1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,520 Speaker 2: Terminal and the Bloomberg Business App. Loura Rang of FS 10 00:00:37,560 --> 00:00:41,120 Speaker 2: Investments is with us alongside SoC Gen's Savanter Rishappa. Laura, 11 00:00:41,159 --> 00:00:43,239 Speaker 2: let's start with you your reaction to this date. You've 12 00:00:43,240 --> 00:00:45,040 Speaker 2: had five minutes to chew over it. What stands out 13 00:00:45,080 --> 00:00:45,360 Speaker 2: for you? 14 00:00:46,760 --> 00:00:49,599 Speaker 3: So you know, we've had now sort of four months 15 00:00:49,600 --> 00:00:54,200 Speaker 3: of unfriendly inflation data and growth really continuing to surprise 16 00:00:54,240 --> 00:00:57,040 Speaker 3: with the outside. Today's got to be a huge relief 17 00:00:57,080 --> 00:00:59,680 Speaker 3: because some of the early numbers for April will really 18 00:00:59,720 --> 00:01:02,960 Speaker 3: con firmed by this broader look and this broader data. 19 00:01:03,400 --> 00:01:06,319 Speaker 3: So you know, this is a more Davis report. I 20 00:01:06,319 --> 00:01:09,240 Speaker 3: feel like you have to acknowledge that I do notice 21 00:01:09,280 --> 00:01:12,319 Speaker 3: the slow down and spending, especially the real spending. We're 22 00:01:12,319 --> 00:01:14,440 Speaker 3: starting to get data for Q two, and you know, 23 00:01:14,520 --> 00:01:15,880 Speaker 3: you tease that going into this. 24 00:01:15,920 --> 00:01:18,679 Speaker 4: But we had a you know, still. 25 00:01:18,520 --> 00:01:21,759 Speaker 3: Peeling back the headline number of Q one. The underlying 26 00:01:21,840 --> 00:01:24,640 Speaker 3: data was fairly strong. I think we're now waiting to 27 00:01:24,680 --> 00:01:27,600 Speaker 3: see how Q two shapes up. So far looks like 28 00:01:27,640 --> 00:01:29,920 Speaker 3: it's also going to be a little bit slower. I 29 00:01:29,920 --> 00:01:34,319 Speaker 3: think the landing maybe really sort of orchestrated in Q two. 30 00:01:34,560 --> 00:01:36,320 Speaker 2: Sabatra is that landing insight. 31 00:01:38,040 --> 00:01:39,800 Speaker 5: We think that the Fed's going to stay on hold 32 00:01:39,840 --> 00:01:41,479 Speaker 5: for the for the domain of the year, and this 33 00:01:41,680 --> 00:01:46,839 Speaker 5: data point doesn't really push this. No sense of urgency 34 00:01:46,920 --> 00:01:50,720 Speaker 5: I think from the Fed with the inflation starting to 35 00:01:50,800 --> 00:01:53,360 Speaker 5: ease up, you know, growth is starting to come down. 36 00:01:53,680 --> 00:01:56,960 Speaker 5: But we heard from Williams yesterday and he's expecting growth 37 00:01:56,960 --> 00:01:58,680 Speaker 5: in the context of two to two and a half 38 00:01:58,720 --> 00:02:01,920 Speaker 5: percent for this year. Inflation core PC heading towards two 39 00:02:01,960 --> 00:02:03,280 Speaker 5: and a half percent of the end of the year. 40 00:02:03,640 --> 00:02:06,400 Speaker 5: There's really no urgency for the FED to cut rates 41 00:02:07,000 --> 00:02:09,720 Speaker 5: anytime this year. We see the earliest had Web looking 42 00:02:10,160 --> 00:02:13,280 Speaker 5: for the Fed to cut rates is after the elections 43 00:02:13,280 --> 00:02:16,400 Speaker 5: of the December meeting if the data requires them to 44 00:02:16,440 --> 00:02:17,000 Speaker 5: do so, but. 45 00:02:17,000 --> 00:02:19,640 Speaker 1: Subadra on the margins, given the fact that this isn't 46 00:02:19,639 --> 00:02:22,440 Speaker 1: necessarily a game changer, but it does confirm this idea 47 00:02:22,480 --> 00:02:25,120 Speaker 1: that maybe the this inflationary trend is back on track. 48 00:02:25,639 --> 00:02:28,400 Speaker 1: Does that give you more conviction actually with some of 49 00:02:28,440 --> 00:02:31,519 Speaker 1: your closely held beliefs, this idea that you should buy bonds, 50 00:02:31,560 --> 00:02:33,760 Speaker 1: particularly the longer end, and then inflation will come down 51 00:02:33,800 --> 00:02:36,720 Speaker 1: and then essentially we will essentially normalize. 52 00:02:37,040 --> 00:02:39,720 Speaker 5: You know, you can buy bonds in the long end, 53 00:02:39,720 --> 00:02:42,200 Speaker 5: but it's really much more attracted to hold front end 54 00:02:42,800 --> 00:02:45,720 Speaker 5: treasuries because the yields are way more attractive. 55 00:02:46,080 --> 00:02:48,040 Speaker 4: And that's exactly what you're seeing investors. 56 00:02:48,040 --> 00:02:51,960 Speaker 5: I mean, you're seeing AUMs in money market funds at 57 00:02:52,040 --> 00:02:55,600 Speaker 5: six trillion. Money is going into the very front end 58 00:02:55,680 --> 00:02:59,000 Speaker 5: of the yeal curve just because returns look very, very attractive, 59 00:02:59,040 --> 00:03:00,680 Speaker 5: and the yeal curve is in and I think that 60 00:03:00,680 --> 00:03:03,440 Speaker 5: that trend is here to stay until we know that 61 00:03:03,480 --> 00:03:05,880 Speaker 5: the Fed is going to be cutting rates aggressively. And 62 00:03:05,919 --> 00:03:08,120 Speaker 5: this is really when it gets a little bit tricky 63 00:03:08,240 --> 00:03:11,799 Speaker 5: for me, because you look at the policy path that's 64 00:03:11,840 --> 00:03:15,440 Speaker 5: priced in the markets. You're looking at very few cuts 65 00:03:15,440 --> 00:03:18,160 Speaker 5: between now and the middle of next year, So you're 66 00:03:18,160 --> 00:03:20,200 Speaker 5: looking at less than one hundred basis points of cuts 67 00:03:20,200 --> 00:03:22,639 Speaker 5: by the middle of next year. So that still argues 68 00:03:22,680 --> 00:03:25,600 Speaker 5: for investors to continue to plow money into the very 69 00:03:25,600 --> 00:03:27,560 Speaker 5: front under the yolk of not so much in the long. 70 00:03:27,520 --> 00:03:30,280 Speaker 1: End, Laura, this raises this sort of larger question, which 71 00:03:30,400 --> 00:03:32,520 Speaker 1: is doesn't really matter if the Fed cuts rates once, right, 72 00:03:32,560 --> 00:03:33,919 Speaker 1: I mean, it's sort of this is the issue that 73 00:03:33,960 --> 00:03:36,320 Speaker 1: we have with the ECV as well. Are people looking 74 00:03:36,360 --> 00:03:39,320 Speaker 1: for evidence of a real slowdown that it could lead 75 00:03:39,680 --> 00:03:43,000 Speaker 1: to a protracted rate cutting cycle based on what we're 76 00:03:43,000 --> 00:03:46,800 Speaker 1: seeing now? Does this data go anywhere near beginning to 77 00:03:46,880 --> 00:03:48,280 Speaker 1: move us in that direction? 78 00:03:49,480 --> 00:03:52,400 Speaker 3: Yeah, and maybe I'll take that question a slightly different direction, 79 00:03:52,520 --> 00:03:55,960 Speaker 3: because I agree, you know, twenty five basis points, especially 80 00:03:56,040 --> 00:03:59,200 Speaker 3: given where we are at over five and a quarter, 81 00:03:59,560 --> 00:04:02,360 Speaker 3: is not going to move the needle tremendously on interest 82 00:04:02,440 --> 00:04:05,760 Speaker 3: rate sensitive sectors of the economy. I think the question 83 00:04:05,960 --> 00:04:09,400 Speaker 3: to me is, you know, we're probably not focused enough 84 00:04:09,520 --> 00:04:13,840 Speaker 3: on growth, which has been so strong at three percent, 85 00:04:14,360 --> 00:04:19,040 Speaker 3: Expectations of higher growth are now so built into markets. 86 00:04:19,320 --> 00:04:20,720 Speaker 6: Nominal GDPP growth of. 87 00:04:20,680 --> 00:04:24,120 Speaker 3: Six percent turns out is enough to power equities higher, 88 00:04:24,560 --> 00:04:28,679 Speaker 3: even though rate cut expectations have been ratcheted very far back. 89 00:04:29,120 --> 00:04:32,680 Speaker 3: So going forward, if that slows to five percent, you know, 90 00:04:32,920 --> 00:04:35,640 Speaker 3: this isn't a big slowdown. But I think, you know, 91 00:04:35,680 --> 00:04:37,800 Speaker 3: we need to pay attention to the fact that so 92 00:04:38,000 --> 00:04:41,560 Speaker 3: much growth is priced into earnings expectations, and there's so 93 00:04:41,720 --> 00:04:44,440 Speaker 3: much optimism price in to markets. The two way risk 94 00:04:44,520 --> 00:04:47,839 Speaker 3: on growth numbers are now really significant. We haven't seen 95 00:04:47,839 --> 00:04:48,800 Speaker 3: that in a year and a half. 96 00:04:49,200 --> 00:04:51,320 Speaker 2: Laura, before we run away with the conversation about growth, 97 00:04:51,320 --> 00:04:53,400 Speaker 2: can we just sit on inflation just for one beat longer. 98 00:04:53,480 --> 00:04:55,880 Speaker 2: You've been saying for a while that we'd get stuck 99 00:04:55,920 --> 00:04:58,080 Speaker 2: around three percent, you're rethinking that. 100 00:04:59,800 --> 00:04:59,840 Speaker 7: Not. 101 00:05:00,240 --> 00:05:02,360 Speaker 3: I still think that at the end of the year, 102 00:05:02,400 --> 00:05:06,400 Speaker 3: we're going to see rent for inflation pressures continue to 103 00:05:06,440 --> 00:05:08,839 Speaker 3: creep back up, and I think we're going to see 104 00:05:08,880 --> 00:05:12,800 Speaker 3: the inflationary process really stuck around three percent. I don't 105 00:05:12,839 --> 00:05:15,200 Speaker 3: think that stops the FED from cutting it. The economy 106 00:05:15,240 --> 00:05:18,160 Speaker 3: slows a lot, but I think it makes it very 107 00:05:18,160 --> 00:05:20,200 Speaker 3: hard to maneuver in a place where we're still growing 108 00:05:20,200 --> 00:05:21,240 Speaker 3: at two two and a half percent. 109 00:05:21,320 --> 00:05:23,160 Speaker 2: Mohammed dal Erin has been on this program and he 110 00:05:23,200 --> 00:05:26,760 Speaker 2: talks about stackflation rewins. Lara, are you thinking about stackflation 111 00:05:26,839 --> 00:05:28,440 Speaker 2: rewins at the back end of this year? 112 00:05:29,120 --> 00:05:32,240 Speaker 3: You know, today the economy looks really solid. I'm not 113 00:05:32,279 --> 00:05:35,000 Speaker 3: too worried about it because business investment is going to 114 00:05:35,120 --> 00:05:37,479 Speaker 3: ratchet back up again. I think we're in a good 115 00:05:37,480 --> 00:05:39,520 Speaker 3: place for the economy. I'm trying not to overthink it 116 00:05:39,560 --> 00:05:39,880 Speaker 3: too much. 117 00:05:39,880 --> 00:05:42,000 Speaker 2: It's about you we overthinking it when you say no 118 00:05:42,120 --> 00:05:44,440 Speaker 2: rate cuts this year and you're looking at inflation. What 119 00:05:44,480 --> 00:05:46,719 Speaker 2: does growth look like at the backhand of twenty four. 120 00:05:47,480 --> 00:05:50,160 Speaker 5: Probably going to gradually slow down as we progress through 121 00:05:50,200 --> 00:05:51,560 Speaker 5: the remainder of the year. 122 00:05:52,120 --> 00:05:53,240 Speaker 4: We're not overthinking it. 123 00:05:53,279 --> 00:05:55,159 Speaker 5: I think the simplest path is for the Fed to 124 00:05:55,200 --> 00:05:57,880 Speaker 5: stay on hold for the remainder of the year, instead 125 00:05:57,920 --> 00:06:01,480 Speaker 5: of kind of the conundrum that the ECBs and right now, 126 00:06:01,520 --> 00:06:04,239 Speaker 5: where you know, the market's pricing in for a June 127 00:06:04,600 --> 00:06:06,720 Speaker 5: cut and then the debate on whether they're going to 128 00:06:06,760 --> 00:06:09,400 Speaker 5: cut again in July, whether they're going to cut again 129 00:06:09,400 --> 00:06:13,520 Speaker 5: in September. So the sort of volatility of expectations is 130 00:06:13,560 --> 00:06:16,240 Speaker 5: really what's confusing investors. 131 00:06:16,240 --> 00:06:19,320 Speaker 4: So to me, a very straightforward. 132 00:06:18,640 --> 00:06:20,840 Speaker 5: Path is for the Fed to stay on hold for 133 00:06:20,880 --> 00:06:24,160 Speaker 5: as long as they possibly can, and then embark on 134 00:06:24,400 --> 00:06:26,960 Speaker 5: maybe a cut a quarter or some sort of a 135 00:06:27,080 --> 00:06:29,719 Speaker 5: very steady path of rate cuts from then on. 136 00:06:29,760 --> 00:06:30,919 Speaker 4: As opposed to this back. 137 00:06:30,720 --> 00:06:34,320 Speaker 1: And forth, Laura really raised this two pronged idea of 138 00:06:34,320 --> 00:06:37,000 Speaker 1: both inflation and then this idea of growth. 139 00:06:37,080 --> 00:06:38,040 Speaker 4: And what happens if you. 140 00:06:38,000 --> 00:06:41,520 Speaker 1: Start moving out of the inflation being offset by strong 141 00:06:41,560 --> 00:06:46,200 Speaker 1: growth to maybe not ciflation, but inflation not being offset 142 00:06:46,279 --> 00:06:48,800 Speaker 1: as much subadri Does that make you, if there is 143 00:06:48,920 --> 00:06:53,000 Speaker 1: clear slowing in growth, clear growing and spending, a little 144 00:06:53,120 --> 00:06:57,000 Speaker 1: less sanguine about riskier securities within fixed income just because 145 00:06:57,000 --> 00:07:00,320 Speaker 1: you both have rates on hold still enough inflation to 146 00:07:00,360 --> 00:07:03,599 Speaker 1: make the Fed nervous, but it economily just doesn't have 147 00:07:03,680 --> 00:07:04,760 Speaker 1: the same kind of juice in it. 148 00:07:05,080 --> 00:07:05,279 Speaker 4: Yeah. 149 00:07:05,800 --> 00:07:07,720 Speaker 5: Because of that, That's one of the reasons why we 150 00:07:07,760 --> 00:07:11,840 Speaker 5: think that that across the yield curve, yields are going 151 00:07:11,880 --> 00:07:13,960 Speaker 5: to struggle to get about that five percent level. 152 00:07:14,360 --> 00:07:15,960 Speaker 4: Two year above five percent is. 153 00:07:15,920 --> 00:07:19,600 Speaker 5: Going to require a much more, you know, different stance 154 00:07:19,640 --> 00:07:21,760 Speaker 5: from policy. The Fed either has to hike or not 155 00:07:21,840 --> 00:07:23,960 Speaker 5: cut for the next couple of years, and for the 156 00:07:24,040 --> 00:07:28,560 Speaker 5: tenure to get about five percent, the market is always 157 00:07:28,600 --> 00:07:31,360 Speaker 5: going to be looking towards growth slowing down in the 158 00:07:31,400 --> 00:07:34,440 Speaker 5: second half, and that's really going to cap the rise 159 00:07:34,480 --> 00:07:37,240 Speaker 5: and yields. So even though we've had these discussions about 160 00:07:37,240 --> 00:07:39,640 Speaker 5: our star and whether our start is a lot higher 161 00:07:40,480 --> 00:07:43,240 Speaker 5: and whether you know, debt and deficits start to matter, 162 00:07:43,600 --> 00:07:45,600 Speaker 5: I really think that the focus at LEEDS for the 163 00:07:45,640 --> 00:07:48,560 Speaker 5: second half is going to be on the slowdown and growth, 164 00:07:48,600 --> 00:07:50,840 Speaker 5: and that's going to really cap the rize and yields. 165 00:07:51,040 --> 00:07:53,040 Speaker 5: Ten yearls are going to struggle to get to five 166 00:07:53,080 --> 00:07:54,720 Speaker 5: percent this time around. 167 00:07:54,760 --> 00:07:56,560 Speaker 4: Where are you on the our star debate? 168 00:07:58,360 --> 00:08:00,360 Speaker 5: You know, there's a case to be made a very 169 00:08:00,360 --> 00:08:04,040 Speaker 5: sympathetic to the comments we've had from both Bill Dudley 170 00:08:04,080 --> 00:08:07,280 Speaker 5: as well as Lori Logan that maybe our star is 171 00:08:07,480 --> 00:08:10,160 Speaker 5: a lot higher at least a short term our star 172 00:08:10,320 --> 00:08:15,400 Speaker 5: might be higher than what we're hearing from FED President Williams. 173 00:08:16,080 --> 00:08:17,640 Speaker 4: But the question is how can. 174 00:08:17,520 --> 00:08:20,880 Speaker 5: The FED actually act on that, because what they really 175 00:08:20,960 --> 00:08:24,520 Speaker 5: need to see is the data support a higher our star. 176 00:08:24,680 --> 00:08:27,239 Speaker 5: So we'll find out in maybe three to four years 177 00:08:27,240 --> 00:08:29,960 Speaker 5: where our star is today. It's really hard to know 178 00:08:30,000 --> 00:08:32,080 Speaker 5: where it is right now as it stands. 179 00:08:32,200 --> 00:08:34,320 Speaker 1: And Laura, this sort of goes to this framework of 180 00:08:34,400 --> 00:08:36,160 Speaker 1: it's hard to know where the end zone is going 181 00:08:36,200 --> 00:08:38,800 Speaker 1: to be. Also, just in inflation, as Jean was mentioning, 182 00:08:38,840 --> 00:08:39,920 Speaker 1: you think inflation is going to. 183 00:08:39,840 --> 00:08:42,320 Speaker 4: Remain stuck at around three percent? What would you have 184 00:08:42,360 --> 00:08:43,400 Speaker 4: to see to rethink that. 185 00:08:43,679 --> 00:08:45,680 Speaker 1: We have Neil data coming out this morning with a 186 00:08:45,720 --> 00:08:49,320 Speaker 1: note after this data came out just saying every month 187 00:08:49,360 --> 00:08:51,560 Speaker 1: this year, see month of a month core inflation lower 188 00:08:51,600 --> 00:08:53,520 Speaker 1: than the same month and twenty twenty three. What happens 189 00:08:53,559 --> 00:08:56,360 Speaker 1: if this patterns holds into the summer, is that something 190 00:08:56,360 --> 00:08:58,600 Speaker 1: that could make you rethink this idea of three percent 191 00:08:58,880 --> 00:09:00,960 Speaker 1: is sort of the sticky for inflation. 192 00:09:02,600 --> 00:09:06,400 Speaker 3: I think to me, the problem is that we really 193 00:09:06,679 --> 00:09:10,480 Speaker 3: are don't We don't remember how much everything had to 194 00:09:10,559 --> 00:09:13,760 Speaker 3: go perfectly to get inflation at two percent. You know, 195 00:09:13,840 --> 00:09:17,280 Speaker 3: today we've got commodity prices really moving higher. I think 196 00:09:17,400 --> 00:09:21,520 Speaker 3: rents are going to reaccelerate. Ironically, high FED you know, 197 00:09:21,640 --> 00:09:26,040 Speaker 3: really restrictive FED policy has stopped home construction, which is 198 00:09:26,040 --> 00:09:29,679 Speaker 3: what's needed to help, you know, unravel this whole real 199 00:09:29,840 --> 00:09:34,120 Speaker 3: estate sort of stagnation and stuck at higher prices environment 200 00:09:34,120 --> 00:09:37,120 Speaker 3: that we're in. You know, long story short, when you 201 00:09:37,320 --> 00:09:39,560 Speaker 3: put it all together, we may well you know, see 202 00:09:39,600 --> 00:09:42,000 Speaker 3: inflation dip a little bit lower. 203 00:09:42,040 --> 00:09:44,200 Speaker 4: But I think my forecast is a. 204 00:09:44,120 --> 00:09:50,040 Speaker 3: Longer run problem of stubborn inflation above two percent. Kind 205 00:09:50,040 --> 00:09:51,640 Speaker 3: of the mirror image of where we were for the 206 00:09:51,640 --> 00:09:54,160 Speaker 3: five years before COVID stuck below two percent. 207 00:09:54,240 --> 00:09:56,800 Speaker 2: I always feel like it was regulating us. Thank you. 208 00:09:57,120 --> 00:09:59,960 Speaker 2: They always feel personal. Those ails totally sent amounts of client. 209 00:10:00,000 --> 00:10:02,720 Speaker 2: I'm just saying, yeah, I feel like the census directly, 210 00:10:03,000 --> 00:10:03,600 Speaker 2: it feels like. 211 00:10:03,520 --> 00:10:05,959 Speaker 1: He watches us and then scripes the screen when I speak. 212 00:10:06,400 --> 00:10:08,760 Speaker 1: You have no idea what you're talking about, Primo. 213 00:10:08,520 --> 00:10:09,959 Speaker 2: Just saying, which is basically what he's done on this 214 00:10:10,040 --> 00:10:10,760 Speaker 2: program before. 215 00:10:10,920 --> 00:10:12,319 Speaker 4: That's right, that's our friends. 216 00:10:12,360 --> 00:10:14,599 Speaker 2: Apparently, I kind of believe that. Let's look ahead to 217 00:10:14,679 --> 00:10:18,200 Speaker 2: next week ECP next Thursday. Then we get the payrolls 218 00:10:18,240 --> 00:10:20,719 Speaker 2: report in our survey right now, keep giving you a 219 00:10:20,720 --> 00:10:23,439 Speaker 2: sneak peek. Here's the latest. One eighty one hundred and 220 00:10:23,480 --> 00:10:26,319 Speaker 2: eighty thousand is the meeting estimate in our survey. Previous 221 00:10:26,400 --> 00:10:29,200 Speaker 2: number one seventy five. So Patrick, can we talk about 222 00:10:29,240 --> 00:10:31,599 Speaker 2: next week both the ECP and a payrolls report, And 223 00:10:31,640 --> 00:10:33,440 Speaker 2: let's start with payrolls and we'll finish on the European 224 00:10:33,480 --> 00:10:35,319 Speaker 2: Central Bank in a couple of minutes. What are you 225 00:10:35,360 --> 00:10:37,079 Speaker 2: looking for from that report next Friday. 226 00:10:37,400 --> 00:10:42,160 Speaker 5: So our economists actually have a slightly higher forecast, if 227 00:10:42,160 --> 00:10:46,000 Speaker 5: you will, for apparerolls than the consensus. So I wouldn't 228 00:10:46,000 --> 00:10:48,360 Speaker 5: be surprised if you get a two hundred thousand inch number. 229 00:10:48,880 --> 00:10:51,840 Speaker 5: The unemployment rate is going to stay below four percent 230 00:10:51,960 --> 00:10:55,640 Speaker 5: for perhaps the remainder of the year. So very strong 231 00:10:55,760 --> 00:11:00,360 Speaker 5: employment report is again what we're expecting for next week. 232 00:11:00,400 --> 00:11:03,040 Speaker 5: But if there's any missus, that's when the market's going 233 00:11:03,080 --> 00:11:06,640 Speaker 5: to react. The market's going to shrug off an upside surprise, 234 00:11:06,679 --> 00:11:07,880 Speaker 5: I think, Laura. 235 00:11:07,600 --> 00:11:10,079 Speaker 4: Do you agree, Yeah, I agree. 236 00:11:10,080 --> 00:11:12,640 Speaker 3: The market seems to have happy ears right now. They 237 00:11:12,679 --> 00:11:15,280 Speaker 3: want the rake huts. That's the news that they react 238 00:11:15,280 --> 00:11:18,200 Speaker 3: to you more than you know, anything that would sort 239 00:11:18,200 --> 00:11:20,319 Speaker 3: of push those back, you know, at the end of 240 00:11:20,320 --> 00:11:23,440 Speaker 3: the day, when we look ahead to rate cuts and 241 00:11:23,480 --> 00:11:25,720 Speaker 3: when that could happen, we're starting to push up against 242 00:11:25,720 --> 00:11:29,080 Speaker 3: the election calendar. I think we're just going to kind 243 00:11:29,080 --> 00:11:30,839 Speaker 3: of give up the gost slowly on a rate cut 244 00:11:30,880 --> 00:11:34,160 Speaker 3: before the election and really focus on those December you know, 245 00:11:34,240 --> 00:11:35,240 Speaker 3: maybe November meeting. 246 00:11:35,320 --> 00:11:37,920 Speaker 2: I'm not sure. Dan investors have happy ears, but I 247 00:11:37,960 --> 00:11:40,800 Speaker 2: get your point, Lara Rang of FS Investments, Lara, thank 248 00:11:40,840 --> 00:11:42,360 Speaker 2: you for that. So Bato, I just wanted to give 249 00:11:42,360 --> 00:11:45,319 Speaker 2: you the final word on the ECP. Big conversation around 250 00:11:45,320 --> 00:11:49,880 Speaker 2: this table about central bank divergence, the limits of that divergence, 251 00:11:49,880 --> 00:11:52,760 Speaker 2: how far can this ECP go without a federal reserve. 252 00:11:54,160 --> 00:11:57,600 Speaker 5: So I think our European economy is set it best, 253 00:11:57,640 --> 00:11:59,560 Speaker 5: which is its data independence. 254 00:11:59,600 --> 00:12:01,840 Speaker 4: I mean, FED and the ECB is already. 255 00:12:01,520 --> 00:12:05,319 Speaker 5: Committed to cutting rates in June, and they're going to 256 00:12:05,400 --> 00:12:08,000 Speaker 5: do it even though the inflation data that we got, 257 00:12:08,640 --> 00:12:12,480 Speaker 5: you know, recently, doesn't really justify them to cut rates 258 00:12:12,480 --> 00:12:15,760 Speaker 5: in June. The question really becomes what happened what comes 259 00:12:15,800 --> 00:12:19,479 Speaker 5: after that? And to me, what you know really dictates 260 00:12:19,559 --> 00:12:22,439 Speaker 5: the price action and the bar market is divergence between 261 00:12:22,440 --> 00:12:24,480 Speaker 5: the ECB and the freend. I think that that's going 262 00:12:24,520 --> 00:12:30,080 Speaker 5: to keep rates between the US and Europe diverging as well, 263 00:12:30,200 --> 00:12:32,080 Speaker 5: because the Fed's going to stay on hold for the 264 00:12:32,120 --> 00:12:33,640 Speaker 5: remainder of the year and the ECB is going to 265 00:12:33,679 --> 00:12:35,280 Speaker 5: still be biased towards cutting rates. 266 00:12:35,480 --> 00:12:37,000 Speaker 2: We came into this week saying it was going. 267 00:12:37,000 --> 00:12:38,760 Speaker 4: To kind of be a sleepy week. You can make 268 00:12:38,800 --> 00:12:40,880 Speaker 4: your argument about whether it was or wasn't for next week. 269 00:12:40,880 --> 00:12:43,440 Speaker 1: It's going to be actually massive when it comes to 270 00:12:43,559 --> 00:12:46,040 Speaker 1: both the Jolts data the payrolls we've got. Of course, 271 00:12:46,480 --> 00:12:50,160 Speaker 1: the ECB excise about I'm excited. 272 00:12:49,880 --> 00:12:50,800 Speaker 4: Yeah, yeh, I'm excited. 273 00:12:50,840 --> 00:12:52,400 Speaker 1: So I just want to know what you're most excited 274 00:12:52,440 --> 00:12:55,319 Speaker 1: about of all these potential data points, the ISM data 275 00:12:55,440 --> 00:12:57,600 Speaker 1: we get, manufacturing and services. 276 00:12:58,480 --> 00:13:00,000 Speaker 4: So i'd start with JOLTS. 277 00:13:00,320 --> 00:13:03,240 Speaker 5: I mean, if you look at the job openings, we 278 00:13:03,280 --> 00:13:06,640 Speaker 5: really want to see that head towards that pre pandemic 279 00:13:07,559 --> 00:13:10,880 Speaker 5: level relative to the number of unemployed. So that's a 280 00:13:11,000 --> 00:13:15,200 Speaker 5: very important first metric on jobs. Beyond that, i'd be 281 00:13:15,240 --> 00:13:17,480 Speaker 5: looking to hear from the ECB and what they're thinking 282 00:13:17,520 --> 00:13:22,040 Speaker 5: about policy, not just for June but beyond for the 283 00:13:22,040 --> 00:13:25,559 Speaker 5: remainder of the year, and then payrolls PAEROLS is very 284 00:13:25,640 --> 00:13:30,040 Speaker 5: very important, and whether we keep that momentum that we've 285 00:13:30,080 --> 00:13:33,640 Speaker 5: had throughout this year is going to inform us on 286 00:13:33,720 --> 00:13:37,320 Speaker 5: whether the FED is going to look at perhaps cutting 287 00:13:37,400 --> 00:13:42,200 Speaker 5: rates in July or September, which is not our base case, 288 00:13:42,240 --> 00:13:45,199 Speaker 5: but that's something that we'd be looking towards. The FED 289 00:13:45,320 --> 00:13:48,480 Speaker 5: really wants to see the job market cool off as 290 00:13:48,520 --> 00:13:51,640 Speaker 5: inflation is coming down as a justification to cut rates, 291 00:13:51,760 --> 00:13:52,960 Speaker 5: and they want to see that data. 292 00:13:53,000 --> 00:13:55,120 Speaker 2: So often we are hitting the grand running in the 293 00:13:55,120 --> 00:14:08,400 Speaker 2: monthitude Sam stowfull of CFRRA writing this, It's been rumored 294 00:14:08,520 --> 00:14:11,400 Speaker 2: the between Memorial Day and Labor Day investors focus more 295 00:14:11,440 --> 00:14:13,679 Speaker 2: on their tands than their portfolios. The S and P 296 00:14:13,800 --> 00:14:15,840 Speaker 2: five hundred gained and average of only one point six 297 00:14:15,920 --> 00:14:19,240 Speaker 2: percent in price between these two holidays since nineteen forty five. 298 00:14:19,600 --> 00:14:23,680 Speaker 2: Instead of experiencing these summertime blues, it frequently enjoys a 299 00:14:23,800 --> 00:14:26,960 Speaker 2: summertime snooze. Sam joins us now for more and hopefully 300 00:14:26,920 --> 00:14:29,360 Speaker 2: Samue'll wake us up a little bit more than that, Sam, 301 00:14:29,360 --> 00:14:30,280 Speaker 2: what do you rafflicating for? 302 00:14:30,480 --> 00:14:30,600 Speaker 6: Then? 303 00:14:30,640 --> 00:14:32,800 Speaker 2: For clients through the rest of this summer to sit back, 304 00:14:32,880 --> 00:14:34,440 Speaker 2: chill and ignore everything. 305 00:14:35,400 --> 00:14:36,600 Speaker 7: Well, good morning, Jonathan. 306 00:14:36,920 --> 00:14:40,280 Speaker 8: I think certainly there's a lot of reasons why one 307 00:14:40,360 --> 00:14:44,080 Speaker 8: might say that this Memorial Day through Labor Day period 308 00:14:44,200 --> 00:14:47,320 Speaker 8: might be quite different from other election years since World 309 00:14:47,360 --> 00:14:51,720 Speaker 8: War Two. Certainly, now we know that AI has been 310 00:14:51,840 --> 00:14:56,320 Speaker 8: driving tech and semiconductors, but EI has really been driving 311 00:14:56,320 --> 00:14:59,880 Speaker 8: the rest of the market. EI being earnings and inflation 312 00:15:00,600 --> 00:15:03,040 Speaker 8: and now with the worry once again that the FED 313 00:15:03,120 --> 00:15:06,760 Speaker 8: could be raising interest rates, possibly staying higher for longer, 314 00:15:06,840 --> 00:15:10,440 Speaker 8: causing a recession. I think that's what's in a sense, 315 00:15:10,520 --> 00:15:14,640 Speaker 8: causing cracks to form underneath the confidence of investors today. 316 00:15:15,000 --> 00:15:16,600 Speaker 1: So does that mean that Sam, you think that people 317 00:15:16,640 --> 00:15:18,480 Speaker 1: shouldn't go try to ten and they should actually be 318 00:15:18,480 --> 00:15:20,880 Speaker 1: in the office actually trading, because otherwise they could lose 319 00:15:20,920 --> 00:15:21,280 Speaker 1: their shirt. 320 00:15:23,040 --> 00:15:24,640 Speaker 7: Very good, Lisa, I like that one. 321 00:15:25,200 --> 00:15:28,520 Speaker 8: No. I think that what we typically find is that 322 00:15:29,240 --> 00:15:33,160 Speaker 8: many of the groups, while they do tend to tread water, investors, 323 00:15:33,200 --> 00:15:35,800 Speaker 8: do tend to gravitate towards the more defensive areas of 324 00:15:35,800 --> 00:15:38,440 Speaker 8: the market. I always say that you are much better 325 00:15:38,520 --> 00:15:45,240 Speaker 8: off rotating than you are retreating in this traditionally sustayed 326 00:15:45,360 --> 00:15:51,960 Speaker 8: period of the year, and it's usually those areas like staples, healthcare, utilities, etc. 327 00:15:52,280 --> 00:15:56,400 Speaker 8: That have done well. But I guess this time around, 328 00:15:56,520 --> 00:15:59,880 Speaker 8: what we're seeing is that since the Dow hit for 329 00:16:00,000 --> 00:16:03,000 Speaker 8: twenty thousand, really there's been no place to hide. The 330 00:16:03,040 --> 00:16:06,080 Speaker 8: market really has been selling off quite a bit, with 331 00:16:06,280 --> 00:16:10,280 Speaker 8: technology being the only group that's still in positive territory. 332 00:16:09,800 --> 00:16:12,120 Speaker 1: And it seems like any kind of miss or even 333 00:16:12,480 --> 00:16:15,080 Speaker 1: in line that isn't necessarily off the charts. For some 334 00:16:15,120 --> 00:16:18,520 Speaker 1: of the biggest winners this year have been punished severely 335 00:16:18,600 --> 00:16:21,520 Speaker 1: in terms of market reaction. I wonder if there's a 336 00:16:21,560 --> 00:16:23,640 Speaker 1: larger takeaway though, when we were exploring this yesterday with 337 00:16:23,640 --> 00:16:26,840 Speaker 1: Peter Oppenheimer of Goldman Sachs that at this point, at 338 00:16:26,840 --> 00:16:29,760 Speaker 1: this level, based on how much yields have moved up, 339 00:16:30,040 --> 00:16:32,120 Speaker 1: that is going to be the tail wagging the dog 340 00:16:32,200 --> 00:16:34,040 Speaker 1: when it comes to the equity markets. It's the further 341 00:16:34,120 --> 00:16:37,120 Speaker 1: that yields go up, the more punitive it becomes for 342 00:16:37,200 --> 00:16:37,960 Speaker 1: the stock market. 343 00:16:37,960 --> 00:16:40,880 Speaker 4: Do you believe that, Oh, yes. 344 00:16:40,680 --> 00:16:44,640 Speaker 8: Because I think that's the real factor that is causing concern. 345 00:16:44,760 --> 00:16:47,640 Speaker 8: I mean, our expectations had been that we would see 346 00:16:47,640 --> 00:16:50,360 Speaker 8: a gradual decline in the ten year yield as the 347 00:16:50,400 --> 00:16:53,280 Speaker 8: year progresses, and so obviously with it going in the 348 00:16:53,280 --> 00:16:57,120 Speaker 8: opposite direction, that makes us sort of second guess our 349 00:16:57,160 --> 00:16:59,680 Speaker 8: own opinions, and I think the same as being done 350 00:16:59,720 --> 00:17:03,800 Speaker 8: by other investors. So our belief still is that the 351 00:17:03,800 --> 00:17:07,760 Speaker 8: Fed will be cutting twice this year, September and December, 352 00:17:08,080 --> 00:17:12,399 Speaker 8: obviously knowing that now September is more like a coin toss. 353 00:17:12,240 --> 00:17:13,719 Speaker 7: As to whether that will happen. 354 00:17:14,160 --> 00:17:17,800 Speaker 8: We also remind investors that every election year since nineteen 355 00:17:17,880 --> 00:17:22,040 Speaker 8: ninety two except twenty twelve had the FED either raise 356 00:17:22,240 --> 00:17:25,680 Speaker 8: or lower eight rates prior to the election, many times 357 00:17:25,800 --> 00:17:29,520 Speaker 8: occurring in September. So I think the FED would love 358 00:17:29,560 --> 00:17:33,119 Speaker 8: the opportunity to show that they are a political Should 359 00:17:33,160 --> 00:17:34,440 Speaker 8: the data allow for that? 360 00:17:34,800 --> 00:17:35,080 Speaker 4: Sam? 361 00:17:35,080 --> 00:17:37,320 Speaker 6: If September is a toin cost, what does the FED 362 00:17:37,400 --> 00:17:39,840 Speaker 6: need to see in the data before September to have 363 00:17:39,840 --> 00:17:43,480 Speaker 6: that confidence to cut just before an election, Well, I. 364 00:17:43,400 --> 00:17:46,760 Speaker 8: Think they're going to have to see today's PCE and 365 00:17:47,119 --> 00:17:52,840 Speaker 8: successive PCE indicators show continued downward trend. I think we're 366 00:17:53,000 --> 00:17:56,600 Speaker 8: likely to see unemployment rate maybe tick up a couple 367 00:17:56,680 --> 00:18:01,320 Speaker 8: of basis points, and also just that maybe a third 368 00:18:01,560 --> 00:18:05,199 Speaker 8: the second quarter GDP does not come in as the 369 00:18:05,240 --> 00:18:08,639 Speaker 8: Atlanta Fed is anticipating at this point well above the 370 00:18:08,680 --> 00:18:09,720 Speaker 8: three percent level. 371 00:18:09,800 --> 00:18:10,800 Speaker 6: So I think the. 372 00:18:10,760 --> 00:18:14,160 Speaker 8: Fed is basically going to be sticking to its mandate 373 00:18:14,200 --> 00:18:17,639 Speaker 8: by saying, can we see inflation come down while not 374 00:18:17,800 --> 00:18:20,320 Speaker 8: having a material impact unemployment? 375 00:18:20,480 --> 00:18:22,840 Speaker 2: Sam, I just want to take the conversation. Finish this 376 00:18:22,920 --> 00:18:25,800 Speaker 2: conversation somewhere where Lisa has been leaning, and I think 377 00:18:25,800 --> 00:18:29,320 Speaker 2: it's an important conversation. What's happened with Salesforce in the 378 00:18:29,359 --> 00:18:32,879 Speaker 2: last twenty four hours, down by about twenty percent. What 379 00:18:33,040 --> 00:18:36,919 Speaker 2: happened with say doll Dow down by about fifteen percent 380 00:18:37,280 --> 00:18:40,040 Speaker 2: in pre market? The down numbers, to Lisa's point earlier 381 00:18:40,080 --> 00:18:42,800 Speaker 2: this morning, they weren't terrible. In fact, they were a beat. 382 00:18:43,040 --> 00:18:45,080 Speaker 2: It just wasn't a big enough beat. And you're seeing 383 00:18:45,160 --> 00:18:48,159 Speaker 2: a monthster move in quite a sizable company, Sam, And 384 00:18:48,200 --> 00:18:50,399 Speaker 2: I'm wondering for you and the team at CFIRA the 385 00:18:50,480 --> 00:18:52,520 Speaker 2: kind of signal that you're taken away from this kind 386 00:18:52,560 --> 00:18:53,200 Speaker 2: of price action. 387 00:18:54,800 --> 00:18:57,760 Speaker 8: Well, I think, as Lisa was saying before, that companies 388 00:18:57,800 --> 00:19:01,040 Speaker 8: are being punished if they don't meet the published numbers 389 00:19:01,160 --> 00:19:05,080 Speaker 8: or even the whisper numbers. Technology for this first quarter 390 00:19:05,920 --> 00:19:10,280 Speaker 8: is showing a twenty five percent gain in earnings versus 391 00:19:10,320 --> 00:19:14,239 Speaker 8: the earlier anticipated twenty percent rise. Also, we've seen an 392 00:19:14,280 --> 00:19:18,119 Speaker 8: improvement in not only twenty twenty four but also twenty 393 00:19:18,200 --> 00:19:22,680 Speaker 8: five estimates now twenty percent for the sector in twenty 394 00:19:22,760 --> 00:19:26,040 Speaker 8: twenty five, but it continues to bump up against the 395 00:19:26,240 --> 00:19:30,360 Speaker 8: thirty pe for the sector itself on forward twelve month earnings, 396 00:19:30,560 --> 00:19:34,680 Speaker 8: which has resulted in pretty much a locked ceiling, if 397 00:19:34,720 --> 00:19:39,520 Speaker 8: you will. And so with these numbers really at stretched valuations, 398 00:19:39,760 --> 00:19:41,600 Speaker 8: I think there is the need for the resetting of 399 00:19:41,640 --> 00:19:43,320 Speaker 8: the dials at least in the near term. 400 00:19:43,520 --> 00:19:45,600 Speaker 2: Sadly saying that has some single names. That's for show. 401 00:19:45,720 --> 00:19:58,480 Speaker 2: Sen starts with a FCFRA a place aside that blumbag 402 00:19:58,480 --> 00:20:01,280 Speaker 2: Scott Chalance makes joined by down to Airline CEO ed 403 00:20:01,359 --> 00:20:06,840 Speaker 2: Bastian in Dubai, guys, Johnson, over to you, John. 404 00:20:06,640 --> 00:20:09,640 Speaker 6: Farah, thank you very much. Indeed, yep ed Bastian here 405 00:20:09,760 --> 00:20:12,399 Speaker 6: in Dubai tonight. He's going to receive the at W 406 00:20:12,600 --> 00:20:15,520 Speaker 6: twenty twenty four Airline of the Year award. That's why 407 00:20:15,560 --> 00:20:18,520 Speaker 6: he's here. He's also here as well for the eightieth 408 00:20:18,640 --> 00:20:20,920 Speaker 6: i artur AGM, which is going to be taking place 409 00:20:20,960 --> 00:20:23,439 Speaker 6: here at the start of next week. But John, you 410 00:20:23,440 --> 00:20:25,359 Speaker 6: bring up you bring up a couple of stories. Actually 411 00:20:25,520 --> 00:20:27,320 Speaker 6: you bring up what's happening with Boeing, but you also 412 00:20:27,359 --> 00:20:30,159 Speaker 6: bring up the issue that we had earlier on in 413 00:20:30,160 --> 00:20:32,639 Speaker 6: the week with the American numbers and the impact that 414 00:20:32,640 --> 00:20:36,040 Speaker 6: that had on the rest of the sector. Ed great 415 00:20:36,040 --> 00:20:39,080 Speaker 6: to see you. Congratulations on the award. First of all, Oh, 416 00:20:39,119 --> 00:20:39,640 Speaker 6: thank you guys. 417 00:20:39,640 --> 00:20:41,000 Speaker 9: It's good to be with you, it's good to be 418 00:20:41,040 --> 00:20:44,000 Speaker 9: in Dubai, and really proud of our team have their 419 00:20:44,040 --> 00:20:47,480 Speaker 9: ability to continue delivering outstanding results for our customers. This 420 00:20:47,520 --> 00:20:49,920 Speaker 9: is what makes these wards first of all very humbling 421 00:20:50,000 --> 00:20:52,320 Speaker 9: to receive, but hungry to continue to win them. 422 00:20:52,440 --> 00:20:55,159 Speaker 6: Yep, you've got to keep it up, don't go to 423 00:20:55,200 --> 00:20:57,560 Speaker 6: keep it up. Let's talk a little bit about kind 424 00:20:57,560 --> 00:20:59,200 Speaker 6: of what is happening in the market right now and 425 00:20:59,520 --> 00:21:02,560 Speaker 6: those custom was that you talk about. We did see 426 00:21:02,560 --> 00:21:05,800 Speaker 6: the American downgrade in terms of its guidance a few 427 00:21:05,880 --> 00:21:07,959 Speaker 6: days back. I'm not going to ask you to comments 428 00:21:07,960 --> 00:21:10,080 Speaker 6: on what is happening over an American, but really just 429 00:21:10,119 --> 00:21:12,160 Speaker 6: to kind of get a comments on whether you're comfortable 430 00:21:12,400 --> 00:21:13,440 Speaker 6: with your current guidance. 431 00:21:13,560 --> 00:21:16,240 Speaker 9: Yeah, the demand has been really strong, and I think 432 00:21:16,240 --> 00:21:18,960 Speaker 9: that was the issue that were the American numbers and 433 00:21:19,080 --> 00:21:22,000 Speaker 9: you know the quarter. As we've indicated all along creagers 434 00:21:22,000 --> 00:21:25,320 Speaker 9: the last several years, that consumer demand and that priority 435 00:21:25,680 --> 00:21:29,439 Speaker 9: to invest in experience continues to be really really healthy. 436 00:21:30,000 --> 00:21:31,200 Speaker 7: June for US is. 437 00:21:31,119 --> 00:21:34,160 Speaker 9: Always the largest travel month of the year of the calendar, 438 00:21:34,200 --> 00:21:36,080 Speaker 9: so we still have to see how June's going to go, 439 00:21:36,119 --> 00:21:37,800 Speaker 9: but I'm confident it will be a good result for 440 00:21:37,840 --> 00:21:40,400 Speaker 9: the full quarter, and we'll see how June runs out. 441 00:21:40,760 --> 00:21:44,720 Speaker 6: Are you seeing any evidence that inflation and its inflation day? 442 00:21:45,080 --> 00:21:47,479 Speaker 6: We're going to be watching those numbers that inflation is 443 00:21:47,560 --> 00:21:51,080 Speaker 6: starting maybe to hit the middle class traveler. The middle 444 00:21:51,119 --> 00:21:55,200 Speaker 6: class traveler is beginning to rethink maybe the attitude towards travel, 445 00:21:55,240 --> 00:21:57,960 Speaker 6: which has been really strong over the last few years. 446 00:21:58,119 --> 00:21:58,960 Speaker 7: I don't see it. 447 00:21:59,240 --> 00:22:01,639 Speaker 9: You know, our consumer tends to be at an upper 448 00:22:01,720 --> 00:22:05,880 Speaker 9: end of the income scale. Our traveler tends to go internationally. 449 00:22:06,040 --> 00:22:11,639 Speaker 9: Our consumer is prioritizing travel above things. So while you 450 00:22:11,680 --> 00:22:14,960 Speaker 9: may be hearing from a number of industrial sectors trade 451 00:22:14,960 --> 00:22:17,520 Speaker 9: downs occurring, we're not seeing that in our numbers. 452 00:22:17,600 --> 00:22:19,080 Speaker 6: Do you think you will see that? At some point? 453 00:22:19,080 --> 00:22:21,840 Speaker 6: Do we go to a more normal? Is the new 454 00:22:21,880 --> 00:22:24,760 Speaker 6: normal in terms of what travel is going to look like? 455 00:22:24,840 --> 00:22:27,520 Speaker 6: Will this continue to persist? The store market continues to 456 00:22:27,520 --> 00:22:31,840 Speaker 6: do very well, We're obviously seeing an upper end consumer 457 00:22:31,880 --> 00:22:34,280 Speaker 6: that is still fairly flushed with cash. Is that something 458 00:22:34,320 --> 00:22:35,119 Speaker 6: that lasts years? 459 00:22:35,240 --> 00:22:37,760 Speaker 9: I think it's going to continue for quite a few 460 00:22:37,880 --> 00:22:40,200 Speaker 9: years to come. One of the factors people don't give 461 00:22:40,320 --> 00:22:45,720 Speaker 9: enough consideration to is our industry's capacity is lower than 462 00:22:45,760 --> 00:22:49,439 Speaker 9: it's been given the constraints around OEMs, whether it's Boeing 463 00:22:49,560 --> 00:22:53,960 Speaker 9: or engine issues. So our economy is a lot larger 464 00:22:53,960 --> 00:22:57,600 Speaker 9: than we were historically go back pre pandemic. Yet the 465 00:22:57,640 --> 00:23:00,399 Speaker 9: amount of capacity that we're all able to fly is 466 00:23:00,440 --> 00:23:03,800 Speaker 9: significantly constrained, and that's what's keeping demand as well as pricing. 467 00:23:04,560 --> 00:23:07,240 Speaker 6: Okay, pricing, so fares is still fairly ROBUSTI. 468 00:23:07,400 --> 00:23:09,840 Speaker 9: Prefers on balance are about twenty percent higher than they 469 00:23:09,840 --> 00:23:11,000 Speaker 9: were pre pandemic. 470 00:23:11,800 --> 00:23:13,960 Speaker 6: You bring up business travel as well. Is that something 471 00:23:14,040 --> 00:23:17,080 Speaker 6: that has come back. It's maybe come back significantly more 472 00:23:17,080 --> 00:23:19,760 Speaker 6: slowly than we've seen in terms of the retail story. 473 00:23:19,960 --> 00:23:22,680 Speaker 6: But is that coming back and ultimately given that bigger economy, 474 00:23:22,800 --> 00:23:24,920 Speaker 6: is that a bigger number someway down the road. 475 00:23:25,040 --> 00:23:27,960 Speaker 9: Well, Business business travel this year, particularly in twenty twenty four, 476 00:23:28,000 --> 00:23:31,359 Speaker 9: has really stepped up. As we went through the return 477 00:23:31,400 --> 00:23:34,200 Speaker 9: from the pandemic. In twenty two and twenty three, business 478 00:23:34,200 --> 00:23:37,440 Speaker 9: travelers were still a bit sluggish, largely because they weren't 479 00:23:37,440 --> 00:23:39,720 Speaker 9: back in their offices and they were still working from. 480 00:23:39,680 --> 00:23:40,920 Speaker 7: Various remote locations. 481 00:23:40,920 --> 00:23:44,680 Speaker 9: Once companies have finally laid the edict down, you needed 482 00:23:44,680 --> 00:23:47,240 Speaker 9: to get back and particularly if some of those businesses 483 00:23:47,240 --> 00:23:50,040 Speaker 9: started to getting a little challenge themselves. People wanted to 484 00:23:50,080 --> 00:23:53,160 Speaker 9: be back in the office that opened up. They need 485 00:23:53,200 --> 00:23:56,320 Speaker 9: to travel for consultancies, to go visit clients, for people 486 00:23:56,359 --> 00:23:58,119 Speaker 9: to get back out on the road to see their 487 00:23:58,160 --> 00:23:58,679 Speaker 9: own people. 488 00:23:58,840 --> 00:24:00,639 Speaker 7: So we've seen business we see We saw about a 489 00:24:00,680 --> 00:24:03,840 Speaker 7: ten point increase in business travel at the start of 490 00:24:03,880 --> 00:24:05,639 Speaker 7: the year and that's continuing to climb. 491 00:24:05,720 --> 00:24:07,920 Speaker 6: Middle of the topline. Okay, so we talked about that 492 00:24:07,920 --> 00:24:09,680 Speaker 6: as we can get middle. What's happening in the middle 493 00:24:09,680 --> 00:24:11,560 Speaker 6: of the P and L. You still seeing What kind 494 00:24:11,600 --> 00:24:13,240 Speaker 6: of inflation are you seeing in the business. 495 00:24:13,359 --> 00:24:16,720 Speaker 9: We're seeing inflation, but it's starting to moderate a bit. 496 00:24:17,320 --> 00:24:20,680 Speaker 9: For us, the biggest part of our inflation story is wages. 497 00:24:20,840 --> 00:24:23,560 Speaker 9: Is our people, which is the best type of inflation 498 00:24:23,640 --> 00:24:26,400 Speaker 9: we can have, and our people continue to grow wages 499 00:24:26,480 --> 00:24:30,200 Speaker 9: in the four to five percent per animal rate. We're 500 00:24:30,240 --> 00:24:33,360 Speaker 9: continuing to work on productivity and efficiency so we can 501 00:24:33,720 --> 00:24:36,399 Speaker 9: take some of those rates and make certain that they're productive. 502 00:24:37,000 --> 00:24:39,879 Speaker 9: Increases other parts of the supply chain where the supply 503 00:24:39,960 --> 00:24:42,280 Speaker 9: chain is still not where it needs to be. We 504 00:24:42,359 --> 00:24:43,680 Speaker 9: talked about the engine issues. 505 00:24:44,440 --> 00:24:45,840 Speaker 6: We still don't how it's just not holding you. 506 00:24:45,800 --> 00:24:49,399 Speaker 9: Back, Well, it's significantly against not just Delta, it's the 507 00:24:49,480 --> 00:24:51,400 Speaker 9: industry and the. 508 00:24:51,359 --> 00:24:52,359 Speaker 7: Turntimes are longer. 509 00:24:52,440 --> 00:24:54,679 Speaker 9: You now have turntimes on planes that could extend up 510 00:24:54,720 --> 00:24:57,160 Speaker 9: to months rather than weeks. 511 00:24:56,800 --> 00:24:57,560 Speaker 7: Which they should be. 512 00:24:58,080 --> 00:25:02,280 Speaker 9: Parts are higher than ever, material cost are growing. You know, 513 00:25:02,280 --> 00:25:05,320 Speaker 9: the manufacturers across the industry are having challenges. 514 00:25:05,440 --> 00:25:07,840 Speaker 6: It doesn't sound like an economy that you're describing that 515 00:25:08,000 --> 00:25:10,480 Speaker 6: the needs needs rate cuts right now. 516 00:25:10,920 --> 00:25:14,000 Speaker 9: Well, it's it's an economy right now from I standpoint, 517 00:25:14,280 --> 00:25:15,040 Speaker 9: that's doing well. 518 00:25:15,119 --> 00:25:17,640 Speaker 7: But there's not just one consumer out there. Okay. Our 519 00:25:17,640 --> 00:25:19,280 Speaker 7: consumer again tends to be in the upper end. 520 00:25:19,320 --> 00:25:22,760 Speaker 9: Our consumer generate a tremendous amount of wealth and continues 521 00:25:23,160 --> 00:25:26,040 Speaker 9: to have that wealth through the pandemic. The markets up, 522 00:25:26,080 --> 00:25:29,280 Speaker 9: real estate's up, Unemployment is extraordinarily. 523 00:25:29,440 --> 00:25:31,240 Speaker 6: I don't need more help, is basically what you're saying. 524 00:25:31,520 --> 00:25:33,760 Speaker 9: The lower end. Yeah, I think there's I think there's 525 00:25:33,800 --> 00:25:36,880 Speaker 9: some challenges. So that's something that the FED will will 526 00:25:37,119 --> 00:25:39,080 Speaker 9: look at all the data. I don't think an airline 527 00:25:39,119 --> 00:25:40,040 Speaker 9: is necessarily the. 528 00:25:40,520 --> 00:25:42,160 Speaker 6: Pretty You've got a pretty good view of what's happening 529 00:25:42,160 --> 00:25:42,800 Speaker 6: in the economy. 530 00:25:42,880 --> 00:25:44,960 Speaker 7: Yeah, our business is doing quite well. 531 00:25:45,440 --> 00:25:48,080 Speaker 6: Okay, you bring up Boeing. You talk about what's happening 532 00:25:48,080 --> 00:25:49,960 Speaker 6: with the with the OEMs, Bowing and app us, but 533 00:25:49,960 --> 00:25:52,280 Speaker 6: it's also the engines, as you mentioned the and Whitney 534 00:25:52,280 --> 00:25:55,280 Speaker 6: engine issues that we've been seeing. How long does this last? 535 00:25:55,640 --> 00:25:57,240 Speaker 6: How long? How much of a struggle is it to 536 00:25:57,280 --> 00:26:00,080 Speaker 6: get hold of the kit that you need right now? 537 00:25:59,840 --> 00:26:02,119 Speaker 6: How much? How long do you think the problems that 538 00:26:02,160 --> 00:26:04,960 Speaker 6: we're seeing at Boeing and Airbus and Pratt and Whitney 539 00:26:05,240 --> 00:26:06,560 Speaker 6: are going to be lasting for well? 540 00:26:06,640 --> 00:26:09,640 Speaker 9: Right now we have no Boeing orders that we're anticipating 541 00:26:09,720 --> 00:26:11,680 Speaker 9: up delivery on in the next several years. So from 542 00:26:11,680 --> 00:26:14,399 Speaker 9: our standpoint, it's really an Airbus story. Air Bus has 543 00:26:14,400 --> 00:26:17,200 Speaker 9: been a great partner, and Airbus continues to provide us 544 00:26:17,600 --> 00:26:21,520 Speaker 9: the planes and the technology that we've been expecting for them, 545 00:26:21,800 --> 00:26:23,440 Speaker 9: and they were right through the pandemic. 546 00:26:23,720 --> 00:26:26,200 Speaker 7: The engines are going to be a bigger issue, particularly 547 00:26:26,240 --> 00:26:26,520 Speaker 7: for us. 548 00:26:26,560 --> 00:26:29,760 Speaker 9: The gear turble fan that's slowing down a little bit 549 00:26:30,080 --> 00:26:32,480 Speaker 9: about the amount of new deliveries that we can take, 550 00:26:32,600 --> 00:26:35,199 Speaker 9: but it's more engines than it is planes. What is 551 00:26:35,240 --> 00:26:37,679 Speaker 9: causing us to do is maintain the existing fleet we 552 00:26:37,800 --> 00:26:40,359 Speaker 9: have a little bit longer. So that's another cost to 553 00:26:40,400 --> 00:26:40,879 Speaker 9: the business. 554 00:26:41,240 --> 00:26:43,600 Speaker 6: You are well known for keeping your fleet for longer 555 00:26:45,080 --> 00:26:47,640 Speaker 6: it had. The age of the average aircraft has come 556 00:26:47,680 --> 00:26:50,479 Speaker 6: down a little bit over the last few years. But 557 00:26:50,640 --> 00:26:53,879 Speaker 6: does that strategy work in an environment where the sustainability 558 00:26:53,960 --> 00:26:56,080 Speaker 6: question comes in? If you fly all the planes, they 559 00:26:56,280 --> 00:26:59,399 Speaker 6: inherently tend to be less efficient. Is that something? Is 560 00:26:59,400 --> 00:27:00,840 Speaker 6: that a problem that you're going to come across at 561 00:27:00,880 --> 00:27:01,200 Speaker 6: some point? 562 00:27:01,200 --> 00:27:03,240 Speaker 9: I don't think so. Again, I think this is transitory. 563 00:27:03,400 --> 00:27:06,720 Speaker 9: I think the OEMs will get their parts. 564 00:27:06,760 --> 00:27:09,040 Speaker 7: I think they will get the transition. A lot of 565 00:27:09,040 --> 00:27:09,760 Speaker 7: this is about. 566 00:27:09,560 --> 00:27:12,399 Speaker 9: Labor and the fact that many of the engine not 567 00:27:12,520 --> 00:27:14,760 Speaker 9: just the Tier one, but down into the tier three 568 00:27:14,800 --> 00:27:16,920 Speaker 9: and tier four of the supply gen let a lot 569 00:27:16,920 --> 00:27:20,600 Speaker 9: of people go. So it's experienced, it's staffing its rates. 570 00:27:20,600 --> 00:27:23,600 Speaker 9: I mean, it's a very complex story. But long term, 571 00:27:23,840 --> 00:27:26,240 Speaker 9: I feel good about our sustainability story. We're taking our 572 00:27:26,320 --> 00:27:29,680 Speaker 9: overall footprint down in the range of one to two 573 00:27:29,720 --> 00:27:32,920 Speaker 9: percent per year every year, and that's going to continue 574 00:27:33,240 --> 00:27:35,520 Speaker 9: to go on, and as we get new planes, those 575 00:27:35,560 --> 00:27:36,080 Speaker 9: numbers are. 576 00:27:35,960 --> 00:27:36,919 Speaker 7: Going to go down faster. 577 00:27:38,480 --> 00:27:40,879 Speaker 6: Politics is going to become a bigger and bigger issue 578 00:27:41,119 --> 00:27:43,680 Speaker 6: over the next few weeks and months. As we approach November, 579 00:27:44,920 --> 00:27:47,359 Speaker 6: when you think about who goes next to the White House, 580 00:27:47,600 --> 00:27:50,840 Speaker 6: What if the next administration need to do to keep 581 00:27:50,920 --> 00:27:53,760 Speaker 6: the aviation market that you've just described, this buoyant market, 582 00:27:53,800 --> 00:27:56,199 Speaker 6: this market with momentum, keep it going. What do you 583 00:27:56,240 --> 00:27:59,000 Speaker 6: need to see from the next administration to keep it 584 00:27:59,040 --> 00:27:59,400 Speaker 6: on track? 585 00:27:59,480 --> 00:28:04,000 Speaker 9: Most important thing is infrastructure investment. Maintaining the current structure 586 00:28:04,200 --> 00:28:08,920 Speaker 9: is challenging, and they need to continue to modernize the technologies. 587 00:28:08,960 --> 00:28:12,360 Speaker 9: They continue to need to get air traffic controllers staffed 588 00:28:12,400 --> 00:28:14,200 Speaker 9: and hired and in position. 589 00:28:13,920 --> 00:28:14,960 Speaker 7: To enable us to grow. 590 00:28:15,480 --> 00:28:18,600 Speaker 9: And from a from an investment standpoint, that's where we 591 00:28:18,600 --> 00:28:22,320 Speaker 9: were very happy to see the FAA reauthorization bill finally 592 00:28:23,359 --> 00:28:26,200 Speaker 9: come about. It took unfortunately months, if not a year 593 00:28:26,280 --> 00:28:29,840 Speaker 9: or year overdue in its delivery, but it's here now. 594 00:28:29,800 --> 00:28:31,439 Speaker 7: And we're going to work closely with the FAA to 595 00:28:31,440 --> 00:28:32,080 Speaker 7: make that happen. 596 00:28:33,080 --> 00:28:36,280 Speaker 6: Just to wrap the conversation up, you feel like you 597 00:28:36,359 --> 00:28:38,040 Speaker 6: are on the front foots at the moment. This is 598 00:28:38,080 --> 00:28:41,240 Speaker 6: an airline that is growing. What is the capacity constraint 599 00:28:41,400 --> 00:28:43,040 Speaker 6: that you are seeing right now that is going to 600 00:28:43,080 --> 00:28:45,080 Speaker 6: slow your race of growth down? If I'm gonna invest 601 00:28:45,120 --> 00:28:47,240 Speaker 6: in looking at delta. Is this as good as it gets? 602 00:28:47,520 --> 00:28:48,200 Speaker 6: What does it get. 603 00:28:48,320 --> 00:28:50,960 Speaker 7: Better from here? We're doing well on capacity growth. This year. 604 00:28:51,000 --> 00:28:54,000 Speaker 9: We expect to grow our top line in the mid 605 00:28:54,360 --> 00:28:57,920 Speaker 9: single digits, you know that four to six seven percent range, 606 00:28:58,440 --> 00:29:01,040 Speaker 9: which I think is healthy growth consider particularly the growth 607 00:29:01,040 --> 00:29:03,440 Speaker 9: we've had over these last handful of years. This year 608 00:29:03,480 --> 00:29:06,400 Speaker 9: will be the highest revenues in our company's history. 609 00:29:06,640 --> 00:29:09,240 Speaker 7: A support are sixty billion dollars plus remind us. 610 00:29:09,560 --> 00:29:11,280 Speaker 9: And the outlook I think is strong because I think 611 00:29:11,280 --> 00:29:13,360 Speaker 9: think the supply chain and the extraints are only going 612 00:29:13,440 --> 00:29:15,800 Speaker 9: to get a little bit better as we moved forward. 613 00:29:16,040 --> 00:29:18,560 Speaker 6: At Congratulations on the award, the ATW award that you'll 614 00:29:18,560 --> 00:29:20,360 Speaker 6: be getting here a Dubai this evening. Great to see 615 00:29:20,360 --> 00:29:22,880 Speaker 6: you here at Dubai. Thanks for stopping bye to see 616 00:29:22,960 --> 00:29:25,040 Speaker 6: us here. Thanks guys Bloomberg. Great to be with you. 617 00:29:25,400 --> 00:29:28,400 Speaker 6: Thank you very much. John from Dubai back to you. 618 00:29:28,640 --> 00:29:30,560 Speaker 2: Thank you, buddy. Great to catch up and hear that 619 00:29:30,600 --> 00:29:33,160 Speaker 2: conversation Guy Johnson there with the down to Airlines CEO 620 00:29:33,440 --> 00:29:37,720 Speaker 2: at Bastian. This is the Bloomberg Surveillance Podcast, bringing you 621 00:29:38,000 --> 00:29:41,400 Speaker 2: the best in markets, economics, angiet politics. You can watch 622 00:29:41,400 --> 00:29:44,200 Speaker 2: the show live on Bloomberg TV weekday mornings from six 623 00:29:44,200 --> 00:29:48,600 Speaker 2: am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 624 00:29:48,760 --> 00:29:51,000 Speaker 2: or anywhere else you listen, and as always, on the 625 00:29:51,000 --> 00:29:53,400 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.