Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's talk about some economics. We're actually government back open.
Speaker 2: Economic data is flowing here, so let's get at it.
Speaker 2: Jennifer Lee, BMO Capital Market Senior Economist, joints us here, Jennifer,
Speaker 2: thanks so much for joining us here. What's kind of
Speaker 2: your setup for the economic call here for the US
Speaker 2: in twenty twenty six. How are you thinking about that?
Speaker 3: Well, good morning, happy holidays to you both, and thank
Speaker 3: you very much for having me on. You know, so,
Speaker 3: I will say I'm a little bit more optimistic now
Speaker 3: that I was, you know, back in April during Liberation Day,
Speaker 3: given just that we have at least more certainty, a
Speaker 3: little bit more clarity on the Tarra front in terms
Speaker 3: of what the levels are. We're not talking about fifty
Speaker 3: percent anymore and anything like that. Whether or not the
Speaker 3: legal they're legal is another story. But that sets up
Speaker 3: for a like at least a firmer I think, a
Speaker 3: start to the year.
Speaker 4: We know what to expect.
Speaker 3: But that's not to say that there are lots of
Speaker 3: landmines in store for US in twenty twenty six, and
Speaker 3: just a lot of them coming in January in particular.
Speaker 5: It's interesting and I'd love your take, Jennifer on what
Speaker 5: data to look at look in between Christmas and New Year.
Speaker 5: It's pretty thin, but we have had a little dose
Speaker 5: of it us to some December Dallas fin Manufacturing Index
Speaker 5: fell to negative ten point nine today. The expectation had
Speaker 5: been for negative six and that's more about the manufacturing
Speaker 5: focus over there in Texas. But we're also seeing some
Speaker 5: of the pending home sales coming in much stronger than
Speaker 5: hand to been anticipated in a month or month basis,
Speaker 5: we're up three point three percent. If you looked at
Speaker 5: that number that broke at ten am, what is the
Speaker 5: tell for you going into twenty twenty six? What are
Speaker 5: the key data points that you want to look at?
Speaker 3: So I'll be looking at I think everybody else will
Speaker 3: be looking at anything that's related to jobs, anything that's
Speaker 3: related to inflation. Funny you mentioning the data because we
Speaker 3: finally finally got the Q three GDP numbers out of
Speaker 3: the Ust just was last week, right, yeah, four point
Speaker 3: three percent, which was like whoa blue mail away? And
Speaker 3: it wasn't just you know, exports, it wasn't just inventories,
Speaker 3: and I think that it.
Speaker 4: Was pretty broad based very interesting.
Speaker 3: Take example from the from the consumer side, a lot
Speaker 3: more spending on that side, not just on it was
Speaker 3: just pretty broad based as well, but a lot of
Speaker 3: non durables and also on services. So you know, we
Speaker 3: can't discount the consumer just yet. But same time, all
Speaker 3: that's a big look in the rear viewer mirror. That
Speaker 3: was all Q three and now we're looking at Q
Speaker 3: four and of course now as they're starting Q one
Speaker 3: in in like in just a few days, but we
Speaker 3: have to get through this period of still not clean data.
Speaker 3: It still has to be scrubbed. I think we're going
Speaker 3: to be looking for a lot more revisions. You'll be
Speaker 3: interesting the first take, of course, and all the regional
Speaker 3: data and all that will make for a very interesting story.
Speaker 3: But I'm going to be more interested in the government
Speaker 3: data and what is going to happen after they revise
Speaker 3: them in the months ahead, to see what the real
Speaker 3: story is going to be. But so far, you know,
Speaker 3: as of the first three quarters of the year, a
Speaker 3: very strong and very resilient US economy still and it's
Speaker 3: going to get messy because of the shutdown that we had.
Speaker 4: In Q four. We're going to have that balance back
Speaker 4: in Q one.
Speaker 3: But at the same time, we can't break out the
Speaker 3: you know, the bubbly jest s yep, because we could
Speaker 3: be talking about shutdown again in the next couple of weeks.
Speaker 4: Sorry to say that.
Speaker 3: Sorry, starting to put a damper inner all this, but yeah,
Speaker 3: that's the reality that's out there.
Speaker 2: So talk to us about the consumer out there, Jennifer,
Speaker 2: how do you see the consumer? I know we've got
Speaker 2: that case shaped economy out there, so maybe we've got
Speaker 2: to you know, hem and hauled a little bit. But
Speaker 2: it seems like the consumer's doing okay. Is that what
Speaker 2: you're seeing so far?
Speaker 3: Again, you know, we got the liliest data that we
Speaker 3: got was from the retail sales report. The core measure
Speaker 3: was very strong, sets up for a again a strong
Speaker 3: still a strong border for this consumer. But still, you know,
Speaker 3: we have to be careful because of the shutdown and
Speaker 3: all that. At the same time, I'm very wary of
Speaker 3: the confidence surveys that we've been seeing.
Speaker 4: I mean, and they can.
Speaker 3: Swing back and forth, but just particularly what we saw
Speaker 3: from the Conference Board survey that had dropped, you.
Speaker 4: Know, considerably.
Speaker 3: But you know, it wasn't about inflation because the inflation
Speaker 3: expectations component, I believe was quite steady, but it was
Speaker 3: all about jobs, and fewer people were saying that they
Speaker 3: found jobs plentiful. More people were saying that they are
Speaker 3: finding jobs hard to get. So that's something that we
Speaker 3: have to be very weary about because obviously, at the
Speaker 3: end of the day, it's having a job, having a
Speaker 3: steady income. That's going to be what It's the main
Speaker 3: driver for the consumer.
Speaker 5: And the main driver for the FED. We're going to
Speaker 5: talk a lot more about the consumer after the next break,
Speaker 5: but talk to Jennifer a little bit about one of
Speaker 5: the key issues you think we should be tiptoeing around
Speaker 5: is who is going to lead the FED next and
Speaker 5: how they react.
Speaker 4: To the data that they're give in to.
Speaker 5: So it's going to be early January that we're going
Speaker 5: to be anticipating which Kevin it'll be.
Speaker 3: Right which exactly we do know for sure that is
Speaker 3: going to be. His first name will be Kevin. The
Speaker 3: last name is to be decided, but you know it's
Speaker 3: going to be he will be having He will have
Speaker 3: a very difficult job finding his way through the data.
Speaker 3: You know, obviously then it will be very important, but
Speaker 3: also getting some sort of a majority within all the
Speaker 3: FED voters, because as we saw from the last FED vote,
Speaker 3: there are quite a few that are not so confident
Speaker 3: that they are ready to cut rates again or just yet.
Speaker 3: You know, we are not looking for a January rate
Speaker 3: cut by any measure.
Speaker 4: I don't think anyone is right now.
Speaker 3: But you know, I think a couple more at the
Speaker 3: minimum rate cuts to come at a slower pace. You know,
Speaker 3: we're looking at March, September, March, June and September for
Speaker 3: the next rate cuts.
Speaker 4: Three more to come.
Speaker 3: Everything obviously will be taken on a meeting by meeting
Speaker 3: basis and will be very data dependent, but having that
Speaker 3: majority will be very critical.
Speaker 2: Jennifer, just when it seems like the market may have
Speaker 2: put tariffs in the rear view mirror. Us MCA talks
Speaker 2: officially launched mid January. I mean, what's going to happen there?
Speaker 2: I mean, you've got a unique perspective up there in Canada.
Speaker 2: What's the expectation.
Speaker 3: I think expectations, I'm going to say, I'm from my perspective,
Speaker 3: I think they're kind of low right now. Not sure
Speaker 3: exactly what's going to happen, whether or not we're going
Speaker 3: to actually have an actual us MCA per se or
Speaker 3: is it going to be a usc CM, a USM
Speaker 3: you know what I mean, some term a combination of that.
Speaker 3: But obviously there's going to be a lot of give
Speaker 3: and take from all parties. It's just going to be
Speaker 3: how much you know, how much each party will be
Speaker 3: giving or taking will be will be critical, but it
Speaker 3: will definitely be a lot different, I.
Speaker 4: Think, than than what we have right now.
Speaker 5: Let's talk more global perspective now, because you've got some
Speaker 5: great takes on global central banks, not just what's happening
Speaker 5: in the FED. Back in Canada, well, twenty twenty four
Speaker 5: was a big year for rate cuts. In fact, one
Speaker 5: hundred mites so done in twenty twenty five. We now
Speaker 5: done until those trade talks are a washout.
Speaker 3: So it sounds like the Bay Firm Governor Maclam basically
Speaker 3: sells like that they are done and that they're quite comfortable.
Speaker 3: The words were like that that they think that rates
Speaker 3: are about right where they are right now to get
Speaker 3: inflation back down to target. So you know, at at
Speaker 3: the bare minimum, sells like nothing is going to happen.
Speaker 3: But I think if there is a risk, the risk
Speaker 3: will be more cuts again, given how the U s
Speaker 3: MCA fares. I mean, the US is our biggest by
Speaker 3: far trading partner out there, with about three quarters of
Speaker 3: our experts going to the US, over fifty percent of
Speaker 3: our airports coming from the US, so many businesses.
Speaker 4: Are very dependent on sorry.
Speaker 1: So at that point, because of that way, do you
Speaker 1: believe that how the how how the talks farewell depend
Speaker 1: will determine what happens with the Baker Canada, and of
Speaker 1: course with inflation and the economy.
Speaker 2: How about what's your dollar call here? For twenty twenty six,
Speaker 2: the dollar has not bounced back like stocks have bounced
Speaker 2: back and other parts of the market to bounce back.
Speaker 3: That has been one of the toughest calls I'll tell you,
Speaker 3: to make the calls of the US dollar. It's been,
Speaker 3: like the US economy, quite resilient. But you would imagine
Speaker 3: in theory in the world where almost all the central
Speaker 3: banks are basically finished easing policy, maybe one more to go,
Speaker 3: maybe a couple more ago, but in some of them
Speaker 3: are getting ready to start to tighten or continue tightening
Speaker 3: in the case of the Bank of Japan. In that
Speaker 3: kind of environment, and then of course with a fed
Speaker 3: still on an easy bias, you would imagine that the
Speaker 3: US dollar would start to weaken, but it's sort of
Speaker 3: like how it's going to be all relative to everybody
Speaker 3: else in terms.
Speaker 4: Of the economy.
Speaker 3: If the US economy continues to remain resilient, which we
Speaker 3: still expect and we've got about two percent growth penciled
Speaker 3: in for twenty twenty six, that will actually help support
Speaker 3: the US dollars.
Speaker 4: So even though we do look for the US dollar
Speaker 4: to weekend, it's going.
Speaker 3: To be a slow, slow, softish weakening trend, not a
Speaker 3: big drop.
Speaker 5: Jennifer Lee, and he needs to say the capital markets