Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.
Speaker 2: Bromoids, along with Tom Keen and Jonathan Ferrow. Join us
Speaker 2: each day for insight from the best in economics, geopolitics,
Speaker 2: finance and investment.
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Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and
Speaker 2: the Bloomberg Business App. Tony Capolano, President and CEO of
Speaker 2: Maria International, things have been pretty uppy. Does it continue
Speaker 2: or does it sort of see an end date? Do
Speaker 2: people start pushing back against the cost?
Speaker 3: I don't think so. I mean, what we've really seen
Speaker 3: the last couple of years is the resilience of travel,
Speaker 3: and we've seen it across segments and across borders. When
Speaker 3: we reported earnings at the end of the first quarter,
Speaker 3: we saw recovery across every segment. Of course, leisure continued
Speaker 3: to be strong. It was the leisure segment that brought
Speaker 3: us out of the pandemic. But group has been remarkably strong.
Speaker 3: In fact, when we look at the remaining three quarters
Speaker 3: of the year, we're up twenty six percent year over
Speaker 3: year in group revenue and business transient Many had predicted
Speaker 3: sort of the demise of business travel, but you made
Speaker 3: the point. Increasingly folks are recognizing or reminding themselves of
Speaker 3: the power of getting in front of their clients, the
Speaker 3: importance of immersing new employees in their company culture. And
Speaker 3: as a result, we're seeing steady quarter over quarter improvement
Speaker 3: in business transient demand as well.
Speaker 2: Is it everywhere for business or places like say San
Speaker 2: Francisco not seeing any kind of revival because of some
Speaker 2: of the outflow there.
Speaker 3: Well, certainly markets like San Francisco are seeing slower recovery,
Speaker 3: but even there, I was listening during the break to
Speaker 3: Scott Kirby's comments. This phenomenon of blended trip purpose I
Speaker 3: think serves markets like San Francisco really well, This idea
Speaker 3: that through the pandemic, more and more travelers learned they
Speaker 3: can work from almost anywhere where. We really saw this
Speaker 3: in the datas we look at recovery by day of
Speaker 3: the week, and what was remarkable was the two days
Speaker 3: of the week that recovered most rapidly were Sunday and Thursday,
Speaker 3: which pre pandemic were really shoulder days. And what that
Speaker 3: tells us is with increasing frequency is business and group
Speaker 3: travelers are tacking on a couple leisure days pre and
Speaker 3: or post trip, and that really has the potential to
Speaker 3: help markets even like San Francisco, which have some leisure appeal.
Speaker 2: Peter, I see you nodding if you do that too, Yeah.
Speaker 4: I think that makes perfect sense. I mean I try
Speaker 4: not to quote unquote take many days off because you
Speaker 4: can work from your hotel room for an hour or two.
Speaker 4: We've done some Bloomberg interviews from hotel rooms on the road,
Speaker 4: so you can do a lot.
Speaker 5: I thinking.
Speaker 4: You set up and you get these extended days, and
Speaker 4: especially with the air travel, as you point out earlier,
Speaker 4: sometimes is a bit painful. It's much easier if you're
Speaker 4: going to go somewhere for four nights instead of just
Speaker 4: two nights or these day trips. So we try and
Speaker 4: do it much of that. I think it makes perfect sense.
Speaker 4: And I was interesting with the Sundays and Thursdays.
Speaker 2: Well, but how much are you able to increase pricing then,
Speaker 2: based on the cost all in of traveling, which has gotten.
Speaker 3: Increazy, So I mean compression drives pricing. And so what
Speaker 3: we see is in leisure destinations and some of the
Speaker 3: urban destinations that have a strong leisure orientation like New York,
Speaker 3: we see a lot of compression, and as a result
Speaker 3: of that compression, we see strong pricing power. In a
Speaker 3: market like a Chicago or a San Francisco, where there's
Speaker 3: less compression, the pricing power is not as strong.
Speaker 2: Are there markets that you're seeing expand much more dramatically?
Speaker 2: I know that we were talking about, for example, in Florida,
Speaker 2: how much hotel prices, And I know experience from experience
Speaker 2: that when I've tried to go visit family down there,
Speaker 2: it's a new experience when it comes to the cost
Speaker 2: of it. I'm wondering, though, is that continuing? Are you
Speaker 2: starting to see in leveling off there?
Speaker 3: You're seeing a bit of leveling off, but to the
Speaker 3: benefit of some of the international destinations. So just this
Speaker 3: morning I was reading some statistics. If you look at
Speaker 3: outbound US to Europe airline bookings for the summer, they're
Speaker 3: up nearly fifty fifty percent year over year. And what
Speaker 3: that suggests is a lot of US travelers who might
Speaker 3: have gone to destinations like South Florida or southern California
Speaker 3: last summer, with increasing frequency, they're going to France and
Speaker 3: Italy and Greece, and so that's maybe eliminating a little
Speaker 3: of that compression pressure in South Florida, which will moderate
Speaker 3: pricing a bit.
Speaker 2: How much you're trying to cater to the high end,
Speaker 2: which has been perhaps recovering even more.
Speaker 3: So, luxury has been exceedingly strong. But we have a
Speaker 3: portfolio of thirty one brands across multiple price tiers and
Speaker 3: price points. So in the luxury tier we continue to
Speaker 3: see pretty strong pricing power. But that's just one tier
Speaker 3: that we operate in. In fact, just last month we
Speaker 3: acquired a brand called City Express, which signaled our entry
Speaker 3: into mid scale for the first time, which is now
Speaker 3: the lowest price tier that we operate in.
Speaker 2: Peter, I'm wondering from your perspective if you've been seeing
Speaker 2: a drop off with perspective to the housekeeping some of
Speaker 2: the other amenities around the experience of staying.
Speaker 5: I have not.
Speaker 4: Actually, I've really enjoyed it. I think we'll continue. I
Speaker 4: had a great trip down in Argentina. We did stay
Speaker 4: at one of your hotels on those other places.
Speaker 1: And did pay him off before coming in.
Speaker 4: What does strike mean we've been talking about, is are
Speaker 4: you seeing resurgents in Asia? Travel to or travel to Asia.
Speaker 4: That's something I've been hearing a little bit about.
Speaker 3: Yeah, we are the and you almost have to look
Speaker 3: at it. China and the balance of Asia. Mainland China
Speaker 3: is fully recovered, but again driven largely by domestic Chinese travel.
Speaker 3: International airline seats into mainland China are only about forty
Speaker 3: percent recovered to where they were pre pandemic, But the
Speaker 3: balance of Asia Pacific, particularly markets like Japan Thailand, are
Speaker 3: booming right now. In fact, I was looking at some statistics.
Speaker 3: Somebody asked me a question about what are the most
Speaker 3: popular destinations and the list that I looked at some
Speaker 3: of the destinations you would expect Italy, France, Greece, but
Speaker 3: Japan was in the top five.
Speaker 1: Are there any markets you're getting out.
Speaker 3: Of, Well, we suspended all our operations in Russia a
Speaker 3: couple of years ago, but other than extreme circumstances like that, no,
Speaker 3: we operate in one hundred and thirty eight countries today
Speaker 3: and in our five hundred thousand room pipeline there are
Speaker 3: another twenty new countries to build.
Speaker 2: On Peter's question, there is this issue of doing business
Speaker 2: in China, and we talked to every executive about how complicated.
Speaker 2: That is, as an American company going into the biggest
Speaker 2: rival right now economically, how much can you operate freely there?
Speaker 2: How much conviction do you have in the fact that
Speaker 2: the Chinese Communist Party will allow you to do your business?
Speaker 3: So our business model I think serves us well. There.
Speaker 3: We have eighty five hundred hotels globally, we only own
Speaker 3: twenty of those physical assets. So our business model is
Speaker 3: one of principally managed, enfranchising hotels. Of the roughly five
Speaker 3: hundred hotels we have in China today, almost the entirety
Speaker 3: of that portfolio is owned by Chinese companies, And so
Speaker 3: I think that serves us well, even against the backdrop
Speaker 3: of some of the complexities of doing business.
Speaker 2: Before we let you go, how much longer can this
Speaker 2: trend of yolo and let's travel around the world really last?
Speaker 3: You know, I don't see it ending anytime soon. I
Speaker 3: think there was pre pandemic, a shift away from consumption
Speaker 3: of hard goods towards investment and experiences, and if anything,
Speaker 3: the pandemic served as an accelerant and caused that trend
Speaker 3: to spread. A call across generations.
Speaker 2: Tony Capouano of Marriott, thank you so much for being
Speaker 2: with us.
Speaker 1: I really appreciate it.
Speaker 2: Be back. Meg of America is Michael gapen weigh in
Speaker 2: on the Fed's path forward, writing quote, the Main Jobs
Speaker 2: report is a particularly difficult one for the FED to
Speaker 2: parse coming out of the May meeting. We argue that
Speaker 2: the FED was inclined to stay on hold in June,
Speaker 2: and the onus would be on the Hawks to justify
Speaker 2: a hike. We think the Main Jobs Report is just
Speaker 2: soft enough to justify a hold, but perhaps not just
Speaker 2: soft enough to justify staying on hold for a long
Speaker 2: period of time. Michael Gapen, u as economist at Bank
Speaker 2: of America Securities, joins the table of economists here. So
Speaker 2: can you give us a sense of what the threshold
Speaker 2: is now for them to stay on hold?
Speaker 6: Well, I think you need to see some material softening
Speaker 6: in the data. I think they've certainly communicated they'd prefer
Speaker 6: to skip, and yes, I think that there was enough
Speaker 6: mixed messages in the employment report where they could do
Speaker 6: that if they want to. Personally, I think the Establishment
Speaker 6: report still gives the better signal, and there's probably some
Speaker 6: sampling error in that household survey, but there's resilience in
Speaker 6: the labor market as you mentioned, the resilience and the
Speaker 6: consumer as you mentioned, and some stickiness and inflation, and
Speaker 6: if the risk backdrop is diminishing and bank stresses more
Speaker 6: or less in stasis, then their communication should shift back
Speaker 6: in the direction of pushing the policy rate higher. That's
Speaker 6: probably the debate that they will be having next week.
Speaker 2: And I know that Laura is going to jump in
Speaker 2: here with a number of questions, But I'm curious how
Speaker 2: high they can go, whether the market is accurately reflecting that.
Speaker 2: Perhaps it's another quarter basis point hike, but it's not
Speaker 2: going to be that significant. It's not going to materially
Speaker 2: change the outlook in terms of the benchmark for the FED.
Speaker 7: Well.
Speaker 6: I do think back in March, before we had the
Speaker 6: banks stress pop up, I do think that they were
Speaker 6: going to guide markets to five four or five six
Speaker 6: on the terminal. That's probably the direction we're going back to.
Speaker 6: Could we get to six or above, you know, yeah,
Speaker 6: it's possible, but I think somewhere between here and say
Speaker 6: five seventy five to six will be sufficiently restrictive. Certainly,
Speaker 6: we are seeing evidence that past hikes are working on
Speaker 6: at least parts of the economy, and so I'm not
Speaker 6: convinced that they need to kind of really ram things
Speaker 6: back up. But yes, we're essentially saying if some of
Speaker 6: the bank's dress and other issues have dissipated, then the
Speaker 6: Fed should fill that gap. Two or three months ago,
Speaker 6: they thought that gap would be somewhere around five and
Speaker 6: a half, maybe a little above. I think that still holds.
Speaker 8: I think something that has really been unique about this cycle,
Speaker 8: clearly as inflation and the disinflationary process is happening. But
Speaker 8: I like to say it's a lot easier to get
Speaker 8: from nine percent down to five percent than from five
Speaker 8: percent back to two percent. And I think one of
Speaker 8: the things that really has come out of the recent
Speaker 8: tsunami of Fed speak is markets pricing out the rate cuts.
Speaker 8: And I know this is really looking around the corner
Speaker 8: right now, But when you think about the FED rate
Speaker 8: hike cycle kind of winding down clearly as it ends,
Speaker 8: I feel like market's rushed to price in the next
Speaker 8: leg down in the FED funds rate. To me, this
Speaker 8: is looking like it would be a very different process.
Speaker 8: It wouldn't be the elevator down that they usually take
Speaker 8: with rates. Do you have any thoughts about how that
Speaker 8: could even well.
Speaker 6: I think that's right. So some the balance leaves between
Speaker 6: the how high and the how long. I think you
Speaker 6: know both of that is is in this discussion, And
Speaker 6: I think you're right that maybe markets didn't baseline expect
Speaker 6: cuts this year, but in distributions of outcomes you had
Speaker 6: to put a lot more weight on that hard landing,
Speaker 6: and if the external risk backdrop is improving, those cuts
Speaker 6: come out as a result. So yeah, I think if
Speaker 6: you're not, you know, if they're looking to kind of
Speaker 6: fine tune where the policy stands is some of that
Speaker 6: is the how long, and I think markets have done
Speaker 6: it correctly in the sense of first you price out
Speaker 6: those cuts, will debate on how high things go, So
Speaker 6: the cycle could be a little different one where you're
Speaker 6: right that getting inflation down to the mid forest has
Speaker 6: been relatively easy. They've gotten help from other spaces. How
Speaker 6: we get that down to two is still in front
Speaker 6: of us.
Speaker 1: So do you think that good news is still good news?
Speaker 1: As Peter she was saying, No, I.
Speaker 6: Think good news is back to being bad news because
Speaker 6: good news if you include the risk backdrop mean less risk,
Speaker 6: then you should in theory get more fed hikes so
Speaker 6: I think we're back to the good news is bad
Speaker 6: news world.
Speaker 8: Laura, how much do you There's been a lot made
Speaker 8: about obviously, corporate margins have been relatively healthy throughout this period,
Speaker 8: and they're starting to narrow somewhat. There's been talk that
Speaker 8: that is now one of the factors that's adding to inflation,
Speaker 8: the fact that companies are being a little bit greedy
Speaker 8: about not wanting to clearly, you know, as would make
Speaker 8: sense for their own shareholder value, not wanting to give
Speaker 8: up that margin. How much is that now a driver
Speaker 8: of inflation or is it still a reaction to the
Speaker 8: strong economy.
Speaker 6: I think it's a little. I think it's fair to
Speaker 6: say it's both. And what I would say is what
Speaker 6: has surprised us most about the inflation forecast is how
Speaker 6: little goods prices have come down. I think we are
Speaker 6: all kind of on the shelter story, and that passed
Speaker 6: through seems to be happening as we would have expected.
Speaker 6: But to me, the big shock is you have these
Speaker 6: big durables items new cars, use cars, household of alliances,
Speaker 6: and so forth. They've been basically flat. And I think
Speaker 6: that's what you're seeing is that you know, margins have
Speaker 6: been getting squeezed and then then they got widened out,
Speaker 6: and I think corporate corporations are deciding, well, what is
Speaker 6: the elasticity of a price cut at this point in time.
Speaker 6: So I think the strong economy has meant goods prices
Speaker 6: have not come down as much as we had expected. Conversely,
Speaker 6: to open up room for goods prices to come down
Speaker 6: and for inflation to get back to two, you do
Speaker 6: have to moderate demand. And that's why I think good
Speaker 6: news is bad news.
Speaker 9: I have a question for both of you guys, since
Speaker 9: you both have traders at your offices. The anecdotal information
Speaker 9: I get is that, yeah, FED Fund's futures have been
Speaker 9: very volatile, that have been up and down about cuts
Speaker 9: and things like that, but traders have not. The expectation
Speaker 9: on the desks is that the FED is going to
Speaker 9: stay high and maybe even raise rates again. So we're
Speaker 9: getting conflicting signals from the trade guests and from the
Speaker 9: FED fund's futures.
Speaker 6: I think that's fair. I think, you know, there's some
Speaker 6: people who will play that game more than others, and
Speaker 6: some have different time horizons. I'd say the majority of
Speaker 6: investors that I meet with, so let's say two out
Speaker 6: of three are on board with the higher for longer
Speaker 6: and likely no cuts this year out of the FED. However,
Speaker 6: there's a group of investors I meet with who are
Speaker 6: very concerned about bank stress and see that as being
Speaker 6: more material and people like me are too complacent about it,
Speaker 6: and they say, well, the lags are going to hit
Speaker 6: later this year and the game is up in effect,
Speaker 6: and we'll know it when when we see it. But
Speaker 6: I would say, yes, more, there are more than not
Speaker 6: saying higher for longer seems to be where we're going.
Speaker 8: I would say the same thing. I think that on
Speaker 8: our desk there's, you know, a mix that reflects the
Speaker 8: future's curve, and there are there's a vocal group that
Speaker 8: is perhaps smaller in number, that really feels like the
Speaker 8: Fed's raising rates, they're going to break something, going to
Speaker 8: see yields come down very sharply should the economy slow.
Speaker 1: And I think that's.
Speaker 8: One of the reasons why we have this sort of
Speaker 8: fight in the sort of one year ahead FED rate expectations.
Speaker 8: But a lot of us are still in kind of
Speaker 8: I think a camp that they're not going to have
Speaker 8: the room for that.
Speaker 1: In the past three weeks.
Speaker 2: It seems like there has been a shifting tone where
Speaker 2: a soft landing has suddenly become more likely that it
Speaker 2: had been.
Speaker 5: It's back.
Speaker 1: How long is it going to stay back?
Speaker 2: Mike?
Speaker 6: Until we get guidance that the funds rates going closer
Speaker 6: to six.
Speaker 1: You think'st break it? You think that that's well.
Speaker 6: No, I mean I think the soft landing can't be
Speaker 6: ruled out. I don't think it's ever been able to
Speaker 6: be ruled out entirely. I just think is as you
Speaker 6: mentioned in the lead in history suggests it's more likely
Speaker 6: than not. When the FED moves this quickly into counter inflation,
Speaker 6: you do have to pay a price at some point.
Speaker 6: So I think we're all in the You know, okay
Speaker 6: that that outcomes more likely than not, but it's a
Speaker 6: very different cycle, and I don't think we can entirely
Speaker 6: rule out that they kind of hit it just right.
Speaker 6: So it is back on the table at the moment
Speaker 6: because the risk backdrop has has improved. Now we'll see
Speaker 6: about the other direction.
Speaker 8: I feel like it always looks like a soft landing
Speaker 8: until all of a sudden, you're face.
Speaker 6: I mean, we're in a recession forecast, so I can't
Speaker 6: I'm not going to talk away from what the view is. Yeah,
Speaker 6: but I just just you know, Yeah, So I still
Speaker 6: think in the end it's more likely than not we'll
Speaker 6: have to, you know, pay some price to bring inflation down.
Speaker 6: And given what I said about goods prices being firm
Speaker 6: and the consumer being resilient, you have to lean against that.
Speaker 9: Will Halloween have a recession is you know, when your
Speaker 9: neighbor loses its jobs. A depression is when you lose
Speaker 9: your right And I guess the soft landing is when
Speaker 9: bonuses are cut on Wall Street, Michael.
Speaker 2: Cape It and Bank of America Securities, Thank you so much,
Speaker 2: Ellen Wall Senior fellow at the Atlantic Council and author
Speaker 2: of Saudi Inc.
Speaker 1: After that one million.
Speaker 2: Barrel cut that Saudi Arabia agreed to unilaterally go through with,
Speaker 2: even though the United Era Emirates most notably came out
Speaker 2: and didn't have to make a similar cut, Ellen, what
Speaker 2: do you make of this announcement and frankly, the sort
Speaker 2: of lackluster response in markets.
Speaker 10: Yeah, I'm not surprised by the somewhat lackluster response, especially
Speaker 10: because a one million barrel of day cut across the
Speaker 10: board from OPEK plus was being tossed around over the weekend,
Speaker 10: and so the fact that that didn't come through and
Speaker 10: instead we've got this Saudi lollipop of a one million
Speaker 10: barrel of day cut unilaterally on their part for the
Speaker 10: month of July.
Speaker 5: I think that the.
Speaker 10: Market sees that as as less significant than a across
Speaker 10: the board OPEC plus cut extended maybe for six months.
Speaker 10: I do think though, that the market is a bit
Speaker 10: downplaying the significance of the deal that renegotiated the baseline
Speaker 10: production levels, because starting in twenty twenty four, these are
Speaker 10: going to come into effect, and that's really going to
Speaker 10: bring more clarity to the market because one of the
Speaker 10: issues that we've seen with OPEC is that they push
Speaker 10: through a one million barrel a day cut, but it's
Speaker 10: not actually going to be one million barrels a day
Speaker 10: because a lot of the countries that are participating are
Speaker 10: not actually producing up to.
Speaker 5: Their max level.
Speaker 10: Their capacity is down because their production quotas are back
Speaker 10: from twenty sixteen and now it's twenty twenty three and
Speaker 10: things are really different. So I think that once these
Speaker 10: new baselines come into effect, OPEX production rates will actually
Speaker 10: be more reflective of what's actually on the market, and
Speaker 10: the market will appreciate that clarity.
Speaker 2: Do we have a sense ellen of just how much
Speaker 2: demand has actually fallen off versus the forward look of
Speaker 2: demand potentially falling off?
Speaker 1: Is there if there's a recession.
Speaker 2: In other words, our price is accurately reflecting the slowdown
Speaker 2: that some people are saying is transpiring in China.
Speaker 10: In other places, prices are reflecting the fear of the
Speaker 10: slowdown much more than what any actual slowdown is, mostly
Speaker 10: because we're not really sure what that slowdown is going
Speaker 10: to be. We also don't know how China is going
Speaker 10: to react to this. Is China going to push through
Speaker 10: some kind of big manufacturing stimulus that will push up demand.
Speaker 10: Plus there's always this kind of fake I don't want
Speaker 10: to say it's fake, but China tends to buy more
Speaker 10: crude oil when it's cheap, to put into storage, maybe
Speaker 10: for rainy days or whatnot, or just to resell, to
Speaker 10: process and resell around to Asia. And so there's a
Speaker 10: lot of cheap crud available on the market. Now. Russia
Speaker 10: is a huge purveyor of it. But also there's you know,
Speaker 10: Iranian and Venezuela imprud that China can get, and so
Speaker 10: they may actually be buying more crude oil than they're using,
Speaker 10: and that's kind of papering over any kind of demand
Speaker 10: issues that we're seeing.
Speaker 4: Yeah, one big wildcar I've been wondering about, and maybe
Speaker 4: you've got some good color on, is what's going on
Speaker 4: with the Strategic Petroleum Reserve. Where do we stand? What
Speaker 4: are you hearing about us trying to rebuild that, because
Speaker 4: to me, it's a bit concerning that it got so
Speaker 4: low and it's staying this low and we're not really
Speaker 4: taking advantage of lower oil prices.
Speaker 10: Yeah, that's that's a big issue. I think part of
Speaker 10: it is that maintenance needs to be done in some
Speaker 10: of the storage facilities, and so the government is hesitant
Speaker 10: to start making purchases before it's completed those those maintenance things,
Speaker 10: which you know is an issue and.
Speaker 5: I do think needs to be addressed.
Speaker 10: But I don't think that. I do think that they
Speaker 10: can purchase more than they are, and the fact that
Speaker 10: they're not, particularly when prices are in a good spot,
Speaker 10: is concerning. I also think that when they do start
Speaker 10: to purchase finally, which I do believe they will, whether
Speaker 10: it's this particularly government or you know, another administration, we
Speaker 10: are going to see a big bump in demand, and
Speaker 10: that's going to push prices up because this is going
Speaker 10: to be a lot of food purchases. And I don't
Speaker 10: think that there are prepared to do this, and I
Speaker 10: also think that Opek is kind of waiting for this
Speaker 10: to happen. They got very upset when the government, basically,
Speaker 10: when the Biden Ministry is basically said hey, we're going
Speaker 10: to start purchasing when it hits this level, and then
Speaker 10: they didn't. And Opek was like, well, we were expecting
Speaker 10: this demand bump. Now we're going to have to cut supply.
Speaker 10: And I think they were burned and a bit upset
Speaker 10: about that.
Speaker 1: Interesting. Ellen Waald to the Atlantic Council.
Speaker 9: Thank you.
Speaker 2: At Mills, Washington policy atalyst at Raymond Jane's joining us.
Speaker 10: Now.
Speaker 2: That is a good question the momentum the Republicans may
Speaker 2: have from the debt sealing resolution as it were, even
Speaker 2: if the President, as he is right now, trying to
Speaker 2: take credit for coming up with some sort of bipartisan agreement.
Speaker 7: I would actually argue what you saw out of this
Speaker 7: that's under reported, Lisa, is that what was the big
Speaker 7: part of this from a DC perspective is there were
Speaker 7: a number of different land mines that could have gone
Speaker 7: off between now and the election that got diffused. I
Speaker 7: think some of those are going to be beneficial to Republicans,
Speaker 7: but arguably more beneficial to President Biden.
Speaker 5: The threat of a government shutdown has come down.
Speaker 7: What they did was pull forward the discussion of exactly
Speaker 7: how much should defense get, how much should non defense get.
Speaker 7: They defuse the issue on IRS kind of budgets and
Speaker 7: audits that could have been a huge presidential issue next year.
Speaker 5: They diffuse the issue of student loans. Now.
Speaker 7: We could talk about the market impact of people starting
Speaker 7: to repay their student loans come September, but I would argue,
Speaker 7: kind of, yes, McCarthy comes out of this arguably stronger.
Speaker 7: But the Biden team was looking at the next couple
Speaker 7: of months, the next two years and saying, what are
Speaker 7: some of the things that could be really problematic for us,
Speaker 7: and could we get it as part of this deal
Speaker 7: as little as possible that we'd have to give to
Speaker 7: fuse those future time bombs. And I think that's why
Speaker 7: they think this is truly a big win for them.
Speaker 2: The problem for President Biden is that the Washington Eco
Speaker 2: Chamber right now and the political sort of talk shows
Speaker 2: are focusing more on his age than they are about
Speaker 2: coming to some sort of bipartisan agreement. And he's trying
Speaker 2: to say, look, I'm the one who can get these
Speaker 2: things across. Why can't you give me credit? And mail say, well,
Speaker 2: you chipped over a sandbag. How is he going to
Speaker 2: get out from under that?
Speaker 5: I don't know, Lisa. I mean, his age is his age.
Speaker 7: I think what he is trying to do and what
Speaker 7: the Biden team continues to kind of focus on is
Speaker 7: his accomplishments, and that what was the other big winner
Speaker 7: out of this debt sailing debate was the middle held.
Speaker 5: What we have seen kind of through.
Speaker 7: Legislative success under the Biden administration is that not necessarily
Speaker 7: the extremes win kind of the last couple of years,
Speaker 7: it was Joe Manchin moving the party more to the
Speaker 7: center to the extent he had possible. And then with
Speaker 7: this he's saying, look, the reason why you try to
Speaker 7: keep him as president, His argument would be is that
Speaker 7: you get the middle, which is where most of the
Speaker 7: country is, to get those wins. And he put points
Speaker 7: to the bipartisan Infrastructure Bill, the Chips and Science Act
Speaker 7: in that kind of fight with US and China.
Speaker 5: I do think that the next thing that they.
Speaker 7: Want to do is something on energy permitting reform more
Speaker 7: than what they just did in a real focus on
Speaker 7: critical minerals as well as supply chains as the top
Speaker 7: part of their agenda, trying to see if they can
Speaker 7: can build on those bipartisan wins.
Speaker 11: So Ed I thought that was really interesting analysis about
Speaker 11: avoiding the land minds and kind of diffusing some of
Speaker 11: those over the next two years. But one of the
Speaker 11: things that struck me is that throughout this whole debt
Speaker 11: sealing drama, Biden's on popularity in the polling data rose.
Speaker 11: So I come back to the issue all these things
Speaker 11: that he's accomplished legislatively, how syllable are those to the
Speaker 11: American public? How well is he going to be able
Speaker 11: to actually campaign on those?
Speaker 5: Laurie, It's a good question.
Speaker 7: I think that one of the things that we are
Speaker 7: looking at and polling data here at Raymond James is
Speaker 7: that in our current environment, any political figure out there
Speaker 7: as a ceiling not much more than fifty percent, So
Speaker 7: we don't look at it in the past, where we
Speaker 7: had presidents with sixty seventy percent approval ratings. That's kind
Speaker 7: of a bygone error where we saw the downdraft in
Speaker 7: his polling numbers largely came from some of his supporters.
Speaker 7: Now that there is an accomplishment, a deal sign something averted,
Speaker 7: we would expect that probably to tick up where it
Speaker 7: goes from here. I can't predict the future in that regard,
Speaker 7: but the key for Republicans is getting some of the
Speaker 7: folks that supported Joe Biden in twenty twenty to come
Speaker 7: over to their camp. We will try to see kind
Speaker 7: of if anyone can do that. But ultimately, what Joe
Speaker 7: Biden always says is, don't compare me to the almighty,
Speaker 7: compare me to the alternative. Ultimately, this is going to
Speaker 7: be about a choice, and so it's as much about
Speaker 7: Joe Biden as it is who Republicans choose and or
Speaker 7: if there's a third party candidate.
Speaker 5: So the twenty twenty four election and is going.
Speaker 7: To be a big wildcard for the market for the
Speaker 7: rest of this year and especially obviously next year.
Speaker 2: Just real quick here ed over the weekend talking about
Speaker 2: who he's going to run against. Eight candidates, went to
Speaker 2: this Iowa State Fair, and we're trying to appeal to
Speaker 2: the Republican constituents eight potential Republican nominees President former President
Speaker 2: Trump not among them. What did you make of that
Speaker 2: he was not there in one of the sort of
Speaker 2: lead ups to the announcements to just keep on coming.
Speaker 7: I think that you look at the polling data and
Speaker 7: form President Trump is in the lead. I think for
Speaker 7: the time being, he's happy to kind of let that
Speaker 7: be the case. What we are going to ultimately see
Speaker 7: is how many other people get into this race and
Speaker 7: does that diffuse the non Trump vote or is he
Speaker 7: able to consolidate and keep that power and work. Probably
Speaker 7: still several months out before we have any true inkling
Speaker 7: as to where this Republican race is going to go.
Speaker 1: Ed Mills and Raymond James, thank you so much.
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Speaker 2: I'm Lisa Abramowitz, and this is Bloomberg