Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: On today's episode, we'll be taking a look at the
Speaker 2: global macro landscape. In a moment, we'll be chatting with
Speaker 2: David Spell, co CIO at Mount Lucas Management. Plus a
Speaker 2: discussion on the fed's path ahead with Bill Adams. He
Speaker 2: is the chief economist at Comerica Bank. But we begin
Speaker 2: in Tokyo. Joining us now is Katherine Thorbeck. She is
Speaker 2: Asia tech columnist for Bloomberg Opinion. She's been very busy
Speaker 2: this week writing about the story on a Deep Seek,
Speaker 2: the Chinese AI startup. Catherine, thank you for making time
Speaker 2: to chat with us. I know it's been a busy
Speaker 2: week for you. What I want to begin with the
Speaker 2: story that just broke late in the day US time.
Speaker 2: American officials are investigating whether Deep Seek essentially circumvented restrictions
Speaker 2: on advanced semiconductors from Nvidia. Now we know that the
Speaker 2: Biden administration cut off China's access to a range of
Speaker 2: some of Nvidia's most powerful products. Now Sands seemed to
Speaker 2: be shifting a little bit. Can you fill us in
Speaker 2: on what you understand the story to.
Speaker 3: Be, right. So this news just came out, as you mentioned,
Speaker 3: just a few hours ago, and I don't think it
Speaker 3: really caught anybody by surprise that the US would launch
Speaker 3: a probe into, you know, what sort of chips Deep
Speaker 3: Seek was using to train its models and whether it
Speaker 3: was able to circumvent export controls. And it's too soon
Speaker 3: to sort of know the outcome of that investigation, but honestly,
Speaker 3: it wouldn't entirely surprise me if they were able to
Speaker 3: get their hands on some Nvidia chips, some of the
Speaker 3: more advanced chips that have been cut off to China.
Speaker 3: You know, these export controls have proven pretty porous in
Speaker 3: a number of instances. That said, we don't know at
Speaker 3: this point in time, and deep seek has it is
Speaker 3: out there that Deep Seek was hoarding some of the
Speaker 3: older in video chips before these export controls came in,
Speaker 3: and whether they were able to get their hands on
Speaker 3: the more advanced models, that's sort of the question now.
Speaker 3: And I think a lot of people in the US,
Speaker 3: you know, are just very curious how they were able
Speaker 3: to create these AI models with the technology that they had.
Speaker 3: So it makes sense that the US would launch this investigation. Now,
Speaker 3: it wouldn't entirely surprise me if they were able to
Speaker 3: obtain some of these more advanced chips. I'm not sure
Speaker 3: that would necessarily change the narrative about how deep seak
Speaker 3: has sort of upended big tech and BAI race. Right now,
Speaker 3: I still think that they were able to prove that they,
Speaker 3: you know, are able to come up with AI breakthroughs
Speaker 3: despite all of these restrictions, and I think that that
Speaker 3: still is very much top of mind for big tech
Speaker 3: right now.
Speaker 2: So our reporting indicates when it comes to the chip story,
Speaker 2: that American officials are looking at whether they were acquired
Speaker 2: these Nvidia chips through a third party or a third
Speaker 2: parties plural in Singapore. But there are a number of
Speaker 2: other investigations going on in regards to deep seek, and
Speaker 2: that would include Microsoft often open Ai looking at whether
Speaker 2: open aiyes model was somehow used in training deep seek.
Speaker 3: Is that right, that's correct? And so right now Microsoft
Speaker 3: is probing whether deep seek used outputs from open AI's
Speaker 3: models to train their own model, which would technically be
Speaker 3: a breach of the terms of service for open using
Speaker 3: open AI's models. But to me, this this really reeked
Speaker 3: of a lot of irony. You know, open ai has
Speaker 3: trained its models by basically scraping writing and art from
Speaker 3: the entire internet, you know, without really getting meaningful consent
Speaker 3: from artists and writers to do that. So it did
Speaker 3: seem a little bit odd and it has rubbed a
Speaker 3: lot of people sort of the wrong way. A lot
Speaker 3: of jokes have been made about Oh now open a
Speaker 3: open ai all the sudden cares about, you know, intellectual
Speaker 3: property rights. You know, whether deep Seak obtained this data
Speaker 3: improperly or not is still sort of the subject of investigation.
Speaker 3: But I think it does put open ai in a
Speaker 3: little bit of an awkward spot right now.
Speaker 2: So what does the deep Seek story tell us or
Speaker 2: allow us to understand about the evolution of the AI
Speaker 2: industry in China?
Speaker 3: Right So, I think deep seek really caught the West
Speaker 3: by surprise when it released its most recent model on
Speaker 3: January twentieth, And I don't think it necessarily had to
Speaker 3: catch so many people entirely off guard, and you know,
Speaker 3: caused this multi billion dollar stock market sort of route,
Speaker 3: and some of those losses have been paired back over
Speaker 3: over the week. But you know, I first wrote about
Speaker 3: deep Seek back in June more than six months ago
Speaker 3: when it released its V two model, one of its
Speaker 3: earlier AI models, and I was just saying that this
Speaker 3: is actually a very impressive AI model. You know, for
Speaker 3: a long time, the West and Silicon Valley has sort
Speaker 3: of claimed dominance in the AI race, and they've thought
Speaker 3: there were years ahead of China, and I think policymakers
Speaker 3: in Washington have thought, you know, the export controls, the
Speaker 3: restrictions on chips that they've been putting towards China that
Speaker 3: would really hold China back, and Deep Seek really up
Speaker 3: ended that narrative. You know, they showed that Chinese AI,
Speaker 3: Chinese AI startups are actually really able to innovate and
Speaker 3: are able to do it at a fraction of the
Speaker 3: cost that these Silicon Valley tech giants have been doing.
Speaker 3: So it really sort of I think people were really
Speaker 3: really impressed by this R one model that they put
Speaker 3: out on January twentieth, And this R one model, it
Speaker 3: can really it's a reasoning model, so it can really
Speaker 3: sort of think through questions the way you know a
Speaker 3: human would think through questions. It's been on par with
Speaker 3: you know, open AIS models on a number of industry benchmarks,
Speaker 3: and it really I think, you know, caught the sort
Speaker 3: of tech billionaires in the US, some of these very
Speaker 3: powerful companies totally off guard this week.
Speaker 2: To what extent do you believe there is an entrenched
Speaker 2: bias that China doesn't innovate, that it merely copies.
Speaker 3: So I think we've seen this narrative for a while,
Speaker 3: and I think that there's a number of reasons why
Speaker 3: this comes up over and over again and why we're
Speaker 3: continually shocked by China's tech breakthroughs. And you know, some
Speaker 3: of these, I think, you know, a language barrier, separate
Speaker 3: social media ecosystems, and sort of a shrinking number of
Speaker 3: foreign reporters actually in China give the US very little
Speaker 3: visibility into some of the more exciting sort of developments
Speaker 3: in China's tech sector right now. And I also think
Speaker 3: that there's sort of an insular mindset in the US
Speaker 3: that you know, Silicon Valley and sort of these the
Speaker 3: Silicon Valley leaders, a lot of them seem to think
Speaker 3: that they're the only ones who can really lead the
Speaker 3: charge here, and I think it leaves huge blind spots
Speaker 3: to what's going on in China. A lot of sort
Speaker 3: of the coverage of China that we read in the
Speaker 3: US is very focused on geopolitical rivalries and a lot
Speaker 3: of you know, voices in Washington see any sort of
Speaker 3: tech breakthroughs in China as you know, a threat to
Speaker 3: democracy everywhere. And whether or not that's true, I think
Speaker 3: it does create these big blind spots to some of
Speaker 3: the sort of actual people working in China, and you know,
Speaker 3: the more than one billion people that live there and
Speaker 3: a lot of times are innovating and sort of driving
Speaker 3: tech forward despite their government and not because of it.
Speaker 2: I know, the TikTok story is something that you and
Speaker 2: I have discussed in the past, and the proprietary nature
Speaker 2: of that algorithm something that Chinese would like to protect.
Speaker 2: I found it curious that in the case of deep Seek,
Speaker 2: the developers opted for kind of an open system. Did
Speaker 2: that surprise you at all?
Speaker 3: It didn't entirely surprise me. I think that they were
Speaker 3: sort of working with what they've got, and you know,
Speaker 3: open source models you can sort of tweak and a
Speaker 3: lot of people can work on them at once, and
Speaker 3: you can sort of they're they're a little bit cheaper
Speaker 3: to run than sort of what open ai is doing,
Speaker 3: which is just training bigger and bigger and bigger proprietary models,
Speaker 3: So it didn't totally surprise me that they did this.
Speaker 3: I think it does sort of raise larger questions of
Speaker 3: sort of the future direction of the AI sector and
Speaker 3: whether it will be you know, dominated by these like
Speaker 3: smaller startups that are really perfecting and tweaking these open
Speaker 3: source models, or whether sort of the open AI route,
Speaker 3: which is just you know, creating bigger and bigger and
Speaker 3: bigger models and spending more and building out these models,
Speaker 3: whether that will sort of prove superior and we'll have
Speaker 3: to see how it does play out in the long run.
Speaker 2: So we were talking a moment ago about open ai,
Speaker 2: and you reference the fact that open ai essentially was
Speaker 2: trained using the US intranet, and I'm wondering, from the
Speaker 2: point of view of deep seek, do we know much
Speaker 2: about how this model was trained at all?
Speaker 3: So I think it's interesting. I think when it comes
Speaker 3: to deep Seek. One of the big issues that sort
Speaker 3: of as the swarm of American and international users have
Speaker 3: discovered as they've logged on and you know, downloaded this
Speaker 3: app and it's you know, shot up to the top
Speaker 3: of Apple's app store this week. One of the things
Speaker 3: that they've discovered, is you know what's off limits behind
Speaker 3: China's Great Firewall and whether that's you know, talking about Shijinping,
Speaker 3: talking about China's human rights record in Shinjong, where you know,
Speaker 3: there have been documented human rights abuses of weager Muslim minorities,
Speaker 3: and right now, when you chat with deep seek about that,
Speaker 3: you know it'll initially say, let's change the subject, let's
Speaker 3: talk about something else. There are sort of workarounds that
Speaker 3: I was able to play around with this week where
Speaker 3: I did get it to say and sort of encode.
Speaker 3: You know that Xi Jinping has faced international criticism for
Speaker 3: his treatment of Hong Kong protesters and political dissidents. So
Speaker 3: it does show that deep Seek was trained on data
Speaker 3: beyond the Great Firewall, and I'm sure that's going to
Speaker 3: cause a headache for deep Seek. You know, I don't
Speaker 3: think Chinese authorities are going to crack down on this
Speaker 3: tool that you know has brought such a positive international
Speaker 3: spotlight to its tech sector and tech capabilities. But what
Speaker 3: I do think that this all shows is that there's
Speaker 3: a lot more at stake in this global race for
Speaker 3: AI dominance between the US and China. You know, as
Speaker 3: more people turn to these tools for research, for homework help.
Speaker 3: They could also be used to sort of covertly influence
Speaker 3: our ideas and influence our ideologies, whether that's from Beijing
Speaker 3: or from the US. So I think that, you know,
Speaker 3: there's obviously a lot of money in stock market value
Speaker 3: at stake here, but these tools are also very powerful
Speaker 3: and they have the power to really influence people. And
Speaker 3: I think that that we're going to see more of
Speaker 3: that sort of play now in the long run.
Speaker 2: Catherine will leave it there always a pleasure. Katherine Thorbeck,
Speaker 2: Asia tech columnist for Bloomberg Opinion, joining us here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Chrisner. There was certainly volatility in the currency
Speaker 2: markets in late New York trading today and the catalyst
Speaker 2: was President Trump. He said that he will follow through
Speaker 2: on his threat to impose twenty five percent tariffs on
Speaker 2: imports from Canada and Mexico this Saturday. For a closer
Speaker 2: look now at how these tariffs might affect the macro outlook,
Speaker 2: I'm joined by David Aspell. He is partner also co
Speaker 2: CIO at Mount Lucas Management, joining us from just outside Philadelphia.
Speaker 2: Thank you for making time to chat with us. David,
Speaker 2: do you have a sense of what the tariff threat
Speaker 2: may mean to global markets generally speaking?
Speaker 1: I mean, there's a lot of uncertainty, doesn't it.
Speaker 4: You know, we've got a new administration that's just come
Speaker 4: in that you know, it's clearly sees volatility as a feature,
Speaker 4: not a bug. And you know they're using tariffs, amongst
Speaker 4: other things, for negotiating leverage to try and push through
Speaker 4: some pretty large macro policy goals. And these policy goals
Speaker 4: run directly through currency markets, through bond yields, and they're
Speaker 4: going to have large impacts on economies everywhere.
Speaker 1: It's going to be a fascinating four years.
Speaker 2: I think, yeah, definitely, the dollar has been a big beneficiary.
Speaker 2: We can talk about FED policy in a moment. But
Speaker 2: do you expect the dollar to remain very strong here
Speaker 2: against the matures?
Speaker 1: I think it's hard to say.
Speaker 4: I think what's going on is that, you know, we've
Speaker 4: gone through a period of US exceptionalism over the past
Speaker 4: few years, where the US economy has been stronger than others,
Speaker 4: and so that's why you've seen it particularly against Japan
Speaker 4: or against the Euro. You know, the euro has been
Speaker 4: weak because the European economy has been weak.
Speaker 1: It's the same with the UK. And if you think
Speaker 1: why that.
Speaker 4: Is, it's because the US has had has higher rates
Speaker 4: currently and it can survive higher rates because it's got
Speaker 4: a slightly different type of economy where mortgage rates don't
Speaker 4: feed through in quite the same way. And now you've
Speaker 4: got an administration that seems like it's unleashing some animal spirits.
Speaker 4: So as long as that continues and the US does
Speaker 4: better than others, then yeah, I think the US dollar
Speaker 4: can stay can stay fairly well bid.
Speaker 2: There's been some debate in Washington as whether or not
Speaker 2: these policies regarding tariffs are inflationary. Do you have a
Speaker 2: view on that.
Speaker 1: I don't think they are.
Speaker 4: I think they might be for a short period of
Speaker 4: time as a macro trader, and how I look at inflation,
Speaker 4: how I think the FED looks at inflation is maybe
Speaker 4: a little different to how people on main street see it.
Speaker 1: What inflation to me is.
Speaker 4: Is an ongoing process of higher prices for a period
Speaker 4: of time, whereas tariffs to me are a one off
Speaker 4: price shock. Now it could be that they get embedded,
Speaker 4: particularly at a time when people are nervous about inflation,
Speaker 4: but I think that the negatives of inflation will take
Speaker 4: you know, as they slow down the economy in some places,
Speaker 4: if people are nervous about them, will take the edge
Speaker 4: off them. And I think generally if the inflation part
Speaker 4: of me seems quite well set over the next few years,
Speaker 4: partly because of housing.
Speaker 2: Just a few weeks ago, the debate in the bond
Speaker 2: market was whether or not we were going to see
Speaker 2: a five percent yield on the tenure. I'm looking at
Speaker 2: something now that's closer to four and a half percent.
Speaker 2: What's your view on yields going forward?
Speaker 4: Unless something goes very wry in inflation, which is possible
Speaker 4: but seems unlikely.
Speaker 1: I think we've seen the peak and yields. I think
Speaker 1: the economy can survive them.
Speaker 4: But I think you've got a FED that wants to
Speaker 4: reduce rates and is able to reduce rates over time.
Speaker 4: If you look at where the FED projections were at
Speaker 4: the end of the year, you know they thought that
Speaker 4: with a two point five percent core PC at the
Speaker 4: end of this year, they would have rates down at
Speaker 4: three point nine, which to me seems like they're making
Speaker 4: an easier bar to cut rates rather than a higher bar.
Speaker 1: So I think they offer good value.
Speaker 4: It seems that they're useful in a portfolio context currently
Speaker 4: because if the economy slows down, the FED is able
Speaker 4: to cut which I think.
Speaker 1: Is real helpful.
Speaker 2: In terms of the story across the Asia Pacific, it's
Speaker 2: mainly been about weak domestic demand in China and sluggishness
Speaker 2: in the industrial economy. Do you have a sense of
Speaker 2: what China is going through, where we are now in
Speaker 2: this cycle, and whether or not things are beginning to improve.
Speaker 1: Yeah.
Speaker 4: I think that that's been one of the major stories
Speaker 4: in the global economy over the past few years. The
Speaker 4: extent to which China has been slowing. They've clearly got
Speaker 4: a consumption problem. That their economy is incredibly unbalanced. They
Speaker 4: run very large surpluses and rely on other people to
Speaker 4: soak up those surpluses, and.
Speaker 1: The rest of the world has decided that rightly.
Speaker 4: I think that it's not going They're not willing to
Speaker 4: absorb those surpluses, which has led to some slow down
Speaker 4: in China. I think what they're doing is slowly they
Speaker 4: are trying to rebalance, and I thought that the stimulus
Speaker 4: policies they put in around rates and the other loosenings
Speaker 4: and the cleaning up a balance sheets. I thought they
Speaker 4: were quite powerful. Just about now starting to see those,
Speaker 4: to see those come to fruition. The data seems like
Speaker 4: it's starting to turn up. It seems like the stimulus
Speaker 4: was powerful around the consumer.
Speaker 1: It's just I worry that it's.
Speaker 4: Going to run into a buzzsaw of the new administration
Speaker 4: and tariffs, and I hope that we can get a
Speaker 4: deal done that rebalances their economy and means that we
Speaker 4: don't have to the rest of the world doesn't have
Speaker 4: to soak up their surpluses without too much collateral damage.
Speaker 2: I'm curious about whether you're finding any value across markets
Speaker 2: in Asia. Now, Chinese assets may be inexpensive on a
Speaker 2: relative basis, we can go there, but I'm also curious
Speaker 2: about what you're seeing in Japan.
Speaker 4: I would say that we generally do systematic trend following,
Speaker 4: So what we're doing is just following prices. If things
Speaker 4: are going up, we're along them. If things are going down,
Speaker 4: with short them, which means you know, we've been in
Speaker 4: the in the yen trade for a long period of time.
Speaker 4: We have been long dollars and short yeah, and that's
Speaker 4: been good. I think that trade can continue because of
Speaker 4: the interest rate differential. Alongside on the discretion side where
Speaker 4: we run macro strategies, I think the Chinese equity market
Speaker 4: is incredibly cheap.
Speaker 1: As long as it can do the things.
Speaker 4: It just needs to be able to do the rebalancing
Speaker 4: to get through this period and come to a trade
Speaker 4: agreement and operate in a much more normal way as
Speaker 4: something closer to a regular emerging market economy. If it
Speaker 4: can do that, then the equity market there is incredibly cheap.
Speaker 4: If it cannot do that, then I think we'll end
Speaker 4: up this will be another false down of which you've
Speaker 4: had a few over the past years. But I'm pretty
Speaker 4: hopeful that the new administration is able to do a
Speaker 4: trade deal and we see some brighter times ahead in Asia.
Speaker 2: David, we'll leave it there, Thanks so much. David Spell,
Speaker 2: partner co CIO at Mount Lucas Management, joining us here
Speaker 2: on the Daybreak Aasia podcast. So let's turn our attention
Speaker 2: now to the US economy. Today, we learn that economic
Speaker 2: growth expanded at a solid pace in the fourth quarter,
Speaker 2: albeit a little less than forecast. Fourth quarter GDP growing
Speaker 2: at a rate of two point three percent, and can
Speaker 2: consumer spending advancing at an annual rate of four point
Speaker 2: two percent. Let's take a closer look now with Bill Adams.
Speaker 2: He is the chief economist at Comerica Bank. Bill, thanks
Speaker 2: for making time to chat with us. Give me your
Speaker 2: overall impression of this GDP print. What do you think
Speaker 2: it tells us?
Speaker 5: So the headline was a slowdown, but the details were strong.
Speaker 5: If you look at my preferred measure of core real
Speaker 5: GDP that's real final sales to private domestic purchasers. That
Speaker 5: tracks GDP's trend by leaving out the effects of inventories,
Speaker 5: leaving out the effects of trade and government spending. That
Speaker 5: grew three point two percent annualized in the fourth quarter.
Speaker 5: So that's good news. The US economy is in good shape.
Speaker 5: Growth momentum is stronger than the headline in the fourth
Speaker 5: quarter and closer to the annual growth rate two point
Speaker 5: eight percent, which is excellent for the US economy.
Speaker 2: So at the same time, today we learned that weekly
Speaker 2: jobless claims came in well below estimates. And I'm wondering
Speaker 2: whether when you look at the claims day on top
Speaker 2: of the GDP data, you come away with a conclusion that, yeah,
Speaker 2: the Fed's going to be on hold for a bit longer.
Speaker 5: It sure looks like it. The labor market data in
Speaker 5: the second half of twenty twenty four, we're worrying the Fed.
Speaker 5: You'll recall that was when we were all talking about
Speaker 5: the Psalm rule, form of FED economist Claudia Sam's observation.
Speaker 5: When the three month moving average of the unemployment rate
Speaker 5: rises by half a percent or more from it's twelve
Speaker 5: month low, typically the economy has been in recession, and
Speaker 5: so that Psalm rule triggered, and I think that was
Speaker 5: one of the big contributors to why the Fed cut
Speaker 5: interest rates a full percentage point between September and December.
Speaker 5: But now we have this solid GDP growth data in hand,
Speaker 5: Labor market data like that claims data like the jobs
Speaker 5: report have stabilized, and that means that the FED is
Speaker 5: less worried about the economic outlook and they can they
Speaker 5: feel they have the latitude to refocus their attention on
Speaker 5: bringing inflation closer to that two percent target.
Speaker 2: So, Bill, I'm curious to get your take on how
Speaker 2: the policies from the Trump administration as they relate to
Speaker 2: deportations may impact the labor market. Do you have a
Speaker 2: sense of that.
Speaker 5: So directionally, if the US labor market has fewer workers,
Speaker 5: that would tend to push the unemployment rate down. That's
Speaker 5: just labor demand is not going to decline as much
Speaker 5: as labor supply would, and so it's a question of
Speaker 5: magnitude how large this effect is going to be. But
Speaker 5: I think the Fed is clearly taking a wait and
Speaker 5: see approach to see how much the change in immigration
Speaker 5: policies affects labor supply over the next twelve months, next
Speaker 5: twenty four months, as well as waiting and see this
Speaker 5: for what exactly happens with tariff policies tax policies. But directionally,
Speaker 5: it all kind of points to either a tighter job
Speaker 5: market with changes in immigration policy, or higher prices for
Speaker 5: consumers and for businesses if teriff rates go up, or
Speaker 5: just an overall hotter economy if we have tax cut
Speaker 5: directed stimulus. So all of that would be reasons for
Speaker 5: the FED to slow the move lower in interest rates
Speaker 5: or to just hold interest rates steady for an extended period.
Speaker 5: That seems to be the theme right now.
Speaker 2: So if you extend that then into the market's response.
Speaker 2: I'm talking about the treasury market here, is it likely
Speaker 2: that that tenure yield could approach five percent this year.
Speaker 5: I'm expecting that for most of the year, the ten
Speaker 5: year is probably going to range between four and a
Speaker 5: quarter percent and four and three quarters percent. I think
Speaker 5: a lot of the concerns about upper pressures on inflation,
Speaker 5: or pressures on the labor market, or on the fiscal
Speaker 5: deficit if we have more stimulus, all of that is
Speaker 5: I think pretty clearly reflected in market pricing today.
Speaker 2: What about the knock on effect that it would have
Speaker 2: with the mortgage market.
Speaker 5: I think we'll have less of a recovery of home
Speaker 5: sales than we would have in the absence of these policies,
Speaker 5: but you know that's relative, and if you're comparing to
Speaker 5: twenty twenty four, that was the weakest year since the
Speaker 5: mid nineties for existing home sales, I think the direction,
Speaker 5: even with mortgage rates staying high, is probably a bit
Speaker 5: higher this year. It's just it's going to be a
Speaker 5: more measured recovery for existing home sales than we otherwise
Speaker 5: would have seen. New home sales I think look better
Speaker 5: because there's homebuilders are offering incentives to home buyers, and
Speaker 5: the kind of the absolute number of existing homes that
Speaker 5: are listed right now is still pretty low, and that
Speaker 5: is directing home buyers, the ones who can afford to
Speaker 5: be buying in a market like this, to have a
Speaker 5: look at new construction.
Speaker 2: I mentioned a moment ago, the consumer spending in the
Speaker 2: fourth quarter of last year was very robust at four
Speaker 2: point two percent growth. How do you evaluate the American
Speaker 2: consumer right now? Are things beginning to become less robust
Speaker 2: in a way?
Speaker 5: Perhaps that's a funny question. So on average, the American
Speaker 5: consumer is in great shape, benefiting from the big increases
Speaker 5: in the stock market, big increases in home equity for homeowners,
Speaker 5: and that wealth effect is funding robust spending on discretionary
Speaker 5: categories on new vehicles. New vehicle sales also helped along
Speaker 5: by both fears of higher prices because the tariffs, and
Speaker 5: then also the idea that maybe those incentives for EV
Speaker 5: sales could go away. But in general, the average American
Speaker 5: consumer is performing well. But that average is really being
Speaker 5: held up by high income, high wealth, affluent households. And
Speaker 5: if you look at the typical consumer, the media and consumer,
Speaker 5: they are much more affected by the increase in rents,
Speaker 5: by the increase in the cost of food and other
Speaker 5: essentials and that side of the American consumer is struggling
Speaker 5: to an extent still. I think it's been directionally a
Speaker 5: little bit better over the last six to twelve months,
Speaker 5: but if you look at high frequency measures of food insecurity,
Speaker 5: for example, it does look like you see more stress
Speaker 5: right now than you saw before the pandemic hit and
Speaker 5: transform the US economy.
Speaker 2: Bill will leave it there. Thank you so much for
Speaker 2: joining us today. Bill Adams there. He is the chief
Speaker 2: economist at Comerica Bank. Joining us here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Chrisner, and this is
Speaker 2: Bloomberg