Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Let's
Speaker 1: start a conversation off this morning with Peter Dixon, Commons
Speaker 1: Bank Global Equities economist. Peter. Great to catch up with you, sir,
Speaker 1: I just want to start with the basic one. Seems
Speaker 1: to me that nobody really wants to sell down risk
Speaker 1: before the first vaccination. Do you share that view, sir,
Speaker 1: M morning, Um, Yeah, it's true. I mean I think
Speaker 1: that at the moment um, you know, all the good
Speaker 1: news is basically being put into the price, but most
Speaker 1: of it anyway, and you know, we're not in kindly
Speaker 1: show how is it going to play out? And we've
Speaker 1: we've had lots of questions, I think, particularly regarding the
Speaker 1: Apresentica situation, but as you said, markets just not willing
Speaker 1: to sell off. Um, you know, at the moment I
Speaker 1: think we're in a bit of a holding pattern. Obviously,
Speaker 1: the holiday disrupted um period has has probably forced investors
Speaker 1: onto the back put a little bit. We're being a
Speaker 1: little bit circumspect now and we still have a couple
Speaker 1: of weeks I guess of trading in this year to come. Um,
Speaker 1: you know, normally you'd expecting to start winding down. But
Speaker 1: I think there are just so many things, so many
Speaker 1: moving parts out there, that I think we can expect
Speaker 1: a very very interesting two weeks. I think the my
Speaker 1: view is that we should be positive. I think we'd
Speaker 1: probably ender you a little bit higher than we are now.
Speaker 1: But um, you know, there's there's many a slip between
Speaker 1: coup lip as you say, and you know there are
Speaker 1: there are lots of downside risks. Well, let's talk about
Speaker 1: the slips that we've had already. Jobless claims moving the
Speaker 1: wrong way last week, jobless claims moving the wrong way
Speaker 1: this week. Peter, I've kept asking a question, how big
Speaker 1: will our tolerance be? How high will our tolerance be?
Speaker 1: As we work our way through some negative data in
Speaker 1: the United States of America. We've shaken off two weeks
Speaker 1: of it. Can we shake off three? Can we shake
Speaker 1: off four? Or five? Six? Um? To fair point? You know,
Speaker 1: when how many how many dat points do you need
Speaker 1: to see a pattern or a trender moving here. UM.
Speaker 1: I mean I think the markets are looking a bit
Speaker 1: further ahead than it. I mean, obviously the labor market
Speaker 1: in the States has taken a massive hit, doesn't need
Speaker 1: has been the casing no other markets around the world.
Speaker 1: But we get more to the data in the US,
Speaker 1: and I think we just put it under the magnifined
Speaker 1: class a little bit more. UM. But it is true
Speaker 1: that it's still some importanment anyway, it's still some tenderly
Speaker 1: shorter where we were back in February. UM. And as
Speaker 1: you said, it's running in the wrong direction. Um. If
Speaker 1: we get to the end of the year we've had
Speaker 1: any major problems, I think markets can can wear that.
Speaker 1: You know, a couple of a couple of small ups
Speaker 1: and a couple of small downs. Broadly ciders and claims
Speaker 1: will be happy. But if if the claims numbers started
Speaker 1: moving the wrong direction of fact to pay, that's the
Speaker 1: point in which I think markets was not to get worried.
Speaker 1: And of course, given the mounting number of COVID cases everywhere,
Speaker 1: but obviously in the United States, I think that certainly
Speaker 1: is a major with Peter, great to have you with us.
Speaker 1: I'm interested by not all markets are made the same.
Speaker 1: At the moment, I'm looking at a board with the
Speaker 1: Russell two thousand. Yes it's only done by tenth of
Speaker 1: a percent, but it's down while the NASDAC outperforms once again,
Speaker 1: this so called rotation trade, which we turn a phrase
Speaker 1: we use too much at the moment, but it's on hold.
Speaker 1: Can we move higher without big tech in leading charge?
Speaker 1: Or do you expect that big tech will once again
Speaker 1: become a game plan for investors? Um? Well, I think
Speaker 1: there would remember this used there all interesting ones. I
Speaker 1: mean in terms of the big picture. Um, you know,
Speaker 1: I do think that the tech universe will move higher,
Speaker 1: but I think we'll have to different chips in those
Speaker 1: parts of the text that we like or would have
Speaker 1: a um you know opposed COVID future and those which
Speaker 1: perhaps have gone well, you know, thanks the lockdown. So
Speaker 1: you know, do you want to stick with Netflix in
Speaker 1: a world in which we're were getting back to some
Speaker 1: Ford normality? Whereas there has been a game change in
Speaker 1: terms of Amazon's revolution of the online trading platform. So
Speaker 1: I think there is there's definitely still value there, but
Speaker 1: whether it will be the same trade that we saw
Speaker 1: prior to the lockdowns, I would question in terms of
Speaker 1: the non tech sector, Um, you know, it is really
Speaker 1: dependent on good news on the vaccines front. I mean, um,
Speaker 1: as I said, I think much of the good news
Speaker 1: was price being very quickly. We need more part of
Speaker 1: the market higher. Um you know, that could happen, But
Speaker 1: at the moment, there's nothing out there which is really
Speaker 1: going to uh, which is been flogging my bolt floating around.
Speaker 1: I mean, the moves have been sensational. The Russell two
Speaker 1: thousand up twenty on the month, a record month, at
Speaker 1: record highs, the Dow at that sacred number thirty thou Meanwhile,
Speaker 1: bonds remain completely ranged and making the US Treasury, which
Speaker 1: never really get above one percential points peter folding the
Speaker 1: yield differentiation here and how much at what point we
Speaker 1: might see people back away from these valuations if the
Speaker 1: yield does just pick up that much higher in the
Speaker 1: US well, I mean, the most question you have to
Speaker 1: ask yourself is is what those central part is going
Speaker 1: to do? And the w belihood is that they will
Speaker 1: stay active for a long time to come. So I
Speaker 1: think we're talking, you know, another six months or there
Speaker 1: about at least before we have to start thinking about
Speaker 1: um significant moves in years. Yes, there might be a
Speaker 1: bit of a pickup UM if we stop UM more
Speaker 1: good vaccine news, I mean much better news we're seeing
Speaker 1: now that that could you know, send you us a
Speaker 1: little bit higher. But I genuinely don't think that years
Speaker 1: are going to go anywhere any time fast. So whatever
Speaker 1: they pick up in the first half of next year,
Speaker 1: they're probably losing. Let's talk about why we want to
Speaker 1: jump in just quickly and get to the bond market.
Speaker 1: At the moment, two's tense thirties yields lower on tens
Speaker 1: were down to bay points to zero point eight six.
Speaker 1: This market is rallied. As Caroline pointed out, we've had
Speaker 1: that great rotation over the last month. This bond market
Speaker 1: yields just haven't come with it. We've been asking a question,
Speaker 1: why do you think it's technical because people believe the
Speaker 1: FED steps in and put a lid on it, or
Speaker 1: do you think it's fundamental. There's some doubts in this
Speaker 1: bond market about that object free for growth, for inflation
Speaker 1: for the years to come. If you ask me to,
Speaker 1: I would expectations of what the ES central banks are
Speaker 1: going to do and said, you know, maybe, um, it's fundamentals.
Speaker 1: I mean, there are some people out there who say, well, actually,
Speaker 1: if the recovery does go at pace over the course
Speaker 1: of the next there's been such damage to the supply
Speaker 1: side of the economy that you might actually see inflation
Speaker 1: start to pick up. I mean, that's not my view,
Speaker 1: but it's out there, so you know, there are some
Speaker 1: modest side this. But I ain generally speaking, I would
Speaker 1: see you know, rate to go in ciders and U
Speaker 1: the Caroline's point, why is the great rotation that happened
Speaker 1: simply because investors we don't see muny violent bonds that
Speaker 1: they continue to pol into Aroviu. Do not think that's
Speaker 1: going to be the theme, certainly for you in a
Speaker 1: month one, Peter Greater, catch up. Appreciate your time this morning,
Speaker 1: Sir Pil Dixon there of Commerce Bank. Camilla Yanaschowski joins
Speaker 1: us now of CFR, a equity research Commilla. I'm trying
Speaker 1: to understand this. Did he increases in COVID positive testing
Speaker 1: rates in the United States of America across the country,
Speaker 1: including hospitalizations? Do they lead to people shopping less or
Speaker 1: just changing how they shop? Shopping less? For sure? Thanks
Speaker 1: for having me fantastic to have you. Let's build on that, then, Comilla,
Speaker 1: where do they shop less in store? I mean, today
Speaker 1: is Black Friday here in the US, and COVID nineteen
Speaker 1: is completely challenging the traditional holiday calendar. I think we're
Speaker 1: going to be seeing very few shoppoholics trending on Twitter,
Speaker 1: uh camping outside a wal Mart, Target or bust by
Speaker 1: today and that very muted outlook we have on Black Friday,
Speaker 1: which traditionally has been one of the biggest holiday shopping
Speaker 1: days of the year, has to do a fear of
Speaker 1: COVID nineteen and daily cases reaching new daily highs. In fact,
Speaker 1: the survey in October found that a little over ten
Speaker 1: percent of consumers said that they were very likely to
Speaker 1: shop in stores on Black Friday. So Committa, the medium
Speaker 1: and the medium of which people choose the shop is
Speaker 1: clearly shifting away from bricks and mortar towards e commerce.
Speaker 1: That's been clear for years and accelerated through this pandemic.
Speaker 1: When I say where will they shop less? I'm trying
Speaker 1: to understand what will people spend money on home depot
Speaker 1: in the home improvement channel that has just been absolutely
Speaker 1: massive through this year. Is that what you see continue
Speaker 1: strength into one even with a vaccine. Resolutely, when we
Speaker 1: look at the survey data, we've seen elevated interest for
Speaker 1: home decker and home furnishings, which doesn't come to us
Speaker 1: as a surprise given that with COVID nineteen cocooning, people
Speaker 1: are taking on more at home living projects. But also
Speaker 1: the data that we've looked at has shown that gift cards,
Speaker 1: the clothing and accessories will continue to be popular categories
Speaker 1: this holiday season. Wow clothing. Finally, because everyone seems to
Speaker 1: have been pretty doom and gloom on that one coming.
Speaker 1: I'm I'm a sucker for an experiential present, you know,
Speaker 1: and you name it a cook re calls some sort
Speaker 1: of cocktail making thing. Are people doing that? I mean
Speaker 1: we've seen a B and B managed to pivot into
Speaker 1: that sort of element of things, but I feel that
Speaker 1: experiential is going to be foot coming off the gas.
Speaker 1: What what is seeing and this is specifically with the
Speaker 1: higher income demographic and why we have a forecast for
Speaker 1: the holiday season of a K shaped economic recovery, is
Speaker 1: that higher income individuals, which have seen after restoration of
Speaker 1: jobs and higher income growth, they're actually shifting spend away
Speaker 1: from pandemic reliance services like travel like entertainment like experiences,
Speaker 1: and that spend is actually shifting into retail this holiday season.
Speaker 1: So our holiday outlook, which is that retail sales for
Speaker 1: the months of November and December will be flat year
Speaker 1: every year, coming in at one point five trillion dollars.
Speaker 1: It's really reliant on how much these higher income individuals
Speaker 1: splurgd this holiday season. This K shaped economy is so
Speaker 1: important to us and the unequal nature of which this
Speaker 1: rebound is occurring. Who benefits by the fact that they're
Speaker 1: unfortunately middle high income brackets who were able to spend
Speaker 1: on a on a piece of jewelry rather than a
Speaker 1: high end luxury travel and who doesn't. Who loses out
Speaker 1: by the fact that those on the who can't manage
Speaker 1: to get back to work at the moment are unable
Speaker 1: to buy for their children in the way that they
Speaker 1: usually would on the retailer. And we did a digital
Speaker 1: traffic analysis. It's an analysis that we run every year
Speaker 1: to forecast or winners and losers. And the reason why
Speaker 1: we look at digital traffic is because we see a
Speaker 1: direct positive correlation between digital traffic and in store traffic.
Speaker 1: And we saw growing momentum of luxury brands like Tiffany's
Speaker 1: entering this holiday season. And then one name that we
Speaker 1: called out in terms of our top five winners was
Speaker 1: Williams Sonoma, which is a digital first home furnishing retailer
Speaker 1: specifically targeted to a higher income demographic. And then in
Speaker 1: terms of losers, I think it comes more on the
Speaker 1: lower income consumer end because we think that this group
Speaker 1: of people are very likely to embrace frugality this holiday
Speaker 1: season as fiscal stimulus starts to run low. There are
Speaker 1: estimates that approximately twelve million workers are facing a jobless
Speaker 1: benefit cliff. On December twenty text, commit to appreciate your
Speaker 1: time this morning. Ready to hope you had a wonderful Thanksgiving.
Speaker 1: Kimilianischewsky there of cf R A, let's bring in our
Speaker 1: guests this morning during Materics MetLife Investment Management, Chief market
Speaker 1: Strategist during Fantastic to catch up with you, mate. Let's
Speaker 1: just talk about the bond market to begin with. We've
Speaker 1: talked through the last ten years in the last cycle,
Speaker 1: and our inability to get yield higher, much higher, our
Speaker 1: inability in Europe to generate any kind of recovery that
Speaker 1: actually lead to higher interest rates. In fact, they kept
Speaker 1: going lower through the cycle. Why is this recovery going
Speaker 1: to be any different route, Well, what I talked to people,
Speaker 1: I think what's different about this recovery is that everyone's
Speaker 1: talking about the risk of inflation going forward. Um. And
Speaker 1: it's actually surprised me because I think when we do
Speaker 1: the math, you know, we come up with kind of
Speaker 1: inflation normalizing post that, post this crisis. UM. But I
Speaker 1: think a lot of people have it in their in
Speaker 1: their minds at the is an inflationary event longer term, uh,
Speaker 1: And that the period we're living in, you know, more
Speaker 1: closely resembles kind of the Vietnam ra and the United
Speaker 1: States that seventies era that led to uh, you know,
Speaker 1: inflation picking up. You have a FED that's very aggressive.
Speaker 1: You have government stimulus, which uh, you know, we already
Speaker 1: had rounds of and we'll probably have more rounds of UM.
Speaker 1: And then of course you have you have a big
Speaker 1: amount of dislocation and things like the labor market um.
Speaker 1: And so you know, you combine those factors and people
Speaker 1: are beginning to worry a little bit more about inflation
Speaker 1: than they used to. Drew got into the eighties at
Speaker 1: the end of the seventies, the tenure yield was about
Speaker 1: right now, it's eighty five basis points. That's a nomenal yield, granted,
Speaker 1: but through where's the concern around inflation? Why is it
Speaker 1: not being priced into this bond market? I know, it's
Speaker 1: part of the conversation. I'm having them daily as well.
Speaker 1: It's not in the market right now, you know, I
Speaker 1: think because people have have kind of you know, this
Speaker 1: is the boy who cried Wolf scenario. People like myself
Speaker 1: have talked about inflation risks coming out of two thousand
Speaker 1: and eight. We were wrong. Um, you know, other people
Speaker 1: you know, talked about it as well, and so people
Speaker 1: have kind of got it into their heads that inflation
Speaker 1: is this thing that you know, the old people in
Speaker 1: Wall Street talk about, but that that doesn't really exist. Uh.
Speaker 1: And I you know, you hate to say, well, this
Speaker 1: time is going to be different, but I do think
Speaker 1: that there are some reasons to believe inflation might tick higher.
Speaker 1: But let's just normalize it, you know, the idea that
Speaker 1: this movement and yields is not part of kind of
Speaker 1: the movement yields we saw for the last couple of decades, right,
Speaker 1: this is this is an aberration across the trend. Uh.
Speaker 1: And it means that most likely, the most likely scenario
Speaker 1: in my mind, is that inflation moves higher, yields move higher.
Speaker 1: We probably don't go above the pre COVID highs. Right.
Speaker 1: Remember at the end of two thousand nineteen ten uar
Speaker 1: US treasure yields were just below two percent, So you know,
Speaker 1: even just a normalization is a basis points um or
Speaker 1: so uh. And I think that's something that's more realistic
Speaker 1: or more reasonable to consider. Um. I'm not worried about
Speaker 1: a four percent ten year yield anytime soon. If you
Speaker 1: want to call that being worried, I think i'd be.
Speaker 1: I'd be moving money at that point one inflation rate, though,
Speaker 1: do you see on the high side, how hot does
Speaker 1: it run. I'm looking for a normalization of inflation, so
Speaker 1: two percent or so. Uh. You know it's um and
Speaker 1: you know it could go a little higher for a
Speaker 1: temporary period of time. But I think the question people
Speaker 1: have is if we see two percent inflation, is the
Speaker 1: FED going to react? And I think pretty clearly the
Speaker 1: answers no, They've told us no. UM. And what worries me?
Speaker 1: And I think what worries other people about that. Is
Speaker 1: this idea that an organization that really couldn't orchestrate an
Speaker 1: inflationary push or you know, has has had more difficulty
Speaker 1: pulling down inflation, moving inflation around the way that they want,
Speaker 1: has the ability to kind of maneuver inflation, you know,
Speaker 1: with that fine degree of precision. And I think you know,
Speaker 1: think it run hot for a while sounds great. How
Speaker 1: do you know when you're supposed to pull back? And
Speaker 1: how do you know what the lag is in terms
Speaker 1: of people believing that you're finally serious about inflation this time?
Speaker 1: So all of those factors are combining to you know,
Speaker 1: the things that are trying to make us feel good
Speaker 1: about the current environment and and keeping policy easy are
Speaker 1: the ones that are making people more concerned about the
Speaker 1: longer term outlook for the inflation move. Where is this
Speaker 1: inflation coming from? There? Drew? Are we importing it? Are
Speaker 1: we fiscal stimulating it? I think people, I think people
Speaker 1: are going back to the idea that it's a monetary phenomenon. Uh,
Speaker 1: you know, the FED has created a gigantic balance sheet.
Speaker 1: But unlike in two thousand and eight, where there were
Speaker 1: regulatory changes that made banks, you know, hold more in
Speaker 1: the way of bank reserves and kind of more of
Speaker 1: that liquid cash. Um, there's nothing on the other side
Speaker 1: of it this time. Uh, there are no regulatory changes
Speaker 1: I've taken place to kind of make people want to
Speaker 1: hold more cash. Uh. You know, people are holding more
Speaker 1: cash because of COVID, because of the risk around the
Speaker 1: econom Me. If you take that away and all that
Speaker 1: money is still sitting out there, people wonder where it's
Speaker 1: going to go. I also think, you know, from a
Speaker 1: psychological perspective, there are you know, the savings rates very high.
Speaker 1: People are kind of tired of being in their homes,
Speaker 1: tired of being locked up. Um, you know, where are
Speaker 1: they going to go spend that money when the all
Speaker 1: clearer is given? Uh? And is there enough capacity in
Speaker 1: the places that they're gonna want to spend that money
Speaker 1: to actually allow them to spend it? And I think
Speaker 1: the answer is no. Right, There's going to be you
Speaker 1: know a lot of demand for a lot of experiences
Speaker 1: and things like that that are just gonna you know,
Speaker 1: it's gonna be whoever wins the bit. The turn of
Speaker 1: the year is a really important time for bookings for airlines.
Speaker 1: Going into a study east of holiday going into spring
Speaker 1: going into the summer, Andrew, you can imagine the competition
Speaker 1: for flights to go on vacations if the vaccinations have
Speaker 1: actually started. I want to check it on the price
Speaker 1: action just quickly through just excuse me for a moment. Equally,
Speaker 1: futures are near session high. So if about ten points
Speaker 1: on five hundred had a brief move on the VIX
Speaker 1: just for a moment sub twenty for the first time,
Speaker 1: I believe, going all the way back to February sub
Speaker 1: twenty just briefly right now twenty eight. Do you just
Speaker 1: returned to the story of rates. You said something really
Speaker 1: important and really quite compelling. The most important question right
Speaker 1: now through one, if we do get anywhere near two
Speaker 1: percent inflation twenty one into twenty two, is how the
Speaker 1: FED response And they've sat up there reaction function really
Speaker 1: really clearly on rates now, Drew, I'm trying to work
Speaker 1: things out and just extrapolate it out a year, two years, three,
Speaker 1: maybe five. So forgive me, but do you think we
Speaker 1: could face a europe style issue where we go through
Speaker 1: a full cycle, a full recovery without ever putting rates up.
Speaker 1: I mean, I think it's possible. I mean, I you
Speaker 1: know it depends on a recovery from what I mean.
Speaker 1: One of the things that you know, I think it's
Speaker 1: easy to lose sight of is most forecasts, including our own.
Speaker 1: You know, I had a recession in one, that's when
Speaker 1: we were expecting a recession. So we were preparing for
Speaker 1: a recession, uh, in the later stages of nine, because
Speaker 1: we saw one coming a year year and a half out.
Speaker 1: Not because of a virus obviously, but you know, if
Speaker 1: you looked at margins, if you looked at the way
Speaker 1: the labor market was behaving, it all suggested that something
Speaker 1: was going to begin to kind of fall apart in
Speaker 1: the in the later half of we'd be staring a
Speaker 1: recession in the face. UM. You know, I don't think
Speaker 1: this is a cycle. This is this is a shock
Speaker 1: the cycle that we're in. UM, you know, probably reset
Speaker 1: actually a little bit right we we've you know, had
Speaker 1: the recession, having the recession, seeing the labor market do
Speaker 1: what's gonna do? UM? I actually think the next economic
Speaker 1: cycle could be something like the um you're seeing. You
Speaker 1: know that there's going to be improvements in productivity, you know. UM,
Speaker 1: think of this as I think of all the technological
Speaker 1: advancements that happened during World War Two. Right, This is
Speaker 1: not obviously World War two, but this is a big
Speaker 1: shock to the global system that required big movements and
Speaker 1: technology that required big changes. We're experimenting with things, we're
Speaker 1: figuring out how things work, and we're doing at a
Speaker 1: very rapid pace. Um. And when we come out of this,
Speaker 1: a lot of the changes that take place are going
Speaker 1: to be ones that are actually productivity boosting. I think
Speaker 1: we need to really think about the positive sometimes put
Speaker 1: my money to work. Then drew in your focus as
Speaker 1: chief market strategist wearing portfolio, are you adding, well, I mean, look, uh,
Speaker 1: you know, don't fight the Fed. The good adage, um,
Speaker 1: you know, I think you know, if you look across um,
Speaker 1: you know, we are a fixed income oriented portfolio. So
Speaker 1: we're you know, we're we're taking our cues from from
Speaker 1: from the Fed. We're taking our cues from kind of
Speaker 1: uh where we think that things you know, should be going.
Speaker 1: But we're also not losing suite of the fact that
Speaker 1: you know, some of the you know, I think some
Speaker 1: of the ideas that are being put forward are or
Speaker 1: maybe getting a little ahead of themselves. Right, people are
Speaker 1: going to go back to offices right. You know, there
Speaker 1: is an efficiency there of people going to offices. There's
Speaker 1: some lack of efficiency there, but there's also I think
Speaker 1: more benefits than not going into an office and interacting
Speaker 1: with people on a daily basis and seeing those interactions
Speaker 1: and what they turn into. UM. Once again part of
Speaker 1: that experimentation process. UM. And I think you know, for
Speaker 1: a long time people are like, why do we need
Speaker 1: to go into offices? What value does it add? I
Speaker 1: think everyone who's more working from home for the last
Speaker 1: eight months and can give you a good idea of
Speaker 1: what actually value is added by going into the office.
Speaker 1: And I'm still some of those stories are very personal too.
Speaker 1: Drew appreciated times dreamatice of Mattlife, thank you. Who are
Speaker 1: the haves and the have nots? When it comes to
Speaker 1: the retail sector, let's dig into that now, Jonathan, ahead
Speaker 1: of your important nine am open show, we're going to
Speaker 1: be talking retail still. Steve say it was with us
Speaker 1: most Card senior advisor and of course former SAX CEO,
Speaker 1: and we heard it from Peter Navarro there. We heard
Speaker 1: it across the aisle, this need for fiscal stimulus. If
Speaker 1: you were still heading up sacks right here, right now,
Speaker 1: how important would some more fiscal stimulus be to you? Oh,
Speaker 1: I think another fiscal stimulus is critical, especially for main
Speaker 1: street retailers. If you're one of the big box Walmart
Speaker 1: targets that were in the needs versus the wants, they're
Speaker 1: doing extremely well. The numbers that they posted during the
Speaker 1: third quarter were pretty stunning. I think the issue is
Speaker 1: for the travel related the restaurants, the small retailers that
Speaker 1: aren't able to play in at the scale and be
Speaker 1: able to do things like buy online, pickup and store.
Speaker 1: Those retailers are really struggling and the stimulus checks for
Speaker 1: the lower income consumers are important. So the bridge that
Speaker 1: you talk about between now and the post vaccine period
Speaker 1: that are really required. Now being said that, the consumer
Speaker 1: overall is really quite strong right now, and we can
Speaker 1: talk about some of the MasterCard spending pulse numbers, but
Speaker 1: the vibrancy of the consumer, especially the high end consumer,
Speaker 1: is really quite remarkable. I talked about the house and
Speaker 1: have knots and nuts. It isn't it. It's the fact
Speaker 1: it's the middle class. The upper class of people who
Speaker 1: have maintained their white color jobs working from home, is
Speaker 1: still able to splash the cash. What are they splashing
Speaker 1: it on at the moment? Steve, Well, the reality is
Speaker 1: what they're not spending on. They're not commuting, they're saying home,
Speaker 1: they're not traveling, so they're not going out to eat
Speaker 1: in restaurants as much. So they're spending on things related
Speaker 1: to their home and uh it could be hardware, home electronics, uh,
Speaker 1: everything to spruce up their house and make it more
Speaker 1: comfortable at home, or just thriving. And they've continued to
Speaker 1: thrive during the pandemic. But I think it's important to
Speaker 1: step back from it and look at where is overall
Speaker 1: consumption Because when we went into the depths of this
Speaker 1: uh sort of pandemic, in let's call it the March
Speaker 1: time frame, overall retail consumption was down minus about twelve
Speaker 1: and I thought, boy, we're really going to have a
Speaker 1: very long recovery. And by May June it was down
Speaker 1: to about a minus five. During the Midsummer it went
Speaker 1: to a flat and over the last two and a
Speaker 1: half months we've been positive. And importantly the month and
Speaker 1: this is all spending post day of the month of
Speaker 1: October was up four and then the first half of
Speaker 1: November was up five point eight percent. So we're on
Speaker 1: a trend where overall consumption is healthy and that's even
Speaker 1: with the stimulus checks having stopped in the last period
Speaker 1: of time. So what you're seeing is an acceleration of
Speaker 1: earlier Thanksgiving promotions. You're seeing pulling it forward. You're you're
Speaker 1: seeing that higher end consumer coming back, and you are
Speaker 1: seeing this kind of home related electronics, uh phenomena, grocery,
Speaker 1: home delivery, things like that are just doing extremely well.
Speaker 1: According to your data that you have, the spending pulse data.
Speaker 1: All those that are able to spend, those fortunate few
Speaker 1: have been well fortunate, many have been able to be
Speaker 1: on the upward trajection of the K shaped economy. Are
Speaker 1: they spending more thoughtfully at the moment, Steve, You know,
Speaker 1: I think there's some qualitative research that's been done by MasterCard.
Speaker 1: In addition to the actual spending pulse, which shows you
Speaker 1: what categories they're buying, it's also showing attitude Lee that
Speaker 1: they they see the pain that's out there. They're shopping
Speaker 1: a lot more locally, or they're looking to shop more locally.
Speaker 1: They're looking to support their communities. You're seeing the less travel.
Speaker 1: You're also seeing seeing a very big uptick and what
Speaker 1: I call socially conscious uh shopping. That's about whether sustainability,
Speaker 1: social responsibility. A lot of this started with the gen
Speaker 1: Z customer. It's expanded more broadly and people are looking
Speaker 1: to do good while they shop as well. And that's
Speaker 1: I think a phenomena that's going to be increasingly important
Speaker 1: as we go into next year. With your must card
Speaker 1: hat on, but also with your experience from Sacks. Do
Speaker 1: you think the likes of Sacks, the likes of the
Speaker 1: big department stores, luxury high end department stores, are pivoting
Speaker 1: to that realization that people want to spend more consciously
Speaker 1: and more responsibly. Oh absolutely, I see it especially well. First.
Speaker 1: I see it in a lot of the smaller direct
Speaker 1: to consumer brands that each have a story to tell.
Speaker 1: I see it in the bigger companies. It's harder if
Speaker 1: you're a large department store carrying thousands of items. I
Speaker 1: see it in the philanthropic work that these companies are doing.
Speaker 1: I see it in what they're promoting. Uh So there
Speaker 1: is an effort being made. It's a little bit, uh
Speaker 1: you know. I think it's on a case by case,
Speaker 1: company by company perspective, but I do see it as
Speaker 1: being an underlying trend that's hitting all of the re
Speaker 1: tailor is not just the individual DTC brands. Steve Moscot
Speaker 1: has such a wonderfully global perspective and what I find fascinating,
Speaker 1: having come from the UK, when I first moved to
Speaker 1: New York, I was as standard that I wasn't able
Speaker 1: to use touchless payment as as freely as I had
Speaker 1: in London. I would never walk without without, never take
Speaker 1: a wallet, I'll just take my phone. And then suddenly
Speaker 1: here I keep having to run back to the office
Speaker 1: to get my salad because I walked out and my
Speaker 1: phone didn't work to pay. Is that happening more? Are
Speaker 1: we seeing that digital divide between say the UK and
Speaker 1: the US in terms of payments shrink. I think you've
Speaker 1: seen a massive change going on over the last let's
Speaker 1: call it eight months, and it's driven by the consumer
Speaker 1: desire for convenience and safety. So anything that relates to safety,
Speaker 1: touchless becoming contactless, becoming one of those elements by online
Speaker 1: pick up, curb side shopping online or having exponential growth.
Speaker 1: You've seen overall internet commerce going from twelve percent of
Speaker 1: commerce to of commerce even today over high base growing
Speaker 1: in the fifty six growth range contactless meaning of to
Speaker 1: let's call it a touchless UH credit card experience that's
Speaker 1: growing exponentially. It's nowhere near the levels that you're seeing
Speaker 1: in let's say in London, and I think that's going
Speaker 1: to be the opportunity. So these trends have been accelerated
Speaker 1: by probably let's call it eight years and change in
Speaker 1: eight months or six years of change in six months,
Speaker 1: and I think that you're the consumers getting comfortable with
Speaker 1: the experience and it's that's the direction it's going. So
Speaker 1: you say it off one of all, have time with
Speaker 1: the Moscott Senior advisor from a sax CEO. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
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Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
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