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Geopolitics, EM, and Consumers · Bloomberg Intelligence

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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: Every business day we bring you interviews from CEOs, market pros,
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Speaker 2: Thank everybody on their yearhead twenty twenty three, we're saying
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Speaker 2: the reopening of China was going to be a major,
1:03
Speaker 2: major play. It doesn't feel like it's really played out.
1:07
Speaker 2: So you know the question is kind of what happened
1:10
Speaker 2: and where do we go from here? Julie, let's say
1:12
Speaker 2: she joined as she covers all the emerging markets for
1:15
Speaker 2: Bloomberg News. She's based in South Paolo, Brazil. Julia, Again,
1:21
Speaker 2: the China call seemed like a reasonable call, seemed like
1:25
Speaker 2: an easy call to make a year ago.
1:27
Speaker 3: What happened, and it was a total consensus call.
1:32
Speaker 4: Right.
1:32
Speaker 3: We've had Goldman, Morgan, Stanley, Bank of America, everybody saying,
1:35
Speaker 3: you know, China's going to reopen and kind of be
1:37
Speaker 3: a wave that lifts all boats and it's super positive
1:40
Speaker 3: for emerging markets. And what you ended up seeing was
1:43
Speaker 3: the exact opposite, Right, China has been a drag on
1:47
Speaker 3: emerging markets as a whole. If you look at it,
1:50
Speaker 3: the EM index, which is very very heavy China, it's
1:53
Speaker 3: about thirty percent China waiting. It's down fifteen percent, underperforming
2:00
Speaker 3: US stocks by the most and I think thirty five
2:02
Speaker 3: years or something. If you strip China, it's up by
2:05
Speaker 3: the most in four years, by about the same amount.
2:08
Speaker 3: So it ended up being a problem for those calling
2:11
Speaker 3: for the decade of emerging markets or you know, the
2:13
Speaker 3: beginning of a massive rally in EM particularly because of China,
2:17
Speaker 3: and it just all the hopes that with the COVID
2:19
Speaker 3: restrictions easing, it would lift everything, and it.
2:22
Speaker 5: Just didn't happen.
2:23
Speaker 6: And that's why, for example, we're just getting a call
2:25
Speaker 6: out of Goldman can allow over there had a global
2:28
Speaker 6: currency rates Emerging markets in general saying look now think
2:31
Speaker 6: about EM and em X China going forward.
2:34
Speaker 5: It feels like that's right.
2:36
Speaker 3: It's a theme we keep seeing. We saw a couple
2:39
Speaker 3: of weeks ago the em X China ETF.
2:44
Speaker 5: Just surging in inflows.
2:46
Speaker 3: It's now bigger than the inflows are bigger than for
2:50
Speaker 3: the China ETF, which a few years ago was fifty
2:53
Speaker 3: times bigger than the X China ETF. So you're seeing
2:56
Speaker 3: a lot of money flow out of China and all
2:58
Speaker 3: acid classes and go. And then it depends on the call,
3:02
Speaker 3: but you're seeing Latin America benefit. You're seeing a lot
3:04
Speaker 3: of India flows, a lot of money managers calling for
3:09
Speaker 3: you know, the growth prospects of India and the reforms,
3:13
Speaker 3: and just money just keeps flowing out of China.
3:16
Speaker 2: So, you know, Julie, I wonder what EM investors are
3:19
Speaker 2: saying today because to me, as you mentioned, it's a
3:22
Speaker 2: big part of the MSCI see kind of have to
3:24
Speaker 2: be there, but to me it feels almost uninvestable. This
3:28
Speaker 2: quote unquote China risk where the government can come in
3:31
Speaker 2: and just really recavoc on my business. I think about
3:34
Speaker 2: Ali Baba, which is kind of the IBM of China.
3:38
Speaker 2: It just took Ali Baba out to the woodshed. What
3:41
Speaker 2: are investors saying about the ability to invest in China
3:44
Speaker 2: these days?
3:46
Speaker 3: And what you see a lot too is the is
3:47
Speaker 3: the surprises, right. I think the property crisis was a
3:50
Speaker 3: big kind of nobody saw coming in. It wiped out
3:54
Speaker 3: seventy billion of value, so it is harder to invest in.
3:58
Speaker 3: What you're seeing from what hearing from investors a lot
4:01
Speaker 3: is the gauges that we usually look at. So the
4:03
Speaker 3: MSCIM for stocks, it's kind of losing its place as
4:08
Speaker 3: a benchmark just because you have to look at China
4:11
Speaker 3: and ex China, and because this index is so heavy,
4:15
Speaker 3: it's kind of not representative of what's happening in emerging
4:17
Speaker 3: markets where you're seeing a broad rarely once you discount
4:21
Speaker 3: the thirty percent that's China.
4:23
Speaker 6: I mean, just look at what happened on Friday of
4:25
Speaker 6: last week. With the gaming sector tencent down twelve percent.
4:28
Speaker 6: You saw NETS is down sixteen percent in the ADR training,
4:32
Speaker 6: I mean extraordinary bait and switch. It felt like once
4:35
Speaker 6: again in terms of the overall view of gaming and
4:38
Speaker 6: whether or not you're going to be having to be
4:40
Speaker 6: charged for an adult using the gaming section, in particular
4:43
Speaker 6: when you're making in app purchases and the like.
4:45
Speaker 5: And then of course later.
4:46
Speaker 6: China approves one hundred and five new video games on
4:48
Speaker 6: Monday to try and sort of calm the concerns that
4:50
Speaker 6: it immediately rifled. So it does feel as though ultimately
4:55
Speaker 6: people are feeling very misguided by what happens with China.
4:58
Speaker 5: Ultimately, therefore, where do they invest?
5:00
Speaker 6: Is there any new country that we single out overall?
5:03
Speaker 6: Is there a viewpoint that you need to be elsewhere?
5:07
Speaker 3: Julia at the moment, I think the most consensus call
5:10
Speaker 3: at the moment is India.
5:12
Speaker 5: It's what we keep hearing from everyone.
5:13
Speaker 3: You have to invest in India. Saudi Arabia comes up
5:16
Speaker 3: a lot, as does Latin America. Brazil has been cutting rates,
5:20
Speaker 3: Chile has been cutting rates and kind of giving a
5:22
Speaker 3: boost to markets. Mexico is another destination. It's close to
5:26
Speaker 3: the US, we have a lot of companies moving factories
5:29
Speaker 3: into Mexico, which is a boom to the economy. So
5:33
Speaker 3: those are the geographies that we're hearing most about while
5:37
Speaker 3: money managers leave China, kind of leave it alone for
5:40
Speaker 3: a little bit, Julia, let.
5:42
Speaker 5: Change so great to have some time with you.
5:44
Speaker 6: You really appreciate you dialing in from Latin America or
5:47
Speaker 6: of course based over there, thinking all things of managing
5:51
Speaker 6: editor for the EM at Markets Americas.
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6:09
Speaker 2: Thy Art Shamali, CEO and founder of Greenwich Media Strategies,
6:14
Speaker 2: Gard thanks so much for joining us here. I don't
6:16
Speaker 2: know where to start in that part of the world.
6:18
Speaker 2: There are so many uncertainties here. So much is such
6:21
Speaker 2: a fluid situation. Let's start with the Red Sea. What's
6:25
Speaker 2: the status of shipping in the Red Sea? Is everybody
6:29
Speaker 2: diverting or people taking their chances? Where are we?
6:32
Speaker 8: Well?
6:33
Speaker 9: You had as as you heard you had over the
6:35
Speaker 9: last few weeks.
6:36
Speaker 10: You had the houthy militants in Yemen, which are backed
6:39
Speaker 10: by Iran and funded and armed by Iran, attacking vessels
6:43
Speaker 10: in the Middle in the Red Sea, vessels Israeli flagged ships,
6:47
Speaker 10: but also commercial ships of all times, in order to
6:50
Speaker 10: create trouble, in order to destabilize things, and frankly, it
6:52
Speaker 10: is kind of an effort on the part of Iran
6:54
Speaker 10: really to destabilize things without declaring it all out or
6:57
Speaker 10: and instigating a response from the United States at least
7:00
Speaker 10: major response. And so we had shipping companies say that
7:03
Speaker 10: they were going to divert traffic around around Africa, which
7:06
Speaker 10: is we all know would increase costs majorly and then
7:09
Speaker 10: also and also create delay times, could contribute to global
7:15
Speaker 10: inflation and so on.
7:16
Speaker 9: And so the US responded was saying, you know.
7:18
Speaker 10: What, we're creating an international navy coalition. And so the
7:22
Speaker 10: United States has it has a number of countries that
7:24
Speaker 10: have participated in that in order to patrol, if you will,
7:28
Speaker 10: the Red Sea and the Suez Canal to continue to
7:30
Speaker 10: allow shipping.
7:31
Speaker 9: And so they've created it.
7:33
Speaker 10: We don't have all the details on how many vessels
7:35
Speaker 10: or ships are there from the United States and which
7:37
Speaker 10: countries but we do know that it has already diminished
7:40
Speaker 10: the risk. It hasn't decreased it entirely or eliminated it entirely, but.
7:44
Speaker 9: It has decreased the risk.
7:45
Speaker 10: And already you have as of yesterday, some shipping companies
7:49
Speaker 10: like Marisk for example, have announced that they're going to
7:51
Speaker 10: resume shipping through the Red Sea and the sews Canal.
7:54
Speaker 10: Not all of them yet, but I expect as people
7:56
Speaker 10: see that things are tad commer that are going to
8:00
Speaker 10: resume shipping entirely.
8:02
Speaker 6: So maybe that takes off some of the anxiety that
8:05
Speaker 6: we've seen from a price perspective, shown in oil prices. However,
8:09
Speaker 6: the conflict, as we see it, all of this stemming from,
8:12
Speaker 6: of course, conflict between Hamas Israel, and I'm interested, of
8:17
Speaker 6: course in ultimately how you see that particularly ramping up
8:21
Speaker 6: because it has been increased concerns particularly around Iran visa
8:24
Speaker 6: VI Israel. How we seeing that particularly ratcheting up its
8:28
Speaker 6: concerns for you as well?
8:30
Speaker 10: Yeah, I don't see any let up in that conflict
8:34
Speaker 10: or in the aggression pursued by Israel, and by the way,
8:37
Speaker 10: also the aggression pursued by Hamas in this conflict. There
8:40
Speaker 10: have been since last week a number of efforts to
8:42
Speaker 10: try and reopen a truce. The Israeli president offered a
8:46
Speaker 10: one week truce in exchange for another round of hostage
8:51
Speaker 10: and prisoner exchanges. Then Egypt has come up with a
8:54
Speaker 10: very ambitious plan that I don't think will stick, for
8:57
Speaker 10: a more permanency spire that would include even and not
9:00
Speaker 10: only releasing hostages, but also changing the power structure in
9:04
Speaker 10: Gaza to include one that's a technocratic Palestinian government and
9:06
Speaker 10: not one led by Hamas, which Hamas outright and rejected.
9:09
Speaker 10: Amasa has outright rejected both both offers of these ceasefires. Now,
9:14
Speaker 10: I do think that you're going to see small humanitarian
9:17
Speaker 10: lauses and truces that are short in nature again, because
9:20
Speaker 10: we know that Hamas and the Israeli government have agreed
9:23
Speaker 10: in principle already two humanitarian causes that yield a Palestinian
9:29
Speaker 10: prisoner slash hostage Israeli hostage exchange.
9:32
Speaker 9: So I bet we'll see that again.
9:34
Speaker 10: But in the meantime, until that happens, the Israeli government
9:37
Speaker 10: and Natanya, who has been very public about this, have
9:40
Speaker 10: said that there's really no let up. Nata Yah, who
9:41
Speaker 10: just yesterday or two days ago said that there is
9:44
Speaker 10: no stop to what we're seeing on the ground in Gaza.
9:48
Speaker 10: And I will tell you in my own experience when
9:50
Speaker 10: I worked at the White House working on conflicts, including
9:53
Speaker 10: past conflicts between Israel and Tamas, these wars are short
9:57
Speaker 10: in the grand scheme of wars, and so I don't
9:59
Speaker 10: expect it to last at this intensely past the new year.
10:03
Speaker 10: I mean into the new year, maybe a month or so,
10:05
Speaker 10: but after that I expect somewhere around February it'll die down,
10:08
Speaker 10: but it will not stop until the Israeli government really
10:11
Speaker 10: gets at the heart of Hamas's leadership in han Yunis
10:14
Speaker 10: in the South, Goazagara.
10:16
Speaker 2: What's the support for President Netanyahu at this point, and
10:20
Speaker 2: I guess by extension just the overall war effort here.
10:24
Speaker 2: Where are we in that right now?
10:26
Speaker 9: That's a great question.
10:28
Speaker 10: Israelis have really spoken very loudly against against Netanyahu, and
10:31
Speaker 10: by the way, they were speaking loudly against him before
10:34
Speaker 10: before October seventh, because of his own corruption scandals, because
10:39
Speaker 10: of how he was trying to overhaul the judiciary inside
10:42
Speaker 10: Israel in order to protect himself from these corruption investigations,
10:46
Speaker 10: and so there was already a lot of animosity toward him,
10:49
Speaker 10: a lot of protests against him, and this is only
10:52
Speaker 10: increased that sentiment further because a lot of his policies
10:56
Speaker 10: created the vulnerabilities that Hamas took advantage of when they
10:59
Speaker 10: went and pursued their horrific terrorist attack on October seventh.
11:03
Speaker 9: But that said, they are in the middle of this
11:05
Speaker 9: intense war.
11:05
Speaker 10: And so while you have what seems to be a
11:08
Speaker 10: majority of Israelis, and there's been a lot of Israeli
11:11
Speaker 10: polling on that against Natanya Who add more in favor
11:15
Speaker 10: of Benny Gantz, who is in the wartime cabinet. I
11:18
Speaker 10: don't expect Natanya Who to leave or resign or be
11:20
Speaker 10: forced out at this moment. But like I said, when
11:23
Speaker 10: those intense operations slow down a bit, which I expect
11:27
Speaker 10: sometime after the new year, that's when the Israelis will
11:30
Speaker 10: turn and say, all right, now it's time to kick
11:32
Speaker 10: Natanya Who out, and I expect Benny Gantz to be
11:35
Speaker 10: put in place.
11:36
Speaker 6: Hega, what then of the administration, we of course are
11:40
Speaker 6: heading towards an election in twenty twenty four. With your
11:43
Speaker 6: twelve years of experience of working within government, what will
11:47
Speaker 6: the response level end up being from the White House
11:50
Speaker 6: at the moment.
11:52
Speaker 10: I don't expect the position of the White House when
11:55
Speaker 10: it comes to calling for a ceasefire or to place
11:57
Speaker 10: conditions on USA to Israel to change at all. And
12:02
Speaker 10: some of it could be because they're banking on the
12:04
Speaker 10: fact that it will be short lived, and it will be,
12:07
Speaker 10: like I said, the grand scheme of how wars go
12:09
Speaker 10: around the world and in history, these wars between Israel
12:12
Speaker 10: and Hamas tend to be relatively short and so they
12:15
Speaker 10: may be banking on that. But a lot of it
12:16
Speaker 10: really does stem from a genuine desire to defeat Hamas completely,
12:20
Speaker 10: a belief that the Israeli government can do so. And
12:23
Speaker 10: by the way, I agree with that, given that we
12:25
Speaker 10: saw it happen with the international Coalition against Isis, that
12:29
Speaker 10: might not mean that they could eradicate Hamas completely the
12:31
Speaker 10: way in Etanyahu says, But defeating Hamas and its military
12:35
Speaker 10: and governing capabilities is a real achievable goal in my opinion,
12:38
Speaker 10: and you can see that the Biden administration wants that,
12:41
Speaker 10: and they also don't want to show any kind of
12:44
Speaker 10: lack of support for Israel at this time, and that's
12:46
Speaker 10: why they're not going to place additional conditions that already
12:49
Speaker 10: exist on the weaponry equipment vehicles going going to Israel.
12:54
Speaker 10: That said, you do see them heightening this rhetoric on
12:57
Speaker 10: the US side, calling on Israel to really limit or
13:00
Speaker 10: avoid civilian casualties at all costs, to be as targeted
13:03
Speaker 10: as possible, to transfer to low intensity operations.
13:06
Speaker 9: And that's because not only is.
13:08
Speaker 10: That morally the right thing to do, but in terms
13:10
Speaker 10: of the strategic goal of a broader, secure Israeli state
13:15
Speaker 10: that harming civilians this way, killing them this way, doesn't
13:19
Speaker 10: help them achieve that goal. As Lloyd Austin says, Secretary
13:22
Speaker 10: of Austin, it would replace a tactical victory with a
13:26
Speaker 10: strategic defeat. And that's why you see the US continuing
13:28
Speaker 10: to advise them this way.
13:30
Speaker 2: So are the Middle East is not the only hot
13:32
Speaker 2: spot out there. We still have the war in Ukraine.
13:35
Speaker 2: And I spoke to Admiral James Tervitas a couple of
13:38
Speaker 2: weeks ago, the former NATO chairman, and he said, basically,
13:41
Speaker 2: he just returned from Korea and he said what he
13:44
Speaker 2: believes is going to have to happen in Ukraine is
13:47
Speaker 2: what happened in Korea in nineteen fifty two or fifty three,
13:50
Speaker 2: which is basically swapping land for peace. Is there any
13:55
Speaker 2: feeling in that part of the world that that's even
13:58
Speaker 2: on the table or as possible? What's update?
14:01
Speaker 10: Well, it's not the feeling certainly coming from Ukraine, and
14:05
Speaker 10: it's not entirely yet the feeling in Europe, though you
14:08
Speaker 10: see things starting to become a little bit awkward or uncomfortable,
14:12
Speaker 10: if you will, so on that. So, first of all,
14:14
Speaker 10: I'm so glad you're asking about Ukraine, because nobody is
14:16
Speaker 10: really and just because the attention has diverted to Israelkauz,
14:20
Speaker 10: it does not mean that the war there has led
14:22
Speaker 10: up at all.
14:24
Speaker 9: Things there seem to be in somewhat of a stalemate.
14:26
Speaker 10: Though I have to really stress that while we see
14:29
Speaker 10: a lot of press articles saying that Ukraine is losing
14:32
Speaker 10: its counter offensive, that is not true. In July, Ukraine
14:35
Speaker 10: had regained fifty percent of the territory that Russia had
14:38
Speaker 10: seized since February twenty twenty two.
14:40
Speaker 9: And that is significant.
14:41
Speaker 10: That said, they are running out of ammunition and we
14:43
Speaker 10: know that, and Presidence Zelenski came to the United States
14:46
Speaker 10: and pleaded to Congress for more aid. A lot of
14:50
Speaker 10: experts say that they'll run out by March. Now that said,
14:53
Speaker 10: I do believe at the beginning of this year, at
14:55
Speaker 10: the beginning of twenty twenty four, that Congress will pass
14:58
Speaker 10: a new round of aid for Ukraine, for Israel, and
15:01
Speaker 10: also for the southern border, which has been which is
15:03
Speaker 10: what Republicans have said is holding up a They want
15:06
Speaker 10: to compromise on that. President Biden has said he's going
15:09
Speaker 10: to compromise on that, and I think they will. I
15:10
Speaker 10: think they'll come to an agreement. But that said, it
15:13
Speaker 10: shows that things are becoming more difficult in the garnering
15:18
Speaker 10: support for Ukraine. And that is in part because if
15:21
Speaker 10: it's an election year, Americans are growing a bit more weary.
15:25
Speaker 10: Not the majority, but but a lot are growing more
15:27
Speaker 10: weary of support for Ukraine. Obviously, you have inflation, and
15:31
Speaker 10: in Europe you're seeing the same. The Hungarian Prime Minister
15:33
Speaker 10: Victor Orbon he got in the way of the EU
15:37
Speaker 10: sending another aid package to Ukraine. The EU requires consensus
15:40
Speaker 10: of all of its twenty seven member states in order
15:43
Speaker 10: to pass something.
15:43
Speaker 9: Like that, and so you're seeing difficulties arise.
15:46
Speaker 10: Like I said, they will get there across the finish
15:49
Speaker 10: line in the new year. But given how difficult it's becoming,
15:52
Speaker 10: I'm not surprised that you're starting to see leaders say, hey,
15:55
Speaker 10: we don't want to leave Ukraine in the lurk like this,
15:58
Speaker 10: and so maybe we need to start considering how to
16:02
Speaker 10: lay the ground up for negotiations and position Ukraine in
16:04
Speaker 10: as strong a position as possible.
16:07
Speaker 2: Grey, thanks so much for joining us. Really really appreciate
16:09
Speaker 2: getting your perspective for Ur Shamali, CEO and founder of
16:13
Speaker 2: Greenwich Media Strategies. She's also an adjunct professor at Columbia
16:16
Speaker 2: University School of International Public Affairs and a non resident
16:19
Speaker 2: Senior Fellow at the Atlantic Council's at Geoeconomic Center.
16:23
Speaker 7: You're listening to the tape Can's are Live program Bloomberg
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16:42
Speaker 6: We want to be bringing in Jennifer Lee, senior economist
16:44
Speaker 6: at Remote Capital Markets, and Jennifer It has been an
16:47
Speaker 6: extraordinary year. If you think about the way in which
16:50
Speaker 6: basically every economists got it wrong in the direction of travel, well,
16:53
Speaker 6: how far we'd go in terms of boring costs going high.
16:57
Speaker 6: They never anticipated quite the ramp up.
16:59
Speaker 5: But now every.
17:00
Speaker 6: Economist thinking that we're going to be cutting an extraordinary
17:02
Speaker 6: debate degree. Well, the market see at least one point
17:05
Speaker 6: five paces, well one hundred and fifty basis points one
17:08
Speaker 6: point five percent for the next year. We feel as
17:11
Speaker 6: though the market's getting ahead of itself when it comes
17:13
Speaker 6: to overall federal reserve policy or what do you make
17:16
Speaker 6: of it?
17:17
Speaker 8: Good morning, and thank you for having me on. Yes,
17:19
Speaker 8: I think the.
17:20
Speaker 11: Market is a little bit ahead of itself, to put
17:24
Speaker 11: it gently. Uh, there's still some talk about, you know, earlier,
17:28
Speaker 11: earlier rate cuts for the federal reserve. But I don't
17:31
Speaker 11: see how that's going to happen. You know, it's sort
17:32
Speaker 11: of something dramatic happening. You know, we don't look, but
17:35
Speaker 11: we do look. We do look for rate cuts to
17:37
Speaker 11: come around the middle part of the year, at about
17:39
Speaker 11: one hundred basis points in total. It's just we've gotten
17:44
Speaker 11: so much momentum still building up. I mean, even though
17:47
Speaker 11: we saw three quarter growth and it seems like forever ago,
17:49
Speaker 11: you know, revised down last week for two four point
17:52
Speaker 11: nine percent. That's still a heck of a strong number.
17:54
Speaker 11: You know, there's nobody denying that. And that was, by
17:56
Speaker 11: the way, the very first estimate that that the BA
17:59
Speaker 11: came out was was four point nine percent. So four
18:02
Speaker 11: point nine percent Q four so far, you know, we've
18:04
Speaker 11: seen signs of slowing, but there is still a lot
18:07
Speaker 11: of momentum.
18:07
Speaker 8: And you know, we again it seems like for hour ago.
18:10
Speaker 11: But just last week we saw the personal spending and
18:12
Speaker 11: income data bully cow still very strong. You zero point
18:15
Speaker 11: three percent real spending and it was basically across the board.
18:19
Speaker 8: And I always look.
18:20
Speaker 11: At the key things you know, that people could be
18:22
Speaker 11: spending on or would not be spending on if they're
18:24
Speaker 11: really really worried, and there's still more spending on dining out.
18:28
Speaker 11: There's a lot more spending on recreational goods and vehicles
18:31
Speaker 11: things like that that you know, if things were really
18:33
Speaker 11: really tough, you wouldn't be doing all that, And there's
18:35
Speaker 11: still some spending on that front. So we are still
18:38
Speaker 11: seeing some decent momentum moving into the fourth court, into
18:41
Speaker 11: the turn of the year. So again, earlier rate cuts
18:45
Speaker 11: I think are just overblown.
18:47
Speaker 8: Those those those that sort of talk interesting.
18:50
Speaker 6: So if we do see still a lot resilience, if
18:53
Speaker 6: we do see ultimately also maybe wage inflation being sustained,
18:58
Speaker 6: do you do you ultimately think that the FED will
19:02
Speaker 6: have to become more joined up in its approach messaging
19:06
Speaker 6: as well, because that's where the whiplash seems to be
19:08
Speaker 6: coming in. We have FED chair Pale speaking of perhaps
19:11
Speaker 6: this necessity to start cutting in twenty twenty four, and
19:13
Speaker 6: then a couple of FED speak come out and try
19:16
Speaker 6: and weel us back in terms of how far how
19:18
Speaker 6: fast are we getting a consistent message?
19:21
Speaker 11: Up until last up until recently, I would say yes,
19:24
Speaker 11: But now it's like I.
19:25
Speaker 8: Don't know what to happen at FED meeting.
19:27
Speaker 11: But you know, obviously Fed Tairpal I feel took you know,
19:31
Speaker 11: through the markets for a loop when he you know,
19:32
Speaker 11: started talking about the fact that ray cuts had entered
19:36
Speaker 11: the discussion, you know, and he didn't really push back
19:39
Speaker 11: on too much of the questioning that he got during
19:41
Speaker 11: the uh uh, during the Q and A. So that's
19:44
Speaker 11: why we saw that parade of every single I believe
19:47
Speaker 11: it was every single FED official coming out shortly after
19:50
Speaker 11: saying hold up, way too soon. Discussion of earlier raitcuts
19:55
Speaker 11: is too premature. You know, we still have to see
19:57
Speaker 11: a lot more data. Everything is going you know, again,
19:58
Speaker 11: we're looking at the totality the data, as we keep
20:00
Speaker 11: talking about all the time, and I think there's going
20:03
Speaker 11: to be a lot more of that before we can
20:05
Speaker 11: see the official rate cuts. But you know, it's going
20:07
Speaker 11: to you know, we do believe it's going to happen
20:08
Speaker 11: again mid part of twenty twenty four, which is around
20:11
Speaker 11: the corner at this point. But the fact that you know, things.
20:13
Speaker 9: Are slowly, slowly, slowly slowing.
20:18
Speaker 11: And the fact that inflation is coming down, you know,
20:20
Speaker 11: it's a good place to be in right now. And
20:22
Speaker 11: this is something that I don't think any of us
20:24
Speaker 11: would have anticipated a year ago.
20:25
Speaker 2: So, Jennifer, can we officially take the recession talk off
20:30
Speaker 2: the table?
20:32
Speaker 11: We were I'm going to say this again, we've always
20:34
Speaker 11: been in that soft landing category and we had I
20:39
Speaker 11: think a negative print on one point last year, but
20:43
Speaker 11: we took that all out. You know, again, this is
20:45
Speaker 11: like the whole soft landing, no landing, any landing kind
20:48
Speaker 11: of scenario. You know, we still see things slowing obviously
20:52
Speaker 11: around the turn of this year, and of you know,
20:54
Speaker 11: this is going to prompt those FED rate cuts to
20:57
Speaker 11: come along around June.
20:58
Speaker 8: Or around June.
21:00
Speaker 11: So but I don't think a hard landing or actual
21:04
Speaker 11: recession is right now. Looks like it's in the cards,
21:07
Speaker 11: but you know, things can change very very quickly. A
21:09
Speaker 11: lot of still a lot of uncertainty that's playing out
21:11
Speaker 11: out there as the as twenty twenty four begins, So
21:14
Speaker 11: we'll see how all that plays out. But as of
21:16
Speaker 11: right now, you know, we are not looking for an
21:18
Speaker 11: actual full fledged recession.
21:20
Speaker 2: Jennifer, I don't know, just in my opinion, I think
21:23
Speaker 2: the Fed's done a decent job here, I mean, coming
21:25
Speaker 2: out of a pandemic. But you don't they didn't teach
21:28
Speaker 2: in business school. Maybe a little bit late, okay, I'll
21:31
Speaker 2: give you that, but by and large they seems to
21:33
Speaker 2: have managed this thing pretty well. If in fact, we
21:36
Speaker 2: do get a soft landing. What's your feeling here is
21:39
Speaker 2: now we have a little bit of hindsight.
21:42
Speaker 8: I'm going to one hundred percent agree with you of that.
21:44
Speaker 11: I mean the fact that again we are at this
21:46
Speaker 11: stage at the last you know, the last few days
21:49
Speaker 11: of December of twenty twenty three, and that whole soft
21:52
Speaker 11: landing narrative is still complaint can continue to play out,
21:55
Speaker 11: and more and more people have hopped on it over
21:57
Speaker 11: the last few months. And this is something I guess,
22:00
Speaker 11: you know, again, no one would imagine, you know, in
22:02
Speaker 11: unemployment it's still very very tight. Wage growth is still
22:06
Speaker 11: on the rise, you know, but not as hot as
22:07
Speaker 11: it was was. So this is you know, dare I say,
22:10
Speaker 11: it's almost goldilocks ish, you know, this is something that
22:14
Speaker 11: the FED is totally welcoming. And for sure it seems
22:16
Speaker 11: like they've done a great job. And the fact that
22:19
Speaker 11: the US economy remains resilience after over five hundred and
22:21
Speaker 11: twenty five basis points of great hikes is pretty darn good.
22:25
Speaker 11: I mean, this is I think they should be giving
22:28
Speaker 11: themselves a pad on the back. But again, it ain't
22:30
Speaker 11: over until it's over, and we're gonna have to see
22:33
Speaker 11: how you know, twenty twenty four plays out. Still if
22:36
Speaker 11: we start seeing more signs of potential, you know, more
22:39
Speaker 11: heavier breaking I guess on the economic momentum front.
22:42
Speaker 6: And let's just talk about some of those risk factors
22:45
Speaker 6: not to be a Debbie Downer at the end of
22:47
Speaker 6: the conversation, But just tell us a little bit about
22:50
Speaker 6: what is it that you think could pull back a
22:52
Speaker 6: consumer at this moment which does seem to be so resilient.
22:55
Speaker 6: Is it geopolitics, is it tensions in the Middle East?
22:58
Speaker 6: What is it that suddenly up ends some of these
23:00
Speaker 6: rosier viewpoints when it comes to self landing.
23:03
Speaker 8: I want to say all of the above.
23:04
Speaker 11: I mean, if consumer starts seeing more signs of you know, potential,
23:08
Speaker 11: even like supply chain issues coming back into the mix.
23:11
Speaker 11: You know, China's opening again and all that, so that's fine,
23:13
Speaker 11: But then now we've got everything that's happening in the
23:16
Speaker 11: Red Sea. There's a story this morning about about Europe,
23:19
Speaker 11: you know, trying to create its own battery chain you
23:22
Speaker 11: know scenario, and it's having problems sourcing sourcing supplies or
23:26
Speaker 11: components because of you know, a competition from the US.
23:29
Speaker 11: So that could also throw a wrench into that. And
23:31
Speaker 11: of course, as you mentioned geopolitics, you know, the war
23:35
Speaker 11: in Ukraine, of course, the conflict in the Middle East.
23:39
Speaker 11: If that ramps up. We also have a number of
23:41
Speaker 11: elections coming up in the in twenty twenty four. We
23:44
Speaker 11: have you know, you know, not the political expert, of course,
23:46
Speaker 11: but we've got Taiwan coming up in January, and of
23:49
Speaker 11: course the you know whole series of European elections during
23:52
Speaker 11: the year, and then of course we've got the US
23:54
Speaker 11: coming up in November, and all of these could throw
23:57
Speaker 11: a big wrench and all this.
23:59
Speaker 8: I always like to look at climate as well.
24:00
Speaker 11: I mean, this is something that seemed like a you know,
24:03
Speaker 11: a very far away to story many you know, a
24:05
Speaker 11: couple of years ago, but it's still very much now.
24:07
Speaker 8: It's very much here.
24:09
Speaker 11: We can see it from you know, here in Toronto
24:11
Speaker 11: we have like a green Christmas, which is something I
24:13
Speaker 11: haven't seen in a long time. This is all could
24:16
Speaker 11: potentially add to the whole inflationary pressures in the terms
24:19
Speaker 11: of how it affects food prices for example.
24:22
Speaker 2: All right, jeniferly, thanks so much for joining us. Jennifer
24:25
Speaker 2: Leeve from a Bank of Montreal Beimo as we know
24:28
Speaker 2: it in the trade. You giving us her thoughts on
24:30
Speaker 2: this economy looks like a pretty solid soft landing. At
24:33
Speaker 2: this point.
24:34
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24:38
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24:41
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24:44
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24:53
Speaker 5: Judy Van Allen is joining us.
24:55
Speaker 6: She's chief revenue officer at Recruiting Rewards now rocketing.
25:00
Speaker 5: I'm thinking of cash back, I'm thinking of coupons.
25:02
Speaker 6: I'm thinking though, of you being able to track consumer
25:04
Speaker 6: sentiment as it stands online in particular, and Julie, is
25:08
Speaker 6: the consumer as resilient as it was this time last
25:12
Speaker 6: year when it comes to e commerce purchasing.
25:15
Speaker 9: It's a great question.
25:16
Speaker 4: And first, it was a massive holiday season, especially for
25:20
Speaker 4: brands like US who cultivate great loyalty the incentives, rewards, discounts, coupons.
25:28
Speaker 4: But unlike the last couple of holiday shopping seasons, we
25:32
Speaker 4: had to wait until the very last minute to see
25:34
Speaker 4: those consumer dollars flow through, which is obviously a scary
25:38
Speaker 4: moment when you consider how much spend flows through Q four. Normally,
25:42
Speaker 4: last couple of years, shopping really started in October November
25:46
Speaker 4: in earnest. This year, it really started on Cyber Week
25:51
Speaker 4: which we kind of anticipated would happen and luckily did happen,
25:55
Speaker 4: knowing that consumers would likely be waiting for the best
25:58
Speaker 4: possible deals. But what I will say is particularly interesting
26:02
Speaker 4: is that because consumers waited, there was a lot of
26:05
Speaker 4: pent up demand that rolled into December. But that made
26:09
Speaker 4: it quite hard for many retailers and brands to sustain
26:13
Speaker 4: that sort of promotional activity through end of year. So
26:17
Speaker 4: some were smart with their budgets, some less smart, and
26:20
Speaker 4: it did really create some winners and losers.
26:22
Speaker 5: Okay, let's talk about the winners who won.
26:27
Speaker 4: From a category standpoint, I would say there are some
26:29
Speaker 4: interesting things. Travel really did quite well, ostensibly because consumers
26:35
Speaker 4: were waiting for the best deals on high price point purchases.
26:39
Speaker 4: We thought electronics would.
26:41
Speaker 9: Be a big winner.
26:42
Speaker 8: Not so much.
26:44
Speaker 4: They did start to come back a little bit in December,
26:47
Speaker 4: but given those are discretionary purchases, we did think that
26:50
Speaker 4: those dollars would wait for the big deals to occur.
26:55
Speaker 4: Apparel was another one that wasn't so super sense again,
27:00
Speaker 4: because that's a bit discretionary. People aren't gifting apparel as much.
27:04
Speaker 4: It's more something for yourself that you might want and
27:07
Speaker 4: not need. On the other hand, we saw incredible growth
27:11
Speaker 4: coming out of department stores, marketplaces, footwear, toys. So really
27:18
Speaker 4: apparel and electronics was the only two that were a
27:21
Speaker 4: tad lackluster.
27:22
Speaker 2: I'll say, well, against my better judgement, Caroline, I bought
27:26
Speaker 2: an Xbox for one of my offspring and I did
27:29
Speaker 2: it begrudgingly, but he had a pretty good year.
27:34
Speaker 3: All right.
27:34
Speaker 2: So, Julie, I mean, how do we feel about the
27:38
Speaker 2: consumer here, because I'm not sure how the consumer's paying
27:40
Speaker 2: for all this stuff? Is what are the retailers telling
27:42
Speaker 2: me about credit and that type of thing.
27:45
Speaker 4: Yeah, So, I mean we see consumers spending, right, you know,
27:48
Speaker 4: you just you just listed the stats for us there.
27:51
Speaker 4: But I think we have to remember that consumers are spending,
27:54
Speaker 4: but they're looking for the best value.
27:56
Speaker 9: So, but that's really putting brand loyalty in questions.
28:00
Speaker 4: So you see a lot of retailers and brands really
28:03
Speaker 4: scrambling to try to figure out what does this mean
28:05
Speaker 4: for how they retain.
28:07
Speaker 9: Shoppers going forward.
28:08
Speaker 4: And while there are certainly signs of inflation cooling, I
28:12
Speaker 4: think that there are many facets of our current economy
28:16
Speaker 4: political landscape. A lot going to be happening in the
28:18
Speaker 4: next year that are that's going to mean that consumers
28:22
Speaker 4: are still very, very value driven, which is going to
28:25
Speaker 4: create a challenge, a juxtaposition, if you will, for retailers,
28:29
Speaker 4: who I think at the beginning of the year, you're
28:31
Speaker 4: going to hear a lot of retailers looking to return
28:34
Speaker 4: to health, which is going to mean they're looking for
28:37
Speaker 4: better profit margins coming out of a very competitive, high
28:41
Speaker 4: promotional QUE four.
28:43
Speaker 9: But again that's.
28:44
Speaker 2: Yeah, that's kind of where I want to go, Julie.
28:45
Speaker 2: I mean, I hear a lot about consumers seeking value
28:48
Speaker 2: and promotions and things, So what does that mean for
28:51
Speaker 2: the retailer's margins.
28:53
Speaker 4: It's a challenge, right, they are going they usually are
28:57
Speaker 4: used to having to give quite a lot of way
29:00
Speaker 4: for and then come Q one there's an ability to
29:02
Speaker 4: recoup those healthy margins, and that's even more important now
29:06
Speaker 4: coming off of COVID, when loyalty really look in question
29:10
Speaker 4: and consumer and retailers have been spending spending to earn
29:14
Speaker 4: back shoppers for the last couple of years, so this
29:17
Speaker 4: return to health is important, and there are a couple
29:19
Speaker 4: of things that they can do to meet a shopper
29:22
Speaker 4: where they are while still offering incentives things like cash back.
29:28
Speaker 8: Cash back is a.
29:29
Speaker 4: Great lever for allowing a retailer to charge regular price
29:33
Speaker 4: but create an incentive for a shopper. And even though
29:37
Speaker 4: I know you said you didn't go in store too
29:39
Speaker 4: much to shop this holiday season, that is a big
29:43
Speaker 4: and growing arena, especially for younger shoppers. So another area
29:48
Speaker 4: that retailers can think to invest is in incentivizing things
29:53
Speaker 4: like buy online, pickup in store, where they can give
29:56
Speaker 4: an incentive there but drive consumers to shop where they
30:00
Speaker 4: know that they'll get additional purchases once those consumers are
30:03
Speaker 4: in the store.
30:04
Speaker 2: All right, Julie, thank you so much for joining us,
30:06
Speaker 2: as I always appreciate getting a few minutes of your time.
30:08
Speaker 2: Julie ben Allen. She is the chief revenue officer at
30:12
Speaker 2: Racketon Rewards, giving us the latest lowdown on what has
30:17
Speaker 2: been a pretty solid holiday shopping season.
30:21
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30:34
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