WEBVTT - US CPI Cools, EU China EV Tariffs 0:00:02.920 --> 0:00:10.799 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.040 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Affo Cardplay and then Broyd Auto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business app. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.480 or watch us live on YouTube. 0:00:25.280 --> 0:00:27.600 Obviously, the big macro story is what we saw with 0:00:27.680 --> 0:00:30.479 CPI and then looking ahead to that FED meeting. This 0:00:30.560 --> 0:00:32.680 is the first time since twenty twenty that we get 0:00:32.760 --> 0:00:36.600 the Central Bank decision on the same day as CPI, 0:00:36.640 --> 0:00:38.440 and you could read the CPI in many different kind 0:00:38.479 --> 0:00:40.960 of ways. So let's ask Jeffrey Cleveland. He's chief economist 0:00:41.120 --> 0:00:43.720 at Peydon and Regal. He joins us, Now, hey, Jeffrey, 0:00:43.720 --> 0:00:45.080 what was your read on CPI. 0:00:46.920 --> 0:00:50.360 Well, good morning, happy FED day. I think you put 0:00:50.360 --> 0:00:54.600 it in context. Sequentially, to start the year, we had 0:00:54.640 --> 0:00:57.720 a point four reading, then another point four reading, then 0:00:57.760 --> 0:00:59.720 I think we had another point for reading, and then 0:00:59.760 --> 0:01:02.880 we hado point three month to month percent change for 0:01:02.960 --> 0:01:05.600 April for four CPI, and then this morning point two 0:01:06.160 --> 0:01:08.800 or if you like, on the out to do two 0:01:08.840 --> 0:01:11.560 decimal places, it was point one six. So this is 0:01:11.560 --> 0:01:15.600 great news. This is great news. Uh, we you know, 0:01:15.600 --> 0:01:17.880 it shows a little cooling off in the underlying pace 0:01:17.880 --> 0:01:21.760 of inflation on goods. Goods prices were down, but also 0:01:21.920 --> 0:01:25.479 services price is cool during the month. So everything's sort 0:01:25.520 --> 0:01:28.520 of moving in the right direction or I think for 0:01:28.600 --> 0:01:31.280 the soft landing narrative, but you know, also in the 0:01:31.319 --> 0:01:35.120 direction that policymakers would like to see. So it's a 0:01:35.160 --> 0:01:36.640 great start to FED day. 0:01:36.959 --> 0:01:37.720 All right, Jeffrey. 0:01:37.800 --> 0:01:40.240 So given that, how do you think how do you 0:01:40.280 --> 0:01:43.600 think our good friends at the FED will digest this news. 0:01:44.840 --> 0:01:46.959 Well, I don't know if it's irony or it's the 0:01:47.000 --> 0:01:51.040 perfect day for this, but I suspect at you know, 0:01:51.120 --> 0:01:54.560 two pm your time, eleven am my time here in 0:01:54.560 --> 0:01:58.840 Los Angeles, we'll get some news in probably the median 0:01:59.480 --> 0:02:03.520 estimate for core PCE for twenty twenty four we'll be 0:02:03.600 --> 0:02:06.480 nudged up by policy makers. So they as of the 0:02:06.560 --> 0:02:10.120 last projections they gave us two point six, that probably 0:02:10.120 --> 0:02:12.239 gets pushed up to two point eight. So in a 0:02:12.320 --> 0:02:16.440 day where CPI came in soft inflation is seeming to soften, 0:02:16.680 --> 0:02:20.239 they're going to raise their inflation estimate for the year 0:02:20.400 --> 0:02:23.240 a little bit, just based on the math, similar maybe 0:02:23.240 --> 0:02:27.280 to what the ECB also did last week, so that's possible. 0:02:27.600 --> 0:02:30.880 They probably also reduced a number of ikes or sorry 0:02:30.919 --> 0:02:33.280 cuts cuts. I didn't say hikes an when I said 0:02:33.320 --> 0:02:36.280 cuts Italy in the dots. 0:02:36.360 --> 0:02:36.520 Yeah. 0:02:36.600 --> 0:02:39.200 Yeah, so they had three in there. That probably goes 0:02:39.240 --> 0:02:42.360 down to two. I could go down to one, but 0:02:42.400 --> 0:02:45.080 I think two is probably more likely. So that'll be 0:02:45.120 --> 0:02:47.840 interesting for the rest of the day. And then we'll 0:02:47.840 --> 0:02:50.440 see Chair Powell how he puts this into contest. I 0:02:50.480 --> 0:02:53.240 suspect he'll say this is good, this is good, but 0:02:53.280 --> 0:02:56.360 we need a few good months, not just one good month, 0:02:56.720 --> 0:03:00.320 so then we can argue later is that free? Is 0:03:00.360 --> 0:03:00.960 that four? 0:03:01.200 --> 0:03:03.720 I was saying, is it five? I've heard like how 0:03:03.720 --> 0:03:04.160 many months? 0:03:04.240 --> 0:03:04.359 Is that? 0:03:04.480 --> 0:03:07.160 Constant tute? Which brings me to that infletion point. You 0:03:07.200 --> 0:03:09.000 just pointed out that they might raise it to two 0:03:09.000 --> 0:03:11.440 point eight percent. Is the market going to take that 0:03:11.960 --> 0:03:13.360 as good news or bad news? 0:03:14.680 --> 0:03:14.880 You know? 0:03:14.960 --> 0:03:17.160 I think this is pretty well telegraphed. I mean, if 0:03:17.160 --> 0:03:19.840 you're looking at these numbers in the forecasting community, I 0:03:19.840 --> 0:03:24.720 think that's not controversial. However, the market, yeah, could react negatively. 0:03:25.360 --> 0:03:27.800 The other thing might be alex would be not just 0:03:27.840 --> 0:03:30.320 the twenty twenty four dot but the twenty twenty five, 0:03:30.840 --> 0:03:33.960 so the median for PCEE for next year. If that 0:03:34.040 --> 0:03:36.640 moves up a little bit, that could maybe send a 0:03:36.720 --> 0:03:40.360 message that inflation is a bit stickier. That could disappoint 0:03:40.400 --> 0:03:43.400 the market. So that there's a lot of movie parts 0:03:43.440 --> 0:03:46.240 here that will have to play out over the course 0:03:46.280 --> 0:03:46.760 of the day. 0:03:47.600 --> 0:03:50.840 So, Jeffrey, what do you think the Fed does here? 0:03:50.880 --> 0:03:52.960 I mean, I think the market is now pressing in, 0:03:53.160 --> 0:03:56.400 you know, maybe certainly a November cut and bringing September 0:03:56.440 --> 0:03:59.040 back on to the table here. How do you think 0:03:59.200 --> 0:04:00.840 what kind of messaging we'll get around that? 0:04:01.760 --> 0:04:03.400 Well, I think that's where it comes back to you. Okay, 0:04:03.400 --> 0:04:05.440 this is a good report. How many good reports do 0:04:05.520 --> 0:04:08.600 the policymakers need to see to become confident? Is it three? 0:04:08.680 --> 0:04:12.160 Is it four? Is it five? If it's four, I 0:04:12.160 --> 0:04:15.240 think that rules out a cut before the election, so 0:04:15.400 --> 0:04:18.200 that we still have the first cut in December in 0:04:18.240 --> 0:04:21.000 our projection, I'm pretty comfortable with that. We'll have to 0:04:21.040 --> 0:04:23.000 listen to the bed share today and see if there's 0:04:23.000 --> 0:04:26.040 any reason to speed that up. I mean, the other 0:04:26.120 --> 0:04:28.279 thing to keep in mind here, talking to colleagues this 0:04:28.320 --> 0:04:31.560 morning doesn't need to do a lot I don't think 0:04:31.760 --> 0:04:33.880 they're in a good spot. I said that a few 0:04:33.920 --> 0:04:37.520 times over the months on this show. The stocks are, 0:04:37.640 --> 0:04:41.040 you know, at all time high. Labor market is holding 0:04:41.080 --> 0:04:41.880 up pretty solid. 0:04:41.880 --> 0:04:42.039 You know. 0:04:42.080 --> 0:04:44.479 Some of the concern was if the bed remained too 0:04:44.560 --> 0:04:46.799 high for too long, it would sink the labor market. 0:04:47.240 --> 0:04:50.400 That doesn't appear to be happening, and inflation is you know, 0:04:50.560 --> 0:04:53.359 things cooled off in May. This is good news, I 0:04:53.400 --> 0:04:57.440 fully admit it. But we're still above two percent on 0:04:57.839 --> 0:04:59.960 the year on year, whether you're looking at four piece 0:05:00.680 --> 0:05:03.240 or you're looking at course. Yes, still rush to do 0:05:03.279 --> 0:05:06.520 anything here, So I think, you know, we'll just wait 0:05:06.520 --> 0:05:08.520 and see see how the data comes in the next 0:05:08.600 --> 0:05:09.839 couple of months, then make a decision. 0:05:10.000 --> 0:05:12.440 And that is why Bank of America. So if you discim, 0:05:12.480 --> 0:05:15.279 Renni and who was on surveillance, said things are kind 0:05:15.320 --> 0:05:17.919 of awesome for stocks, like cue the Lego song, Like 0:05:17.960 --> 0:05:20.240 that's exactly the point that you're kind of laying out 0:05:20.640 --> 0:05:23.320 My big question that I just don't really understand or 0:05:23.360 --> 0:05:26.680 shelter costs. So I appreciate that they were the biggest 0:05:26.680 --> 0:05:31.279 component of the May price increase. Why are we not 0:05:31.480 --> 0:05:34.640 falling faster like we have been waiting for the rents 0:05:34.640 --> 0:05:37.279 to reset, for things to cool down and shelter for 0:05:37.520 --> 0:05:38.719 years at this point. 0:05:40.040 --> 0:05:41.919 Yeah, that's come up a lot with clients, and I 0:05:41.960 --> 0:05:44.880 think the issue is a lot of clients point to 0:05:45.880 --> 0:05:49.680 the you know measures, private sector rent measures that may 0:05:49.720 --> 0:05:54.480 be capturing the marginal renters cost of renting. So someone 0:05:54.560 --> 0:05:58.120 moving into a nice building there and in Manhattan, you 0:05:58.120 --> 0:05:59.800 know where they have a nice door person, you know 0:06:00.120 --> 0:06:02.400 the door for them, those rents may have come down. 0:06:02.440 --> 0:06:03.960 I don't know. You tell me, I don't know. 0:06:04.160 --> 0:06:04.800 We don't live there. 0:06:05.600 --> 0:06:08.800 That's on a lot of those private sector rent metrics capture. 0:06:09.279 --> 0:06:12.000 The BLS is running a different exercise and trying to 0:06:12.040 --> 0:06:15.800 look at the average cost to all renters, and this 0:06:15.920 --> 0:06:18.600 tend this series just tends to move a lot slower 0:06:19.120 --> 0:06:22.320 than investors at Hope. So you know, the patients from 0:06:22.440 --> 0:06:24.320 a lot of investors, it's like, hey, this we need 0:06:24.360 --> 0:06:26.960 to we're seeing it. We're seeing the disinflation in the 0:06:26.960 --> 0:06:29.680 private sector rent metrics. That's got to translate, and it's 0:06:29.720 --> 0:06:32.320 just taking it's taken longer to play out. So that's 0:06:32.320 --> 0:06:33.679 my preferred story. 0:06:34.400 --> 0:06:37.479 Jeff for giving us an economic or inflation backdrop that 0:06:37.520 --> 0:06:40.120 we got I guess a better handle on today. What's 0:06:40.120 --> 0:06:42.640 your call in the US consumer? Can US consumer continue 0:06:42.640 --> 0:06:44.400 to power this economy? 0:06:44.400 --> 0:06:47.240 For yes, yes it can. I mean we look at 0:06:47.240 --> 0:06:49.520 the consumer, We look at how many people are employed, 0:06:49.920 --> 0:06:52.920 how much they're working, what they're getting paid, And when 0:06:52.960 --> 0:06:55.560 you look at that, that that measure, that aggregate measure 0:06:55.600 --> 0:06:59.120 PAUL is still running almost six percent year on year. 0:06:59.720 --> 0:07:02.520 So and we know the US consumer is not a 0:07:02.520 --> 0:07:05.480 big saber. What they earn, they tend to spend. So 0:07:05.640 --> 0:07:09.880 really earnings matter, and earnings are holding up through the 0:07:09.960 --> 0:07:13.080 main data, so I think the US consumer will have 0:07:13.480 --> 0:07:16.320 ample spending power. The other thing, if I have a 0:07:16.320 --> 0:07:19.720 few more seconds, is that in addition to income, US 0:07:19.760 --> 0:07:23.160 consumers can rely on borrowing capacity. We don't think borrowing 0:07:23.200 --> 0:07:26.960 capacity is maxed out, so people could borrow more. Some 0:07:27.080 --> 0:07:30.120 cohorts of the US consumer could also sell assets or 0:07:30.160 --> 0:07:33.200 borrow against assets to spend. Net worth is up a 0:07:33.240 --> 0:07:35.640 lot in the last few years, so we think that's 0:07:35.680 --> 0:07:38.680 a big component that could keep the consumer spending. So 0:07:38.720 --> 0:07:41.280 that's why when you look at our GDP call, we're 0:07:41.320 --> 0:07:43.760 still above trend for twenty twenty four. We think GDP 0:07:43.920 --> 0:07:47.240 will grow around two point four two point five percent 0:07:47.320 --> 0:07:50.080 this year, and that's driven by the consumer. 0:07:50.600 --> 0:07:53.200 You were just like so awesome. You have so much 0:07:53.320 --> 0:07:55.560 energy and so much enthusiasm. I don't know if you 0:07:55.600 --> 0:07:57.200 get off air and you just like go to sleep, 0:07:57.240 --> 0:08:00.440 but it's so nice and refreshing to hear like a 0:08:00.520 --> 0:08:05.400 solid opinion and some enthusiasm. To that point, you talked 0:08:05.400 --> 0:08:08.160 about the consumers holding in. What about like restaurants and 0:08:08.240 --> 0:08:11.400 services and things that are directly tied to the consumer, 0:08:11.520 --> 0:08:14.280 of those prices coming down or is that demand and 0:08:14.320 --> 0:08:16.960 those sticky consumers keeping prices elevated. 0:08:17.720 --> 0:08:21.160 It's possible that just the pace of consumer spending will 0:08:21.240 --> 0:08:25.160 keep prices stickier. Doesn't mean an acceleration. It just means that, 0:08:25.240 --> 0:08:27.960 you know, on core, maybe we'll hang out three percent, 0:08:28.080 --> 0:08:30.360 three three and a half percent on core, we won't 0:08:30.400 --> 0:08:33.280 get back to you know, the pre COVID sub two 0:08:33.280 --> 0:08:37.200 percent level. So that's entirely plausible. It's also, you know, 0:08:37.240 --> 0:08:39.800 possible that consumers are shifting away maybe spending less on 0:08:39.840 --> 0:08:43.400 some retail on goods, they're spending more on services. So 0:08:43.440 --> 0:08:47.040 that's a shift that's underway. You seeing that with air travel. 0:08:47.120 --> 0:08:49.120 So I think that's that's one thing to keep in mind, 0:08:49.120 --> 0:08:51.640 it's not necessarily a slow down in consumer spending, but 0:08:51.679 --> 0:08:54.079 a shift in how consumers are spending those dollars. 0:08:54.480 --> 0:08:56.400 All right, Jeffrey Clevelan, thanks so much for joining us. 0:08:56.559 --> 0:08:59.200 Jeffrey Cleveland chief economists have paid in and regal joining 0:08:59.240 --> 0:09:01.400 us a via zoom from Los Angeles. 0:09:03.240 --> 0:09:07.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:07.200 --> 0:09:10.720 weekdays at ten am Eastern on applecar Play and Android 0:09:10.760 --> 0:09:13.520 Auto with the Bloomberg Business app. You can also listen 0:09:13.640 --> 0:09:16.720 live on Amazon Alexa from our flagship New York station. 0:09:17.120 --> 0:09:19.880 Just say Alexa play Bloomberg eleven thirty. 0:09:21.160 --> 0:09:23.440 It is FED day, it is CPI Day. So what 0:09:23.480 --> 0:09:25.079 do we do? We talked to one of the best, 0:09:25.160 --> 0:09:28.280 Danielle di Martino Booth. She's CEO and chief strategist for 0:09:28.400 --> 0:09:31.240 QI Research. We love the strong opinions that you have, 0:09:31.320 --> 0:09:33.320 and we love how you look at the market. Okay, 0:09:33.480 --> 0:09:37.319 so you're pessimistic on the economy. Is that a fair 0:09:37.440 --> 0:09:38.480 statement to say? 0:09:39.240 --> 0:09:42.880 It's? Yes, it is fair. I'm right there with Anna Wong, 0:09:43.160 --> 0:09:45.679 and I've been saying it since January that we likely 0:09:45.720 --> 0:09:49.640 went into recession in October of twenty twenty three. That's 0:09:49.679 --> 0:09:54.160 when the McKelvey rule was first triggered. It's got a 0:09:54.200 --> 0:09:57.679 flawless track record back to nineteen sixty eight. It's kind 0:09:57.679 --> 0:09:59.800 of like the Psalm role, but it's devised differently by 0:09:59.840 --> 0:10:03.920 the former chief economist at Goldman's Acts. He was interviewed 0:10:04.080 --> 0:10:07.000 in January of two thousand and eight, and because his 0:10:07.080 --> 0:10:09.600 mckelvy rule had been triggered in December two thousand and seven, 0:10:10.120 --> 0:10:12.760 and they said they asked him at the time the 0:10:12.800 --> 0:10:15.920 Wall Street Journal, are are we in recession? And he said, oh, 0:10:16.120 --> 0:10:18.400 I'm gonna have to wait and see. So of his 0:10:18.480 --> 0:10:20.760 own rule, he said it might be different this time. 0:10:20.760 --> 0:10:22.960 But it wasn't. It wasn't. We didn't find out for 0:10:23.040 --> 0:10:26.240 three hundred and sixty six days from the National Bureau 0:10:26.240 --> 0:10:28.959 of Economic Research that it did. The recession had been 0:10:29.040 --> 0:10:32.600 dated to December two thousand and seven. But we know 0:10:32.760 --> 0:10:35.720 that once the mckelviy rule is triggered that we're typically 0:10:35.760 --> 0:10:36.320 in recession. 0:10:36.440 --> 0:10:38.280 But then we have this whole like record high in 0:10:38.320 --> 0:10:40.440 the equity market. Oh, everything's kind of awesome. 0:10:40.480 --> 0:10:42.400 It's supposed to be this way by bonds. 0:10:42.120 --> 0:10:44.600 Y'ls are lower, It's supposed to be like this right now. 0:10:44.440 --> 0:10:47.520 It is you typically get a good ten percent blowoff 0:10:47.600 --> 0:10:50.880 rally the time kind of when main Street starts to 0:10:50.960 --> 0:10:54.200 understand that we're in recession, which Bright Chairpowell acknowledged that 0:10:54.280 --> 0:10:56.280 last time he was at the podium, he mentioned indeed, 0:10:56.360 --> 0:10:59.840 dot Com, he mentioned University of Michigan and households starting 0:10:59.880 --> 0:11:01.800 to say, oh my gosh, if I lose my job, 0:11:01.840 --> 0:11:03.720 I'm not going to get another one. Kind of from 0:11:03.720 --> 0:11:07.120 that moment of the Fed recognizing that main Street sees 0:11:07.120 --> 0:11:09.679 that we're falling into recession, until when the Fed actually 0:11:09.679 --> 0:11:11.880 cuts rights for the first time, you tend to see 0:11:11.920 --> 0:11:14.080 a good ten percent rally in the stock market. 0:11:14.400 --> 0:11:16.400 So what we'll be hear from our feeder reserve the 0:11:16.400 --> 0:11:17.240 cerconion you believe. 0:11:18.000 --> 0:11:20.760 I think we're gonna hear either two or three. I 0:11:20.760 --> 0:11:23.559 would not be surprised to see the three rate cuts. 0:11:23.880 --> 0:11:27.319 Say on the table, the unemployment rate was not rounded 0:11:27.400 --> 0:11:30.200 up to four point zero percent. It was three point 0:11:30.280 --> 0:11:33.360 nine six percent. It was a good strong four percent. 0:11:34.800 --> 0:11:36.400 And given what we've seen in the past, when the 0:11:36.480 --> 0:11:39.360 unmployment rate moves up, inches up a tenth of a 0:11:39.400 --> 0:11:41.760 percentage point a tenth, a tenth a tent right, that's 0:11:41.840 --> 0:11:44.679 exactly what we've seen for the last thirteen months, very 0:11:44.720 --> 0:11:48.199 small movements. But typically when we see you know, your 0:11:48.200 --> 0:11:52.000 Bloomberg bc y function, when the when bankruptcy start to run, 0:11:52.040 --> 0:11:54.880 as they're running this month at the fastest pace since 0:11:54.920 --> 0:11:58.400 the pandemic, companies with fifty million in liabilities or more. 0:11:58.440 --> 0:12:02.640 There was coach last night at five Transportation company. Typically 0:12:02.640 --> 0:12:06.240 when we see an acceleration in bankruptcy filings, we also 0:12:06.320 --> 0:12:09.600 see the increases in the unemployment rate tick up. So 0:12:09.679 --> 0:12:12.120 it's feasible that we could see in July and in 0:12:12.160 --> 0:12:15.200 August a large enough move to put the FED in 0:12:15.320 --> 0:12:19.439 play come September, September, November, December. Maybe those three dots 0:12:19.520 --> 0:12:20.559 stay on the plot today. 0:12:20.800 --> 0:12:22.559 So see why Go? 0:12:22.960 --> 0:12:23.559 You see why Go? 0:12:23.800 --> 0:12:25.880 It is really awesome. Has a nice little pie chart 0:12:25.920 --> 0:12:28.440 that shows where the bankruptcies are are coming and the 0:12:28.480 --> 0:12:30.800 most are coming from consumer discretionary and this is a 0:12:30.840 --> 0:12:33.600 period over one year. It breaks down industries, it breaks 0:12:33.640 --> 0:12:36.000 down the name and then the liability is very cool. 0:12:36.640 --> 0:12:39.200 One of the richest functions on the termin that. 0:12:39.080 --> 0:12:40.280 That's our desert island function. 0:12:40.400 --> 0:12:42.680 Is what you said, now, that is my desert island function. 0:12:42.760 --> 0:12:46.040 My desert island go to financial indicator would be the 0:12:46.080 --> 0:12:50.240 move index, which should be a pure play on treasury 0:12:50.240 --> 0:12:55.000 market volatility. However, when treasury rates fall and the move 0:12:55.160 --> 0:12:58.040 moves up, it's telling you what's going on in BCY 0:12:58.120 --> 0:13:00.680 that there's a credit event rumbling. So we're under the 0:13:00.720 --> 0:13:05.280 surface because if treasury rates are falling, then treasury volatility 0:13:05.679 --> 0:13:08.280 should fall. When they move in the opposite direction, there's 0:13:08.280 --> 0:13:11.040 a lot of tension in the system that typically starts 0:13:11.080 --> 0:13:13.880 to flag you know, there's issues with the banking system. 0:13:13.880 --> 0:13:16.320 We're lending and what are we seeing. We're seeing commercial 0:13:16.360 --> 0:13:18.280 industrial lending contract right now? 0:13:18.760 --> 0:13:22.360 Should the Fed have already been cutting likely? 0:13:22.920 --> 0:13:27.240 Likely? Right, We're eleven months in to the Fed holding 0:13:27.440 --> 0:13:30.719 after their last rate hike heading into the Great Recession 0:13:31.280 --> 0:13:33.760 December two thousand and seven, the Fed held off for 0:13:33.920 --> 0:13:37.800 fifteen months. It was the longest in history. So the 0:13:37.880 --> 0:13:40.480 longer they kind of hold off, hold off, hold off, 0:13:40.600 --> 0:13:43.360 the bigger the potential for a policy here that they've 0:13:43.360 --> 0:13:44.120 waited too long. 0:13:44.840 --> 0:13:47.120 So I have to say, when Danielle's on, I get 0:13:47.200 --> 0:13:49.080 right ins to be like, ask you this, ask for that, 0:13:49.160 --> 0:13:52.280 ask you this. So this comes from a listener. Do 0:13:52.320 --> 0:13:54.800 you think that the next rolling six months of economic 0:13:54.840 --> 0:13:58.440 data remains noisy, or does the deterioration remain consistent, So 0:13:58.480 --> 0:14:00.640 it's like a drip drip, or it's like a cliff. 0:14:01.280 --> 0:14:04.280 I think we're starting to see something that more closely 0:14:04.360 --> 0:14:08.760 resembles a cliff. You have essentials inflation at QI Research, 0:14:08.800 --> 0:14:10.880 we parse them out running at four point seven percent 0:14:10.920 --> 0:14:13.800 year over year. It also happens to be completely out 0:14:13.840 --> 0:14:17.920 of the Fed's control, pure discretionary inflation. It used to 0:14:17.960 --> 0:14:21.040 just be a goods deflation story, but what we saw 0:14:21.120 --> 0:14:25.160 this morning was goods and services that are discretionary in nature. 0:14:25.160 --> 0:14:27.800 These are things at households want to buy but do 0:14:27.840 --> 0:14:30.960 not need to have. That's at zero point one percent 0:14:31.120 --> 0:14:34.760 year over year. At the cusp of falling into negativity. 0:14:34.760 --> 0:14:40.480 We've got hotel rates falling, car rental rates falling, air 0:14:40.520 --> 0:14:44.000 airfares are coming down. So the services inflation that had 0:14:44.000 --> 0:14:48.120 been the happy story post, well, everybody's bought enough of 0:14:48.160 --> 0:14:50.120 what they need, so they're not going to build themselves 0:14:50.200 --> 0:14:52.440 an extra deck in the back of their house. We're 0:14:52.480 --> 0:14:56.680 actually seeing that combining now with massive disinflation on the 0:14:56.720 --> 0:14:59.880 services side. So the Fed's job is basically done because 0:15:00.000 --> 0:15:03.120 all they can can control is what's discretionary in nature? 0:15:04.600 --> 0:15:06.640 Do they not look at that data? Do they not 0:15:07.040 --> 0:15:09.000 value this high as maybe others do. 0:15:09.160 --> 0:15:11.560 Of course they look at the data. But but Powell 0:15:11.600 --> 0:15:14.080 seems for some reason to want to stay higher for longer. 0:15:14.320 --> 0:15:16.600 Maybe he gets up at the podium today and only 0:15:16.640 --> 0:15:19.800 talks about non farm payrolls and not the unemployment rate 0:15:19.960 --> 0:15:23.320 and not the zero print on headline CPI. Maybe he 0:15:23.400 --> 0:15:25.280 just says, that's an anomaly of energy prices. 0:15:25.480 --> 0:15:29.680 Who knows, where's the disinflation? You mentioned a lot of 0:15:29.720 --> 0:15:32.119 services disinflation where. 0:15:32.280 --> 0:15:34.400 Well, we're seeing it in hotels. They're down negative, they're 0:15:34.440 --> 0:15:37.800 one point seven percent uh year over year. We're seeing 0:15:37.800 --> 0:15:41.560 that play out in very weak occupancy trends. We get 0:15:41.560 --> 0:15:44.480 the str data on a weekly basis. City does a 0:15:44.480 --> 0:15:47.120 good job of providing reports on that. Outside of a 0:15:47.120 --> 0:15:51.320 bump at Easter, we've seen occupancy negative year over year, 0:15:51.640 --> 0:15:54.800 week after week after week, beginning the week after New 0:15:54.840 --> 0:15:57.840 Year's And that is telling you what a lot of 0:15:58.840 --> 0:16:01.400 ged Why is this hotel selling for pennies on the dollar. 0:16:01.480 --> 0:16:03.760 That doesn't make any sense. Americans are still spending on 0:16:03.800 --> 0:16:09.200 services unless we've pulled back, Unless we're just focused sheerly 0:16:09.280 --> 0:16:13.720 on okay, fine, auto insurance rates tick down just a 0:16:13.760 --> 0:16:15.800 little bit, they're still up twenty percent. You're over here 0:16:15.920 --> 0:16:19.040 the things we must buy. That inflation's running at four 0:16:19.040 --> 0:16:23.600 point seven percent year over year, you are pulling back 0:16:23.640 --> 0:16:26.440 on anything that is discretionary, including travel. 0:16:27.880 --> 0:16:29.560 Dot plots Do I care? I mean, I've got a 0:16:29.600 --> 0:16:30.040 function for it. 0:16:30.160 --> 0:16:32.320 We care a lot about the dot plots today because 0:16:32.360 --> 0:16:34.800 the dotstab you could have a mac truck between the 0:16:34.800 --> 0:16:38.600 difference between the market reaction of three staying or being 0:16:38.640 --> 0:16:41.080 whittled down from three to two. I do think that 0:16:41.200 --> 0:16:44.720 markets right now are assuming too given today's CPI print. 0:16:44.920 --> 0:16:47.600 If they keep three, then you're going to look to 0:16:47.720 --> 0:16:50.760 Powell at the podium to talk a lot more about 0:16:50.920 --> 0:16:53.480 the second mandate of maximizing employment. 0:16:54.320 --> 0:16:57.000 Great stuff, yep, always always. 0:16:56.840 --> 0:16:58.920 Danielle, thank you so much. We appreciate you stopping in. 0:16:58.920 --> 0:16:59.520 Great to be here. 0:17:00.000 --> 0:17:02.280 It's great to get a counterintuitive, passionate voice on stuff. 0:17:02.360 --> 0:17:04.800 Daniel de Martinez, Booth CEO and chief strategist for a 0:17:04.880 --> 0:17:09.119 q I Research. Interesting. I don't I don't want to 0:17:09.119 --> 0:17:10.920 be an economist. I feel like everything is a worst 0:17:10.920 --> 0:17:14.320 has test. Everyone has the same data, But then how 0:17:14.359 --> 0:17:17.840 you filter it through your models gets you to different conclusions, 0:17:17.880 --> 0:17:18.720 but you have to wonder. 0:17:18.800 --> 0:17:20.119 I tell you the market likes to today, the S 0:17:20.160 --> 0:17:23.120 and P five one and a quarter percent, the NASTAC 0:17:23.200 --> 0:17:25.280 up one point eight percent. The Russell will point out, 0:17:25.400 --> 0:17:27.119 that's kind of where the game is right now, up 0:17:27.119 --> 0:17:28.480 two point nine percent here today. 0:17:28.520 --> 0:17:30.360 So we're broadening out, which a lot of. 0:17:30.280 --> 0:17:32.480 Market strategies will tell you that's a healthy thing for 0:17:32.560 --> 0:17:33.440 the markets in general. 0:17:35.720 --> 0:17:39.600 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:17:39.680 --> 0:17:42.320 weekdays at ten am Eastern on Apple car Play and 0:17:42.320 --> 0:17:45.399 Android Auto with the Bloomberg Business App. Listen on demand 0:17:45.440 --> 0:17:50.240 wherever you get your podcasts, or watch us live on YouTube. 0:17:50.800 --> 0:17:52.160 Alex Deal and Paul Sweeney. 0:17:52.160 --> 0:17:54.320 We're live here in our Bloomberg Interactive Brokers studio and 0:17:54.359 --> 0:17:56.040 we're also streaming live on YouTube, so you can head 0:17:56.040 --> 0:17:58.960 over to YouTube dot com and search Bloomberg Podcast and 0:17:58.960 --> 0:18:01.000 that's where you will find this. Charlie was just reporting 0:18:01.080 --> 0:18:03.720 S and P at record highs, just a big big 0:18:04.240 --> 0:18:07.159 I think, embraced by the marketplace and risk assets on 0:18:07.200 --> 0:18:08.920 what we saw was a little bit cooler than expected 0:18:08.920 --> 0:18:11.399 inflation data. Couple that with a FED meeting in the 0:18:11.400 --> 0:18:13.320 stair for noon. A lot of folks taking this as 0:18:13.359 --> 0:18:15.200 an opportunity to jump into the market's check in. 0:18:15.119 --> 0:18:16.760 With a professional on this whole thing. 0:18:16.800 --> 0:18:20.440 David Kodla, founder, chief executive officer and chief investment strategist 0:18:20.760 --> 0:18:25.600 at Mainstay Capital Management, joins us. David, the market likes 0:18:25.600 --> 0:18:28.840 what it heard this morning. I guess anticipating an accommodati 0:18:28.840 --> 0:18:29.919 of FED going forward. 0:18:30.200 --> 0:18:30.840 What's your take. 0:18:32.800 --> 0:18:36.760 I think that's exactly what we're seeing. Good morning, Paul 0:18:36.800 --> 0:18:42.680 and alex. I you know, we here's the quandary, right 0:18:43.119 --> 0:18:48.399 We have an inverty deal curve for the longest in 0:18:48.640 --> 0:18:53.560 history and an inversion very deep that is eight freight 0:18:53.640 --> 0:18:57.960 on predicting a recession. We have these stats out there, 0:18:58.480 --> 0:19:01.919 credit card interests at an all time high, delinquencies at 0:19:01.920 --> 0:19:07.199 an all time high, auto loan defaults rising rapidly. That 0:19:07.480 --> 0:19:11.160 is anecdotal data pointing towards problems in the economy. At 0:19:11.160 --> 0:19:14.840 the same time, we had positive GDP in the fourth quarter, 0:19:14.920 --> 0:19:18.720 first quarter, and GDP now from the Atlanta FED is 0:19:18.760 --> 0:19:21.840 currently above three percent for the second quarter, and that's 0:19:21.920 --> 0:19:29.480 a very volatile number. Earnings are beat expectations by a 0:19:29.520 --> 0:19:32.720 wide margin for the first quarter. We're expecting good earnings 0:19:32.760 --> 0:19:35.119 for the year. We're out of the earnings recession, strong 0:19:35.160 --> 0:19:41.720 earnings going forward. And the S and P Global PMI 0:19:42.480 --> 0:19:46.120 has manufacturing and services at twenty four and twenty five 0:19:46.200 --> 0:19:51.280 month highs. So there is a lot of conflicting data 0:19:51.320 --> 0:19:54.800 out there as to where the economy is at right 0:19:54.840 --> 0:19:58.719 now and where the economy is going. And as far 0:19:58.760 --> 0:20:01.919