For equities you got stocks trading heavy bank of america says Fund Managers are overweight. Tech the most since 2021. Is there even cash left to buy any dip here from new york, im alex deal with my cohost in london, guy johnson. Welcome to bloomberg markets. Not as intense as it was a few hours ago, but were definitely seeing a strong up risk off kind of move within the market. Diy and holding up those are two things you never want to hear in the same sentence because it really does. To be honest, im just talking about from personal experience. The consumer thing i think is fascinating. Look at what is happening. You got strong wage data out of the uk, youve got marks and spencer, a stalwart of the british high street, coming out and announcing really strong results on your side of the pond. Home depot back to the to the diy thing. The numbers look good. Yeah. Structurally, i think theres a long term positive story, but what but a couple of things. I mean, one, gasoline prices are quite high. I mean, were definitely over four in some areas at the northeast here. So thats going to kind of eat into sentiment as well. And also, you get student loan repayments are going to kick back up. Yes. The Biden Administration is trying to fix that or get ahead of it and provide more relief. But if that kicks up, thats going to dent spending, too. Its like you can always make the bull bear side. Ive been hearing about why the consumer is going to be slowing down for a very long time now. Its not happening. Okay. Thats not true. Actually, the consumer is slowing down. If you widen the lens, the consumer is definitely slowing down. My point is that i think the consumer is going kicking and screaming. Theres still savings. Theres still a desire to spend. Theres still all kinds of reasons why the consumer wants to spend. The services story kind of speaks to that. There is a slowdown, but its its a slow slowdown. And as i say, i think the consumer the muscle memory is just to spend. And that continues to be the story. So our question of the day is a fairly straightforward one. Alex, isnt, but is the consumer fighting the fed and by extension, other Central Banks . Im going to fold the bank of england in here because its definitely got a wage problem. Lets figure this one out. Joining us on the consumer side, simone foxman, joining us on the macro side, simon white. Simon, im going to start with you. I read your piece on the markets live blog. You got to widen the lens, havent you . The consumer long term is definitely slowing down, but the rate of change rates have gone from 0 to 5. Weve weve seen a huge tightening of conditions, yet the consumer is only slowing down gradually. Is the consumer fighting the fed . I mean, as you say, its muscle memory. I mean, they are they are not going to suddenly unless they absolutely have to change their spending habits. I mean, its what people do. Its second nature. Yep. Unless theyve got a really strong reason not to. So whats clear, obviously, i think that a lot of people got this wrong. I got this wrong that you, you didnt really appreciate the extent of the excess savings, not just in the us, but in the uk and europe. And i think a lot of that stuff maybe isnt even in the official statistic. I mean, there was a rumor in the uk that 50 billion was fraudulent money. So youve got other money that might be circulating through that came from governments fraudulently thats circulating through the system. So theres obviously stuff thats really keeping things support sorted. But youre correct, the trend is definitely down. Its just not as sharply as you might have otherwise would have expected. Oh yeah, we definitely saw that here in the us too, with all the stimulus checks as well. Simone, youve been digging through home depot, the stock reacting positively. What do we wind up learning about the consumer like . Is the consumer really pushing back on the fed . Theres a lot of mixed mixed messages here because on one hand, while, yes, diy did hold up a little bit better than than home depot maybe was thinking if theres still weakness there, theres still weakness on the pro side. So there is an overall decline and thats why we saw comp sales down on 2 . Admittedly, they werent as bad as the 4 numbers that we were looking for, but i think, you know, when you step back and you analyze a lot of the context that weve gotten from executives in Corporate America recently, there are two different kinds of consumers. Theres the high end consumer thats traveling to europe, thats making plans to travel to asia that has built up a lot of equity in their homes. They are going strong. And then theres a lower end consumer, maybe a middle income consumer as well. That suddenly going to have to start paying back their Student Loans. Theyre already limiting how much theyre buying, whether at fast food or elsewhere. And theyre really starting to see the pain, which then leads me, guy, to sort of unions and how weve seen a lot of Union Agreements over in the uk here. Were looking at the writers strike. Theyre going to meet again with hollywood. Weve had trucker strike like theres yes, but weve seen that pay increase also. And if that kind of pay outpaces inflation, why wouldnt you keep spending . Well, thats the story in the uk, isnt it . Believe you me, we know about strikes. We know about unions, we know about that narrative. It is developing here and continues to develop here. Were seeing some extraordinary pay offers being dished out. And simon, this is this is the difference. Theres i was talking to John Beauvais about this a little bit earlier on today from blackrock. He was saying basically what we are going through is now what were now seeing is a demographic shift kicking in as well. There is a shortage of workers that gives labor more power. That means that were going to see wage bargaining actually having an effect for the first time in years and years and years. And that is going to continue to support the consumer. Yeah, i think thats obviously thats a medium term to longer term trend. I could certainly buy id say in a slightly shorter basis, id say certainly looking at the us, if you look at real wages, theyre actually not that much different from what they were in 2016, 2015, and theyre not that much above their long term average. Leading indicators also expect wages to start rolling over now. So to get any of these effects really feeding through, we need to see this continuation in wage growth because whats going to happen, of course. But momentum is there, isnt it . Well, the momentum is there from youre right, from unionization. But obviously you have to look at the you can have a number of different stories that weve heard about. But collectively, obviously, you have to see it in the aggregate data to know if its got momentum, if it is going to push forward, and it would need to continue doing that so that you get that continued wage growth. But lets say on the other hand, you still remember youve got, you know, costs such as mortgage costs are very high. You have Consumer Credit has been tightening. These things are very negative for consumption. So the wages thing will have to be counterbalanced with whats happening there as well. Just to update you guys, s p taking another leg lower now, up by almost 9 10 of 1 . Volume is light, but you have yields hitting session lows. Definitely evolving as a straight up risk off safety kind of session step with the dollar, though, the dollar is trading a little bit mixed. Simone, you cover the retail guys. We get target this week. We get walmart. What are we going to learn about the consumer through that, whether its a trade down kind of consumer or looking at the lower end. So target should be really interesting expectations are pretty low there. This tends to geared towards a little bit higher income of a consumer. Also, that middle income space. So if they really underperform, i think the expectation here first, First Sales Decline in four years. So if we get some outperform guidance, that would signal a much stronger consumer. But some of this might be idiosyncratic, like walmarts been a really interesting play too, because they have such a large food and grocery business that has allowed them to kind of hold up even for consumers that are pulling back elsewhere. So they get a really broad, sweeping view of the consumer there. The issues going to be margins. Again, food is a low margin. Business, electronics, things like that are much higher. Simon final point to you, alex, just brought up whats happening in the markets. Im trying to im trying to sort of rationalize what im seeing in front of im going to start with stocks. Is the stock market today signaling and its the middle of august, is the stock market signaling today that basically the fed is going to have to do more . Is the stock market today signaling that the fed is going to have to stay higher for longer . Is that the real message from retail sales is actually its not the consumer facing the fed. Its the fed having to fight the consumer. And maybe its got to fight a little harder. Yeah, i mean, at the margin, i think that that will have something i mean, you mentioned august. Weve got very light volumes at this time of year. But yeah, if you want to sort of create a potential narrative that maybe the fed will have to im not sure thats the way things will ultimately end up happening. But certainly the way things are today, if people are looking at these retail Sales Numbers on their monthly basis, as i pointed out earlier, i think if you look at a trend basis, they are still very negative. So it depends in a lot of things. But right now i think thats a credible narrative. Right . The markets looking at higher for longer again. Yeah, fair point. Fun combo. Guys, thanks a lot. Really appreciate it. Simon foxman, simon white, thank you both very much. So were going to put our question of the day. Is the consumer fighting the fed, katrina, dudley franklin, mutual advisers, investment strategist and portfolio manager, joins us now. Hey, guy, before we go, though, Hawaiian Electric industries would just cut to junk by s p shares, extending decline. Now theyre now down about 20 bucks. This comes after a billion like a massive amount was wiped out of its market cap yesterday on those wildfires in maui. Its the biggest provider of power and Utility Company in hawaii. Guy. Absolutely. And you look at what happened there. Well continue to follow this story both in terms of the death toll and the impact its going to have. How is how is how are they going to redevelop . Maui, i think is a critical question as well, that now needs to be thought about. This is bloomberg. This is a keepsake frame. This is actually a photo from my wedding. Im adam weiss, founder and ceo of keepsake, the mobile app that makes it easy to have your photos printed, framed and shipped to your doorstep. You just choose a photo that you love. You can preview it in over 100 frames and in a couple of days youre going to receive your photo in a beautiful handmade frame. So if youve got a special photo on your phone, install the free keepsake app. We would love a chance it for you. Manga baby, calm down. Calm down. Yo, your body, your beauty. Look down. Oh, look down at me. No, no, no, no. Wo wo wo wo wo wo wo wo wo wo wo wo. If you gon give me your low, low, low, low, low, low, low, low, low betas, rhythm and blues, caribbean sale now on visit beaches. Com wealth changing question on has your advisor created a portfolio based only on your age and risk tolerance . Thats simply not good enough. Your money deserves better and so do you. That Creative Planning our private Wealth Managers learn about you first and then they create a customized plan and portfolio by partnering with our inhouse money managers, accountants and attorneys. Dont settle for a standard portfolio. Book your free meeting today at Creative Planning. Com. Create a planning a richer way to wealth. The us consumer still remains extremely resilient. The consumer is strong. Very, very resilient. Resilient. Consumer sentiment is high. Brazilian consumer with their spending, youre going to begin to see the impact on the consumer demand cools just a bit. The consumer starting to show some cracks. Savers is starting to be exhausted. Savings are being worked down. Consumers are accelerating their borrowing. There will be some headwinds, Student Loans, the consumer is going to come under increasing pressure. Inflation, food prices, oil prices. There are a bunch of debts coming due rates start to materially weigh on consumer activity. Its how consumers behave, not what they say. So those are some of the guests that weve been speaking with on bloomberg about the us consumer, which i feel like weve been hearing and talking about for a very long time. So brings us to the question of the day. Is the consumer is fighting the fed, fighting the boe, fighting Central Banks. Joining us now, Katrina Dudley franklin, mutual advisers, investment strategist and portfolio manager, is the consumer fighting the fed. Katrina, i dont think we can think about it in terms of the consumer fighting the fed. The consumer plays two roles here. The first is the consumer is the employee. And you look at those employment numbers, they are persistently, you know, were keeping low unemployment. And thats on one side of the coin. And the fed is watching that. And youve seen comments that we maybe need to have some policies to loosen up the labor market and then on the other side, youre right, the consumer is the driver because so much of our spending, you know, 70 is consumer driven here in the economy. So, yes, the the consumer will be the driver of the fed, but thats because theyre playing those dual roles. So what does that mean for investor for for an investor think that you need to take a step back and have a look at what were seeing in terms of the commentary. Most of the ceos that we were listening to on the Second QuarterEarnings Call were seeing really strong signs. I think 70 of s p reporting companies actually beat estimates. So the quarter was strong, but they kept talking about this recession and its a recession that we keep talking about. We keep pushing off and we keep pushing off and we keep pushing off. So my question is, do we really need to have this recession or actually, can we just have a mild downturn and keep going . Yeah. And actually, guy that really dovetails nicely to the bank of america fund manager survey report where the majority of people now dont see a recession coming like theyre able to articulate a soft landing, which is why youve seen a lot of money go that cash pile has been drawn down. Yeah, moneys going into stocks. Moneys going into tech. Yes. Yes. But listen to the back end of that string we just had and Student Loans are kicking in. Gas prices are going higher. Mortgage costs are starting to have an impact as as people cant put off moving and they have to move and they have to accept higher rates. The headwinds are growing and katrina, what do you do with those headwinds . Can you just ignore them . You dont think theyre powerful enough . Weve gone from 0 to 5 on rates. The feds now talking about keeping rates sort of higher for longer. Arent there a series of quite significant headwinds that are gathering, gathering kind of into one that could knock this economy off course . Look, im the daughter of a homebuilder, so i know the homebuilding market well. And you talk about the rising mortgage costs because people are forced to move. Why are they moving . Theyre moving for a job and theyre usually moving for a job thats paying more money. And that means that they can afford the higher Mortgage Rates or if even if theyre just moving for a job at the same wage, the way to adjust for higher mortgage costs is to buy a house that is lower in value. So maybe you need to go a little further out. But we just think that, yes, on a like for like basis, those costs are higher, but we think that the consumer will be able to adjust to them. And im probably more in the camp that, you know, consumer are moving homes because theyre getting higher wages and better jobs somewhere else and that will more than cover the higher mortgage bill. So katrina pair that with what were seeing in the market then because the Market Reaction is a bit confusing to me, i would have thought with that setup, we would see some buy some selling in the front end of the curve. Yeah, youd see equities down because yields were higher and you see the dollar move a little higher. What do you make then of the market today . The market is really kind of balancing at the moment because they see a slowdown. I dont think that theyre talking about theyre seeing a recession. Theyre seeing a slowdown. And thats thats resulting in that tapering of the market and the tapering of expectations. But lets move over to the tech stocks, because thats really the 100 pound gorilla here thats been driving the s p in particular. And i think that the narrative for tech stocks was very 12 months ago. And if you look at it today, people are just seeing the opportunities that are created and that opportunity set is this confluence of both the new technology taking hold as well as the fact that we still havent solved this labor crisis and so technology and capital are the two things that are going to step in and help us because technology and capital will drive productivity, which means we can, as an economy, produce more with less labor. Thats a very long term story. Thats a structural story that you can invest in over the long term. It feels like youve got to be very nimble in the short term, though, to deal with a market thats really choppy. Katrina, ive been doing this a long time. I cant remember this level of uncertainty. Nobody, to be honest, really has a good idea of where were going. Sometimes you can see kind of momentum. Taking us in a certain direction doesnt feel like that right now. Whats your degree of certainty . How do you feel about at least tactically, the short term . I think tactically in the short term, were a little cautious as well. We do see some of those pressures on the valuation side. But the good news is, is that companies can grow into those valuations, which is that balance that we have long term versus short term. And we just keep coming back and looking at the narrative and just looking at the positives that are really weighing in here, which is the fully employed, the full emplo