WEBVTT - Federal Reserve Meets; Apple to Post Earnings 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.799 at Bloomberg dot com. Well, we are eagerly awaiting the 0:00:24.800 --> 0:00:28.360 FED announcement of their policy tomorrow when we talk. When 0:00:28.400 --> 0:00:31.560 we talk FED and all the intricacies of the FED 0:00:31.600 --> 0:00:33.479 and what it means for the rates market, there is 0:00:33.479 --> 0:00:36.360 absolutely no one better to speak to than Ira Jersey. 0:00:36.400 --> 0:00:39.800 Ira is a b I rate strategist for Bloomberg Intelligence. 0:00:40.159 --> 0:00:41.959 He joined us on the phone. Ira, thanks so much 0:00:42.000 --> 0:00:45.600 for joining us. Okay, we're gonna get let's say we 0:00:45.680 --> 0:00:49.800 get that twenty five basis point cut tomorrow. Then everybody's 0:00:49.840 --> 0:00:53.680 gonna really focus on the language of chairman Pal. What 0:00:53.720 --> 0:00:56.160 do you expect to hear from the chairman? Yeah, I 0:00:56.200 --> 0:01:00.200 think the chairman is Yeah, it's gonna be tricky for him, 0:01:00.200 --> 0:01:02.680 and you know, trying to discount what he's gonna say 0:01:02.760 --> 0:01:05.080 is going to be difficult, primarily because a lot of 0:01:05.080 --> 0:01:07.560 the data that we've had the last three weeks or 0:01:07.600 --> 0:01:10.280 so has been relatively good, where some people are even 0:01:10.360 --> 0:01:12.280 questioning whether or not they should be cutting rates at all, 0:01:12.319 --> 0:01:14.520 and they and they will cut interest rates basis points 0:01:14.520 --> 0:01:16.399 that would be that the real shock would be if 0:01:16.440 --> 0:01:18.680 they didn't. So so the question is are they gonna 0:01:19.160 --> 0:01:21.760 Are they going to hike more? And the answer is probably, 0:01:21.800 --> 0:01:24.320 excuse me, cut more? Like more that would be that 0:01:24.360 --> 0:01:26.960 would be amazing, But um that you know, are they 0:01:26.959 --> 0:01:30.240 going to cut more? And uh, and what's the magnitude 0:01:30.240 --> 0:01:32.560 and the pace of that? So you know, if it's 0:01:32.560 --> 0:01:34.680 starting in June, we thought maybe they'd cut a couple 0:01:34.680 --> 0:01:36.560 of times and then wait a little while and then 0:01:36.640 --> 0:01:39.600 and then um, cut a bit more if they had to, say, 0:01:39.600 --> 0:01:42.600 in early. But but at this point it's it's not 0:01:42.640 --> 0:01:44.640 obvious that they're going to have to. So I think 0:01:44.680 --> 0:01:48.040 that he's going to need to be pretty neutral in 0:01:48.040 --> 0:01:50.760 his statement, saying basically like we're going to be very 0:01:50.840 --> 0:01:53.720 data dependent, and that might not be enough for risk 0:01:53.760 --> 0:01:57.520 assets to really um to really be upbeat after that, 0:01:57.600 --> 0:01:59.680 because I think a lot of risk asset markets, whether 0:01:59.680 --> 0:02:02.320 it's at his in equities have really been reliant on 0:02:02.360 --> 0:02:04.440 the idea that the FED is going to cut you know, 0:02:04.640 --> 0:02:07.120 three or four times, which is what the market has 0:02:07.440 --> 0:02:10.440 has continued to price. Well, that's exactly my question, is 0:02:10.440 --> 0:02:13.240 it it feels like the markets set up to take 0:02:13.400 --> 0:02:16.160 anything that j. Powell does or says is hawkish because 0:02:16.160 --> 0:02:18.160 it's not going to be a fifty or seventy five 0:02:18.200 --> 0:02:21.680 basis point cut. Yeah, I think that's right, Alex. You 0:02:21.720 --> 0:02:23.880 know that. So if they cut twenty five now and 0:02:23.919 --> 0:02:26.280 then he hints it they're going to cut in again 0:02:26.440 --> 0:02:30.480 in September October, but don't necessarily expect there to be 0:02:30.760 --> 0:02:35.160 a prolonged easing cycle. So say, you know, as much 0:02:35.160 --> 0:02:37.359 as the market is currently priced, which is basically for 0:02:37.560 --> 0:02:40.519 four cuts by the middle of next year, Um, I 0:02:40.840 --> 0:02:43.240 think that risk assets take that badly. Now do they 0:02:43.280 --> 0:02:45.560 take it badly in that they reprice a couple of 0:02:45.600 --> 0:02:48.480 percent and then you know, find a new equilibrium or 0:02:48.600 --> 0:02:51.160 it doesn't wind up being a prolonged down trend because 0:02:51.160 --> 0:02:55.240 I think, you know, ironically, if the FED hints like 0:02:55.360 --> 0:02:57.160 I just mentioned that they're going to cut twice and 0:02:57.160 --> 0:03:00.000 then and then stop for a while, if that means 0:03:00.000 --> 0:03:02.600 a two percent or three percent repricing in the SMP five. 0:03:03.000 --> 0:03:05.120 I don't think that the FED cares. I think that 0:03:05.120 --> 0:03:08.600 that maybe is actually good right from from the FED standpoint, 0:03:08.639 --> 0:03:10.320 and that's what kind of what they would hope for. 0:03:10.760 --> 0:03:14.440 But if it winds up starting a downtrend in risk assets, 0:03:14.480 --> 0:03:19.080 you know, wider credit, lower equities, that's the type of 0:03:19.080 --> 0:03:20.720 thing that then you wind up pricing it back in. 0:03:20.800 --> 0:03:23.960 So there's weird feedback loop that the markets might actually 0:03:24.040 --> 0:03:27.840 generate for the FED, which, um, you know, in an 0:03:27.919 --> 0:03:31.040 environment where the the economy is modeling along that the 0:03:31.080 --> 0:03:34.160 Feds looking at the markets for some semblance of what 0:03:34.280 --> 0:03:36.760 expectations are for the future, and right now, you know, 0:03:36.800 --> 0:03:39.520 expectations for the future isn't okay, but not great economy. 0:03:39.600 --> 0:03:42.760 So you know, in that environment, UM, little changes can 0:03:42.800 --> 0:03:45.800 mean a lot to monetary policy makers. So are we 0:03:45.960 --> 0:03:48.120 We had a guest on earlier today who was suggesting 0:03:48.240 --> 0:03:53.960 that the FED should bring quantitative easoning back onto the table. 0:03:54.080 --> 0:03:56.600 Do you think that is an option that they would consider? 0:03:57.720 --> 0:04:00.680 It is? I I think that they won't really consider 0:04:00.720 --> 0:04:03.480 that until after they cut you know, four or five times, 0:04:03.480 --> 0:04:05.520 so basically until the FED funds y it's closer to 0:04:05.560 --> 0:04:07.920 one percent. I don't think QUI is an option now. 0:04:08.000 --> 0:04:09.800 Something that they could do and something they will do 0:04:10.400 --> 0:04:12.600 starting the middle of next year at the latest, if 0:04:12.600 --> 0:04:15.200 not even a little bit earlier, is they'll start to 0:04:15.880 --> 0:04:19.000 increase your balance sheet just to keep reserve levels constant. 0:04:19.040 --> 0:04:21.640 So there's this very technical thing that goes on where 0:04:22.040 --> 0:04:26.000 currency in circulation is usually rising, and as it's rising, 0:04:26.400 --> 0:04:29.560 that means that some other liability that the FED has, 0:04:29.600 --> 0:04:33.720 such as reserves, continually go down, and they the FED 0:04:33.800 --> 0:04:36.880 has stated that they have a policy of keeping ample 0:04:36.960 --> 0:04:39.799 reserves in the system, and in order to keep ample 0:04:39.800 --> 0:04:42.240 bank reserves in the system, eventually they're going to have 0:04:42.320 --> 0:04:44.520 to start increasing their balance sheet again to do that 0:04:44.920 --> 0:04:47.440 um and I think that they have to do that 0:04:47.640 --> 0:04:49.159 sometime in the third quarter of next year, and they 0:04:49.240 --> 0:04:50.600 might even do it a little bit earlier. So that 0:04:50.760 --> 0:04:54.200 is kind of a dovish ish thing, which I think 0:04:54.320 --> 0:04:57.640 will you know, make the markets happy, particularly risk asset markets, 0:04:57.720 --> 0:05:00.640 because I kind of don't understand the dynamics. It's it's 0:05:00.640 --> 0:05:03.239 a it's an optics issue I think more than anything. 0:05:03.279 --> 0:05:06.200 But that could be something that's helpful that's not really QUI. 0:05:06.279 --> 0:05:08.320 Some people are gonna call it QUI. It's not que though, 0:05:08.360 --> 0:05:09.800 And you know, we have a lot of work that 0:05:09.839 --> 0:05:12.320 we've done, so terminal users can check out b I 0:05:12.440 --> 0:05:15.400 rates and find some of our information on on the 0:05:15.400 --> 0:05:17.560 FED balance sheet and how we think that will develop 0:05:17.600 --> 0:05:19.120 over the next year and a half. We love the 0:05:19.120 --> 0:05:21.280 shameless plugs era. We do it all the time. Um. 0:05:21.560 --> 0:05:24.280 So when you say it's not que like than than than, 0:05:24.400 --> 0:05:27.040 what is it? I mean, in essence is providing the 0:05:27.160 --> 0:05:30.599 more immity in the market. It's standard monetary policy. I 0:05:30.600 --> 0:05:33.640 mean people don't realize, but prior to the two thousand 0:05:33.640 --> 0:05:37.200 seven financial crisis, the Fed's balance sheet increased by about 0:05:37.240 --> 0:05:40.440 three to five percent every year. So going back to 0:05:40.520 --> 0:05:43.960 that same type of environment where the Fed's increasing its 0:05:43.960 --> 0:05:47.200 balance sheet incrementally every single month in order to keep 0:05:47.200 --> 0:05:51.200 reserve balances constant, would not be that Dutch, just typical 0:05:51.240 --> 0:05:54.640 monetary policy. It's not que right, the FEDS balance sheet. 0:05:54.760 --> 0:05:56.800 You know, everyone says, oh, it's so big now, and 0:05:56.839 --> 0:06:00.320 it was a trillion dollars before the before the crisis. Yes, 0:06:00.360 --> 0:06:02.920 before the crisis it was a trillion, but it was 0:06:02.960 --> 0:06:05.960 only four billion. So the thing is is like over that, 0:06:06.120 --> 0:06:09.000 over that twelve year period more than doubled. Right, So 0:06:09.320 --> 0:06:13.719 it's not a that's right, and that wasn't called quantitative easing, right. 0:06:13.800 --> 0:06:16.520 Quantitative easing is large scale ass of purchases that are 0:06:16.560 --> 0:06:19.080 a large portion of both the market and also the 0:06:19.520 --> 0:06:22.200 size of the fed's balance sheet, where you're actively increasing 0:06:22.480 --> 0:06:24.680 the amount of reserves that are in the system, not 0:06:24.839 --> 0:06:28.160 keeping them confident, which is what we're talking about. Our Jersey, 0:06:28.160 --> 0:06:30.520 thank you so much. As always, when we talk Fed, 0:06:30.600 --> 0:06:32.520 we need to talk to Ira Jersey. We will wait 0:06:32.720 --> 0:06:35.200 to see what the FED does tomorrow. Clearly we will 0:06:35.240 --> 0:06:38.120 be all over that that Bloomberg Radio. Ira Jersey, senior 0:06:38.160 --> 0:06:55.480 rate strategist for Bloomberg Intelligence, joining us on the phone. 0:06:57.800 --> 0:07:00.160 Time to check in with Bloomberg Opinion. We're join by 0:07:00.160 --> 0:07:03.280 Bloomberg Opinion columnust Shira over Day, who's giving us a 0:07:03.279 --> 0:07:06.159 little preview of what we might see from Apple. So 0:07:06.520 --> 0:07:09.040 again kind of you know these quarters for Apple, they're 0:07:09.160 --> 0:07:12.600 really interesting for investors trying to get a sense of 0:07:12.640 --> 0:07:15.920 how well this company is making the transition from really 0:07:16.040 --> 0:07:18.960 a a phone and iPad company to maybe something a 0:07:19.000 --> 0:07:21.520 little bit more in terms of the services and so on. 0:07:21.560 --> 0:07:23.520 What are you gonna be looking for Shure when the 0:07:23.520 --> 0:07:26.880 company reports tonight. Yeah, I think that those are important 0:07:27.120 --> 0:07:31.080 details about revenue has been declining and is expected to 0:07:31.080 --> 0:07:35.400 continue to decline for Apple's iPhone business in this quarter. 0:07:36.000 --> 0:07:39.760 And I think what investors are watching is both how 0:07:39.840 --> 0:07:42.200 much can they fill in at least some of the 0:07:42.240 --> 0:07:45.320 gap from other products things like you know, Apple watching 0:07:45.360 --> 0:07:48.880 air pods and also that services business, as you said, 0:07:48.920 --> 0:07:53.720 which includes things like App Store downloads and Apple Care warranties, uh, 0:07:53.760 --> 0:07:56.600 and the revenue that the revenue sharing payments that they 0:07:56.640 --> 0:07:58.600 get from Google and things like that. The other thing 0:07:58.640 --> 0:08:01.280 that investors are looking for is anything about China. That 0:08:02.000 --> 0:08:05.920 revenue from China has been declining significantly the first half 0:08:05.920 --> 0:08:08.760 of Apple's fiscal year, and the question is will it 0:08:08.840 --> 0:08:12.760 get slightly better going forward? And the commentary about China 0:08:12.840 --> 0:08:15.880 is going to be very closely watched, as will anything 0:08:15.880 --> 0:08:19.840 that Apple says about moving bits of their supply chain 0:08:19.920 --> 0:08:21.840 out of China and what the impact of that is 0:08:21.840 --> 0:08:24.440 going to be on the company's costs. So what are 0:08:24.480 --> 0:08:26.480 the chances that Apple says any of those things, meaning 0:08:26.480 --> 0:08:28.120 that they're gonna be like, look look at all the 0:08:28.120 --> 0:08:30.480 pretty service revenue, Look at how much that jump by 0:08:30.520 --> 0:08:33.240 double digits. Blah blah blah. Oh iPhone sales, Yeah, they're 0:08:33.240 --> 0:08:35.240 gonna be really strong in the replacement cycle. Was Apple 0:08:35.240 --> 0:08:39.320 actually gonna say? You basically just channeled Tim Cook that 0:08:39.480 --> 0:08:43.360 is yeah, that is exactly what they say is yeah, yeah, 0:08:43.400 --> 0:08:47.640 iPhones blah blah blah, the foundation of our billion dollars 0:08:47.640 --> 0:08:50.559 in annual revenue. Look at this, look at this beautiful 0:08:50.600 --> 0:08:53.760 services revenue. And that is the message that they're sending. 0:08:53.760 --> 0:08:55.480 But look, I've said this before and I'll say it 0:08:55.520 --> 0:08:59.240 again that there's no way for things like you know, 0:08:59.320 --> 0:09:02.439 App Store downloads and Apple Music subscriptions and and the 0:09:02.520 --> 0:09:05.400 upcoming television service. There's no way that can fill the 0:09:05.440 --> 0:09:10.120 gap from declining iPhone revenue if that continues to decline. 0:09:10.120 --> 0:09:13.160 And if you look at the smartphone market at large, 0:09:13.440 --> 0:09:16.320 that is the trajectory of the smartphone market. It's unit 0:09:16.400 --> 0:09:19.360 sales of smartphones are expected to decline globally for the 0:09:19.440 --> 0:09:22.480 third straight year in two thousand nineteen. This is a 0:09:22.520 --> 0:09:25.720 trend that it seems, at least in the near future, 0:09:25.760 --> 0:09:29.800 to continue. Uh. And Apple has not really addressed those 0:09:29.880 --> 0:09:32.960 broad trends in the smartphone industry and whether it can 0:09:33.000 --> 0:09:35.160 kind of buck those. It's interesting the timing of this 0:09:35.200 --> 0:09:38.680 earnings call is very coincidental, I guess, with the U 0:09:38.760 --> 0:09:42.280 S trade to get delegation over in Shanghai negotiating potential 0:09:42.320 --> 0:09:45.800 trade deal. And no company arguably is more exposed or 0:09:45.840 --> 0:09:49.679 certainly a poster child for good or bed trade relationships 0:09:49.720 --> 0:09:51.840 between the US and China than Apple. What do you 0:09:51.840 --> 0:09:56.160 expect Apple to say about what they're doing to kind 0:09:56.200 --> 0:09:58.679 of deal with the uncertainty with China? You know, at 0:09:58.720 --> 0:10:01.880 least so far in the in the last few earnings calls, 0:10:01.880 --> 0:10:05.040 Apple has been pretty optimistic about the US and China 0:10:05.160 --> 0:10:10.160 resolving their trade disagreements in some sort of amicable way. Um, 0:10:10.240 --> 0:10:13.640 we'll see if that happens. Right. Apple so far has 0:10:13.640 --> 0:10:16.960 been relatively immune from some of the tariffs that the 0:10:17.040 --> 0:10:20.600 US has imposed on goods coming from China. So there 0:10:20.600 --> 0:10:24.160 are not yet tariffs on smartphones, for example, which is 0:10:24.400 --> 0:10:28.120 at least by units, very important for Apple. We'll see 0:10:28.160 --> 0:10:31.160 if that changes. Um, and yeah, I agree that it 0:10:31.160 --> 0:10:33.559 will be interesting to see what Tim Cook in particular 0:10:33.679 --> 0:10:37.640 says about those trade talks and whether he sees some 0:10:37.720 --> 0:10:42.160 resolution and how what is in the stock and that, like, 0:10:42.240 --> 0:10:44.880 who's the marginal buyer that's going to come into this 0:10:44.960 --> 0:10:49.840 equity tomorrow. It's it's really hard to know that Apple 0:10:49.920 --> 0:10:53.000 has been I think it is now at or near 0:10:53.720 --> 0:10:59.079 it's all time high in terms of pevaluation. So this stock, 0:10:59.320 --> 0:11:03.120 like many box in two thousand nineteen, is pretty expensive, 0:11:03.679 --> 0:11:07.160 and I do wonder, right, people who aren't already in 0:11:07.160 --> 0:11:08.760 the stock, what do they need to see from the 0:11:08.800 --> 0:11:12.280 company that will change their mind. I mean, the story 0:11:12.360 --> 0:11:15.480 is not changing. That iPhone revenue is probably going to 0:11:15.520 --> 0:11:19.560 continue to decline or maybe increase marginally, and so I 0:11:19.559 --> 0:11:23.320 think the question is if you get in, it's a belief, 0:11:23.400 --> 0:11:26.720 a bet that they can find some new product or 0:11:26.760 --> 0:11:30.760 service that's gonna fill in the gap more from that 0:11:30.880 --> 0:11:34.120 declining iPhone revenue. How about use of cash? I know, uh, 0:11:34.160 --> 0:11:37.600 they have dollars of cash and marketuple securities on the 0:11:37.600 --> 0:11:39.800 balance sheet. What are they doing with the cash? They're 0:11:39.840 --> 0:11:43.360 going to give it to a SoftBank? The vision seriously, 0:11:43.559 --> 0:11:45.440 they have so much cash that they can give some 0:11:45.520 --> 0:11:48.120 of it to SoftBank and have plenty leftover to do 0:11:48.240 --> 0:11:51.840 lots of things. I think Apple's made clear they have 0:11:51.880 --> 0:11:56.000 two hundred plus billion dollars in gross cash. They've made 0:11:56.040 --> 0:11:58.199 clear for some time that eventually they want to get 0:11:58.200 --> 0:12:02.600 to some sort of cash neutral position, and that means 0:12:02.600 --> 0:12:04.559 they're probably gonna give a lot of it back to 0:12:04.640 --> 0:12:08.240 shareholders in the forms of dividend and particularly share buy backs, 0:12:08.280 --> 0:12:11.640 which they've already been pretty aggressive on. So I assume 0:12:11.720 --> 0:12:15.840 that that will continue. Thanks very much, Bloomberg Opinion, Thomas 0:12:15.880 --> 0:12:17.920 Shira over Day, Thank you so much again giving us 0:12:17.960 --> 0:12:19.720 your thoughts on Apple. I'm sure we'll be talking to 0:12:19.800 --> 0:12:38.480 you after they report this week. We have a whole 0:12:38.520 --> 0:12:41.480 host of economics data, um you know, coming out, probably 0:12:41.720 --> 0:12:44.400 highlighted by the jobs report we will get on Friday. 0:12:44.720 --> 0:12:47.440 One question is how strong is the consumer? We know 0:12:47.520 --> 0:12:50.360 the consumer has really been driving this economy. How much 0:12:50.480 --> 0:12:52.960 is left for the U. S. Consumer? To get a 0:12:52.960 --> 0:12:54.959 sense of that, we turned to Lynn Franco. Lynn is 0:12:55.000 --> 0:12:57.960 a senior director of Economic Indicators and Surveys at the 0:12:58.040 --> 0:13:02.080 Conference Board, and our own ulnas Ulieteva from Bloomberg Economics 0:13:02.160 --> 0:13:05.120 joins us as well. Lynn, what did your data show 0:13:05.160 --> 0:13:08.280 you today for the latest report. We had a nice 0:13:08.360 --> 0:13:11.920 rebound in July following June's decline, so it seems that 0:13:12.160 --> 0:13:15.439 consumers have put that escalation and trade and Tower of 0:13:15.520 --> 0:13:19.040 tensions behind them, and they're focusing back on the fundamentals, 0:13:19.040 --> 0:13:21.560 which is really employment. We had a pretty good report 0:13:21.600 --> 0:13:23.920 and I think we're expecting another strong report this week. 0:13:24.240 --> 0:13:27.920 How does a consumer factor in things like trade or 0:13:28.240 --> 0:13:30.560 the debate over the dollar for example, or things like 0:13:30.600 --> 0:13:32.640 that we talked about all the time in the financial markets. 0:13:33.240 --> 0:13:35.920 It doesn't seem to impact the consumer that much. It's 0:13:35.960 --> 0:13:39.160 really the fundamentals, you know, wage growth, employment growth, that's 0:13:39.160 --> 0:13:42.480 really what's driving confidence. And what we're seeing here is there. 0:13:42.520 --> 0:13:45.600 You know, they're assessing both current conditions very favorably, and 0:13:45.600 --> 0:13:48.679 they're very optimistic that the economy is going to continue expanding, 0:13:48.720 --> 0:13:51.520 So that should translate into strong spending in the next 0:13:51.520 --> 0:13:55.040 two quarters. So, Julian, we know that how strong the 0:13:55.480 --> 0:13:58.560 how important the consumer is to the economy. What is 0:13:58.559 --> 0:14:01.320 your sense of bloomerk economy as it relates to can 0:14:01.360 --> 0:14:04.520 the consumer continue to drive this economy given where we're 0:14:04.559 --> 0:14:08.079 seeing maybe some weakness in manufacture, not just in US, 0:14:08.120 --> 0:14:10.400 but more so outside of the US. Is a consumers 0:14:10.440 --> 0:14:13.960 still strong enough to continue to drive this economy forward? Absolutely. 0:14:14.000 --> 0:14:19.120 I think today's reports both on consumer confidence and earlier 0:14:19.200 --> 0:14:23.160 on personal income and spending really support this notion that 0:14:23.280 --> 0:14:26.560 consumers will continue to drive economic growth in the second 0:14:26.560 --> 0:14:28.480 half of the year. So if you look at the 0:14:28.520 --> 0:14:33.160 profile of personal income and particularly wage and salaries growth 0:14:33.480 --> 0:14:38.840 in the second quarter, we saw continued acceleration in that profile. 0:14:39.240 --> 0:14:43.920 And the July reading on consumer confidence that is, you know, 0:14:44.000 --> 0:14:48.240 basically the best reading this year, UH, suggests that we 0:14:48.360 --> 0:14:52.760 will continue to see personal income and consumer confidence driving 0:14:52.800 --> 0:14:55.760 personal spending higher. Lynn, what are the elements that go 0:14:55.800 --> 0:14:59.040 into the higher consumer confidence number? But you guys measure well, 0:14:59.040 --> 0:15:01.840 take a look at current business conditions and employment conditions 0:15:01.840 --> 0:15:04.120 and those are coming in very strong. And then we 0:15:04.160 --> 0:15:06.960 took take a look at consumers expectations six months down 0:15:06.960 --> 0:15:10.600 the road in terms of business conditions, employment and their 0:15:10.640 --> 0:15:15.600 income prospects there and it's just very strong across the board. So, 0:15:16.080 --> 0:15:19.000 as Elena said, it's the highest reading this year, and 0:15:19.040 --> 0:15:21.640 we think that the in terms of growth and consumer 0:15:21.720 --> 0:15:23.720 is going to continue to be a very strong pillar 0:15:23.960 --> 0:15:28.280 despite other pockets of weakness. And looking at the details, Lynn, 0:15:28.400 --> 0:15:31.280 if you look at the jobs plentiful and jobs hard 0:15:31.320 --> 0:15:34.760 to get, UH, that actually suggests that we might see 0:15:34.760 --> 0:15:37.680 a decline in the unemployment rate in the upcoming report 0:15:38.040 --> 0:15:41.440 on Friday. So jobs hard to get increased a little 0:15:41.480 --> 0:15:45.480 bit in June, but they fell again in July, and 0:15:45.520 --> 0:15:48.280 that tells me that maybe there was something about like 0:15:48.400 --> 0:15:53.240 some temporary hiring and just hard hard to get jobs 0:15:53.800 --> 0:15:56.920 in such tight labor market. But it seems like it's 0:15:56.920 --> 0:15:59.840 abating and we can see another decline in the end 0:15:59.840 --> 0:16:02.000 of limit rate. Eleen, I can't let you come into 0:16:02.000 --> 0:16:04.320 the studio without asking you about the FED tomorrow. How 0:16:04.360 --> 0:16:08.400 important is lower interest rates or the prospect of lower 0:16:08.440 --> 0:16:11.680 interest rates for the consumer and consumer confidence? Is that 0:16:11.720 --> 0:16:16.520 a big factor? I think we already see a lot um. 0:16:17.040 --> 0:16:20.040 You know, the interest rates have been very low, and 0:16:20.080 --> 0:16:22.920 you already see that in mortgage rates for example. So 0:16:23.040 --> 0:16:27.400 mortgage rates already declined quite a bit, but unfortunately didn't 0:16:27.400 --> 0:16:31.440 really left home sales that much. But you know, it's 0:16:31.800 --> 0:16:35.760 supporting consumer spending like auto sales and things like that. 0:16:35.840 --> 0:16:39.000 I think that's where you see the impact of lower 0:16:39.040 --> 0:16:42.360 interest rates. So Lynn, going forward, you said that you 0:16:42.360 --> 0:16:44.600 know you feel like the consumer can continue on this path. 0:16:44.920 --> 0:16:47.360 Does it get better though, because I'm wondering, like what 0:16:47.440 --> 0:16:49.920 the incremental gain can really be from this point, and 0:16:49.960 --> 0:16:52.520 if we be tied into GDP growth that's going to 0:16:52.600 --> 0:16:55.480 be steady as she goes versus better well, in terms 0:16:55.480 --> 0:16:58.280 of GDP, we're probably expecting the economy to grow somewhere 0:16:58.280 --> 0:17:01.560 around two or a little above two cent um. You know, 0:17:01.680 --> 0:17:04.520 we just had spending coming at four point three. I 0:17:04.520 --> 0:17:07.920 don't think we're going to get much stronger than that um, 0:17:07.920 --> 0:17:10.480 but I think we can stay around those strong levels 0:17:10.520 --> 0:17:12.440 maybe you know, two and a half three and a 0:17:12.480 --> 0:17:16.320 half percent in terms of spending UM. And and also 0:17:16.400 --> 0:17:18.160 in terms of you know, getting back to the Fed 0:17:18.200 --> 0:17:20.920 and interest rates, the percent of consumers who expect interest 0:17:21.000 --> 0:17:23.720 rates to get higher was the lowest reading we've seen 0:17:23.760 --> 0:17:26.320 since uh, you know, two thousand and twelve. So it's 0:17:26.320 --> 0:17:29.520 already baked in that the Fed is likely to cut rates. 0:17:30.400 --> 0:17:32.280 Lin Franco, thank you so much. Lynn Franco is a 0:17:32.359 --> 0:17:36.439 senior director of Economic Indicators and Surveys at the Conference Board, 0:17:36.720 --> 0:17:39.159 joining us as she does regularly with that data from 0:17:39.200 --> 0:17:43.280 the Conference Board and Elena Estulia Tieva Bloomberg Economics always 0:17:43.400 --> 0:17:45.639 uh welcome in this studio to get the sense that 0:17:45.720 --> 0:17:48.240 get the latest on kind of you know, what's going 0:17:48.280 --> 0:17:50.239 on in the economy. How strong is the economy. How 0:17:50.280 --> 0:18:06.600 long can the economy continue to go? We have the 0:18:06.720 --> 0:18:10.639 SMP up about this year. The question is where do 0:18:10.720 --> 0:18:13.640 we go from here to get some clarification, get some guidance. 0:18:13.680 --> 0:18:18.119 We turned to Matt Malee, equity strategist at Miller Tabak. Uh, Matt, 0:18:18.160 --> 0:18:20.600 thanks so much for joining us. Start off real quick, 0:18:20.600 --> 0:18:24.560 what do you think we're gonna get from the Fed tomorrow? Uh? Yeah, 0:18:25.280 --> 0:18:27.919 I'm kind of with the consensus twenty five basis points. 0:18:28.520 --> 0:18:31.199 I don't think we'll get the big fifty uh anything. 0:18:31.320 --> 0:18:33.439 It's not out of the question, of course. Um. But 0:18:33.520 --> 0:18:36.159 the big question is going to be the big thing 0:18:36.200 --> 0:18:38.000 we're gonna look for, of course, is in the uh 0:18:38.480 --> 0:18:42.439 uh in the press conference, when Charon Powell will get 0:18:42.440 --> 0:18:44.080 a little more in accordant with guidance. And we've been 0:18:44.240 --> 0:18:47.919 talking about earnings reports recently, and the more important thing 0:18:47.920 --> 0:18:49.679 has been the guidance. I think that's gonna be the 0:18:49.720 --> 0:18:51.520 same for the Fed. If they signal, you know, if 0:18:51.520 --> 0:18:53.080 they signal is kind of a one and done thing, 0:18:53.160 --> 0:18:55.640 especially if it's only twenty five basis points, that's gonna 0:18:55.680 --> 0:18:58.919 be I think kind of get some investors off guard. However, 0:18:58.920 --> 0:19:01.399 if they do indicate that they're gonna uh do it 0:19:01.440 --> 0:19:03.720 another time and maybe even a third time this year 0:19:04.400 --> 0:19:08.080 that would be viewed as positive. So how you position then? Well, 0:19:08.160 --> 0:19:09.679 right now, it's it's so weird because we're at this 0:19:09.800 --> 0:19:12.399 key uh level in the in the stock market. I mean, 0:19:12.440 --> 0:19:14.720 we we're talking about, hey, we make a new records 0:19:14.720 --> 0:19:16.480 and it seems like, oh my gosh, the stock market 0:19:16.480 --> 0:19:20.280 has been unbelievable. Well, I mean it is or has been, 0:19:20.840 --> 0:19:23.280 but for the last eighteen nineteen months, we keep getting 0:19:23.320 --> 0:19:26.040 up near this three thousand level and then we break 0:19:26.040 --> 0:19:27.800 to a new high, but only a slight new high, 0:19:27.840 --> 0:19:30.680 and then roll back over. This is basically the fourth 0:19:30.760 --> 0:19:32.960 time we've done it, uh, and it's still only a 0:19:33.040 --> 0:19:35.359 slight new high. So uh, if we can get further 0:19:35.440 --> 0:19:38.320 mind kind of magic numbers thirteen sorry, three thousand thirty 0:19:38.320 --> 0:19:40.200 on the SMP because I would give it a three 0:19:40.240 --> 0:19:44.840 percent uh move above it's so high. But you know, 0:19:45.080 --> 0:19:47.119 it's it's if we fail again, it's going to be 0:19:47.480 --> 0:19:50.040 a big concern. So I guess my way I plan 0:19:50.160 --> 0:19:52.120 it right now. It's kind of weight on the sidelines 0:19:52.160 --> 0:19:54.520 to see what happens. I'm you know, uh, the one thing, 0:19:54.680 --> 0:19:57.280 it's two things the number one. Still looking at some 0:19:57.320 --> 0:19:59.600 of the defensive names in case it doesn't, in case 0:19:59.640 --> 0:20:02.560 some market rolls over. But also look at gold because 0:20:02.600 --> 0:20:06.159 it's already broken out key a resistance level. And uh, 0:20:06.160 --> 0:20:08.040 if we can move above fourteen fifty, it's going to 0:20:08.119 --> 0:20:10.080 be a real breakout for the for the for the 0:20:10.119 --> 0:20:12.680 yellow metal sometat. I was reading some of your recent 0:20:12.720 --> 0:20:15.400 research and uh, I see your noting that, in your opinion, 0:20:15.680 --> 0:20:18.399 you think there's a meaningful decline in the stock market 0:20:18.400 --> 0:20:20.520 over the next over the near future. It's much more 0:20:20.560 --> 0:20:22.840 possible than most people are thinking right now. What kind 0:20:22.880 --> 0:20:25.640 of gives you that thought, Well, there's a couple of things. Well, 0:20:25.720 --> 0:20:28.760 two things that stand out to me is I worry 0:20:28.760 --> 0:20:31.080 about why why the FED is really getting involved in 0:20:31.080 --> 0:20:34.520 this an insurance rate cut, what you know, interest rate cut. 0:20:34.720 --> 0:20:36.399 Why would they need to feel the need to do that. 0:20:36.640 --> 0:20:38.520 Is there's something that they're seeing. And the thing that 0:20:38.560 --> 0:20:41.720 really concerns me most of all is the action in 0:20:41.760 --> 0:20:45.000 the European banks. There's been a huge divergence in the 0:20:45.040 --> 0:20:47.800 European banks, especially over the last few months. I mean, 0:20:48.240 --> 0:20:49.840 we have the you know, this big sell off in 0:20:49.880 --> 0:20:53.040 the fourth quarter of last year, throughout the throughout the world, 0:20:53.400 --> 0:20:56.080 and of course we've all rallied uh strongly off those 0:20:56.160 --> 0:21:02.879 levels of the US market stuff. Uh uh, I'm sorry, uh, 0:21:03.920 --> 0:21:07.080 from those lows. The European market is up seventent from 0:21:07.080 --> 0:21:10.439 those lows. And yet the European banks are unchanged, and 0:21:10.480 --> 0:21:12.439 over the last few months they've sold off in a 0:21:12.480 --> 0:21:15.680 severe way and they're testing those lows from back in December. 0:21:15.880 --> 0:21:17.919