Markets Ready for Fed and Tech Earnings

Summary

Bloomberg Surveillance Podcast: "Markets Ready for Fed and Tech Earnings"

Date: July 29, 2026
Hosts: Tom Keene, Jonathan Ferro, Paul Sweeney
Guests: Goldman Sachs Asset Management (unnamed guest), Ian White (Huntington Bank), Ian Lincoln (BMO Capital Markets), Julia Wilson (KPMG)

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Episode Overview

The episode centers on the anticipation surrounding the upcoming Federal Reserve decision and tech earnings, with particular focus on the “higher for longer” interest rate environment, global inflation concerns, credit markets, consumer spending trends, and the factors shaping monetary policy. The hosts lead insightful conversations with leading industry experts about bond markets, corporate debt issuance, the changing consumer landscape, and how economic data drives central bank decisions.

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Key Discussion Points & Insights

1. The Fed, Global Inflation, and the “Higher for Longer” Rates Environment

[02:04 - 06:43] Guest: Goldman Sachs Asset Management

• Monetary Policy Approach:

  • The Fed is likely to reduce forward guidance, injecting more volatility at the short end of the curve.
  • "There's going to be less forward guidance going forward, but the market still needs to figure out what that means in terms of policy and reaction functions." (Goldman Sachs AM, 02:30)
  • Question raised whether the Fed will start to look more like the Bank of England, known for internal dissent and varied stances.

• Interest Rates & Inflation:

  • “Higher for longer” rates is the prevalent regime both in the US and globally.
  • Inflation remains “higher and stickier” and commodity shocks are adding to this pressure.
  • Supply at the long end of the curve is pushed up by fiscal expansion and corporate issuance, especially technology-related paper.

• Bond Market Dynamics:

  • Corporate and sovereign bond issuance is surging—roughly $1.4 trillion expected through 2030 on top of $8 trillion already outstanding in the Bloomberg IG Index.
  • The bond market’s risk premium is widening, especially for hyperscalers and technology issuers.
  • "The risk premium that the bond market commands is going up over time. The spreads are not only wider but the spread curve is steeper." (Goldman Sachs AM, 05:19)
  • Selection is critical: "Getting actually into the weeds of individual deals is going to be the driver because the volume is gigantic and bondholders will be very discerning." (Goldman Sachs AM, 04:09)

• Return to a New Normal:

  • There's consensus that steeper curves and wider spreads signal a return to a more "normal" market environment post-quantitative easing.

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2. Macro Forces, Central Banks, and Policy Differentiation

[06:43 - 07:36] Guest: Goldman Sachs Asset Management

• More policy differentiation is emerging globally as central bank approaches diverge.
• The post-QE world features more volatility, especially at the short end; markets are adjusting to less guidance and faster-changing reaction functions.
• Discussion briefly turns light-hearted on UK “task forces,” highlighting differences in policy culture between central banks.

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3. The Housing Market, Consumer Spending, and the Fed’s Dilemma

[10:46 - 14:52] Guest: Ian White, Huntington Bank

• Housing’s Role in Inflation:

  • Although housing costs in CPI include rent, hotels, insurance, etc., rental inflation is not currently a major pressure—positive for lower-income consumers.
  • “Rents are not a big pressure right now. And for a lot of lower income households, that’s a really big deal on the spending side.” (Ian White, 11:11)

• Income Dynamics:

  • Lower- and middle-income households’ spending is actually outpacing that of higher-income groups thanks to recent tax cuts and refunds.
  • For lower-income households, rent composes a much larger share of their budget compared to expenses like gasoline.

• Fed’s Mandate Focus:

  • With a relatively stable labor market and spending holding up, the Fed’s “bias is towards the upside on rates.”
  • “If you only see one side of the mandate as a problem, you’re going to be biased towards upside on rates.” (Ian White, 14:18)
  • Inflation is expected to cool, making today’s rate decision relatively straightforward.

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4. Data Centers, Corporate Investment, and Real-Economy Trends

[15:08 - 16:16] Guest: Ian White, Huntington Bank

• Data center growth is “permeating” various industries (energy, construction materials) and driving significant business for banks and equipment suppliers, especially across the Southeast and Midwest.

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5. Fed Rate Strategy, Market Reaction, and Policy Credibility

[19:19 - 26:15] Guest: Ian Lincoln, BMO Capital Markets

• Fed’s Need for Data:

  • Emphasis on the importance of upcoming CPI releases in shaping the Fed’s path.
  • The possibility that the neutral rate ("r-star") is higher, suggesting justification for additional hikes.

• Reluctance to Commit (No Forward Guidance):

  • The Fed is likely to avoid stating moves are “one-off” to preserve future flexibility and market trust.
    • “That sounds suspiciously like forward guidance. And I think he would be reluctant to do just that.” (Ian Lincoln, 20:11)
  • Small moves (like 25bps) have limited near-term real-economy impact, especially given long lags in policy transmission.

• Policy & Market Dynamics:

  • The Fed wants to avoid a “reactive” image from frequent reversals.
  • The bond market has already strengthened yields; the equity market remains relatively buoyant, so broader financial conditions are still easy.

• Real Yields:

  • Inflation-adjusted 30-year Treasury yields are near record highs (~2.9%), signaling market skepticism about long-run inflation.
    • “What is the significance of a new high? 2.9% real 30 year yield. I think it’s a clear indication that there are a lot of reasons to be nervous about whether it is a higher R star making a lower policy boundary.” (Ian Lincoln, 24:22)

• Fed Communication:

  • Warsh’s (Fed Chair) last press conference was intentionally vague, embodying the shift away from forward guidance.

• Projections:

  • 12-month outlook for the 10-year yield: “375 under 4%.” (Ian Lincoln, 26:03)

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6. Consumer Spending, Back-to-School, and Resilience

[29:46 - 37:48] Guest: Julia Wilson, KPMG

• Back-to-School Spending:

  • Overall spending up 6%, but there is high variance across households—about 40% spending more, 40% about the same, and 20% less.
  • Parents are making tradeoffs, such as cutting discretionary spending to afford essential school and extracurricular costs.

• K-Shaped Economy:

  • Debate over whether the K-shaped divergence is fading; evidence of resilience among middle-tier and lower-income consumers, especially on essential “utilitarian” purchases.

• Enrichment Activities:

  • Non-academic spending (athletics, enrichment) is a significant and persistent part of the family budget despite inflationary challenges.

• Impact of Fuel Prices:

  • Higher gasoline prices strain lower-income budgets more, influencing purchasing timing and quantity for necessities.

• Retail Behavior:

  • Spending on essentials remains stable; higher reliance on savings and credit cards is noted as softness rises.
  • Brick-and-mortar shopping is not dead—mall and store visits, especially among younger generations, are rebounding.

• Gen Alpha & Spending:

  • Youngest consumers are involved in spending (and even have their own cards), reflecting changing generational attitudes to retail.

• College Costs:

  • Tuition, room, and board continue their relentless climb, with an aside about William & Mary’s 250th anniversary underscoring cost burdens.

• Bottom Line:

  • “There’s nothing that’s really taken huge swath of the US consumers and taken away the paycheck. They’re continuing to spend and they’re spending begrudgingly. But we’re seeing really strong earnings coming out from this core consumer companies.” (Julia Wilson, 34:28)

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Notable Quotes & Memorable Moments

• On changing market dynamics:

  "The risk premium that the bond market commands is going up over time. The spreads are not only wider but the spread curve is steeper."
  — Goldman Sachs Asset Management, [05:19]

• On the Fed’s forward guidance retreat:

  "That sounds suspiciously like forward guidance. And I think he would be reluctant to do just that... By not responding to what we saw earlier this year in terms of the uptick in inflation, nor responding to June’s data, the Fed has an implied degree of credibility that I think they want to maintain."
  — Ian Lincoln, BMO Capital Markets, [20:11, 21:03]

• On the resilience of the US consumer:

  "There’s nothing that’s really taken huge swath of the US consumers and taken away the paycheck. They’re continuing to spend and they’re spending begrudgingly."
  — Julia Wilson, KPMG, [34:28]

• On generational shifts in spending:

  "The 90s are back in a lot of ways... The youngest generations... really, there’s a blended back-to-school... They have their own credit card or spending money."
  — Julia Wilson, KPMG, [35:58, 36:27]

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Segment Timestamps

| Segment Topic | Description/Insight | Timestamps | |---------------------------------------------------|---------------------------------------------------------------------|------------------| | Fed Policy, Market Volatility | Less guidance, higher-for-longer rates, issuance trends | 02:04 – 06:43 | | Macro Forces, Global CB Divergence | Post-QE volatility, more differentiated policy approaches | 06:43 – 07:36 | | Housing & Inflation, Consumer Spending | Rent, lower-income spending resilience, Fed mandate focus | 10:46 – 14:52 | | Data Centers Impact Across Industries | Corporate investment drivers, data center boom | 15:08 – 16:16 | | Fed Strategy: Reaction Function & Communication | No forward guidance, lagged policy, market signals | 19:19 – 26:15 | | Consumer Trends, Back-to-School, Retail | Shifting spend, K-shaped debate, enrichment, generational trends | 29:46 – 37:48 |

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Final Takeaways

• Markets are grappling with a new era of less predictable central bank signaling, wider credit spreads, and higher-for-longer interest rates.
• Inflation remains sticky, but consumer spending is holding up, especially among lower and middle-income households.
• Corporate and sovereign debt issuance—particularly in tech and energy infrastructure—is shaping bond markets.
• The Fed’s current message is one of patience, credibility, and flexibility rather than strong forward guidance.
• Consumer trends remain complex: there are persistent pressures, adaptation via spending trade-offs, and a shift towards more in-person shopping among younger cohorts.

For those following markets, economics, and policy, this episode offers a well-rounded, data-driven snapshot of investor concerns and opportunities as the Fed, tech earnings, and the resilient US consumer take center stage.

Transcript

[Tom Keene]

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[Tom Keene]

Joining us right now with Goldman Sachs Asset Management joins us here. You're out of London, out of Bristol. You are out of the land of central bank dissenting. I love when the bank of England comes out. Everybody's angry, everybody's arguing. Do you see where you sit and where you digest Jan Hatzius Economics? Do you see a Fed that's going to become more like the bank of England?

[Guest from Goldman Sachs Asset Management]

Well, good morning. It's tough to tell at this stage. It'd be very interesting to see actually how today's meeting goes. I think will give us a little bit of a flavor of what is to come. I think the market understands very clearly that, you know, there's going to be less forward guidance going forward, but the market still needs to figure out what that means in terms of kind of policy and reaction functions. So, so let's be open minded about that. But it is really very likely to your point that we're going to get a little bit more volatility at the short end going forward given the way the Fed's likely to communicate your market,

[Jonathan Ferro]

your fixed income markets. I mean it's been higher for longer. Is that the new world for you guys? Higher for longer Here I'm looking at the 10 year at 460 something. I mean that's not. I kind of thought the 450 was my ceiling and then you guys blew right past that.

[Guest from Goldman Sachs Asset Management]

Well, there's a couple of things going on. First of all, short end rates are likely to be higher. Inflation is higher. Not just in the US around the world, but inflation is higher and stickier. And then of course now we've got the commodity price shock that is propagating throughout the economy. So that lifts the shorter end of the curve and then we've got a lot of supply coming at the longer end of the curve A from fiscal. So governments are issuing more. But you see it in the, in the IG market as well. You see the corporate market issue and more particularly kind of hybrid scalers at the long end. So that puts pressure.

[Jonathan Ferro]

Your bankers have been busy, Morgan Stanley bankers, JP Morgan bankers, been busy pumping out all this technology paper here. Where do you see the best value I guess on a global scale? Is it the US market? Where do you see the value today?

[Guest from Goldman Sachs Asset Management]

So I think there are pockets of value globally. If you thinking of the paper that's being pumped out, I think on the IG side, I think it's very important to just keep in mind that there's going to be a lot of this coming. Yeah, you know, we kind of look at the numbers to about 2030. Expectation is you're going to see something like an additional 1.4 trillion. And compare that to the 8 trillion that you have in the kind of Bloomberg IG index. That's a, that's a big number. So where's the value? I think you have to assess the value on an individual basis. Typically, you know, what matters are the details and number of these deals, the maturities of these deals, the leases, the states in which, you know, some of these projects are being built. So you know, selection and getting actually into the weeds of individual deals is going to be the driver because the volume is gigantic and the bondholders will be very discerning when it comes to buying this paper.

[Tom Keene]

What is the signal you See in hyperscaler price down in some of the CDS elevation that we see when you look at technology paper, can you add to those positions with new issuance or existing issuance?

[Guest from Goldman Sachs Asset Management]

Well, coming back to the point that there's going to be a lot more where this paper comes from. So one shift you've actually seen is that the risk premium that the bond market commands is going up over time. Right. So the spreads are not only wider but the spread curve is steeper. Now that's a good thing because the market is beginning to command the right risk premium and the breakdown between the equity market gets versus the fixed rate.

[Tom Keene]

Okay, this is the heart of the matter. You just brilliantly said it. We've got a new steeper normal curve. Ed Yardeni on Friday said, get used to it. This is normal. Is that where Goldman Sachs is? All we're doing is reverting to a normal market.

[Guest from Goldman Sachs Asset Management]

I think, I think it's likely that the issuance will drive a more normal kind of issuance pattern, 100% and that will put pressure the longer end of the curve.

[Tom Keene]

Paul, that's. That to me is the foundational idea. I mean, issue is price discovery, simple as that.

[Jonathan Ferro]

Assets under management of gsam. What is the total number for you

[Guest from Goldman Sachs Asset Management]

guys in wealth management and asset management? About 4 trillion.

[Jonathan Ferro]

$4 trillion. I remember you were running equity monies out of Tampa, Florida back in the day. What are the macro forces here, the big economic macro forces that you guys are focused on right now? Is it, Is it global inflation? Is it. What's some of the issues that are really first and foremost for your portfolio managers?

[Guest from Goldman Sachs Asset Management]

So look, one thing we're seeing in the kind of post QE world is a lot more differentiation. So we started maybe mentioning the bank of England. We've got a Bank of England meeting actually this week. We've got bank of Japan also coming this week. We're seeing a lot of differentiation. What's priced in is becoming a lot more kind of volatile, particularly at the short end. So that's, that's the first big thing. What drives it? Well, we're going to learn a lot more about what drives it in the US today so that the reaction functions are changing. You've got the task force in particular in the US that will look at a lot of the kind of fundamentals and frameworks as to what's driving.

[Tom Keene]

Are they going to get anything done? I mean, what do they call a task force in England?

[Guest from Goldman Sachs Asset Management]

Why do they call it task force?

[Tom Keene]

Is it called a task force?

[Guest from Goldman Sachs Asset Management]

I think.

[Tom Keene]

Are they going to get anything done. You got to be kidding.

[Jonathan Ferro]

England, they just go to a pub and they figure it all.

[Tom Keene]

Exactly. I mean that's the way to do it.

[Guest from Goldman Sachs Asset Management]

You know, like consulting a little bit is not a bad idea. Right?

[Ian White]

The world is changing.

[Guest from Goldman Sachs Asset Management]

It's okay, you know.

[Tom Keene]

Exactly. Thank you so much with this consulting for Goldman Sachs Asset Management so we can now in New York we got to have them in on a daily basis. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Jonathan Ferro]

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

Ian Wyatt joins us from Charlotte, North Carolina. Of course, all the work of Huntington bank of Columbus as well. Okay, 33% of active listings in Charlotte have undergone price cuts before selling. I mean there's a whole housing price dynamic involved here. Does the Fed care about the housing economy within their decision today?

[Ian White]

Right now I don't see housing as well. There's some cuts and housing softened. I do think that that matters for the consumers. If especially on the rental side, if we look at where the inflation is happening in housing, if you break out the shelter components, you can see it's not really in the rental side. It's in funnily enough, the housing component of CPI includes hotels, for example. It includes insurance, it includes all the costs of housing. And so we're seeing it there. And that's doing more upper income. So as far as, you know, lower income consumers, the average consumer, I think they do care that that rents are not a big pressure right now. And for a lot of lower income households, that's a really big deal on the spending side too. And I think we're seeing that in the spending data right now as well is that those households are still spending. But I think right now, yes, the Fed is obviously focused on inflation. The jobs picture is okay and that's partly because those households are still spending. They had a pretty good tax cut come in, we had the refunds and we've seen pretty solid spending data. In fact, all the recent spending data skewing more lower income is actually growth is faster amongst lower and middle income than upper income households.

[Jonathan Ferro]

So does that mean the K shaped economy which we've talked about for so long, is that less of an issue now? It would seem that with higher inflation it would be more of an issue.

[Ian White]

Yeah, you'd think that. Now I think part of it was we probably underestimated how bad rent was back in the day for these households and how much government stimulus was withdrawn. Because sometimes we're Somewhat separated from that. So you had huge rental inflation. And for a decent note, the CBI says, you know, your rent's roughly, and housing is roughly a 30 year spending, but for a lot of households at the lower income, it's 50%. You're talking 35% of them are spending more than 35%. So it's a bigger deal and that's not a inflationary pressure. Whereas gasoline in a good year is 4% of their spending.

[Jonathan Ferro]

4%.

[Ian White]

Let me set up to 5 or 6.

[Tom Keene]

You're so good at this. Let me set up the polarity on this. The president, United States is worried about real estate prices in the bottom half in North Carolina because he's, you know, his team's got to get reelected. Wall street is worried about price increases in the Hamptons because bony seasons killing everybody. That's the barbell polarity of America. Who does Chairman Marsh address today? Fancy people in the Hamptons or mere mortals 40 miles outside Charlotte who can barely get by?

[Ian White]

I think, I think Chair Warsh is. And in general, this Fed has become less focused on Wall street over time and what the markets are doing now. Obviously the chair has spoken a bit about having the bond market lead rather than, than follow the Fed. But the reality is when we look at their reaction function as far as the job side, the, the other side of the mandate, back in September they cut. And the previous September, they cut because what they saw was softness in the labor market. That really isn't coming through when you read whether it's the Beige book or other job reports. Really it's a fairly stable labor market now. Maybe job growth has slowed a little or maybe it was just, you know, sort of some of the noise in the data. We had a bit faster job growth for three, four months and now we had kind of a softer month in July, I mean, in June. So, so they're looking at that, but they don't really see that as an issue right now. So they see them as having one issue. And that's why the bias is towards the upside on rates. It's simply that they don't see the other side of the mandate as a problem. And so if you only see one side of the mandate as a problem, you're going to be biased towards upside on rates. At the same time, I think they see this, we see this in forecasts, not just us, but other forecasters as well, is that we see inflation coming down. And so that's why we think this is an easy call today.

[Jonathan Ferro]

Okay.

[Julia Wilson]

All right.

[Jonathan Ferro]

You're At Huntington bank with some of your recent acquisitions, you guys are a solid kind of big regional bank. What are your customers telling you? Are your customers, are they, are they coming to you guys knocking on the door looking for loans? Do they want to grow? Do they want to invest? What are you guys seeing?

[Ian White]

Yes, I work a lot with our commercial clients. That's really where the part of the organization I work with. So I'm working with companies all the time, talking to them out there all over the country. And yeah, we're, we're everywhere from Houston to Jacksonville now in the south, we're out in Denver where we're a pretty large bank or legally a large bank now too. So what they're telling us is data centers is weirdly permeating almost any industry you wouldn't expect really. And so it's something like, you know, we were talking to somebody who owned a pipeline right away and all of a sudden that gas pipeline right away got really valuable because all of a sudden there's going to be a huge, huge amount of gas generation because there's going to be a data centers, large data center being built on the other end or you know, somebody who makes equipment that creates aggregate like they crush rocks for gravel. You wouldn't think that. And tell me 35, 40% of our business right now is data centers just for and almost any. Weird. It's weird how often I have that conversation. I've, I've been rather shocked by how often I've had that conversation. Especially it's, it's really in our core footprint where a lot of the data centers are happening. It's whether it's the Southeast or the Midwest.

[Tom Keene]

Ian, thank you so much. Ian White with his chief economist Huntington at Bank. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Jonathan Ferro]

For certain, support for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the diploma, manually sweeping idle cash, putting on a hedge on Public you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve of the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory services by Public Advisors, LLC SEC registered advisor complete disclosures available at public.com disclosures grainger knows

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple Carplay and Android Auto with the Bloomberg Business app or watch us live on YouTube in plain English,

[Tom Keene]

Ian Lincoln holds a high ground at BMO Capital Markets, the Bank of Montreal headed to US Rates strategy that barely describes it. You allude lower in your note, and I've been saying this all week. The most important thing about July 29th is September 16th October 28th December 9th. How badly does this chairman need more CPI information?

[Paul Sweeney]

That's the wild card. If he truly believes that our star is higher as a result of the data that we've seen thus far in 2026, then now's a reasonable time to start pushing policy rates higher. But if they once the market's going to price in another three or four.

[Tom Keene]

Why? This is the second time this has come up in 12 hours. If they go once, why can't he release a statement and then in a press conference say this is a one off that we did today.

[Paul Sweeney]

That sounds suspiciously like forward guidance. And I think that he would be reluctant to do just that because the other aspect of it is the Fed gets the joke. 25 basis points when policy rates are where they are really isn't going to move the needle. We also know that policy changes impact the real economy with a lag. And if you're hiking 25 basis points now, are you really that worried about what the world's going to look like at the end of the year? It seems like a more significant policy.

[Tom Keene]

Paul, what the lag is going to be for the gentleman in Pennsylvania Avenue? The lag is going to be to the first Tuesday of November.

[Jonathan Ferro]

Exactly why I've heard this before that when the Fed moves a tend to move not just one move but multiple. Why is that? Why don't they just. Why do they feel the need or to do two or three or four if you're going to do one, envision

[Paul Sweeney]

a scenario in which they go 25 today we wait two meetings and then they cut 25 because the data suggested that that was the case. You then have the perception of a Fed that doesn't really know what's going on. And so they're responding to each incremental move. And that's why patience is such a powerful tool. By not responding to what we saw earlier this year in terms of the uptick in inflation, nor responding to June's data, the Fed has a implied degree of credibility that I think they want to maintain.

[Jonathan Ferro]

Personally I'm a big fan of procrastination kicking the can down the road. How does the Fed think about that?

[Paul Sweeney]

I suspect that in this environment in which Warsh is still trying to build a consensus around a lot of things, that patience will be the path of least resistance. But there's also again the credibility issue. If in fact we believe that neutral is higher, we need to get back there more quickly.

[Tom Keene]

I'm fascinated Ian, by what the bond market tells you. Looking at your four Bloomberg's @BMO capital markets, not only full faith and credit, but when you look at credit, hyperscaler, credit, cds, all of it. What does the market tell you about this moment?

[Paul Sweeney]

For Chairman Wash, I think that the chair has really established himself as a credible inflation fighter or at least not a clear dove because of who's in the White House at the moment. That was his first meeting. He reiterated that with at the semiannual congressional testimony. And now the question is if we really believe that the Fed is going to contain inflation over time. You don't want to buy 30 year inflation protection, which is why real 30 year yields are as high as they are. I think that's a very informative aspect of what's going on in the market right now. That also speaks to some of the hyperscale issuance or hyperscaler issuance and what that's doing to the broader bond market right now. I do think that the market is a bit, a bit uncertain about the outlook and a lot of clients and a lot of people are just taking a step back and they're letting the monetary policy situation play out right now.

[Jonathan Ferro]

Again, I'm a big fan of just sitting on my hands here. So if I'm talking to the Fed chairman, Washington, I would say the market's already moved. I got the 10 year at 462. We can sit on our hands here. Does that argument have any weight, do you think?

[Paul Sweeney]

Well, the treasury market has been doing a fair amount of heavy lifting for the Fed, but the issue is the equity market is pushing the other direction. Financial conditions are still relatively easy overall.

[Tom Keene]

Can I stop the show?

[Jonathan Ferro]

Yeah.

[Tom Keene]

So the magic here folks is Paul says something smart, Ian says something smarter and I go to the Bloomberg and actually get the picture on the terminal. I search in, I go generic 30 year in. Up comes the inflation adjusted 30 year bond essentially. And of course it was 2%. It went down under 0% during COVID and Ian, as you point out, it's moonshotted back to new highs. What is the significance of a new high? 2.9% real 30 year yield.

[Paul Sweeney]

I think it's a clear indication that there are a lot of reasons to be nervous about whether it is a higher R star making a lower policy boundary.

[Tom Keene]

Then why not get it started today and shock people when they're not expecting it?

[Paul Sweeney]

Actually if he were to go, let's say imagine he went 50 or the committee went 50 or 75, what happens to the equity market? Pretty sharp decline. Presumably that would tighten financial conditions or make them less easy. That would take some of the edge off of inflation. But the issue then becomes what would the market price in? Would we see 75 but instead price in another 150 or 200 most likely.

[Jonathan Ferro]

What kind of statement, what kind of press conference are you expecting here today?

[Paul Sweeney]

That's a bigger wild card than has been in the past. What we saw last press conference by Warsh was a lot of conversation about things that could happen and not a lot of conversation about what will happen in the near term. And that's the pulling back from forward guidance. I do think that it will, I think it will be a lively press conference, but I don't think that we'll have any great insight as it takes us.

[Jonathan Ferro]

Does he have to do a press conference? Can he just say, hey, here's our statement, we're good. I mean you hear from our Fed people all the time. Does he have to do a press conference or has that been kind of established as the norm?

[Paul Sweeney]

Well, it's certainly established as the norm and by not doing a press conference that would be a clear message to the market and it would be a volatility enhancing message. You'd see a lot of choppy price action around that.

[Tom Keene]

People always want to know your 10 year yield, where is your US full faith and credit yield 12 months from now?

[Paul Sweeney]

12 months from now so July 2027 I think at this stage you're probably in the 375 under 4%.

[Tom Keene]

Yes, you are trouble.

[Jonathan Ferro]

He is.

[Tom Keene]

I mean the combo of his under 4% call on yield plus his availability of Montreal Canadian tickets at the bank, it's just, it's just right at the double barrel Brilliance E. Lingen. Thank you so much BMO Capital Markets. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Ian White]

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[Julia Wilson]

And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business and foreign

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[Julia Wilson]

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[Tom Keene]

So here's what's happening right now. Y' all watch the World cup and the brat, I mean the child, the offspring, is trying out for soccer. Yeah, and they're like jv borderline. Maybe they'll play varsity. Okay, but they're like, mom, Dad, I need the Adidas Predator Elite ftse.

[Jonathan Ferro]

Absolutely.

[Tom Keene]

It's what you use when you control

[Jonathan Ferro]

or you striking 30, $40 maybe. How much?

[Tom Keene]

$280 for these. Joining us now in charge of back to school spending, Julia Wilson, who's exquisite at KPMG on looking at the consumer in the trends. This is back to school spending still a thing.

[Julia Wilson]

Back to school is still a thing. And the headline number is school spend is up 6%. But the way that I think about is you really have to unpack that and the devil's in the details. So the average says the consumer is going to be spending more, but if I look at 10 consumers and how they're thinking about it. You have basically four of those consumers are going to spend more, four of those consumers are going to spend about the same and two of them are going to spend a little bit less. And that all nets out to about 6%. So it's really interesting to see that of those consumers there really is a discrepancy across the mix.

[Jonathan Ferro]

We had an economist in here in your seat just about an hour ago who said they think the K shaped economy is becoming less pronounced. Do you see that?

[Julia Wilson]

It's funny because I was thinking we're doing back to school and there's a lot of other letters in the Alphabet than K. I definitely think there is that. You still see this. There's the haves and the have nots and then there's kind of the steady of the ship which is a very large component right now of at least back to school spend. Because that's not even, that's not really discretionary, that's quasi utilitarian spend. But what I really like to see is when I look at the fringes of the data, so if I continue to unpack those 10 consumers, there's four that are spending more. What are they really doing? Two of those consumers are making trade offs. So they're going to spend less going out and dining out and they're you know, thing doing things at home. They might stop to do those vacations that they were doing over the summer. There's one of those that are making sometimes kind of like not sustainable choices like dipping into spending. But there's one and this is the one that I kind of think they're taking my survey and rolling their eyes a little bit of, you know, I don't need to change my behaviors to spend more on school. So that's, that's 1 in 10 consumers saying that across tuition. So when we ask tuition hikes, there's a question in our survey about that. There's something about the soccer spin. So it's no joke. The three kids, the cleats, the shin guards, the kind of training, you know, of the after school enrichment activities after

[Tom Keene]

is that, that's what athletics is called emg.

[Julia Wilson]

And it's kind of half and half. So we could either pay for tutoring or they're probably doing both because it's a multi select question. But you know, half of the parents that you know, pay for enrichment activities, they're spending on enrichment.

[Tom Keene]

You're gonna kill.

[Julia Wilson]

We have a lot of thought.

[Tom Keene]

The biggest scam on this is I'm going to Go to my school. We're going to a lacrosse camp at Disney World for a week. An enrichment activity week at Disney World is three and a half days. Oh, you're paying for the week.

[Jonathan Ferro]

Yep.

[Tom Keene]

But all in it's. They got the enrichment. You know that.

[Julia Wilson]

And they do it really well. I have to say all they do really well. I have firsthand knowledge of going to some soccer tournaments.

[Jonathan Ferro]

So what does $4 or 25 gas mean for the consumer really right back there again?

[Julia Wilson]

Well, it's right back there in the average. You know, the last time that I was here, we were talking about gas prices and they have spiked again. The amount that the average consumer spends on gas is about what we suggest in our survey that consumers are going to spend. So for the consumers that are at the upper echelons in brackets, it's not as much of the percentage of the budget. But for those whose budget is only four or five thousand dollars a month, then that really starts to hit. And that's where you see consumers buying early. So prime day was earlier than it's been in the past five years. And people are buying those utilitarian products like you got the core school supplies, but you also send stuff in that are personal care and hygiene. You've got one backpack full of notebooks, but you have two sacks full of Kleenex and all those other kinds of things. Those things are putting more stress on the bottom kind of the where it's

[Tom Keene]

a high the most depressing the day kids are growing. Julia Wilson depressing on she's principal for the paychecks empty consumer and retail strategy KPMG830 in the morning and in four hours I think it's a Fed meeting. Maybe five hours. We'll call that futures a negative five year. And the president's comments on the attack last night in Jordan certainly weighing on the market brent crude over $90 a barrel. Paul Sweeney with Julia Wilson.

[Jonathan Ferro]

So, Julia, the good news is, I mean the inflation's out there. It's an issue, but the consumer's got a job. I mean, that's the probably the biggest part of just I would think retail sales is when we yeah, it's more

[Julia Wilson]

than one exogenous shock to really bring the US consumer down. So you know, they're continuing to spend. There's nothing that's really taken huge swath of the US consumers and taken away the paycheck. And that's where you see the retreats that we did when we had Covid when we have any of the other major recessions so they're continuing to spend and they're spending begrudgingly. But we're seeing really strong earnings coming out from this core consumer companies. And I think it's a result of the resilience of the consumer.

[Tom Keene]

What do you see in uses of charge cards or what's it called, Pay as you go. Yeah, dynamic there. The kpmgcs.

[Jonathan Ferro]

Yeah.

[Julia Wilson]

So that is when you're talking about the consumer spending more. There's, there's places that they can cut back. And you do see that when we have one of our key graphs that I love to look at is taking everything that's, you know, essentials, you know, your house and your car and your groceries on one end and things that are really non essential and the things that are dipping the biggest or the large purchases, travel, the toys and electronics, all of those things are kind of low, but the middle of the pack, you know, they're still spending on apparel and footwear and some of the things that, you know, you can really. Do I need it this month or do I need it next month? So they are spending and there are some of the consumers that are dipping into savings or putting it on credit cards. So you do see those two things slipping up. And that's where we start to say there's a little bit more softness in the consumer kind of increasingly going that direction.

[Jonathan Ferro]

And the consumers go into the store, they're not just clicking. Right. I mean for a while we thought there would be no more department stores out there and the malls will be dead. But that's not what we're hearing.

[Julia Wilson]

No, the 90s are back in a lot of ways. So the, you know, if you look at generationally, the ones that are most time strapped are your Millennials and your Gen X's and they're the ones that are using and they have a little bit more on average, they have more money to spend on higher prices. But the youngest generations, and you have to think about the Gen Alphas are really, there's a blended back school. They're the ones that are going off to college. They're the ones that were born really late. It's really scary to say how, what year?

[4imprint Announcer]

What year?

[Julia Wilson]

I'm talking about Gen Alphas have things that, you know, they have their own credit card or spending money and so. Oh, do they, you know, there's definitely ways that they can either have their own credit card or there's, you know, different products that, you know, a parent can control.

[Tom Keene]

Like it's Sephora.

[Julia Wilson]

Yes, they, you know, those, those Kids that are those kids keep it going. Are using their spending money at Sephora

[Tom Keene]

to hydrate their face after soccer practice.

[Julia Wilson]

They do. Hydration is important. It's one of those areas that it goes in your body or on your skin. And, and sunscreen is, is definitely the sun stays out longer. So, so those sun products are continuing to, to elevate our specialty beauty.

[Jonathan Ferro]

Live in large.

[Tom Keene]

This is just Julie, it's like this is the most oppressive.

[Jonathan Ferro]

I can see my charge card here for my son in Tokyo. I see where he eats every day.

[Tom Keene]

You know what the fundamental thing is? Room, board and tuition out of estate at William and Mary is 71,000 bucks a year.

[Julia Wilson]

And it's, and that's a bargain compared

[Tom Keene]

to 100,000 at some of these schools.

[Jonathan Ferro]

The oldest football rivalry in the South, William and Mary and University of Richmond.

[Tom Keene]

You know, I've never been there.

[Jonathan Ferro]

Yep.

[Tom Keene]

I feel lesser that I had not been to Williamsburg.

[Julia Wilson]

It's the 250th anniversary, so William and Mary.

[Jonathan Ferro]

Oh, is that right?

[Bloomberg Announcer]

Yeah.

[Julia Wilson]

Well, so we were the second oldest university.

[Paul Sweeney]

So.

[Jonathan Ferro]

Yeah.

[Tom Keene]

Julia, thank you. Brilliant. Julia Wilson.

[Bloomberg Announcer]

Kpmg this is the Bloomberg Surveillance podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

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