Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern
Speaker 1: on Apple car Play or Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Monica Descenzo joins US snub had a global investment strategy
Speaker 2: GP Morgan Private Bank. What are fancy people doing with
Speaker 2: their cash?
Speaker 3: I don't know about fancy people. What I can tell
Speaker 3: you what my clients are doing with their cash. Balances
Speaker 3: are actually still pretty high. If you look like a
Speaker 3: cross our entire platform, something around twenty percent of assets
Speaker 3: is actually still sitting in cash. Some of my larger
Speaker 3: clients so that it's even greater than that, And I
Speaker 3: think that just reflects the desire for many people to
Speaker 3: add to risk assets on some kind of pullback. We
Speaker 3: just haven't had a prolonged pullback. We've had volatile but
Speaker 3: it hasn't been very long lasting. So I expect as
Speaker 3: we move through the summer, maybe if we get a
Speaker 3: few more bumps, you'll see some of that move into
Speaker 3: the market. And then I think as we move towards
Speaker 3: the back half of the year. I think people are
Speaker 3: just hoping that we get through all this turmoil in
Speaker 3: the Middle East and some of these headlines. The problem is,
Speaker 3: you know, when it feels good, that's generally not the
Speaker 3: best time to invest, So you probably should be sticking
Speaker 3: a toe in now.
Speaker 4: How concerned are your clients about inflation? I know it's
Speaker 4: you know, this inflation that we're seeing out there. It
Speaker 4: impacts the lower end of the case shaped economy, perhaps
Speaker 4: a little bit more than the higher end. But I'm
Speaker 4: guessing you're getting some phone calls.
Speaker 3: It is by far the biggest risk that people think about.
Speaker 3: I think when you think about the client base, I
Speaker 3: work with many of them, remember the seventies, and they say, Okay,
Speaker 3: we look at this market. It just keeps grinding higher,
Speaker 3: grinding higher, and yet you have higher rates, higher inflation
Speaker 3: that feels like it's going to be more persistent, and
Speaker 3: so that they're very concerned that this could somehow be
Speaker 3: the seventies all over again, where we get caught, you know,
Speaker 3: off kilter. That said, when I look at portfolios, I
Speaker 3: don't see portfolios that are built for a higher inflationary environment.
Speaker 3: And so when you look at this market, hi single
Speaker 3: digits here date. That's where we're having most of our conversations.
Speaker 3: Think about rebalancing, think about adding more to your portfolio
Speaker 3: that's going to carry better in an inflationary environment. So
Speaker 3: you got to look at real assets, infrastructure, even hedge
Speaker 3: funds again, which many of my clients have not used
Speaker 3: as a tool in a very long time. I know,
Speaker 3: just saying it, I kind of chuckle like you because
Speaker 3: they were out of favor.
Speaker 2: For a long time.
Speaker 3: And I think now people are starting to appreciate what
Speaker 3: uncorrelated strategies could do in an inflationary environment.
Speaker 4: Even in a fixed income market up well, you could
Speaker 4: sit in to your treasure and get north to four
Speaker 4: percent now, and I mean that's got to be attractive for.
Speaker 3: A lot of it is, especially in a world where
Speaker 3: we look out twelve months, we're looking for five six
Speaker 3: seven percent returns in equities, So if you can get
Speaker 3: close to that with fixed income with much less volatility,
Speaker 3: then that feels attractive. And so I think the big
Speaker 3: question that you mentioned at the beginning of the cash
Speaker 3: with inflation, where it is cash is not real you
Speaker 3: should be So do need to dip a toe in
Speaker 3: and into risk assets in some form, even if it's
Speaker 3: just you know, going out a little bit in the risk.
Speaker 2: So what do you do with duration? First of all,
Speaker 2: let's get this stereotype out of the way. Fancy people
Speaker 2: as I call them. Are they sixty forty Are they
Speaker 2: loaded the book on Apple and Nvidia? Are they eighty
Speaker 2: five percent bonds? What's the actual makeup of those portfolios?
Speaker 3: When you start to go to like the higher end
Speaker 3: of the well spectrum, you do see more assets in
Speaker 3: longer duration investments that could be alternatives other areas like that,
Speaker 3: because they don't need a liquidity right and so that
Speaker 3: they can take a lot more risk. So that's gonna
Speaker 3: be different from like a standard you know, mom and
Speaker 3: pop investor. And so that's where I see more investments
Speaker 3: going that they're playing for the long term. They want
Speaker 3: to ride this out, they don't want to worry about Okay,
Speaker 3: So you've.
Speaker 2: Got a family of forty five people deciding which f
Speaker 2: one grand prix to go to next? Great, and there's
Speaker 2: one person who's responsible is they look at the monthly statement.
Speaker 2: If we see yield up, price down, how many months
Speaker 2: out do they have to see price down before they
Speaker 2: get upset?
Speaker 3: You know, it's funny, I that'sn't a way. While alternatives
Speaker 3: can be a better asset class, some of these marked
Speaker 3: you know, not donate as regular basis. So it helps
Speaker 3: people hang in there. You know, clients do panic. That's
Speaker 3: why I have a job right to try to keep
Speaker 3: them steady. And where we spend a lot of time
Speaker 3: beside hogwe inflation, is what is your plan, what is
Speaker 3: your goal? What is this money for? And if it's
Speaker 3: for five, ten, fifteen years from now, your kids or
Speaker 3: your grandkids, you should not panic on a monthly statement.
Speaker 3: I try to caution people to not let that cause
Speaker 3: these reactions. And even I mentioned market up nine percent
Speaker 3: year to date, people look at that and they say, oh,
Speaker 3: I can't add here. I shouldn't add at highs. All
Speaker 3: the data we look at, we look at it over time.
Speaker 3: Maybe not in a two or three month period, but
Speaker 3: four or five months are longer. Adding it an all
Speaker 3: time high almost no different than adding on a dep
Speaker 3: And so I try to caution people on the behavioral
Speaker 3: side to not let your emotions dictate how you invest,
Speaker 3: and rather stick to the plan that we've articulated.
Speaker 2: Easier said than done that exactly.
Speaker 4: How about gold gold Wait we hit a you know,
Speaker 4: hit five thousand. We've now pulled back to forty five hundred.
Speaker 4: But still I know gold is in the conversation off
Speaker 4: with your clients.
Speaker 3: Absolutely, I you know, most of my clients in spite
Speaker 3: of the rally what over one hundred percent of the
Speaker 3: last few years, so golds had an amazing rally. And
Speaker 3: yet on this re in volatility, I think people assumed
Speaker 3: the Middle East crisis would cause a rally and that's
Speaker 3: not what happened. And there's a lot of reasons for that.
Speaker 3: But you look at where gold is now and you say, okay,
Speaker 3: I still most of my clients still want to diversify
Speaker 3: a bit outside of their dollar exposure, so gold helps there.
Speaker 3: And then you look at Central Bank of buying, which
Speaker 3: we think is still going to be a tailwind over
Speaker 3: the next six to eighteen months. And so that we
Speaker 3: have those two together, still feels like there's a place
Speaker 3: for golden portfolios. The question is how you add it.
Speaker 3: And so they actually have some volatility, so you can
Speaker 3: sell puts, you can do strategies like that to leg
Speaker 3: in at a lower level, which has been house in
Speaker 3: my larger families have been doing it.
Speaker 2: Madican. Thank you so much, Medica. This sends over JP
Speaker 2: Moore in Private Bank. Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch US live on YouTube.
Speaker 2: David Oil right now with us on economics and the
Speaker 2: America's at Macquarie as well. David, I don't feel like
Speaker 2: I've had a traditional economics discussion, like Paul, what when
Speaker 2: the Red Sox had penet hopes? Fact, David, if you're
Speaker 2: writing an eight page memo today, do you have any
Speaker 2: understanding of where the American economy is, say September November
Speaker 2: of this year.
Speaker 5: Yeah, Well, look, Tom, we are actually fairly optimistic in
Speaker 5: terms of where things are heading. We think that the
Speaker 5: consumer is proving resilient, and credit growth remains strong. The
Speaker 5: AI capex cycle continues to run strong. So we suspect
Speaker 5: that you're in a good place, and I think that
Speaker 5: that will remain the play the case when you get
Speaker 5: to the fall and you'll be talking about how strong
Speaker 5: the economy is and the need for rate hikes down
Speaker 5: the line from the Fed.
Speaker 4: David, how concerned are you about the inflation in this economy?
Speaker 4: Is it a short term war driven energy inflation or
Speaker 4: is it something more?
Speaker 5: I think there's something more. I think that you you know,
Speaker 5: certainly the oil spike is probably passing through and you're
Speaker 5: likely to see that come through in core inflation and
Speaker 5: coming months. But I think on top of that you
Speaker 5: have a tech boom. And I think this is one
Speaker 5: of the undertold stories of twenty twenty five and even
Speaker 5: twenty twenty six now is how much tech is driving
Speaker 5: and inflation impulse. If you look at at things like
Speaker 5: computer software and accessories in the Consumer Price Index that
Speaker 5: has historically been about minus five percent year on year.
Speaker 5: In the latest release for April that was up fourteen
Speaker 5: percent year over year, So you've seen a real inflection
Speaker 5: in that PPI. Semiconductor similar story, that's up twenty five
Speaker 5: twenty six percent year on year.
Speaker 2: With the inflation we have of a central tendency three
Speaker 2: point eight percent. I notice Canada coming out today with
Speaker 2: a much lower inflation regime. Is Macquarie modeling out a
Speaker 2: potential four percent statistic or or do you just see
Speaker 2: migrating not to two percent forget about that's silliness, but
Speaker 2: just nudging down if you will.
Speaker 5: I think in the US, of course you have a
Speaker 5: much tighter labor market, and then what's the case in Canada.
Speaker 5: Canada built up some labor slacks. I think that helps
Speaker 5: to explain why you're seeing some divergence in the inflation
Speaker 5: data out over over the last couple of months in
Speaker 5: those two economies. But I'd say that four percent on
Speaker 5: a headline number is probably likely to occur later this
Speaker 5: year in the US, So it's not something that we
Speaker 5: think will be sustained, but certainly with the oil price increase,
Speaker 5: that's four percent is obtainable. I think probably longer term,
Speaker 5: you're looking at inflation settling in around two and a
Speaker 5: half to three percent. We've had, I mean, inflation has
Speaker 5: been above target for over five years now.
Speaker 2: We turned a surveillance experts here with David Alexis Christophers
Speaker 2: and Paul Sweeney. Guys, if we get four or four
Speaker 2: point one percent inflation, mentally, we're not ready for that,
Speaker 2: I would suggest I don't.
Speaker 4: And this is a US consumer, like a lot of
Speaker 4: consumers around the world, have been beat over the head
Speaker 4: with inflation for a long time now.
Speaker 6: And it'll be the first time a whole generation has
Speaker 6: seen inflation be that high.
Speaker 5: So they don't do what.
Speaker 2: David, That's a really important point from Alexis. I mean,
Speaker 2: this is a whole new new for a lot of people,
Speaker 2: isn't Well.
Speaker 5: I think the lived experience for a lot of people
Speaker 5: that entered their working lives or their adulthood and you
Speaker 5: know around twenty twenty has been you know, elevated inflation.
Speaker 5: And so I think that the luxury that we had
Speaker 5: in twenty twenty two and in twenty twenty three when
Speaker 5: you had that first wave of inflation posts the COVID
Speaker 5: reopening was that you had had low inflation for you know,
Speaker 5: thirty or forty years, So people weren't I didn't have
Speaker 5: their backup as much about it. And I think that
Speaker 5: you know, if we have a second inflation wave here
Speaker 5: and it looks like one maybe underway, you know, people
Speaker 5: will be much more sensitive. I think that's that's astute point, David.
Speaker 4: Given that backdrop, what's your view of the US consumer
Speaker 4: these days?
Speaker 5: Well, look, consumer I think has proven more resilient than
Speaker 5: a lot of people had anticipated at the outset of
Speaker 5: this oil price spike, same store sales growth I was
Speaker 5: looking at it the other day is up close to
Speaker 5: ten percent year over year. We've had solid retail sales
Speaker 5: growth through April, so it looks like the spending has continued,
Speaker 5: which I think the sum has been a bit of
Speaker 5: a puzzle given the higher gasoline prices some had anticipated
Speaker 5: would be more of a drag. Tax re elevated tax
Speaker 5: refund checks I think are part of the story. And
Speaker 5: then I think another undertold part of the story is
Speaker 5: credit growth. Right, credit loosening is taking place, and consumers
Speaker 5: are making up for the higher gasoline prices through taking
Speaker 5: out credit.
Speaker 2: So one final question, my summary of all this, David
Speaker 2: Doyle is I got to start modeling out of FED
Speaker 2: rate increase.
Speaker 5: I think that's right. Look, we've been calling for a
Speaker 5: Federate the next move for an increase since the start
Speaker 5: of the year. You know, right now we're in early
Speaker 5: twenty twenty seven, but it's possible if the data continue
Speaker 5: to evolve then in the way that it has been
Speaker 5: that they have to start moving in twenty twenty six.
Speaker 5: So I do think that we'll be talking about that
Speaker 5: more than the months to.
Speaker 2: Come, David do Thank you so much Macquari this morning.
Speaker 2: That was a great summary of where we are. We're
Speaker 2: not doing that enough now given all the distractions, stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Apple Karplay and Android Otto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube for Global Wall Street.
Speaker 2: Now, this is a tree his public service to America
Speaker 2: at the White House for President Trump. Joseph Flifornia. Jones
Speaker 2: joins us. But what you don't know, and probably President
Speaker 2: Trump didn't know, he was at Deutsche Bank years ago
Speaker 2: in the combine that melded economics into fixed income. We're
Speaker 2: thrilled he could be with us today with parchment from
Speaker 2: Vassar and some work at New York University as well. Okay,
Speaker 2: I got to get this out of the way right now.
Speaker 2: I saw Gold and Sach's treatment and they look at
Speaker 2: four point six zero ten years a pivot point. Okay,
Speaker 2: we're there, and we're there quickly. Do you have in
Speaker 2: your head a ten year yield where the system unravels.
Speaker 7: No, but I do think rates are going higher Tom
Speaker 7: for a whole host of factors, a higher inflation risk
Speaker 7: premium they need at some point for treasure to raise
Speaker 7: more supply, and the fact that the market has really
Speaker 7: only priced about one tightening, and I could see potentially
Speaker 7: a series of tightening, So yields go higher.
Speaker 2: Okay, Paul's got eight questions. I'm going to get this
Speaker 2: one in quickly here.
Speaker 6: If yields go higher, price down, it can be ambiguous,
Speaker 6: good or bad or zag and posen say you're going
Speaker 6: to see a higher wage, a higher real wage.
Speaker 2: Do you buy that optimism or is it going to
Speaker 2: be stress?
Speaker 7: It's possible, I mean the AI the productivity story could
Speaker 7: translate into much higher wages. The corporate share of income
Speaker 7: is high, so hopefully at some point that does flow
Speaker 7: to workers. I was very bullish on the economy, and
Speaker 7: we was talking in my prior role of a disinflationary boom,
Speaker 7: which seems very reasonable until the Middle East warst started,
Speaker 7: because I think that completely changed the dynamics. So yes,
Speaker 7: I'm bullish on I was bullish on growth in terms
Speaker 7: of being lower and non inflationary and rates coming down
Speaker 7: in the FED easing, All that's kind of thrown by
Speaker 7: the wayside. In terms of what level of yields crack
Speaker 7: the system, we don't really know. It's really a liquidity
Speaker 7: and confidence story. Could be four seventy five on tens,
Speaker 7: it could be five percent on tens, and there's so
Speaker 7: many other dynamics up playing. As you're well aware the
Speaker 7: narrowness of the market. The equity market has been a
Speaker 7: handful of companies, and at some point you know that
Speaker 7: exuberance may itself be stretched. So if if it's tightening,
Speaker 7: financial conditions suddenly tighten, risk appetite changes, then it could
Speaker 7: unravel quickly.
Speaker 4: Joe and your notes, you say inflation is a problem.
Speaker 4: I think most of our viewers and listeners would agree
Speaker 4: with you. How long is it going to be a problem?
Speaker 7: Do you think that's a great question? I mean, when's
Speaker 7: the war going to end? And how quickly can these
Speaker 7: bottlenecks stop. I mean the way to think of it
Speaker 7: is too many COVID, and I think that's what most
Speaker 7: investors don't understand, which makes me think yield to go higher.
Speaker 7: When I say many COVID, there's major supply chain disruptions.
Speaker 7: It's not just energy, it's nitrogenior relates to fertilizer, different
Speaker 7: material that going with the plastics are the sensitive commodities.
Speaker 7: And what we learned during COVID is just can't turn
Speaker 7: wells off. You just can't shut this on a much
Speaker 7: much smaller scale. But you can't just turn the system
Speaker 7: off and like a light switch, automatically goes back and
Speaker 7: the market is I don't think the bond market isn't
Speaker 7: fully appreciative of that.
Speaker 2: Joe Varona SMBC and Eco securities threatenly could be with
Speaker 2: us at today and we continue here, I guess with
Speaker 2: the arch idea and you live this at the White House.
Speaker 2: This is a president who likes joint stimuli all the time.
Speaker 2: We've got a nominal GDP pop in five percent plus
Speaker 2: persistently there, We've got you know, inflation well above the
Speaker 2: FED target and all that are we just living in
Speaker 2: a new stimulus driven miliu and it goes until it goes.
Speaker 7: We might tom but it's that's the case. Then you
Speaker 7: know inflation expectations need to be reset and you need
Speaker 7: a higher term structure rates to reflect the environment you
Speaker 7: just described. So to either one or the other. Either
Speaker 7: the economy is going to produce non inflationary growth and
Speaker 7: eventually the FED can get rates to neutral.
Speaker 2: Or right that work.
Speaker 7: We're in a regime where you've got rising debt to GDP,
Speaker 7: higher inflation relative to where the fence cart is, and
Speaker 7: that would be in the Fed's not cutting and that's
Speaker 7: a higher rate regime.
Speaker 2: Do you perceive that model is one hundred basis points
Speaker 2: shift sorry folks, jargon, a one percentage point shift up
Speaker 2: in the curve? Or could it be more sixties like
Speaker 2: can be a real shift into Provoker?
Speaker 7: Well, in the sixties is very as you know, Tom's
Speaker 7: very gradual, yet cyclical. The floor on inflation higher cyclical
Speaker 7: floors as you move through the sixties into the seventies.
Speaker 7: Best guess it's the latter that it would be like
Speaker 7: maybe let's say one hundred basis points repricing. It's a
Speaker 7: nice round number, but you know, could it be something longer?
Speaker 7: It's possible. I mean, in the last couple of years
Speaker 7: inflation is running about seventy five bases point above the
Speaker 7: Fed's target. We're going to go higher than that in
Speaker 7: the next few months. When could it end? Maybe by
Speaker 7: the fall we'll see. I mean, how I guess question
Speaker 7: is how disinflationary is AI in the short term may
Speaker 7: actually be contributing to the problems we have for the
Speaker 7: data center build out and energy usage. Longer term is
Speaker 7: probably disinflationary.
Speaker 4: We've got a new FED chairman, presumably he feels a
Speaker 4: little pressure to get rates down.
Speaker 2: A boy, the data doesn't seem great question, Paul, we're
Speaker 2: going to make some news here. Are you interviewing for
Speaker 2: a position at the FED?
Speaker 7: No, I'm not interviewing for the position at the FED. No,
Speaker 7: by the way, And I've gotten to know them. I
Speaker 7: think they're a bunch of FED people. That was one
Speaker 7: cool thing about the job. There's a lot of super
Speaker 7: talented people there. Kevin worsh will do a great job.
Speaker 7: I'm very confident of that. However, I don't see how
Speaker 7: Kevin's going to make a plausible case for Raycots.
Speaker 5: Yeah, it just is just not there.
Speaker 7: And if the market continues to price tightening, maybe he
Speaker 7: just pushes back against the committee that's certainly becoming, at
Speaker 7: least on from the President's more hawkish. Maybe he pushes
Speaker 7: back a bit, gets it more center, and then kind
Speaker 7: of hope for the best things may be unfold in
Speaker 7: a positive way in the back half of the year,
Speaker 7: but right now, look at like the Price is Paid
Speaker 7: series in the isms. The New York Fed's got this
Speaker 7: global Pressure Supply Index. Not sure exactly how they put
Speaker 7: it together, but the picture certainly shows these supply chain
Speaker 7: disruptions that's all pro inflation in the system.
Speaker 4: So again, is this a inflation?
Speaker 2: I don't know.
Speaker 4: It just feels stickier to me than just.
Speaker 5: A bit sticky.
Speaker 7: Well, well, you could see if you look at like
Speaker 7: the San Francisco Fed, they've got the acyclical and cyclical
Speaker 7: price trends. You look at the Atlanta fit sticky price index. Yeah,
Speaker 7: you're seeing it absolutely sticky. And by the way, it's
Speaker 7: been above trend, so you know, we've been well above
Speaker 7: two and a lot of these components, the supercre that
Speaker 7: the former chair Jay Powell likes looking at and running
Speaker 7: about three and a half percent, definitely sticky.
Speaker 4: So I mean there's nothing the FED can do, right,
Speaker 4: I mean.
Speaker 7: There's nothing the Fed can do other than at some
Speaker 7: point potentially raise rates try to slow demand. And the
Speaker 7: problem with raising rates to slow demand to bring inflation
Speaker 7: back to target, which right now is probably going to
Speaker 7: be at least a point, if not a point and
Speaker 7: a half above target is generally a recession. The question
Speaker 7: is does if FED want to do that. If it
Speaker 7: doesn't want to do that, they implicitly change their target.
Speaker 7: You're going to be in a world then where rates
Speaker 7: are higher, You're gonna have a steeper urb and higher yields.
Speaker 2: Real true for you across this nation and worldwide. Joseph
Speaker 2: Livornia with us today with this SMBC Nico here with
Speaker 2: his service to the nation in the first Trump administration.
Speaker 2: Lots of good work, including serious fixed income chaps. Stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app. Watch
Speaker 1: us live on YouTube right now.
Speaker 2: Mishelle Meyer darkens the door. She's chief economist, head of
Speaker 2: economics master Card, and all I can say is she
Speaker 2: owns consumer analysis. Let's get this out of the way.
Speaker 2: The state of the American consumer. I know it's case shaped.
Speaker 2: Don't give me that. How fragile is it?
Speaker 8: So I would use a different word. I would use
Speaker 8: the word nimble for consumers. Consumers have been hit with
Speaker 8: a number of shocks of the last few years, and
Speaker 8: they have managed to navigate those shocks remarkably well.
Speaker 9: And I think it's because the shocks have not.
Speaker 8: Been uniform in terms of the basket of spend, so
Speaker 8: they've had some flexibility in terms of how to figure
Speaker 8: out where the prices are rising, where they're seeing more discounts,
Speaker 8: and they're gravitating to where they find the most amount
Speaker 8: of value.
Speaker 9: It's pretty remarkable to see.
Speaker 2: I love your marketing at MasterCard. She used to write
Speaker 2: normal reports for banks in America. Now she's at MasterCard
Speaker 2: AI Enabled Traveler.
Speaker 9: I mean, it's fine.
Speaker 8: How it's fine now, I love talking about the Federal Reserve,
Speaker 8: but it's.
Speaker 9: Fabulous to also talk.
Speaker 8: About these broader themes in the economy and what we
Speaker 8: can see in our own incredible data sets. So we
Speaker 8: did so. It's called the travel equation. It's around three
Speaker 8: forces that are driving travel in this economy. Macro, particularly geopolitics,
Speaker 8: machines which would be AI, and then motivations, which is
Speaker 8: where you want to go. The personal motivations that drive travel.
Speaker 8: And one of the things that was really remarkable that
Speaker 8: we were able to clean from our data is to
Speaker 8: be able to understand how consumers that are utilizing AIS.
Speaker 8: We separate into two cohorts, the consumers that have AI
Speaker 8: subscriptions and a matching set of cohortive consumers that don't,
Speaker 8: and you can see how they're traveling differently. First of all,
Speaker 8: those that are using AI subscriptions spend more of their
Speaker 8: budget towards travel, and then they go to places that
Speaker 8: are off the beaten path, like things you would never
Speaker 8: have known, or cities that you're not necessarily aware of.
Speaker 8: You're seeing a very high share of tourists spending in
Speaker 8: those cities from that AI subscriber bucket. So it's fascinating
Speaker 8: to see how consumers are embracing AI to find new
Speaker 8: places to travel that have more value, especially in the
Speaker 8: world with high inflation.
Speaker 2: Paul Sweet is the only one.
Speaker 4: With a real life I do the kids are going
Speaker 4: to the kids give me five days in Ireland. Boom
Speaker 4: two seconds later, full itinary hotels, restaurants, everything.
Speaker 9: Funny you say Ireland.
Speaker 8: We actually found forward looking bookings that from the North
Speaker 8: America the most, like the highest increase in bookings for
Speaker 8: the summer is Dublin.
Speaker 4: Yep, you prove it out the kids. A couple of
Speaker 4: years ago was Barcelona. Now, yeah, I don't know where
Speaker 4: everybody's going, But how about there's a lot of tension
Speaker 4: in the world here in the Middle East, and of
Speaker 4: course are people adjusting to travel to reflect that?
Speaker 8: Of course, of course, and that's that's critical when you
Speaker 8: think about the overwhelming force that's out there in terms
Speaker 8: of travel, it is very much geopolitics, and it's the
Speaker 8: cost of travel, and that's what consumers have to manage
Speaker 8: in terms of where do they go from a safety perspective,
Speaker 8: where do they go from a cost perspective, how do
Speaker 8: they think about.
Speaker 9: The availability of flights?
Speaker 8: All of those are critical parts of the equation in
Speaker 8: North America, I the U asked. But even more so,
Speaker 8: of course, if you're staying in the Middle East or throughout.
Speaker 4: Asia, Canadians not coming down to Florida, are going to
Speaker 4: Arizona when it gets cold, Is that still an issue?
Speaker 8: I think that you know, you're seeing Canadians flock to
Speaker 8: warmer weather, whether it's not some lard in Arizona or Mexico.
Speaker 9: But no, you're still seeing a lot of a lot
Speaker 9: of movement.
Speaker 4: All right, so we've got I'm going to go back
Speaker 4: to your old well here. Yeah, we've got a new
Speaker 4: Federal Reserve chairman here, what is he going to do
Speaker 4: with his Federal Reserve because he's presumably he's got a
Speaker 4: little bit of pressure from the administration to bring rights down.
Speaker 4: But the data just isn't there, is it?
Speaker 9: So we'll see.
Speaker 8: I mean, I think that's the reality is that we
Speaker 8: are in Wade and C mode and that's probably the
Speaker 8: right place to be because we have to determine how
Speaker 8: the increase and energy prices will feed through the economy.
Speaker 8: So there's both growth dynamics and inflation dynamics. So I
Speaker 8: think for the FED to sit and monitor the data
Speaker 8: and try to understand the transmission of the shock into
Speaker 8: the economy is absolutely the right approach.
Speaker 9: And the Committee has made that very clear.
Speaker 8: They've been very vocal in terms of where they see
Speaker 8: those risks. We had multiple descents in the last meeting,
Speaker 8: very active commentary coming out of Federal Reserve talking about
Speaker 8: those that are leaning more towards potentially a hip being
Speaker 8: the next move those still in the cut camp, but
Speaker 8: most that are just saying we have to see how
Speaker 8: things play out.
Speaker 2: I don't know the chart in front of me, but
Speaker 2: I saw a chart yesterday from the Federzer Bank of
Speaker 2: San Francisco that showed the flow of people in a
Speaker 2: way losing their job, moving in transition from employment to unemployment,
Speaker 2: and for the younger cohort it was shocking the decline
Speaker 2: in jobs, the flow out of into unemployment. What is
Speaker 2: master Card seeing on the stresses on the labor front.
Speaker 8: I mean, for us, of course, just looking at the
Speaker 8: public labor market statistics, just like you are in terms
Speaker 8: of the BLS data, the flow data, the jolt status,
Speaker 8: jobless claims, so specifically to the stat that you reference
Speaker 8: in terms of the flow of labor in and out
Speaker 8: of unemployed cohorts. Earlier in the year and really actually
Speaker 8: last year, we did see the younger cohort, higher educated
Speaker 8: seeing a higher duration of unemployment. The last few months
Speaker 8: that's actually come down. So I think given what we're
Speaker 8: seeing in terms of very low unemployment rate four point
Speaker 8: three percent unemployment rate, the ratio of job openings, the
Speaker 8: number of unemployed is remaining pretty low, pretty stable. It
Speaker 8: feels to me that we're in a labor market that
Speaker 8: is pretty frankly stable, and you're seeing the right amount
Speaker 8: of movement in the workforce. Now obviously it's not even
Speaker 8: it never is, but on aggregate it about private sector
Speaker 8: job creation running at sixty eight thousand a month the
Speaker 8: last six months, the unemployment rate again holding low wage
Speaker 8: growth pre serving to be pretty steady.
Speaker 9: Feels like a stay will leave a market.
Speaker 4: At master Card, you get some unique data there's we
Speaker 4: see how the consumers are really spending the money. Is
Speaker 4: anything jumping out at youde that might be a little
Speaker 4: different than maybe we would have thought here because we
Speaker 4: do have this case shaped economy. I'm not sure if
Speaker 4: you see that in your data.
Speaker 8: So I mean I have a lot of views around
Speaker 8: the case shaped narrative, which we don't need to go
Speaker 8: and do right now. But in terms of what we're
Speaker 8: seeing for the total picture, in terms of overall spend,
Speaker 8: of course, we saw a big increase in spending at
Speaker 8: the pump. So if you look at spending on fuel
Speaker 8: and convenience running about twenty percent positive on a year
Speaker 8: of a year basis, and that showed up very quickly
Speaker 8: once gas prices rose.
Speaker 9: So that's the pass through of higher gas prices to
Speaker 9: the pump, to the consumer.
Speaker 8: And then if you look at the broader basket of spend,
Speaker 8: consumers are still spending at a pretty decent clip. In
Speaker 8: other categories, you're not really seeing a cut back, particularly
Speaker 8: in areas that you would think like discretionary spending for
Speaker 8: restaurants that's holding.
Speaker 2: Okay, we got this is important, And folks who got
Speaker 2: to run around of time with Michelle, this is important.
Speaker 2: Are we more aware of the k shaped agony because
Speaker 2: of our new social media, our new discourse, our new
Speaker 2: communication versus fifty years ago or one hundred and fifty
Speaker 2: years ago. Because you're optimistic and I hear this some
Speaker 2: people it's just not that bad out there, and yet
Speaker 2: we're here. It it's bad out there every tick of
Speaker 2: the day.
Speaker 8: Well, of course, there's the headlines that are coming in
Speaker 8: fast and fears across the board, and then there's the data.
Speaker 8: And when you actually look at the numbers and you
Speaker 8: see how people are spending and how businesses are investing,
Speaker 8: you see an economy that is still moving forward. And
Speaker 8: that's why for us having this purview in looking at
Speaker 8: the data, it makes all the difference.
Speaker 2: I can't say enough how bottle. You just heard from
Speaker 2: Michelle Meyer. You look at the market, you say, where
Speaker 2: is the optimism given the agony, And the answer is
Speaker 2: she does what she does at MasterCards. She looks at
Speaker 2: the data at San Francisco. Nicholas Petrowski, Na Doot I
Speaker 2: just reput that out on LinkedIn, and if you want
Speaker 2: to learn about Michelle Meyer's work, I can't say enough
Speaker 2: about some of our guests and their commitment to the
Speaker 2: new LinkedIn. Dan Roth driving that for LinkedIn, What Urine
Speaker 2: Timmor's doing at Fidelity, Michelle Meyer when she's doing at MasterCard.
Speaker 2: You've got economists out there like a doctor Petrowski and Nadau.
Speaker 2: These are incredible charts, incredible visuals. Just join on LinkedIn
Speaker 2: and build out your following each and every day, huge
Speaker 2: huge value as well.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal