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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 2: Stops pulling back following the biggest one day rally since May.
Speaker 2: Cameron Dawson of neweged Wealth, writing, for now, we see
Speaker 2: recent market volatility as a positioning evaluation recalibration, not a
Speaker 2: growth scare. Cameron joins us now for more camera. Good morning.
Speaker 2: It did not feel like a positioning recalibration through much
Speaker 2: of last week. All that volatility, and we were down
Speaker 2: just zero zero point one percent on the SMP. What
Speaker 2: was last week?
Speaker 3: Well, at the beginning of every bout of market volatility,
Speaker 3: we always ask ourselves, did anything happen that would cause
Speaker 3: EPs or GDP estimates to get revised lower. If the
Speaker 3: answer is no, it shortens shallow. If the answer is yes,
Speaker 3: it's typically deeper and more protracted. And so as we
Speaker 3: looked at the outlook over the course of last week,
Speaker 3: we thought that the answer to that growth question was no.
Speaker 3: And the way that we got to that is looking
Speaker 3: at something like highield spreads not blowing out. Highild spreads
Speaker 3: are at three hundred and forty eight basis points.
Speaker 4: This is not a bond.
Speaker 3: Market that is freaking out about growth. You also look
Speaker 3: at market leadership. You've had really strong leadership out of industrials, energy, materials, financials,
Speaker 3: all areas of the market that would not be rallying
Speaker 3: if we were really concerned about growth. So the net
Speaker 3: of everything is that it seems to be more about positioning, valuation,
Speaker 3: and sentiment recalibration, not a deeper growth scare Well's.
Speaker 2: Stay on valuation. Could it have a damping of FANCTOM
Speaker 2: valuations through the year ahead.
Speaker 3: Yeah, I think that that is probably the biggest risk.
Speaker 3: If we all sit back and think about all the
Speaker 3: justifications as to why the US equity market should trade
Speaker 3: it twenty two times forward or thirty eight times on
Speaker 3: the cape ratio.
Speaker 4: The argument went that because.
Speaker 3: The components of the S and P five hundred are
Speaker 3: that much more quality than they used to be, because
Speaker 3: of the higher weighting in tech, you have things like
Speaker 3: higher free cash flow margins, higher return on invested capital.
Speaker 4: But if we're starting to ding.
Speaker 3: The outlook for free cash flow margins for the big
Speaker 3: hyper scalers, lower potentially return on invested capital for the
Speaker 3: software names, given AI uncertainty, it raises the question of
Speaker 3: is that justification forever higher valuations something that we should
Speaker 3: push back on.
Speaker 5: Well, and this is the reason why, and we'll get
Speaker 5: to the fundamentals in just a minute. People are saying
Speaker 5: it feels more than just a violent shift in positioning
Speaker 5: that can really revert back. There has been a change
Speaker 5: in the way people view tech companies, how cash rich
Speaker 5: they are, how much they can keep giving dividends, and
Speaker 5: how much they can keep doing share bad buybacks, which
Speaker 5: have been a huge tailwind to this stock market. At
Speaker 5: what point do you see the technicals really turning against
Speaker 5: the US equity market?
Speaker 3: Yeah, I think think it's first important to note that
Speaker 3: at the peak of the growth trade back in November
Speaker 3: of last year, you had max positioning and megacap growth
Speaker 3: and max underweight positioning and cyclical so there has been
Speaker 3: a big, huge positioning recalibration. I think your questions are
Speaker 3: really important because the whole notion is that these are
Speaker 3: very capital late businesses that don't need a lot of
Speaker 3: incremental investment. And if you look at that over the past,
Speaker 3: what you saw is that all of these companies are
Speaker 3: able to grow earnings by double digits without having to
Speaker 3: spend any money.
Speaker 4: That was incredible.
Speaker 3: But now they're growing earnings by double digits, but they're
Speaker 3: having to spend hundreds of billions of dollars to.
Speaker 4: Do so well.
Speaker 5: This raises the issue of the fundamentals, right, And we've
Speaker 5: seen this broadening out trade and you think that it
Speaker 5: might might have legs.
Speaker 4: We see the equal Weight reaching all time.
Speaker 5: Highs even amid the carnage that we're seeing in the
Speaker 5: SaaS coppolps.
Speaker 4: I think I said that correctly.
Speaker 5: Going forward, how much is that broadening out and frankly,
Speaker 5: the entire index going high or crimped by the story
Speaker 5: that's taking place with a fundamental shift in the way
Speaker 5: that tech companies are being valued in front are performing
Speaker 5: and existing in this world.
Speaker 4: Yeah, I think It's.
Speaker 3: Such a fascinating point because if you think about the
Speaker 3: driver of all of this growth within tech spending, which
Speaker 3: is also leading into growth within value sectors, how much
Speaker 3: of this is dependent on some of these software names
Speaker 3: continuing to make investments that would be demand of AI.
Speaker 4: So I think some of this is all just a
Speaker 4: circular reference.
Speaker 3: If we start questioning the KAPEX growth going forward, does
Speaker 3: that also question some of these value rallies that we
Speaker 3: have seen lead the market since November?
Speaker 6: You also talk about how these software companies are the
Speaker 6: ones that are going to be the ones to lead
Speaker 6: when it comes to AI and are the ones that
Speaker 6: have the most to gain. So would this be a
Speaker 6: moment to step in and get.
Speaker 4: Some of those stocks after the accompli.
Speaker 3: Of potentially the most to gain, they have the most
Speaker 3: to lose. But I think if applied properly, they actually
Speaker 3: have a lot to gain given the fact that they
Speaker 3: typically have high headcount, they typically have very strong customer relationships.
Speaker 3: But if they don't move quickly on AI, then they
Speaker 3: have a lot to lose. I think it's important with
Speaker 3: the software names to take a step back and think
Speaker 3: about the technicals because they are very, very oversold. If
Speaker 3: you look at them on a daily, they're oversold. On
Speaker 3: a weekly they're oversold. If you look at them, they're
Speaker 3: now trading at the two hundred week moving average that
Speaker 3: would support back in twenty twenty five, back in twenty
Speaker 3: twenty two, So that would suggest that you have some
Speaker 3: kind of bounce. I think the big question is can
Speaker 3: software regain its leadership coming out of this bounce. I
Speaker 3: think that's a lot more in question, just simply because
Speaker 3: there's all these doubts of things that effectively software companies
Speaker 3: can't disprove at this point, because it's ai risks that
Speaker 3: could be out one, two, three, four years in the future.
Speaker 2: Look at where the leadership's coming from right now. Regional
Speaker 2: bank stocks up every single day through last week on
Speaker 2: the week, up by seven percent, and it wasn't just
Speaker 2: the small names bank for America City JP Morgano somewhere
Speaker 2: between five to six percent through last week.
Speaker 4: What do you think that speaks to deregulation.
Speaker 3: I think it speaks to this question if banks would
Speaker 3: be allowed to grow their balance sheets further, if they're
Speaker 3: allowed to take on more leverage. I think it's fascinating
Speaker 3: that for the banks they have been growing earnings over
Speaker 3: the course of the last two years at a faster
Speaker 3: pace than even prior to the Great Financial Crisis, which
Speaker 3: just suggests that banks have been in an extraordinary period
Speaker 3: of operating leverage as they cut costs and still see
Speaker 3: really strong top line growth. But it also, i think
Speaker 3: is a reflection of this cyclical optimism, because just as
Speaker 3: you saw the regional banks rallying hard, you also saw
Speaker 3: things like transportation stocks rallying hard. And if you look
Speaker 3: at everything within the transportation side of things, you're seeing
Speaker 3: better shipping rates, you're seeing better rejection rates coming out
Speaker 3: of the truckers, You're seeing a demand start to really
Speaker 3: cause a capacity tightening, which all suggests that there's cyclical
Speaker 3: underpinning of a little bit of a fire being lit
Speaker 3: in that part of the market.
Speaker 4: The question, of course, is can it continue.
Speaker 2: Well, let's talk more about that at the index level.
Speaker 2: This is something Jim Reid of Deutsche Bank has raised
Speaker 2: many other people upon during the same question. At the moment,
Speaker 2: can you have the kind of vicious rotation we're having
Speaker 2: over a prolonged period without index level stress.
Speaker 3: If you think of times like twenty twenty two or
Speaker 3: going back to two th thousand to two thousand and two,
Speaker 3: the answer would be no. If the largest weights in
Speaker 3: the market are continuing to come under significant pressure and
Speaker 3: really leading the market lower, then it's really hard for
Speaker 3: names that are a much smaller portion of the market
Speaker 3: to drag the overall index higher. So you could be
Speaker 3: in an environment where index level returns are kind of
Speaker 3: shoulder shrugging and ho hum, but you have very strong
Speaker 3: returns and pockets of the market that are much smaller.
Speaker 3: I think it's an important point as well that you're
Speaker 3: effectively moving liquidity out of very deep liquid parts of
Speaker 3: the market in tech and into much shallower, smaller parts
Speaker 3: of the market in these cyclicals, which can help explain
Speaker 3: some of the magnitude of these upside moves.
Speaker 2: Cameron Dawson of New h Weeth joins us. Now for more, Cameron,
Speaker 2: let's continue this conversation. The sull America trade, you actually
Speaker 2: sing in the data because we're seeing it in the headlines.
Speaker 4: Yeah, definitely not.
Speaker 3: If you look at last year, we saw record numbers
Speaker 3: of influence into treasuries as well as equities, So we
Speaker 3: ended twenty twenty five with record foreign holdings in both.
Speaker 4: Treasuries and equities.
Speaker 3: You saw five hundred billion dollars worth of treasury increase
Speaker 3: in the overall holding. So sell America was definitely the
Speaker 3: narrative last year. It did not play out in practice.
Speaker 3: But it is good to remember that prices are set
Speaker 3: at the margin and there's a great Bloomberg screen that's
Speaker 3: debt go and what you can see is the treasury
Speaker 3: holdings of different countries.
Speaker 4: And for the last thirteen.
Speaker 3: Years, China has effectively cut its treasury holdings in half.
Speaker 4: So this is not a news story.
Speaker 3: The question is do you see less treasury buying from China?
Speaker 3: Do you also see less treasury buying potentially from Japan
Speaker 3: because home yields are higher, and potentially less treasury buying
Speaker 3: from Europe. You've seen a huge increase, a threefold increase
Speaker 3: in treasury holdings from the UK, for example. So could
Speaker 3: you see that at the margin start to come down
Speaker 3: and put pressure up on long term yields?
Speaker 5: Have we already seen that priced in? I mean, I'm
Speaker 5: asking this with respect to how much the Bank of
Speaker 5: Japan and frankly Takaichi is putting pressure on us tenure yields.
Speaker 3: Yeah, I think you have potentially seen some of the
Speaker 3: fiscal worries get priced in early on within Japan, because
Speaker 3: you're seeing the response this morning is not nearly as violent.
Speaker 3: The selloff in bonds is not nearly as violent as
Speaker 3: what we're seeing as the rise in equities. I do
Speaker 3: still think that there's a very little direction within the
Speaker 3: tenure Treasury. It's at four point two percent. All of
Speaker 3: its moving averages are just kind of coalesced in one
Speaker 3: tight area, which says that there's really no conviction within
Speaker 3: the tenure treasury yield.
Speaker 4: If the tenure.
Speaker 3: Treasury believed the equity market and the cyclical rebound, I
Speaker 3: don't think that we would be seeing ten years at
Speaker 3: four point two percent. They'd likely be closer to four
Speaker 3: point six percent.
Speaker 5: Which is the reason why people are looking at Kevin
Speaker 5: worsh the potentially a new incoming Fed SHAIRT should he
Speaker 5: get confirmed or even heard. Secretary Bust had some really
Speaker 5: interesting things to say over the weekend about how it
Speaker 5: was probably going to take about a year or more
Speaker 5: in order to really start to wind down the balance
Speaker 5: sheet in any significant way, and he made some other comments.
Speaker 5: At a time when we're looking at something of a
Speaker 5: Fed Treasury accord or something like that. Do you have
Speaker 5: a sense of what that could look like.
Speaker 3: Yeah, well, we've been joking that they should rebrand quantitative
Speaker 3: easing on a dative freedom in order to be able
Speaker 3: to navigate this balance sheet runoff. I think it's a
Speaker 3: really big question because we know that Treasury wants yields
Speaker 3: to move lower, not just on the front end, in
Speaker 3: order to reduce treasury borrowing costs, which interest expense is
Speaker 3: over one trillion dollars.
Speaker 4: It's larger than defence spending.
Speaker 3: So this is something that they want the front end
Speaker 3: to come down, but they also want the back end
Speaker 3: to come down. They want to have relief within the
Speaker 3: housing market with mortgage rates coming lower, cyclical areas of
Speaker 3: the market getting stimulated by lower long term yields. It's
Speaker 3: really hard to do that in a very pro growth,
Speaker 3: pro stimulus kind of backdrop, which means that it suggests
Speaker 3: in order to accomplish three percent growth and three percent
Speaker 3: treasury yields, you need some kind of treasury market intervention.
Speaker 4: It can't do it alone. So what would that look like?
Speaker 6: And I'm glad you bring this up because just a
Speaker 6: few hours ago, the President actually put on truth Social
Speaker 6: a Bloomberg story talking about a Barclay's note about how
Speaker 6: this president wants to see mortgage rates drop to five
Speaker 6: percent this year.
Speaker 4: Can they actually get to that?
Speaker 3: Well, some of the things are within their control. We
Speaker 3: saw the mortgage buying that was that was pushed through
Speaker 3: back a couple of months ago, and then there's of
Speaker 3: course things that are out of their control. And the
Speaker 3: best way to think about the yield curve is that
Speaker 3: the surer you are in the yield curve, the ward's
Speaker 3: controlled by the FED. As you move longer and longer out,
Speaker 3: it's controlled by supply and demand. The supply side of
Speaker 3: the course is what's going on within the fiscal side
Speaker 3: of things, and the demand side is demand from not
Speaker 3: just domestic owners, but foreign orders. And I think that
Speaker 3: that's one of the big questions that everybody's wrestling with.
Speaker 4: This morning.
Speaker 2: Found a word on Torston slock of Apollo. You saw
Speaker 2: the quote, I'm sure you read it over the weekend,
Speaker 2: right hikes at the end of the athink. That's the conversation.
Speaker 3: Well, if you look at the warp screen, they actually
Speaker 3: have a slight probability of rate heights starting in twenty
Speaker 3: twenty seven. I don't think that This is something that
Speaker 3: worsh will necessarily want to push through, but it is
Speaker 3: a committee vote.
Speaker 4: And think of us going forward in just June.
Speaker 3: If we have this kind of of strong economy where
Speaker 3: we see some reacceleration, are we in an environment where
Speaker 3: the chairs were the.
Speaker 2: Only one blas coming up?
Speaker 4: What about.
Speaker 2: That's turn to the metals market. Some major moves in
Speaker 2: the last week in both gold and in silver the
Speaker 2: Treasury Secretary scale best and also pointing the finger over
Speaker 2: the wild swings in precious metals.
Speaker 7: The gold move things have gotten a little unruly in China.
Speaker 7: They're having to tighten margin requirements. So the gold looks
Speaker 7: to me kind of like a classical specut in below.
Speaker 2: All gold hovering around five k after a stretch of
Speaker 2: historic volatility. Amy, Gareth, Mork and Stanley seeing more upside
Speaker 2: ahead with a bullcase of fifty seven hundred for the
Speaker 2: second half of the year. Amy joins us now for more,
Speaker 2: Amy going to see you. Welcome to New York. Great here,
Speaker 2: wild wild swings not just in gold, but silver too,
Speaker 2: And if we can bring up the silver chart here today.
Speaker 2: The silver chart is one of the most ridiculous things
Speaker 2: I've ever seen. Covering financial markets, a runny of sixty percent,
Speaker 2: and then a complete round trip on what Yeah, Look.
Speaker 1: I think silver you do always expect more volatility. It
Speaker 1: has generally lower liquidity, there's smaller trading volumes going through.
Speaker 4: I think we could say.
Speaker 1: Look, the setup was reasonably supportive in terms of we'd
Speaker 1: eroded a lot of the inventory, and so when somebody
Speaker 1: needs metal immediately and that metal is not available, it
Speaker 1: sort of goes to the highest bidder and the price
Speaker 1: can accelerate very rapidly. And clearly there was an element
Speaker 1: of momentum here as well. And then of course when
Speaker 1: we had that turnaround in both gold and silver, with
Speaker 1: potentially the nomination of wash coming through and some of
Speaker 1: that momentum coming off, you know, it's not surprising we've
Speaker 1: pulled back a long way. I think what we've been
Speaker 1: struggling with is what is the right valuation for silver here?
Speaker 1: And especially when you see, you know, a fifty dollars
Speaker 1: trading range for something that only started the year at
Speaker 1: seventy five dollars. That's quite difficult to do.
Speaker 2: And the Treasury Secretary was porn in the finger at
Speaker 2: China with regards to gold. He said things were getting
Speaker 2: a little unruly in China. Can you translate what does
Speaker 2: it mean by that?
Speaker 4: So I think.
Speaker 1: Definitely there's been an element of momentum and high volumes
Speaker 1: going through and we've seen this across the metals, very
Speaker 1: very high trading volumes in China, and so we've seen
Speaker 1: some sort of controls from the exchanges and position limits
Speaker 1: trying to cab things back into place. We might also
Speaker 1: be seeing a bit of positioning taken off ahead of
Speaker 1: Luna New Year, because things will generally be slowing down there.
Speaker 1: So I think partly that's probably been having a hand here.
Speaker 1: But I think also unsurprising when you get sort of
Speaker 1: a straight line up in metals to have a bit
Speaker 1: of consolidation take a pause, that's not unusual.
Speaker 5: So it seemed like Scott Bessett was talking about the
Speaker 5: hat he's currently blaming this one trader who had an
Speaker 5: incredible slew of losses in China and then fled the country.
Speaker 5: I mean, it just raises the question of how financialized
Speaker 5: some of these metals markets have gotten. The idea that
Speaker 5: suddenly people are turning to precious metals as an alternative
Speaker 5: to things like treasuries, which are a very deep liquid market.
Speaker 5: How comfortable is the gold market? Is this silver market
Speaker 5: with this moniker of an alternative as an attorney to
Speaker 5: be treated as an alternative to full faith and credit
Speaker 5: in the Unitedity's government.
Speaker 1: So I think gold has kind of always had this
Speaker 1: role as a safe hay and traditional so you have
Speaker 1: had yes, financial flows, but also real physical buying from
Speaker 1: central banks, from ETFs, and kind of we're used to
Speaker 1: this sort of flowing gold. I think for silver, because
Speaker 1: it's also got that industrial metal hat, probably this is
Speaker 1: where it's a little more difficult because there are real
Speaker 1: end users who also need silver. So when people are
Speaker 1: suddenly trying to buy quite large volumes for financial reasons
Speaker 1: and then you still have the physical buyers, that's where
Speaker 1: things get a little tense. So gold, I would say,
Speaker 1: should be okay with this silver obviously a lot of
Speaker 1: volatility as we're seeing.
Speaker 5: Then you overlay the fundamentals, which is that every country
Speaker 5: in the world is trying to build up as strategic
Speaker 5: reserves of some metals as well as try to build
Speaker 5: out their infrastructure. We still heard about the vault from
Speaker 5: President Trunk that he wants to stackpile certain metals. Do
Speaker 5: you have a sense of how much there could really
Speaker 5: skew valuations.
Speaker 4: Is that already prosed in.
Speaker 1: Yeah, So I think the stockpiling theme is super interesting.
Speaker 1: So we have as you say, Project Vault launched in
Speaker 1: the US, which is looking for any critical minerals. Now,
Speaker 1: the US critical minerals list is about sixty different metals.
Speaker 1: Some of these are very very small market, some of
Speaker 1: these are much bigger, and so I think we need
Speaker 1: to see what ultimately is going to be top priority
Speaker 1: in terms of stockpiling. I can think, you know, it's
Speaker 1: probably you know, it could be any of those metals,
Speaker 1: but it's the larger ones could be more easily able
Speaker 1: to absorb that stockpiling. You could say for copper, actually,
Speaker 1: already the US has already built quite a large stockpile.
Speaker 1: Last year, the US imported probably two thirds again what
Speaker 1: it would normally need, and most of that is just
Speaker 1: sat in the warehouse system. So actually you could say
Speaker 1: the US may have an incentive to try and keep
Speaker 1: that in the country rather than letting that be exported.
Speaker 6: I was going to ask you about copper too, because
Speaker 6: really this matters with demand in China. How weak is
Speaker 6: the demand is so off the demand right now for
Speaker 6: copper and China.
Speaker 1: Yeah, I think it's remarkable how strong copper has been
Speaker 1: considering what we're seeing in the Chinese demand. And this
Speaker 1: is not a new story. This is something that started
Speaker 1: back in September October time Q four. We saw Chinese
Speaker 1: apparent consumption down around twelve percent year on year. Is
Speaker 1: that really weighing on the sort of total full year
Speaker 1: twenty twenty five demand number. We're going into lunar New year,
Speaker 1: which is where activity typically slows down. So often you
Speaker 1: see the semi fabricators slowing down their activity, but yet
Speaker 1: copper has proved remarkably resilient, which I think tells you
Speaker 1: there's broader macro factors at play. There's this theme around
Speaker 1: the AI trade, stockpiling, scarcity, supply chains, and then also
Speaker 1: these macro overlays of rake cuts still coming through demand
Speaker 1: for real assets from investors.
Speaker 4: WESA mentioned Project Vault.
Speaker 6: What about the fact this administration also has tariffs on
Speaker 6: some of these metals.
Speaker 1: Yeah, so at the moment, you've got your steel and
Speaker 1: aluminium tariffs in place, and what it looks like, if anything,
Speaker 1: is actually the US has been importing less aliminum than
Speaker 1: it needs at the moment, so that would imply actually
Speaker 1: the stocking rather than stocking and copper. We only have
Speaker 1: tariffs on things like copper wire, not on copper itself.
Speaker 1: But we are due to here.
Speaker 4: Whether those MICROWA twenty twenty seven they're going to.
Speaker 1: Do it, it's a tricky one to call. I'd say
Speaker 1: the US is probably more reliant on imports of aluminium
Speaker 1: than copper, so arguably if they can do it on aluminium,
Speaker 1: could do it on copper. The market is not really
Speaker 1: pricing that that is going to happen at the moment.
Speaker 1: There's very little premium for US metal at this point.
Speaker 1: But the other thing they could do is, of course,
Speaker 1: just kick the can down the road and say, look,
Speaker 1: let's see again in six months from now, and that
Speaker 1: is more likely to keep the metal on shore, but
Speaker 1: without really having too much impact on domestic US copper price.
Speaker 2: Well, just how tight is the copper market at the moment,
Speaker 2: So we.
Speaker 4: Do have a lot of inventory.
Speaker 1: We've had this big infantry build in the US, but
Speaker 1: I would almost disregard that for now because it's sort
Speaker 1: of locked in the US. If you think of that
Speaker 1: as a strategic reserve, then you'd say the copper market's
Speaker 1: pretty tight, London inventtry is low. Chinese infantry, yes, is building,
Speaker 1: which we think is this demand weakness, but we always
Speaker 1: get built around this time of year. To me, the
Speaker 1: big signal for us is going to be as we
Speaker 1: come out of Lunar New Year, what happens in China.
Speaker 1: Does activity pick up or not? And that's going to
Speaker 1: really tell us, you know, is China just pausing because
Speaker 1: prices have moved a lot, or is this China actually
Speaker 1: stepping away from the market. Normally they pause, they kind
Speaker 1: of get used to the new price levels and they
Speaker 1: come back in.
Speaker 2: Can we finish on supply Back in the day, give
Speaker 2: a minor a dollar. They've dig a hole. Are they
Speaker 2: still digging holes?
Speaker 4: Not so much.
Speaker 7: So.
Speaker 1: We are now ten years on from the twenty fifteen
Speaker 1: to sixteen metals price downturn, which is where mining companies
Speaker 1: largely cut their budgets, and we're really starting to fill
Speaker 1: the effects of that. And the challenge is this long
Speaker 1: lead time, so we can't give you a big list
Speaker 1: of new minds that are coming on in the next
Speaker 1: few years.
Speaker 4: And even now where.
Speaker 1: Copper prices are really high, you'd argue probably most copper
Speaker 1: projects in the world would make sense. Here, we're still
Speaker 1: seeing companies trying to buy each other or buy assets
Speaker 1: rather than building from scratch. So really what we're then
Speaker 1: hoping for is a bit of scrap, a bit of
Speaker 1: brown field expansion, but nothing major stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. So here's the
Speaker 2: list this morning, the Federal Reserve of waiting delayed reports
Speaker 2: on both employment and inflation, US payrolls. Do you want
Speaker 2: to Whennesday? Followed by CPI on Friday. Dania Peterson of
Speaker 2: the Conference Board Right in the next five days will
Speaker 2: be a blockbuster week to look ahead to that. Dana
Speaker 2: joins us now for more, Danna, good morning. Let's talk
Speaker 2: about confidence first. The CEOs that we speak to sound confident,
Speaker 2: and the CEOs you hear from bullish about hiring, because
Speaker 2: that seems to be the story in the data at
Speaker 2: the moment.
Speaker 8: Not really, they're still waiting on the sidelines, and we're
Speaker 8: seeing that in the actual data. Payrolls have been pretty small,
Speaker 8: but that's also consistent with on labor market that's still healthy,
Speaker 8: very close to maximum employment.
Speaker 2: Is it a supply side factor? Then if it's a
Speaker 2: labor market that's still healthy because at the moment we're
Speaker 2: looking back to olf months and we could see jobs
Speaker 2: growth at zero nothing. Data that doesn't sound healthy.
Speaker 8: Well, it's about levels, not the deltas right. So right,
Speaker 8: if you look at the data, either the establishment payrolls
Speaker 8: or the household survey in levels, most people are still
Speaker 8: working and those levels have returned to the path that
Speaker 8: we had before the pandemic with a delta, and that
Speaker 8: delta is really the advancement of people retiring. Other than that,
Speaker 8: most people are still working if they want to data in.
Speaker 5: The Conference Board's own survey, a number of respondents, the
Speaker 5: greatest number of respondents going back to twenty twenty one,
Speaker 5: say that jobs are hard to get. You see an
Speaker 5: increasing amount of concern about the availability of work. And
Speaker 5: I'm just wondering how much of a forward leading indicator
Speaker 5: this tends to be in prior readings.
Speaker 8: Well, I think this time it's a little bit different. Yes,
Speaker 8: it is pointing to the fact that the unemployment rate
Speaker 8: could rise because people, some people especially in industries like finance
Speaker 8: and tech, are being let go and it's very difficult
Speaker 8: for them to find new jobs. And so that's accurate.
Speaker 8: The survey is saying, yeah, it's tough to get a
Speaker 8: job out there if you don't already have one. But
Speaker 8: when you look at the JULS data and even the
Speaker 8: unemployment rate, most people, most companies are not letting anyone go.
Speaker 8: So we're kind of still in this low, higher low
Speaker 8: fire place. And again it's about the level the number
Speaker 8: of people who are actually working is very high.
Speaker 5: That said data, we have seen jobless claims start to
Speaker 5: tick up, and there is some concern that this particular
Speaker 5: reading that we get on Wednesday of non farm payrolls
Speaker 5: is going to be really skewed to the downside from
Speaker 5: the revisions, the benchmark revisions that are going to come out.
Speaker 5: I'm just wondering what you're looking for to determine whether
Speaker 5: you're starting to see a shift from low high or
Speaker 5: low fire dynamic to something slightly different, a little bit
Speaker 5: more pernicious, a little bit more protracted to the downside.
Speaker 8: Sure, so I'll be looking at two things. Yes, you
Speaker 8: can look at payrolls in terms of the change, but again,
Speaker 8: when you're close to full employment, you don't need much
Speaker 8: change at all because most people are working. So I
Speaker 8: would look at the level of that and certainly with
Speaker 8: the unemployment rate, I would deep beneath the surface and
Speaker 8: take a look at who's driving it. Is it people
Speaker 8: who who are newly let go or is it people
Speaker 8: who are still looking for jobs. You have to look
Speaker 8: at those details to understand what's going on in the
Speaker 8: labor market.
Speaker 6: And then, of course Friday we're going to get CPI.
Speaker 6: So as you say, blockbuster week for economic data, what
Speaker 6: are you focused on when it comes to inflation report?
Speaker 8: Absolutely, I'm looking at again underneath the surface, first, looking
Speaker 8: at goods, especially those that are most likely to be imported.
Speaker 8: Are we still seeing prices increase for those items? And
Speaker 8: we've seen that in the data over the last few months.
Speaker 8: So the tariff effect is coming in. However, it's being
Speaker 8: offset mightily by slowing shelter costs, and that's that's a
Speaker 8: good thing. So I'll be looking at the shelter costs
Speaker 8: to make sure that's still putting downward pressure on overall inflation.
Speaker 8: But I'll also be looking at any services that are
Speaker 8: indirectly affected by tariffs, and also things like hell insurance
Speaker 8: and car insurance, which we know have been rising.
Speaker 6: When it comes to when you said earlier about CEOs,
Speaker 6: they're waiting on the sidelines. What exactly do CEOs want
Speaker 6: to hear in order for them to get back in
Speaker 6: and start hiring again.
Speaker 8: Well, I think for a lot of them, any of
Speaker 8: them that are exposed in some form or fashion to
Speaker 8: supply chains, are waiting for the trade deals to be completed.
Speaker 8: There's still some major trade deals that have not been affected.
Speaker 8: And also usmcaight renegotiations start this summer, and if you
Speaker 8: are an auto company or a lumber company, you're curious
Speaker 8: to know whether or not you're going to have to
Speaker 8: pay different rates of tariffs, whether a product is moving
Speaker 8: from Canada to the US, from Mexico to the US,
Speaker 8: and so I think they really want to know what
Speaker 8: that looks like for them.
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