Speaker 1: And now from Morgan Stanley. Ellen Zetner joins us. Ellen.
Speaker 2: I want to go into the data and all that,
Speaker 2: but I want to go back to early ellen Zetner,
Speaker 2: which only you and I were around from.
Speaker 3: I'm coming in hot, just like ers are coming in hot.
Speaker 2: You made your name analyzing the American consumer. To me,
Speaker 2: that was the great error of economics in the past.
Speaker 2: In the past eighteen months, Paul and I opened the
Speaker 2: show with the booming Delta Airlines. What does Morgan Stanley
Speaker 2: see is the state of the American consumer?
Speaker 1: Given this bang On jobs.
Speaker 3: Report, Not a lot has changed, right. People are still
Speaker 3: spending on services, not so much on goods, travel, travel, travel,
Speaker 3: and especially the wealthy consumers, and so not a whole
Speaker 3: lot has changed in this report. We see it too, right,
Speaker 3: goods in the jobs sector down, Spending on goods not as.
Speaker 4: Strong as services.
Speaker 3: You know, goods are going to be impacted by Tarius
Speaker 3: more so than service, and so we're going to continue
Speaker 3: to see that shift between services gaining sharing at the
Speaker 3: expensive goods.
Speaker 4: But this is a.
Speaker 3: More of the same good jobs market. And yes, there
Speaker 3: was a lot of rebound in this number from hurricanes
Speaker 3: and strike in the last month, and that was really
Speaker 3: the guess on how much of that payback we would
Speaker 3: get in this number.
Speaker 4: It's still the story that we've got.
Speaker 3: Some ever so gradual softening of the labor market.
Speaker 4: Man, it's gradual.
Speaker 1: So I mean, how do you think the Federal Reserve
Speaker 1: is going to kind of ingest this data to the market.
Speaker 3: I don't know what number would have gotten them to
Speaker 3: change their thoughts about being on hold here. I think
Speaker 3: in December I was more in the camp that the
Speaker 3: language that they used, the boilerplate language.
Speaker 4: That they used basically was a hard pause.
Speaker 3: And now with the January meeting, it's the housekeeping meeting
Speaker 3: where you have a lot of shifts and voters come
Speaker 3: in and out. You've got even more of a divergence
Speaker 3: between doves and hawks on the fee, and you've got
Speaker 3: uncertainty around fiscal policy, and uncertainty means policy paralysis.
Speaker 4: Just on hold here and we'll let you know when
Speaker 4: it's time to move again.
Speaker 2: In the blur of this show, and trust me, folks,
Speaker 2: there's like twenty people helping me and Paul get through this.
Speaker 1: Every morning I.
Speaker 2: Remember little things, whispers of things from weeks ago, and
Speaker 2: one of them is an ellen Zeenner whisper, you were
Speaker 2: heated at the polarity of consumption in America and your
Speaker 2: definition of the haves to find the ellen Zenner halves
Speaker 2: in America enjoying a four point one percent unemployment rate.
Speaker 3: Well, so the unemployment rate, we saw the under employment
Speaker 3: rate also come down seven five. We're giving strength all
Speaker 3: the way down to the most underserved in the labor market.
Speaker 3: But that bifurcation of the consumer, the top two income
Speaker 3: quintiles is more than sixty percent of all consumer spending,
Speaker 3: and day.
Speaker 2: Fifth of America is sixty percent.
Speaker 3: Of consumption one two fifths one fish, one fifth.
Speaker 1: Is forty I just got a C minus and Marik.
Speaker 3: That well, you know I'm here to keep you honest. Tom,
Speaker 3: there we go.
Speaker 1: But Paul, this is incredible. One two fists right, forty percent?
Speaker 1: Now am I.
Speaker 3: Close more than sixty percent? We're just not getting this.
Speaker 3: It's a whole lot.
Speaker 4: Let's just say that a lot lot.
Speaker 1: So how does that inform kind of your view of
Speaker 1: kind of investment opportunities out there, because it seems like
Speaker 1: the economy, whether you're looking at labor, where you're looking
Speaker 1: at the consumer, whether you're looking at the Fed, things
Speaker 1: seem to be in pretty decent shape out there.
Speaker 3: Right, Yeah, things are pretty decent shape. I think that
Speaker 3: it means it's going to be higher, higher for longer
Speaker 3: interest rates.
Speaker 4: It doesn't mean the Fed's not going to cut this year.
Speaker 3: And I certainly wouldn't put bets that they're going to
Speaker 3: hike based on this this report, right, I would still
Speaker 3: put a very low probability that they hike at some
Speaker 3: point this year. But what you've got to do as
Speaker 3: a policy maker, if you're doing prudent policy making, even
Speaker 3: when we start to get a flurry of executive orders
Speaker 3: after January twentieth, you want to look through price increases
Speaker 3: from tariffs because on the other side of that, you
Speaker 3: get a hit to aggregate demand. When that comes through,
Speaker 3: the FED could still be cutting but later later this year.
Speaker 2: The tech team Seth Carpenter and Elan Zettner is the
Speaker 2: way to go at Morgan Stanley Ellen. This headline just
Speaker 2: out and I usually don't do this, but it gets
Speaker 2: to what your meetings are going to be like at
Speaker 2: Morgan Stanley. Today, traders shift full pricing of next FED
Speaker 2: rate cut to October.
Speaker 4: Wow.
Speaker 1: That's wow, Okay for you, that's wow.
Speaker 4: To me, that's a wow.
Speaker 3: That's a wow, because I have been one of the
Speaker 3: scenarios out there is that the Fed's gonna cut and
Speaker 3: maybe the cut just as much as they're saying they
Speaker 3: might cut this year, but it comes later later because
Speaker 3: they really have to see what policies come out of
Speaker 3: the administration and if they do hit demand later on.
Speaker 1: Okay, no, you're not in speaking terms of Seth Carpenter,
Speaker 1: but the basic ideas here we are is you.
Speaker 2: Have a twisted economics because Texas you you are hard wired.
Speaker 4: I'm realrepreneur.
Speaker 2: No, I'm serious, You're hardwired the entrepreneurial nature of America.
Speaker 2: Do you, Seth Carpenter, Richard Berner, Steve Roach, and everyone
Speaker 2: else in the game.
Speaker 1: Do we underestimate the.
Speaker 2: Entrepreneurial spirit of say someone like Michael Dell.
Speaker 3: I don't know if we underminestimate the entrepreneurial spirit.
Speaker 4: But but it was it was.
Speaker 3: It was gangbusters during COVID when people were able to
Speaker 3: have a rethink and take advantage of excess income, low
Speaker 3: interest rates, and we saw a proliferation of business startups
Speaker 3: and that's always productive of fraudy for the economy. It's
Speaker 3: just just a positive all the way around. Now we're
Speaker 3: seeing productivity gains from the labor market having been so
Speaker 3: tight for so long that businesses sought efficiencies and that's
Speaker 3: coming through now. That's not even AI yet. So america
Speaker 3: An exceptionalism is real. It's very real.
Speaker 4: Did you change your outlook?
Speaker 1: Will you change your outlook now that we are having
Speaker 1: a new administration come in and you know, a kind
Speaker 1: of more solid Republican Congress?
Speaker 3: No, no, no, I think that you know pick your baseline.
Speaker 3: I mean none of us know what's going to come
Speaker 3: out of the administration after January twentieth, and so whatever
Speaker 3: baseline you have, it's.
Speaker 4: Going to be wrong.
Speaker 1: Yep.
Speaker 3: So you just have a lot of scenarios, and one
Speaker 3: of those scenarios will be sort of in the pocket
Speaker 3: of what we get.
Speaker 1: What does it mean for the markets?
Speaker 2: For the stock market, I mean it's away from your
Speaker 2: remit is chief economic strategist.
Speaker 1: I love this global ahead of thematic.
Speaker 2: Sure job is to fix the Dallas Cowboys? Is what
Speaker 2: does it mean for the stock market? If you're sitting
Speaker 2: down with Lisa Shallatte, what do you tell her?
Speaker 3: Yeah, So Lisa and I are tied at the hip
Speaker 3: now both on the Global Investment Committee at Morgan Stanley
Speaker 3: and look, I wouldn't be investing in aggregate indexes here
Speaker 3: because policies are going to come fast and furious, and
Speaker 3: they're going to infect certain pockets of the market.
Speaker 4: So you want to be in real assets.
Speaker 3: You want to be in energy, you want to be
Speaker 3: in commodities, you want.
Speaker 4: To be she's got a game. I'll throw a paw
Speaker 4: in there.
Speaker 3: Oh yes, today, So watch course I'm watching LANDMN.
Speaker 1: Okay, Well, what do you think Sweety's all into it?
Speaker 1: I mean, is it?
Speaker 4: Well, I don't know a lot about the patch.
Speaker 3: I'm probably learning just as much as everybody else it.
Speaker 3: You know, it's not a whole lot going on in
Speaker 3: West Texas.
Speaker 1: But you're plus on oil and energy.
Speaker 3: Oil and American energy reads, healthcare financials because it's going
Speaker 3: to be higher for longer interest rates, and so there
Speaker 3: are there are plenty of pockets of investment right now.
Speaker 4: We're very, very big on.
Speaker 3: Thematic investing AI and defense and specifically software software. So
Speaker 3: there are pockets and there are things that we're excited
Speaker 3: about this year, and they avoid You want to avoid
Speaker 3: things that are super impacted by the volatility around what
Speaker 3: policies could come out of the administration.
Speaker 1: Ellen, thank you. Allen's with Us with Morgan Stanley