1 00:00:00,120 --> 00:00:02,520 Speaker 1: Let's get to our guest, Rebecca Felton, who's with us 2 00:00:02,560 --> 00:00:07,400 Speaker 1: for this half hour, senior market strategist at Riverfront Investment Group. Rebecca, 3 00:00:07,560 --> 00:00:11,400 Speaker 1: the Federal Reserve and leading officials are are trying to 4 00:00:11,400 --> 00:00:15,000 Speaker 1: to keep up a brave face about staying tight, but 5 00:00:15,200 --> 00:00:18,160 Speaker 1: then on the same hand or at the same time, 6 00:00:18,200 --> 00:00:21,040 Speaker 1: they're saying that they'll be dated dependent. So there's a 7 00:00:21,079 --> 00:00:24,600 Speaker 1: little bit of a conflict in that. If you're data dependent, 8 00:00:24,720 --> 00:00:26,920 Speaker 1: then should you really be telling us that there won't 9 00:00:26,920 --> 00:00:30,120 Speaker 1: be any rate cuts next year? Well, thank you so 10 00:00:30,240 --> 00:00:32,599 Speaker 1: much for having me, And I think that they are 11 00:00:32,720 --> 00:00:37,479 Speaker 1: right to stay firm because we don't see inflation getting 12 00:00:37,479 --> 00:00:40,720 Speaker 1: anywhere close to that two percent plus I think two 13 00:00:40,760 --> 00:00:43,960 Speaker 1: to four percent target range um by by the end 14 00:00:44,000 --> 00:00:45,760 Speaker 1: of the year, maybe at best you could see it 15 00:00:45,800 --> 00:00:49,280 Speaker 1: down to six. So knowing what their target is and 16 00:00:49,320 --> 00:00:52,120 Speaker 1: knowing what their intentions are, we don't expect to see 17 00:00:52,159 --> 00:00:55,680 Speaker 1: them pivot any time soon. They can very easily. And 18 00:00:55,720 --> 00:00:59,080 Speaker 1: I think they've conveyed that keep rates high and not 19 00:00:59,560 --> 00:01:02,600 Speaker 1: you know, keep them high, stop raising, but keep them high. 20 00:01:02,680 --> 00:01:06,160 Speaker 1: And I think that that's a concern as well. Well. 21 00:01:06,360 --> 00:01:09,000 Speaker 1: Obviously we're on radio, said childstn't work too well. But 22 00:01:09,040 --> 00:01:11,200 Speaker 1: there is a child on the Bloomberg terminal today that 23 00:01:11,240 --> 00:01:14,880 Speaker 1: indicates the swamps market still expects a right cut later 24 00:01:14,920 --> 00:01:17,759 Speaker 1: in three So who's gonna win this arm wristle, the Fed, 25 00:01:17,959 --> 00:01:20,880 Speaker 1: all the market. I think at the end of the day, 26 00:01:20,920 --> 00:01:23,720 Speaker 1: it's going to be the Fed. You know. I think 27 00:01:23,720 --> 00:01:27,080 Speaker 1: that they've been very clear and into your point earlier 28 00:01:27,080 --> 00:01:30,920 Speaker 1: about being data dependent. Um, we have started to see 29 00:01:31,000 --> 00:01:34,440 Speaker 1: some softening in prices in some of the various data points, 30 00:01:34,480 --> 00:01:37,400 Speaker 1: but we're still well above where they want them to be. 31 00:01:37,440 --> 00:01:39,600 Speaker 1: You know, even when we had to pull back in gasoline, 32 00:01:39,600 --> 00:01:42,399 Speaker 1: for example, UM, we're still what a dollar or so 33 00:01:42,520 --> 00:01:46,319 Speaker 1: more than where we were before the pandemic. Um, So 34 00:01:46,440 --> 00:01:48,520 Speaker 1: there's a long ways to go to get to what 35 00:01:48,600 --> 00:01:52,640 Speaker 1: they consider appropriate. Well, it's language, though, I mean, we 36 00:01:52,640 --> 00:01:55,520 Speaker 1: know they're trying to use language to stay tight because 37 00:01:55,520 --> 00:01:57,960 Speaker 1: they want to beat inflation. But nobody knows what's going 38 00:01:58,000 --> 00:02:00,720 Speaker 1: to happen. In fact, last year they thought rates would 39 00:02:00,720 --> 00:02:02,560 Speaker 1: be at a quarter percent right now, and look where 40 00:02:02,600 --> 00:02:04,960 Speaker 1: they are. So you know, you can't really put too 41 00:02:05,080 --> 00:02:07,960 Speaker 1: much stake in what somebody's guessing is going to be 42 00:02:08,080 --> 00:02:11,079 Speaker 1: the conditions in the middle to the latter part of 43 00:02:11,200 --> 00:02:14,240 Speaker 1: next year, of course, And one thing that we have 44 00:02:14,320 --> 00:02:17,519 Speaker 1: to get through much sooner than that is earning season, 45 00:02:17,560 --> 00:02:19,600 Speaker 1: which we'll start in earnest next week, and I think 46 00:02:19,600 --> 00:02:23,400 Speaker 1: we're going to learn a lot um as that begins. Particularly, 47 00:02:23,720 --> 00:02:25,760 Speaker 1: you know, we're going to be listening to what companies 48 00:02:25,760 --> 00:02:29,240 Speaker 1: are saying about if they can maintain pricing power, what 49 00:02:29,360 --> 00:02:32,760 Speaker 1: their demand is looking like, because those are those are 50 00:02:32,919 --> 00:02:36,000 Speaker 1: things that we have heard very strong reports on over 51 00:02:36,040 --> 00:02:39,040 Speaker 1: the last several quarters, and we need to see that 52 00:02:39,160 --> 00:02:42,720 Speaker 1: in order for that earnings momentum to turn back positive. 53 00:02:42,840 --> 00:02:45,160 Speaker 1: You know, we've been seeing the estimates go down and 54 00:02:45,200 --> 00:02:46,760 Speaker 1: down and down, and I think we need to see 55 00:02:46,760 --> 00:02:51,680 Speaker 1: some stabilization and some improvements um in tone, in order 56 00:02:51,720 --> 00:02:54,760 Speaker 1: to feel that we've bottomed, at least on a valuation basis, 57 00:02:54,800 --> 00:02:58,160 Speaker 1: and at least at those earnings estimates have bottomed. And Rebecca, 58 00:02:58,240 --> 00:03:01,239 Speaker 1: you were talking about earnings. As we hit it into 59 00:03:01,320 --> 00:03:04,320 Speaker 1: the break, we hear a lot of talk about and 60 00:03:04,440 --> 00:03:10,200 Speaker 1: earnings recession in the next quart up. What are your expectations, Well, 61 00:03:10,680 --> 00:03:15,160 Speaker 1: we we have concerns about that as well. Um. I 62 00:03:15,200 --> 00:03:18,399 Speaker 1: think that the bar has been set very low. Earnings 63 00:03:18,400 --> 00:03:20,519 Speaker 1: have now come down I think for Q three to 64 00:03:21,400 --> 00:03:25,600 Speaker 1: sub three, depending on what source you're looking at. So 65 00:03:25,680 --> 00:03:29,880 Speaker 1: it's very clear that the trajectory seems lower. UM. But 66 00:03:31,080 --> 00:03:33,000 Speaker 1: what they say, I think it's going to be more 67 00:03:33,040 --> 00:03:35,920 Speaker 1: important than what they report, because that is going to 68 00:03:35,960 --> 00:03:38,320 Speaker 1: be the forward looking data in terms of what they're 69 00:03:38,320 --> 00:03:41,520 Speaker 1: seeing in terms of business trends, pricing pressures, UM, their 70 00:03:41,560 --> 00:03:44,200 Speaker 1: ability to raise prices, and I think that will be 71 00:03:44,240 --> 00:03:47,840 Speaker 1: the key to a resumption in the markets, if they 72 00:03:47,880 --> 00:03:51,160 Speaker 1: can turn the tide on the momentum that we've seen 73 00:03:51,160 --> 00:03:53,240 Speaker 1: in the revision right right, we've been seeing it go down. 74 00:03:53,320 --> 00:03:55,760 Speaker 1: We need to see that reverse and it's hard to 75 00:03:55,760 --> 00:04:00,040 Speaker 1: tell right now until we start hearing them talk. So 76 00:04:00,120 --> 00:04:02,080 Speaker 1: let's talk a little bit about some of the data. 77 00:04:02,160 --> 00:04:05,920 Speaker 1: We had reasonably positive data today with with private sector 78 00:04:06,040 --> 00:04:09,040 Speaker 1: jobs and and I guess the consumer is looking pretty 79 00:04:09,080 --> 00:04:13,000 Speaker 1: reasonable here. Do you think it mainly comes down to wages? Uh? 80 00:04:13,160 --> 00:04:15,800 Speaker 1: And so that's one of the reasons why we could 81 00:04:15,800 --> 00:04:19,320 Speaker 1: be pretty cautious this week waiting for the non farm payrolls. 82 00:04:20,200 --> 00:04:24,960 Speaker 1: Of course, UM, we know that wages have risen over 83 00:04:25,040 --> 00:04:27,640 Speaker 1: five percent year over year, but of course inflation has 84 00:04:27,680 --> 00:04:32,120 Speaker 1: outstripped that we're seeing changes in consumer buying patterns, um, 85 00:04:32,720 --> 00:04:36,080 Speaker 1: be it at the grocery store, being in their travel plans, um, 86 00:04:36,120 --> 00:04:38,800 Speaker 1: you know, trading down on brands and making trips shorter. 87 00:04:39,320 --> 00:04:43,120 Speaker 1: So clearly the consumer both with dollars and I think 88 00:04:43,200 --> 00:04:45,760 Speaker 1: that that will be a key component to keep the 89 00:04:45,800 --> 00:04:49,680 Speaker 1: economy growing. UM. Wages have been strong, but it sounds 90 00:04:49,720 --> 00:04:52,520 Speaker 1: like with some of the pre announcements that we have 91 00:04:52,640 --> 00:04:55,200 Speaker 1: heard that that may be a thing of the past 92 00:04:55,279 --> 00:04:59,880 Speaker 1: because we're hearing more about layoffs, hiring freezes. Uh, they're 93 00:05:00,080 --> 00:05:03,920 Speaker 1: the wage increases are slowing and UM, so that part 94 00:05:04,040 --> 00:05:07,479 Speaker 1: of the inflationary picture maybe over. Mmm. How much more 95 00:05:07,560 --> 00:05:09,760 Speaker 1: do you think the consumer can endure in this regard? 96 00:05:09,760 --> 00:05:12,440 Speaker 1: Because consumer strength has been you know, one of the 97 00:05:12,520 --> 00:05:16,240 Speaker 1: underpinnings of what we've been seeing in the macro picture 98 00:05:16,320 --> 00:05:19,239 Speaker 1: thus far. And could that be the bit of data 99 00:05:19,560 --> 00:05:23,400 Speaker 1: that the FIT is watching out for. Of course, UM, 100 00:05:23,440 --> 00:05:25,839 Speaker 1: you know, particularly when you think about what we're seeing 101 00:05:25,880 --> 00:05:29,839 Speaker 1: in the housing market. UM, how many contracts have been canceled, 102 00:05:30,040 --> 00:05:34,400 Speaker 1: Mortgage applications continue to fall, UM, people are being priced 103 00:05:34,400 --> 00:05:37,680 Speaker 1: out of being able to afford a new home purchase. UM. 104 00:05:37,839 --> 00:05:41,000 Speaker 1: So it's not just grocery shopping and gasoline. It's it's 105 00:05:41,040 --> 00:05:45,920 Speaker 1: big purchases to um people that the the job opening 106 00:05:46,400 --> 00:05:51,200 Speaker 1: number today was um lower. The quit rate seems to 107 00:05:51,240 --> 00:05:53,680 Speaker 1: be a little lower, So it sounds like people are 108 00:05:53,680 --> 00:05:57,000 Speaker 1: staying put and sort of waiting out what goes on 109 00:05:57,080 --> 00:06:01,239 Speaker 1: in the economy. Yeah, and we're seeing right rents leading 110 00:06:01,279 --> 00:06:06,000 Speaker 1: to people maybe living together, more moving back in with family. 111 00:06:06,920 --> 00:06:10,040 Speaker 1: In Connor sends peace on the terminal, He reports that 112 00:06:10,160 --> 00:06:13,320 Speaker 1: Real Page Market Analytics said that apartment demand in the 113 00:06:13,360 --> 00:06:16,080 Speaker 1: third quarter was much weaker than seen in the past 114 00:06:16,080 --> 00:06:19,040 Speaker 1: couple of years. And owners equivalent rents plays a big 115 00:06:19,120 --> 00:06:23,120 Speaker 1: role in CPI, of course, And and to your point, 116 00:06:23,320 --> 00:06:28,080 Speaker 1: we had seen rents going very high year over year 117 00:06:28,200 --> 00:06:30,719 Speaker 1: earlier in the year. We've seen some moderation there, but 118 00:06:30,839 --> 00:06:33,279 Speaker 1: perhaps the damage was done to your point about folks 119 00:06:33,320 --> 00:06:37,800 Speaker 1: moving back home or more people living together, because you know, 120 00:06:37,839 --> 00:06:40,400 Speaker 1: once rents go up, they don't typically lower them for you. 121 00:06:40,680 --> 00:06:44,680 Speaker 1: That is obviously a concern. Housing in general is more expensive. 122 00:06:45,040 --> 00:06:48,080 Speaker 1: We know there are a lot more folks who are 123 00:06:48,440 --> 00:06:51,479 Speaker 1: living paycheck to paycheck. They're relying on those credit cards, 124 00:06:51,480 --> 00:06:53,720 Speaker 1: and of course those rates are going higher to putting 125 00:06:53,720 --> 00:06:56,640 Speaker 1: those consumers further at risk. So there is a lot 126 00:06:56,680 --> 00:06:59,520 Speaker 1: to be cautious about with the consumer, given how much 127 00:06:59,520 --> 00:07:03,640 Speaker 1: of g d HE they're responsible for. We are still 128 00:07:03,640 --> 00:07:06,080 Speaker 1: in wait and see mode in terms of what we 129 00:07:06,120 --> 00:07:08,400 Speaker 1: would think that they're going to do over the next 130 00:07:08,400 --> 00:07:11,160 Speaker 1: twelve months. But to your point, they've held in so far. 131 00:07:11,800 --> 00:07:15,840 Speaker 1: We can hope that that that continues. Alright, Rebecca Felton, 132 00:07:16,120 --> 00:07:18,840 Speaker 1: thanks so much for joining us today on Bloomberg Daybreak Asia. 133 00:07:19,120 --> 00:07:23,559 Speaker 1: Rebecca Felton as senior market Strategists at Riverfront Investment Group.