1 00:00:05,080 --> 00:00:07,200 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,680 --> 00:00:10,799 Speaker 2: I'm Lisa Abramoids along with Tom Keen and Jonathan Ferrell, 3 00:00:11,160 --> 00:00:15,280 Speaker 2: join us each day for insight from the best in economics, geopolitics, 4 00:00:15,320 --> 00:00:19,480 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:19,600 --> 00:00:22,840 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:22,880 --> 00:00:26,440 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. 7 00:00:26,800 --> 00:00:29,080 Speaker 3: I was distracted. The average heighte of a cruise passenger 8 00:00:29,200 --> 00:00:32,959 Speaker 3: is forty seven years old. Hi, fool, didn't know that? 9 00:00:33,040 --> 00:00:33,639 Speaker 1: Well, there you go. 10 00:00:33,800 --> 00:00:34,400 Speaker 3: Didn't know that? 11 00:00:34,440 --> 00:00:36,640 Speaker 1: Would you like to Nope? 12 00:00:36,760 --> 00:00:39,800 Speaker 3: At least as some badges now investment strategists that Jpre 13 00:00:39,880 --> 00:00:42,160 Speaker 3: Morgan glob wal have that listened to me about cruises. 14 00:00:42,200 --> 00:00:44,120 Speaker 3: The stocks are doing great. At least, it's good to see. 15 00:00:43,920 --> 00:00:45,000 Speaker 4: You, great to see you. 16 00:00:45,280 --> 00:00:47,680 Speaker 3: Vibe shift, Let's talk about the vibe shift. We're not 17 00:00:47,720 --> 00:00:49,720 Speaker 3: talking about recessions. What are we talking about. 18 00:00:50,159 --> 00:00:52,480 Speaker 4: Look, we can sede at this point that we came 19 00:00:52,640 --> 00:00:56,120 Speaker 4: into this year probably too pessimistic on the macro front. 20 00:00:56,520 --> 00:00:59,960 Speaker 4: What we're seeing is this resurgence, or rather perseverance of 21 00:01:00,040 --> 00:01:02,640 Speaker 4: the resilience in the US economic backdrop, and I think 22 00:01:02,640 --> 00:01:05,480 Speaker 4: that's been driven by a handful of different dynamics, But 23 00:01:05,880 --> 00:01:07,360 Speaker 4: it seems like a lot of people are kind of 24 00:01:07,360 --> 00:01:09,760 Speaker 4: coming around, facing the music and trying to figure out 25 00:01:09,800 --> 00:01:10,600 Speaker 4: where we go from here. 26 00:01:10,720 --> 00:01:13,479 Speaker 3: Equity market rallies usually do that. People start to jump 27 00:01:13,520 --> 00:01:15,760 Speaker 3: on board and now they're thinking about where else they 28 00:01:15,800 --> 00:01:17,760 Speaker 3: need to be, what's missed out, what's lagged, and they're 29 00:01:17,800 --> 00:01:19,520 Speaker 3: shifting towards the stike of the course. Banks had a 30 00:01:19,520 --> 00:01:21,800 Speaker 3: great month in July. Do you see reason for that 31 00:01:21,880 --> 00:01:22,640 Speaker 3: to continue? 32 00:01:22,840 --> 00:01:25,280 Speaker 4: We do, actually, so I think it's really important to 33 00:01:25,280 --> 00:01:28,120 Speaker 4: think about the anatomy of the year today equity market rally. 34 00:01:28,319 --> 00:01:31,240 Speaker 4: Everyone at this point knows that it has been predominantly 35 00:01:31,319 --> 00:01:34,600 Speaker 4: driven by the megacap complex that you know, kind of 36 00:01:35,200 --> 00:01:38,279 Speaker 4: has been flying on the wings of artificial intelligence hopes. 37 00:01:38,319 --> 00:01:40,120 Speaker 4: But we do think that this rally can start to 38 00:01:40,120 --> 00:01:43,000 Speaker 4: broaden out. And that's a big reason why we've been 39 00:01:43,080 --> 00:01:45,560 Speaker 4: encouraging investors to focus on the other four hundred and 40 00:01:45,680 --> 00:01:47,800 Speaker 4: ninety three names in the S and P five hundred, 41 00:01:47,920 --> 00:01:51,480 Speaker 4: which taken together are actually still trading at evaluation below 42 00:01:51,520 --> 00:01:52,640 Speaker 4: their ten year average. 43 00:01:52,800 --> 00:01:55,120 Speaker 1: What money are they going to use to buy these stocks? 44 00:01:55,160 --> 00:01:57,000 Speaker 2: In other words, do you start to recommend that people 45 00:01:57,040 --> 00:01:59,880 Speaker 2: take money out of money markets and put them into, 46 00:02:00,000 --> 00:02:02,800 Speaker 2: so you know, the other sectors of the equity markets, 47 00:02:03,280 --> 00:02:05,600 Speaker 2: or are you saying to people that you have to 48 00:02:05,600 --> 00:02:06,200 Speaker 2: have a balance. 49 00:02:06,240 --> 00:02:07,160 Speaker 1: I mean, how does this. 50 00:02:07,160 --> 00:02:09,360 Speaker 2: Sort of come to for if you don't want people 51 00:02:09,400 --> 00:02:11,360 Speaker 2: to necessarily cash out of big tech? 52 00:02:11,720 --> 00:02:15,360 Speaker 4: Look, cash is a great place to start. We think 53 00:02:15,400 --> 00:02:17,280 Speaker 4: we know that a lot of our clients are still 54 00:02:17,360 --> 00:02:21,400 Speaker 4: heavily overweight excess cash based on the anonymioused client data 55 00:02:21,440 --> 00:02:24,840 Speaker 4: that we look through for our mid year outlook exercise. 56 00:02:25,120 --> 00:02:27,560 Speaker 4: So even in light of this shift in our macro 57 00:02:27,680 --> 00:02:30,600 Speaker 4: view that the FED could possibly pull off a soft landing, 58 00:02:30,919 --> 00:02:33,560 Speaker 4: we do still think that reinvestment risk is here. Come 59 00:02:33,600 --> 00:02:35,640 Speaker 4: first quarter of next year, we think the FED could 60 00:02:35,639 --> 00:02:38,200 Speaker 4: be in a place to start gradually cutting interest rates, 61 00:02:38,360 --> 00:02:40,960 Speaker 4: and we would much prefer that investors take that excess 62 00:02:41,000 --> 00:02:44,880 Speaker 4: cash exten duration or start rebuilding that equity portfolio that 63 00:02:44,919 --> 00:02:46,400 Speaker 4: they want to carry through the next cycle. 64 00:02:46,560 --> 00:02:49,120 Speaker 2: Does it bother you that you're looking at earnings yield 65 00:02:49,440 --> 00:02:51,240 Speaker 2: on the S and P five hundred that are the 66 00:02:51,320 --> 00:02:53,520 Speaker 2: lowest relative to what you're getting on a ten year 67 00:02:53,560 --> 00:02:55,840 Speaker 2: treasury Going back to two thousand and one. Does that 68 00:02:55,919 --> 00:02:58,320 Speaker 2: raise some alarm bells that maybe valuations are at a 69 00:02:58,360 --> 00:03:01,000 Speaker 2: whack and that bonds look better than some people are 70 00:03:01,040 --> 00:03:01,639 Speaker 2: making them out. 71 00:03:02,120 --> 00:03:04,959 Speaker 4: Look, we continue to love core bonds. It's one of 72 00:03:04,960 --> 00:03:07,560 Speaker 4: our highest conviction ideas, and it does bother me a 73 00:03:07,560 --> 00:03:09,880 Speaker 4: little bit, but we certainly take it into account when 74 00:03:09,880 --> 00:03:13,680 Speaker 4: we think through portfolio construction. I think investors more than 75 00:03:13,720 --> 00:03:16,400 Speaker 4: ever need to be mindful of goals based or outcome 76 00:03:16,480 --> 00:03:19,519 Speaker 4: oriented approach. And if that means then the choosing core 77 00:03:19,560 --> 00:03:22,480 Speaker 4: fixed income with yields at these current elevated levels is 78 00:03:22,600 --> 00:03:25,040 Speaker 4: enough to get you to your long term goals, then 79 00:03:25,080 --> 00:03:28,640 Speaker 4: by all means, but long term ten year plus time horizon, 80 00:03:28,680 --> 00:03:31,440 Speaker 4: we still see the potential for stocks to act as 81 00:03:31,440 --> 00:03:34,760 Speaker 4: that engine of capital appreciation in portfolios, so we don't 82 00:03:34,760 --> 00:03:36,200 Speaker 4: want to sleep on the opportunity. 83 00:03:36,320 --> 00:03:39,520 Speaker 3: We started this conversation by talking about resilience, and about 84 00:03:39,520 --> 00:03:41,600 Speaker 3: four minutes into it you were talking about right cuts. 85 00:03:42,000 --> 00:03:44,760 Speaker 3: What are the factors behind resilience of the year so 86 00:03:44,880 --> 00:03:47,560 Speaker 3: far that you think are going to fade sufficiently enough 87 00:03:47,600 --> 00:03:50,320 Speaker 3: that the Fed's cutting rates in early twenty twenty four. 88 00:03:50,480 --> 00:03:52,480 Speaker 3: Can you identify the factors first and then just walk 89 00:03:52,560 --> 00:03:54,200 Speaker 3: us through where you're seeing signs of weakness that you 90 00:03:54,280 --> 00:03:57,040 Speaker 3: think will continue coming through that eventually are going to 91 00:03:57,120 --> 00:03:58,560 Speaker 3: lead this fed to cut rates. 92 00:03:58,800 --> 00:03:59,120 Speaker 1: Sure. 93 00:03:59,320 --> 00:04:02,280 Speaker 4: So in terms of what's been driving the resilience, start 94 00:04:02,280 --> 00:04:05,320 Speaker 4: first with the consumer. I think excess savings perhaps weren't 95 00:04:05,400 --> 00:04:08,360 Speaker 4: drawn down as quickly as everyone thought they might have been, 96 00:04:08,720 --> 00:04:11,160 Speaker 4: but we do see that kind of tapering to an 97 00:04:11,240 --> 00:04:13,760 Speaker 4: end over the course of this year. You also have 98 00:04:13,800 --> 00:04:16,880 Speaker 4: to consider the businesses and consumers. Both have been relatively 99 00:04:17,080 --> 00:04:20,359 Speaker 4: insulated from interest rate pressures given that they locked in 100 00:04:20,480 --> 00:04:23,719 Speaker 4: lower levels of financing. And you've got these tailwinds coming 101 00:04:23,760 --> 00:04:26,560 Speaker 4: from the fiscal spending front related to the you know, 102 00:04:26,640 --> 00:04:30,839 Speaker 4: more than two trillion dollars worth of infrastructure investment that's 103 00:04:30,920 --> 00:04:33,080 Speaker 4: kind of you know, earmarked to be doled out over 104 00:04:33,120 --> 00:04:35,600 Speaker 4: the course of the next ten years. So those are 105 00:04:35,640 --> 00:04:37,800 Speaker 4: the reasons for resilience. And you add to that what 106 00:04:37,880 --> 00:04:40,159 Speaker 4: we've been seeing in the labor market, which is pretty 107 00:04:40,160 --> 00:04:43,479 Speaker 4: favorable trends when it comes to labor force participation, but 108 00:04:43,560 --> 00:04:46,000 Speaker 4: to the extent that growth continues to slow and we 109 00:04:46,040 --> 00:04:48,920 Speaker 4: are still calling for you know, flat to slightly negative 110 00:04:48,960 --> 00:04:51,000 Speaker 4: growth in the first and second quarters of next year, 111 00:04:51,360 --> 00:04:54,440 Speaker 4: maybe you do see a modest rise in the unemployment rate, 112 00:04:54,680 --> 00:04:58,120 Speaker 4: and that I think continues to urge investors to heed 113 00:04:58,160 --> 00:05:00,560 Speaker 4: some caution and not get two over the skis when 114 00:05:00,560 --> 00:05:01,479 Speaker 4: it comes to adding risk. 115 00:05:01,640 --> 00:05:04,360 Speaker 2: How much does that really hinge? An oil price is 116 00:05:04,400 --> 00:05:08,160 Speaker 2: staying where they are, an inflation continuing to steadily come down. 117 00:05:08,360 --> 00:05:10,960 Speaker 4: Look, I think oil prices are definitely kind of one 118 00:05:11,000 --> 00:05:14,760 Speaker 4: of the you know, variables or X factors here. We'll 119 00:05:14,800 --> 00:05:17,839 Speaker 4: be curious to see if prices do continue to consolidate higher. 120 00:05:17,839 --> 00:05:20,680 Speaker 4: We're doing the work right now on our oil price outlook, 121 00:05:20,839 --> 00:05:23,520 Speaker 4: but that could potentially change the outlook for the FED. 122 00:05:23,839 --> 00:05:26,400 Speaker 4: And we know, just looking at the past year of data, 123 00:05:26,520 --> 00:05:29,280 Speaker 4: right a year ago, when oil prices had exploded higher, 124 00:05:29,440 --> 00:05:32,200 Speaker 4: that's when you had consumer confidence hitting all time lows. 125 00:05:32,480 --> 00:05:34,280 Speaker 4: And so to the extent that we see that kind 126 00:05:34,279 --> 00:05:36,880 Speaker 4: of rear its ugly head again, it could potentially weigh 127 00:05:36,920 --> 00:05:39,240 Speaker 4: on the outlook and you know, bring a resurgence of 128 00:05:39,400 --> 00:05:40,760 Speaker 4: bearish sentiment. 129 00:05:40,720 --> 00:05:43,160 Speaker 3: Bring crude eighty five. At least this was great. Thanks 130 00:05:43,200 --> 00:05:44,920 Speaker 3: for joining us and thanks for coming in of course, 131 00:05:44,920 --> 00:05:47,239 Speaker 3: thank you. At least Austin, by that of JP Morgan 132 00:05:47,279 --> 00:06:01,400 Speaker 3: Global Wealth Management, I could join us now seeing research 133 00:06:01,400 --> 00:06:03,560 Speaker 3: ouna list at TD count Helene, let's talk about these 134 00:06:03,600 --> 00:06:06,279 Speaker 3: airlines and the distinction that Lisa draws between the performance 135 00:06:06,320 --> 00:06:09,600 Speaker 3: of the domestic focused airlines and international what's happening in 136 00:06:09,640 --> 00:06:11,360 Speaker 3: the two markets at the moment, Helene. 137 00:06:12,240 --> 00:06:15,640 Speaker 5: Well, Lisa hit it on ahead. We are seeing very 138 00:06:15,800 --> 00:06:19,080 Speaker 5: good demand on the North Atlantic especially, and we're seeing 139 00:06:19,160 --> 00:06:22,520 Speaker 5: less good demand in the US domestic market. And what 140 00:06:22,640 --> 00:06:26,520 Speaker 5: we have been thinking is that twenty twenty one and 141 00:06:26,600 --> 00:06:29,480 Speaker 5: twenty twenty two we're all about US domestic because there 142 00:06:29,520 --> 00:06:33,200 Speaker 5: really wasn't a lot of places to go internationally. And 143 00:06:33,560 --> 00:06:37,320 Speaker 5: now that the international markets are open again, people are 144 00:06:37,360 --> 00:06:41,120 Speaker 5: traveling again, and we think this summer is all about 145 00:06:41,160 --> 00:06:45,360 Speaker 5: Europe and next summer will be all about Asia, especially 146 00:06:45,400 --> 00:06:48,279 Speaker 5: because the US passport is not going to get you 147 00:06:48,320 --> 00:06:50,960 Speaker 5: as far as it gets you now, beginning in twenty 148 00:06:51,000 --> 00:06:53,159 Speaker 5: twenty four, you're going to need a visa to go 149 00:06:53,200 --> 00:06:55,840 Speaker 5: to Europe. You're going to need a visa to go 150 00:06:55,880 --> 00:06:59,280 Speaker 5: to the UK. You can do it online, but it's 151 00:06:59,320 --> 00:07:01,880 Speaker 5: going to cost you. And so I think you'll see 152 00:07:01,880 --> 00:07:05,440 Speaker 5: that shift away from European countries to Asian countries. 153 00:07:05,600 --> 00:07:08,200 Speaker 3: We've got a playbook with regards to that heline when 154 00:07:08,200 --> 00:07:12,200 Speaker 3: we introduce the Esta visa for Europeans and others to 155 00:07:12,200 --> 00:07:13,960 Speaker 3: come to the United States, do is it really hit 156 00:07:14,000 --> 00:07:16,760 Speaker 3: travel in that way, given how easy it is to 157 00:07:16,800 --> 00:07:19,000 Speaker 3: actually complete the thing. I remember many years ago I 158 00:07:19,040 --> 00:07:20,560 Speaker 3: used to have to do that when I came to 159 00:07:20,600 --> 00:07:23,040 Speaker 3: New York, when it actually moved the dial on visitors 160 00:07:23,040 --> 00:07:23,760 Speaker 3: to Europe. 161 00:07:24,520 --> 00:07:27,240 Speaker 5: Yeah, I think I think it'll be a combination of that. 162 00:07:27,600 --> 00:07:31,400 Speaker 5: And I think fares have been really, really high this summer. 163 00:07:31,440 --> 00:07:33,880 Speaker 5: It's turned a lot of people off if you didn't 164 00:07:33,920 --> 00:07:38,680 Speaker 5: book really early. And then and I think as Asia reopens, 165 00:07:39,000 --> 00:07:41,280 Speaker 5: it's kind of you know, we did Europe, Now let's 166 00:07:41,320 --> 00:07:44,240 Speaker 5: go someplace new. And I think that's the trend you're 167 00:07:44,280 --> 00:07:47,840 Speaker 5: going to see probably beginning after a Labor Day this 168 00:07:47,960 --> 00:07:51,559 Speaker 5: year and then going into twenty twenty four and five, 169 00:07:51,640 --> 00:07:55,080 Speaker 5: and it'll probably be twenty five before we get whatever 170 00:07:55,280 --> 00:07:58,320 Speaker 5: normal is going to be. You know, that single digit 171 00:07:58,440 --> 00:08:04,040 Speaker 5: growth that's probably sustainable. The ten to twenty percent growth 172 00:08:04,080 --> 00:08:06,040 Speaker 5: we're seeing in the industry and we've seen in the 173 00:08:06,120 --> 00:08:09,440 Speaker 5: last couple of years is just not sustainable for a 174 00:08:09,440 --> 00:08:10,720 Speaker 5: whole variety of reasons. 175 00:08:11,160 --> 00:08:14,080 Speaker 2: I have to say we've done Europe, now let's do Asia. 176 00:08:14,120 --> 00:08:16,200 Speaker 2: It makes it seem like we're all just living in 177 00:08:16,240 --> 00:08:18,920 Speaker 2: this hard mentality of post pandemic reality. 178 00:08:18,920 --> 00:08:19,200 Speaker 6: Helene. 179 00:08:19,240 --> 00:08:21,960 Speaker 2: I'm looking right now also at visas to go to Europe, 180 00:08:22,000 --> 00:08:24,520 Speaker 2: and they range from it looks like seven euros to 181 00:08:25,080 --> 00:08:26,880 Speaker 2: forty euros depending. 182 00:08:26,560 --> 00:08:27,720 Speaker 1: On where you're going. 183 00:08:27,800 --> 00:08:30,280 Speaker 2: Although I could be getting this somewhat wrong, Helene. How 184 00:08:30,320 --> 00:08:33,600 Speaker 2: much is this driven by business versus personal travel? How 185 00:08:33,600 --> 00:08:37,280 Speaker 2: long can individuals and families continue to pay prices that 186 00:08:37,360 --> 00:08:40,160 Speaker 2: seem pretty sticky and. 187 00:08:40,600 --> 00:08:43,400 Speaker 1: Unresponsive to demand pressure it Anyway. 188 00:08:44,240 --> 00:08:47,040 Speaker 5: I've been trying to figure that question out too, because 189 00:08:47,080 --> 00:08:49,680 Speaker 5: the answer to that too, because it seems to me 190 00:08:49,880 --> 00:08:51,360 Speaker 5: when I go on a plane and I make a 191 00:08:51,440 --> 00:08:54,040 Speaker 5: right turn, all these families are making the left turn, 192 00:08:54,200 --> 00:08:56,640 Speaker 5: and I'm trying to figure out, Gee, I've paid a 193 00:08:56,640 --> 00:08:58,440 Speaker 5: lot of money for my ticket. I booked it two 194 00:08:58,480 --> 00:09:02,760 Speaker 5: months ago or ten weeks ago, and how come you're 195 00:09:02,840 --> 00:09:06,400 Speaker 5: going there and I'm not. And I think that there's 196 00:09:06,480 --> 00:09:09,040 Speaker 5: going to be pushback. I mean, I do think that 197 00:09:09,080 --> 00:09:12,240 Speaker 5: people will just say, Okay, we you know, we bought 198 00:09:12,240 --> 00:09:15,040 Speaker 5: all our stuff during the pandemic, and then we did 199 00:09:15,080 --> 00:09:18,000 Speaker 5: all our traveling after the pandemic, and now We're just 200 00:09:18,040 --> 00:09:21,440 Speaker 5: going to get back to kind of a normal lifestyle 201 00:09:21,800 --> 00:09:25,280 Speaker 5: of working because I think over time, as we get 202 00:09:25,280 --> 00:09:28,120 Speaker 5: further and further away from the pandemic, companies are going 203 00:09:28,160 --> 00:09:31,839 Speaker 5: to require people, even in a hybrid environment, to come 204 00:09:31,880 --> 00:09:34,000 Speaker 5: to the office more off and then they've been. 205 00:09:33,840 --> 00:09:39,000 Speaker 7: Going and that won't lend itself to traveling Thursday to 206 00:09:39,080 --> 00:09:43,560 Speaker 7: Tuesday or Thursday to Monday, and then business travel will shift, right, 207 00:09:44,040 --> 00:09:45,319 Speaker 7: You'll see that shift and mix. 208 00:09:45,400 --> 00:09:47,760 Speaker 1: You're laughing at me, Well, no, I'm not laughing at you. 209 00:09:47,880 --> 00:09:49,960 Speaker 2: Just the image that you paint of everybody who's not 210 00:09:50,080 --> 00:09:53,120 Speaker 2: working going with their families, paying through the nose to do. 211 00:09:53,040 --> 00:09:55,720 Speaker 3: Your going to give us a commentary on newborn babies 212 00:09:55,720 --> 00:09:57,480 Speaker 3: and business class and whether they should be allowed in 213 00:09:57,520 --> 00:09:57,880 Speaker 3: there or. 214 00:09:59,280 --> 00:10:01,959 Speaker 2: To I'm just sitting here wondering, you know, how long 215 00:10:02,000 --> 00:10:05,320 Speaker 2: can people keep networking and spending all their money. Have 216 00:10:05,360 --> 00:10:08,000 Speaker 2: you seen any signs of pushback on the pricing, Helene, 217 00:10:08,080 --> 00:10:11,400 Speaker 2: as of yet or is all of your anticipation of 218 00:10:11,440 --> 00:10:14,400 Speaker 2: that simply an extrapolation of pure logic. 219 00:10:15,160 --> 00:10:17,360 Speaker 5: Yeah, I think it's a combination of both. We have 220 00:10:17,480 --> 00:10:20,760 Speaker 5: seen pushback on pricing. You've seen domestic prices come down 221 00:10:21,120 --> 00:10:24,320 Speaker 5: pretty much on a year over year basis from really 222 00:10:24,440 --> 00:10:27,680 Speaker 5: levels that again we're not sustainable, so you're still above 223 00:10:27,760 --> 00:10:32,440 Speaker 5: twenty nineteen levels, but we're below twenty twenty two levels, 224 00:10:32,440 --> 00:10:34,840 Speaker 5: so I think that's a positive. And then you know, 225 00:10:34,880 --> 00:10:38,800 Speaker 5: when you think about shifting demand, airlines can shift demand 226 00:10:38,840 --> 00:10:42,959 Speaker 5: by lowering ticket prices and people will respond to that. 227 00:10:43,120 --> 00:10:45,439 Speaker 5: And then the last thing I would point out is 228 00:10:46,840 --> 00:10:50,520 Speaker 5: in terms of visiting friends and relatives. You know, China 229 00:10:50,720 --> 00:10:54,959 Speaker 5: was closed for years, right, three four years and it 230 00:10:55,280 --> 00:10:57,679 Speaker 5: opened earlier this year, and you don't see a lot 231 00:10:57,720 --> 00:11:01,920 Speaker 5: of business travel there, some business travel. You don't see 232 00:11:01,960 --> 00:11:03,920 Speaker 5: a lot of leisure for sure, but what you do 233 00:11:04,040 --> 00:11:06,200 Speaker 5: see is a lot of people who couldn't get home 234 00:11:06,240 --> 00:11:09,880 Speaker 5: for a couple of years going home. So that's the trend. 235 00:11:10,240 --> 00:11:13,199 Speaker 5: And then six eight months a year later, you start 236 00:11:13,240 --> 00:11:18,360 Speaker 5: to see tourists pick up. But for sure, we're seeing 237 00:11:18,400 --> 00:11:24,160 Speaker 5: pushback on pricing. And every Tuesday I get fair sale 238 00:11:24,280 --> 00:11:26,720 Speaker 5: offerings from a lot of the airlines. You know, just 239 00:11:26,800 --> 00:11:31,679 Speaker 5: sign up for the email alerts to monitor discounts, and 240 00:11:31,720 --> 00:11:34,200 Speaker 5: the discounts are deeper than they were six months ago. 241 00:11:34,320 --> 00:11:37,760 Speaker 5: So yes, we're seeing some pressure on price. 242 00:11:37,840 --> 00:11:40,400 Speaker 3: Helene, I've got ten seconds. So just pick a name 243 00:11:40,520 --> 00:11:42,480 Speaker 3: favorite airline right now? Which stock is it? 244 00:11:43,360 --> 00:11:47,720 Speaker 5: Yeah, we're still on United. Okay, well we're domestic and 245 00:11:47,800 --> 00:11:48,800 Speaker 5: higher international. 246 00:11:49,080 --> 00:11:52,000 Speaker 3: Scott Kirby getting it done over night, Helene, Thank you, 247 00:11:52,120 --> 00:11:59,520 Speaker 3: Helene Becker of TD Jordan Rochester joins US now G 248 00:11:59,679 --> 00:12:02,199 Speaker 3: ten FX strategiest for at Namura Jordan. What for to 249 00:12:02,240 --> 00:12:03,719 Speaker 3: catch up with you, sir, Let's start with the Bank 250 00:12:03,760 --> 00:12:06,200 Speaker 3: of England later this week. Is it twenty five? Is 251 00:12:06,240 --> 00:12:06,760 Speaker 3: it fifty? 252 00:12:07,160 --> 00:12:07,320 Speaker 8: Is it? 253 00:12:07,360 --> 00:12:09,560 Speaker 3: What the ECB and the Federal Reserve delivered over the 254 00:12:09,600 --> 00:12:11,400 Speaker 3: last week, which is a lot of communication about a 255 00:12:11,400 --> 00:12:11,959 Speaker 3: ton of nothing? 256 00:12:12,120 --> 00:12:13,760 Speaker 9: What is it? 257 00:12:13,840 --> 00:12:15,880 Speaker 10: A ton of nothing? Well, in terms of the Bank 258 00:12:15,920 --> 00:12:17,640 Speaker 10: of Ingland, we think they'll do twenty five. And the 259 00:12:17,720 --> 00:12:20,360 Speaker 10: problem John for Sterling is that there's about thirty two 260 00:12:20,400 --> 00:12:22,640 Speaker 10: and a half basis points price for that meeting, and 261 00:12:22,679 --> 00:12:23,600 Speaker 10: that's going to move Sterling. 262 00:12:23,640 --> 00:12:24,600 Speaker 9: Now, it's not too much. 263 00:12:24,640 --> 00:12:26,439 Speaker 10: It's not like a fifty to fifty chance of them 264 00:12:26,480 --> 00:12:29,360 Speaker 10: going for a fifty basis point hike at this meeting 265 00:12:29,400 --> 00:12:31,679 Speaker 10: priced in. But you saw with the RBA overnight when 266 00:12:31,679 --> 00:12:34,560 Speaker 10: there's around eight basis points are so priced in for 267 00:12:34,760 --> 00:12:38,480 Speaker 10: potential hiking they don't deliver, it can see a big 268 00:12:38,520 --> 00:12:40,800 Speaker 10: move lower in the currency. So it could be the 269 00:12:40,800 --> 00:12:43,320 Speaker 10: case that on Thursday we have banking and doing twenty five. 270 00:12:43,760 --> 00:12:46,000 Speaker 10: It's too early for them to declare a victory lap, 271 00:12:46,160 --> 00:12:47,680 Speaker 10: that's the thing. So we think there's gonna be another 272 00:12:47,679 --> 00:12:50,240 Speaker 10: few more hikes to come, maybe seventy five basis points 273 00:12:50,240 --> 00:12:53,240 Speaker 10: overall from where we are now today this year, and 274 00:12:53,240 --> 00:12:56,400 Speaker 10: that's the reason why sterling has relatively traded quite well. 275 00:12:56,559 --> 00:12:58,679 Speaker 10: It's become a carry trade, John, it's one of the 276 00:12:58,760 --> 00:13:01,679 Speaker 10: highest carry currencies the G ten. But all the charts 277 00:13:01,720 --> 00:13:04,319 Speaker 10: we follow that tell us where inflation's going say it's 278 00:13:04,360 --> 00:13:07,400 Speaker 10: going to slow down quite noticeably. So the good sector, John, 279 00:13:07,720 --> 00:13:09,880 Speaker 10: really go to slow down this inflation is here. The 280 00:13:09,920 --> 00:13:13,920 Speaker 10: problem with the UK with services inflation are indicators suggested 281 00:13:14,120 --> 00:13:16,520 Speaker 10: it should have gone down starting around a few months. 282 00:13:16,320 --> 00:13:17,200 Speaker 9: Ago, and it didn't. 283 00:13:17,440 --> 00:13:19,680 Speaker 10: But the good news is the last CPI print was 284 00:13:19,800 --> 00:13:23,400 Speaker 10: possibly the peak of service inflation in the UK. That's 285 00:13:23,400 --> 00:13:25,520 Speaker 10: why the banking might take note of that and say, 286 00:13:25,559 --> 00:13:28,560 Speaker 10: actually there's some early signs that policy is working to 287 00:13:28,600 --> 00:13:29,600 Speaker 10: slow down that sector. 288 00:13:29,760 --> 00:13:30,880 Speaker 9: But it's just one data point. 289 00:13:30,920 --> 00:13:33,439 Speaker 10: We need a few more CPR reports until that victuy 290 00:13:33,480 --> 00:13:34,360 Speaker 10: lap can be declared. 291 00:13:34,480 --> 00:13:36,440 Speaker 3: On this side of the Atlantic, we've had a similar 292 00:13:36,440 --> 00:13:40,079 Speaker 3: conversation about whether the Federal Reserve is sufficiently restrictive. When 293 00:13:40,120 --> 00:13:42,200 Speaker 3: you put everything together that you've just said, Jordan, can 294 00:13:42,240 --> 00:13:44,720 Speaker 3: you draw that conclusion that the Bank of England is 295 00:13:44,760 --> 00:13:46,439 Speaker 3: sufficiently restrictive? 296 00:13:47,679 --> 00:13:48,560 Speaker 9: I think they are. John. 297 00:13:49,200 --> 00:13:52,360 Speaker 10: We're seeing evidence in terms of PMI, input prices, supply 298 00:13:52,520 --> 00:13:56,840 Speaker 10: side all saying it's restrictive. Demand is slowing down, retail sales. 299 00:13:57,160 --> 00:13:59,200 Speaker 10: All these sort of indicators are nowhere near astrong as 300 00:13:59,520 --> 00:14:02,120 Speaker 10: what they were last year. But a lot of the 301 00:14:02,120 --> 00:14:05,560 Speaker 10: analysis that goes into it sometimes just proves wrong in 302 00:14:05,640 --> 00:14:08,320 Speaker 10: terms of the hard data. So the pms have been 303 00:14:08,440 --> 00:14:11,080 Speaker 10: very weak on the manufacturing sector, but the industrial production 304 00:14:11,320 --> 00:14:12,800 Speaker 10: figures haven't been as weak. 305 00:14:12,960 --> 00:14:14,360 Speaker 9: The soft versus hard debate. 306 00:14:14,600 --> 00:14:16,880 Speaker 10: So if you're looking at hard data, you're looking at 307 00:14:17,360 --> 00:14:19,520 Speaker 10: realized inflation, you'd you're. 308 00:14:19,400 --> 00:14:21,040 Speaker 9: The Bank of England saying we need to do more. 309 00:14:21,200 --> 00:14:23,080 Speaker 10: But if you're in my space, if you're looking at 310 00:14:23,080 --> 00:14:26,040 Speaker 10: the forward looking indicators, they suggest, yeah, we are pretty 311 00:14:26,040 --> 00:14:27,720 Speaker 10: close to being sufficiently restrictive. 312 00:14:27,960 --> 00:14:31,200 Speaker 2: That's over in England where John was mentioning UK housing 313 00:14:31,200 --> 00:14:33,360 Speaker 2: prices which dropped the most since two thousand and nine, 314 00:14:33,600 --> 00:14:35,280 Speaker 2: as you do see these rate increases, and we will 315 00:14:35,320 --> 00:14:38,480 Speaker 2: talk about that later. Over in Europe and the European Union, 316 00:14:38,480 --> 00:14:41,800 Speaker 2: there is a question around whether they are sufficiently restrictive 317 00:14:41,840 --> 00:14:45,720 Speaker 2: at a time when core inflation has exceeded headline CPI 318 00:14:45,880 --> 00:14:49,120 Speaker 2: the most going back to twenty twenty one, and at 319 00:14:49,120 --> 00:14:50,960 Speaker 2: a time when you're starting to hear a little bit 320 00:14:51,000 --> 00:14:54,320 Speaker 2: more of a dubbish conversation from some of the members. 321 00:14:54,000 --> 00:14:57,280 Speaker 1: There can you still get bullish and long. 322 00:14:57,080 --> 00:14:59,600 Speaker 2: Euro versus dollar if you do have that kind of 323 00:14:59,600 --> 00:15:00,920 Speaker 2: shift even among the hucks. 324 00:15:02,040 --> 00:15:04,160 Speaker 10: Indeed, we've had a shift already, and that's kind of 325 00:15:04,160 --> 00:15:06,560 Speaker 10: why euro dollar has really fallen from the one twelve 326 00:15:06,600 --> 00:15:08,520 Speaker 10: handle to where we are today just below one ten. 327 00:15:08,880 --> 00:15:11,160 Speaker 10: We've had various moments this year where it felt like 328 00:15:11,200 --> 00:15:13,960 Speaker 10: euro dollar might break to the upside and to the downside, 329 00:15:14,120 --> 00:15:16,400 Speaker 10: but the pain has been this range that we've had 330 00:15:16,440 --> 00:15:18,760 Speaker 10: for most of twenty twenty three. We need a trend, 331 00:15:19,080 --> 00:15:21,600 Speaker 10: and these false breakouts are just mutton dressed as lamb. 332 00:15:21,920 --> 00:15:24,080 Speaker 10: We need to have some sign that either the US 333 00:15:24,080 --> 00:15:27,000 Speaker 10: disinflation story is strong enough and we'll see that dollar weakness, 334 00:15:27,480 --> 00:15:30,280 Speaker 10: or that the ECB perhaps doesn't need to cut rates 335 00:15:30,480 --> 00:15:33,040 Speaker 10: at all next year, or if they do towards the 336 00:15:33,120 --> 00:15:35,840 Speaker 10: n Q four. If we get that sort of story, 337 00:15:35,880 --> 00:15:38,560 Speaker 10: then euro dollar can be supported from the rates angle. 338 00:15:38,800 --> 00:15:41,400 Speaker 10: But the problem at the moment, Lisa, equities are rallying, 339 00:15:41,440 --> 00:15:43,200 Speaker 10: which is a reason to buy euro and it's the 340 00:15:43,200 --> 00:15:45,160 Speaker 10: reason why we are long euro. We're looking for one 341 00:15:45,280 --> 00:15:48,760 Speaker 10: fourteen by the end of September. But oil prices are 342 00:15:48,760 --> 00:15:51,640 Speaker 10: picking back up and the rates market in the EGb 343 00:15:51,800 --> 00:15:53,960 Speaker 10: space have softened. In terms of what's price for the 344 00:15:53,960 --> 00:15:56,680 Speaker 10: ECB by your end, we think they're done. We think 345 00:15:56,720 --> 00:16:00,320 Speaker 10: that's possibly the last rate hype by the ECB. Little 346 00:16:00,360 --> 00:16:02,240 Speaker 10: bit of market price and that's left for year end. 347 00:16:02,280 --> 00:16:04,200 Speaker 9: Will be disappointed. It's not too much. 348 00:16:04,240 --> 00:16:06,360 Speaker 10: We are pricing less than one rate height now, but 349 00:16:06,560 --> 00:16:09,040 Speaker 10: that is a drag on the euro. But if equities 350 00:16:09,080 --> 00:16:11,280 Speaker 10: go to five thousand in the SMP like your previous 351 00:16:11,600 --> 00:16:13,920 Speaker 10: guests were talking about, then the only way is for 352 00:16:13,960 --> 00:16:15,240 Speaker 10: dollar weakness in that environment. 353 00:16:15,240 --> 00:16:17,800 Speaker 2: In my view, how disruptive could higher oil process be 354 00:16:18,000 --> 00:16:20,120 Speaker 2: and natural gas for that matter, given some of the 355 00:16:20,160 --> 00:16:22,200 Speaker 2: recent disruptions and cost sun carriers. 356 00:16:23,440 --> 00:16:25,760 Speaker 10: The biggest headache I have right now is oil prices. 357 00:16:25,760 --> 00:16:28,440 Speaker 10: I would say it upsets the apple cart for sure, 358 00:16:28,520 --> 00:16:30,520 Speaker 10: because the story is about US disinflation. 359 00:16:30,680 --> 00:16:31,000 Speaker 9: Energy. 360 00:16:31,000 --> 00:16:33,720 Speaker 10: Before this oil price rally was down forty percent year 361 00:16:33,760 --> 00:16:35,760 Speaker 10: and new in the US, and if it had stayed 362 00:16:35,760 --> 00:16:38,760 Speaker 10: at those levels before we had this rally, it would 363 00:16:38,760 --> 00:16:42,320 Speaker 10: have really dragged down USCPI. But now we've seen retail 364 00:16:42,400 --> 00:16:44,920 Speaker 10: gasoline prices in the US pick up by five percent 365 00:16:45,160 --> 00:16:47,000 Speaker 10: towards the end of July, and it could go further. 366 00:16:47,040 --> 00:16:50,000 Speaker 10: If we break ninety dollars a barrel in oil, I 367 00:16:50,000 --> 00:16:53,800 Speaker 10: think central bankers will be too cautious and they'll say, actually, 368 00:16:54,040 --> 00:16:56,840 Speaker 10: we don't need to even discuss about cutting grapes at all. 369 00:16:56,880 --> 00:16:59,240 Speaker 10: We need to stay higher for longer or even surprise 370 00:16:59,520 --> 00:17:01,760 Speaker 10: with another hike this year. And we think both the 371 00:17:01,760 --> 00:17:03,360 Speaker 10: FED and the ECB are done. But if we have 372 00:17:03,440 --> 00:17:05,520 Speaker 10: oil go to ninety dollars, let's say it goes to 373 00:17:05,560 --> 00:17:08,760 Speaker 10: one hundred, that's clearly a mixture of supply concerns, but 374 00:17:08,800 --> 00:17:11,480 Speaker 10: it probably is due to demand picking backups in a 375 00:17:11,520 --> 00:17:14,199 Speaker 10: surprising fashion that we'll see a few central banks have 376 00:17:14,320 --> 00:17:16,640 Speaker 10: to turn hawkish in the second half of this year, 377 00:17:16,720 --> 00:17:18,560 Speaker 10: which we don't really expect. We think that most center 378 00:17:18,640 --> 00:17:20,600 Speaker 10: banks are close to the end of their cycle. But 379 00:17:20,880 --> 00:17:23,119 Speaker 10: if we get to ninety to one hundred lisa, a 380 00:17:23,160 --> 00:17:24,879 Speaker 10: lot of things will have to change in the narratives 381 00:17:24,880 --> 00:17:25,440 Speaker 10: that are out there. 382 00:17:25,640 --> 00:17:27,679 Speaker 3: Jordan, I've got thirty seconds. Is it too early for 383 00:17:27,800 --> 00:17:30,040 Speaker 3: aston Villa predictions for next season? 384 00:17:31,160 --> 00:17:33,679 Speaker 10: Well, look, I think we're now a top ten club 385 00:17:34,000 --> 00:17:37,000 Speaker 10: that's whole ten day after last year. Okay, that's a 386 00:17:37,040 --> 00:17:39,560 Speaker 10: massive improvement of where we were when we had Gerard. 387 00:17:39,359 --> 00:17:42,639 Speaker 3: Jordan, Rochester Namura with a subtle dig as Steven Gerrard 388 00:17:53,160 --> 00:17:55,399 Speaker 3: Regina Mayor joints as clobal head of Clients and Markets 389 00:17:55,400 --> 00:17:58,320 Speaker 3: over at pmg Regina, Let's start there and talk about 390 00:17:58,320 --> 00:17:59,920 Speaker 3: this run and greater catch up with you and working 391 00:18:00,200 --> 00:18:03,480 Speaker 3: program as always. What's on depending that rally through July 392 00:18:03,520 --> 00:18:04,879 Speaker 3: and can it continue through August? 393 00:18:06,320 --> 00:18:10,159 Speaker 8: Well, demand continues to outpace supply and opiq plus with 394 00:18:10,240 --> 00:18:14,800 Speaker 8: its strategic cuts and even the Saudi's voluntary one million 395 00:18:14,840 --> 00:18:18,080 Speaker 8: barrel per day that they've indicated they will extend through 396 00:18:18,080 --> 00:18:22,040 Speaker 8: September has created buoyancy in the crew markets like Brent 397 00:18:22,160 --> 00:18:27,000 Speaker 8: above eighty five, WTI once again above above eighty and 398 00:18:27,040 --> 00:18:30,600 Speaker 8: that demand is outpacing supply. There are some analysts that 399 00:18:30,680 --> 00:18:33,560 Speaker 8: are saying, when we're able to go back and analyze 400 00:18:33,600 --> 00:18:37,359 Speaker 8: the actual demand figures that July, given it was one 401 00:18:37,400 --> 00:18:39,600 Speaker 8: of the hottest months on record, or the hottest month 402 00:18:39,640 --> 00:18:42,000 Speaker 8: on record, and we still rely on a lot of 403 00:18:42,000 --> 00:18:47,399 Speaker 8: fossil fuels to drive cooling, that July of twenty twenty 404 00:18:47,440 --> 00:18:51,880 Speaker 8: three will be the highest demand for hydrocarbons ever, outpacing 405 00:18:52,800 --> 00:18:54,199 Speaker 8: August of twenty nineteen. 406 00:18:54,359 --> 00:18:57,280 Speaker 3: Wow, Regina, where's that incremental demound coming from? Has it 407 00:18:57,280 --> 00:19:01,120 Speaker 3: been Europe where we've had this massive heat the United States? 408 00:19:01,119 --> 00:19:02,760 Speaker 3: Has it come from China? Where's it coming from? 409 00:19:03,600 --> 00:19:06,520 Speaker 8: Well, China has just not given us the demand uptick 410 00:19:06,600 --> 00:19:08,520 Speaker 8: that we keep expecting. I think I've been on your 411 00:19:08,520 --> 00:19:11,560 Speaker 8: program multiple times and you know it's always Chinese demand 412 00:19:11,560 --> 00:19:13,640 Speaker 8: will pick up in the next few months. Chinese demand 413 00:19:13,640 --> 00:19:15,440 Speaker 8: will pick up in the next few months. 414 00:19:15,480 --> 00:19:16,679 Speaker 1: The thing that's really. 415 00:19:16,880 --> 00:19:21,520 Speaker 8: Created the added demand is industrial activity is picking up 416 00:19:21,960 --> 00:19:25,520 Speaker 8: in the Western market. So the supply chain challenges, you know, 417 00:19:25,960 --> 00:19:29,880 Speaker 8: the deep bottlenecking that's occurred, and the travel you all 418 00:19:29,880 --> 00:19:35,120 Speaker 8: were talking about crews, passengers, there's still tremendous travel consumption, 419 00:19:35,920 --> 00:19:39,800 Speaker 8: tremendous bullishness in the consuming population. We continue to consume, 420 00:19:39,840 --> 00:19:43,440 Speaker 8: we continue to travel. Companies continue to produce, and that's 421 00:19:43,560 --> 00:19:47,240 Speaker 8: driving record demand. On top of it's a really, really, 422 00:19:47,280 --> 00:19:49,879 Speaker 8: really hot summer, and it takes a lot to drive 423 00:19:50,320 --> 00:19:51,200 Speaker 8: the cooling. 424 00:19:50,880 --> 00:19:53,760 Speaker 1: That we need, and it also is interrupting some of 425 00:19:53,760 --> 00:19:56,000 Speaker 1: the processing. There was a piece out this. 426 00:19:55,960 --> 00:19:59,760 Speaker 2: Morning talking about how the very hot weather has reduced 427 00:19:59,760 --> 00:20:03,120 Speaker 2: some of the refining capabilities of certain companies. You also 428 00:20:03,160 --> 00:20:05,359 Speaker 2: are seeing some of the shipping costs for even natural 429 00:20:05,440 --> 00:20:08,720 Speaker 2: gas rising substantially over in Europe. 430 00:20:08,960 --> 00:20:11,040 Speaker 1: How much is this fueling a call. 431 00:20:10,920 --> 00:20:13,960 Speaker 2: From you that oil prices are going to go substantially higher, 432 00:20:14,000 --> 00:20:17,200 Speaker 2: even natural gas over in Europe. 433 00:20:17,320 --> 00:20:21,000 Speaker 8: I'm not as bit bullish that the prices will continue 434 00:20:21,040 --> 00:20:24,760 Speaker 8: to go higher, Lisa. I do think that supply continues 435 00:20:24,800 --> 00:20:28,920 Speaker 8: to meet the record demand that we're facing, and we're 436 00:20:28,920 --> 00:20:31,439 Speaker 8: going to get a peak right summer. Travel is in 437 00:20:31,480 --> 00:20:33,320 Speaker 8: the US is starting to tail off. I know in 438 00:20:33,359 --> 00:20:36,760 Speaker 8: Europe it's kicking off for August, but there's an end 439 00:20:36,920 --> 00:20:40,159 Speaker 8: to that, and so I don't think we'll see the 440 00:20:40,200 --> 00:20:42,720 Speaker 8: big spikes that we've seen in the past. I think 441 00:20:42,760 --> 00:20:47,640 Speaker 8: that demand continues to or supply continues to roughly meet demand. 442 00:20:47,680 --> 00:20:50,560 Speaker 8: The story in the gasoline price spikes that we've seen 443 00:20:50,600 --> 00:20:54,360 Speaker 8: in the US, it's just inventory. It's inventory inventory, inventory, 444 00:20:54,680 --> 00:20:57,639 Speaker 8: and motor gasoline and refined products don't move around the 445 00:20:57,640 --> 00:21:01,440 Speaker 8: world as well as as crew does, so they are 446 00:21:01,560 --> 00:21:06,600 Speaker 8: very geographically specific. And in the US, motor gasoline stocks 447 00:21:06,680 --> 00:21:10,160 Speaker 8: inventory stocks are down to its lowest level since twenty fifteen. 448 00:21:10,560 --> 00:21:12,679 Speaker 8: I think that is a remarkable statistic. 449 00:21:13,040 --> 00:21:15,600 Speaker 2: How do they rebuild that, especially at a time when 450 00:21:15,840 --> 00:21:19,080 Speaker 2: there is concern about the strategic petroleum reserve of the 451 00:21:19,200 --> 00:21:22,280 Speaker 2: US and there's a question about rebuilding that, and there 452 00:21:22,440 --> 00:21:24,639 Speaker 2: is a lack of refineries in the United States. 453 00:21:25,480 --> 00:21:29,440 Speaker 8: Yeah, so the refining industry has contracted significantly, but it's 454 00:21:29,440 --> 00:21:33,399 Speaker 8: also incredibly more efficient than it ever was. Refineries are 455 00:21:33,440 --> 00:21:36,120 Speaker 8: still running pretty flat out. The statistics I was looking 456 00:21:36,160 --> 00:21:40,040 Speaker 8: at showed roughly ninety four percent utilization throughout the month 457 00:21:40,040 --> 00:21:42,600 Speaker 8: of July, which is really about as high as it 458 00:21:42,720 --> 00:21:45,119 Speaker 8: can get it. Maybe ninety five ninety six, but just 459 00:21:46,040 --> 00:21:49,440 Speaker 8: a little bit a few basis points above what they're 460 00:21:49,520 --> 00:21:53,720 Speaker 8: currently at. But we will see summer driving season come 461 00:21:53,760 --> 00:21:57,399 Speaker 8: back down, the demand for motor gasoline will rationalize, and 462 00:21:57,440 --> 00:22:00,280 Speaker 8: the refineries will be able to catch up. We will 463 00:22:00,320 --> 00:22:03,159 Speaker 8: see a short term spike and gasoline prices, But I 464 00:22:03,200 --> 00:22:08,360 Speaker 8: do see consumers seem to be less reactive to the 465 00:22:08,400 --> 00:22:12,040 Speaker 8: price at the pump. Our survey KPMG recently did forty 466 00:22:12,119 --> 00:22:15,400 Speaker 8: nine percent of consumers say they're moderately or concerned about 467 00:22:15,440 --> 00:22:18,240 Speaker 8: the higher price of gasoline. That's down from seventy percent 468 00:22:18,640 --> 00:22:20,680 Speaker 8: last year at this time. So I think there's less 469 00:22:20,680 --> 00:22:23,920 Speaker 8: price sensitivity in terms of gasoline consumption as well. 470 00:22:24,040 --> 00:22:27,000 Speaker 3: Regina, how do you do friendship between less price sensitivity 471 00:22:27,000 --> 00:22:28,960 Speaker 3: and price is just not being as high as they 472 00:22:28,960 --> 00:22:30,160 Speaker 3: were last year? 473 00:22:31,960 --> 00:22:32,520 Speaker 1: Fairpoint? 474 00:22:32,720 --> 00:22:36,080 Speaker 8: Fair point, John, But I do think because of this 475 00:22:36,200 --> 00:22:40,000 Speaker 8: consumption boom and that there's inflationary pressure across a lot 476 00:22:40,080 --> 00:22:43,560 Speaker 8: of activities. We've seen price spikes and different commodities like 477 00:22:43,640 --> 00:22:48,000 Speaker 8: eggs over time, and you know, the prices for experiences 478 00:22:48,040 --> 00:22:53,199 Speaker 8: and restaurant activity, travel costs, and we still see consumption moving. 479 00:22:53,280 --> 00:22:56,880 Speaker 8: So I do think there is perhaps less price sensitivity 480 00:22:56,920 --> 00:22:59,800 Speaker 8: overall with the consumer. Maybe we're becoming more immune to 481 00:22:59,800 --> 00:23:02,679 Speaker 8: some of the inflationary impacts that'll only last for a 482 00:23:02,720 --> 00:23:05,320 Speaker 8: certain period of time. But I do think we're benefiting 483 00:23:05,359 --> 00:23:07,560 Speaker 8: from that lack of price sensitivity. 484 00:23:07,720 --> 00:23:11,040 Speaker 3: Downtown, the airlines, Jana Thank you. Jina Mah of KPMG. 485 00:23:15,560 --> 00:23:18,479 Speaker 2: We have been talking all day about the UK housing 486 00:23:18,560 --> 00:23:21,160 Speaker 2: market and how much prices have declined. We're talking two 487 00:23:21,160 --> 00:23:24,159 Speaker 2: thousand and nine levels at a time when the US 488 00:23:24,240 --> 00:23:29,760 Speaker 2: has been bolliant, amazingly resilient, defin all expectations. Bizarre, however, 489 00:23:29,760 --> 00:23:31,879 Speaker 2: you want to categorize at joining US now to do 490 00:23:31,880 --> 00:23:34,119 Speaker 2: a much better job than I could. Jonathan Miller, President 491 00:23:34,160 --> 00:23:37,359 Speaker 2: and CEO of Miller Samuel, who has an overview of 492 00:23:37,640 --> 00:23:40,200 Speaker 2: US housing markets and global housing markets at a time 493 00:23:40,480 --> 00:23:43,960 Speaker 2: where it has be fuddled pretty much everyone. What's your 494 00:23:44,000 --> 00:23:47,000 Speaker 2: take on the resilience in a US market that should 495 00:23:47,000 --> 00:23:48,879 Speaker 2: have been brought down by these higher rates akin to 496 00:23:48,920 --> 00:23:49,280 Speaker 2: what we've. 497 00:23:49,119 --> 00:23:49,720 Speaker 1: Seen in the UK. 498 00:23:50,040 --> 00:23:53,800 Speaker 6: Right, It's the difference between variable and fixed rates. Most 499 00:23:53,840 --> 00:23:57,280 Speaker 6: of the world relies on variable mortgage rates, and in 500 00:23:57,320 --> 00:24:01,720 Speaker 6: the US people are locked in. Actually, the reason why 501 00:24:01,760 --> 00:24:05,239 Speaker 6: we don't have a lot of inventory and inventory is 502 00:24:05,440 --> 00:24:10,000 Speaker 6: the metric to focus on, or lack of listening inventory, 503 00:24:10,040 --> 00:24:13,680 Speaker 6: and that's because people are wedded to their low rates 504 00:24:13,840 --> 00:24:17,280 Speaker 6: because rates were probably kept too low for too long. 505 00:24:17,720 --> 00:24:19,720 Speaker 1: There is a study that I was looking at. 506 00:24:19,960 --> 00:24:22,719 Speaker 2: US homeowners are nearly twice as willing to sell if 507 00:24:22,760 --> 00:24:25,520 Speaker 2: their mortgage rate is five percent or higher. But just 508 00:24:25,560 --> 00:24:27,240 Speaker 2: one in five mortgaged homes. 509 00:24:26,920 --> 00:24:29,760 Speaker 1: Meet that criteria. In other words, they have such low rates, 510 00:24:29,760 --> 00:24:31,000 Speaker 1: they're not going to move right. 511 00:24:31,080 --> 00:24:35,040 Speaker 6: It's like eighty percent, Yeah, eighty percent are sort of 512 00:24:35,200 --> 00:24:39,600 Speaker 6: just sitting and waiting. There's uncertainty. Everybody's expecting a recession. 513 00:24:39,960 --> 00:24:43,399 Speaker 6: We've been forecasting a recession for in six months for 514 00:24:43,440 --> 00:24:48,199 Speaker 6: two years. You know, people are just sitting. When consumers 515 00:24:48,280 --> 00:24:51,520 Speaker 6: are uncertain, they sit, they wait, and as a result, 516 00:24:51,640 --> 00:24:56,040 Speaker 6: and also too people that may want to buy, they 517 00:24:56,080 --> 00:24:59,120 Speaker 6: have to sell their house to do it, but they 518 00:24:59,119 --> 00:25:04,240 Speaker 6: can't find a house, so they're stuck. Inventory is extremely 519 00:25:04,280 --> 00:25:07,200 Speaker 6: low across most of the markets that we cover. 520 00:25:07,320 --> 00:25:09,119 Speaker 2: Could you give us a sense of historical precedent of 521 00:25:09,240 --> 00:25:11,880 Speaker 2: last time the inventory was so low. Basically, the number 522 00:25:11,880 --> 00:25:14,400 Speaker 2: of homes on the market that you could potentially. 523 00:25:13,960 --> 00:25:18,680 Speaker 6: Buy there hasn't been you know. The inventory now, for example, 524 00:25:18,720 --> 00:25:24,800 Speaker 6: in Florida is sixty percent below pre pandemic levels. Many 525 00:25:24,840 --> 00:25:29,280 Speaker 6: housing markets, you're looking at inventory thirty forty fifty percent 526 00:25:30,080 --> 00:25:32,879 Speaker 6: lower than it was in twenty nineteen before the pandemic, 527 00:25:32,880 --> 00:25:36,680 Speaker 6: when rates really dropped and demand surged and there was 528 00:25:36,720 --> 00:25:42,240 Speaker 6: a frenzy. I'm not sure people realize how extensive the 529 00:25:42,320 --> 00:25:46,720 Speaker 6: obliteration of listing inventory was during the pandemic. With rates 530 00:25:46,760 --> 00:25:47,560 Speaker 6: being so low. 531 00:25:47,840 --> 00:25:49,320 Speaker 1: Well, so here's a question. 532 00:25:49,400 --> 00:25:52,080 Speaker 2: Right now, we see home builders going nuts, building as 533 00:25:52,119 --> 00:25:54,480 Speaker 2: much as they possibly can because there is no inventory and. 534 00:25:54,400 --> 00:25:55,600 Speaker 1: People need a place to live. 535 00:25:56,640 --> 00:26:00,199 Speaker 2: If rates do come back down, if there is what 536 00:26:00,400 --> 00:26:04,040 Speaker 2: of new housing supply? Could you see prices go down 537 00:26:04,080 --> 00:26:08,040 Speaker 2: dramatically when the door is actually open to true price discovery? 538 00:26:08,800 --> 00:26:11,399 Speaker 6: I think so. I mean the way to think of 539 00:26:11,960 --> 00:26:16,480 Speaker 6: inventory coming back into the market. If rates drop substantially, 540 00:26:17,000 --> 00:26:19,000 Speaker 6: you know, they're sort of in the sixes, you know, 541 00:26:19,200 --> 00:26:22,240 Speaker 6: high sixes and low sevens. You know, if they're in 542 00:26:22,280 --> 00:26:27,719 Speaker 6: the fives, maybe we start talking about more supply coming on. 543 00:26:28,400 --> 00:26:31,880 Speaker 6: But we have unemployment at three and a half percent. 544 00:26:34,400 --> 00:26:34,800 Speaker 10: You know, it. 545 00:26:36,320 --> 00:26:38,679 Speaker 6: Seems like there's more rate cuts in store just on 546 00:26:38,720 --> 00:26:42,680 Speaker 6: that item alone, which sort of goes in the opposite 547 00:26:42,680 --> 00:26:43,840 Speaker 6: direction of rates falling. 548 00:26:44,680 --> 00:26:46,639 Speaker 2: We were talking earlier about the UK, and I do 549 00:26:46,720 --> 00:26:50,119 Speaker 2: want to just wonder if there is any corollary, what 550 00:26:50,240 --> 00:26:53,119 Speaker 2: would happen in the US if there were variable rates. 551 00:26:53,400 --> 00:26:55,720 Speaker 2: We saw prices fall at the fastest pace going back 552 00:26:55,720 --> 00:26:58,679 Speaker 2: to two thousand and nine in the United Kingdom, they 553 00:26:58,720 --> 00:26:59,560 Speaker 2: do have variable rates. 554 00:26:59,560 --> 00:27:00,880 Speaker 1: We talked to at that earlier. 555 00:27:01,480 --> 00:27:03,399 Speaker 2: Would that be what we would see in the US 556 00:27:03,960 --> 00:27:06,880 Speaker 2: if we weren't shielded by a thirty year mortgage rate? 557 00:27:07,040 --> 00:27:12,159 Speaker 6: Absolutely, that's you know, the idea here is that the 558 00:27:12,240 --> 00:27:18,040 Speaker 6: psychologist people are locked in and they're able to enjoy 559 00:27:18,760 --> 00:27:22,199 Speaker 6: a lower rate, while people new to the market can't. 560 00:27:22,600 --> 00:27:24,639 Speaker 6: And there's a premium for that. And one of the 561 00:27:24,640 --> 00:27:29,160 Speaker 6: premiums is to sit and wait. It's a luxury rather 562 00:27:29,240 --> 00:27:32,600 Speaker 6: that to sit and wait. You don't have to. You know, 563 00:27:32,640 --> 00:27:34,879 Speaker 6: we have home equity at you know, some of the 564 00:27:35,000 --> 00:27:38,840 Speaker 6: highest levels in history. There's no stress for people having 565 00:27:38,920 --> 00:27:43,720 Speaker 6: to sell economies pretty good. People just sit and wait. 566 00:27:44,240 --> 00:27:46,639 Speaker 6: And so I think this whole process is going to 567 00:27:46,680 --> 00:27:51,080 Speaker 6: take time, which as opposed to, you know, a few 568 00:27:51,200 --> 00:27:52,800 Speaker 6: years rather than a few quarters. 569 00:27:53,160 --> 00:27:55,240 Speaker 2: One thing that some people will say is that the 570 00:27:55,280 --> 00:27:58,679 Speaker 2: housing market is bottomed and you're seeing a recovery. Is 571 00:27:58,680 --> 00:28:02,560 Speaker 2: that an accurate way of careterizing a market that's essentially stagnating. 572 00:28:03,720 --> 00:28:07,440 Speaker 6: So I think when you refer to that, the reference 573 00:28:07,520 --> 00:28:11,879 Speaker 6: is really to pricing, because pricing has leveled off and 574 00:28:11,960 --> 00:28:17,160 Speaker 6: is rising in some markets from pandemic highs if you will. 575 00:28:18,040 --> 00:28:22,639 Speaker 6: But sales activity, you know, is still way off and 576 00:28:24,600 --> 00:28:27,919 Speaker 6: the rate of descent is slowed. It's somewhat stable. But 577 00:28:30,280 --> 00:28:34,280 Speaker 6: sales activity is held back because of inventory, and inventory 578 00:28:34,320 --> 00:28:37,480 Speaker 6: is held back because of high rates, and high rates 579 00:28:37,520 --> 00:28:42,520 Speaker 6: are held back because of low unemployment. I mean, it's 580 00:28:42,640 --> 00:28:44,200 Speaker 6: just this whole domino thing. 581 00:28:44,440 --> 00:28:45,880 Speaker 1: Talking about the domino effect. 582 00:28:46,080 --> 00:28:48,120 Speaker 2: You speak to a lot of mortgage brokers, I'm sure, 583 00:28:48,440 --> 00:28:50,080 Speaker 2: and people who work in real estate. 584 00:28:50,200 --> 00:28:54,320 Speaker 6: Yes, what's the mood like, Well, it's interesting. Over the 585 00:28:54,400 --> 00:28:57,320 Speaker 6: last year, there's been this sentiment that, hey, you know, 586 00:28:57,440 --> 00:29:01,720 Speaker 6: rates are going to come down, and I keep asking 587 00:29:01,720 --> 00:29:05,280 Speaker 6: the question. You know, with unemployment, you know, add or 588 00:29:05,320 --> 00:29:11,240 Speaker 6: near record lows consistently, how can rates be cut? You know, 589 00:29:11,280 --> 00:29:14,600 Speaker 6: maybe they'll drift lower. If the FED stabilizes for a while, 590 00:29:15,360 --> 00:29:17,800 Speaker 6: we can. I think it's reasonable to expect that, but 591 00:29:18,200 --> 00:29:22,520 Speaker 6: not a sharp decline. The economy is too strong on 592 00:29:22,560 --> 00:29:25,360 Speaker 6: the unemployment side, so it really, you know, the FED 593 00:29:25,480 --> 00:29:27,720 Speaker 6: is going to have to keep using their baseball bat 594 00:29:27,840 --> 00:29:29,600 Speaker 6: to damage the economy. 595 00:29:29,640 --> 00:29:33,040 Speaker 2: Well, if the rate structure, if we stayed around five 596 00:29:33,040 --> 00:29:34,479 Speaker 2: and a half percent, or even if we go down 597 00:29:34,520 --> 00:29:37,440 Speaker 2: to five percent, say for a full year. What does 598 00:29:37,480 --> 00:29:39,960 Speaker 2: that do to inventory? What does that do to the 599 00:29:40,000 --> 00:29:40,760 Speaker 2: mortgage market? 600 00:29:40,960 --> 00:29:43,280 Speaker 6: So, first of all, that would be great to get 601 00:29:43,320 --> 00:29:46,600 Speaker 6: things going. You know, rates in the mid fives even, 602 00:29:47,040 --> 00:29:49,760 Speaker 6: I think would pull a lot more people into the market, 603 00:29:49,840 --> 00:29:54,040 Speaker 6: which would not in a panic sort of flood of inventory, 604 00:29:54,040 --> 00:29:56,360 Speaker 6: but it would be it would normalize to a certain degree. 605 00:29:56,400 --> 00:29:59,560 Speaker 6: And we see transactions pick up right now because of 606 00:29:59,600 --> 00:30:03,880 Speaker 6: the lack of inventory. We're seeing bidding wars start to 607 00:30:03,960 --> 00:30:08,680 Speaker 6: approach forty to fifty percent of local housing markets, meaning 608 00:30:09,240 --> 00:30:12,360 Speaker 6: sales that close above the last asking price. We're seeing 609 00:30:12,480 --> 00:30:16,719 Speaker 6: some big numbers in certain markets, and that's because of 610 00:30:16,880 --> 00:30:19,320 Speaker 6: chronic lack of supply. So the demand is still there 611 00:30:19,400 --> 00:30:24,320 Speaker 6: even with higher rates. Yeah, so New York Metro is 612 00:30:24,360 --> 00:30:27,600 Speaker 6: a prime example. In Southern California another example where we're 613 00:30:27,640 --> 00:30:31,080 Speaker 6: seeing bidding wars at nearly half of the close transactions 614 00:30:31,080 --> 00:30:32,320 Speaker 6: in the quarter last quarter. 615 00:30:32,440 --> 00:30:33,720 Speaker 1: Are you seeing any soft patches? 616 00:30:34,920 --> 00:30:37,920 Speaker 6: Not really, I mean, you know, soft patch to me 617 00:30:38,080 --> 00:30:43,840 Speaker 6: would be defining it by price. Pricing is stable in 618 00:30:43,920 --> 00:30:49,080 Speaker 6: terms of activity, sales that is certainly almost every market 619 00:30:49,160 --> 00:30:54,080 Speaker 6: is very slow, and it's because everybody's stuck. No supply, 620 00:30:54,240 --> 00:30:54,840 Speaker 6: no sales. 621 00:30:55,240 --> 00:30:56,840 Speaker 1: Is a Sun Belt still as hot as it used 622 00:30:56,840 --> 00:30:57,000 Speaker 1: to be? 623 00:30:57,080 --> 00:30:59,640 Speaker 2: I mean, I shouldn't have said that bad metaphor, but 624 00:30:59,680 --> 00:31:01,680 Speaker 2: i'm you know, is it still as popular? 625 00:31:01,720 --> 00:31:04,080 Speaker 6: I should say as a star, I'd say it's hotter 626 00:31:04,800 --> 00:31:09,120 Speaker 6: than outside the Sunbelt, but to use that same phrase, 627 00:31:09,240 --> 00:31:13,479 Speaker 6: but yeah, I mean, but not as robust as it was. 628 00:31:14,280 --> 00:31:16,320 Speaker 6: But I think in a lot of the Sun Belt 629 00:31:16,320 --> 00:31:20,320 Speaker 6: markets inventory is even tighter than in say markets like 630 00:31:20,360 --> 00:31:25,080 Speaker 6: the Northeast, where inventory while it's in many markets twenty 631 00:31:25,120 --> 00:31:27,960 Speaker 6: percent off a pre pandemic, it's not sixty percent off. 632 00:31:28,360 --> 00:31:29,920 Speaker 1: Jonathan Miller, thank you so much. 633 00:31:30,000 --> 00:31:31,920 Speaker 2: This is really one of the most fascinating times I 634 00:31:31,920 --> 00:31:35,000 Speaker 2: could possibly imagine for the housing market of Miller, Samuel. 635 00:31:35,120 --> 00:31:37,640 Speaker 2: I look forward to reading your next report, which will 636 00:31:37,720 --> 00:31:41,360 Speaker 2: highlight all of the latest trends. Subscribes the Bloomberg Surveillance 637 00:31:41,400 --> 00:31:45,000 Speaker 2: podcast on Apple, Spotify, and anywhere else you get your podcasts. 638 00:31:45,320 --> 00:31:48,200 Speaker 2: Listen live every weekday starting at seven am Eastern on 639 00:31:48,240 --> 00:31:51,560 Speaker 2: Bloomberok dot com, the iHeartRadio app, tune In, and the 640 00:31:51,600 --> 00:31:54,800 Speaker 2: Bloomberg Business app. You can watch us live on Bloomberg 641 00:31:54,840 --> 00:31:57,440 Speaker 2: Television and always on the Bloomberg terminal. 642 00:31:57,640 --> 00:31:58,520 Speaker 1: Thanks for listening. 643 00:31:58,560 --> 00:32:11,720 Speaker 2: I'm Lisa Abramowitz and this is bloomberghm