1
00:00:00,080 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:11,960 --> 00:00:15,560
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along

3
00:00:15,600 --> 00:00:18,960
Speaker 2: with Paul Sweeney. Join us each day for insight from

4
00:00:18,960 --> 00:00:23,119
Speaker 2: the best in economics, finance, investment, and international relations. You

5
00:00:23,160 --> 00:00:26,520
Speaker 2: can also watch the show live on YouTube. Visit the

6
00:00:26,520 --> 00:00:31,280
Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday

7
00:00:31,280 --> 00:00:34,320
Speaker 2: mornings from seven to ten am Eastern from our global

8
00:00:34,360 --> 00:00:39,000
Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify,

9
00:00:39,360 --> 00:00:42,920
Speaker 2: or anywhere else you listen and always I'm Bloomberg Radio,

10
00:00:43,080 --> 00:00:47,160
Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Long ago

11
00:00:47,200 --> 00:00:49,440
Speaker 2: and far away, folks, a guy named Farrell was at

12
00:00:49,479 --> 00:00:52,440
Speaker 2: Merrill Lynch with Rosenberg, and between the two of them

13
00:00:52,479 --> 00:00:55,560
Speaker 2: it was two required reads every week. And with Rosenberg

14
00:00:56,040 --> 00:00:58,640
Speaker 2: on page three or four, it was a vertical column

15
00:00:59,160 --> 00:01:04,160
Speaker 2: slicing in inflation like no one down the street. Absolutely,

16
00:01:04,200 --> 00:01:08,240
Speaker 2: no one did it or does it like David Rosenberg. David,

17
00:01:08,319 --> 00:01:11,640
Speaker 2: what is the character the nature of our disinflation?

18
00:01:13,680 --> 00:01:17,800
Speaker 3: Well, inflation like any other price, and of course inflation

19
00:01:17,959 --> 00:01:21,040
Speaker 3: is a changing price. Is not the level always going

20
00:01:21,080 --> 00:01:24,400
Speaker 3: to be dictated by the shape of the demand of

21
00:01:24,440 --> 00:01:28,199
Speaker 3: supply curves in the economy and how those curves are moving.

22
00:01:29,200 --> 00:01:31,680
Speaker 3: So you know, what we're seeing happening, and especially in

23
00:01:31,680 --> 00:01:35,000
Speaker 3: the labor market, is those demand of supply curves are

24
00:01:35,040 --> 00:01:40,280
Speaker 3: moving in a decisive disinflationary pattern. And so that's what

25
00:01:40,280 --> 00:01:43,800
Speaker 3: I'm looking at right now, just how these demand supply

26
00:01:43,880 --> 00:01:48,240
Speaker 3: curves are shifting and as I said, shifting way towards

27
00:01:48,240 --> 00:01:50,560
Speaker 3: lower wage inflation and price inflation in general.

28
00:01:50,840 --> 00:01:53,680
Speaker 2: Some people don't know where those curves are. Some people

29
00:01:53,760 --> 00:01:56,720
Speaker 2: look at them at Little Marshall and Cross. What I'm

30
00:01:56,760 --> 00:02:00,320
Speaker 2: going to suggest you is that's not true. But there

31
00:02:00,360 --> 00:02:05,200
Speaker 2: are times where accelerative tendencies or convexity can move. Is

32
00:02:05,280 --> 00:02:08,760
Speaker 2: supply moves or demand moves. Are we at a point

33
00:02:08,800 --> 00:02:12,080
Speaker 2: where we get jump conditions in disinflation to a much

34
00:02:12,120 --> 00:02:12,880
Speaker 2: lower set.

35
00:02:15,000 --> 00:02:18,200
Speaker 3: Well, the best way I can answer that is almost

36
00:02:18,280 --> 00:02:24,680
Speaker 3: a paraphrase what j Powell said at the podium after

37
00:02:24,840 --> 00:02:27,959
Speaker 3: the lst FMC meeting. You know where he said that

38
00:02:28,040 --> 00:02:30,800
Speaker 3: recession is not the FEDS base case scenario. He's not

39
00:02:30,840 --> 00:02:35,639
Speaker 3: concerned about a collapsing economy. But he talked incessantly about

40
00:02:36,040 --> 00:02:38,519
Speaker 3: the widening slack that we're seeing in the labor market.

41
00:02:39,919 --> 00:02:42,040
Speaker 3: And that's ultimately going to be one of the key

42
00:02:42,120 --> 00:02:46,040
Speaker 3: elements behind any inflation or disinflation. So it's very interesting

43
00:02:46,160 --> 00:02:49,000
Speaker 3: that while he remained a bit of a cheerleader for

44
00:02:49,080 --> 00:02:52,520
Speaker 3: the economy, he's noting that they're getting more comfortable, getting

45
00:02:52,560 --> 00:02:58,520
Speaker 3: more confident over the disinflation. But the emphasis on slack

46
00:02:58,600 --> 00:03:02,840
Speaker 3: emerging the labor market me was very key, and I

47
00:03:02,880 --> 00:03:05,600
Speaker 3: think that what he's really signaling here is that we

48
00:03:05,720 --> 00:03:08,400
Speaker 3: are saying, and whether it's because the productivity numbers have

49
00:03:08,520 --> 00:03:13,720
Speaker 3: consistently come in other than expected and the immigration boom

50
00:03:13,760 --> 00:03:17,440
Speaker 3: that supported population growth and the labor force participation rate,

51
00:03:18,520 --> 00:03:22,440
Speaker 3: that we've had a shift in the supply curve even

52
00:03:22,480 --> 00:03:25,800
Speaker 3: as demand is hung in. Now demand growth isn't what

53
00:03:25,840 --> 00:03:28,880
Speaker 3: it was, say twelve twenty four to thirty six months ago,

54
00:03:29,000 --> 00:03:32,160
Speaker 3: with all the stimulus, but demand growth is holding in.

55
00:03:32,639 --> 00:03:35,840
Speaker 3: But we have a situation where perhaps demand growth is

56
00:03:35,880 --> 00:03:38,520
Speaker 3: running at say two and a half percent on a trend,

57
00:03:39,520 --> 00:03:43,119
Speaker 3: but what if that's bumping against a supply curve that's

58
00:03:43,160 --> 00:03:46,240
Speaker 3: closer to four percent. So all of a sudden, what

59
00:03:46,280 --> 00:03:49,560
Speaker 3: we view as real GDP growth, which is the proxy

60
00:03:49,600 --> 00:03:52,320
Speaker 3: for agrid demand, what looks like two to two and

61
00:03:52,360 --> 00:03:55,920
Speaker 3: a half percent today benchmarked against what the supply curve

62
00:03:56,000 --> 00:03:58,640
Speaker 3: is doing in the economy is almost what zero was,

63
00:03:59,320 --> 00:04:02,000
Speaker 3: say ten to one of your thirty years ago. So

64
00:04:02,040 --> 00:04:05,000
Speaker 3: that's really what's important here, is every single widening gap

65
00:04:05,080 --> 00:04:10,400
Speaker 3: between the growth in every command benchmarked against acurate supply. Right,

66
00:04:10,520 --> 00:04:14,320
Speaker 3: that's on without a recession, you've had cornflation for all

67
00:04:14,360 --> 00:04:18,720
Speaker 3: to talk about sticky, sticky, sticky cornflations come down by

68
00:04:19,000 --> 00:04:20,599
Speaker 3: one hundred and fifty basis points.

69
00:04:20,680 --> 00:04:23,000
Speaker 2: You know, David and Paul Sweeney were at seven o

70
00:04:23,120 --> 00:04:26,120
Speaker 2: eight am at Wall Street time, and where our heads

71
00:04:26,120 --> 00:04:29,599
Speaker 2: are breaking over price theory with David Rosenberg. But the

72
00:04:29,680 --> 00:04:32,279
Speaker 2: answer is all of the Foreign Affairs article in China.

73
00:04:32,680 --> 00:04:34,760
Speaker 2: There's a lot of supply out there. There's a lot

74
00:04:34,760 --> 00:04:36,680
Speaker 2: of Maybe that's what's bringing prices down.

75
00:04:36,560 --> 00:04:39,200
Speaker 4: A lot of supply out there. David, what did the

76
00:04:39,880 --> 00:04:42,720
Speaker 4: what's the labor market telling us about this economy here?

77
00:04:42,760 --> 00:04:44,880
Speaker 4: I mean the market really got freaked out a week

78
00:04:44,880 --> 00:04:48,120
Speaker 4: ago Friday about some of those labor data.

79
00:04:50,600 --> 00:04:54,720
Speaker 3: Well, I don't think that you know, the stock market

80
00:04:55,440 --> 00:04:58,120
Speaker 3: as a stem alone number should have freaked out. I

81
00:04:58,360 --> 00:05:02,480
Speaker 3: was not surprised by the reaction, and the treasury market

82
00:05:02,880 --> 00:05:05,960
Speaker 3: was not surprised at ten year yields on that day

83
00:05:06,040 --> 00:05:09,200
Speaker 3: closed just below four percent, and we were down about

84
00:05:09,839 --> 00:05:12,000
Speaker 3: at least ten basis points that day. I mean, that

85
00:05:12,040 --> 00:05:16,440
Speaker 3: didn't surprise me because we saw a headline number below

86
00:05:16,480 --> 00:05:21,160
Speaker 3: expected downward revisions. The unemployment rate rose. Now you can

87
00:05:21,160 --> 00:05:23,480
Speaker 3: debate us whether or not that's a weather report or not.

88
00:05:23,600 --> 00:05:27,560
Speaker 3: The BLS said that the hurricane had just a marginal impact,

89
00:05:28,000 --> 00:05:30,480
Speaker 3: but you had widening slack in the labor market and

90
00:05:30,600 --> 00:05:35,159
Speaker 3: wage growth continued to recede. So this was just a

91
00:05:35,200 --> 00:05:38,320
Speaker 3: schmorgas board, a very benevolent events as far as the

92
00:05:38,360 --> 00:05:43,360
Speaker 3: treasure market was concerned. Was it a recessionary statistic, although

93
00:05:43,400 --> 00:05:47,360
Speaker 3: I'm still in the recession camp. It's been a long wait. No,

94
00:05:47,560 --> 00:05:52,120
Speaker 3: But it was certainly a disinflationary report, and that's what

95
00:05:52,160 --> 00:05:54,400
Speaker 3: the bond market had to see. And you see, the

96
00:05:54,480 --> 00:05:58,240
Speaker 3: thing is that the Non Farm and Household Survey came

97
00:05:58,240 --> 00:06:01,520
Speaker 3: out exactly two days after the foi C meeting. Now,

98
00:06:01,600 --> 00:06:04,680
Speaker 3: I would posit that if J. Powell didn't concentrate so

99
00:06:04,760 --> 00:06:07,200
Speaker 3: much of his attention on the other part of the

100
00:06:07,279 --> 00:06:10,640
Speaker 3: dual mandate, which is a labor market, where he talked

101
00:06:10,640 --> 00:06:14,440
Speaker 3: about that incessantly from the podium. Then maybe the market

102
00:06:14,480 --> 00:06:18,320
Speaker 3: reaction wouldn't have been so acute, especially in the bond market.

103
00:06:18,839 --> 00:06:23,200
Speaker 3: But he told you where his attention is shifting, and

104
00:06:23,360 --> 00:06:27,080
Speaker 3: so that's what made the employment number so much more important.

105
00:06:27,600 --> 00:06:31,320
Speaker 3: But it really reinforced his message that even without the

106
00:06:31,360 --> 00:06:36,359
Speaker 3: economy collapsing, we are seeing widening disinflationary slack converged in

107
00:06:36,360 --> 00:06:38,440
Speaker 3: the labor market. And that's all you really have.

108
00:06:38,320 --> 00:06:41,120
Speaker 2: To now, David folded into the stock market, which you

109
00:06:41,200 --> 00:06:43,520
Speaker 2: do so well, and I want you to fold in.

110
00:06:43,560 --> 00:06:48,200
Speaker 2: The idea of nominal GDP comes in because inflation comes

111
00:06:48,240 --> 00:06:52,719
Speaker 2: in in a Rosenberg flash fashion. Maybe real GDP's QUI

112
00:06:52,920 --> 00:06:56,360
Speaker 2: scenter solid or comes in and all of a sudden,

113
00:06:56,400 --> 00:07:00,919
Speaker 2: corporations are struggling for revenue growth. Alohol Depot is that

114
00:07:01,000 --> 00:07:02,560
Speaker 2: our twenty twenty.

115
00:07:02,200 --> 00:07:07,320
Speaker 3: Five Well, it probably is, because what was important about

116
00:07:07,320 --> 00:07:11,600
Speaker 3: home Depot wasn't what they said about their current sale,

117
00:07:11,640 --> 00:07:16,679
Speaker 3: the very weak guidance that they provided that was really

118
00:07:16,720 --> 00:07:20,840
Speaker 3: I think the source of disappointment today. And it's following

119
00:07:20,840 --> 00:07:26,640
Speaker 3: a string of companies, primarily in the consumer space, which

120
00:07:26,720 --> 00:07:31,120
Speaker 3: are really struggling, and all the eyes of course are

121
00:07:31,160 --> 00:07:36,400
Speaker 3: on technology and the general of AI wave and technology

122
00:07:37,000 --> 00:07:40,680
Speaker 3: call it over thirty percent of the stock market, a

123
00:07:40,760 --> 00:07:45,920
Speaker 3: much lower share of the economy. And what's important, I

124
00:07:45,960 --> 00:07:49,760
Speaker 3: think from I guess a macro perspective taking the queue

125
00:07:49,760 --> 00:07:53,560
Speaker 3: from the stock market, is that the only sector among

126
00:07:53,600 --> 00:07:56,120
Speaker 3: the eleven s and P five hundred sectors this year

127
00:07:56,160 --> 00:08:01,600
Speaker 3: that's in the red is consumer discretionary, which may be

128
00:08:01,800 --> 00:08:05,800
Speaker 3: less than ten percent of the stock market capitalization. It

129
00:08:05,840 --> 00:08:09,120
Speaker 3: doesn't get that much attention because everybody is just focused

130
00:08:09,120 --> 00:08:15,240
Speaker 3: on the sex that's provided by the technology sector. But

131
00:08:15,400 --> 00:08:19,960
Speaker 3: discretionary consumer spending is forty percent of GDP. And so

132
00:08:20,000 --> 00:08:22,280
Speaker 3: what the stock market is telling you for all the

133
00:08:22,360 --> 00:08:25,160
Speaker 3: naysayers out there a both because the recession hasn't come,

134
00:08:25,320 --> 00:08:29,360
Speaker 3: therefore it's never going to come. But you have a

135
00:08:29,360 --> 00:08:32,800
Speaker 3: disconnect between the components of the stock market, their shares

136
00:08:33,000 --> 00:08:34,400
Speaker 3: and the shares that actually are.

137
00:08:34,320 --> 00:08:35,599
Speaker 5: In the economy.

138
00:08:35,760 --> 00:08:39,400
Speaker 3: So the consumer discretionary space being the only sector down

139
00:08:39,880 --> 00:08:43,400
Speaker 3: but the dominant force in domestic demand I think is

140
00:08:43,480 --> 00:08:46,480
Speaker 3: a red flag as far as the economic goal look

141
00:08:46,559 --> 00:08:47,120
Speaker 3: is concerned.

142
00:08:47,679 --> 00:08:50,520
Speaker 4: So, David, how do you view the US consumer I mean,

143
00:08:50,559 --> 00:08:53,079
Speaker 4: I guess it's hard to even say there is a

144
00:08:53,120 --> 00:08:55,600
Speaker 4: common consumer out there. There seems to be many strata

145
00:08:55,840 --> 00:08:59,880
Speaker 4: out there. How would you characterize consumer demand out there?

146
00:09:00,800 --> 00:09:03,360
Speaker 3: Well, you know, everybody's talking about the K shaped economy,

147
00:09:03,800 --> 00:09:05,920
Speaker 3: but you are even starting to see some of the

148
00:09:05,960 --> 00:09:09,600
Speaker 3: strains emerge in the higher end. And the higher end

149
00:09:09,800 --> 00:09:12,680
Speaker 3: has been held up because they're not as dead heavy

150
00:09:13,040 --> 00:09:15,559
Speaker 3: as low and middle income households. They're not as dead heavy,

151
00:09:15,600 --> 00:09:19,080
Speaker 3: therefore not as vulnerable to the interst rate shot of

152
00:09:19,120 --> 00:09:22,600
Speaker 3: the past couple of years. And of course they've benefited

153
00:09:22,640 --> 00:09:25,439
Speaker 3: from the wealth effect from what the stock market has

154
00:09:25,440 --> 00:09:28,120
Speaker 3: given them, and now the stock market seems to be

155
00:09:28,160 --> 00:09:31,800
Speaker 3: topping out. But in the end, recessions are caused by

156
00:09:32,120 --> 00:09:35,640
Speaker 3: slight changes at the margin, and you're seeing those strains

157
00:09:35,679 --> 00:09:39,040
Speaker 3: really emerge amongst low income households, which spend one hundred

158
00:09:39,040 --> 00:09:42,560
Speaker 3: percent of their income. And I think, actually, you know,

159
00:09:42,600 --> 00:09:46,880
Speaker 3: the biggest bombshell was what Brian moynihan said on Facination

160
00:09:47,040 --> 00:09:52,080
Speaker 3: on Sunday, Because you know, these bank CEOs, let's face it,

161
00:09:52,080 --> 00:09:55,679
Speaker 3: they're normally a pretty cheery bunch, but he's talking about

162
00:09:55,720 --> 00:09:59,600
Speaker 3: their sample size, Oh, of only sixty million consumer accounts.

163
00:10:00,080 --> 00:10:03,440
Speaker 3: Hillis Ergo the other consumer bank, and he didn't just

164
00:10:03,480 --> 00:10:06,600
Speaker 3: say that consumer spending is slowing. He said, it's slowing sharply.

165
00:10:07,280 --> 00:10:09,160
Speaker 3: And you have all these other economists and I know

166
00:10:09,200 --> 00:10:11,520
Speaker 3: they show up on your show, is talking about oh well,

167
00:10:12,160 --> 00:10:15,200
Speaker 3: traffic at airports and traffic at restaurants and traffic at

168
00:10:15,240 --> 00:10:18,560
Speaker 3: theme parks. Everything's fine. And that was laid to rest

169
00:10:18,600 --> 00:10:21,679
Speaker 3: by Brian Monahan, who said, oh, yes, for sure, traffic

170
00:10:21,760 --> 00:10:26,520
Speaker 3: is strong. But here's the problem is that spending spending

171
00:10:26,800 --> 00:10:27,520
Speaker 3: per person.

172
00:10:28,000 --> 00:10:29,360
Speaker 5: Yeah, I'll take that down.

173
00:10:29,880 --> 00:10:33,160
Speaker 3: Also, stop by the way, traffic doesn't go into GD right.

174
00:10:33,160 --> 00:10:36,160
Speaker 2: But to put a bow on this, and I want

175
00:10:36,160 --> 00:10:38,120
Speaker 2: to get your market conviction here of what you're doing

176
00:10:38,160 --> 00:10:41,439
Speaker 2: if you're not all in cash. But to mister Moinianne's point,

177
00:10:41,760 --> 00:10:46,080
Speaker 2: revenue is price dynamics in unit dynamics, and so in

178
00:10:46,120 --> 00:10:50,160
Speaker 2: the airline business they're popping unit dynamics nicely. But the

179
00:10:50,200 --> 00:10:53,880
Speaker 2: prediction here has to be a Rosenberg like price drifts away.

180
00:10:54,080 --> 00:10:55,400
Speaker 2: There's no pricing power.

181
00:10:55,440 --> 00:10:59,760
Speaker 3: Is there no pricing power? And you know, there's obviously

182
00:11:01,240 --> 00:11:03,120
Speaker 3: a bit of a disconnect. I've got to say I'm

183
00:11:03,160 --> 00:11:07,440
Speaker 3: not a conspiracy theorist, but the government data have been

184
00:11:07,559 --> 00:11:11,240
Speaker 3: so far off. The more anecdotal survey data, and of

185
00:11:11,240 --> 00:11:14,920
Speaker 3: course what corporate executives have been saying, and what about

186
00:11:14,960 --> 00:11:17,040
Speaker 3: the Beige Book? And I was actually hardened by the

187
00:11:17,080 --> 00:11:19,640
Speaker 3: fact that at least J Pebbell gave some lip service

188
00:11:19,679 --> 00:11:23,240
Speaker 3: to the base Book, which is the most comprehensive, albeit

189
00:11:23,440 --> 00:11:26,520
Speaker 3: non data assessment of the US economy that comes with

190
00:11:26,600 --> 00:11:27,400
Speaker 3: every six weeks.

191
00:11:27,400 --> 00:11:28,280
Speaker 5: And you're a hundred.

192
00:11:28,000 --> 00:11:31,320
Speaker 3: Percent right, Tom, Every single basebook this year, even during

193
00:11:32,000 --> 00:11:35,679
Speaker 3: that temporary inflation blift caused by insurance costs beginning of

194
00:11:35,720 --> 00:11:37,959
Speaker 3: the year that caused the FED to sort of step back,

195
00:11:39,160 --> 00:11:43,319
Speaker 3: every single bag book is talking about an ongoing loss.

196
00:11:43,080 --> 00:11:45,760
Speaker 5: Of corporate pricing power. And of course you're not about

197
00:11:45,760 --> 00:11:46,400
Speaker 5: pricing power.

198
00:11:46,679 --> 00:11:49,360
Speaker 3: It's not about levels, and it's the bomb. Market does

199
00:11:49,400 --> 00:11:52,880
Speaker 3: not respond to levels, the responds to change. And what's

200
00:11:52,920 --> 00:11:57,000
Speaker 3: happening is that you see when the corporate sector, we're

201
00:11:57,080 --> 00:12:03,520
Speaker 3: raising prices was nobody's business in twenty two, nobody cared.

202
00:12:03,840 --> 00:12:06,160
Speaker 3: Everybody was willing to accept the price increases in the

203
00:12:06,160 --> 00:12:09,160
Speaker 3: consumer sector because you were flush, right with that two

204
00:12:09,160 --> 00:12:12,160
Speaker 3: tillion dollars the stimulus checks. They see all of a sudden,

205
00:12:12,520 --> 00:12:15,120
Speaker 3: the stimulus checks are gone. The same is rate It

206
00:12:15,160 --> 00:12:17,320
Speaker 3: barely more than three percent is a fraction of the

207
00:12:17,360 --> 00:12:20,280
Speaker 3: pre COVID range of seven to eight percent, and all

208
00:12:20,280 --> 00:12:24,160
Speaker 3: of a sudden, without the cash cushion, people see, look

209
00:12:24,200 --> 00:12:25,280
Speaker 3: at these price levels.

210
00:12:25,720 --> 00:12:25,920
Speaker 2: Now.

211
00:12:25,920 --> 00:12:27,959
Speaker 3: The thing is that, and this is what I'm looking at,

212
00:12:28,160 --> 00:12:32,120
Speaker 3: corporate profit margins are still in the top half of

213
00:12:32,200 --> 00:12:36,280
Speaker 3: the historical range. So companies actually have the capacity to

214
00:12:36,480 --> 00:12:38,800
Speaker 3: reduce their prices. I don't think we're going back to

215
00:12:38,840 --> 00:12:41,880
Speaker 3: where you're worth two or three, but they have capacity

216
00:12:41,920 --> 00:12:45,000
Speaker 3: to lower their prices in response to what was obviously

217
00:12:45,000 --> 00:12:48,120
Speaker 3: a consumer revolt right now against these prices. And that,

218
00:12:48,200 --> 00:12:50,320
Speaker 3: by the way, is when you build it to a

219
00:12:50,400 --> 00:12:56,000
Speaker 3: deflace eight deflationary environment times steadfastly bullish all the treasury.

220
00:12:55,640 --> 00:12:58,440
Speaker 2: Market, thank you, and we'll get the yield calls the

221
00:12:58,480 --> 00:13:00,120
Speaker 2: next time around. A lot of people will all of

222
00:13:00,160 --> 00:13:01,600
Speaker 2: a sudden looking.

223
00:13:01,240 --> 00:13:05,520
Speaker 5: For Rosenberg like yields. David Rosenberg Rosenberg.

224
00:13:05,120 --> 00:13:18,679
Speaker 2: Research can't say enough about his work. Seemshaw, who joins

225
00:13:18,720 --> 00:13:23,280
Speaker 2: us right now. Seemashaw is with principal Grow were thrilled

226
00:13:23,320 --> 00:13:25,640
Speaker 2: that she could join us this morning with a great

227
00:13:25,679 --> 00:13:30,560
Speaker 2: perspective from London. I want to get to the flap

228
00:13:30,600 --> 00:13:32,520
Speaker 2: at the moment, which is sort of the global wrap

229
00:13:32,559 --> 00:13:35,079
Speaker 2: around the carry trade in Japan. But I want to

230
00:13:35,120 --> 00:13:39,079
Speaker 2: bounce off what Lisa Matteo just said, which is people

231
00:13:39,120 --> 00:13:42,600
Speaker 2: are considering layoffs. Are we just really setting ourselves up

232
00:13:43,200 --> 00:13:46,800
Speaker 2: a la home depot alla, generous motors and others where

233
00:13:46,840 --> 00:13:49,800
Speaker 2: companies are really going to start managing headcount?

234
00:13:50,120 --> 00:13:51,640
Speaker 5: Is that what you feel in the air.

235
00:13:53,000 --> 00:13:55,800
Speaker 6: Hey, tom So? I mean, look, that is really important news.

236
00:13:55,800 --> 00:13:58,880
Speaker 6: If we start to hear more companies talking about layoffs

237
00:13:58,920 --> 00:14:01,000
Speaker 6: and it really is a concern, I would say that

238
00:14:01,040 --> 00:14:02,880
Speaker 6: at the moment though, I mean I think what we've

239
00:14:02,880 --> 00:14:07,959
Speaker 6: been hearing on the street and across the board is, yes,

240
00:14:08,400 --> 00:14:12,240
Speaker 6: companies are revisiting their labor costs. It makes sense. You know,

241
00:14:12,320 --> 00:14:15,160
Speaker 6: they're looking at hire every financing costs, particularly with the

242
00:14:15,200 --> 00:14:18,080
Speaker 6: funding wall coming up, and so as a result of that,

243
00:14:18,080 --> 00:14:20,400
Speaker 6: they're looking at everything and they have to you know,

244
00:14:21,120 --> 00:14:23,800
Speaker 6: balance off any additional cost somewhere else. And the thing

245
00:14:23,840 --> 00:14:26,680
Speaker 6: that they are looking at is appraising where on the

246
00:14:26,920 --> 00:14:29,400
Speaker 6: lob cost site that they can pull back on. We

247
00:14:29,480 --> 00:14:32,680
Speaker 6: haven't as yet seen layoffs, but we have seen snipping

248
00:14:32,680 --> 00:14:36,200
Speaker 6: around at the edges where they're produced hours, earnings, et cetera.

249
00:14:36,320 --> 00:14:39,080
Speaker 6: But not quite the job layoffs at this point.

250
00:14:38,600 --> 00:14:41,480
Speaker 2: What sector do we watch to see the trend? The

251
00:14:41,720 --> 00:14:44,640
Speaker 2: easy answer for Global Wall Street it's a financial sector.

252
00:14:45,240 --> 00:14:47,360
Speaker 5: But what sector would you pay attention to?

253
00:14:48,360 --> 00:14:50,520
Speaker 6: It's a financial sector cently, but it's really the consumer

254
00:14:50,560 --> 00:14:54,280
Speaker 6: discretionary because that remember that the consumer site has been

255
00:14:54,320 --> 00:14:57,880
Speaker 6: the key driver for the broader, ye broader US economy.

256
00:14:58,280 --> 00:15:01,480
Speaker 6: If you're starting to see pullback on that area, well

257
00:15:01,520 --> 00:15:04,960
Speaker 6: then that really does start to question the strength the

258
00:15:05,000 --> 00:15:07,160
Speaker 6: resilience of the US economy. So that's a bit I think,

259
00:15:07,160 --> 00:15:10,400
Speaker 6: which would be the really concerning side, And suddenly any

260
00:15:10,400 --> 00:15:12,240
Speaker 6: areas which are really interest rate sensitive the bit that

261
00:15:12,280 --> 00:15:14,360
Speaker 6: would be more cyclical and would be I guess bit

262
00:15:14,400 --> 00:15:17,800
Speaker 6: more of an advanced warning that there's economic pressures building.

263
00:15:18,760 --> 00:15:21,280
Speaker 4: So Sam mcgiven that, I guess, you know, you think

264
00:15:21,280 --> 00:15:23,800
Speaker 4: about a week ago Friday, with the job data really

265
00:15:23,880 --> 00:15:25,920
Speaker 4: kind of spook the market, how do you think the

266
00:15:25,920 --> 00:15:28,480
Speaker 4: Federal Reserve is kind of leaning at this point?

267
00:15:30,360 --> 00:15:32,280
Speaker 6: So I think this is the big question that everyone

268
00:15:32,280 --> 00:15:35,440
Speaker 6: is thinking through. So I think similar to I mean,

269
00:15:35,680 --> 00:15:37,320
Speaker 6: the first thing to member is that you know, just

270
00:15:37,360 --> 00:15:39,680
Speaker 6: as we are absorbing the ecomic data as it comes out,

271
00:15:39,720 --> 00:15:41,400
Speaker 6: that is exactly what the feathers do that. I don't

272
00:15:41,400 --> 00:15:44,240
Speaker 6: think they have any additional information on top of what

273
00:15:44,280 --> 00:15:46,760
Speaker 6: we do. But what we can see in assuming that

274
00:15:46,800 --> 00:15:49,320
Speaker 6: the inflation data today and tomorrow are fairly well behaved,

275
00:15:49,320 --> 00:15:52,640
Speaker 6: it means that they can shift their focus points to

276
00:15:52,680 --> 00:15:55,680
Speaker 6: the other side of their mandate. Now, we do think

277
00:15:55,720 --> 00:15:57,800
Speaker 6: that they will have to err on the side of caution.

278
00:15:58,200 --> 00:16:00,960
Speaker 6: You know, maybe think about front loading of those rate cuts,

279
00:16:01,480 --> 00:16:04,360
Speaker 6: whether that's back to back twenty five bases point cuts.

280
00:16:04,560 --> 00:16:07,640
Speaker 6: If you have a worse labor market report come the

281
00:16:07,680 --> 00:16:10,880
Speaker 6: beginning of September than certainly a fifty bases point move

282
00:16:10,920 --> 00:16:12,560
Speaker 6: starts to come on to board. But the thing that

283
00:16:12,600 --> 00:16:14,640
Speaker 6: you're seeing already is that FRED speakers are not all

284
00:16:14,760 --> 00:16:17,720
Speaker 6: unanimous in the idea that the labor market is slowing,

285
00:16:17,800 --> 00:16:19,920
Speaker 6: that inflation is under control. So I think there's a

286
00:16:19,920 --> 00:16:21,840
Speaker 6: bit of consensus building that still needs to go on

287
00:16:21,960 --> 00:16:22,760
Speaker 6: behind the scenes.

288
00:16:24,320 --> 00:16:27,600
Speaker 4: And Suman, we had some the manufacturing I know, this

289
00:16:27,640 --> 00:16:30,320
Speaker 4: is a services driven economy here in the US seventy

290
00:16:30,320 --> 00:16:34,440
Speaker 4: percent or so, but the manufacturing market, manufacturing economies week,

291
00:16:34,480 --> 00:16:39,040
Speaker 4: we had some weak isms last week. What do you

292
00:16:39,040 --> 00:16:39,440
Speaker 4: make of that?

293
00:16:41,520 --> 00:16:43,880
Speaker 6: Well, it's concerning, I mean, I think with the isms

294
00:16:44,360 --> 00:16:46,040
Speaker 6: for the last year or so, i'ld say that they

295
00:16:46,040 --> 00:16:48,480
Speaker 6: haven't been the best indicative of what's actually going on

296
00:16:49,040 --> 00:16:51,760
Speaker 6: selling the hard data, So we want to take that

297
00:16:51,840 --> 00:16:53,880
Speaker 6: with a pinch of salt. But this is the thing

298
00:16:53,920 --> 00:16:55,320
Speaker 6: with the US of commune. I don't think en was

299
00:16:55,320 --> 00:16:58,480
Speaker 6: in denial about this. They're really our pockets a weakness.

300
00:16:58,880 --> 00:17:00,680
Speaker 6: It's definitely not the point I don't end what's making

301
00:17:00,720 --> 00:17:03,840
Speaker 6: the point that the whole US economy is looking really strong.

302
00:17:04,240 --> 00:17:07,199
Speaker 6: So I were saying manufacturing segments of housing, they're the

303
00:17:07,280 --> 00:17:11,240
Speaker 6: areas where you are seeing weakness. And to your point

304
00:17:11,280 --> 00:17:13,560
Speaker 6: before you know, services is the main driver. So that's

305
00:17:13,560 --> 00:17:16,679
Speaker 6: a bit that if that starts to turn and starts

306
00:17:16,680 --> 00:17:18,959
Speaker 6: to topple, then actually the picture for the US economy

307
00:17:18,960 --> 00:17:24,280
Speaker 6: starts to really really deteriorate. The manufacturing side is clearly slowing.

308
00:17:24,359 --> 00:17:26,200
Speaker 6: I think that has come through in a number of

309
00:17:26,240 --> 00:17:27,119
Speaker 6: bits of data.

310
00:17:27,280 --> 00:17:29,680
Speaker 2: So where do you have nominal GDP. I mean, we're

311
00:17:29,680 --> 00:17:31,640
Speaker 2: sitting here this morning in New York team we're looking

312
00:17:31,640 --> 00:17:36,240
Speaker 2: at home depot with you know, not shocking that's the wrong.

313
00:17:36,000 --> 00:17:36,480
Speaker 5: Word, but.

314
00:17:37,960 --> 00:17:42,640
Speaker 2: Abruptly negative same store sales numbers. Is that just an

315
00:17:42,640 --> 00:17:47,000
Speaker 2: indication that nominal GDP not only under five percent, but

316
00:17:47,119 --> 00:17:50,800
Speaker 2: can begin to threaten a nominal GDP growth to three

317
00:17:50,840 --> 00:17:51,880
Speaker 2: point nine percent.

318
00:17:53,600 --> 00:17:56,280
Speaker 6: So what we're seeing in our podcast as we get

319
00:17:56,280 --> 00:17:58,040
Speaker 6: through to the second half of the year is that

320
00:17:58,080 --> 00:18:02,240
Speaker 6: you see GDP slowing down towards that trend level somewhere

321
00:18:02,280 --> 00:18:04,399
Speaker 6: between the one point seventy to two point two percent

322
00:18:04,440 --> 00:18:08,439
Speaker 6: on a real GDP basis. So I do think I mean,

323
00:18:08,480 --> 00:18:11,040
Speaker 6: I think the home depot is a concern because we

324
00:18:11,080 --> 00:18:12,439
Speaker 6: do typically look at that. It's a bit of a

325
00:18:12,440 --> 00:18:15,000
Speaker 6: forward looking indicator of what is building up in terms

326
00:18:15,040 --> 00:18:17,720
Speaker 6: of strains amongst consumers. So it's one thing that we

327
00:18:17,720 --> 00:18:20,560
Speaker 6: do need to really focus on and take notice of

328
00:18:20,560 --> 00:18:22,639
Speaker 6: that news story. But I think that we should be

329
00:18:22,640 --> 00:18:24,520
Speaker 6: expecting that, look, the use of company isn't going to stay.

330
00:18:24,760 --> 00:18:27,080
Speaker 6: It's not going to stay, not going to continue to accelerate.

331
00:18:27,080 --> 00:18:31,359
Speaker 6: I would expect that atlantic GDP now tracker to be

332
00:18:31,359 --> 00:18:34,119
Speaker 6: coming down as a month and the quarter progresses. But

333
00:18:34,200 --> 00:18:37,200
Speaker 6: I think a trend level for GDP for the second

334
00:18:37,240 --> 00:18:39,639
Speaker 6: half of this year makes sense, with maybe a further

335
00:18:39,680 --> 00:18:42,360
Speaker 6: slowdown at the beginning of next year before the red

336
00:18:42,359 --> 00:18:44,879
Speaker 6: cants start to really come in and second half of

337
00:18:44,960 --> 00:18:46,520
Speaker 6: next year starts to look a little bit stronger.

338
00:18:46,600 --> 00:18:47,920
Speaker 5: Look, so let me cut to the chase.

339
00:18:47,960 --> 00:18:51,040
Speaker 2: What does a stock market do if I've got trending

340
00:18:51,680 --> 00:18:53,400
Speaker 2: tepid sea mishaw like.

341
00:18:53,359 --> 00:18:54,560
Speaker 5: We're going to get through the year.

342
00:18:55,600 --> 00:18:58,600
Speaker 2: Is there a way that equities manage to be resilient

343
00:18:58,800 --> 00:19:01,280
Speaker 2: or even in proven price.

344
00:19:02,800 --> 00:19:04,240
Speaker 6: I think that they do. So I think that there's

345
00:19:04,240 --> 00:19:07,480
Speaker 6: actually a window, actually a Frienny long window where equities

346
00:19:07,560 --> 00:19:10,880
Speaker 6: can do okay. Now, for the first month or two,

347
00:19:10,920 --> 00:19:12,320
Speaker 6: I think it is going to be challenging because the

348
00:19:12,359 --> 00:19:14,760
Speaker 6: market is going to respond to every single bit of data,

349
00:19:15,200 --> 00:19:17,480
Speaker 6: and ineptly across any bit of data, there's going to

350
00:19:17,480 --> 00:19:22,080
Speaker 6: be pockets which you are weak, so that volatility uncertainty continues.

351
00:19:22,320 --> 00:19:23,880
Speaker 6: But I think the key thing is this, in terms

352
00:19:23,920 --> 00:19:26,800
Speaker 6: of a recession outlook, even if there is a genuine

353
00:19:26,840 --> 00:19:30,119
Speaker 6: economic slowdown coming through, given the resilience and the balance

354
00:19:30,119 --> 00:19:33,320
Speaker 6: sheet strength of households and corporates, is it likely that

355
00:19:33,400 --> 00:19:36,320
Speaker 6: the Fed can't come to save the US economy with

356
00:19:36,400 --> 00:19:39,320
Speaker 6: various red cuts. So I try to put the chance

357
00:19:39,359 --> 00:19:42,320
Speaker 6: of recession fairly low, which means that after a bit

358
00:19:42,359 --> 00:19:45,320
Speaker 6: of volatility and pullback, I think the equity market can

359
00:19:45,400 --> 00:19:47,520
Speaker 6: still eke out some positive gains as we get through

360
00:19:47,880 --> 00:19:49,920
Speaker 6: twenty twenty four into twenty twenty five.

361
00:19:50,119 --> 00:19:51,360
Speaker 5: That's her first ball of a week.

362
00:19:51,480 --> 00:19:52,199
Speaker 4: Yeah, there you go.

363
00:19:53,760 --> 00:19:54,080
Speaker 2: Doing it.

364
00:19:54,880 --> 00:19:57,439
Speaker 4: I mean, have we been talking about a recession for

365
00:19:57,480 --> 00:20:02,040
Speaker 4: two maybe three years now? When when do we typically

366
00:20:02,080 --> 00:20:06,440
Speaker 4: how often do recessions typically happen? And aren't we overdue?

367
00:20:08,160 --> 00:20:10,480
Speaker 6: So look, it depends whichever indicator you're looking at. But

368
00:20:10,520 --> 00:20:12,960
Speaker 6: I mean, if you're thinking about what happens post for

369
00:20:13,160 --> 00:20:16,480
Speaker 6: tightening around now is when you're meant to be in recession.

370
00:20:17,040 --> 00:20:20,960
Speaker 6: So certainly with the sum rule, with the jobs numbers,

371
00:20:21,000 --> 00:20:23,480
Speaker 6: et cetera, maybe it'll kind of falls together nicely that

372
00:20:23,520 --> 00:20:25,280
Speaker 6: this is the time that we should be in recession.

373
00:20:25,640 --> 00:20:27,600
Speaker 6: But if you look across the broader environment, you know

374
00:20:27,600 --> 00:20:30,000
Speaker 6: we're not really seeing signs of that. The concern, of course,

375
00:20:30,200 --> 00:20:33,520
Speaker 6: is always that once you see some layoffs, it becomes

376
00:20:33,600 --> 00:20:36,800
Speaker 6: something which is self reinforcing and it can unravel very

377
00:20:36,880 --> 00:20:40,119
Speaker 6: very quickly, which is why these news stories around companies

378
00:20:40,160 --> 00:20:43,080
Speaker 6: announcab layoups is really really important. But as I said,

379
00:20:43,119 --> 00:20:45,800
Speaker 6: as long as you have strong household and corporate balance sheets,

380
00:20:46,000 --> 00:20:48,080
Speaker 6: then actually a weakness in the labor market should not

381
00:20:48,119 --> 00:20:50,439
Speaker 6: be able to mutate into that kind of hard landing.

382
00:20:50,800 --> 00:20:54,440
Speaker 2: Sumer Sea, thank you so much. The Principal Assets Management,

383
00:20:54,440 --> 00:20:57,040
Speaker 2: their chief Global Strategies greatly appreciate that.

384
00:21:07,800 --> 00:21:08,119
Speaker 5: Folks.

385
00:21:08,160 --> 00:21:10,560
Speaker 2: Actually, when we quote PPI, Paul and I have no

386
00:21:10,640 --> 00:21:11,800
Speaker 2: idea what we're talking about.

387
00:21:11,880 --> 00:21:12,080
Speaker 5: Now.

388
00:21:12,240 --> 00:21:15,040
Speaker 2: Mcke's in my ear telling me what to do. But

389
00:21:15,080 --> 00:21:17,520
Speaker 2: the reason we're doing it is to give Sarah House

390
00:21:18,240 --> 00:21:21,320
Speaker 2: time to digest the numbers. Senior economist at Wells Fargo,

391
00:21:21,880 --> 00:21:25,120
Speaker 2: an expert on this. Sarah House, does this PPI set

392
00:21:25,560 --> 00:21:27,879
Speaker 2: confirm disinflation in place?

393
00:21:29,320 --> 00:21:32,400
Speaker 1: I think it confirms that we are seeing that disinflationary

394
00:21:32,480 --> 00:21:36,320
Speaker 1: trend still underway. So we did see I think some

395
00:21:36,440 --> 00:21:39,240
Speaker 1: improvement in terms of the headline and the traditional core,

396
00:21:39,440 --> 00:21:42,320
Speaker 1: although if you look at what we refer to as

397
00:21:42,359 --> 00:21:45,200
Speaker 1: the core core in the PPI, so that strips out

398
00:21:45,200 --> 00:21:48,399
Speaker 1: an addition to food and energy trade services, which are

399
00:21:48,440 --> 00:21:51,360
Speaker 1: measured in margins. That did come in a little bit

400
00:21:51,400 --> 00:21:56,280
Speaker 1: firmer than expected, which I think is consistent with slowing inflation,

401
00:21:56,640 --> 00:21:58,439
Speaker 1: but it's a gradual slope.

402
00:21:58,640 --> 00:22:00,560
Speaker 2: So there's a summary for you in the summary and

403
00:22:00,600 --> 00:22:04,880
Speaker 2: the support we get on economic indicators. Always with Commonwealth,

404
00:22:04,960 --> 00:22:08,760
Speaker 2: our economic indicators is Sarah House today brought you by Commonwealth,

405
00:22:08,840 --> 00:22:12,520
Speaker 2: supporting more than two thousand independent financial advisors with a

406
00:22:12,560 --> 00:22:16,359
Speaker 2: two to one advisor to staff ratio small firm attentiveness,

407
00:22:16,720 --> 00:22:17,960
Speaker 2: big advisor impact.

408
00:22:18,160 --> 00:22:20,160
Speaker 5: Go to Commonwealth.

409
00:22:20,520 --> 00:22:22,240
Speaker 4: Sarah, what do you think the Federal Reserve? How do

410
00:22:22,280 --> 00:22:24,360
Speaker 4: you think this Federal Reserve will kind of look at

411
00:22:24,359 --> 00:22:26,440
Speaker 4: these numbers this morning in totality?

412
00:22:27,920 --> 00:22:29,960
Speaker 1: Yeah, so, I think they'll be digging into the details

413
00:22:30,000 --> 00:22:33,760
Speaker 1: in terms of what specifically feeds into the PCE measure.

414
00:22:33,920 --> 00:22:37,320
Speaker 1: So I think, like economists and like a lot of

415
00:22:37,359 --> 00:22:40,119
Speaker 1: market participants, getting a lot more dialed in into the

416
00:22:40,160 --> 00:22:44,000
Speaker 1: granularity of the PCE and CPI combo what it means

417
00:22:44,000 --> 00:22:48,120
Speaker 1: for the Feds in preferred inflation measure. But I think

418
00:22:48,160 --> 00:22:51,840
Speaker 1: they'll be looking at a number that still seems like

419
00:22:51,880 --> 00:22:54,960
Speaker 1: it's consistent with the first quarters flare up in inflation

420
00:22:55,160 --> 00:22:58,920
Speaker 1: being just that a flare up and again not really

421
00:22:58,960 --> 00:23:02,480
Speaker 1: derailing the disinflationary trend that started last year.

422
00:23:03,080 --> 00:23:07,160
Speaker 4: So give us your thoughts here, Sarah about this economy here.

423
00:23:07,200 --> 00:23:08,679
Speaker 4: I think a lot of folks are concerned that the

424
00:23:08,680 --> 00:23:11,520
Speaker 4: Fed is it's too late in cutting rates and that

425
00:23:11,560 --> 00:23:16,720
Speaker 4: the risks of inflation a recession are really there and

426
00:23:16,800 --> 00:23:19,160
Speaker 4: maybe the Fed's not recognizing them. How do you think

427
00:23:19,160 --> 00:23:20,200
Speaker 4: about that?

428
00:23:21,440 --> 00:23:23,120
Speaker 1: Yeah, so when I look at the labor market data,

429
00:23:23,160 --> 00:23:26,520
Speaker 1: and this isn't just about the July jobs report that

430
00:23:26,560 --> 00:23:28,720
Speaker 1: we got a little over a week ago, but really

431
00:23:28,760 --> 00:23:31,919
Speaker 1: the array of jobs market data, which shows that not

432
00:23:32,000 --> 00:23:35,280
Speaker 1: only are conditions softening, but they're really back to where

433
00:23:35,320 --> 00:23:38,280
Speaker 1: they were and kind of pre pandemic in some cases

434
00:23:38,320 --> 00:23:42,040
Speaker 1: even mid twenty tens. I think that you are seeing

435
00:23:42,080 --> 00:23:45,080
Speaker 1: that that downward momentum is concerning, and I think the

436
00:23:45,840 --> 00:23:49,160
Speaker 1: recession risks have risen. But the good news is that

437
00:23:49,240 --> 00:23:52,919
Speaker 1: the FED has room to dial back the level of

438
00:23:52,960 --> 00:23:56,120
Speaker 1: restrictiveness that we're seeing. And I don't think a recession

439
00:23:56,200 --> 00:23:58,880
Speaker 1: is a foregone conclusion, but the FED needs to get

440
00:23:58,880 --> 00:24:02,800
Speaker 1: going in or to support the labor market, especially given

441
00:24:02,840 --> 00:24:05,840
Speaker 1: that I think we've seen that disinflationary trend in place

442
00:24:05,920 --> 00:24:08,159
Speaker 1: and no longer as much of a concern.

443
00:24:08,320 --> 00:24:10,560
Speaker 2: Let's get up to CPI to Marlin Sarah House, I mean,

444
00:24:10,560 --> 00:24:13,800
Speaker 2: you've got a model on an Excel spreadsheet, one part

445
00:24:13,840 --> 00:24:19,120
Speaker 2: real GDP and one part your measure of inflation equals

446
00:24:19,119 --> 00:24:22,480
Speaker 2: nominal GDP. Let's go through each part right now, Where

447
00:24:22,480 --> 00:24:25,399
Speaker 2: are you forward on real GDP twelve months?

448
00:24:26,480 --> 00:24:29,040
Speaker 1: Yeah, so we're looking for real GDP to slow, so

449
00:24:29,119 --> 00:24:31,760
Speaker 1: probably somewhere closer to one and a half two percent

450
00:24:32,000 --> 00:24:34,879
Speaker 1: over the next twelve months, and I think that is

451
00:24:34,960 --> 00:24:37,840
Speaker 1: consistent with the slowdown that we're seeing in the jobs

452
00:24:37,840 --> 00:24:42,800
Speaker 1: market what that means for consumer income, but with inflation

453
00:24:42,920 --> 00:24:44,239
Speaker 1: slowing too, that does mean that.

454
00:24:44,560 --> 00:24:46,960
Speaker 2: So what's your inflation number that you're overlaying on a

455
00:24:47,000 --> 00:24:49,760
Speaker 2: one and a half to two one point seventy five

456
00:24:49,800 --> 00:24:51,160
Speaker 2: percent center tendency.

457
00:24:52,200 --> 00:24:54,960
Speaker 1: Yeah, so when you're looking at core PCEE, probably somewhere

458
00:24:55,280 --> 00:24:57,680
Speaker 1: right around two percent, maybe two and a quarter, so

459
00:24:58,080 --> 00:25:00,320
Speaker 1: further progress, not quite all the way back to the

460
00:25:00,359 --> 00:25:02,760
Speaker 1: Fed six percent target, but we think against the labor

461
00:25:02,760 --> 00:25:03,920
Speaker 1: market good enough as much.

462
00:25:03,960 --> 00:25:04,720
Speaker 4: This is critical.

463
00:25:04,800 --> 00:25:08,840
Speaker 2: So you're talking about modeling a center tendency sub four

464
00:25:08,880 --> 00:25:10,760
Speaker 2: percent nominal GDP.

465
00:25:12,200 --> 00:25:15,159
Speaker 1: Roughly four percent, Yeah, given that inflation is probably going

466
00:25:15,200 --> 00:25:15,960
Speaker 1: to be a little bit about it.

467
00:25:15,960 --> 00:25:17,320
Speaker 2: I'm just trying to make some news here. It's a

468
00:25:17,359 --> 00:25:19,960
Speaker 2: slow day here. Sarah alse wells Fargo with us. Sarah,

469
00:25:19,960 --> 00:25:21,840
Speaker 2: what are we going to see tomorrow with the CPI

470
00:25:22,080 --> 00:25:22,840
Speaker 2: at eight thirty?

471
00:25:23,800 --> 00:25:25,760
Speaker 1: Yeah, So we're looking for a zero point two percent

472
00:25:25,840 --> 00:25:28,200
Speaker 1: increase on both the headline and the core. So that's

473
00:25:28,320 --> 00:25:31,600
Speaker 1: in line with the consensus, but I think the details

474
00:25:31,600 --> 00:25:33,879
Speaker 1: are going to be really important. So to what extent

475
00:25:33,960 --> 00:25:37,800
Speaker 1: are we still seeing outright goods deflation? And are we

476
00:25:37,840 --> 00:25:40,800
Speaker 1: seeing more progress on the services side, both in housing

477
00:25:40,920 --> 00:25:44,240
Speaker 1: but also the non housing services that have been such

478
00:25:44,280 --> 00:25:45,800
Speaker 1: a concern for the Fed.

479
00:25:47,080 --> 00:25:49,320
Speaker 4: So, Sarah, I mean, I guess you know, one of

480
00:25:49,359 --> 00:25:51,720
Speaker 4: the issues here is the consumer. We're also going to

481
00:25:51,760 --> 00:25:54,840
Speaker 4: hear from the consumer later this week. How's the US

482
00:25:54,880 --> 00:25:58,040
Speaker 4: consumer out there from your perspective, Yeah, so.

483
00:25:58,000 --> 00:26:00,960
Speaker 1: The US consumer is hanging in there, but we do

484
00:26:01,200 --> 00:26:05,640
Speaker 1: think that households are increasingly constrained in their spending. So

485
00:26:05,880 --> 00:26:09,200
Speaker 1: credit is more expensive, harder to get, so we're seeing

486
00:26:09,240 --> 00:26:11,760
Speaker 1: less use of it. At the same time, not as

487
00:26:11,880 --> 00:26:15,600
Speaker 1: much of that of that excess savings from the pandemic,

488
00:26:15,920 --> 00:26:18,280
Speaker 1: And so it really comes down to the jobs market,

489
00:26:18,400 --> 00:26:22,720
Speaker 1: and they'rew slower dog growth, slower nominal wage growth. That

490
00:26:22,880 --> 00:26:27,679
Speaker 1: means slower slower income growth as well, right, And so

491
00:26:27,760 --> 00:26:29,800
Speaker 1: we think that's where where you get that slow down

492
00:26:29,960 --> 00:26:32,480
Speaker 1: in consumer spending is consumers just don't have as much

493
00:26:32,560 --> 00:26:34,920
Speaker 1: to fall back on. And so they're getting more cautious

494
00:26:34,960 --> 00:26:38,000
Speaker 1: as a result, but you still have positive real income gains,

495
00:26:38,000 --> 00:26:40,720
Speaker 1: and so that's keeping overall spending in positive territory.

496
00:26:40,920 --> 00:26:45,680
Speaker 2: Sure, fold in your work economics into the Wells Fargo

497
00:26:46,280 --> 00:26:48,760
Speaker 2: yield guess and where I want to go. I mean,

498
00:26:48,800 --> 00:26:51,040
Speaker 2: I can go ten year nominal, but I'm going to

499
00:26:51,040 --> 00:26:54,200
Speaker 2: go the ten year inflation is just to yield. It's

500
00:26:54,200 --> 00:26:57,199
Speaker 2: in two beeps, it's in five beeps over two cups

501
00:26:57,200 --> 00:27:02,560
Speaker 2: of Starbucks black coffee one point seven seven percent. How

502
00:27:02,640 --> 00:27:06,439
Speaker 2: much down can real yields come when you model in

503
00:27:06,480 --> 00:27:08,920
Speaker 2: a maybe four percent nomenal GDP.

504
00:27:10,640 --> 00:27:12,560
Speaker 1: Well, I think if you continue to see the improvement

505
00:27:12,600 --> 00:27:15,440
Speaker 1: on the inflation side, they can they can come in

506
00:27:15,480 --> 00:27:17,439
Speaker 1: a little bit more. And I think especially as if

507
00:27:17,480 --> 00:27:19,680
Speaker 1: you get the FED cutting, which we think that they'll

508
00:27:19,680 --> 00:27:23,879
Speaker 1: actually cut pretty aggressively here in the rest of the

509
00:27:23,920 --> 00:27:26,560
Speaker 1: rest of the year. So there's there's probably still still

510
00:27:26,600 --> 00:27:29,720
Speaker 1: some room to go. But we're not going back to

511
00:27:30,320 --> 00:27:32,880
Speaker 1: the pre pandemic days by any means. So we think

512
00:27:32,920 --> 00:27:36,800
Speaker 1: that FED easing is going to be more recalibration and

513
00:27:37,440 --> 00:27:39,720
Speaker 1: not a move to accommodativeness.

514
00:27:40,119 --> 00:27:42,680
Speaker 2: Thanks so much, greatly appreciate that Sarah House with us

515
00:27:43,359 --> 00:27:44,280
Speaker 2: with Wills Fargo.

516
00:27:44,640 --> 00:27:47,199
Speaker 5: They're Senior Economistic.

517
00:27:57,400 --> 00:28:02,119
Speaker 2: Your Daily front Pages, the Less of Hour, Lisa, what

518
00:28:02,119 --> 00:28:02,879
Speaker 2: do you have? All Right?

519
00:28:02,920 --> 00:28:05,360
Speaker 7: We've talked about how artificial and intelligence like a lot

520
00:28:05,359 --> 00:28:06,800
Speaker 7: of college kids are taking.

521
00:28:06,560 --> 00:28:07,320
Speaker 1: Courses in it.

522
00:28:07,600 --> 00:28:10,919
Speaker 7: But it turns out a lot of older Americans, we're

523
00:28:10,920 --> 00:28:13,679
Speaker 7: talking about seniors, they are starting to take classes in

524
00:28:13,840 --> 00:28:16,360
Speaker 7: artificial intelligence. I mean, think about it. They've gone through

525
00:28:16,359 --> 00:28:18,680
Speaker 7: a lot of transitions, right, you had the icebox to

526
00:28:18,760 --> 00:28:21,080
Speaker 7: the refrigerator, you had radio to TV.

527
00:28:21,320 --> 00:28:22,200
Speaker 1: Ye had they went.

528
00:28:22,040 --> 00:28:23,120
Speaker 7: Through all these transports.

529
00:28:24,800 --> 00:28:26,480
Speaker 5: Icebox I didn't point to.

530
00:28:28,520 --> 00:28:30,560
Speaker 2: I don't have a clear memory, but I have a

531
00:28:30,600 --> 00:28:33,520
Speaker 2: memory of my mother waiting for the ice truck, okay

532
00:28:33,560 --> 00:28:34,080
Speaker 2: to come down.

533
00:28:34,359 --> 00:28:36,479
Speaker 7: Okay, so you're in there, you're in there, all right.

534
00:28:36,560 --> 00:28:40,040
Speaker 4: So there here's bar Barbara Winston. I saw ice boxes

535
00:28:40,080 --> 00:28:42,560
Speaker 4: turn into refrigerators. That is how long I've been around.

536
00:28:42,960 --> 00:28:45,880
Speaker 4: But I think this is probably this being AI is

537
00:28:45,920 --> 00:28:48,440
Speaker 4: the greatest technical revolution that I'll see in my lifetime.

538
00:28:48,760 --> 00:28:51,160
Speaker 4: That's saying something because just Barbara Winston is eight.

539
00:28:51,400 --> 00:28:55,520
Speaker 7: Years exactly, and they're interested. I mean, think about it,

540
00:28:55,560 --> 00:28:58,360
Speaker 7: like there are some things like these classes at senior centers.

541
00:28:58,360 --> 00:29:00,960
Speaker 7: Now it could help them because it makes them easier

542
00:29:01,000 --> 00:29:03,240
Speaker 7: to get things like medical appointments, like a I can

543
00:29:03,320 --> 00:29:06,600
Speaker 7: help you at that. But it's also teaching them about

544
00:29:06,600 --> 00:29:09,720
Speaker 7: the other side of it, like being successible, susceptible to

545
00:29:09,880 --> 00:29:13,440
Speaker 7: misinformation like deep fakes, and seniors are very subceptible. Yeah,

546
00:29:13,440 --> 00:29:15,960
Speaker 7: I think yeah.

547
00:29:16,400 --> 00:29:20,480
Speaker 2: Social note it's percolating with zel the banks. The government's

548
00:29:20,520 --> 00:29:23,640
Speaker 2: looking at the banks as they should be. It's I

549
00:29:23,680 --> 00:29:26,120
Speaker 2: think not the bank's fault. But the fact is all

550
00:29:26,160 --> 00:29:30,080
Speaker 2: this new technology leads to people be careful out there.

551
00:29:30,160 --> 00:29:33,960
Speaker 5: Ye. Yeah, I get stuff all the time, all the time. Yeah.

552
00:29:34,320 --> 00:29:35,160
Speaker 5: It used to be simple.

553
00:29:35,200 --> 00:29:37,000
Speaker 2: It was a letter from Nigeria and you could yes,

554
00:29:37,240 --> 00:29:38,520
Speaker 2: take Nigeria.

555
00:29:38,520 --> 00:29:40,080
Speaker 5: It's not as simple as that anymore.

556
00:29:40,200 --> 00:29:40,280
Speaker 3: No.

557
00:29:40,520 --> 00:29:42,200
Speaker 7: You get them on your phone too. You get these

558
00:29:42,240 --> 00:29:46,200
Speaker 7: weird text messages. What's crazy. We were just talking about

559
00:29:46,200 --> 00:29:48,920
Speaker 7: the Olympics, right, but you remember what was missing from

560
00:29:48,960 --> 00:29:51,720
Speaker 7: this year's Olympics was baseball, right, and softball have to

561
00:29:51,720 --> 00:29:54,719
Speaker 7: point that out. Okay, but it's coming back in twenty

562
00:29:54,760 --> 00:29:55,280
Speaker 7: twenty eight.

563
00:29:55,360 --> 00:29:55,520
Speaker 4: Right.

564
00:29:55,520 --> 00:29:58,560
Speaker 7: It's in Los Angeles. So MLB players want to play,

565
00:29:58,600 --> 00:30:00,960
Speaker 7: but as you know, the lead doesn't let them. So

566
00:30:01,000 --> 00:30:03,920
Speaker 7: it's kind of this back and forth about what's going on,

567
00:30:04,040 --> 00:30:07,760
Speaker 7: so they never really allowed them one thing, you know,

568
00:30:08,120 --> 00:30:10,320
Speaker 7: it coincides with their season, so they would have to

569
00:30:10,320 --> 00:30:12,440
Speaker 7: shut down, right, I mean, but players want to play,

570
00:30:12,480 --> 00:30:15,480
Speaker 7: you have show show hey Otani, He told Sports Illustrated

571
00:30:15,520 --> 00:30:17,440
Speaker 7: he wants to play. Bryce Harper has been fighting for it.

572
00:30:17,560 --> 00:30:19,720
Speaker 7: Aaron Judge says, it would be a dream to play

573
00:30:19,760 --> 00:30:22,640
Speaker 7: in the Olympics. But could that shut down? You know

574
00:30:22,760 --> 00:30:24,360
Speaker 7: what could that mean? I mean they're already cramming. You

575
00:30:24,520 --> 00:30:26,800
Speaker 7: think one hundred and sixty two games into one hundred

576
00:30:26,840 --> 00:30:31,360
Speaker 7: and eighty days. If they prolong it, Hockey tried it tests,

577
00:30:31,480 --> 00:30:33,680
Speaker 7: they went for about two weeks. They went dark and

578
00:30:34,280 --> 00:30:37,200
Speaker 7: injured and people and that's the other thing. Injuries, Like

579
00:30:37,320 --> 00:30:39,520
Speaker 7: that's another thing. I mean. And then if you, let's

580
00:30:39,520 --> 00:30:41,680
Speaker 7: say you postpone it, you extend the season, then you're

581
00:30:41,960 --> 00:30:43,160
Speaker 7: you're competing with the NFL.

582
00:30:43,440 --> 00:30:46,760
Speaker 5: Each were way more in this. Did we lose break

583
00:30:46,920 --> 00:30:54,120
Speaker 5: dancing after the way you didn't like it? Snoop was

584
00:30:54,200 --> 00:30:56,360
Speaker 5: up with the stands, Knodd and Off was so bored.

585
00:30:57,720 --> 00:30:58,400
Speaker 5: What else do you have?

586
00:30:58,520 --> 00:30:58,840
Speaker 2: This one?

587
00:30:59,760 --> 00:31:03,480
Speaker 7: This? The San Francisco FED says Middle low income America dynamit.

588
00:31:03,720 --> 00:31:07,400
Speaker 2: We got a problem. Excuse me, you gotta tell Ari.

589
00:31:07,680 --> 00:31:10,480
Speaker 2: On YouTube, when we talk about baseball, we lead with

590
00:31:10,560 --> 00:31:14,280
Speaker 2: the Red Sox. Need images, even if it's about Los Angeles,

591
00:31:14,680 --> 00:31:16,480
Speaker 2: we show the Red Sox first.

592
00:31:16,560 --> 00:31:18,280
Speaker 5: Okay, next new rule, Okay.

593
00:31:19,800 --> 00:31:23,280
Speaker 7: San Francisco Fed survey middle and low income Americans. They're

594
00:31:23,320 --> 00:31:26,320
Speaker 7: running out of disposable cash, but they're on track to

595
00:31:26,400 --> 00:31:29,280
Speaker 7: have less than they were on pace before the pandemic.

596
00:31:29,400 --> 00:31:31,400
Speaker 7: So here's what that survey showed. Just to break down

597
00:31:31,440 --> 00:31:34,520
Speaker 7: the numbers, the top twenty percent of households by income,

598
00:31:34,600 --> 00:31:36,880
Speaker 7: they saw their liquid assets, so we're talking about things

599
00:31:36,960 --> 00:31:40,360
Speaker 7: like cash and funds and savings, checking money market accounts.

600
00:31:40,760 --> 00:31:43,560
Speaker 7: They rose sharply in twenty twenty early twenty twenty one,

601
00:31:43,600 --> 00:31:46,240
Speaker 7: but then they dropped. They're now about two percent below

602
00:31:46,560 --> 00:31:49,600
Speaker 7: what would have been about the pandemics impact. So it's

603
00:31:49,640 --> 00:31:52,240
Speaker 7: even worse for those households that represent the lowest eighty

604
00:31:52,320 --> 00:31:55,240
Speaker 7: percent by income. So it's just showing how much they have.

605
00:31:55,320 --> 00:31:58,080
Speaker 2: Is I can say, and I'm so glad you did this.

606
00:31:58,240 --> 00:32:01,280
Speaker 2: I can't say enough about this, folks. I follow the

607
00:32:01,560 --> 00:32:04,600
Speaker 2: and there's people to keep this. A percent of Americans

608
00:32:04,640 --> 00:32:08,440
Speaker 2: living paycheck to paycheck. To me is a social statement

609
00:32:09,160 --> 00:32:10,560
Speaker 2: and it's shocking.

610
00:32:10,920 --> 00:32:12,880
Speaker 4: I mean, it's just and you're seeing it in some

611
00:32:13,000 --> 00:32:14,560
Speaker 4: of the earnings numbers. We've heard from a lot of

612
00:32:14,600 --> 00:32:17,280
Speaker 4: the consumer companies this, I mean from the fast food

613
00:32:17,280 --> 00:32:18,960
Speaker 4: companies all the way across the board.

614
00:32:19,000 --> 00:32:22,520
Speaker 7: Okay, yeah, definitely. And then this is the last one,

615
00:32:22,640 --> 00:32:25,280
Speaker 7: a music one. Okay, we've been talking about vinyl all

616
00:32:25,280 --> 00:32:28,040
Speaker 7: the time. Everybody's going into vinyl with me. But now

617
00:32:28,320 --> 00:32:31,360
Speaker 7: it's about audio cassettes. That's what the kids doing.

618
00:32:31,360 --> 00:32:32,200
Speaker 2: It's gen z.

619
00:32:33,360 --> 00:32:36,320
Speaker 7: Yes, they are listening to audio cassettes. The reason why

620
00:32:36,440 --> 00:32:38,480
Speaker 7: you have a lot of these stars they're putting out

621
00:32:38,480 --> 00:32:41,800
Speaker 7: their new music onto cassette, like the Musk Graves, Taylor Swift,

622
00:32:41,920 --> 00:32:45,360
Speaker 7: Olivia Rodrigu, du Alipa, Ariana Grande cassettes.

623
00:32:45,960 --> 00:32:46,240
Speaker 1: Kiss.

624
00:32:46,560 --> 00:32:49,280
Speaker 5: I want to listen to Vampire on cassettes.

625
00:32:49,800 --> 00:32:52,280
Speaker 7: Yes, because they're saying, well, here's the thing. When you

626
00:32:52,360 --> 00:32:55,440
Speaker 7: compare it with vinyl, the kids are saying that it's

627
00:32:55,560 --> 00:32:56,920
Speaker 7: cheaper and it's more portable.

628
00:32:57,120 --> 00:32:58,640
Speaker 4: That's what we said back into seventies.

629
00:33:00,680 --> 00:33:03,160
Speaker 5: I think I could go all day on this. I'll

630
00:33:03,160 --> 00:33:04,080
Speaker 5: give you one story.

631
00:33:04,240 --> 00:33:07,600
Speaker 2: Brockton will understand this Brockton's their producer.

632
00:33:07,720 --> 00:33:10,760
Speaker 5: He'll understand this. If you can sit in.

633
00:33:10,800 --> 00:33:14,600
Speaker 2: The burger King and I twenty five, I twenty four

634
00:33:14,840 --> 00:33:19,280
Speaker 2: and four ninety five, and you bribe your kids by

635
00:33:19,360 --> 00:33:22,000
Speaker 2: feeding them Burger King, and you sit there with a

636
00:33:22,120 --> 00:33:26,000
Speaker 2: pencil turning the cassette wheel because a foot and a

637
00:33:26,040 --> 00:33:27,200
Speaker 2: half of tapes.

638
00:33:26,960 --> 00:33:28,840
Speaker 5: Out on your lap in the car.

639
00:33:29,360 --> 00:33:30,320
Speaker 4: Yep, that's how you do it.

640
00:33:30,440 --> 00:33:34,200
Speaker 5: That was technology. And they want to go back to that.

641
00:33:34,480 --> 00:33:36,760
Speaker 7: They want to go back to it. They're just they're

642
00:33:36,840 --> 00:33:38,960
Speaker 7: pushing their parents. The parents are going into the attic,

643
00:33:39,040 --> 00:33:40,880
Speaker 7: the garage, they're trying to find the boom boxes.

644
00:33:41,080 --> 00:33:42,360
Speaker 3: The kids can play the tape.

645
00:33:42,640 --> 00:33:45,320
Speaker 5: Does anybody in the control room have a turntable in

646
00:33:45,400 --> 00:33:46,680
Speaker 5: their house? You do?

647
00:33:47,840 --> 00:33:48,000
Speaker 4: You do?

648
00:33:48,080 --> 00:33:51,840
Speaker 2: You're probably playing Jay Giles ben Right Brockton, Yeah, I

649
00:33:51,920 --> 00:33:54,680
Speaker 2: mean I got Jay Giles Vinyl Well.

650
00:33:54,600 --> 00:33:57,280
Speaker 4: The first album I ever listened to and was born

651
00:33:57,320 --> 00:34:00,680
Speaker 4: to run on my sister's cassette player in her bedroom.

652
00:34:00,880 --> 00:34:02,800
Speaker 4: I was not allowed to take the cassette player out

653
00:34:02,840 --> 00:34:04,160
Speaker 4: of the bedroom, so I had to sit on her

654
00:34:04,240 --> 00:34:08,239
Speaker 4: floor on the shag rug a teal shagrug seventy five,

655
00:34:08,719 --> 00:34:11,880
Speaker 4: listening to Borner Run cassette. That's how good that was.

656
00:34:12,000 --> 00:34:15,560
Speaker 7: Look at that memory. Oh my first final was Donnie

657
00:34:15,560 --> 00:34:19,800
Speaker 7: and Marie Goe Coconut. It's my firks finals.

658
00:34:20,160 --> 00:34:23,160
Speaker 4: I mean, Goda love it. She's a news reporter. Donnie

659
00:34:23,200 --> 00:34:23,960
Speaker 4: and Marie.

660
00:34:25,200 --> 00:34:29,080
Speaker 2: Love it all right. Such. This is a Bloomberg Surveillance podcast,

661
00:34:29,360 --> 00:34:34,120
Speaker 2: bringing you the best in economics, finance, investment, and international relations.

662
00:34:34,440 --> 00:34:37,759
Speaker 2: You can also watch the show live on YouTube. Visit

663
00:34:37,840 --> 00:34:41,839
Speaker 2: the Bloomberg Podcast channel on YouTube to see the show

664
00:34:42,200 --> 00:34:45,239
Speaker 2: weekday mornings from seven to ten am Eastern from our

665
00:34:45,280 --> 00:34:49,040
Speaker 2: global headquarters in New York City. Subscribe to the podcast

666
00:34:49,120 --> 00:34:53,120
Speaker 2: on Apple, Spotify, or anywhere else you listen, and always

667
00:34:53,320 --> 00:34:57,640
Speaker 2: on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app,