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Bloomberg Audio Studios, Podcasts, radio News.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. We begin this hour with stocks hire on reports for a more targeted US tariff approach. Jean Pavan of Blackrock writing, we stay overweight US equities on our tactical horizon of six to twelve months, as policy uncertainty should ease over the period. John joins us now for more. John, good to see you more confidence being long stocks versus bonds. Just help us understand the why. Well.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. We begin this hour with stocks hire on reports for a more targeted US tariff approach. Jean Pavan of Blackrock writing, we stay overweight US equities on our tactical horizon of six to twelve months, as policy uncertainty should ease over the period. John joins us now for more. John, good to see you more confidence being long stocks versus bonds. Just help us understand the why. Well.

On the bone side, I think we are a high conviction that we are observing right now resetting of global rates higher.

On the bone side, I think we are a high conviction that we are observing right now resetting of global rates higher.

It's a big story.

It's a big story.

I think you know, we see fiscal spending being everywhere. This is important reaction to the foreign policy of the US UH and that has still to play out. So I guess being underweight bonds is is OIG conviction. On the equity side of things, we remain of the view that we are at, Like you.

I think you know, we see fiscal spending being everywhere. This is important reaction to the foreign policy of the US UH and that has still to play out. So I guess being underweight bonds is is OIG conviction. On the equity side of things, we remain of the view that we are at, Like you.

Know, uncertainty right now is maxed out. Never seen that before.

Know, uncertainty right now is maxed out. Never seen that before.

Along many policy leavers, objectives are not clear, and so all that together I don't think can last forever. I mean, that's not good for anyone. So we think over the next few weeks, as we get more clarity, I think markets will be able to get on with whatever is the destination.

Along many policy leavers, objectives are not clear, and so all that together I don't think can last forever. I mean, that's not good for anyone. So we think over the next few weeks, as we get more clarity, I think markets will be able to get on with whatever is the destination.

And that's that's the that's the overweight the.

And that's that's the that's the overweight the.

Markets swear markets in the United States. What about markets elsewhere that have actually rallied into this decision.

Markets swear markets in the United States. What about markets elsewhere that have actually rallied into this decision.

I'm thinking of China, I'm thinking of Europe.

I'm thinking of China, I'm thinking of Europe.

Yeah, so I think right now this has been the opposite. Right, so, we've seen the rest of the world out performing in the US, but on the sixty to twelve month horizon, we expect to go back to the US taking the lead. I think this is partly because on the European side, even though we are a bit more positive, we turn neutral. We used to be on the weight. We think this is more of a narrow story. It's ministry spending its banks and it has some momentum for a few months, but we don't think this is yet a macro story that's going to carry Europe.

Yeah, so I think right now this has been the opposite. Right, so, we've seen the rest of the world out performing in the US, but on the sixty to twelve month horizon, we expect to go back to the US taking the lead. I think this is partly because on the European side, even though we are a bit more positive, we turn neutral. We used to be on the weight. We think this is more of a narrow story. It's ministry spending its banks and it has some momentum for a few months, but we don't think this is yet a macro story that's going to carry Europe.

For the next twelve months.

For the next twelve months.

So we expect to revert back to US taking the lead as a result, if you.

So we expect to revert back to US taking the lead as a result, if you.

Put these two ideas together, the idea that we're seeing a structural repricing of rates and that you still are overweight the US or expecting the US to take the lead later this year, do you think overall equity returns are going to be constrained by this repricing of rates.

Put these two ideas together, the idea that we're seeing a structural repricing of rates and that you still are overweight the US or expecting the US to take the lead later this year, do you think overall equity returns are going to be constrained by this repricing of rates.

Globally, So we don't think rates are coming down. We think the ten year in a year in the US, which has been rallying, is not the story we're going to see going forward. So there's going to be an adjustment. But we think that you know, there's like deep forces that will reassert themselves AI. We still are, you know, very bollish on AI being a powerful source of driver's returns, and as a result, we think it's possible to withstand higher rates, moderate increase in rates, and withstand those for equity if we get a very significant adjustment in rates, which is not impossible given the uncity we're facing. Depending on the policies that will be put in place, then it would challenge the view in equities.

Globally, So we don't think rates are coming down. We think the ten year in a year in the US, which has been rallying, is not the story we're going to see going forward. So there's going to be an adjustment. But we think that you know, there's like deep forces that will reassert themselves AI. We still are, you know, very bollish on AI being a powerful source of driver's returns, and as a result, we think it's possible to withstand higher rates, moderate increase in rates, and withstand those for equity if we get a very significant adjustment in rates, which is not impossible given the uncity we're facing. Depending on the policies that will be put in place, then it would challenge the view in equities.

I guess for the US in the United States, do you think that the US is going to be the main beneficiary from this AI mega trend that you've been talking about for quite a while, or do you think that increasingly you and your colleagues are starting to think about China as also being maybe not as much of a beneficiary, but a significant one with some of the advancements that we're seeing currently.

I guess for the US in the United States, do you think that the US is going to be the main beneficiary from this AI mega trend that you've been talking about for quite a while, or do you think that increasingly you and your colleagues are starting to think about China as also being maybe not as much of a beneficiary, but a significant one with some of the advancements that we're seeing currently.

Yeah, I think both are set to benefit from the from the AI story. I think about China and the US, we think this is where it plays out. There's a bit of a Middle East story as well, but it's not a global story, so we think this is more powerful in the US. I think the U US eventually provide an environment where we were more comfortable with I guess, you know, on the macro perspective, Uh, so the AI story is playing in both places. I think the macro backdrop eventually is more positive in the US. That's why the combination of macro in AI favors US over China.

Yeah, I think both are set to benefit from the from the AI story. I think about China and the US, we think this is where it plays out. There's a bit of a Middle East story as well, but it's not a global story, so we think this is more powerful in the US. I think the U US eventually provide an environment where we were more comfortable with I guess, you know, on the macro perspective, Uh, so the AI story is playing in both places. I think the macro backdrop eventually is more positive in the US. That's why the combination of macro in AI favors US over China.

For US, it's interesting you mentioned the Middle East. We just had shake time noon down in Washington and the UAE saying they're going to invest more than one trillion in AI. But a lot of that is almost contingent on them being able.

For US, it's interesting you mentioned the Middle East. We just had shake time noon down in Washington and the UAE saying they're going to invest more than one trillion in AI. But a lot of that is almost contingent on them being able.

To get access to these chips.

To get access to these chips.

Is that all the leverage the US holds, they have all the power.

Is that all the leverage the US holds, they have all the power.

I think that's part of it, right, So there's there's a it's it's it's first of all, it's a story that is a very high buyers to intrigue, a massive amount of cape that is needed to be a player in that space, and I think so you need big firm with big balance sheet. Uh, it's possible for other countries with deep pockets to play a role in there. But I do think that the US does have, you know, the upper hand on this at this stage.

I think that's part of it, right, So there's there's a it's it's it's first of all, it's a story that is a very high buyers to intrigue, a massive amount of cape that is needed to be a player in that space, and I think so you need big firm with big balance sheet. Uh, it's possible for other countries with deep pockets to play a role in there. But I do think that the US does have, you know, the upper hand on this at this stage.

When you see positive news like that, but then you also see banks coming out and potentially easing their probability of US recession.

When you see positive news like that, but then you also see banks coming out and potentially easing their probability of US recession.

How do you wag the two?

How do you wag the two?

Well?

Well?

I think right now that the part we haven't talked about. We've talked about the six to twelve month horizon with the our view that eventually we get back to a better place. But for now, as I said, the uncertainty is kind of peak level. I don't think I've ever seen, you know, so much a range of views on what might happen. The commentary on the outlook is as wide as I've never seen. It's as political has never seen it. And as a result, that is holding back people. And the longer it lasts, then I think we don't think a recession is in the card. We think there's a lot of resilience. In fact, I don't think the recession is the biggest risk. I think the recession the biggest risk is long term decision, infrastructure decision and so on that if they're put on old we're going to see a lower structural growth rate in the US eventually, and that's much bigger deal than a recession.

I think right now that the part we haven't talked about. We've talked about the six to twelve month horizon with the our view that eventually we get back to a better place. But for now, as I said, the uncertainty is kind of peak level. I don't think I've ever seen, you know, so much a range of views on what might happen. The commentary on the outlook is as wide as I've never seen. It's as political has never seen it. And as a result, that is holding back people. And the longer it lasts, then I think we don't think a recession is in the card. We think there's a lot of resilience. In fact, I don't think the recession is the biggest risk. I think the recession the biggest risk is long term decision, infrastructure decision and so on that if they're put on old we're going to see a lower structural growth rate in the US eventually, and that's much bigger deal than a recession.

You keep talking about how later this year we'll get to a better place from some sort of policy level, or from a certainty level. What does that mean at a time when we keep talking about uncertainty being a feature not a bug of this administration.

You keep talking about how later this year we'll get to a better place from some sort of policy level, or from a certainty level. What does that mean at a time when we keep talking about uncertainty being a feature not a bug of this administration.

I don't, I think.

I don't, I think.

I mean, I'll give you one example in the tariff. I think you know you right now, there is a debate. There's uncertainty about what will be the impact of those tariff for the US, for the trading partners, and you can make an argument that it's going to be minimal, it doesn't hurt the US. Once the evidence comes in, I think the leverage of this buggaining chip will be waning, and so I think one way or the other, we're going to see a reduction. It's going to be harder to dismiss the damage from tariff, is going to be harder to just make bold statement about we're going to go with even higher tariffs, and I think you get a circunvergence someplace as a result.

I mean, I'll give you one example in the tariff. I think you know you right now, there is a debate. There's uncertainty about what will be the impact of those tariff for the US, for the trading partners, and you can make an argument that it's going to be minimal, it doesn't hurt the US. Once the evidence comes in, I think the leverage of this buggaining chip will be waning, and so I think one way or the other, we're going to see a reduction. It's going to be harder to dismiss the damage from tariff, is going to be harder to just make bold statement about we're going to go with even higher tariffs, and I think you get a circunvergence someplace as a result.

Is that the moment to buy bonds when we actually start to say that, or is there another reason why you just don't believe treasuries are going to play that role this time around.

Is that the moment to buy bonds when we actually start to say that, or is there another reason why you just don't believe treasuries are going to play that role this time around.

I think the underlying forces. We don't think inflation is resolved. I think the Fed last week has painted the most optimistic scenario on and they've included then in their forecasts on the tariffs.

I think the underlying forces. We don't think inflation is resolved. I think the Fed last week has painted the most optimistic scenario on and they've included then in their forecasts on the tariffs.

You don't buy it.

You don't buy it.

I don't buy it.

I don't buy it.

And then I think the fiscal side, I mean, we'll need to see, but we have hope of taxic extension coming in, so we know this is this is.

And then I think the fiscal side, I mean, we'll need to see, but we have hope of taxic extension coming in, so we know this is this is.

UH going to make the deficit wider.

UH going to make the deficit wider.

If it's the only thing happening, the saving is much more concertain, and so I think the fiscal story remains one of deficits and putting pressure on meals.

If it's the only thing happening, the saving is much more concertain, and so I think the fiscal story remains one of deficits and putting pressure on meals.

When you open up the SEP and you look at those forecasts from the Federal Reserve, which pace of that jumped up to you and said that's aspirational?

When you open up the SEP and you look at those forecasts from the Federal Reserve, which pace of that jumped up to you and said that's aspirational?

I don't buy it.

I don't buy it.

Well.

Well.

To me, the most revealing part of the of the SEP and the press conference last week was when when asked about whether this is a one of story inflation. I think the chairman was very careful to say, well, we don't know for sure.

To me, the most revealing part of the of the SEP and the press conference last week was when when asked about whether this is a one of story inflation. I think the chairman was very careful to say, well, we don't know for sure.

Last time it was. But when he answered the question later.

Last time it was. But when he answered the question later.

About like when they would get concerned about inflation, he said, well, if we were to see inflation appearing in as part of the economy that has nothing to do with with tariff, then we would get concerned.

About like when they would get concerned about inflation, he said, well, if we were to see inflation appearing in as part of the economy that has nothing to do with with tariff, then we would get concerned.

That's to me like doubling down on this is a one off.

That's to me like doubling down on this is a one off.

They see the tariff as being a one off, and so that that definitely stand stood out for me.

They see the tariff as being a one off, and so that that definitely stand stood out for me.

Do you not think it is a one off.

Do you not think it is a one off.

I think I think it could be.

I think I think it could be.

But it was last time because it was like very targeted. If we're talking about Broadbay's resetting of global trade, I think there's going to be adjustment. I think the cost of doing international production will be higher. And it's not like just a tax or a tariff. It's the broader adjustment higher cost of production.

But it was last time because it was like very targeted. If we're talking about Broadbay's resetting of global trade, I think there's going to be adjustment. I think the cost of doing international production will be higher. And it's not like just a tax or a tariff. It's the broader adjustment higher cost of production.

For some time, you've heard the argument from economists that because employment anxiety is higher now, the second round effects will be dampened. People won't be able to ask for a raise. You won't see those second or the second round effects of that spike in prices.

For some time, you've heard the argument from economists that because employment anxiety is higher now, the second round effects will be dampened. People won't be able to ask for a raise. You won't see those second or the second round effects of that spike in prices.

What do you say back to those people.

What do you say back to those people.

I think we have a very tight liberal market. I think the FED seasons are being balanced. I think we have seen over the last few years immigration playing a massive role in helping the liberal market cope with a lot of tightness.

I think we have a very tight liberal market. I think the FED seasons are being balanced. I think we have seen over the last few years immigration playing a massive role in helping the liberal market cope with a lot of tightness.

I think that is the big story going forward.

I think that is the big story going forward.

So I'm not sure that the boggaining power for wage negotiations will shift that much.

So I'm not sure that the boggaining power for wage negotiations will shift that much.

As for a pay raise, Really, you're on really a mission, man.

As for a pay raise, Really, you're on really a mission, man.

I wonder what that psychology shame from them, you know.

I wonder what that psychology shame from them, you know.

Employer and yeah, well I keep fitting it not asking for a bowl of whatever. It's Oliver, John Bava and Black Croc. Thank you, Thank you, Banks for America publishing its newest small Businesses Checkpoint. The team rights in the following. Despite continued optimism, small business uncertainty is on the rise. According to aggregated credit and debit card spending data, small businesses are slowing their card spending across the board. Sharon Miller, the President and co head of Business Banking and Bank for America, joined us now for more.

Employer and yeah, well I keep fitting it not asking for a bowl of whatever. It's Oliver, John Bava and Black Croc. Thank you, Thank you, Banks for America publishing its newest small Businesses Checkpoint. The team rights in the following. Despite continued optimism, small business uncertainty is on the rise. According to aggregated credit and debit card spending data, small businesses are slowing their card spending across the board. Sharon Miller, the President and co head of Business Banking and Bank for America, joined us now for more.

Sharon, good to see you, good to see it.

Sharon, good to see you, good to see it.

Good morning.

Good morning.

Let's talk about the little spots of weakness that we're starting to see emerge. Where are they and what's behind it?

Let's talk about the little spots of weakness that we're starting to see emerge. Where are they and what's behind it?

Well, we are seeing weakness in manufacturing firms, especially the smaller manufacturing firms, so those with five hundred thousand revenue and below. But as you look at the larger companies, we are still seeing strength there. We're seeing strength and retailers with the exception of furniture, which.

Well, we are seeing weakness in manufacturing firms, especially the smaller manufacturing firms, so those with five hundred thousand revenue and below. But as you look at the larger companies, we are still seeing strength there. We're seeing strength and retailers with the exception of furniture, which.

Really shows the sort of ad hoc nature of some of the threats and how different companies are responding to it. Before we dig into the specific sectors, I'm wondering the difference between big and small businesses you say small businesses are slowing their card spending across the board. Is that the right distinction to make small versus big?

Really shows the sort of ad hoc nature of some of the threats and how different companies are responding to it. Before we dig into the specific sectors, I'm wondering the difference between big and small businesses you say small businesses are slowing their card spending across the board. Is that the right distinction to make small versus big?

I would say small versus medium sized businesses. So when you think of our segments anywhere from startup to fifty million in revenues, so you have small and mid sized companies within there. But generally speaking, we're talking about a million dollar in below company. When we're seeing smaller businesses.

I would say small versus medium sized businesses. So when you think of our segments anywhere from startup to fifty million in revenues, so you have small and mid sized companies within there. But generally speaking, we're talking about a million dollar in below company. When we're seeing smaller businesses.

What's the standout? What industry has been very strong at the moment.

What's the standout? What industry has been very strong at the moment.

Well, we are seeing strength and retailers with the exception of furniture, but restaurant spending is strong. We are seeing strong strength and shopping going out to eat, all of those types of retailers, e commerce. So I think that there's some trends there, and so you have to see what the data is telling you, not necessarily what the consumer is telling you.

Well, we are seeing strength and retailers with the exception of furniture, but restaurant spending is strong. We are seeing strong strength and shopping going out to eat, all of those types of retailers, e commerce. So I think that there's some trends there, and so you have to see what the data is telling you, not necessarily what the consumer is telling you.

Is this a leading indicator? Are these card data tending to a point to strength or weakness depending on where we are in the cycle.

Is this a leading indicator? Are these card data tending to a point to strength or weakness depending on where we are in the cycle.

Well, I think it's a weight and see attitude. I mean, there are things on the horizon and some dependencies that businesses are thinking about, whether it's tariffs, the political environment, taxes. How is all that going to come to life as they're thinking about CAPEX for their business.

Well, I think it's a weight and see attitude. I mean, there are things on the horizon and some dependencies that businesses are thinking about, whether it's tariffs, the political environment, taxes. How is all that going to come to life as they're thinking about CAPEX for their business.

Let's say on CAPEX, how do you get a decent idea of whether those CAPEX decisions aren't being delayed, pushed back, or just totally derailed. Which one do you think it is at the moment?

Let's say on CAPEX, how do you get a decent idea of whether those CAPEX decisions aren't being delayed, pushed back, or just totally derailed. Which one do you think it is at the moment?

I think it's delayed. I think it's a weight and see attitude where you're still seeing people spending on their business, albeit not as strong as we had seen last year. So there is some wait and see out there because they don't know what's going to happen. And so as I'm talking to clients around the country, that's what I'm hearing as well. We do want to expand we do want to invest in our business, but we're holding off just a bit to see what's going to happen.

I think it's delayed. I think it's a weight and see attitude where you're still seeing people spending on their business, albeit not as strong as we had seen last year. So there is some wait and see out there because they don't know what's going to happen. And so as I'm talking to clients around the country, that's what I'm hearing as well. We do want to expand we do want to invest in our business, but we're holding off just a bit to see what's going to happen.

Sean.

Sean.

As you know, these companies have a massive role to play an employment in this country, and we're starting to focus even more on the hard day to the employment numbers that come in every week jobless claims. Now, if you go into a wait and see economy, how long before you start to say we're not going to hire, we're going to fire.

As you know, these companies have a massive role to play an employment in this country, and we're starting to focus even more on the hard day to the employment numbers that come in every week jobless claims. Now, if you go into a wait and see economy, how long before you start to say we're not going to hire, we're going to fire.

Is there a lack of time.

Is there a lack of time.

Is there a typical framework timeline to think about this, or we in no man's land.

Is there a typical framework timeline to think about this, or we in no man's land.

I wouldn't say we're in no man's land.

I wouldn't say we're in no man's land.

I mean we've got to watch the data every week, every month and what's happening in the economy. But I would say that in business formation and those that are actually putting together plans to hire businesses, we are seeing an increase in the number of new businesses opened that are talking about I'm going to employ people, and so that is good news as you think about where we are today versus pre pandemic.

I mean we've got to watch the data every week, every month and what's happening in the economy. But I would say that in business formation and those that are actually putting together plans to hire businesses, we are seeing an increase in the number of new businesses opened that are talking about I'm going to employ people, and so that is good news as you think about where we are today versus pre pandemic.

Levels, Are there significant exceptions We were talking about sort of the ad hoc nature of who gets hurt and who doesn't. Are there areas small park where you are seeing real deterioration.

Levels, Are there significant exceptions We were talking about sort of the ad hoc nature of who gets hurt and who doesn't. Are there areas small park where you are seeing real deterioration.

I would say we are seeing, you know, a little bit of deterioration and manufacturing, especially in those firms less than five hundred thousand in revenues. In furniture, that's the only retail category that we did see a decline. And so those two areas are areas that we are watching.

I would say we are seeing, you know, a little bit of deterioration and manufacturing, especially in those firms less than five hundred thousand in revenues. In furniture, that's the only retail category that we did see a decline. And so those two areas are areas that we are watching.

Find the retailer point absolutely fascinating and I think it reinforces what Chairman pow said just last week that you can read too much into the sentiment survey data is look at what people are doing and right now for him, for many for economists too, they're looking at the hard data and it's still holding up and there's not much to see here.

Find the retailer point absolutely fascinating and I think it reinforces what Chairman pow said just last week that you can read too much into the sentiment survey data is look at what people are doing and right now for him, for many for economists too, they're looking at the hard data and it's still holding up and there's not much to see here.

When you take surveys online, there have been studies that show that people tend to say that they feel less good, and a lot of these surveys are online, and so they all ran to online.

When you take surveys online, there have been studies that show that people tend to say that they feel less good, and a lot of these surveys are online, and so they all ran to online.

I feel terrible.

I feel terrible.

Why and then they say, oh, I'm going to go shopping, you know, And this is sort of what has been bearing out retail fare exactly in the data.

Why and then they say, oh, I'm going to go shopping, you know, And this is sort of what has been bearing out retail fare exactly in the data.

That sounded personal.

That sounded personal.

Branmo's just saying, it's always you know, those texts that you said to people or you're just ranting and then you're like, Okay, now I'm done, move on.

Branmo's just saying, it's always you know, those texts that you said to people or you're just ranting and then you're like, Okay, now I'm done, move on.

Is that how people approach you, Mitch? When it comes out on Friday, you are.

Is that how people approach you, Mitch? When it comes out on Friday, you are.

My opinion on the world pretty much.

My opinion on the world pretty much.

Sharon is good to see as always. Thanks for being with us. We appreciate the update. Sharon millerde of Bank for America. Let's stick with the consumer investors looking ahead to consumer confidence and later on this week, Danna Tausi if the Taosi Advisory Group writing, frenetic is an app word to describe the current environment. Key measurements such as consumer sentiment and volatility in the stock market reflect the anxiety out there. Dana John just now for more, Donna, good to see what's.

Sharon is good to see as always. Thanks for being with us. We appreciate the update. Sharon millerde of Bank for America. Let's stick with the consumer investors looking ahead to consumer confidence and later on this week, Danna Tausi if the Taosi Advisory Group writing, frenetic is an app word to describe the current environment. Key measurements such as consumer sentiment and volatility in the stock market reflect the anxiety out there. Dana John just now for more, Donna, good to see what's.

Always nice to see you.

Always nice to see you.

Thank you for having me.

Thank you for having me.

People pulling back, that's what we want to know. Do you see it in the channel checks?

People pulling back, that's what we want to know. Do you see it in the channel checks?

We are we are singing in the channel checks. When you look at the earnings results that are coming out from retailers lately, the fourth quarter almost feels divorced from what you have in the first quarter, and going forward, you look at the guidance that companies are giving out in the consumer space for the first quarter. In essence, we always know the consumer area is a third and fourth quarter weighted, but now the first quarter is expected to be for the most part, weaker than consensus and what consensus had out there, So you need to accelerate even more rapidly. And that word forrenetic the reason I like it. I looked up the definition anxiety indusive indusive activity in a wild and uncontrollable way, and that what it feels like today.

We are we are singing in the channel checks. When you look at the earnings results that are coming out from retailers lately, the fourth quarter almost feels divorced from what you have in the first quarter, and going forward, you look at the guidance that companies are giving out in the consumer space for the first quarter. In essence, we always know the consumer area is a third and fourth quarter weighted, but now the first quarter is expected to be for the most part, weaker than consensus and what consensus had out there, So you need to accelerate even more rapidly. And that word forrenetic the reason I like it. I looked up the definition anxiety indusive indusive activity in a wild and uncontrollable way, and that what it feels like today.

Consumption has been super resilient for the last several years. But beneath the surface, beneath the headline numbers, it's been very bifurcated. Low income consumers have been squeezed for quite a while. A number of years now. High income consumers have held up. Is that still the case, because if they start to go, this is over?

Consumption has been super resilient for the last several years. But beneath the surface, beneath the headline numbers, it's been very bifurcated. Low income consumers have been squeezed for quite a while. A number of years now. High income consumers have held up. Is that still the case, because if they start to go, this is over?

What's the story?

What's the story?

I think the higher consumers moditorated. They're spending a bit. You look at what Delta Airlines said a few weeks ago, and Delta is the premier airline or the premium price of twenty percent or more. You're still seeing the uber high end doing very well. You look at Rmez's results and the double digit increases. But everyone else out there it's a state where it's not as robust as it had been, and consumers are discerning. Look at what Costco said where they've seen a shift to people eating at home, and we're seeing more evidence of that type of behavior.

I think the higher consumers moditorated. They're spending a bit. You look at what Delta Airlines said a few weeks ago, and Delta is the premier airline or the premium price of twenty percent or more. You're still seeing the uber high end doing very well. You look at Rmez's results and the double digit increases. But everyone else out there it's a state where it's not as robust as it had been, and consumers are discerning. Look at what Costco said where they've seen a shift to people eating at home, and we're seeing more evidence of that type of behavior.

What do you need to win?

What do you need to win?

You need newness, you need events, you need activation in order to drive interest. I was on Friday and on Saturday, I was downtown at the opening of the new print Tom's Department store, the first one here in the US, the weight was around the block, So there's interest in newness.

You need newness, you need events, you need activation in order to drive interest. I was on Friday and on Saturday, I was downtown at the opening of the new print Tom's Department store, the first one here in the US, the weight was around the block, So there's interest in newness.

Do we have a sense then, just to that point of who might be using this as an excuse the idea that there's consumer hesitancy. So when on kitchen sink it throw all your problems out there, clear the decks, and then do what you want.

Do we have a sense then, just to that point of who might be using this as an excuse the idea that there's consumer hesitancy. So when on kitchen sink it throw all your problems out there, clear the decks, and then do what you want.

I think some of the companies overall who have been performing poorly you are able to do that. You've certainly taken a look at some of the lower end department stores that have had some of those issues, but many of the others they're hoping that they can still see that sell through the ones that are winning brand leaders, discounters and off pricers. You definitely see even the weakness and some of the luxury brands that haven't been as strong. You look at some of the European brands like Caring doesn't have the same robust posture that they had before, and they just found a new Gucci designers. So we'll see what happens. It'll be interesting to see LVMH's sales results when they report in mid April.

I think some of the companies overall who have been performing poorly you are able to do that. You've certainly taken a look at some of the lower end department stores that have had some of those issues, but many of the others they're hoping that they can still see that sell through the ones that are winning brand leaders, discounters and off pricers. You definitely see even the weakness and some of the luxury brands that haven't been as strong. You look at some of the European brands like Caring doesn't have the same robust posture that they had before, and they just found a new Gucci designers. So we'll see what happens. It'll be interesting to see LVMH's sales results when they report in mid April.

Who do you think is going to be really caught in the crosshairs when it comes to tariffs.

Who do you think is going to be really caught in the crosshairs when it comes to tariffs.

The areas that are being impacted the most from tariffs, it's definitely some of the footwear companies, some of the dollar stores, and the speed which you need to diversify. You can do three things. You diversify to other areas, you split the cost with the manufacturers, or and you raise prices. But diversifying and paying the cost with manufacturers or them diversifying it takes time. There's a reason companies went to China. It's fast and the labor knew what to do and it's cost effective.

The areas that are being impacted the most from tariffs, it's definitely some of the footwear companies, some of the dollar stores, and the speed which you need to diversify. You can do three things. You diversify to other areas, you split the cost with the manufacturers, or and you raise prices. But diversifying and paying the cost with manufacturers or them diversifying it takes time. There's a reason companies went to China. It's fast and the labor knew what to do and it's cost effective.

But when it comes to April second, we're going to get this quote liberation day. Maybe it's going to be more selective than a broad scope. How are these companies preparing for that they're not being able to move manufacturing a matter of weeks.

But when it comes to April second, we're going to get this quote liberation day. Maybe it's going to be more selective than a broad scope. How are these companies preparing for that they're not being able to move manufacturing a matter of weeks.

They're including it in their guidance from many of the companies. The guidance that you've seen for twenty twenty five includes the tariff implications at the point until which they know how much the tariff is anything else it is basically they'll need to reset again. And for the most part in the early runnings, You're right, it's not a lot of the apparel world, but it is many the other areas that raises prices for the end consumer.

They're including it in their guidance from many of the companies. The guidance that you've seen for twenty twenty five includes the tariff implications at the point until which they know how much the tariff is anything else it is basically they'll need to reset again. And for the most part in the early runnings, You're right, it's not a lot of the apparel world, but it is many the other areas that raises prices for the end consumer.

So we've heard reports about certain companies I'm thinking about Walmart in particular, that have gone to Chinese suppliers and said, all right, cut your cost by ten percent, eat it, and they say, no, thank you, not going to do it this time. How much are you seeing that across the board, these sort of efforts to job owing suppliers into absorbing it, not getting that, and so ultimately they will have no choice but to raise those prices.

So we've heard reports about certain companies I'm thinking about Walmart in particular, that have gone to Chinese suppliers and said, all right, cut your cost by ten percent, eat it, and they say, no, thank you, not going to do it this time. How much are you seeing that across the board, these sort of efforts to job owing suppliers into absorbing it, not getting that, and so ultimately they will have no choice but to raise those prices.

I'm hearing about it from some of the bigger players, the smaller players also, so they're all looking at other areas in which diversified manufacturing, not in the US because of how expensive it is, going to South America, going to Africa are some of the other areas that we're hearing companies work to do that.

I'm hearing about it from some of the bigger players, the smaller players also, so they're all looking at other areas in which diversified manufacturing, not in the US because of how expensive it is, going to South America, going to Africa are some of the other areas that we're hearing companies work to do that.

Macy's has Macy's problems.

Macy's has Macy's problems.

Their stock is down by another twenty percent, so fine, Yet today, do we need another luxury department store in New York City? You mentioned Prince TOMPs. Do we need another one overall?

Their stock is down by another twenty percent, so fine, Yet today, do we need another luxury department store in New York City? You mentioned Prince TOMPs. Do we need another one overall?

I mean location is a little bit different on Wall Street. But in saying that, there was people down there, certainly when I was there around the block.

I mean location is a little bit different on Wall Street. But in saying that, there was people down there, certainly when I was there around the block.

I know it's the same thing down there over the weekend. I just wonder if that loss We'll see, well.

I know it's the same thing down there over the weekend. I just wonder if that loss We'll see, well.

No, in a month or so. But I think that locational is a little bit odd to get regular visitors all the time.

No, in a month or so. But I think that locational is a little bit odd to get regular visitors all the time.

But they don't want to be known as a department store. I think that friends are very very said about this, yes, so how are so? How are they communicating that five to a have a minute what they have said about they don't printense, doesn't want to be known as a department store.

But they don't want to be known as a department store. I think that friends are very very said about this, yes, so how are so? How are they communicating that five to a have a minute what they have said about they don't printense, doesn't want to be known as a department store.

What are they cooling it?

What are they cooling it?

Experiential? They want to be experience.

Experiential? They want to be experience.

I'll approach there.

I'll approach there.

They basically have like five beverages like a Harrod's, much smaller. I mean, when you're thinking fifty five thousand square feet, it's two floors the ret not all the restaurants are open.

They basically have like five beverages like a Harrod's, much smaller. I mean, when you're thinking fifty five thousand square feet, it's two floors the ret not all the restaurants are open.

Yet.

Yet.

The reason why is exactly because of the way that you ask that question, do we really need more department stores? You have to wonder a lot of people are thinking the same thing. Because Macy's was not a pleasant experience, because it didn't really do it well.

The reason why is exactly because of the way that you ask that question, do we really need more department stores? You have to wonder a lot of people are thinking the same thing. Because Macy's was not a pleasant experience, because it didn't really do it well.

It downtounds a bit of a ghost town. On the weekend. We've got enough to fall down there to make this work.

It downtounds a bit of a ghost town. On the weekend. We've got enough to fall down there to make this work.

That's going to be the big question. They do have exclusive brands from France that are there. Since it's hard to get in, it's going to take time for everyone to see it and go back on a repeat basis.

That's going to be the big question. They do have exclusive brands from France that are there. Since it's hard to get in, it's going to take time for everyone to see it and go back on a repeat basis.

Yeah, so I'm willing to go downtown to go see it, especially knowing there's lines and there's probably more lines during the week I've had.

Yeah, so I'm willing to go downtown to go see it, especially knowing there's lines and there's probably more lines during the week I've had.

One, right, Well, I agree. I will go back there to check it out, to see how they're differentiating themselves. You would think there was other locations like that Barney's building, but that's much bigger than fifty five thousand square feet and you need an anchor to bring people up. Madison Avenue.

One, right, Well, I agree. I will go back there to check it out, to see how they're differentiating themselves. You would think there was other locations like that Barney's building, but that's much bigger than fifty five thousand square feet and you need an anchor to bring people up. Madison Avenue.

Oh, the old Barnie's building. Yes, I used to like it there, used to like.

Oh, the old Barnie's building. Yes, I used to like it there, used to like.

It that empty.

It that empty.

It's still empty, right, it's still the one that you're talking about, the one on Madison another.

It's still empty, right, it's still the one that you're talking about, the one on Madison another.

Madison and sixty first.

Madison and sixty first.

I need to do something about that, Dyna. We'll sort that out. Danna TOOWSI there the Taosi Advice Regroup. Danna, thank you, thank you. So I was downtown beig Muan was full lots of people. They are having lunch, doing drinks, all of that stuff.

I need to do something about that, Dyna. We'll sort that out. Danna TOOWSI there the Taosi Advice Regroup. Danna, thank you, thank you. So I was downtown beig Muan was full lots of people. They are having lunch, doing drinks, all of that stuff.

Then you go to.

Then you go to.

Prince Homs around the corner. The line literally gone around a block.

Prince Homs around the corner. The line literally gone around a block.

Twenty five percent of the brands that they're bringing in you cannot get in the United States. You literally have to go to France to see them. And I've been to printentps in France and I love it. So I'm very excited about this because finally you get access.

Twenty five percent of the brands that they're bringing in you cannot get in the United States. You literally have to go to France to see them. And I've been to printentps in France and I love it. So I'm very excited about this because finally you get access.

That's the attraction. I think that's the attraction.

That's the attraction. I think that's the attraction.

That's how they're going to win potentially, and maybe the restaurants one to get it.

That's how they're going to win potentially, and maybe the restaurants one to get it.

Yeah, Well, with the experience aspect is important. I mean I think about that with my own younger cohort of sample size at home, and they talk about the experience of going to certain places and why they are willing to go to the place. It gives the place somewhere to go.

Yeah, Well, with the experience aspect is important. I mean I think about that with my own younger cohort of sample size at home, and they talk about the experience of going to certain places and why they are willing to go to the place. It gives the place somewhere to go.

It's interesting.

It's interesting.

I can't friends exactly don't care less about the experience, sort of like I just want a friction free transaction. I just want to get thanks for everyone. I don't want to talk to people. Just let's get the size and let's go shops.

I can't friends exactly don't care less about the experience, sort of like I just want a friction free transaction. I just want to get thanks for everyone. I don't want to talk to people. Just let's get the size and let's go shops.

I must really see you coming in and run I'm the type of person that they offer you some champagne and that's I'm buying another.

I must really see you coming in and run I'm the type of person that they offer you some champagne and that's I'm buying another.

Pose more expensive, that's taking a hit on the margin. I'm just direct. They're much easier.

Pose more expensive, that's taking a hit on the margin. I'm just direct. They're much easier.

Wow of seeing something new, it's very exciting.

Wow of seeing something new, it's very exciting.

Make the sale. Coming up on the program, They're always going to say, thank you. Let's stick with the economy. Kathy Boschantik of Nationwide Mutual Insurance writing, if downside risk to our baseline forecasts continue to build, the FMC may shift its focus from inflation to slowing economic growth and potentially deliver a rate cut earlier in Q three. Kathy joins us now for more. Kathy, welcome to the program. That is the number one question that so many people have. If the Federal Reserve has sticky and above target inflation, are they in a position to respond to downside risk materializing in the economy. What gives you the confidence that they can do that later this year?

Make the sale. Coming up on the program, They're always going to say, thank you. Let's stick with the economy. Kathy Boschantik of Nationwide Mutual Insurance writing, if downside risk to our baseline forecasts continue to build, the FMC may shift its focus from inflation to slowing economic growth and potentially deliver a rate cut earlier in Q three. Kathy joins us now for more. Kathy, welcome to the program. That is the number one question that so many people have. If the Federal Reserve has sticky and above target inflation, are they in a position to respond to downside risk materializing in the economy. What gives you the confidence that they can do that later this year?

Well, good morning, John, and I should highlight first our baseline forecast is that they don't you know that they wait until the fourth quarter and we only have one rate hike for the year. But what I was illustrating is that we continue to see downside risk building, right, You're seeing in the economic data. Even if these terrorists which you were talking about, maybe are more targeted and not as negative for growth or inflation, you still have a lot of uncertainty out there. I think even after April second, it will have a little clarity, but still uncertainty, and that uncertainty is corrosive to economic growth. So my concern is that there's downside risk to our baseline and that defend. Yeah, maybe they do need to come in in the third quarter. Now they have to balance things, right, you know, inflation versus growth. But if they believe now Chairman Power open this the genie bottle, right and said that the genial said transitory. If they really do believe that, then they can shift to growth because they're going to look through the tariff impact. But you know, tremendous uncertainty at this point, Kathy.

Well, good morning, John, and I should highlight first our baseline forecast is that they don't you know that they wait until the fourth quarter and we only have one rate hike for the year. But what I was illustrating is that we continue to see downside risk building, right, You're seeing in the economic data. Even if these terrorists which you were talking about, maybe are more targeted and not as negative for growth or inflation, you still have a lot of uncertainty out there. I think even after April second, it will have a little clarity, but still uncertainty, and that uncertainty is corrosive to economic growth. So my concern is that there's downside risk to our baseline and that defend. Yeah, maybe they do need to come in in the third quarter. Now they have to balance things, right, you know, inflation versus growth. But if they believe now Chairman Power open this the genie bottle, right and said that the genial said transitory. If they really do believe that, then they can shift to growth because they're going to look through the tariff impact. But you know, tremendous uncertainty at this point, Kathy.

Right now, the market's baking in almost three rate cuts through the remainder.

Right now, the market's baking in almost three rate cuts through the remainder.

Of this year by the Federal Reserve.

Of this year by the Federal Reserve.

Do you think that that increases the risk of inflation picking back up in the scenario that you just laid out, or growth is slowing, inflation is sticky and some of it or a lot of it can be attributed to tariffs.

Do you think that that increases the risk of inflation picking back up in the scenario that you just laid out, or growth is slowing, inflation is sticky and some of it or a lot of it can be attributed to tariffs.

Yeah, you know, financial conditions I think overall are a bit a bit volatile, and a lot of that due to the equity market. But we're also seeing corporate bond spreads widen a bit, you know, not alarmingly so, but wid so, even though the bond markets pricing in more easing. The fact is, I don't think overall financial conditions have really eased that much. And if you look at the tenure yield, it's you know, it's quite volatile, but it's still gonna mean time. Mortgage rates are eyes so I don't see that you know, easier credit flowing through to the economy and really jazzing up things. If anything, maybe provides a little buffer, but I think there's still a lot of headwinds, you know, hitting the consumer, hitting businesses at this point, which.

Yeah, you know, financial conditions I think overall are a bit a bit volatile, and a lot of that due to the equity market. But we're also seeing corporate bond spreads widen a bit, you know, not alarmingly so, but wid so, even though the bond markets pricing in more easing. The fact is, I don't think overall financial conditions have really eased that much. And if you look at the tenure yield, it's you know, it's quite volatile, but it's still gonna mean time. Mortgage rates are eyes so I don't see that you know, easier credit flowing through to the economy and really jazzing up things. If anything, maybe provides a little buffer, but I think there's still a lot of headwinds, you know, hitting the consumer, hitting businesses at this point, which.

Raises a question cave of whether fed rate cuts will actually be effective at boosting growth. Will they be the same kind of put, if not on acid prices then on the economy that they have been traditionally.

Raises a question cave of whether fed rate cuts will actually be effective at boosting growth. Will they be the same kind of put, if not on acid prices then on the economy that they have been traditionally.

Yeah, it's I think that what the market really wants is that Trump put, and we don't seem to be getting that as much or at least the strike price is lower. But again there is good news that the tariffs that then would be announced that April second could be more targeted, and there's sectoral tariffs, you know, maybe not on top of that, but again we don't know. But I think with the FED, I think we have to be careful to think the FED is just going to come to the rescue. I think they could support growth is needed, but I think, you know, so much really is coming out of the White House. The economic policy changes are really kind of swamping the FED effect.

Yeah, it's I think that what the market really wants is that Trump put, and we don't seem to be getting that as much or at least the strike price is lower. But again there is good news that the tariffs that then would be announced that April second could be more targeted, and there's sectoral tariffs, you know, maybe not on top of that, but again we don't know. But I think with the FED, I think we have to be careful to think the FED is just going to come to the rescue. I think they could support growth is needed, but I think, you know, so much really is coming out of the White House. The economic policy changes are really kind of swamping the FED effect.

I think at this.

I think at this.

Point, Kathy isn't too early for j. Powell to call it transitory when wom we don't know how harsh these targeted tariffs are going to be and we don't know the retaliation those countries may take on the United States.

Point, Kathy isn't too early for j. Powell to call it transitory when wom we don't know how harsh these targeted tariffs are going to be and we don't know the retaliation those countries may take on the United States.

Yeah, I kind of probably, like many people, kind of shuddered a little bit when I heard transitory, because we don't know, and we could continue to get like this stripping out of tariff announcements, and that could mean that the inflation impact lasts for longer. Even if it's not as big, it could last for long and that complicates things. I think quite a bit, so I think it was a little premature, and I think you know, they could the baseline their forecast is what you know. It does show a temporary increase in inflation and then growth slowing. But I think, you know, putting that transitory stamp that, I think that was a little PREMATURER.

Yeah, I kind of probably, like many people, kind of shuddered a little bit when I heard transitory, because we don't know, and we could continue to get like this stripping out of tariff announcements, and that could mean that the inflation impact lasts for longer. Even if it's not as big, it could last for long and that complicates things. I think quite a bit, so I think it was a little premature, and I think you know, they could the baseline their forecast is what you know. It does show a temporary increase in inflation and then growth slowing. But I think, you know, putting that transitory stamp that, I think that was a little PREMATURER.

Kathy.

Kathy.

I think some people are confident because they believe the labor market's not as tight as it once was, and the potential for second round effects, the potential for people going out and saying, you know what, I want a bigger paycheck and the company actually following through and delivering one is somehow been dampened by the increasing employment anxiety that we've witnessed in some of the surveys over the last month. We've got some pushback actually from Black Rock Jean Bavan about twenty minutes ago on that point, and I think it was actually credible pushback. He said, you've got to think about the lack of immigration we're going to see over the next several years, and this labor market could well be tighter than people think alongside that tariff effort, and which would make us vulnerable to second round effects. Kathy, how do you think about the labor market dynamic, because I think that point is probably the most important one.

I think some people are confident because they believe the labor market's not as tight as it once was, and the potential for second round effects, the potential for people going out and saying, you know what, I want a bigger paycheck and the company actually following through and delivering one is somehow been dampened by the increasing employment anxiety that we've witnessed in some of the surveys over the last month. We've got some pushback actually from Black Rock Jean Bavan about twenty minutes ago on that point, and I think it was actually credible pushback. He said, you've got to think about the lack of immigration we're going to see over the next several years, and this labor market could well be tighter than people think alongside that tariff effort, and which would make us vulnerable to second round effects. Kathy, how do you think about the labor market dynamic, because I think that point is probably the most important one.

Yeah, no, I think that's a great point. That Yes, it's it's hirer to go in to ask for a reason. You know, employ employers have more power right now. But on the other hand, just as you pointed out, John less, immigration means all else equal a tighter labor market. If you look at the household survey, they dissect foreign born and uh kind of indigenous, you know, domestic workers here, and all of the jobs that are created of playing the household survey last year on net were for foreign born workers. Because we have a demographic issue here right, we have people who are retiring, the baby boomers. So we do need immigration to kind of keep the labor market fluid and and it could get tighter than we all think, especially in certain sectors. Now, whether that transcends to the whole labor market, you know, wage growth going up maybe a different story, but certainly where immigrants are prominent in the agriculture, retail, homeworking situations, there you can see some wage pressure.

Yeah, no, I think that's a great point. That Yes, it's it's hirer to go in to ask for a reason. You know, employ employers have more power right now. But on the other hand, just as you pointed out, John less, immigration means all else equal a tighter labor market. If you look at the household survey, they dissect foreign born and uh kind of indigenous, you know, domestic workers here, and all of the jobs that are created of playing the household survey last year on net were for foreign born workers. Because we have a demographic issue here right, we have people who are retiring, the baby boomers. So we do need immigration to kind of keep the labor market fluid and and it could get tighter than we all think, especially in certain sectors. Now, whether that transcends to the whole labor market, you know, wage growth going up maybe a different story, but certainly where immigrants are prominent in the agriculture, retail, homeworking situations, there you can see some wage pressure.

Hey, Kathy, I appreciate your for you as always, and the clerk say, Kathy poll chance it that of nationwide. This is the burg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.

Hey, Kathy, I appreciate your for you as always, and the clerk say, Kathy poll chance it that of nationwide. This is the burg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.