1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,840 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,200 Speaker 1: or watch us live on YouTube. 6 00:00:27,720 --> 00:00:32,080 Speaker 2: Monica Descenzo joins US snub had a global investment strategy 7 00:00:32,120 --> 00:00:36,839 Speaker 2: GP Morgan Private Bank. What are fancy people doing with 8 00:00:36,960 --> 00:00:38,560 Speaker 2: their cash? 9 00:00:38,920 --> 00:00:40,559 Speaker 3: I don't know about fancy people. What I can tell 10 00:00:40,560 --> 00:00:43,000 Speaker 3: you what my clients are doing with their cash. Balances 11 00:00:43,040 --> 00:00:45,600 Speaker 3: are actually still pretty high. If you look like a 12 00:00:45,640 --> 00:00:48,400 Speaker 3: cross our entire platform, something around twenty percent of assets 13 00:00:48,520 --> 00:00:50,840 Speaker 3: is actually still sitting in cash. Some of my larger 14 00:00:50,840 --> 00:00:52,920 Speaker 3: clients so that it's even greater than that, And I 15 00:00:52,960 --> 00:00:55,400 Speaker 3: think that just reflects the desire for many people to 16 00:00:55,520 --> 00:00:57,720 Speaker 3: add to risk assets on some kind of pullback. We 17 00:00:57,840 --> 00:01:00,320 Speaker 3: just haven't had a prolonged pullback. We've had volatile but 18 00:01:00,400 --> 00:01:02,920 Speaker 3: it hasn't been very long lasting. So I expect as 19 00:01:02,920 --> 00:01:04,480 Speaker 3: we move through the summer, maybe if we get a 20 00:01:04,520 --> 00:01:06,560 Speaker 3: few more bumps, you'll see some of that move into 21 00:01:06,560 --> 00:01:08,639 Speaker 3: the market. And then I think as we move towards 22 00:01:08,640 --> 00:01:10,560 Speaker 3: the back half of the year. I think people are 23 00:01:10,640 --> 00:01:12,640 Speaker 3: just hoping that we get through all this turmoil in 24 00:01:12,640 --> 00:01:15,160 Speaker 3: the Middle East and some of these headlines. The problem is, 25 00:01:15,200 --> 00:01:16,840 Speaker 3: you know, when it feels good, that's generally not the 26 00:01:16,840 --> 00:01:19,319 Speaker 3: best time to invest, So you probably should be sticking 27 00:01:19,319 --> 00:01:20,440 Speaker 3: a toe in now. 28 00:01:20,240 --> 00:01:23,640 Speaker 4: How concerned are your clients about inflation? I know it's 29 00:01:23,760 --> 00:01:25,440 Speaker 4: you know, this inflation that we're seeing out there. It 30 00:01:25,440 --> 00:01:28,040 Speaker 4: impacts the lower end of the case shaped economy, perhaps 31 00:01:28,040 --> 00:01:29,880 Speaker 4: a little bit more than the higher end. But I'm 32 00:01:29,880 --> 00:01:31,240 Speaker 4: guessing you're getting some phone calls. 33 00:01:31,959 --> 00:01:34,360 Speaker 3: It is by far the biggest risk that people think about. 34 00:01:34,560 --> 00:01:36,000 Speaker 3: I think when you think about the client base, I 35 00:01:36,040 --> 00:01:38,440 Speaker 3: work with many of them, remember the seventies, and they say, Okay, 36 00:01:38,440 --> 00:01:40,199 Speaker 3: we look at this market. It just keeps grinding higher, 37 00:01:40,240 --> 00:01:43,920 Speaker 3: grinding higher, and yet you have higher rates, higher inflation 38 00:01:43,959 --> 00:01:46,120 Speaker 3: that feels like it's going to be more persistent, and 39 00:01:46,200 --> 00:01:47,960 Speaker 3: so that they're very concerned that this could somehow be 40 00:01:48,040 --> 00:01:50,240 Speaker 3: the seventies all over again, where we get caught, you know, 41 00:01:50,800 --> 00:01:53,800 Speaker 3: off kilter. That said, when I look at portfolios, I 42 00:01:53,800 --> 00:01:56,840 Speaker 3: don't see portfolios that are built for a higher inflationary environment. 43 00:01:56,880 --> 00:01:59,440 Speaker 3: And so when you look at this market, hi single 44 00:01:59,440 --> 00:02:02,400 Speaker 3: digits here date. That's where we're having most of our conversations. 45 00:02:02,440 --> 00:02:05,160 Speaker 3: Think about rebalancing, think about adding more to your portfolio 46 00:02:05,360 --> 00:02:08,120 Speaker 3: that's going to carry better in an inflationary environment. So 47 00:02:08,120 --> 00:02:11,400 Speaker 3: you got to look at real assets, infrastructure, even hedge 48 00:02:11,400 --> 00:02:13,280 Speaker 3: funds again, which many of my clients have not used 49 00:02:13,280 --> 00:02:14,800 Speaker 3: as a tool in a very long time. I know, 50 00:02:15,000 --> 00:02:16,600 Speaker 3: just saying it, I kind of chuckle like you because 51 00:02:17,080 --> 00:02:18,160 Speaker 3: they were out of favor. 52 00:02:17,919 --> 00:02:18,480 Speaker 2: For a long time. 53 00:02:18,520 --> 00:02:21,000 Speaker 3: And I think now people are starting to appreciate what 54 00:02:21,120 --> 00:02:23,800 Speaker 3: uncorrelated strategies could do in an inflationary environment. 55 00:02:24,040 --> 00:02:25,680 Speaker 4: Even in a fixed income market up well, you could 56 00:02:25,680 --> 00:02:27,440 Speaker 4: sit in to your treasure and get north to four 57 00:02:27,480 --> 00:02:29,280 Speaker 4: percent now, and I mean that's got to be attractive for. 58 00:02:29,280 --> 00:02:31,040 Speaker 3: A lot of it is, especially in a world where 59 00:02:31,160 --> 00:02:33,320 Speaker 3: we look out twelve months, we're looking for five six 60 00:02:33,400 --> 00:02:35,919 Speaker 3: seven percent returns in equities, So if you can get 61 00:02:35,960 --> 00:02:38,119 Speaker 3: close to that with fixed income with much less volatility, 62 00:02:38,120 --> 00:02:40,520 Speaker 3: then that feels attractive. And so I think the big 63 00:02:40,600 --> 00:02:42,160 Speaker 3: question that you mentioned at the beginning of the cash 64 00:02:42,760 --> 00:02:44,880 Speaker 3: with inflation, where it is cash is not real you 65 00:02:44,880 --> 00:02:47,000 Speaker 3: should be So do need to dip a toe in 66 00:02:47,040 --> 00:02:49,040 Speaker 3: and into risk assets in some form, even if it's 67 00:02:49,080 --> 00:02:50,519 Speaker 3: just you know, going out a little bit in the risk. 68 00:02:50,560 --> 00:02:53,280 Speaker 2: So what do you do with duration? First of all, 69 00:02:53,360 --> 00:02:56,160 Speaker 2: let's get this stereotype out of the way. Fancy people 70 00:02:56,280 --> 00:02:59,400 Speaker 2: as I call them. Are they sixty forty Are they 71 00:02:59,440 --> 00:03:02,480 Speaker 2: loaded the book on Apple and Nvidia? Are they eighty 72 00:03:02,560 --> 00:03:06,680 Speaker 2: five percent bonds? What's the actual makeup of those portfolios? 73 00:03:07,440 --> 00:03:09,120 Speaker 3: When you start to go to like the higher end 74 00:03:09,120 --> 00:03:12,000 Speaker 3: of the well spectrum, you do see more assets in 75 00:03:12,240 --> 00:03:16,760 Speaker 3: longer duration investments that could be alternatives other areas like that, 76 00:03:16,800 --> 00:03:18,440 Speaker 3: because they don't need a liquidity right and so that 77 00:03:18,520 --> 00:03:20,160 Speaker 3: they can take a lot more risk. So that's gonna 78 00:03:20,160 --> 00:03:21,800 Speaker 3: be different from like a standard you know, mom and 79 00:03:21,800 --> 00:03:24,959 Speaker 3: pop investor. And so that's where I see more investments 80 00:03:25,000 --> 00:03:27,120 Speaker 3: going that they're playing for the long term. They want 81 00:03:27,120 --> 00:03:28,720 Speaker 3: to ride this out, they don't want to worry about Okay, 82 00:03:28,800 --> 00:03:29,239 Speaker 3: So you've. 83 00:03:29,080 --> 00:03:31,840 Speaker 2: Got a family of forty five people deciding which f 84 00:03:31,919 --> 00:03:34,640 Speaker 2: one grand prix to go to next? Great, and there's 85 00:03:34,680 --> 00:03:39,240 Speaker 2: one person who's responsible is they look at the monthly statement. 86 00:03:39,640 --> 00:03:43,640 Speaker 2: If we see yield up, price down, how many months 87 00:03:43,680 --> 00:03:46,520 Speaker 2: out do they have to see price down before they 88 00:03:46,520 --> 00:03:47,200 Speaker 2: get upset? 89 00:03:48,160 --> 00:03:50,800 Speaker 3: You know, it's funny, I that'sn't a way. While alternatives 90 00:03:50,880 --> 00:03:53,000 Speaker 3: can be a better asset class, some of these marked 91 00:03:53,040 --> 00:03:55,800 Speaker 3: you know, not donate as regular basis. So it helps 92 00:03:55,960 --> 00:03:59,280 Speaker 3: people hang in there. You know, clients do panic. That's 93 00:03:59,280 --> 00:04:01,400 Speaker 3: why I have a job right to try to keep 94 00:04:01,400 --> 00:04:03,720 Speaker 3: them steady. And where we spend a lot of time 95 00:04:03,960 --> 00:04:06,320 Speaker 3: beside hogwe inflation, is what is your plan, what is 96 00:04:06,360 --> 00:04:08,640 Speaker 3: your goal? What is this money for? And if it's 97 00:04:08,680 --> 00:04:10,680 Speaker 3: for five, ten, fifteen years from now, your kids or 98 00:04:10,680 --> 00:04:14,080 Speaker 3: your grandkids, you should not panic on a monthly statement. 99 00:04:14,120 --> 00:04:17,680 Speaker 3: I try to caution people to not let that cause 100 00:04:17,680 --> 00:04:20,600 Speaker 3: these reactions. And even I mentioned market up nine percent 101 00:04:20,640 --> 00:04:22,560 Speaker 3: year to date, people look at that and they say, oh, 102 00:04:22,560 --> 00:04:24,680 Speaker 3: I can't add here. I shouldn't add at highs. All 103 00:04:24,720 --> 00:04:26,719 Speaker 3: the data we look at, we look at it over time. 104 00:04:26,800 --> 00:04:28,320 Speaker 3: Maybe not in a two or three month period, but 105 00:04:28,520 --> 00:04:30,720 Speaker 3: four or five months are longer. Adding it an all 106 00:04:30,760 --> 00:04:33,000 Speaker 3: time high almost no different than adding on a dep 107 00:04:33,040 --> 00:04:35,440 Speaker 3: And so I try to caution people on the behavioral 108 00:04:35,480 --> 00:04:38,279 Speaker 3: side to not let your emotions dictate how you invest, 109 00:04:38,320 --> 00:04:40,760 Speaker 3: and rather stick to the plan that we've articulated. 110 00:04:40,960 --> 00:04:42,320 Speaker 2: Easier said than done that exactly. 111 00:04:42,480 --> 00:04:45,200 Speaker 4: How about gold gold Wait we hit a you know, 112 00:04:45,839 --> 00:04:48,679 Speaker 4: hit five thousand. We've now pulled back to forty five hundred. 113 00:04:48,680 --> 00:04:51,920 Speaker 4: But still I know gold is in the conversation off 114 00:04:51,960 --> 00:04:52,599 Speaker 4: with your clients. 115 00:04:52,640 --> 00:04:55,520 Speaker 3: Absolutely, I you know, most of my clients in spite 116 00:04:55,560 --> 00:04:57,080 Speaker 3: of the rally what over one hundred percent of the 117 00:04:57,160 --> 00:04:59,320 Speaker 3: last few years, so golds had an amazing rally. And 118 00:04:59,400 --> 00:05:01,680 Speaker 3: yet on this re in volatility, I think people assumed 119 00:05:02,040 --> 00:05:04,120 Speaker 3: the Middle East crisis would cause a rally and that's 120 00:05:04,160 --> 00:05:05,720 Speaker 3: not what happened. And there's a lot of reasons for that. 121 00:05:05,920 --> 00:05:07,839 Speaker 3: But you look at where gold is now and you say, okay, 122 00:05:08,320 --> 00:05:10,080 Speaker 3: I still most of my clients still want to diversify 123 00:05:10,120 --> 00:05:12,520 Speaker 3: a bit outside of their dollar exposure, so gold helps there. 124 00:05:12,720 --> 00:05:14,440 Speaker 3: And then you look at Central Bank of buying, which 125 00:05:14,440 --> 00:05:15,960 Speaker 3: we think is still going to be a tailwind over 126 00:05:16,000 --> 00:05:19,360 Speaker 3: the next six to eighteen months. And so that we 127 00:05:19,400 --> 00:05:21,520 Speaker 3: have those two together, still feels like there's a place 128 00:05:21,520 --> 00:05:24,000 Speaker 3: for golden portfolios. The question is how you add it. 129 00:05:24,040 --> 00:05:26,680 Speaker 3: And so they actually have some volatility, so you can 130 00:05:26,760 --> 00:05:29,240 Speaker 3: sell puts, you can do strategies like that to leg 131 00:05:29,279 --> 00:05:30,760 Speaker 3: in at a lower level, which has been house in 132 00:05:30,800 --> 00:05:32,000 Speaker 3: my larger families have been doing it. 133 00:05:32,160 --> 00:05:34,600 Speaker 2: Madican. Thank you so much, Medica. This sends over JP 134 00:05:34,720 --> 00:05:38,000 Speaker 2: Moore in Private Bank. Stay with us. More from Bloomberg 135 00:05:38,080 --> 00:05:40,120 Speaker 2: Surveillance coming up after this. 136 00:05:47,360 --> 00:05:50,960 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 137 00:05:51,040 --> 00:05:54,200 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 138 00:05:54,279 --> 00:05:57,919 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 139 00:05:58,080 --> 00:05:59,520 Speaker 1: watch US live on YouTube. 140 00:05:59,600 --> 00:06:03,359 Speaker 2: David Oil right now with us on economics and the 141 00:06:03,440 --> 00:06:06,719 Speaker 2: America's at Macquarie as well. David, I don't feel like 142 00:06:06,720 --> 00:06:10,840 Speaker 2: I've had a traditional economics discussion, like Paul, what when 143 00:06:10,839 --> 00:06:13,520 Speaker 2: the Red Sox had penet hopes? Fact, David, if you're 144 00:06:13,560 --> 00:06:16,960 Speaker 2: writing an eight page memo today, do you have any 145 00:06:17,080 --> 00:06:21,680 Speaker 2: understanding of where the American economy is, say September November 146 00:06:21,760 --> 00:06:22,400 Speaker 2: of this year. 147 00:06:24,720 --> 00:06:28,719 Speaker 5: Yeah, Well, look, Tom, we are actually fairly optimistic in 148 00:06:28,800 --> 00:06:30,640 Speaker 5: terms of where things are heading. We think that the 149 00:06:30,680 --> 00:06:34,719 Speaker 5: consumer is proving resilient, and credit growth remains strong. The 150 00:06:34,760 --> 00:06:39,719 Speaker 5: AI capex cycle continues to run strong. So we suspect 151 00:06:39,720 --> 00:06:42,080 Speaker 5: that you're in a good place, and I think that 152 00:06:42,080 --> 00:06:44,280 Speaker 5: that will remain the play the case when you get 153 00:06:44,360 --> 00:06:47,440 Speaker 5: to the fall and you'll be talking about how strong 154 00:06:47,480 --> 00:06:50,200 Speaker 5: the economy is and the need for rate hikes down 155 00:06:50,200 --> 00:06:50,960 Speaker 5: the line from the Fed. 156 00:06:51,960 --> 00:06:55,360 Speaker 4: David, how concerned are you about the inflation in this economy? 157 00:06:56,040 --> 00:07:00,279 Speaker 4: Is it a short term war driven energy inflation or 158 00:07:00,320 --> 00:07:01,040 Speaker 4: is it something more? 159 00:07:03,160 --> 00:07:04,920 Speaker 5: I think there's something more. I think that you you know, 160 00:07:04,960 --> 00:07:08,280 Speaker 5: certainly the oil spike is probably passing through and you're 161 00:07:08,320 --> 00:07:10,200 Speaker 5: likely to see that come through in core inflation and 162 00:07:11,160 --> 00:07:13,520 Speaker 5: coming months. But I think on top of that you 163 00:07:13,600 --> 00:07:15,240 Speaker 5: have a tech boom. And I think this is one 164 00:07:15,280 --> 00:07:18,360 Speaker 5: of the undertold stories of twenty twenty five and even 165 00:07:18,360 --> 00:07:22,040 Speaker 5: twenty twenty six now is how much tech is driving 166 00:07:22,080 --> 00:07:24,280 Speaker 5: and inflation impulse. If you look at at things like 167 00:07:24,320 --> 00:07:28,560 Speaker 5: computer software and accessories in the Consumer Price Index that 168 00:07:28,560 --> 00:07:31,560 Speaker 5: has historically been about minus five percent year on year. 169 00:07:31,920 --> 00:07:34,960 Speaker 5: In the latest release for April that was up fourteen 170 00:07:35,040 --> 00:07:38,040 Speaker 5: percent year over year, So you've seen a real inflection 171 00:07:38,280 --> 00:07:42,480 Speaker 5: in that PPI. Semiconductor similar story, that's up twenty five 172 00:07:42,560 --> 00:07:43,920 Speaker 5: twenty six percent year on year. 173 00:07:44,680 --> 00:07:48,000 Speaker 2: With the inflation we have of a central tendency three 174 00:07:48,040 --> 00:07:51,080 Speaker 2: point eight percent. I notice Canada coming out today with 175 00:07:51,120 --> 00:07:55,960 Speaker 2: a much lower inflation regime. Is Macquarie modeling out a 176 00:07:56,000 --> 00:08:00,000 Speaker 2: potential four percent statistic or or do you just see 177 00:08:00,400 --> 00:08:04,680 Speaker 2: migrating not to two percent forget about that's silliness, but 178 00:08:05,400 --> 00:08:09,320 Speaker 2: just nudging down if you will. 179 00:08:09,680 --> 00:08:11,480 Speaker 5: I think in the US, of course you have a 180 00:08:11,560 --> 00:08:14,240 Speaker 5: much tighter labor market, and then what's the case in Canada. 181 00:08:14,280 --> 00:08:16,679 Speaker 5: Canada built up some labor slacks. I think that helps 182 00:08:16,680 --> 00:08:20,160 Speaker 5: to explain why you're seeing some divergence in the inflation 183 00:08:20,240 --> 00:08:22,840 Speaker 5: data out over over the last couple of months in 184 00:08:22,840 --> 00:08:26,080 Speaker 5: those two economies. But I'd say that four percent on 185 00:08:26,120 --> 00:08:30,680 Speaker 5: a headline number is probably likely to occur later this 186 00:08:30,760 --> 00:08:32,800 Speaker 5: year in the US, So it's not something that we 187 00:08:32,800 --> 00:08:36,080 Speaker 5: think will be sustained, but certainly with the oil price increase, 188 00:08:36,240 --> 00:08:39,480 Speaker 5: that's four percent is obtainable. I think probably longer term, 189 00:08:39,480 --> 00:08:41,640 Speaker 5: you're looking at inflation settling in around two and a 190 00:08:41,679 --> 00:08:44,040 Speaker 5: half to three percent. We've had, I mean, inflation has 191 00:08:44,080 --> 00:08:45,800 Speaker 5: been above target for over five years now. 192 00:08:45,880 --> 00:08:50,400 Speaker 2: We turned a surveillance experts here with David Alexis Christophers 193 00:08:50,480 --> 00:08:54,120 Speaker 2: and Paul Sweeney. Guys, if we get four or four 194 00:08:54,160 --> 00:08:58,760 Speaker 2: point one percent inflation, mentally, we're not ready for that, 195 00:08:59,120 --> 00:09:00,280 Speaker 2: I would suggest I don't. 196 00:09:00,360 --> 00:09:02,520 Speaker 4: And this is a US consumer, like a lot of 197 00:09:02,520 --> 00:09:04,440 Speaker 4: consumers around the world, have been beat over the head 198 00:09:04,440 --> 00:09:06,640 Speaker 4: with inflation for a long time now. 199 00:09:06,720 --> 00:09:08,720 Speaker 6: And it'll be the first time a whole generation has 200 00:09:08,720 --> 00:09:10,040 Speaker 6: seen inflation be that high. 201 00:09:10,240 --> 00:09:11,480 Speaker 5: So they don't do what. 202 00:09:12,120 --> 00:09:15,120 Speaker 2: David, That's a really important point from Alexis. I mean, 203 00:09:15,160 --> 00:09:17,200 Speaker 2: this is a whole new new for a lot of people, 204 00:09:17,320 --> 00:09:19,280 Speaker 2: isn't Well. 205 00:09:19,480 --> 00:09:22,360 Speaker 5: I think the lived experience for a lot of people 206 00:09:22,360 --> 00:09:25,079 Speaker 5: that entered their working lives or their adulthood and you 207 00:09:25,160 --> 00:09:28,280 Speaker 5: know around twenty twenty has been you know, elevated inflation. 208 00:09:28,520 --> 00:09:31,120 Speaker 5: And so I think that the luxury that we had 209 00:09:31,160 --> 00:09:33,160 Speaker 5: in twenty twenty two and in twenty twenty three when 210 00:09:33,160 --> 00:09:35,640 Speaker 5: you had that first wave of inflation posts the COVID 211 00:09:35,679 --> 00:09:39,560 Speaker 5: reopening was that you had had low inflation for you know, 212 00:09:39,600 --> 00:09:42,520 Speaker 5: thirty or forty years, So people weren't I didn't have 213 00:09:42,559 --> 00:09:44,679 Speaker 5: their backup as much about it. And I think that 214 00:09:44,800 --> 00:09:47,079 Speaker 5: you know, if we have a second inflation wave here 215 00:09:47,080 --> 00:09:49,520 Speaker 5: and it looks like one maybe underway, you know, people 216 00:09:49,559 --> 00:09:53,320 Speaker 5: will be much more sensitive. I think that's that's astute point, David. 217 00:09:53,360 --> 00:09:56,280 Speaker 4: Given that backdrop, what's your view of the US consumer 218 00:09:56,440 --> 00:09:57,400 Speaker 4: these days? 219 00:09:59,280 --> 00:10:02,200 Speaker 5: Well, look, consumer I think has proven more resilient than 220 00:10:02,200 --> 00:10:04,360 Speaker 5: a lot of people had anticipated at the outset of 221 00:10:04,360 --> 00:10:07,160 Speaker 5: this oil price spike, same store sales growth I was 222 00:10:07,200 --> 00:10:08,840 Speaker 5: looking at it the other day is up close to 223 00:10:08,880 --> 00:10:11,800 Speaker 5: ten percent year over year. We've had solid retail sales 224 00:10:11,800 --> 00:10:15,080 Speaker 5: growth through April, so it looks like the spending has continued, 225 00:10:15,559 --> 00:10:17,240 Speaker 5: which I think the sum has been a bit of 226 00:10:17,400 --> 00:10:20,520 Speaker 5: a puzzle given the higher gasoline prices some had anticipated 227 00:10:20,320 --> 00:10:24,000 Speaker 5: would be more of a drag. Tax re elevated tax 228 00:10:24,040 --> 00:10:25,640 Speaker 5: refund checks I think are part of the story. And 229 00:10:25,640 --> 00:10:27,360 Speaker 5: then I think another undertold part of the story is 230 00:10:27,360 --> 00:10:30,960 Speaker 5: credit growth. Right, credit loosening is taking place, and consumers 231 00:10:31,000 --> 00:10:34,240 Speaker 5: are making up for the higher gasoline prices through taking 232 00:10:34,280 --> 00:10:35,000 Speaker 5: out credit. 233 00:10:35,160 --> 00:10:37,640 Speaker 2: So one final question, my summary of all this, David 234 00:10:37,640 --> 00:10:40,000 Speaker 2: Doyle is I got to start modeling out of FED 235 00:10:40,080 --> 00:10:40,800 Speaker 2: rate increase. 236 00:10:43,000 --> 00:10:44,880 Speaker 5: I think that's right. Look, we've been calling for a 237 00:10:44,880 --> 00:10:48,040 Speaker 5: Federate the next move for an increase since the start 238 00:10:48,040 --> 00:10:51,120 Speaker 5: of the year. You know, right now we're in early 239 00:10:51,160 --> 00:10:53,960 Speaker 5: twenty twenty seven, but it's possible if the data continue 240 00:10:54,000 --> 00:10:56,000 Speaker 5: to evolve then in the way that it has been 241 00:10:56,000 --> 00:10:58,520 Speaker 5: that they have to start moving in twenty twenty six. 242 00:10:58,559 --> 00:11:00,520 Speaker 5: So I do think that we'll be talking about that 243 00:11:00,520 --> 00:11:01,240 Speaker 5: more than the months to. 244 00:11:01,160 --> 00:11:04,120 Speaker 2: Come, David do Thank you so much Macquari this morning. 245 00:11:04,120 --> 00:11:06,160 Speaker 2: That was a great summary of where we are. We're 246 00:11:06,160 --> 00:11:09,920 Speaker 2: not doing that enough now given all the distractions, stay 247 00:11:09,920 --> 00:11:13,800 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 248 00:11:21,080 --> 00:11:24,640 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 249 00:11:24,720 --> 00:11:27,840 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 250 00:11:27,960 --> 00:11:31,360 Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app, 251 00:11:31,520 --> 00:11:34,600 Speaker 1: or watch us live on YouTube for Global Wall Street. 252 00:11:34,640 --> 00:11:37,240 Speaker 2: Now, this is a tree his public service to America 253 00:11:37,280 --> 00:11:41,000 Speaker 2: at the White House for President Trump. Joseph Flifornia. Jones 254 00:11:41,120 --> 00:11:43,480 Speaker 2: joins us. But what you don't know, and probably President 255 00:11:43,480 --> 00:11:46,840 Speaker 2: Trump didn't know, he was at Deutsche Bank years ago 256 00:11:46,880 --> 00:11:51,680 Speaker 2: in the combine that melded economics into fixed income. We're 257 00:11:51,679 --> 00:11:54,920 Speaker 2: thrilled he could be with us today with parchment from 258 00:11:55,000 --> 00:11:58,640 Speaker 2: Vassar and some work at New York University as well. Okay, 259 00:11:58,960 --> 00:12:00,800 Speaker 2: I got to get this out of the way right now. 260 00:12:00,840 --> 00:12:03,360 Speaker 2: I saw Gold and Sach's treatment and they look at 261 00:12:03,400 --> 00:12:06,680 Speaker 2: four point six zero ten years a pivot point. Okay, 262 00:12:06,760 --> 00:12:09,360 Speaker 2: we're there, and we're there quickly. Do you have in 263 00:12:09,400 --> 00:12:13,839 Speaker 2: your head a ten year yield where the system unravels. 264 00:12:14,559 --> 00:12:16,880 Speaker 7: No, but I do think rates are going higher Tom 265 00:12:16,960 --> 00:12:19,600 Speaker 7: for a whole host of factors, a higher inflation risk 266 00:12:19,679 --> 00:12:22,320 Speaker 7: premium they need at some point for treasure to raise 267 00:12:22,360 --> 00:12:25,040 Speaker 7: more supply, and the fact that the market has really 268 00:12:25,040 --> 00:12:28,080 Speaker 7: only priced about one tightening, and I could see potentially 269 00:12:28,080 --> 00:12:30,200 Speaker 7: a series of tightening, So yields go higher. 270 00:12:30,280 --> 00:12:32,600 Speaker 2: Okay, Paul's got eight questions. I'm going to get this 271 00:12:32,640 --> 00:12:33,720 Speaker 2: one in quickly here. 272 00:12:34,120 --> 00:12:39,120 Speaker 6: If yields go higher, price down, it can be ambiguous, 273 00:12:39,240 --> 00:12:42,760 Speaker 6: good or bad or zag and posen say you're going 274 00:12:42,840 --> 00:12:46,080 Speaker 6: to see a higher wage, a higher real wage. 275 00:12:46,160 --> 00:12:48,560 Speaker 2: Do you buy that optimism or is it going to 276 00:12:48,559 --> 00:12:49,079 Speaker 2: be stress? 277 00:12:49,320 --> 00:12:52,160 Speaker 7: It's possible, I mean the AI the productivity story could 278 00:12:52,160 --> 00:12:55,200 Speaker 7: translate into much higher wages. The corporate share of income 279 00:12:55,280 --> 00:12:58,160 Speaker 7: is high, so hopefully at some point that does flow 280 00:12:58,160 --> 00:13:01,160 Speaker 7: to workers. I was very bullish on the economy, and 281 00:13:01,160 --> 00:13:04,640 Speaker 7: we was talking in my prior role of a disinflationary boom, 282 00:13:05,160 --> 00:13:08,240 Speaker 7: which seems very reasonable until the Middle East warst started, 283 00:13:08,240 --> 00:13:11,440 Speaker 7: because I think that completely changed the dynamics. So yes, 284 00:13:11,480 --> 00:13:14,360 Speaker 7: I'm bullish on I was bullish on growth in terms 285 00:13:14,400 --> 00:13:16,960 Speaker 7: of being lower and non inflationary and rates coming down 286 00:13:17,000 --> 00:13:19,280 Speaker 7: in the FED easing, All that's kind of thrown by 287 00:13:19,320 --> 00:13:21,600 Speaker 7: the wayside. In terms of what level of yields crack 288 00:13:21,679 --> 00:13:24,560 Speaker 7: the system, we don't really know. It's really a liquidity 289 00:13:24,640 --> 00:13:27,720 Speaker 7: and confidence story. Could be four seventy five on tens, 290 00:13:27,720 --> 00:13:29,679 Speaker 7: it could be five percent on tens, and there's so 291 00:13:29,720 --> 00:13:32,000 Speaker 7: many other dynamics up playing. As you're well aware the 292 00:13:32,120 --> 00:13:34,560 Speaker 7: narrowness of the market. The equity market has been a 293 00:13:34,559 --> 00:13:37,520 Speaker 7: handful of companies, and at some point you know that 294 00:13:38,200 --> 00:13:40,880 Speaker 7: exuberance may itself be stretched. So if if it's tightening, 295 00:13:40,880 --> 00:13:44,199 Speaker 7: financial conditions suddenly tighten, risk appetite changes, then it could 296 00:13:44,280 --> 00:13:45,120 Speaker 7: unravel quickly. 297 00:13:46,280 --> 00:13:48,320 Speaker 4: Joe and your notes, you say inflation is a problem. 298 00:13:48,360 --> 00:13:50,640 Speaker 4: I think most of our viewers and listeners would agree 299 00:13:50,640 --> 00:13:53,120 Speaker 4: with you. How long is it going to be a problem? 300 00:13:53,120 --> 00:13:55,600 Speaker 7: Do you think that's a great question? I mean, when's 301 00:13:55,600 --> 00:13:57,160 Speaker 7: the war going to end? And how quickly can these 302 00:13:57,160 --> 00:14:00,000 Speaker 7: bottlenecks stop. I mean the way to think of it 303 00:14:00,240 --> 00:14:02,640 Speaker 7: is too many COVID, and I think that's what most 304 00:14:02,720 --> 00:14:05,000 Speaker 7: investors don't understand, which makes me think yield to go higher. 305 00:14:05,000 --> 00:14:08,040 Speaker 7: When I say many COVID, there's major supply chain disruptions. 306 00:14:08,400 --> 00:14:11,920 Speaker 7: It's not just energy, it's nitrogenior relates to fertilizer, different 307 00:14:11,960 --> 00:14:14,760 Speaker 7: material that going with the plastics are the sensitive commodities. 308 00:14:15,160 --> 00:14:17,160 Speaker 7: And what we learned during COVID is just can't turn 309 00:14:17,280 --> 00:14:19,680 Speaker 7: wells off. You just can't shut this on a much 310 00:14:19,760 --> 00:14:22,600 Speaker 7: much smaller scale. But you can't just turn the system 311 00:14:22,680 --> 00:14:25,520 Speaker 7: off and like a light switch, automatically goes back and 312 00:14:25,600 --> 00:14:27,840 Speaker 7: the market is I don't think the bond market isn't 313 00:14:27,880 --> 00:14:28,880 Speaker 7: fully appreciative of that. 314 00:14:29,000 --> 00:14:32,240 Speaker 2: Joe Varona SMBC and Eco securities threatenly could be with 315 00:14:32,360 --> 00:14:34,920 Speaker 2: us at today and we continue here, I guess with 316 00:14:35,000 --> 00:14:38,480 Speaker 2: the arch idea and you live this at the White House. 317 00:14:38,960 --> 00:14:43,680 Speaker 2: This is a president who likes joint stimuli all the time. 318 00:14:44,120 --> 00:14:48,040 Speaker 2: We've got a nominal GDP pop in five percent plus 319 00:14:48,080 --> 00:14:52,480 Speaker 2: persistently there, We've got you know, inflation well above the 320 00:14:52,520 --> 00:14:55,040 Speaker 2: FED target and all that are we just living in 321 00:14:55,080 --> 00:14:59,040 Speaker 2: a new stimulus driven miliu and it goes until it goes. 322 00:14:59,040 --> 00:15:01,080 Speaker 7: We might tom but it's that's the case. Then you 323 00:15:01,080 --> 00:15:04,600 Speaker 7: know inflation expectations need to be reset and you need 324 00:15:04,640 --> 00:15:07,000 Speaker 7: a higher term structure rates to reflect the environment you 325 00:15:07,120 --> 00:15:09,360 Speaker 7: just described. So to either one or the other. Either 326 00:15:09,360 --> 00:15:12,640 Speaker 7: the economy is going to produce non inflationary growth and 327 00:15:12,680 --> 00:15:14,760 Speaker 7: eventually the FED can get rates to neutral. 328 00:15:14,560 --> 00:15:15,560 Speaker 2: Or right that work. 329 00:15:15,640 --> 00:15:18,560 Speaker 7: We're in a regime where you've got rising debt to GDP, 330 00:15:19,480 --> 00:15:22,840 Speaker 7: higher inflation relative to where the fence cart is, and 331 00:15:22,920 --> 00:15:24,720 Speaker 7: that would be in the Fed's not cutting and that's 332 00:15:24,760 --> 00:15:25,760 Speaker 7: a higher rate regime. 333 00:15:25,920 --> 00:15:29,160 Speaker 2: Do you perceive that model is one hundred basis points 334 00:15:29,160 --> 00:15:33,120 Speaker 2: shift sorry folks, jargon, a one percentage point shift up 335 00:15:33,120 --> 00:15:35,760 Speaker 2: in the curve? Or could it be more sixties like 336 00:15:35,800 --> 00:15:38,080 Speaker 2: can be a real shift into Provoker? 337 00:15:38,480 --> 00:15:40,360 Speaker 7: Well, in the sixties is very as you know, Tom's 338 00:15:40,440 --> 00:15:45,880 Speaker 7: very gradual, yet cyclical. The floor on inflation higher cyclical 339 00:15:45,920 --> 00:15:48,240 Speaker 7: floors as you move through the sixties into the seventies. 340 00:15:49,120 --> 00:15:50,920 Speaker 7: Best guess it's the latter that it would be like 341 00:15:50,960 --> 00:15:53,440 Speaker 7: maybe let's say one hundred basis points repricing. It's a 342 00:15:53,520 --> 00:15:56,480 Speaker 7: nice round number, but you know, could it be something longer? 343 00:15:56,520 --> 00:15:58,440 Speaker 7: It's possible. I mean, in the last couple of years 344 00:15:58,800 --> 00:16:01,800 Speaker 7: inflation is running about seventy five bases point above the 345 00:16:01,800 --> 00:16:04,520 Speaker 7: Fed's target. We're going to go higher than that in 346 00:16:04,520 --> 00:16:06,720 Speaker 7: the next few months. When could it end? Maybe by 347 00:16:06,760 --> 00:16:10,280 Speaker 7: the fall we'll see. I mean, how I guess question 348 00:16:10,320 --> 00:16:13,160 Speaker 7: is how disinflationary is AI in the short term may 349 00:16:13,200 --> 00:16:15,120 Speaker 7: actually be contributing to the problems we have for the 350 00:16:15,200 --> 00:16:18,000 Speaker 7: data center build out and energy usage. Longer term is 351 00:16:18,000 --> 00:16:19,320 Speaker 7: probably disinflationary. 352 00:16:20,320 --> 00:16:23,920 Speaker 4: We've got a new FED chairman, presumably he feels a 353 00:16:23,960 --> 00:16:25,560 Speaker 4: little pressure to get rates down. 354 00:16:26,120 --> 00:16:29,720 Speaker 2: A boy, the data doesn't seem great question, Paul, we're 355 00:16:29,800 --> 00:16:32,360 Speaker 2: going to make some news here. Are you interviewing for 356 00:16:32,440 --> 00:16:33,520 Speaker 2: a position at the FED? 357 00:16:34,000 --> 00:16:36,240 Speaker 7: No, I'm not interviewing for the position at the FED. No, 358 00:16:36,400 --> 00:16:39,080 Speaker 7: by the way, And I've gotten to know them. I 359 00:16:39,120 --> 00:16:41,760 Speaker 7: think they're a bunch of FED people. That was one 360 00:16:41,760 --> 00:16:43,880 Speaker 7: cool thing about the job. There's a lot of super 361 00:16:43,920 --> 00:16:47,240 Speaker 7: talented people there. Kevin worsh will do a great job. 362 00:16:47,440 --> 00:16:50,240 Speaker 7: I'm very confident of that. However, I don't see how 363 00:16:50,280 --> 00:16:52,400 Speaker 7: Kevin's going to make a plausible case for Raycots. 364 00:16:52,520 --> 00:16:54,360 Speaker 5: Yeah, it just is just not there. 365 00:16:54,800 --> 00:16:57,720 Speaker 7: And if the market continues to price tightening, maybe he 366 00:16:57,920 --> 00:17:01,680 Speaker 7: just pushes back against the committee that's certainly becoming, at 367 00:17:01,760 --> 00:17:04,200 Speaker 7: least on from the President's more hawkish. Maybe he pushes 368 00:17:04,240 --> 00:17:06,320 Speaker 7: back a bit, gets it more center, and then kind 369 00:17:06,359 --> 00:17:08,680 Speaker 7: of hope for the best things may be unfold in 370 00:17:08,720 --> 00:17:10,560 Speaker 7: a positive way in the back half of the year, 371 00:17:10,600 --> 00:17:13,000 Speaker 7: but right now, look at like the Price is Paid 372 00:17:13,040 --> 00:17:15,320 Speaker 7: series in the isms. The New York Fed's got this 373 00:17:15,400 --> 00:17:18,280 Speaker 7: global Pressure Supply Index. Not sure exactly how they put 374 00:17:18,320 --> 00:17:21,320 Speaker 7: it together, but the picture certainly shows these supply chain 375 00:17:21,440 --> 00:17:24,840 Speaker 7: disruptions that's all pro inflation in the system. 376 00:17:25,240 --> 00:17:27,920 Speaker 4: So again, is this a inflation? 377 00:17:28,400 --> 00:17:28,760 Speaker 2: I don't know. 378 00:17:29,240 --> 00:17:31,680 Speaker 4: It just feels stickier to me than just. 379 00:17:31,640 --> 00:17:32,439 Speaker 5: A bit sticky. 380 00:17:32,480 --> 00:17:34,040 Speaker 7: Well, well, you could see if you look at like 381 00:17:34,080 --> 00:17:37,080 Speaker 7: the San Francisco Fed, they've got the acyclical and cyclical 382 00:17:37,840 --> 00:17:41,640 Speaker 7: price trends. You look at the Atlanta fit sticky price index. Yeah, 383 00:17:41,680 --> 00:17:44,080 Speaker 7: you're seeing it absolutely sticky. And by the way, it's 384 00:17:44,080 --> 00:17:46,320 Speaker 7: been above trend, so you know, we've been well above 385 00:17:46,359 --> 00:17:48,919 Speaker 7: two and a lot of these components, the supercre that 386 00:17:49,000 --> 00:17:52,080 Speaker 7: the former chair Jay Powell likes looking at and running 387 00:17:52,080 --> 00:17:54,520 Speaker 7: about three and a half percent, definitely sticky. 388 00:17:54,920 --> 00:17:58,280 Speaker 4: So I mean there's nothing the FED can do, right, 389 00:17:58,400 --> 00:17:58,800 Speaker 4: I mean. 390 00:17:59,119 --> 00:18:01,119 Speaker 7: There's nothing the Fed can do other than at some 391 00:18:01,160 --> 00:18:04,080 Speaker 7: point potentially raise rates try to slow demand. And the 392 00:18:04,080 --> 00:18:07,120 Speaker 7: problem with raising rates to slow demand to bring inflation 393 00:18:07,240 --> 00:18:09,480 Speaker 7: back to target, which right now is probably going to 394 00:18:09,520 --> 00:18:10,760 Speaker 7: be at least a point, if not a point and 395 00:18:10,760 --> 00:18:14,200 Speaker 7: a half above target is generally a recession. The question 396 00:18:14,200 --> 00:18:15,480 Speaker 7: is does if FED want to do that. If it 397 00:18:15,600 --> 00:18:18,280 Speaker 7: doesn't want to do that, they implicitly change their target. 398 00:18:18,680 --> 00:18:20,080 Speaker 7: You're going to be in a world then where rates 399 00:18:20,080 --> 00:18:22,280 Speaker 7: are higher, You're gonna have a steeper urb and higher yields. 400 00:18:22,359 --> 00:18:25,440 Speaker 2: Real true for you across this nation and worldwide. Joseph 401 00:18:25,600 --> 00:18:30,159 Speaker 2: Livornia with us today with this SMBC Nico here with 402 00:18:30,200 --> 00:18:33,600 Speaker 2: his service to the nation in the first Trump administration. 403 00:18:33,840 --> 00:18:38,240 Speaker 2: Lots of good work, including serious fixed income chaps. Stay 404 00:18:38,240 --> 00:18:42,160 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 405 00:18:49,359 --> 00:18:52,960 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 406 00:18:53,040 --> 00:18:56,159 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 407 00:18:56,280 --> 00:19:00,320 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app. Watch 408 00:19:00,400 --> 00:19:02,280 Speaker 1: us live on YouTube right now. 409 00:19:02,359 --> 00:19:05,359 Speaker 2: Mishelle Meyer darkens the door. She's chief economist, head of 410 00:19:05,400 --> 00:19:08,280 Speaker 2: economics master Card, and all I can say is she 411 00:19:08,480 --> 00:19:11,520 Speaker 2: owns consumer analysis. Let's get this out of the way. 412 00:19:11,560 --> 00:19:14,720 Speaker 2: The state of the American consumer. I know it's case shaped. 413 00:19:14,720 --> 00:19:16,639 Speaker 2: Don't give me that. How fragile is it? 414 00:19:17,480 --> 00:19:19,560 Speaker 8: So I would use a different word. I would use 415 00:19:19,600 --> 00:19:23,159 Speaker 8: the word nimble for consumers. Consumers have been hit with 416 00:19:23,200 --> 00:19:25,639 Speaker 8: a number of shocks of the last few years, and 417 00:19:25,680 --> 00:19:29,359 Speaker 8: they have managed to navigate those shocks remarkably well. 418 00:19:29,400 --> 00:19:31,240 Speaker 9: And I think it's because the shocks have not. 419 00:19:31,200 --> 00:19:34,199 Speaker 8: Been uniform in terms of the basket of spend, so 420 00:19:34,200 --> 00:19:37,280 Speaker 8: they've had some flexibility in terms of how to figure 421 00:19:37,280 --> 00:19:40,840 Speaker 8: out where the prices are rising, where they're seeing more discounts, 422 00:19:41,320 --> 00:19:43,920 Speaker 8: and they're gravitating to where they find the most amount 423 00:19:43,920 --> 00:19:44,280 Speaker 8: of value. 424 00:19:44,280 --> 00:19:45,639 Speaker 9: It's pretty remarkable to see. 425 00:19:45,720 --> 00:19:48,280 Speaker 2: I love your marketing at MasterCard. She used to write 426 00:19:48,359 --> 00:19:52,120 Speaker 2: normal reports for banks in America. Now she's at MasterCard 427 00:19:52,840 --> 00:19:55,040 Speaker 2: AI Enabled Traveler. 428 00:19:55,440 --> 00:19:56,320 Speaker 9: I mean, it's fine. 429 00:19:56,480 --> 00:20:01,439 Speaker 8: How it's fine now, I love talking about the Federal Reserve, 430 00:20:01,680 --> 00:20:03,360 Speaker 8: but it's. 431 00:20:03,280 --> 00:20:05,000 Speaker 9: Fabulous to also talk. 432 00:20:04,880 --> 00:20:07,760 Speaker 8: About these broader themes in the economy and what we 433 00:20:07,800 --> 00:20:13,359 Speaker 8: can see in our own incredible data sets. So we 434 00:20:13,960 --> 00:20:17,320 Speaker 8: did so. It's called the travel equation. It's around three 435 00:20:17,359 --> 00:20:21,800 Speaker 8: forces that are driving travel in this economy. Macro, particularly geopolitics, 436 00:20:22,200 --> 00:20:25,080 Speaker 8: machines which would be AI, and then motivations, which is 437 00:20:25,119 --> 00:20:27,760 Speaker 8: where you want to go. The personal motivations that drive travel. 438 00:20:28,359 --> 00:20:30,159 Speaker 8: And one of the things that was really remarkable that 439 00:20:30,200 --> 00:20:32,960 Speaker 8: we were able to clean from our data is to 440 00:20:33,000 --> 00:20:37,280 Speaker 8: be able to understand how consumers that are utilizing AIS. 441 00:20:37,400 --> 00:20:40,160 Speaker 8: We separate into two cohorts, the consumers that have AI 442 00:20:40,240 --> 00:20:44,560 Speaker 8: subscriptions and a matching set of cohortive consumers that don't, 443 00:20:45,000 --> 00:20:47,520 Speaker 8: and you can see how they're traveling differently. First of all, 444 00:20:47,760 --> 00:20:50,240 Speaker 8: those that are using AI subscriptions spend more of their 445 00:20:50,280 --> 00:20:54,119 Speaker 8: budget towards travel, and then they go to places that 446 00:20:54,160 --> 00:20:56,880 Speaker 8: are off the beaten path, like things you would never 447 00:20:57,000 --> 00:20:59,439 Speaker 8: have known, or cities that you're not necessarily aware of. 448 00:21:00,119 --> 00:21:02,679 Speaker 8: You're seeing a very high share of tourists spending in 449 00:21:02,680 --> 00:21:06,000 Speaker 8: those cities from that AI subscriber bucket. So it's fascinating 450 00:21:06,040 --> 00:21:09,840 Speaker 8: to see how consumers are embracing AI to find new 451 00:21:10,040 --> 00:21:13,159 Speaker 8: places to travel that have more value, especially in the 452 00:21:13,200 --> 00:21:14,760 Speaker 8: world with high inflation. 453 00:21:14,960 --> 00:21:16,080 Speaker 2: Paul Sweet is the only one. 454 00:21:16,240 --> 00:21:18,040 Speaker 4: With a real life I do the kids are going 455 00:21:18,080 --> 00:21:22,119 Speaker 4: to the kids give me five days in Ireland. Boom 456 00:21:22,200 --> 00:21:27,160 Speaker 4: two seconds later, full itinary hotels, restaurants, everything. 457 00:21:26,840 --> 00:21:27,920 Speaker 9: Funny you say Ireland. 458 00:21:27,960 --> 00:21:31,440 Speaker 8: We actually found forward looking bookings that from the North 459 00:21:31,440 --> 00:21:36,200 Speaker 8: America the most, like the highest increase in bookings for 460 00:21:36,240 --> 00:21:37,399 Speaker 8: the summer is Dublin. 461 00:21:37,600 --> 00:21:40,520 Speaker 4: Yep, you prove it out the kids. A couple of 462 00:21:40,560 --> 00:21:43,440 Speaker 4: years ago was Barcelona. Now, yeah, I don't know where 463 00:21:43,440 --> 00:21:45,840 Speaker 4: everybody's going, But how about there's a lot of tension 464 00:21:45,920 --> 00:21:48,119 Speaker 4: in the world here in the Middle East, and of 465 00:21:48,160 --> 00:21:52,080 Speaker 4: course are people adjusting to travel to reflect that? 466 00:21:52,200 --> 00:21:55,600 Speaker 8: Of course, of course, and that's that's critical when you 467 00:21:55,600 --> 00:21:58,800 Speaker 8: think about the overwhelming force that's out there in terms 468 00:21:58,840 --> 00:22:02,560 Speaker 8: of travel, it is very much geopolitics, and it's the 469 00:22:02,640 --> 00:22:05,880 Speaker 8: cost of travel, and that's what consumers have to manage 470 00:22:05,960 --> 00:22:08,320 Speaker 8: in terms of where do they go from a safety perspective, 471 00:22:08,560 --> 00:22:10,960 Speaker 8: where do they go from a cost perspective, how do 472 00:22:11,000 --> 00:22:11,680 Speaker 8: they think about. 473 00:22:11,480 --> 00:22:12,840 Speaker 9: The availability of flights? 474 00:22:12,960 --> 00:22:16,639 Speaker 8: All of those are critical parts of the equation in 475 00:22:16,680 --> 00:22:19,080 Speaker 8: North America, I the U asked. But even more so, 476 00:22:19,160 --> 00:22:21,639 Speaker 8: of course, if you're staying in the Middle East or throughout. 477 00:22:21,400 --> 00:22:24,800 Speaker 4: Asia, Canadians not coming down to Florida, are going to 478 00:22:24,840 --> 00:22:27,760 Speaker 4: Arizona when it gets cold, Is that still an issue? 479 00:22:28,119 --> 00:22:31,000 Speaker 8: I think that you know, you're seeing Canadians flock to 480 00:22:31,040 --> 00:22:34,200 Speaker 8: warmer weather, whether it's not some lard in Arizona or Mexico. 481 00:22:35,080 --> 00:22:36,680 Speaker 9: But no, you're still seeing a lot of a lot 482 00:22:36,680 --> 00:22:37,200 Speaker 9: of movement. 483 00:22:37,840 --> 00:22:39,560 Speaker 4: All right, so we've got I'm going to go back 484 00:22:39,560 --> 00:22:42,080 Speaker 4: to your old well here. Yeah, we've got a new 485 00:22:42,119 --> 00:22:45,040 Speaker 4: Federal Reserve chairman here, what is he going to do 486 00:22:45,080 --> 00:22:47,440 Speaker 4: with his Federal Reserve because he's presumably he's got a 487 00:22:47,440 --> 00:22:51,080 Speaker 4: little bit of pressure from the administration to bring rights down. 488 00:22:51,080 --> 00:22:53,440 Speaker 4: But the data just isn't there, is it? 489 00:22:54,840 --> 00:22:55,919 Speaker 9: So we'll see. 490 00:22:56,040 --> 00:22:57,480 Speaker 8: I mean, I think that's the reality is that we 491 00:22:57,520 --> 00:22:59,359 Speaker 8: are in Wade and C mode and that's probably the 492 00:22:59,400 --> 00:23:01,800 Speaker 8: right place to be because we have to determine how 493 00:23:01,840 --> 00:23:04,520 Speaker 8: the increase and energy prices will feed through the economy. 494 00:23:05,000 --> 00:23:09,280 Speaker 8: So there's both growth dynamics and inflation dynamics. So I 495 00:23:09,320 --> 00:23:12,200 Speaker 8: think for the FED to sit and monitor the data 496 00:23:12,200 --> 00:23:14,760 Speaker 8: and try to understand the transmission of the shock into 497 00:23:14,800 --> 00:23:16,879 Speaker 8: the economy is absolutely the right approach. 498 00:23:16,680 --> 00:23:18,439 Speaker 9: And the Committee has made that very clear. 499 00:23:18,480 --> 00:23:21,600 Speaker 8: They've been very vocal in terms of where they see 500 00:23:21,640 --> 00:23:24,280 Speaker 8: those risks. We had multiple descents in the last meeting, 501 00:23:25,160 --> 00:23:29,120 Speaker 8: very active commentary coming out of Federal Reserve talking about 502 00:23:29,440 --> 00:23:32,000 Speaker 8: those that are leaning more towards potentially a hip being 503 00:23:32,000 --> 00:23:34,919 Speaker 8: the next move those still in the cut camp, but 504 00:23:35,080 --> 00:23:37,640 Speaker 8: most that are just saying we have to see how 505 00:23:37,640 --> 00:23:38,360 Speaker 8: things play out. 506 00:23:38,960 --> 00:23:40,240 Speaker 2: I don't know the chart in front of me, but 507 00:23:40,280 --> 00:23:42,399 Speaker 2: I saw a chart yesterday from the Federzer Bank of 508 00:23:42,440 --> 00:23:47,359 Speaker 2: San Francisco that showed the flow of people in a 509 00:23:47,440 --> 00:23:51,920 Speaker 2: way losing their job, moving in transition from employment to unemployment, 510 00:23:52,520 --> 00:23:56,600 Speaker 2: and for the younger cohort it was shocking the decline 511 00:23:57,600 --> 00:24:01,960 Speaker 2: in jobs, the flow out of into unemployment. What is 512 00:24:02,119 --> 00:24:05,840 Speaker 2: master Card seeing on the stresses on the labor front. 513 00:24:06,720 --> 00:24:09,399 Speaker 8: I mean, for us, of course, just looking at the 514 00:24:09,520 --> 00:24:12,240 Speaker 8: public labor market statistics, just like you are in terms 515 00:24:12,280 --> 00:24:15,280 Speaker 8: of the BLS data, the flow data, the jolt status, 516 00:24:15,400 --> 00:24:19,240 Speaker 8: jobless claims, so specifically to the stat that you reference 517 00:24:19,280 --> 00:24:22,760 Speaker 8: in terms of the flow of labor in and out 518 00:24:22,760 --> 00:24:27,760 Speaker 8: of unemployed cohorts. Earlier in the year and really actually 519 00:24:27,880 --> 00:24:32,560 Speaker 8: last year, we did see the younger cohort, higher educated 520 00:24:32,600 --> 00:24:35,760 Speaker 8: seeing a higher duration of unemployment. The last few months 521 00:24:35,800 --> 00:24:40,080 Speaker 8: that's actually come down. So I think given what we're 522 00:24:40,080 --> 00:24:42,160 Speaker 8: seeing in terms of very low unemployment rate four point 523 00:24:42,200 --> 00:24:45,159 Speaker 8: three percent unemployment rate, the ratio of job openings, the 524 00:24:45,240 --> 00:24:48,480 Speaker 8: number of unemployed is remaining pretty low, pretty stable. It 525 00:24:48,480 --> 00:24:50,399 Speaker 8: feels to me that we're in a labor market that 526 00:24:50,680 --> 00:24:55,520 Speaker 8: is pretty frankly stable, and you're seeing the right amount 527 00:24:55,560 --> 00:24:58,240 Speaker 8: of movement in the workforce. Now obviously it's not even 528 00:24:58,320 --> 00:25:01,960 Speaker 8: it never is, but on aggregate it about private sector 529 00:25:02,040 --> 00:25:04,480 Speaker 8: job creation running at sixty eight thousand a month the 530 00:25:04,600 --> 00:25:07,760 Speaker 8: last six months, the unemployment rate again holding low wage 531 00:25:07,760 --> 00:25:09,919 Speaker 8: growth pre serving to be pretty steady. 532 00:25:10,440 --> 00:25:11,840 Speaker 9: Feels like a stay will leave a market. 533 00:25:12,119 --> 00:25:16,359 Speaker 4: At master Card, you get some unique data there's we 534 00:25:16,440 --> 00:25:19,359 Speaker 4: see how the consumers are really spending the money. Is 535 00:25:19,400 --> 00:25:21,000 Speaker 4: anything jumping out at youde that might be a little 536 00:25:21,040 --> 00:25:23,080 Speaker 4: different than maybe we would have thought here because we 537 00:25:23,119 --> 00:25:25,159 Speaker 4: do have this case shaped economy. I'm not sure if 538 00:25:25,200 --> 00:25:26,120 Speaker 4: you see that in your data. 539 00:25:27,119 --> 00:25:28,800 Speaker 8: So I mean I have a lot of views around 540 00:25:28,840 --> 00:25:30,679 Speaker 8: the case shaped narrative, which we don't need to go 541 00:25:30,760 --> 00:25:33,440 Speaker 8: and do right now. But in terms of what we're 542 00:25:33,480 --> 00:25:37,000 Speaker 8: seeing for the total picture, in terms of overall spend, 543 00:25:37,720 --> 00:25:39,479 Speaker 8: of course, we saw a big increase in spending at 544 00:25:39,480 --> 00:25:41,080 Speaker 8: the pump. So if you look at spending on fuel 545 00:25:41,080 --> 00:25:44,200 Speaker 8: and convenience running about twenty percent positive on a year 546 00:25:44,200 --> 00:25:46,280 Speaker 8: of a year basis, and that showed up very quickly 547 00:25:46,320 --> 00:25:47,520 Speaker 8: once gas prices rose. 548 00:25:48,080 --> 00:25:50,600 Speaker 9: So that's the pass through of higher gas prices to 549 00:25:50,640 --> 00:25:51,800 Speaker 9: the pump, to the consumer. 550 00:25:53,040 --> 00:25:55,000 Speaker 8: And then if you look at the broader basket of spend, 551 00:25:55,119 --> 00:25:58,919 Speaker 8: consumers are still spending at a pretty decent clip. In 552 00:25:58,960 --> 00:26:01,360 Speaker 8: other categories, you're not really seeing a cut back, particularly 553 00:26:01,359 --> 00:26:03,639 Speaker 8: in areas that you would think like discretionary spending for 554 00:26:03,720 --> 00:26:05,199 Speaker 8: restaurants that's holding. 555 00:26:05,200 --> 00:26:07,600 Speaker 2: Okay, we got this is important, And folks who got 556 00:26:07,640 --> 00:26:11,440 Speaker 2: to run around of time with Michelle, this is important. 557 00:26:11,880 --> 00:26:16,320 Speaker 2: Are we more aware of the k shaped agony because 558 00:26:16,320 --> 00:26:20,120 Speaker 2: of our new social media, our new discourse, our new 559 00:26:20,200 --> 00:26:24,560 Speaker 2: communication versus fifty years ago or one hundred and fifty 560 00:26:24,640 --> 00:26:27,520 Speaker 2: years ago. Because you're optimistic and I hear this some 561 00:26:27,600 --> 00:26:30,320 Speaker 2: people it's just not that bad out there, and yet 562 00:26:30,320 --> 00:26:32,240 Speaker 2: we're here. It it's bad out there every tick of 563 00:26:32,280 --> 00:26:32,560 Speaker 2: the day. 564 00:26:32,640 --> 00:26:34,760 Speaker 8: Well, of course, there's the headlines that are coming in 565 00:26:34,800 --> 00:26:37,840 Speaker 8: fast and fears across the board, and then there's the data. 566 00:26:38,200 --> 00:26:40,439 Speaker 8: And when you actually look at the numbers and you 567 00:26:40,520 --> 00:26:44,120 Speaker 8: see how people are spending and how businesses are investing, 568 00:26:44,200 --> 00:26:46,919 Speaker 8: you see an economy that is still moving forward. And 569 00:26:46,960 --> 00:26:50,159 Speaker 8: that's why for us having this purview in looking at 570 00:26:50,160 --> 00:26:51,600 Speaker 8: the data, it makes all the difference. 571 00:26:51,680 --> 00:26:54,560 Speaker 2: I can't say enough how bottle. You just heard from 572 00:26:54,600 --> 00:26:57,280 Speaker 2: Michelle Meyer. You look at the market, you say, where 573 00:26:57,320 --> 00:26:59,800 Speaker 2: is the optimism given the agony, And the answer is 574 00:27:00,320 --> 00:27:02,840 Speaker 2: she does what she does at MasterCards. She looks at 575 00:27:02,840 --> 00:27:06,320 Speaker 2: the data at San Francisco. Nicholas Petrowski, Na Doot I 576 00:27:06,520 --> 00:27:09,080 Speaker 2: just reput that out on LinkedIn, and if you want 577 00:27:09,080 --> 00:27:11,960 Speaker 2: to learn about Michelle Meyer's work, I can't say enough 578 00:27:12,440 --> 00:27:15,560 Speaker 2: about some of our guests and their commitment to the 579 00:27:15,600 --> 00:27:20,639 Speaker 2: new LinkedIn. Dan Roth driving that for LinkedIn, What Urine 580 00:27:20,680 --> 00:27:25,720 Speaker 2: Timmor's doing at Fidelity, Michelle Meyer when she's doing at MasterCard. 581 00:27:25,840 --> 00:27:30,040 Speaker 2: You've got economists out there like a doctor Petrowski and Nadau. 582 00:27:30,119 --> 00:27:35,440 Speaker 2: These are incredible charts, incredible visuals. Just join on LinkedIn 583 00:27:35,480 --> 00:27:39,080 Speaker 2: and build out your following each and every day, huge 584 00:27:39,160 --> 00:27:41,160 Speaker 2: huge value as well. 585 00:27:41,560 --> 00:27:46,399 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify 586 00:27:46,520 --> 00:27:50,800 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 587 00:27:50,960 --> 00:27:54,399 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 588 00:27:54,480 --> 00:27:58,520 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 589 00:27:58,560 --> 00:28:01,919 Speaker 1: can also watch us live every weekday on YouTube and 590 00:28:02,119 --> 00:28:03,840 Speaker 1: always on the Bloomberg terminal