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Omicron’s Economic Impact Amid The Holiday Shopping Season · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. All right, so Friday,
• 0:22
  Speaker 1: which was supposed to be a nice, quiet day after
• 0:25
  Speaker 1: the holidays people digesting their Thanksgiving a dinner, turned out
• 0:29
  Speaker 1: to be anything but with the market selling off more
• 0:31
  Speaker 1: than two percent on news of a new potential variant.
• 0:35
  Speaker 1: Let's get some more color here. We're three days into it,
• 0:38
  Speaker 1: learning a little bit more about it, but let's try
• 0:40
  Speaker 1: to get a little bit smarter about this. We can
• 0:41
  Speaker 1: do that with Sam Fazli. He's head of European research
• 0:44
  Speaker 1: for Bloomberg Intelligence. But of course his day job is
• 0:47
  Speaker 1: he's absolutely one of the top farmer and healthcare analysts
• 0:50
  Speaker 1: in the city of London. Uh and he joins us
• 0:52
  Speaker 1: from London. Sam, what are your thoughts. I know we're
• 0:55
  Speaker 1: only three days into it. I know experts like yourselves
• 0:58
  Speaker 1: are gonna tell us we don't really know we need
• 1:00
  Speaker 1: to wait and study it. But what does your initial
• 1:02
  Speaker 1: take from this homicron I guess, variant or mutation? Yes,
• 1:09
  Speaker 1: high Pole, UM, so initial take remains the same. It's
• 1:13
  Speaker 1: got a lot of mutations, more than ever seen before. UM,
• 1:17
  Speaker 1: A lot of them overlapping areas or identical to ones
• 1:20
  Speaker 1: which either induced an increase in infectiousness or ability to
• 1:26
  Speaker 1: evade vaccine or prior infection induced immunity. So all of
• 1:32
  Speaker 1: that has to be proven. Although the direction of travel
• 1:36
  Speaker 1: is not going to be the direction of the way
• 1:38
  Speaker 1: the data will come is not going to be that
• 1:40
  Speaker 1: surprising to me, at least for the immunity game. But
• 1:43
  Speaker 1: I think everybody's gonna hold and let's keep our fingers crossed,
• 1:46
  Speaker 1: is that this anecdotal converse information from South Africa but
• 1:52
  Speaker 1: milder disease. Actually it turns out to be the case
• 1:55
  Speaker 1: when you expand the data. But I'm not holding my breath.
• 1:59
  Speaker 1: I was going to say exactly that. I know you're
• 2:01
  Speaker 1: a scientist, so for you, UM, You're you're reluctant to
• 2:05
  Speaker 1: talk about uh facts without having proof first. But it
• 2:12
  Speaker 1: looks like, UM, from all that we're reading that this
• 2:17
  Speaker 1: mutation spreads very quickly. But isn't UM as fatal as
• 2:23
  Speaker 1: other mutations? Can? We expect do viruses typically, you know,
• 2:28
  Speaker 1: historically evolved in that way, sam um. Eventually they do.
• 2:36
  Speaker 1: But it's not that the virus evolved that it's that
• 2:39
  Speaker 1: the immune system and the interaction with the host evolves.
• 2:44
  Speaker 1: The majority of people end up having an immune response
• 2:48
  Speaker 1: to it, and they get more and more infections, so
• 2:50
  Speaker 1: over time the reaction to it becomes milder and milder.
• 2:54
  Speaker 1: But I have to say that, and I want, I definitely,
• 2:57
  Speaker 1: definitely want this to be the case that we stumbled
• 3:01
  Speaker 1: somehow on a list difficult virus, but there's no data
• 3:06
  Speaker 1: to prove it. It's you know, you go to South Africa.
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  Speaker 1: What's the average age of the South African population twenty
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  Speaker 1: seven point six years old. What's the average of the
• 3:16
  Speaker 1: US population. It's not twenty seven point six years old.
• 3:19
  Speaker 1: Let's just wait and see how this data pends out
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  Speaker 1: as a fatality, we just have to wait. It takes
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  Speaker 1: four weeks from infiction two mortality, so that that's you know,
• 3:31
  Speaker 1: there's no way that there's enough information Scuid and sam,
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  Speaker 1: I guess you know, one of the ongoing concerns I
• 3:38
  Speaker 1: suppose is that when we think about it on a
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  Speaker 1: global scale, there's still so much of the world that
• 3:43
  Speaker 1: is not vaccinated, and as long as that is the case,
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  Speaker 1: that we're still going to have variant after variant after
• 3:51
  Speaker 1: variant going forward. Is that the way to think about it?
• 3:55
  Speaker 1: It is it is a way to think about it
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  Speaker 1: because non vaccinated people carry more risk, are more likely
• 4:01
  Speaker 1: to infect each other and vaccinated people, so that means
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  Speaker 1: more virus, more replications, and more opportunity for random mutations.
• 4:09
  Speaker 1: But on the other hand, Paul, I think what we
• 4:11
  Speaker 1: have to also think about is did these variants actually
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  Speaker 1: come from unvaccinated people or do they have a source
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  Speaker 1: that's nothing to do with vaccination, and it's more to
• 4:22
  Speaker 1: do with the immune status of the of the of
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  Speaker 1: the of the patient zero or whatever whichever way you
• 4:28
  Speaker 1: want to call it, and that's the critical element. Yes,
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  Speaker 1: it's possibly. Remember I think the delta variant, if I'm
• 4:34
  Speaker 1: not wrong, evolved in a patient in in the UK,
• 4:38
  Speaker 1: and sorry, the alpha variant in a patient in the
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  Speaker 1: UK that had some um immunovation. So it's just you
• 4:46
  Speaker 1: just really coptel until the data clarifies. I'm reading conflicting opinions. Obviously,
• 4:53
  Speaker 1: it takes two to make a market. We're always going
• 4:55
  Speaker 1: to have people disagree with each other. But should we
• 4:57
  Speaker 1: be pushing for COVID zero? Should we should we living
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  Speaker 1: um with governments that try to completely eradicate this virus
• 5:06
  Speaker 1: or should we accept that it's that's not possible and
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  Speaker 1: we need to somehow live with it. Now, Matt, I
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  Speaker 1: think that ship has sailed. I mean we have to
• 5:15
  Speaker 1: live with it. The virus isn't just for us. It's
• 5:19
  Speaker 1: um It can infect cats, dogs, civet cats, and white deer,
• 5:24
  Speaker 1: which is what we've heard. No, it's not exactly often
• 5:26
  Speaker 1: that we interact with white deer, but but if you
• 5:29
  Speaker 1: can get into the enemy more often when I moved
• 5:31
  Speaker 1: back to the US, that I interact with the white tail.
• 5:33
  Speaker 1: There you go. Now you're telling us a little bit
• 5:35
  Speaker 1: about what you're going to get up to there. But
• 5:37
  Speaker 1: in reality, and I think it's over that that ship
• 5:41
  Speaker 1: has sailed. It is good there is this coronavirus has
• 5:44
  Speaker 1: eventually become endemic. That doesn't mean that they become less
• 5:48
  Speaker 1: virulent or more virulent. Time will tell how well our
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  Speaker 1: immunity interacts with it over time. All right, Sam, thank
• 5:55
  Speaker 1: you so much for joining us. As always, we really
• 5:57
  Speaker 1: appreciate getting the benefit of your wisdom and your knowledge.
• 6:01
  Speaker 1: San Fazeli he's haid of European Research for Bloomberg Intelligence.
• 6:04
  Speaker 1: He's also BIS pharmaceutical analyst and he's just been covering
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  Speaker 1: this space for decades. He's got a PhD in this stuff,
• 6:12
  Speaker 1: so he's really a great source for us as we
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  Speaker 1: try to pass through all the changes that this pandemic
• 6:17
  Speaker 1: has brought for us. So we appreciate getting some time
• 6:19
  Speaker 1: from Sam here. All Right, we got a rebound in
• 6:26
  Speaker 1: the market today after that big, big Friday sell off,
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  Speaker 1: concerns about this new variant um and the question is
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  Speaker 1: obviously would impact will that have on the economy. Well,
• 6:35
  Speaker 1: one place in the economy it looks pretty darn strong,
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  Speaker 1: is the consumer. Let's check in with Matt Forrester, Chief
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  Speaker 1: investment Officer, Lockwood Advisors at B and Y Melon Pershing. Matt,
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  Speaker 1: thanks so much for joining us here. As you think
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  Speaker 1: about you know, the remainder of this year and then
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  Speaker 1: into two, how are you thinking about the consumer and
• 6:53
  Speaker 1: the health of the consumer right here? Well, never underestimate
• 6:58
  Speaker 1: the US consumer to spend our money than they have
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  Speaker 1: and I think that's probably gonna end up being the
• 7:02
  Speaker 1: story here. So what we see is that you know,
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  Speaker 1: US consumers have are going to have to dip in
• 7:08
  Speaker 1: their savings to buy their preferred basket of goods or
• 7:12
  Speaker 1: holiday spending. Um. We know the savings rates are already
• 7:16
  Speaker 1: below pre COVID levels, So I think analysts should be
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  Speaker 1: a little concerned about. And that's where we're meeting, Matt.
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  Speaker 1: You know, we we we have all been talking for
• 7:27
  Speaker 1: a year now about savings rates that shot higher. I
• 7:31
  Speaker 1: think at one point they were up twelve pc in
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  Speaker 1: the US and lastic check there at nine percent pre COVID.
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  Speaker 1: I think the average was seven and change. What are
• 7:39
  Speaker 1: you looking at right now? Right? So I think analyst
• 7:42
  Speaker 1: should be a little concerned about the idea of a
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  Speaker 1: money illusion. And a lot of the data that we're
• 7:46
  Speaker 1: looking at, and there were nominal numbers are up um,
• 7:50
  Speaker 1: and yet the real data is decidedly weak. And we're
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  Speaker 1: certainly seeing that in you know, consumer income in general
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  Speaker 1: and just US household income me real main money minus
• 8:00
  Speaker 1: inflation or what exactly after inflation. So the question is,
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  Speaker 1: you know, real wages here are are falling quite dramatically.
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  Speaker 1: So the real purchasing power of the U. S consumer
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  Speaker 1: is falling. Uh, and that's linkly to play, you know,
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  Speaker 1: put a little bit of pressure on more on markets
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  Speaker 1: and spending as we go into the you know, next
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  Speaker 1: couple of weeks. Certainly it looks like there's more foot
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  Speaker 1: traffic across the malls according to you know, some of
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  Speaker 1: the studies just just being done you know, real time
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  Speaker 1: practically from real last Friday. UM. But that doesn't mean
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  Speaker 1: the actual spending is going to pick up. We're probably
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  Speaker 1: above where we were last year. The question is whether
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  Speaker 1: it's going to be you know, enough to meet the
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  Speaker 1: expectations that are built into some of the stock crisis
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  Speaker 1: and not much. If you if you actually look at
• 8:42
  Speaker 1: the Bureau of Economic Analysis puts out the US personal
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  Speaker 1: savings rate. It's a percentage of your disposable income, and
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  Speaker 1: right now we're only at seven point three percent. I
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  Speaker 1: would have thought that it's higher. In fact, the five
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  Speaker 1: year averages nine point six percent because of the spikes
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  Speaker 1: that we saw over the last couple of years. So UM,
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  Speaker 1: I think it's really interesting, Paul, if you want to
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  Speaker 1: check it out on your Bloomberg terminal. The the index
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  Speaker 1: is p I D s P E P, s p
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  Speaker 1: I D S DPS index yep, got it boom, all right.
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  Speaker 1: So it's interesting matd here. I mean you talk about
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  Speaker 1: the I guess it brings us back to the question
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  Speaker 1: of inflation. That's been a driving, you know issue for
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  Speaker 1: this market over the last several weeks and months. What
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  Speaker 1: is your inflation calling you in the transitory camp or
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  Speaker 1: are you saying this might be something more and we
• 9:32
  Speaker 1: really need to pay attention. Well, I think the news
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  Speaker 1: of the last couple of days about you know, another
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  Speaker 1: variant of the virus and making its way through is
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  Speaker 1: definitely gonna hurt the supply issues that have been uh
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  Speaker 1: you know, running rap that throughout the economy. I think
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  Speaker 1: that's still, you know, a problem. And there's at least
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  Speaker 1: two reasons to continue to be a little bit pessimistic
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  Speaker 1: about inflation coming down, and that is the owner's of
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  Speaker 1: equivalent rent portion of the c P I UH as
• 9:57
  Speaker 1: well as energy prices, which of course got a big
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  Speaker 1: it on Friday, and we're back off from five to
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  Speaker 1: seventy three on West Texas intermediate crude UM, but that's
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  Speaker 1: still a lot higher than where we were, you know,
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  Speaker 1: throughout most of the year, so it's still impacting consumer wallets.
• 10:14
  Speaker 1: Uh so. Um so, I think the inflation story is
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  Speaker 1: that it's not as transitory as expected. I would mention though,
• 10:22
  Speaker 1: that markets have firmly bought into the transitory story and
• 10:26
  Speaker 1: they continue to price in the idea that inflation is
• 10:29
  Speaker 1: going to fall. If it does, that's gonna be really
• 10:31
  Speaker 1: good news for markets. Um. You know, it will make
• 10:34
  Speaker 1: real interest rates go higher, but it will do so
• 10:37
  Speaker 1: in kind of a benevolent way because inflation is coming down.
• 10:41
  Speaker 1: I'm interesting, gotta ways to go. I'm interested in what
• 10:44
  Speaker 1: you do in your job at Lockwood. You design and
• 10:48
  Speaker 1: manage Lockwoods proprietary investment models. What gets you pumped? What
• 10:52
  Speaker 1: when you wake up in the morning and you're headed
• 10:53
  Speaker 1: to work. What are you like? Yes about? Well, uh,
• 10:58
  Speaker 1: you know, we have a couple of Last year we
• 11:02
  Speaker 1: moved our portfolio into a little place where it would
• 11:04
  Speaker 1: be less inflation sensitive, so that could be a whole
• 11:07
  Speaker 1: host of things. Um. You know, we've increased our exposure
• 11:10
  Speaker 1: to say KRUC commodities or even precious medles like gold.
• 11:14
  Speaker 1: Uh you know, some additional tips exposure just to you know,
• 11:19
  Speaker 1: try to take the edge off of you know, the
• 11:21
  Speaker 1: inflationary story because I think you know, port folio you know, generally,
• 11:25
  Speaker 1: inflation is not a particularly bad thing for you know,
• 11:29
  Speaker 1: nominal portfolios where you know your your sixty forty portfolio,
• 11:33
  Speaker 1: inflation doesn't hurt that much. You know, most portfolios modeifolios
• 11:37
  Speaker 1: that we manage, uh and those of other firms that
• 11:41
  Speaker 1: we have on our platform, they are positively correlated with
• 11:45
  Speaker 1: inflation going higher. So stocks are not a terrible hedge
• 11:50
  Speaker 1: against inflation. But uh, you know, inflation could run, you know,
• 11:53
  Speaker 1: a lot stronger than I think that anybody in the
• 11:55
  Speaker 1: market was expecting. And I think we've got at least
• 11:57
  Speaker 1: another couple of months ago on that story. All Right,
• 12:01
  Speaker 1: Matt Foster, thank you Forrester. Thank you so much. We
• 12:03
  Speaker 1: really appreciate getting your thoughts here. Matt Forrester, chief investment
• 12:07
  Speaker 1: Officer at Lockwood Advisors at b N Y Melon pershing here.
• 12:11
  Speaker 1: So just kind of getting a sense, you know, after
• 12:13
  Speaker 1: that big, big sell off on Friday that caught a
• 12:15
  Speaker 1: lot of folks um, you know, Matt by surprise here,
• 12:19
  Speaker 1: I think when you looked at some of the pretty
• 12:20
  Speaker 1: good volume on the cell side on the way down,
• 12:23
  Speaker 1: getting a little bit of a bounce back here. But
• 12:25
  Speaker 1: as San fa Celli was suggesting, UH, and some other
• 12:28
  Speaker 1: experts that we've spoken to are suggesting, we're really gonna
• 12:31
  Speaker 1: have to wait and see over the next couple of
• 12:33
  Speaker 1: three four weeks, UH, to see kind of perhaps what
• 12:36
  Speaker 1: this new variant means visa the um the vaccines that
• 12:40
  Speaker 1: are already out there. Looking at Twitter, Matt, it's resumed trading.
• 12:46
  Speaker 1: It is now about four point seven percent, trading about
• 12:49
  Speaker 1: forty nine dollars third thirty cents, So that stock is
• 12:52
  Speaker 1: trading again. Let's check in on the markets because they're
• 12:55
  Speaker 1: trying to claw back some of the big, big losses
• 12:58
  Speaker 1: that the market experienced on Friday. Let's check in with
• 13:01
  Speaker 1: Jeff Kleintop, he's achieved global investment strategist for Charles Schwab. Jeff,
• 13:06
  Speaker 1: what did you make of the trading? Hopefully you were
• 13:08
  Speaker 1: home digesting your Thanksgiving dinner, But what did you make
• 13:11
  Speaker 1: of the trading we saw on Friday? Well, obviously it's
• 13:16
  Speaker 1: a big cellphone on the news of on the crom
• 13:19
  Speaker 1: It was a day of light volume, and that's when
• 13:22
  Speaker 1: these knee jerk reactions can happen. Excuse it can happen.
• 13:26
  Speaker 1: Investors recognize the potential for economically damaging lockdowns. And we
• 13:31
  Speaker 1: know some people have been hesitant to rejoin the workforce
• 13:35
  Speaker 1: due to virus concerns, and that could prolong and worsen
• 13:38
  Speaker 1: the inflation situation. So all that came into play on Friday.
• 13:42
  Speaker 1: But today, of course, investors are buying the dip. We
• 13:44
  Speaker 1: know investors no prior scares and new waves were buying opportunities.
• 13:51
  Speaker 1: But obviously it's too early to take this rebound as
• 13:54
  Speaker 1: an all clear. Markets could remain volatile over the next
• 13:56
  Speaker 1: couple of weeks is more information comes available. Well, I
• 13:59
  Speaker 1: guess this gives you the opportunity to UM to pick
• 14:03
  Speaker 1: a side. Right, if you think that the omicron virus
• 14:07
  Speaker 1: is going to be mild and that UM governmental chill
• 14:11
  Speaker 1: out when it comes to travel curbs, you can go
• 14:14
  Speaker 1: ahead and buy this dip because we're still only up
• 14:18
  Speaker 1: a couple hundred points on the Dow Jones Industrial average,
• 14:21
  Speaker 1: and we were off nine hundred on Friday. In fact,
• 14:24
  Speaker 1: we're up eighty five points on the Dow Jones industrial
• 14:27
  Speaker 1: average and we were off nine hundred on Friday. So um,
• 14:30
  Speaker 1: you can you can place a bet here. You know
• 14:35
  Speaker 1: many investors are sitting on cash, trying to decide if
• 14:37
  Speaker 1: they should put it to work. They wanted to pull back,
• 14:40
  Speaker 1: but now they're not too sure, and I think they
• 14:43
  Speaker 1: should consider international developed stocks for the coming year. There
• 14:47
  Speaker 1: are several reasons global growth is still likely to be
• 14:50
  Speaker 1: above average next year, supported by fiscal policy and pent
• 14:53
  Speaker 1: up savings by households and business capex. Valuations outside the
• 14:58
  Speaker 1: US are attractive. In fact, there are some bargains in Japan.
• 15:01
  Speaker 1: The PE ratio is below the twenty year average, just
• 15:05
  Speaker 1: as markets are fretting over sky high valuations here in
• 15:08
  Speaker 1: the US. And frankly, cash is trash right now, with
• 15:11
  Speaker 1: inflation outpacing cash fields. So I think even in light
• 15:13
  Speaker 1: of omicron, there are opportunities to put cash to work.
• 15:16
  Speaker 1: And there are some things we do know. Sure, there's
• 15:19
  Speaker 1: a lot we don't know, but there's plenty that we
• 15:22
  Speaker 1: do know. We knew that there was likely to be
• 15:23
  Speaker 1: a winter wave of COVID. In fact, we've already seen
• 15:26
  Speaker 1: that in some countries, and there will be new variants.
• 15:29
  Speaker 1: Um you know, COVID is becoming endemic rather than pandemic,
• 15:32
  Speaker 1: so this is a total surprise. We also know that
• 15:35
  Speaker 1: the vaccines and boosters are likely to provide at least
• 15:38
  Speaker 1: some protection against the omicron variant because they stimulate not
• 15:41
  Speaker 1: only antibodies, but in une cells that attack infected cells.
• 15:45
  Speaker 1: And we also know that we have a tool kit
• 15:48
  Speaker 1: to combat new variants if needed. The messenger RNA vaccines
• 15:51
  Speaker 1: can be modified finding as little as thirty days, and
• 15:55
  Speaker 1: anti viral pills to treat infections link caught early from
• 15:59
  Speaker 1: Mercan fives or could be coming in the next month
• 16:01
  Speaker 1: or two. In fact, tomorrow the FDA has an advisory
• 16:03
  Speaker 1: committee meeting on Mark's pill. So we know enough that
• 16:07
  Speaker 1: it makes more sense to stick with your investment plan
• 16:10
  Speaker 1: here and put that cash to work rather than abandoned
• 16:12
  Speaker 1: as them occurred to be doing on Friday. All right, Jeff,
• 16:15
  Speaker 1: given that backdrop, and given the I guess a new
• 16:18
  Speaker 1: level of uncertainty introduced into the market on Friday, what
• 16:21
  Speaker 1: is your outlook? Where should we be focusing. Yeah, it's
• 16:26
  Speaker 1: a pretty positive outlook. And although there are plenty of risk,
• 16:29
  Speaker 1: and not just from oncom, but there's you know, potential
• 16:32
  Speaker 1: rate hikes, and there's inflation issues and shortages. But I
• 16:35
  Speaker 1: think if you take a look at the growth picture,
• 16:37
  Speaker 1: we are looking at two the strongest back to back
• 16:42
  Speaker 1: years of global economic growth in nearly fifty years. You
• 16:45
  Speaker 1: gotta go back in three to see a stronger back
• 16:48
  Speaker 1: to vaccenaria for global growth, but really strong booming economic environment.
• 16:53
  Speaker 1: I don't want to lose sight of that, and that
• 16:55
  Speaker 1: means focus on economically sensitive equities, the one that's sold
• 16:58
  Speaker 1: off the most on Friday, or think of the place
• 17:01
  Speaker 1: you want of these cyclicals. Of course, many of those
• 17:03
  Speaker 1: are concentrated outside the US, where the indicries aren't so
• 17:06
  Speaker 1: much in tech and healthcare, but more in industrials and
• 17:09
  Speaker 1: financials and energy. And I think that those are areas
• 17:12
  Speaker 1: we're going to see real opportunities here for for leadership.
• 17:15
  Speaker 1: In two all right, where you well, I was gonna
• 17:19
  Speaker 1: quickly ask, we only have twenty seconds where you think
• 17:21
  Speaker 1: we're gonna see rates. What's the thing I do you know?
• 17:25
  Speaker 1: I I think the FET is going to stick with
• 17:27
  Speaker 1: its path of of tapering. I think where we could
• 17:29
  Speaker 1: see a change is a disabl rate hyped by the
• 17:32
  Speaker 1: Bank of England may get pushed out yet again after
• 17:34
  Speaker 1: they've surprised in November by keeping rates unchanged. So that's
• 17:37
  Speaker 1: why we might see the omni crown effect on on
• 17:40
  Speaker 1: central bank policy. All right, Jeff, thanks so much for
• 17:43
  Speaker 1: joining us. Appreciate getting your thoughts of perspective. Jeffrey Klinop,
• 17:46
  Speaker 1: chief Global investment strategist at Charles Schwabman Company. UM, so
• 17:50
  Speaker 1: we always appreciate that and again still has a constructive
• 17:53
  Speaker 1: outook for two is I think you know, we've heard
• 17:55
  Speaker 1: from many guests over the last couple of days, given
• 17:58
  Speaker 1: the volatility that's come back into this market with the
• 18:01
  Speaker 1: new variant, Uh, most investors keeping in that longer term view, Matt.
• 18:09
  Speaker 1: You know, walking around New York City, you know, the
• 18:12
  Speaker 1: holiday season kicking off here. I think the crowds are
• 18:15
  Speaker 1: certainly starting to pick up a little bit as I
• 18:17
  Speaker 1: kind of, you know, wander down Fifth Avenue and Madison
• 18:20
  Speaker 1: Evan in the shops and everything like that. So it's
• 18:22
  Speaker 1: certainly not normal by any chance. But had the Thanksgiving
• 18:26
  Speaker 1: Day day parade. They're gonna light the Christmas tree at
• 18:28
  Speaker 1: the Rockefeller Center, and we'll seek to what extent. Do
• 18:31
  Speaker 1: you know what's interesting? I got back to Berlin yesterday
• 18:35
  Speaker 1: and uh, it was Sunday, so of course the supermarkets
• 18:39
  Speaker 1: are closed. Germans don't like to work on Sunday, which
• 18:43
  Speaker 1: makes life unconvenient for Americans like me. But what it
• 18:47
  Speaker 1: meant was I had to drive to the main train station,
• 18:49
  Speaker 1: the only place you can buy like milk and eggs
• 18:51
  Speaker 1: on a Sunday, and I noticed that they were taking
• 18:53
  Speaker 1: down the Christmas market. So everything that had been set
• 18:59
  Speaker 1: up in preparation for the holiday season is now being
• 19:02
  Speaker 1: dismantled here as we prepare for lockdown. Jeez. All right, well,
• 19:05
  Speaker 1: let's see how things are proceeding here real estate wise
• 19:09
  Speaker 1: here in US. Angi Solanki joins this National Director of
• 19:12
  Speaker 1: Retail Services for the United States for Colliers. So AI
• 19:16
  Speaker 1: give us a sense of kind of kind of we're
• 19:18
  Speaker 1: twenty months into it here, just the overall real estate
• 19:22
  Speaker 1: market in the US, you know, I'm looking around it.
• 19:25
  Speaker 1: Office is it seems to be a hybrid work model,
• 19:29
  Speaker 1: seems to be the model that's developing. So it must
• 19:32
  Speaker 1: still be tough commercial real estate. Yeah, definitely, thanks for
• 19:36
  Speaker 1: having me, both Matt and Paul, and I would definitely
• 19:40
  Speaker 1: say we're seeing a comeback. It is hybrid at the moment,
• 19:43
  Speaker 1: but I think we're really forecasting for Q one of
• 19:47
  Speaker 1: next year a strong comeback in the office sector and
• 19:51
  Speaker 1: that's going to help and support what we're going to
• 19:52
  Speaker 1: see in retail. You know right now, we've actually seen
• 19:56
  Speaker 1: just for um, the month of November and increase in
• 20:00
  Speaker 1: spend with shoppers coming back to stores, um and really
• 20:04
  Speaker 1: filling up you know, their their basket list of holiday gifts.
• 20:08
  Speaker 1: So we're going to see a nice, healthy, um, you know,
• 20:12
  Speaker 1: they're nice a fourth quarter this year, but also a
• 20:15
  Speaker 1: holiday spend. We did see, or I did see. I
• 20:18
  Speaker 1: was back in New York for pretty much the entire
• 20:20
  Speaker 1: month of November. A lot of big empty storefronts. And
• 20:25
  Speaker 1: I'm not talking about mom and pop store shut or
• 20:28
  Speaker 1: delis that are empty. I'm talking about big box stores
• 20:32
  Speaker 1: like H and M and Container store that had just
• 20:34
  Speaker 1: abandoned their posts. And I'm wondering how much of that
• 20:38
  Speaker 1: empty space, UM, you expect to fill up? Well, I
• 20:43
  Speaker 1: definitely think it will happen. It's going to be a
• 20:44
  Speaker 1: slightly slower recovery for our denser urban markets, but they
• 20:50
  Speaker 1: will be back. Um, They're definitely Larry tailers have figured
• 20:54
  Speaker 1: out how to adjust their locations, their portfolio, the whole
• 20:59
  Speaker 1: Omnichian all. I mean what we saw in you know
• 21:03
  Speaker 1: foot traffic UM stores you know, stores have seen foot
• 21:06
  Speaker 1: traffic up by this year. I mean we've actually seen
• 21:11
  Speaker 1: foot traffic in the South, followed by the Midwest, West,
• 21:14
  Speaker 1: and Northeast, where actual foot traffic came back to stores
• 21:18
  Speaker 1: at the same level of on Black Friday. Why is it?
• 21:24
  Speaker 1: Why is it that the dense urban centers that UM,
• 21:28
  Speaker 1: New York City, Chicago, UM, Los Angeles are seeing those
• 21:35
  Speaker 1: big retailers abandoned them. Are they moving out to the suburbs,
• 21:38
  Speaker 1: are they going where the business is or people not
• 21:40
  Speaker 1: coming back yet to offices as much as they maybe could. Yeah,
• 21:45
  Speaker 1: it's a combination of a variety of different variables. One
• 21:48
  Speaker 1: that you just described, which is, you know, the office
• 21:50
  Speaker 1: workers aren't really here, um, most people are working from
• 21:53
  Speaker 1: home still. So of course the suburban markets have seen
• 21:55
  Speaker 1: a flurry of activity. However, it's not going to take
• 21:59
  Speaker 1: away from you know, the core urban markets because that's
• 22:03
  Speaker 1: where people still love and enjoy to come to and
• 22:05
  Speaker 1: shop and enjoy with all the different experiences, whether it's
• 22:08
  Speaker 1: restaurants or you know, as you mentioned the lighting of
• 22:11
  Speaker 1: the Christmas Tree and Rockefeller Center, et cetera. So what's
• 22:15
  Speaker 1: happening really is you also have other elements, right, so
• 22:18
  Speaker 1: you have you know just um, the change we've seen
• 22:21
  Speaker 1: in just labor um and bringing people back into some
• 22:26
  Speaker 1: of these markets, but they will be coming back. Retailers
• 22:29
  Speaker 1: are gonna come back just as the market and and
• 22:31
  Speaker 1: tourism comes back as well. I mean, tourism plays a
• 22:33
  Speaker 1: huge part in this, uh, and we're I mean we
• 22:37
  Speaker 1: were seeing a nice you know shift with tourism coming back,
• 22:41
  Speaker 1: uh in New York, um, and here also in San Francisco,
• 22:44
  Speaker 1: my home base. And it's also it's also kind of
• 22:47
  Speaker 1: now flowing down a little bit with this new variant
• 22:49
  Speaker 1: UM and hopefully that will soften up or the lockdowns
• 22:52
  Speaker 1: will either slow down and we'll start to see tourism
• 22:55
  Speaker 1: come back even much more stronger in Q one Q
• 22:58
  Speaker 1: two of next year. So in just in terms of retail,
• 23:01
  Speaker 1: we're in the holiday shopping season here, is there is
• 23:04
  Speaker 1: it still that the US retail market in terms of
• 23:07
  Speaker 1: these departments are are still overstored, still need to see
• 23:09
  Speaker 1: a lot of closures. Is that kind of still the case? No,
• 23:13
  Speaker 1: we're actually seeing, um this is the first year we've
• 23:15
  Speaker 1: actually seen more store openings than store closures. So uh,
• 23:20
  Speaker 1: they have taken the time over this pre pandemic where
• 23:24
  Speaker 1: retailers have looked at their entire portfolio and readjusted to
• 23:28
  Speaker 1: look at how do we sell online, how do we
• 23:30
  Speaker 1: sell in store or on demand delivery. So it's not
• 23:34
  Speaker 1: anything new, it's just been in the works, I would say,
• 23:37
  Speaker 1: And so we're at a point where it's still being
• 23:40
  Speaker 1: you know, there's definitely going to be certain areas where
• 23:43
  Speaker 1: we'll see closures, but the portfolios that have been we
• 23:48
  Speaker 1: kind of reassessed. That's starting to um be done and complete,
• 23:52
  Speaker 1: and we're starting to see retailers expand again. There's a
• 23:55
  Speaker 1: handful of retailers looking to expand not only just this year,
• 23:59
  Speaker 1: but next year and into Q one three. All right, Angie,
• 24:04
  Speaker 1: thank you so much for that. We really appreciate getting
• 24:06
  Speaker 1: the update there on real estate. Uh. To think on
• 24:09
  Speaker 1: the retail side, Angie Solanki, National director of Retail Services
• 24:13
  Speaker 1: for the US for Colliers, getting an update there. So again,
• 24:17
  Speaker 1: a pretty decent start to retail sales from what we're
• 24:19
  Speaker 1: hearing across the board. Foot traffic coming back, uh, and
• 24:23
  Speaker 1: that's a good thing. And of course, the the e
• 24:25
  Speaker 1: commerce continues to be a key key driver of retail sales.
• 24:29
  Speaker 1: We saw that clearly accelerate during the pandemic. Thanks for
• 24:34
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 24:37
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• 24:41
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• 24:47
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• 24:49
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• 24:52
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