14:36.720 Day, and I just want to say one thing. 0:14:36.760 --> 0:14:39.200 I just wanted to point out downside surprise on the 0:14:39.200 --> 0:14:43.120 headline CPI. Everything else came in as expected, so so 0:14:43.240 --> 0:14:45.920 IRA's point of this being a relief rally, the things 0:14:45.920 --> 0:14:47.520 were just in line and not worse. 0:14:47.760 --> 0:14:50.960 Molly Smith, Stuart, Paul, Ira, Jersey. That's our Bloomberg team, 0:14:51.080 --> 0:14:52.480 the amazing trifectop. 0:14:54.360 --> 0:14:57.880 You're listening to the Bloomberg Business Week podcast. Catch us 0:14:57.920 --> 0:15:01.160 live weekday afternoons from two to five BM Eastern. Listen 0:15:01.200 --> 0:15:03.360 on Apple car Play and and Broud Auto with a 0:15:03.360 --> 0:15:07.600 Bloomberg Business app, or watch us live on YouTube. 0:15:08.840 --> 0:15:11.760 Jack Morgan out the list of alt investments to keep 0:15:11.800 --> 0:15:15.480 an eye on the firm, high highlighting private equity, private credit, 0:15:15.880 --> 0:15:20.240 real estate, infrastructure, also secondaries. Sounds like certainly a lot 0:15:20.280 --> 0:15:21.720 of the topics that we talked about at Milk and 0:15:21.760 --> 0:15:22.320 that's for sure. 0:15:22.560 --> 0:15:22.760 Yeah. 0:15:22.760 --> 0:15:25.000 Well, our next guest is the head of Alt Investment 0:15:25.080 --> 0:15:28.320 over at Mercer Alternatives. Joining us is Raylan Lambert, Global 0:15:28.360 --> 0:15:31.600 Alternatives Leader at Mercer Alternatives. It's the all investment arm 0:15:31.640 --> 0:15:34.000 of the consulting firm Mercer. It's got one hundred and 0:15:34.040 --> 0:15:37.680 sixty billion dollars in assets under management overall and twenty 0:15:37.680 --> 0:15:40.960 five billion dollars when it comes to the alternatives space. 0:15:41.160 --> 0:15:44.640 She joins us from Rancho Cordova, California. Realan good to 0:15:44.680 --> 0:15:48.120 have you on the program this afternoon. So I'm curious 0:15:48.120 --> 0:15:50.440 about what you're seeing in terms of demand right now, because, 0:15:50.440 --> 0:15:53.240 as Carol mentioned, I mean last week at Milk and 0:15:54.200 --> 0:15:57.760 pretty much all about alternatives and AI. I guess we 0:15:57.760 --> 0:15:58.720 could throw in there at this. 0:15:58.720 --> 0:15:59.760 Point out of private credit. 0:15:59.800 --> 0:16:01.640 But what are you seeing in terms of demand right 0:16:01.680 --> 0:16:03.600 now and in terms of what what investors want to 0:16:03.640 --> 0:16:07.080 see as an overall portion of their portfolio dedicated to alternatives. 0:16:08.360 --> 0:16:12.640 Well, sure, thank you. You know, given that we have 0:16:12.840 --> 0:16:15.760 the tools in our toolkit to help clients implement their 0:16:15.800 --> 0:16:19.800 total portfolios. As you indicated, alternatives is certainly a growing 0:16:19.840 --> 0:16:24.040 component of that. When you think about where portfolios are 0:16:24.080 --> 0:16:28.840 today versus the sixty forty allocation just a few years ago. 0:16:29.360 --> 0:16:32.040 The reality is, I think investors are realizing if you're 0:16:32.120 --> 0:16:36.920 not investing in private markets, you are missing a huge 0:16:37.040 --> 0:16:40.680 component of the investable universe. And so you mentioned private 0:16:40.720 --> 0:16:43.840 credit that has continued to be a high growth area 0:16:43.920 --> 0:16:47.760 for US, particularly amongst our European investors and others that 0:16:47.800 --> 0:16:51.920 are looking for you know, current income and yield Infrastructure 0:16:51.920 --> 0:16:55.680 group and long standing investors in infrastructure, and so certainly 0:16:55.680 --> 0:17:04.160 as the energy transition continues, energy security, those themes certainly 0:17:04.200 --> 0:17:08.600 carry through. And of course private equity is certainly a 0:17:08.640 --> 0:17:11.639 hallmark of what clients seek our help from both an 0:17:11.680 --> 0:17:15.480 advice and implementation standpoint, and so that is an area 0:17:15.560 --> 0:17:18.560 that we continue to focus and certainly happy to touch on. 0:17:18.640 --> 0:17:19.160 AI. 0:17:19.600 --> 0:17:21.280 Yeah, well, and I do want to touch on it, 0:17:21.320 --> 0:17:24.000 But first I want to ask you Raylan, private equity 0:17:24.040 --> 0:17:28.040 different from private credit, different from real estate, different from infrastructure, right, 0:17:28.320 --> 0:17:31.080 So I do. I'm curious. You know, we're the fundamentals 0:17:31.240 --> 0:17:34.719 and the environment's best idea, if you will, in the 0:17:34.760 --> 0:17:36.439 alt space, alt investing space. 0:17:37.720 --> 0:17:39.760