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Speaker 1: And now from Morgan Stanley. Ellen Zetner joins us. Ellen.

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Speaker 2: I want to go into the data and all that,

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Speaker 2: but I want to go back to early ellen Zetner,

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Speaker 2: which only you and I were around from.

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Speaker 3: I'm coming in hot, just like ers are coming in hot.

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Speaker 2: You made your name analyzing the American consumer. To me,

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Speaker 2: that was the great error of economics in the past.

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Speaker 2: In the past eighteen months, Paul and I opened the

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Speaker 2: show with the booming Delta Airlines. What does Morgan Stanley

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Speaker 2: see is the state of the American consumer?

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Speaker 1: Given this bang On jobs.

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Speaker 3: Report, Not a lot has changed, right. People are still

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Speaker 3: spending on services, not so much on goods, travel, travel, travel,

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Speaker 3: and especially the wealthy consumers, and so not a whole

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Speaker 3: lot has changed in this report. We see it too, right,

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Speaker 3: goods in the jobs sector down, Spending on goods not as.

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Speaker 4: Strong as services.

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Speaker 3: You know, goods are going to be impacted by Tarius

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Speaker 3: more so than service, and so we're going to continue

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Speaker 3: to see that shift between services gaining sharing at the

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Speaker 3: expensive goods.

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Speaker 4: But this is a.

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Speaker 3: More of the same good jobs market. And yes, there

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Speaker 3: was a lot of rebound in this number from hurricanes

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Speaker 3: and strike in the last month, and that was really

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Speaker 3: the guess on how much of that payback we would

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Speaker 3: get in this number.

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Speaker 4: It's still the story that we've got.

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Speaker 3: Some ever so gradual softening of the labor market.

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Speaker 4: Man, it's gradual.

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Speaker 1: So I mean, how do you think the Federal Reserve

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Speaker 1: is going to kind of ingest this data to the market.

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Speaker 3: I don't know what number would have gotten them to

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Speaker 3: change their thoughts about being on hold here. I think

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Speaker 3: in December I was more in the camp that the

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Speaker 3: language that they used, the boilerplate language.

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Speaker 4: That they used basically was a hard pause.

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Speaker 3: And now with the January meeting, it's the housekeeping meeting

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Speaker 3: where you have a lot of shifts and voters come

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Speaker 3: in and out. You've got even more of a divergence

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Speaker 3: between doves and hawks on the fee, and you've got

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Speaker 3: uncertainty around fiscal policy, and uncertainty means policy paralysis.

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Speaker 4: Just on hold here and we'll let you know when

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Speaker 4: it's time to move again.

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Speaker 2: In the blur of this show, and trust me, folks,

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Speaker 2: there's like twenty people helping me and Paul get through this.

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Speaker 1: Every morning I.

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Speaker 2: Remember little things, whispers of things from weeks ago, and

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Speaker 2: one of them is an ellen Zeenner whisper, you were

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Speaker 2: heated at the polarity of consumption in America and your

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Speaker 2: definition of the haves to find the ellen Zenner halves

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Speaker 2: in America enjoying a four point one percent unemployment rate.

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Speaker 3: Well, so the unemployment rate, we saw the under employment

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Speaker 3: rate also come down seven five. We're giving strength all

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Speaker 3: the way down to the most underserved in the labor market.

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Speaker 3: But that bifurcation of the consumer, the top two income

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Speaker 3: quintiles is more than sixty percent of all consumer spending,

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Speaker 3: and day.

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Speaker 2: Fifth of America is sixty percent.

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Speaker 3: Of consumption one two fifths one fish, one fifth.

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Speaker 1: Is forty I just got a C minus and Marik.

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Speaker 3: That well, you know I'm here to keep you honest. Tom,

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Speaker 3: there we go.

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Speaker 1: But Paul, this is incredible. One two fists right, forty percent?

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Speaker 1: Now am I.

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Speaker 3: Close more than sixty percent? We're just not getting this.

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Speaker 3: It's a whole lot.

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Speaker 4: Let's just say that a lot lot.

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Speaker 1: So how does that inform kind of your view of

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Speaker 1: kind of investment opportunities out there, because it seems like

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Speaker 1: the economy, whether you're looking at labor, where you're looking

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Speaker 1: at the consumer, whether you're looking at the Fed, things

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Speaker 1: seem to be in pretty decent shape out there.

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Speaker 3: Right, Yeah, things are pretty decent shape. I think that

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Speaker 3: it means it's going to be higher, higher for longer

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Speaker 3: interest rates.

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Speaker 4: It doesn't mean the Fed's not going to cut this year.

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Speaker 3: And I certainly wouldn't put bets that they're going to

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Speaker 3: hike based on this this report, right, I would still

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Speaker 3: put a very low probability that they hike at some

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Speaker 3: point this year. But what you've got to do as

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Speaker 3: a policy maker, if you're doing prudent policy making, even

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Speaker 3: when we start to get a flurry of executive orders

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Speaker 3: after January twentieth, you want to look through price increases

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Speaker 3: from tariffs because on the other side of that, you

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Speaker 3: get a hit to aggregate demand. When that comes through,

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Speaker 3: the FED could still be cutting but later later this year.

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Speaker 2: The tech team Seth Carpenter and Elan Zettner is the

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Speaker 2: way to go at Morgan Stanley Ellen. This headline just

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Speaker 2: out and I usually don't do this, but it gets

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Speaker 2: to what your meetings are going to be like at

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Speaker 2: Morgan Stanley. Today, traders shift full pricing of next FED

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Speaker 2: rate cut to October.

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Speaker 4: Wow.

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Speaker 1: That's wow, Okay for you, that's wow.

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Speaker 4: To me, that's a wow.

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Speaker 3: That's a wow, because I have been one of the

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Speaker 3: scenarios out there is that the Fed's gonna cut and

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Speaker 3: maybe the cut just as much as they're saying they

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Speaker 3: might cut this year, but it comes later later because

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Speaker 3: they really have to see what policies come out of

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Speaker 3: the administration and if they do hit demand later on.

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Speaker 1: Okay, no, you're not in speaking terms of Seth Carpenter,

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Speaker 1: but the basic ideas here we are is you.

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Speaker 2: Have a twisted economics because Texas you you are hard wired.

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Speaker 4: I'm realrepreneur.

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Speaker 2: No, I'm serious, You're hardwired the entrepreneurial nature of America.

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Speaker 2: Do you, Seth Carpenter, Richard Berner, Steve Roach, and everyone

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Speaker 2: else in the game.

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Speaker 1: Do we underestimate the.

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Speaker 2: Entrepreneurial spirit of say someone like Michael Dell.

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Speaker 3: I don't know if we underminestimate the entrepreneurial spirit.

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Speaker 4: But but it was it was.

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Speaker 3: It was gangbusters during COVID when people were able to

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Speaker 3: have a rethink and take advantage of excess income, low

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Speaker 3: interest rates, and we saw a proliferation of business startups

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Speaker 3: and that's always productive of fraudy for the economy. It's

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Speaker 3: just just a positive all the way around. Now we're

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Speaker 3: seeing productivity gains from the labor market having been so

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Speaker 3: tight for so long that businesses sought efficiencies and that's

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Speaker 3: coming through now. That's not even AI yet. So america

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Speaker 3: An exceptionalism is real. It's very real.

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Speaker 4: Did you change your outlook?

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Speaker 1: Will you change your outlook now that we are having

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Speaker 1: a new administration come in and you know, a kind

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Speaker 1: of more solid Republican Congress?

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Speaker 3: No, no, no, I think that you know pick your baseline.

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Speaker 3: I mean none of us know what's going to come

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Speaker 3: out of the administration after January twentieth, and so whatever

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Speaker 3: baseline you have, it's.

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Speaker 4: Going to be wrong.

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Speaker 1: Yep.

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Speaker 3: So you just have a lot of scenarios, and one

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Speaker 3: of those scenarios will be sort of in the pocket

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Speaker 3: of what we get.

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Speaker 1: What does it mean for the markets?

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Speaker 2: For the stock market, I mean it's away from your

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Speaker 2: remit is chief economic strategist.

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Speaker 1: I love this global ahead of thematic.

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Speaker 2: Sure job is to fix the Dallas Cowboys? Is what

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Speaker 2: does it mean for the stock market? If you're sitting

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Speaker 2: down with Lisa Shallatte, what do you tell her?

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Speaker 3: Yeah, So Lisa and I are tied at the hip

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Speaker 3: now both on the Global Investment Committee at Morgan Stanley

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Speaker 3: and look, I wouldn't be investing in aggregate indexes here

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Speaker 3: because policies are going to come fast and furious, and

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Speaker 3: they're going to infect certain pockets of the market.

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Speaker 4: So you want to be in real assets.

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Speaker 3: You want to be in energy, you want to be

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Speaker 3: in commodities, you want.

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Speaker 4: To be she's got a game. I'll throw a paw

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Speaker 4: in there.

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Speaker 3: Oh yes, today, So watch course I'm watching LANDMN.

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Speaker 1: Okay, Well, what do you think Sweety's all into it?

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Speaker 1: I mean, is it?

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Speaker 4: Well, I don't know a lot about the patch.

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Speaker 3: I'm probably learning just as much as everybody else it.

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Speaker 3: You know, it's not a whole lot going on in

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Speaker 3: West Texas.

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Speaker 1: But you're plus on oil and energy.

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Speaker 3: Oil and American energy reads, healthcare financials because it's going

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Speaker 3: to be higher for longer interest rates, and so there

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Speaker 3: are there are plenty of pockets of investment right now.

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Speaker 4: We're very, very big on.

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Speaker 3: Thematic investing AI and defense and specifically software software. So

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Speaker 3: there are pockets and there are things that we're excited

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Speaker 3: about this year, and they avoid You want to avoid

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Speaker 3: things that are super impacted by the volatility around what

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Speaker 3: policies could come out of the administration.

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Speaker 1: Ellen, thank you. Allen's with Us with Morgan Stanley