WEBVTT - Bloomberg Markets: Brown Sees Consistent Data for Fed Hike

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<v Speaker 1>Mobile business news twenty four hours a day at Bloomberg

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<v Speaker 1>Charlie Pellott, the DAL, the SMP, NEZ stack all moving

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<v Speaker 1>Laura as a decline in trading revenue at JP Morgan

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<v Speaker 1>Chase sends bank shares Laura. JP Morgan Chase shares. They're

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<v Speaker 1>now down by two and a half percent. SMP five

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<v Speaker 1>hundred Index down six to twenty four oh six, a

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<v Speaker 1>drop of three tenths of one percent. The Dow is

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<v Speaker 1>down fifty three, also a drop of three tenths of

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<v Speaker 1>one percent, while nestank is down twenty seven a drop

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<v Speaker 1>of point four percent. The Tenure up three thirty second,

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<v Speaker 1>Zeal there two point two percent, Gold up six ninety

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<v Speaker 1>the Ounce to twelve sixty nine. That's a gain of

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<v Speaker 1>six tenths of one percent, and West Texas Intermedia Crew

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<v Speaker 1>down two point six percent to forty eight dollars thirty

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<v Speaker 1>four cents of arrow. I'm Charlie Pellott, and that's a

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<v Speaker 1>Bloomberg business flash. Thank you very much. Charlie Pellet. You're

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<v Speaker 1>listen to Bloomberg Markets, Bloomergradio and in the basebook little

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<v Speaker 1>seller instead of a page, Scott Brown is gonna help

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<v Speaker 1>us figure out what's in the bag book. They're learning

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<v Speaker 1>about the economy with this from Ford today. Scott Brown is,

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<v Speaker 1>of course the chief economist at Raymond, James and Joins

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<v Speaker 1>is right now from Florida, presumably Sonny, Florida through Sat

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<v Speaker 1>penn ad place to be. Um Uh, Scott, what do

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<v Speaker 1>you see when you look at his Facebook? Anything uh

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<v Speaker 1>jump out surprising you? Nothing really surprising, very similar to

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<v Speaker 1>the previous one. Growth still generally described as modest to moderate.

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<v Speaker 1>Labor markets getting tighter, that's the key driver for FED policy.

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<v Speaker 1>Um Inflation pressure is not really there. That still give

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<v Speaker 1>them plenty of time to raise rates. They don't have

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<v Speaker 1>to be in any rush. So I think it's all

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<v Speaker 1>consistent with another move in in June. We still have

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<v Speaker 1>a little bit more data. I ask them manufacturing tomorrow

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<v Speaker 1>and then the May employment bers on Friday, but that's

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<v Speaker 1>very unlikely I think to really turn over the apple

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<v Speaker 1>cart ahead of the mid June policy meeting. Hey, Scott.

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<v Speaker 1>The conversation this week among fed UH speakers has seemed

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<v Speaker 1>to gravitate towards inflation very much talking about UH price indexes.

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<v Speaker 1>So what do we need to be in tune to

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<v Speaker 1>going into our June meeting here as it regards as

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<v Speaker 1>it pertains to inflation, We're gonna get anything here, uh

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<v Speaker 1>as far as UH clarity for that picture, because that

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<v Speaker 1>seems like it's definitely in the focus. Well, uh, you know,

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<v Speaker 1>the numbers are are generally you know, choppy a bit

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<v Speaker 1>in the first part of the month. A lot of

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<v Speaker 1>firms will try to raise prices at the beginning of

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<v Speaker 1>the year and see if they stick. You've had a

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<v Speaker 1>lot of talk about a reflation trade, you know, following

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<v Speaker 1>the election and improving global economy, and there's sort of

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<v Speaker 1>mixed pressures on on commodity prices, but nothing that's really

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<v Speaker 1>gonna really lead to higher inflation. By the time you

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<v Speaker 1>get to the consumer. Uh, if you look at the

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<v Speaker 1>consumer price index over the last year, you're still not

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<v Speaker 1>really seeing you know, any inflation at all and stuff,

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<v Speaker 1>you know, the ex food and energy. Just look at

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<v Speaker 1>the commodities part um, that's that's actually trending negative still

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<v Speaker 1>year over year. The pressure has really become in in services,

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<v Speaker 1>notably rents and healthcare, which have been rising faster than

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<v Speaker 1>overall inflation. But you know, you look at the sort

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<v Speaker 1>of the pressures within the pipeline and nothing too unsettling.

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<v Speaker 1>You know, despite the type job market, we're not seeing

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<v Speaker 1>a lot of wage pressure. He've had some increases in

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<v Speaker 1>the minimum wage and at a state level um, but

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<v Speaker 1>nothing that's that we've you know, the kind of wage

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<v Speaker 1>inflation that we've seen in the past. Uh So it's

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<v Speaker 1>you know, it's still the same old story for the Fed.

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<v Speaker 1>You know, they're they're trying to get towards a more

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<v Speaker 1>neutral policy position. The low inflation numbers suggests that they

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<v Speaker 1>need not be in any hurry to do that. We

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<v Speaker 1>want of these consumer numbers are getting to be troubling.

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<v Speaker 1>We've seen a lot of the retail results, but we

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<v Speaker 1>see this dismensie here. The consumer spending is slow and

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<v Speaker 1>I wonder, you know, indeed that it's softened to use

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<v Speaker 1>the director word from the baseball and I wonder what

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<v Speaker 1>you make of that. We've you know, like I said,

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<v Speaker 1>we've seen that in some corporate results as well. It's

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<v Speaker 1>not a good thing. Yeah, in particular, you know, you

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<v Speaker 1>just came through the Memorial Day holiday, which you know,

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<v Speaker 1>you get a lot of sales promotions. And I went

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<v Speaker 1>to the mall this weekend and it was pretty dead.

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<v Speaker 1>Yeahn So you know, people, you know, consumers have been

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<v Speaker 1>been sort of you know, geared to buy stuff on

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<v Speaker 1>sale over the last couple of decades, and they've been

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<v Speaker 1>concreasingly shopping at that you know, Walmart and and km

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<v Speaker 1>Art and so on. But uh, the malls really aren't

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<v Speaker 1>aren't quite where where it's at. And I think you know,

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<v Speaker 1>when you look at the middle class, there's still a

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<v Speaker 1>lot of constraints. Uh. You know, if you don't own

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<v Speaker 1>your home, you're renting, You're you're paying higher rents um

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<v Speaker 1>than you did before. Um, you know, healthcare costs. I mean,

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<v Speaker 1>one of the things about the Affordable Care Act is

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<v Speaker 1>that it led to more health care consumption. So people

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<v Speaker 1>might go and find that they had a condition that

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<v Speaker 1>they had to treat with, you know, a pill on

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<v Speaker 1>a regular basis, and you know that that takes out

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<v Speaker 1>of some of their disposable income to you know that

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<v Speaker 1>they would normally spend another thing, so that all those

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<v Speaker 1>things could be a factor. But there's this real mix,

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<v Speaker 1>and you see it in things like the Michigan consumer

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<v Speaker 1>sentiment numbers where you start drilling down and you find

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<v Speaker 1>there's still a huge difference between Uh, Democrats and Republicans.

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<v Speaker 1>Those are leading Democrats are expecting a recession. Those that

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<v Speaker 1>are leaning Republican tend to see nonecomic boom ahead. UH.

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<v Speaker 1>And you know that that's a very wide difference. We

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<v Speaker 1>tend to think of workers being more in line with

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<v Speaker 1>the Democrats and business owners more in line with the

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<v Speaker 1>Republican party, and so you get more business fixed investment

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<v Speaker 1>and maybe a little bit tighter reigns on on consumer

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<v Speaker 1>spending growth. Um Scott, if we use the economic data

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<v Speaker 1>as sort of are in a hypothetical scenario in which

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<v Speaker 1>our investors and the only input we have to make

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<v Speaker 1>decisions is the economic data, because I want to try

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<v Speaker 1>and phase out the sort of Trump stuff and whatnot. Um,

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<v Speaker 1>is it clear what's happening in markets is reflective of

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<v Speaker 1>the data where you have near highs in SMP five hundred,

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<v Speaker 1>and then you have also overall the trend is in

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<v Speaker 1>the past month or so has been stronger bond prices

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<v Speaker 1>as well. I mean, what here within the economic side

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<v Speaker 1>tells that story or does it move beyond that do

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<v Speaker 1>we have to bring in the other stuff? Well, a

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<v Speaker 1>lot of it is expectations, particularly after the election. Um,

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<v Speaker 1>you know, stock market has been fueled by you know,

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<v Speaker 1>the Trump agenda that we're gonna roll back regulations, we're

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<v Speaker 1>gonna have this broad tax reform, we're gonna have a

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<v Speaker 1>major infrastructure spending, and I think even with the one

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<v Speaker 1>party rule in Washington, it's gonna be very, very difficult

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<v Speaker 1>to get that agenda through. Certainly, broad tax reform is

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<v Speaker 1>nearly impossible because nobody wants to give up their particular

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<v Speaker 1>deductions and be at all those deductions up is about

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<v Speaker 1>you know, one and a half trillion dollars per year,

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<v Speaker 1>So you may not get the broad tax or from it.

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<v Speaker 1>At least you can cut tax rates at some point

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<v Speaker 1>down the line, maybe later this year or departed next year.

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<v Speaker 1>So uh, I think people sort of factoring in that

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<v Speaker 1>full Trump agenda are going to be disappointed because even

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<v Speaker 1>even if it were fully enacted, you know, you're still

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<v Speaker 1>looking at the labor market constraints which are really gonna

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<v Speaker 1>be binding growth from here on out. You know, this

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<v Speaker 1>is a different world where we're in now compared to

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<v Speaker 1>previous decades where you had the baby broom generation coming in,

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<v Speaker 1>you had a female participation in the labor force increasing.

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<v Speaker 1>Those trends are well behind us. You're looking at the

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<v Speaker 1>underlying pace of growth in the labor force less than

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<v Speaker 1>a third of what it was before. And now you're

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<v Speaker 1>talking about possibly limiting immigration as well, which is unhelpful.

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<v Speaker 1>A lot of things up in the air. Scott brown

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<v Speaker 1>thanks so much for joining us to sift through a

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<v Speaker 1>Scott Brownie's the chief economist at Raymond James A lot here.

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<v Speaker 1>Even though it's a quiet day, we still got Beige

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<v Speaker 1>Book and feeling some good conversations about the economy. Here.

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<v Speaker 1>I'm Oliver Rennick and Bloomberg Core Johnson in San Francisco.

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<v Speaker 1>This is Bloomberg Markets