Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg Terminal. Christian Mollery Glissman Banishing,
Speaker 1: director of Poor Poor Portfolio Strategy at Goldman Sachs, and
Speaker 1: Christian I want to start in Damien's specialty in the
Speaker 1: developing world because overnight the lockdowns in Beijing, the first
Speaker 1: lockdown in the capital of China, to me, is a
Speaker 1: really significant story that changes potentially the narrative for next year.
Speaker 1: How do you view that that story in light of
Speaker 1: some of the optimism around China's reopening. Oh, you make
Speaker 1: a great point. I think if you if you think
Speaker 1: about like outlook for next year, um, like China was
Speaker 1: one of those bright spots because there's a symmetry. The
Speaker 1: economy is in its knees for clear reasons like asset
Speaker 1: prices and in in in very bearish kind of territory.
Speaker 1: So it felt like there is a story that's emerging
Speaker 1: that can to some extent support next year and and
Speaker 1: drive growth acceleration, drive that trough and economic activity. But
Speaker 1: I think what we're learning, and I think what our
Speaker 1: economists have been saying as well, it's going to be
Speaker 1: incredibly bumpy. I think the end game is that China
Speaker 1: will probably by second half of next year accelerate with
Speaker 1: regards to growth, help by the reopening, but the path
Speaker 1: to that could be incredibly bumpy. And the real reopening
Speaker 1: we always thought what would occur kind of around Q two,
Speaker 1: And as you see those cases go up, you could
Speaker 1: say that, um, yeah, the risk is definitely that it's
Speaker 1: being pushed further out. But Christian, how does this affect,
Speaker 1: right the different parameters if it reopens, if it doesn't,
Speaker 1: the bumpy nous that you see, is it bullish if
Speaker 1: they reopen, if that means incredible demand suddenly coming online
Speaker 1: for energy to their in for commodities generally at a
Speaker 1: time when that's one of the main drivers of disinflation
Speaker 1: right now, Yeah, and you you highlight one of the
Speaker 1: big discon answers, like one of the big kind of
Speaker 1: negative cycles there. I think right now, as you know,
Speaker 1: oil prices have kind of come down significantly like curves
Speaker 1: are in the front and a bit in contangle. So
Speaker 1: I think you're dealing currently with the setup where there's
Speaker 1: a bit of a buffer. But you're absolutely right there
Speaker 1: is definitely a chance of a replay of headline inflation
Speaker 1: volatility next year, which then feeds a bit into rates
Speaker 1: and and and and to some extent kind of can
Speaker 1: drive also spill over us too risky assets. But I
Speaker 1: think at this juncture, this full reopening, as I mentioned,
Speaker 1: is to us more of an Age two story. I
Speaker 1: think in the near term it seems to be more
Speaker 1: of a dragon oil than anything, but it does highlight
Speaker 1: something which you mentioned. I think to me, risk premium
Speaker 1: um in the last month have significantly come down across
Speaker 1: the board on China assets, but also on global cyclic classets,
Speaker 1: on China exposed companies in Europe, and it just feels
Speaker 1: like there's not that many good growth stories to go on.
Speaker 1: The market has embraced it very quickly. Partially that has
Speaker 1: contributed to a bit of a false start in in
Speaker 1: kind of relief on on the growth side, and it
Speaker 1: could very quickly reverse to some extent if if if
Speaker 1: that doesn't prove to be the case, well, let's just
Speaker 1: crystallize that. I mean a bit of relief. I mean
Speaker 1: we saw increase in the HANK saying China Enterprises Index
Speaker 1: in October, but we're still down year today. Talked to me,
Speaker 1: I think investors are realizing myself included that you just
Speaker 1: can't have zero exposure to emerging markets in China. Right,
Speaker 1: So my question for you is, you know, what is
Speaker 1: the best way to get that China exposure? What is
Speaker 1: the best way to play the reopening narrative in China.
Speaker 1: You make a great point because it's it's been really
Speaker 1: difficult for international investors from a strategic point of view
Speaker 1: um to to to get excited about China. And and
Speaker 1: there's a concern with regards to how investors will benefit
Speaker 1: from from China economic growth in the coming years. There's
Speaker 1: been a concern with regards to obviously zero covid um
Speaker 1: and and at the same time you have this reopening story.
Speaker 1: The reopening story, if you follow the kind of template
Speaker 1: from developed markets, should be very good for domestic consumer ciglicals,
Speaker 1: services sectors, and and it's not easy to get exposure
Speaker 1: to that via the headline indices. Our team generally have
Speaker 1: become quite a bit more constructive the whole North Asia complex,
Speaker 1: which they think will be pulled along. So you can
Speaker 1: diversify to some extent just being in China with maybe
Speaker 1: being a bit more in Korea, being a bit more
Speaker 1: on Taiwan. Um. But but in the end, if you
Speaker 1: really wanna kind of go directly exposed to the reopening,
Speaker 1: you need to go potentially much more on specific sector
Speaker 1: specific stocks, and it becomes much more of an alpha theme.
Speaker 1: So all strategy team they've created a basket for that,
Speaker 1: which clearly for a lot of the acid allocates. I
Speaker 1: speak to um that that becomes too specific Christian AKA
Speaker 1: talk South Korean Taiwan with you all day. But let's
Speaker 1: shift back to the US here for a minute. I mean, look,
Speaker 1: there's been a lot of talk no recession, shallow recession.
Speaker 1: I think markets are pretty much coming to terms of
Speaker 1: the fact that growth will indeed be slower next year
Speaker 1: in the US. Meanwhile, you know, inflation, while it is
Speaker 1: expected to come off, it's going to be above pre
Speaker 1: COVID levels I think for some time. So in a
Speaker 1: world of slower growth and inflation, you know kind of
Speaker 1: remaining elevated, you know what fixed in commassive classes, our
Speaker 1: best position outperform. Yeah. I mean, especially after what I
Speaker 1: mentioned this, this risk premium contraction, I mean, you've seen
Speaker 1: a remarkable tightening and credit spreads even down in quality. UM,
Speaker 1: it just tells me that you need to be up
Speaker 1: in quality into next year. I think generally we feel
Speaker 1: that next year you you know you you you spoke
Speaker 1: about this earlier. This year, a lot of the fear
Speaker 1: was about peak hawcusionness and very high rates volatility. And
Speaker 1: I think next year will be more about growth volatility.
Speaker 1: I think rates volatility will will will normalize just by
Speaker 1: extension of central banks slowing the pace of hiking and
Speaker 1: and and that just means that UM, you're shifting a
Speaker 1: bit towards solvency risk, and you're shifting towards strength of
Speaker 1: balance sheet UM. And this year, as you know, UM,
Speaker 1: you have had very little cash flow risk, very little
Speaker 1: cash flow shops and and next year you would probably
Speaker 1: see more of those which needs. At this juncture with
Speaker 1: the type of risk premier, you're getting to move up
Speaker 1: the risk curve. We feel up in quality investment create
Speaker 1: credit is where we would be UM, and and there's
Speaker 1: opportunities there to to kind of harvest more attractive year
Speaker 1: to volatility ratios. So, for example, mortgage backed securities that
Speaker 1: benefit a lot from a decline in rates volatility is
Speaker 1: a relatively low risk asset. So we'd rather be in
Speaker 1: these places until we get a bit more read in
Speaker 1: risk premium, which we expect could be in the Q
Speaker 1: one next year rebuild in risk premium. It's such a
Speaker 1: nice way of say saying, hi, old bonds selling off.
Speaker 1: Christian Maller, Glisbon and Gilman Sachs, thank you so much
Speaker 1: for being with us. Joining us now is somebody who
Speaker 1: thought that it was going to be a great day,
Speaker 1: you know, I might as well join them because it's
Speaker 1: going to be so great here, And instead he's se
Speaker 1: question in a corner because it's so bright in his rooms.
Speaker 1: Chief effect strategists to see at a general thank you
Speaker 1: so much for being with us. Kid, you talk about
Speaker 1: that it's not a black Friday so much as a
Speaker 1: gray one, not perhaps in your room, but generally how so, well,
Speaker 1: it's a day when you know, I'm not sure there's
Speaker 1: that much optimism around in the global economy this morning,
Speaker 1: and I'm not sure that there's um, you know, much
Speaker 1: going on, but but it is this sense of, you know,
Speaker 1: even in the US, slowing economy across Europe, and it's
Speaker 1: you know, how do you go running out on all
Speaker 1: these cheap crisis to buy things when you're worried about
Speaker 1: energy costs, worried about mortgage payments and so on. So
Speaker 1: you know, the global economy is clearly slowing. And that's
Speaker 1: the backdrop that the shocker. You mentioned it, but it's
Speaker 1: how much yields have fallen, how much the market is
Speaker 1: priced back FED expectations since j. Powell gave that press
Speaker 1: conference and told us that rates had to be higher
Speaker 1: for longer than the market was pricing just then, you know,
Speaker 1: so we are we are just definitely giving the birth
Speaker 1: to a central bank collectively because we didn't global economy
Speaker 1: sign well. But this is really confusing, especially because in
Speaker 1: those meeting minutes, essentially FED officials said that they expect
Speaker 1: recession as almost as likely as their base case. This
Speaker 1: is as close to capitulation from a central bank that yes,
Speaker 1: there is going to be a downturn, and yes we
Speaker 1: are going to keep rates high in order to curtail inflation,
Speaker 1: even if that does become the base case. Do you
Speaker 1: think that hasn't got enough attention. Um, I think it
Speaker 1: gets attention. I think he's the difficulty with this cycle,
Speaker 1: and it's probably true pretty much everywhere, is that in
Speaker 1: most major economies were going into a downturn at full employment,
Speaker 1: and um, you know, I if the last, if the
Speaker 1: last big recession was, this time is different. This is
Speaker 1: different all over again. Differently, I can't remember a time
Speaker 1: when you have full employment into slowdowns and probably through
Speaker 1: quite a long time, so that the battle is between
Speaker 1: central bankers and how much they think they need to
Speaker 1: tighten and for how long to cool labor market at
Speaker 1: the same time as they can see economies weakening significantly.
Speaker 1: Different sides of the Atlantic you have a slightly different
Speaker 1: take on it. But I think I think that's the
Speaker 1: that's the piece. The central bankers are looking at slower
Speaker 1: at slower data and things, but they're looking at the
Speaker 1: labor market and thinking, how do I really get to
Speaker 1: grips with inflation without getting a higher unemployment rate. You know,
Speaker 1: it's a sleepy Friday here in November, and for me,
Speaker 1: you know, it's not always been that way. If you
Speaker 1: think about the year intern if thinking about cross currency
Speaker 1: basis swamp spreads. They've really behaved rather well given all
Speaker 1: of the tightening and the liquidity pressure we would have
Speaker 1: expected to see into your end. Are you surprised by
Speaker 1: any of this? Um, Well, they were behaving so badly
Speaker 1: six weeks ago that everyone got themselves into a into
Speaker 1: a state about them. And I think and I think
Speaker 1: people started dealing with it very early, so we had
Speaker 1: a we had a longer lead through. I still worry
Speaker 1: that they'll come back in the last week of December
Speaker 1: and ruin my life. But that's just that's what we're
Speaker 1: paid to do, is to worry about things like that.
Speaker 1: But you know, I think that what we make that
Speaker 1: there's a possibility that I mean, particularly in the foreign
Speaker 1: exchange market that you know, from the war in the Ukraine,
Speaker 1: the FED hiking first, the energy crisis, the fact that
Speaker 1: the US benefits from terms of trade as the world's
Speaker 1: second biggest energy producer, never had that before and in
Speaker 1: an energy crisis in modern times. That that all all
Speaker 1: my clients of of you know, written the dollar rally
Speaker 1: for months and months and by and large that they
Speaker 1: you know, let's close up the turn, let's shut everything down,
Speaker 1: let's quieten down, and um and start getting ready for Christmas. Okay,
Speaker 1: we're also seeing tentative signs of investors re engaging with
Speaker 1: non dollar asset classes here as we approach your end.
Speaker 1: So I'm just gonna ask the elephant in the room,
Speaker 1: has the dollar peaked? It's ppeaking? I think it's for
Speaker 1: one of the description it's not a matter Horn peak,
Speaker 1: but a Dolomite speak if that works for Americans. But
Speaker 1: it's it's going to be a series of jagged peaks
Speaker 1: because you know, the other elephants in the room, the
Speaker 1: crisis in Ukraine. Can you know we're all down playing
Speaker 1: the tail risk from that. It can come back in
Speaker 1: a flash, you know. So we we've got we've got
Speaker 1: things we can get concerned about. Clearly, if things are escalating,
Speaker 1: you know, things things get worse in China, that can
Speaker 1: make us worried. But but yes, I look, the dollar
Speaker 1: is going to be significantly weaker by the end of
Speaker 1: next year. We may see I think there's a real
Speaker 1: chance that we may see the dollar quite a lot
Speaker 1: weaker by the end of this year and then stronger
Speaker 1: in January. Just to blow up every outlook piece of anybody, right,
Speaker 1: just because positions come off Kit I'm glad that you
Speaker 1: talked about positioning. And I've to say, when I was
Speaker 1: reading your note, I felt like it was pretty gloomy,
Speaker 1: and I thought, you know, okay, I wonder what your
Speaker 1: pushback is. I get accused of being gloomy all the time.
Speaker 1: How much do you buy into this argument that there's
Speaker 1: already so much gloom that there's no room to be gloomier,
Speaker 1: that stocks have to rally, that the dollar has to
Speaker 1: weaken just because people have already baked in all of
Speaker 1: the bare cases that could potentially happen. I hear that
Speaker 1: from from our equity people and our credit people, And
Speaker 1: for example, you know, in the season of outlooks, if
Speaker 1: the first one I saw from anybody said, you know,
Speaker 1: the next year is the year of yield, which sounds
Speaker 1: pretty gloomy. If before you're supposed to do is to
Speaker 1: buy bonds um the next you know that the view
Speaker 1: that we would have is is that credit spreads look
Speaker 1: as if that that better able to cope with the
Speaker 1: kind of downturn we will get them than equities in
Speaker 1: some ways, but that the equity problem is maybe more
Speaker 1: in small companies than big ones, which small ones which
Speaker 1: can't cope with the volatility we've had in sort of
Speaker 1: events that affect them. But yeah, I think there's a
Speaker 1: lot of there's a lot of negativity for for the
Speaker 1: way that this will let play up priced in. I
Speaker 1: think in the foreign exchange market. Part of it is
Speaker 1: that I have you it slightly differently when when people
Speaker 1: start looking at a soft landing and they say, you know,
Speaker 1: growth's gonna slow, We're going to manage soft landings, that
Speaker 1: seems likely the Fed's done soon they sell the dollar
Speaker 1: because we get to the the the ideal point of
Speaker 1: the smile, where ECB still raising rates, the Feds, the
Speaker 1: Fed stop, where it's all priced in and so on.
Speaker 1: I I still worry that the bigger problem could be
Speaker 1: later now we we don't think we're really going to
Speaker 1: get a recession in the United States. Four. The danger
Speaker 1: with this labor market and with the Fed hiking the
Speaker 1: way they've been is is that if the labor market
Speaker 1: is so tight and going into a recession, that the
Speaker 1: hammer that you need to break them nup of inflation
Speaker 1: might have to be hit really hard. Um and you
Speaker 1: may get later harder landings rather than earlier softer ones.
Speaker 1: But kind of so it may well be that you
Speaker 1: get you know, equities do reasonably well in the first
Speaker 1: half of next year, and then we have to rethink it.
Speaker 1: But uh yeah, for now that everybody, everybody is believing
Speaker 1: that you can soft land the global economy despite this
Speaker 1: unique combination of zero unemployment. At the beginning of our session,
Speaker 1: Cecia General, thank you so much for joining us, kid.
Speaker 1: I hope you enjoy the beautiful sunshine outside despite the
Speaker 1: gloom of what we're talking about. Claudia Sam, founder of
Speaker 1: Some consulting and former Fetterers or of Economist Claudia, thank
Speaker 1: you so much for being with us on this post
Speaker 1: Thanksgiving Friday. How much are you looking to this holiday
Speaker 1: shopping season as a gauge of consumer spending. I'm really optimistic.
Speaker 1: Consumers have delivered this year. We have had a very
Speaker 1: steady pace in terms of overall spending, and the labor
Speaker 1: market is great. I worked at the FED over a
Speaker 1: decade focusing on consumer spending, our forecast, our analysis. People
Speaker 1: when they have income, they spend it. Americans have income
Speaker 1: these jobs. It's true some of the spending now is
Speaker 1: going to be at the higher end, but you know what,
Speaker 1: those people that work at Macy's. They need to keep
Speaker 1: their paychecks, They need people to come in and spend.
Speaker 1: I we have everything for another good holiday season, even
Speaker 1: after inflation adjusted. So I I see a really good
Speaker 1: path forward. And honestly, I'm not too worried about some
Speaker 1: of these businesses, the big businesses taking a little bit
Speaker 1: less in profit. I've been doing pretty well. But you've
Speaker 1: got a little big picture here. But Claudia, on the
Speaker 1: flip side, you could say that that resilience that's spending
Speaker 1: is exactly what's causing a problem for the Federal Reserve,
Speaker 1: because it's the reason there's still momentum, the reason that
Speaker 1: inflation can last longer than many of the lower income
Speaker 1: families can stand it. How does this really cohere with
Speaker 1: this idea that the Fed should be somewhat careful rather
Speaker 1: than just keep going with a sledgehammer. The Fed needs
Speaker 1: to back off. It is absolutely clear, and it's become
Speaker 1: clear over time. A lot of that inflation is coming
Speaker 1: from disruptions on the supply side, disruptions from COVID, disruptions
Speaker 1: from the war in Ukraine. We have seen a lot
Speaker 1: of encouraging signs even in the last consumer price index
Speaker 1: numbers that things are turning over. We're seeing things work
Speaker 1: themselves out. Yeah, it's gonna take time to show up
Speaker 1: in consumer prices. For whatever reason, the Fed has decided
Speaker 1: they've got to see it there, even though we see
Speaker 1: it in producer prices, import prices, rents are turning over
Speaker 1: like we have all the signs that relief is coming
Speaker 1: to consumers, and as the ft does too much, they're
Speaker 1: gonna undo that relief and and overdo it. Claudia, the
Speaker 1: sumerule has been It's why they regarded indicator of recession.
Speaker 1: You know that you created it. Um On. My colleagues
Speaker 1: at Bloomberg Intelligence are calling for probability of a recession
Speaker 1: in the US over the next twelve months. What are
Speaker 1: your thoughts on that? So respectfully, I disagree with them,
Speaker 1: and and frankly, as the data are coming in, particularly
Speaker 1: on the inflation side, I am more and more courage
Speaker 1: that we could skirt the re session. I think if
Speaker 1: we see one, it's almost absolutely going to be of
Speaker 1: a mild variety. At he's given what we know right now,
Speaker 1: right know, they're bad things could happen, and that forecast
Speaker 1: could change. But we have again, there's a lot of
Speaker 1: encouraging signs the labor market is good. You don't. The
Speaker 1: sound role is based on the unemployment rate rising, and
Speaker 1: it's really not. Things look really good in the labor market.
Speaker 1: You know, we're getting back to a more normal, sustainable pace.
Speaker 1: So I don't. I don't see it, and less and
Speaker 1: less I'm seeing it. But you know, I have been
Speaker 1: wrong multiple times, as economy is upside down and backwards,
Speaker 1: and we keep having really bad luck in terms of
Speaker 1: bad things happening in the world. You know, Claudie, you've
Speaker 1: also written extensively on FED activity during periods of wartime,
Speaker 1: right and historically what we've seen, like in World War Two,
Speaker 1: for example, you saw you know, um, you know, basically
Speaker 1: the FED not you know, hiking rates, as aggressively providing
Speaker 1: income support and the like. You know, we just saw,
Speaker 1: you know, roughly seventy the parity key have knocked out
Speaker 1: in Ukraine yesterday. We know the difficulties that are going
Speaker 1: on on the ground there. What should the FED be doing,
Speaker 1: Should they be paying attention and how how should they
Speaker 1: be handling that? Congress should be stepping in and the
Speaker 1: funder Reserve is following their mandate, that's what they have
Speaker 1: to do. They're going to follow the letter of the
Speaker 1: law here in wartime. You can look back to World
Speaker 1: War Two. That was a time when the FED worked
Speaker 1: closely with the Congress and Treasury told them, you are
Speaker 1: going to keep interest rates load, so financing the war
Speaker 1: doesn't cost American taxpayers even more than it has to.
Speaker 1: The independence of the FED is not God given, it
Speaker 1: is Congress given. Now that's a big step forward. And
Speaker 1: I know, even talking about it is like wow. If
Speaker 1: Fed economists is talking about, you know, putting independence temporarily
Speaker 1: on the side, I just I don't get it. I
Speaker 1: don't get why the Federal Reserve is pushing so hard,
Speaker 1: and I certainly don't understand European Central Bank and the
Speaker 1: Bank of England. But this is making a very bad
Speaker 1: situation in Europe worse. Claudia Sam, thank you so much
Speaker 1: for being with us. Claudia Sam of some consulting and
Speaker 1: former Federaliser of Economists. Well, let's see what's going on.
Speaker 1: As we tried to go on the ground and Joe
Speaker 1: Feldman in his car going from store to store, senior
Speaker 1: research analysts and assistant director of research over at Telsey, Joe,
Speaker 1: where are you right now? What are you seeing on
Speaker 1: the ground. Yeah, so I'm in West justestern New York,
Speaker 1: up in the near White Plains, uh and was just
Speaker 1: going through a Best Buy And so far this morning,
Speaker 1: it's really quiet out there. I don't think there's this
Speaker 1: massive rush to get in the store to grab a Doorbuster. Well,
Speaker 1: how much is this? How much is this? Joe? That
Speaker 1: we're just basically seeing the end of this. You know,
Speaker 1: you get in at four am and you get the goods,
Speaker 1: and that's you know, see people line up. That that's
Speaker 1: over because of the online and channels, because of the
Speaker 1: other areas of distribution. Yeah, I think that's absolutely rightly
Speaker 1: so that you you are seeing maybe the end of
Speaker 1: that early morning rush that need to get in for
Speaker 1: a Doorbuster. You know, just talking to some associates in
Speaker 1: one of the stores that I visited, and they were saying, yeah,
Speaker 1: there was no major rush. The prices are basically the
Speaker 1: same that you could have had all all this past
Speaker 1: week online or even walking into the store earlier this week.
Speaker 1: So I think that impetus that that push to get
Speaker 1: you in has maybe waned. But I'm very curious to
Speaker 1: see how traffic is this afternoon, because I do think
Speaker 1: that that people will come out, they want to get social,
Speaker 1: and we haven't had a real true Black Friday in
Speaker 1: a couple of years. Joe, you're fifteen minutes from my
Speaker 1: home in roy Brook, New York there on Central Lab
Speaker 1: and White Plains. How indicative? How representative is that best
Speaker 1: Buy on Central Lab of you know, what's going on
Speaker 1: across the nation. I actually think it's fairly representative. I mean, look,
Speaker 1: it's a nice you know, um, you know, solid community,
Speaker 1: middle through the middle class community around here, people that
Speaker 1: are looking to buy, and and there's a it's a
Speaker 1: very good retail area here in Westchester. And I do
Speaker 1: find that it has been fairly indicative. You know, when
Speaker 1: I speak to the people on my team who live
Speaker 1: all around the Tri state area, we have some around
Speaker 1: the country in other cities, and we we email this morning,
Speaker 1: and everybody's kind of saying the same thing. It's fairly
Speaker 1: quiet so far. So John, it's gonna be um, I
Speaker 1: mean it's gonna be you know, electronics, is it gonna be? Um?
Speaker 1: Is it gonna be big goods? Is it gonna be
Speaker 1: you know, durable? As I mean, where do we see
Speaker 1: a lot of the sales? Where do we see a
Speaker 1: lot of deals. Where do we see a lot of
Speaker 1: promotions taking place here? Yeah, I think we're going to
Speaker 1: see a lot of promotions. Certainly in electronics, we are
Speaker 1: seeing that TVs, headphones, and other giftable items. I think
Speaker 1: we're gonna see special occasion where has been hot lately,
Speaker 1: and I think that that will continue. We've seen beauty,
Speaker 1: even jewelry has been been decent. You know, I think
Speaker 1: people want to feel good and buy some things for themselves. Uh,
Speaker 1: that area is where we may see some interest. Toys
Speaker 1: are always a big, big driver for the holiday season,
Speaker 1: but um, I think it's going to be much more
Speaker 1: focused on on value and that the value you can
Speaker 1: get to in a in a gift for for members
Speaker 1: of your family or some friends. Value means it's discounted, right, Joe,
Speaker 1: I mean this is basically we're looking at a pretty
Speaker 1: steep discounts at a time when there are huge inventories
Speaker 1: at a number of stores, particularly uh, those that overstocked.
Speaker 1: I'm thinking of Target, I'm thinking of a host of others,
Speaker 1: not necessarily Walmart, not necessarily Macy's. How much are you
Speaker 1: seeing the optimism in stock market? Perhaps in the stock
Speaker 1: market outweigh what you're seeing on the ground with all
Speaker 1: of the discounts that that that that retailers are having
Speaker 1: to offer, plus the fact that they're trying to remain
Speaker 1: fully staffed and not lose people that they might not
Speaker 1: be able to rehire later. Yeah, I think there there's
Speaker 1: a lot going on in the retail market right now.
Speaker 1: There is heavy inventory, there's an eats a discount. What
Speaker 1: we've noticed is that the discounts are not that steep
Speaker 1: in the sense that is fairly common this time of year.
Speaker 1: And that's what we're seeing. You know, we're not seeing
Speaker 1: these very broad, deep, you know, forty to sixty, fifty
Speaker 1: to six discounts. Uh. You know, the retailers are definitely
Speaker 1: face facing cost pressures and they're spending what they need
Speaker 1: to to keep the labor force satisfied. And I think
Speaker 1: that we're going to continue to see that. We continue
Speaker 1: to hear that from a lot of others. The big
Speaker 1: question everybody has is really heading into next year, how
Speaker 1: much pressure we're going to see on the consumer? Uh,
Speaker 1: it will we tip into a mild recession or a
Speaker 1: recession at all? And as long as the labor market
Speaker 1: is in pretty good shape, which it is right now.
Speaker 1: We're hopeful that things won't be so bad next year
Speaker 1: and that will hold up some spending levels. And then
Speaker 1: you know, there is some room for optimism, certainly as
Speaker 1: you get deeper into three when you face easier comparisons.
Speaker 1: So you're talking about overall general numbers, how much you
Speaker 1: started to see a bifurcation of stores that cater to
Speaker 1: the lower ends to worse and those that still cater
Speaker 1: to the luxury end still going strong. Yeah, the bifurcation
Speaker 1: is very clear out here right now, where you are seeing,
Speaker 1: you know, the more affluent UH consumer continuing to spend
Speaker 1: and those stores are that cater to them are doing
Speaker 1: fairly well. UM. At the other end of it, there's
Speaker 1: a lot of focus on value. There's a lot of
Speaker 1: focus on food and consumables and basics, which is why
Speaker 1: companies like Walmart and the Dollars stores and even Target
Speaker 1: you know, are doing very well on the basic side
Speaker 1: of things. It's really the discretionary side at the low
Speaker 1: end has been the big pressure point, UH, and that's
Speaker 1: where you could see some some continued pressure this holiday
Speaker 1: season and into next year. Joe Fieldman of Telsey, thank
Speaker 1: you so much. Joe Feldman, you'll be joining us throughout
Speaker 1: the morning. How be driving around to check it all out? Damian.
Speaker 1: I do wonder how much real estate falls into this.
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