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- [00:00]
Barry Ritholtz
This episode is brought to you by Charles Schwab. When is the right time to sell a stock? How do you protect against inflation? Financial decisions can be tricky. Your cognitive and emotional biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab can help listen@schwab.com financialdecoder Every business has an ambition. PayPal Open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations, fixed income.
- [00:52]
Unknown
Currencies and commodities help shape and explain the world in which we live and invest. From tariffs in geopolitics to deficits and economic demand, Bloomberg's FIC Focus Podcast series provides timely insights and expert views from investment industry leaders and the Bloomberg Intelligence, Fixed Income, Currency and Commodity Strategy team tackling the intersection of global events and markets. Join us on FIC Focus now playing on the Bloomberg Terminal and your favorite podcast platform.
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Barry Ritholtz
Bloomberg Audio Studios Podcasts Radio.
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Neil Dutta
News.
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Barry Ritholtz
This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
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Unknown
This week on the podcast, another extra special guest, Neil Dutta with a tour de force explanation on what a market economist is, how it's their job to take all of the academic and somewhat esoteric economic research, take it from the far five yard line into the end zone, why it's so important to put stuff into context that investors can use to focus on not just merely the economic data, but what it means for different sectors of the economy, what means for different companies. I always find Neil fascinating to listen to. He has a really great track record forecasting things in a way that is occasionally out of consensus. So when he's talking about inflation 2021 or Fed hikes in 2022, or why we weren't going to see a recession in that same year, it's always fascinating to see somebody whose thought process is detailed and interesting and out of consensus, but also right. I thought this conversation was fascinating and I think you will also, with no further ado, my conversation with Head of Economic Research at renmac, Neil Dutta. So last time we were here we talked about a bunch of things that you got right. I know your views have evolved. We'll get to some of those but let's just go over your background a little bit. Bachelor's in economics and political science from New York University from nyu. Was the original career plan to go into finance?
- [03:20]
Neil Dutta
No. You know, when you go to college, you have. No, you don't know that jobs like the one I'm in currently even exist. It's like, you mean to tell me I get to write about economics and talk all day long and someone will pay me for it?
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Unknown
No manual labor?
- [03:37]
Neil Dutta
Yeah. And so, you know, I had no idea. I mean, I knew that I had an interest in economics, I had an interest in political science. The original plan was actually, you know, maybe to go to law school, but I ended up, you know, just not doing as well as I thought I was going to on the lsat. So my senior year of college, I was kind of scrambling because I didn't want to go to school for another three years, but I wanted to stay in the city. And I was just like, let me just try to get into Merrill lynch or. It's not a Merrill Lynch. I mean, I got into Merrill lynch, but any of the bulge bracket banks in the city. Right.
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Unknown
All had good. Back in the day, they all had good training programs.
- [04:20]
Neil Dutta
Yes. So that was the goal is to get into one of the analyst programs at the bulge bracket bank. So I got into Merrill Lynch. I actually started off there as a.
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Unknown
Compensation analyst and meaning studying labor, studying salaries and things like that?
- [04:36]
Neil Dutta
Well, right. I mean, yeah. I mean, a lot of what the job was in the amount of time that I had done it was. I mean, a lot of it is just benchmarking the employees of the firm to the market to make sure that you're paying people to market, meaning internally. You're looking internally and managing the year end bonus pools. So that was a whole process in and of itself. But one of the good things about working in HR is that you kind of. So I got my foot in the door. I mean, I was just happy to have something at that point. I remember my. I showed my mother my offer letter. I still have it saved from Merrill lynch where they were paying me $50,000 with a $10,000 signing bonus. And I showed that to my mom and she was like, why would they be paying you this much money? And I was like, well, I don't know.
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Unknown
We'll find out soon.
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Neil Dutta
Yeah, we'll find out what I'm going to be doing. But the benefit of working in HR in particular is that you kind of know where all the jobs are and where the opening open positions are. In the firm. And there was an open position on David Rosenberg's team at, you know, at Merrill Lynch. And so then I joined his firm, sorry, his team that was in early, late 06 or early 2007. So, you know, right when Rosie was killing it, I mean, you know, he was like a marketing machine. He was like the guy like number one in ii. All these things were happening, you know, I mean, and so it was really exciting to be on his team. So it was a really, it was like, it was like a very quick educa. I mean, it was a real education being on his team during that time.
- [06:09]
Unknown
To say nothing of what happened over the next few years. 0809 and the great financial crisis was right around the corner.
- [06:18]
Neil Dutta
Yeah, I mean, I definitely think that, you know, one of the things that I've always come to believe now having been in the business for a long time is that as, you know, like our, like the financial industry is very cyclical. Right. Like, everyone knows someone who's been laid off, let go, you know, has gone through spells of just not having a job. Right. And I do think it says something about you if you've been able to survive these crises.
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Unknown
Yeah. To say the very least. Where was Barron's in your career history? You were an analyst at the weekly Dow Jones publication.
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Neil Dutta
Yes, Barron. That was more of a. When I was in college, I worked for Gene Epstein.
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Unknown
Oh, really?
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Neil Dutta
Yes. Noted libertarian, you know, kind of gave me my first taste of like a lot of the tools that we use now in sort of the business economic space, like Haver Analytics. I actually got my first taste of that working with Gene at Barron's and, you know, getting my sort of first sense of trying to analyze data, looking at, you know, I mean, he had sort of a weekly column on the economy, but a lot of the interesting pieces that he wrote would happen on days of like the employment report or summarizing the ISM data and like what it might mean for the economy and the outlook. So it kind of gave me my first taste of, of what a business economist would do on a day to day basis.
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Unknown
I've noticed you use the phrase market economist or business economist all the time. How does that differ from the traditional economists, for lack of a better word?
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Neil Dutta
Well, I don't have like formal PhD training, so I think that to me is like an important distinction. You have business economists on the street that have PhDs, but I don't think a PhD is required to be a business economist. And to me it's also just a way to respect the academic profession. Right. I mean, you have people here that are really studying a specific niche area, their entire careers. Right. I mean, you think about like behavioral economics and like financial economics. I mean, there are economists that are just looking at that and they're doing it for decades. Right. Because that's what they do.
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Unknown
I think of Hyman Minsky looking at the narrow subtopic of stability and instability in economic systems and toiling away for decades until eventually the market hits a tipping point and suddenly all of this research that seems like a quiet backwater becomes relevant. Yeah, it becomes front page news.
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Neil Dutta
I mean. Right. Or like strategic trade theory. I mean, these are all sorts of things that I think. And you could say maybe the academics take you basically to the five yard line and as a business economist, your job is to kind of run it in for a touchdown and tell the investor community, why is this important to what you're doing right now?
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Unknown
That's very interesting descriptor.
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Neil Dutta
So that's sort of the way I kind of view it. I mean, obviously you lean on a lot of their work throughout your career. I mean, you know, I mean, this had gotten a lot of play earlier in the cycle. But Ed Lemur wrote a paper once called Housing is the Business cycle. Right. I mean, and that was, you know.
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Unknown
Professor at Harvard or Georgetown.
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Neil Dutta
I think he was in the University of California, if I'm not mistaken. But at any rate, I mean, that was a p. That was a piece of research that had gotten a lot of attention over the years. You know, when housing was melting down back in 2022, a lot of people are leaning on that paper again. So it's important. I mean, so to me, it's like I make that distinction because a, I don't have a PhD and I'm not doing the same thing. What I'm basically trying to do is look at all the different sort of pieces of economic information that come out. And on the US Economy, there's always something going on. Right. I mean, in terms of data, some of it's marketing movement, some of it's not. And try to kind of formulate an economic outlook that is useful for investors. That is not what academics tend to do. Right?
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Unknown
For sure. For sure. So when you're at bank of America, Merrill lynch, you were doing a weekly note you authored. How did that help carve out your own space and expertise? And how did that ultimately lead to your job at Ren Mac?
- [10:50]
Neil Dutta
Well, so, I mean, obviously Merrill was. Was an interesting time because I was sort of coming up the ranks. And by 2009, Rosie had left. And so it was sort of this weird time where it was like, a very important time in the economy because we were just transitioning from recession to expansion. But Merrill's economic team was kind of without a leader. Right. So we didn't really have. So it was. I was able to do a lot at that time just by default because there was no one else really doing it. So I would. I would be writing a lot for the, you know, especially for the equity market desk.
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Unknown
You had to be pretty young back in.
- [11:32]
Neil Dutta
Yeah, I was. I was very young. I might have been like, oh, God, I don't know. Like, not even 30. Right. So at any rate. So, I mean, it's one of these things where you. If it's just you and, like, a couple of other people, you know, you're doing a lot more than you otherwise would be doing had there been, like, a chief. A formal chief economist. So I remember the summer of 09 vividly because we had, you know, like, the team had gotten, like, a big reputation for being very bearish because. Obviously, because Rosie. Because of Rosie, but still bearish. But by March. But by the time he had left and by 2Q09, it was becoming increasingly clear that things were kind of turning around. Right. I mean, you know, credit markets had turned. It looked like, you know, housing wasn't getting any worse. Right. Inventories had basically been cut to the bone. They couldn't go any lower. And so we had written a piece basically talking about how, you know, the recession's over, like, that. That's it. And that had gotten a lot of attention from our. From our sales desk. But, you know, that's. To me, like, you know, you talk about writing. One of the things that I've noticed, like, recently is just. It's just ubiquitous. Right. Like, everyone's writing, like, it's just, you know, peak substack. Yes. It's like, come view me on my sub stack. And, like, you know, there's like, all this research, but to me, like, what's important in the research. Sales business, because that's ultimately what I'm in. Right. It's about knowing when to say something, you know. Right. You know, and there's just a lot of, like, filler research that comes out.
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Unknown
I love the word filler because it's literally all it is.
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Neil Dutta
And there's some important. I mean, I do think it's important for clients to kind of see that continuity, but it doesn't have to be some written product. So to me, one of the things I've learned is like, when you write something, make sure that it has some depth and it serves a purpose, right? And so as opposed to just cranking.
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Unknown
Something out daily or weekly, because it.
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Neil Dutta
Just, it's like that eventually, like, you know, that turns into spam, right? I mean, from the perspective of your client. So there's, there's, there's many ways to kind of touch people in terms of accounts like your, your client base that are paying for your, your research and your views and your analysis. And that could, you know, and some of that's written, some of that could be presentations, some of that could be podcasts, some of that, you know, it could be, it's, it's. That to me is what's important. So, you know, writing in the beginning was important, but I think one of the things I learned very early on is that it's important to kind of say something that has meaning and that's not always going to be the case. Right? Like, people don't need to hear from me every day. They need to hear from me when my views on something are working out or not.
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Unknown
I like to say nobody really cares about ism or fill in the blank, whatever your least favorite economic data point is, right.
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Neil Dutta
I mean, and also these days, right, like the market reaction to it is immediate, so you can pretty much tell right away whether the number was good or bad or whatever else. Right. So what do I need to read your analysis for? And so it's, you know, you kind of have to pick your spots about when to try to chime in and provide some kind of useful context for these data points.
- [14:52]
Unknown
So there's a little bit of a void in 2009 after the head of the economics coverage for Merrill lynch departs. And you somewhat fill that void. 9, 10, 11. What leads you to join Ren Mac in 2012?
- [15:08]
Neil Dutta
Well, so by the fall of 09, we had Ethan Harris, oh sure, from Lehman joined. He was named the chief US Economist basically. And, and obviously he was from a fixed income shop. I mean, Lehman was a huge fixed income shop. Ethan was a Fed economist. So his passion was really more towards the fixed income markets. But obviously Merrill was a huge legacy equity shop. Yeah. And so I kind of got a lot of my cut my teeth with the equity salesforce and what I tried to do. And one of the things you do find out in, in the research business is that fixed income doesn't pay for research. It's just, it's just that's what it is, Right.
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Unknown
I Mean, you look at, well, the margins are smaller. The, the basically what is a five to one ratio?
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Neil Dutta
Yeah, you think about like the, the biggest names in research sales over the last number of decades. You think about people like Ed Hyman, isi, Nancy Lazar, right? You think they're writing about like, like rates? No, they're writing about like how economics can be tied into a stock market call. And, and Rosie to his credit was great at that. And that's kind of what I tried to do when Ethan was running things because he didn't really, he didn't really do that, you know, and so he kind of let me run with it and he kind of gave me a lot of latitude to kind of come up with my own ideas and try to tell, you know, an equity salesforce, like why is this important for your clients? Like, and, and because Merrill had so many equity analysts there, there was like a, like a wealth of opportunity, right? Like, so let's say we wanted to write a piece on business investment, right? Like, so why is that important for equities? Well, because a lot of EPS comes from Capex and now you can go talk to your, like you can talk to your industrials analysts, you can talk to the machinery analysts and say like, you know, are you guys bullish or bearish on your names? Like, and if you can come up with a scenario where a macro view can tie into a specific stock sector view for an, for an equity salesperson, that's a home run, right? And so it just makes their life a lot easier. The worst thing you could do, especially at a bulge bracket firm, right, Is well, your economist is really, really negative. But like, you know, this guy is telling me like buy Caterpillar, like how does that work? Like, and like whenever, as a salesperson, like having to deal with that question from a client is annoying, you know what I mean? So whenever you can come up with ways to tie a macroeconomic view into. And this goes back to the business economics, right? I mean tie a macro view to a market call, that's a home run, right? No one cares what your GDP growth view is. I mean you have all these, you look at through the Wall street research and it's like in the back there's like my GDP forecast, you have this big forecast table and that's kind of what they're talking off of, right? But that's not really why I think people pay for research. People pay, you know, people pay for having an economics view that can be aligned with a market's call.
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Unknown
So let's talk about that economic view. Align with a couple of market calls. At least we'll look at the 2000 and 20s because, oh, 9, 10, 11 seems like it's so long ago. Let, let's fast forward a couple of decades. Late in 2021, I very vividly remember most economists were fairly sanguine about inflation. Fed chair Jerome Powell had said we're going to let inflation run hot the previous Jackson Hole. And you made a very out of consensus call. You had said in late 2021 economists were too sanguine about inflation, that the FOMC would have to raise rates. And you said at least four times. And that turned out to be very prescient. We started with four 75 bit raises before we had two at 50 and then a sort of afterthought at 25. Tell us what you were looking at in 2021 that so many other economists missed.
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Neil Dutta
Well, thank you for saying that. I mean, in hindsight I feel like I wasn't hawkish enough.
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Unknown
You know, you were so much more hawkish than the average economist. Yeah, hey, you know, everybody, most people forget sticking the landing. Most people miss the pool. You, you managed to at least put, give your clients a heads up, a Fed tightening is about to start.
- [19:56]
Neil Dutta
Yeah, I mean, right. I mean I caught the swing, I mean, I think and then, you know, eventually I kind of came around to the idea that they'd have to do a lot more than what was price. But I think, yeah, I think thank you for saying that. I did kind of catch that. But you know, to me it was just like a rapidly accelerating economy. It was. So basically the call, I think that the main issue there was, it was one call that you got. Right. That kind of led to everything else. Right. So basically what I saw at the time was a V shaped recovery. And so since there was a V shaped recovery that was going to have ramifications for all the other macro calls that people make, like whether that's the Fed rates, stocks. And so basically what I said was we're gonna have a V shaped recovery. You could see it in the data. They basically turned the lights off, turned it on and threw a bunch of money at the problem.
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Unknown
Yeah, $2 trillion solves a lot of headaches.
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Neil Dutta
Well, it's sort of, you know, they kind of, they fought the last war, right. I mean they essentially, they, they diagnosed the problem as a, it was basically a supply shock. It was a negative, it was a very large negative supply shock that they treated as a big demand shock. And so when you Have a demand side stimulus with a, you know, what is basically a supply shock. Don't be surprised if you get like.
- [21:23]
Unknown
Inflation, inflation, $2 trillion in money coursing into the system and everybody's stuck at home. Guess what they're going to do with that money.
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Neil Dutta
And it's, it's not just, and it wasn't just fed pumping, right. It was, it was a fiscal stimulus, you know, and so, so I think, and also just like the behavior of people at the time, I mean typically in a bad economic situation, you don't see people going out and taking out mortgage loans. But that's exactly what was happening at the time. Right. So housing is like one of these irreversible decisions. So you have to be really confident in things in order to buy one. And so when I started to see people like, you know, mortgage purchase apps are like basically v bottoming, like it's just going straight up like their signal there. And at the time, like everyone was thinking the bottom was going to fall out, it was the opposite and it was in. And I remember at the time, I mean in April of, I think In April of 2020, in the middle of April of 2020, I said we bottomed. It's over there. Whatever, whatever 12 week recession that we had, it's over. And I remember I got so much hate. I remember at the time, like, you know, you had prominent economists telling like it's going to get a lot worse. Like the bottom still not in. But it was just sort of. It's one of these things in business economics where it's like up is up. Right? Like markets care about, they don't care about whether things are good or bad. They care about whether things are getting better or worse. And so, you know, you can say it's not good, but hey, guess what, like at the margin, we had more doordash deliveries in the third week of April than we did in the first week of April.
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Unknown
I don't remember if it was Ned Davis or it might have even been Ed Hyman who had said don't look for when the economy is great or terrible. Look where, when it goes from terrible to, to bad, like that's your first sign that you're making a bottom. Hey, this is really not a great economic data point, but it's so much better than it was last month. Maybe things are turning like that approach is when it goes from terrible to fair, you're moving in the right direction.
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Neil Dutta
Yeah. And also like, I mean to me honestly, like looking back on it, that whole Period was probably was the easiest call I had, I made. And it's interesting because it was kind of out of consent, it was out of consensus at the time. But I thought that it was so easy. I mean, you had the, I mean especially like from a markets perspective, right?
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Unknown
I mean, stocks were straight up after.
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Neil Dutta
Well, not only that, are we like, are we no longer going to have cruise lines? Are we no longer going to have airlines and hotels? Like, it was just so obvious, like, okay, these are like generational buying opportunities. You better just put everything you have into these names and just ride it out. Because anyway, I just thought. But to me, I think what I learned there is just, you know, it's just important to kind of just pick a bunch of indicators and see like, is it getting better or worse? And it was clearly getting better, right? I mean you can't go down after, you know, you've gone down. I mean in some of these indicators it's like you can't just keep falling, right? And so there was stability. And by the second week of April, I think it was pretty obvious that things were turning around. And also the nature of the policy response, like, right, it was huge, biggest gdp. Well, not only that, but the way they were doing it, right? Like the phased in approach to like, okay, so this week like 10% of the economy is open and then next week we're going to take it, we're going to expand it out to gyms and restaurants and then we're going to expand it out to department stores and things like, you know, you know what I mean? So like every week they were kind of flipping on a bunch of on switches, right? And so obviously that was going to keep the economic momentum going.
- [25:19]
Unknown
So let's talk about another out of consensus call you made the following year. Very few economists were calling for no recession in 2022. Most were pretty bearish. And of course they looked at the Fed hikes that they had missed the previous year. You were one of the few people that were saying no recession in 2022. Was it simply that B recovery and just the robust momentum that was in the economy?
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Neil Dutta
Well, I don't know that I said, I mean, I definitely understood where the recession call was coming from. I think for me the bigger gap with the consensus was really going into 2023. And I said there wasn't going to be a recession. And I think first it's important to understand why people were kind of latching onto the recession call back then. It was basically because the Fed told you so. Right? I Mean, the Fed was basically saying we need a recession to deal with inflation. That's what they were saying. When Powell like pain will be required. That's what he means. Right.
- [26:20]
Unknown
And so what did Larry Summer come out and say? Summers came out and said 10% unemployment to fight inflation turned out to be a little too 1970s ish.
- [26:33]
Neil Dutta
Well, sure, I mean what does he have a 30% chance of stagflation, 30% chance of this? 30. I don't know, whatever. But I think part of the reason this is part of the way these models work, right. If you have a period of inflation, the model is going to assume that you need recession in order to kind of get it back to target. Right. So I think at some level, like one of the, one of the driving, one of the reasons driving the recession views on the street back in 2022 was, was because the Fed was basically telling you that's what they thought they needed to get inflation down. Now by the end of 2022, I think it was becoming increasingly clear to me that we weren't going to have a recession. And again, I kind of put on my business economics hat. Right. Like so if you go back to that period, we had the Russian invasion of Ukraine that sent energy prices through the roof. By the end of the year, gas prices had basically round tripped and the labor markets were strong. So we were going into 2023 with upward momentum and real incomes. Okay, so that's good. That should support consumer spending. Next. Despite massive Fed hikes. Like the Fed was going 75 bips a meeting by the end of the year, what was going on with home building stocks? They were actually turning around. Right. Home builder sentiment was getting better. Builders were in a much better balance sheet position. They were able to buy their buyers down in terms of mortgage rate, buy downs. Right.
- [27:57]
Unknown
And massive shortage of single family homes.
- [28:00]
Neil Dutta
Exactly. So housing was doing well despite hikes. You had governments spending a lot of money. Like state and local governments were flush with cash, right. They got all this Covid money. So you had government spending and then everyone was primed for recession. Right. I mean if it's one, it's like this expectations, you know, element of it. If you know, one of the ways I think recession happens is through surprise. If people think, you know, things are going to be okay and then they're not, then that prompts a clearing out of inventories and investment and so forth. And then. But if the opposite is true, then then that'll happen. Right. So if everyone is primed for recession and it doesn't happen, then there's going to be a period where you have to kind of gear up and invest in inventories and hiring and so forth. And, and so based on those four factors, to me it was like by the end of 2022, it's like, yeah, we're not going to have a recession. Real incomes are growing too rapidly in order for that to happen. And the housing market is doing well. Like, if you can get that right, if, if housing is working in the US and labor markets and real incomes are growing, you're not getting a recession. So, you know, and so to me, it was like a really easy market call because a lot of the weakness in the market was just predicated on recession risk. And so the more obvious it became that that wasn't the case. It was, you know, to me it was very clear that, you know, that equities were a strong buy.
- [29:24]
Unknown
So you've talked a little bit about the street predicting four to six rate cuts this year. They've been predicting that pretty much since 2022 and have consistently been way too dovish. What do you think the street has been missing over the past, you know, two or three years?
- [29:43]
Barry Ritholtz
This episode is brought to you by Charles Schwab. When is the right time to sell a stock? How do you protect against inflation? Are you taking the right risks with your portfolio? Financial decisions can be tricky, and often your own cognitive and emotional biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help join host Marc Reape as he offers practical solutions to help overcome the cognitive and emotional biases that may affect your investing decisions. Listen@schwab.com FinancialDecoder Every business has an ambition. PayPal Open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo, pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations when your.
- [30:47]
Unknown
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- [31:48]
Neil Dutta
Well, I mean, I think the main story over the last two years, and I am a little bit more cautious now, but I do think the main story over the last couple of years has just been how resilient the US Economy is. And that's basically been the main story is that we've had very, very strong income growth. We've had obviously a lot of state and local government spending, a lot of federal spending. But the main story I think has been very strong growth in real incomes, which has been supporting household consumption. And if you get the consumer right in the US Pretty much everything else will fall into place.
- [32:24]
Unknown
So when we look out at the world today, we've seen a lot of volatility in policy. I hate the word uncertainty, but at least a lack of clarity which seems to be affecting people's long term travel plans, corporate capex plans. How significant is all of the back and forth on various policy issues out of the White House impacting your analysis?
- [32:55]
Neil Dutta
Well, I do think that when uncertainty is high, it just makes sense to kind of double down and look at the data as it's coming in. Right. I mean, you shouldn't try to make a big sweeping forecast if the uncertainty is high. But you should kind of think about what's like just look at what's happening in front of you. And, and that's kind of what I've been trying to do. And when I look at what's happening right now, I mean, I don't get a lot of optimism. I mean you have it looks like the labor markets are continuing to cool off.
- [33:27]
Unknown
Still positive, but certainly at much lower levels than we saw two, three years ago.
- [33:31]
Neil Dutta
Well, I mean, I think to me momentum matters. Right. We talk about better or worse. Right. And the labor markets are clearly getting worse. And you know, is it, is it nonlinear? No, it's not. But one of the points that I've been making this year is that all recessions begin with a slowdown. Not all slowdowns end in recession, but we know that all recessions start with a Slowdown. And it's pretty clear that the labor markets are slowing down. You have a very narrow kind of breadth of industries adding jobs. A lot of it is in kind of acyclical industries like education and health. So sort of the cyclical areas of the labor market are slowing down. You're seeing weakness in white collar professional services, recruiting intensity is low. So the labor markets, I think are, to me, that's been my big theme for this year, is that it's far more concerning than the consensus seems to appreciate. And I think also for the Fed, they keep talking about how the labor market is solid and, and what they're. I mean, to me that's basically a very like surface level analysis, like they're looking at, okay, the unemployment rate is 4.1% and therefore the labor markets are solid. But I think you can make a very strong case that the unemployment rate of 4.1% is really overstating the degree of health in the, in the job market. Right. Like when the unemployment rate is 4.1%, you typically don't see like the hiring rate as low as it is. You don't see the quits rate as low as it is. You don't see consumer confidence in the job market as bad as it is, you don't see. Even wage growth is slowing down.
- [35:07]
Unknown
Right, but it's slowing down from a pretty high level. What is wage growth now? About 4%? Is that about.
- [35:14]
Neil Dutta
Well, it's actually slowing a bit more than that. I mean, it's running. If you look at over the last three months or so, it's around 3, 3.5%. But again, if the labor markets were tight or tightening, then you wouldn't expect to see wage growth continuing to slow down. And you have ongoing increases in like the number of discouraged workers. Right. You have a lot of people exiting the workforce. They're going straight from unemployment to out of the labor force. I mean, these are not things that happen in a healthy or solid job market.
- [35:46]
Unknown
How much of this is driven by the past five wacky years, including the pandemic and a giant decrease in people working, the recovery in people returning, plus the entire fiscal stimulus making its way through the system. It's not like 2025 is just one in a series of normal years. It's one in a series of very unusual situations, including what, 525 basis points of Fed hikes in 18 months or so. So how do you contextualize this slowdown as the pig works his way through the python?
- [36:27]
Neil Dutta
I mean, so this is sort of the argument that like the whole thing was just one giant like bullwhip. And we've kind of, you know, now we're just, we're still normalizing from all of it. You know, I think to me it's, that's possible, but it's just again, like the sectors that are slowing down are not the ones you want to see slow down. Right. I mean, you know, you're at a point now where it looks like housing market conditions are continuing to deteriorate. Right. Like prices are slowing, they're slowing in the, in the markets where builders make homes. That's going to probably lead to job losses in the construction industry.
- [37:04]
Unknown
They're not getting any help from the Fed in terms of rates at least no time soon.
- [37:08]
Neil Dutta
Well, no. Right. I mean, to the extent that the housing market is working, it's basically because sellers are capitulating. Right. I mean they're, they're listing homes for market. They're willing to take price concessions. That's pushing up transaction volumes to some extent. Extent. Right. So that's been okay. I mean, you see, you have a little bit more elasticity coming into the housing market, but the fact that the labor markets are cooling down, what does that mean? Primarily that's going to weigh on consumer spending and that kind of sets in motion like a below trend growth outlook.
- [37:42]
Unknown
So let me ask you what I think is one of the most perplexing issues. Consumer spending pretty close to record highs right now. And at the same time, consumer sentiment pretty much still in the dumper, off the lows, but still historically low. How do we reconcile the robust spending with the terrible sentiment? Are one of those indicators, one of those measures broken?
- [38:08]
Neil Dutta
Well, I don't know that. So this is like the vibe session kind of story. And I definitely.
- [38:15]
Unknown
Are you a vibe session person or. No, no.
- [38:19]
Neil Dutta
I mean, I think consumer sentiment, to me, what's really interesting about what's happened with consumer sentiment is how the link between consumer sentiment and labor market views basically completely detached following 2021. 2022. Right. I mean, once inflation started going. So for most of my career, if you basically got the labor market view right, you more or less would get the consumer sentiment number. Right. You know what I mean?
- [38:50]
Unknown
But no more.
- [38:51]
Neil Dutta
No more. Right. I mean, so it's just, it's one of these things where when you ask someone like how do you rate the economy? It'll be like something like it'll be a very low number. How do you rate the labor market? It'll be a very strong number. And that's very perplexing, but it just demonstrates that people don't look at the economy solely through the prism of the job market.
- [39:13]
Unknown
What, what else is kind of fascinating is if you ask people how do you rate the economy? And they're like, man, how do you rate your personal economy? Oh, I'm doing fine. It's like, how do you think of Congress? Oh, Congress is terrible. What about your congressman? Oh, he's great.
- [39:27]
Neil Dutta
Totally.
- [39:28]
Unknown
What, so, so all of this brings me back to the question, is sentiment broken? When we look at the Michigan consumer sentiment worse than the pandemic, worse than the GFC, worse than 911 and the dot com implosion worse than the 87 crash, it kind of makes me stop and think, are all of us missing how terrible things are or is just this methodology of asking people in 2025 what they think just doesn't work anymore?
- [39:57]
Neil Dutta
Well, the methodology for the UMich number in particular did change. I think they moved online. But so I, I just, to me it's like consumer sentiment is basically a function of what stocks are doing, what inflation's doing and what jobs are doing. And if you think about it that way, the drop in consumer sentiment made a lot of sense because inflation went really through the roof, right? And so that's why sentiment went down. Since then you've seen some stability in inflation and you know, now that the stock market's back to all time highs, essentially you've seen some recovery in consumer sentiment, not surprisingly. But what I'm, what I've been focusing on, it's, you know, there's this big debate about, you know, how useful survey measures of economic data are, like consumer sentiment ism versus like hard economic data like manufacturing production, jobs growth. So to me, I think the bigger question for people in my field is like, how much do you want to weigh survey measures of economic data in your process? And to me, there is still useful information in these surveys, right? Like so when you, when you look at the conference board data, for example, it's another consumer confidence number if you look at like the labor differential. So what are consumers telling you about how plentiful jobs are? How are jobs hard to get or are they plentiful? That number still does a reasonably good job telling you or informing you about like tightness in the job market, right? So if consumers are telling you that things are a little bit more slack, you should probably believe them. So to me, it's about looking at which pieces of survey data are important and which ones aren't. Even in regional manufacturing Data. Right. You get asked, they ask the purchasing managers about their capex intentions. Again, it's another indicator. It does a reasonably good job like mirroring the broad ups and downs in business investment like core durable goods.
- [42:00]
Unknown
So I think the purchasing manager seems to be. That survey seems to be a little less out of sync with spending than consumer sentiment is with either labor or consumer spending. Fair statement.
- [42:15]
Neil Dutta
Yeah. I mean, the consumer sentiment number doesn't look like consumer spending. I mean, and that. But that's. That. That is true. That is true. There are elements within the consumer sentiment stuff that kind of makes sense. But you know, broadly speaking, you're right. Consumer sentiment is dramatically understating how much consumers have been spending. That's true.
- [42:37]
Unknown
So, so we're talking about all these different US Data series. How do you incorporate global macro trends and global economic data into your models?
- [42:49]
Neil Dutta
I'm going to be honest with you, I don't spend a lot of time focusing on the rest of the world.
- [42:53]
Unknown
Really.
- [42:53]
Neil Dutta
That's probably to my own. To my own.
- [42:56]
Unknown
I mean, especially these days with Europe outperforming the US and emerging markets doing well after underperforming the US for 15 years.
- [43:05]
Neil Dutta
Yeah. I mean, what's interesting is that you look at, you know, it's. Right. I mean, that has been notable, like the outperformance of the Euro. You don't really see much outperformance in growth dynamics. So it kind of tells you like, you know, like sentiment in these towards Europe has been so depressed. So like there's been like some incremental improvement, some incremental narrowing in growth differentials and everyone's thinking that like Europe is off to the races. But I don't really see that in the data that we look at. I mean, if you look at purchasing manager surveys, for example, in Germany, I mean they're still well below. I mean they're still below 50. I mean, German manufacturing, French manufacturing have been in the kind of dumps for.
- [43:42]
Unknown
A while and Germany is in the middle of economic contraction.
- [43:46]
Neil Dutta
Right. Yeah. I mean, it's, you know, there's been a lot of, it seems like a lot of like hopium based on like defense spending and fiscal reflation and so forth.
- [43:56]
Unknown
Huh. Really, really interesting. Let's talk a little bit about the possibility of a recession in 25 or 26. What do you think is the most significant macroeconomic risk facing the United States right now?
- [44:15]
Neil Dutta
Well, I mean, obviously the one that's getting the most attention is erratic trade policy, but I don't think that by itself is what's going to cause a recession. I think it's primarily like monetary policy is too tight. Essentially you have nominal GDP slowing and the Fed funds rate is not doing anything. It's basically flat at 4.5%. So to me that represents a a passive tightening of monetary policy and that will continue to build pressure on the economy, particularly on the labor market. So you know, kind of go down the list, right? I do.
- [44:51]
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- [47:21]
Neil Dutta
I think that the left tail risk of the distribution has gone up. You know, number one, I mean, labor markets are cooling and income growth is slowing. That's probably going to weigh on consumer spending. That was true even before tariffs came into force. If you look at housing, residential investment is probably slowing because home prices are now declining, particularly in the places where the builders are making the homes right, which is like the South Florida, Texas, Arizona. That's weighing on construction activity. If you look at business investment, it's probably welcome that they just pass this tax law that gives some certainty around the tax outlook. But at the same time, you know, some of that effect is going to be blunted by what's going on with trade. So you haven't really seen much in terms of. Outside of AI Business investment's been quite sluggish. So it sounds like state and local governments cutting back. Right. So it's just sort of. It's a very unstable kind of equilibrium, in my opinion. And I do think that as consumer spending is slowing, that creates risk for the US economy.
- [48:49]
Unknown
So is your base case that a recession in second half of 2025 or sometime in 26 likely? Probable?
- [48:58]
Neil Dutta
Possibly, yeah, I have it on the board. I mean, I definitely think that a recession is more likely than not. And specifically, I think you'll see a period of a quarter or two where you get a series of negative employment reports. And I think that'll push up the unemployment rate and probably bring in the Fed to cut more aggressively.
- [49:22]
Unknown
So unemployment rate ticks up to 4.5%, 5%. Where do you see this going? Five and a quarter.
- [49:28]
Neil Dutta
I don't know it goes up that high, but I can easily see it getting it close to 4 to 5% at some point over the next next 12 months.
- [49:33]
Unknown
And that forces the Fed to. So. So let's talk about the Fed for a second. You know, once the first CARES act, which was what, $2 trillion, 10% of GDP, the biggest fiscal stimulus since World War II. Once that was passed, it seemed like the Fed was increasingly behind the curve. We saw inflation start to tick up in 20, but really take off in 21. And they kind of sat on their hands until. When did the cycle start? March or April of 2022.
- [50:07]
Neil Dutta
That's right.
- [50:07]
Unknown
And by then, by June it was inflation peaked and started heading down. And so it seems like they were late to recognize inflation. They were late to Tighten. Now it seems like they're late to start cutting, at least in your assessment. Is the Fed just a big slow, ponderous institution and, and they're always going.
- [50:29]
Neil Dutta
To be behind the sound like Trump too late.
- [50:32]
Unknown
By the way, you're the first person to ever accuse me of that.
- [50:35]
Neil Dutta
Yeah.
- [50:36]
Unknown
But to be fair, hold aside the beef between Trump and Powell. For my entire professional career in finance, it has felt like the Fed is always late to the party.
- [50:51]
Neil Dutta
Yeah. I mean I think.
- [50:54]
Unknown
They'Re just conservative and slow and they would rather be late than mistaken. I think is a fair, you know.
- [51:01]
Neil Dutta
I mean, you know, there are times when they're, I mean even by Powell's own admission, like last year, he said that when they went 50 in September, that even that was a little bit late. So yeah, I mean, you know, it's a consensus building institution. You have to kind of corral your colleagues to your view. And so that, that to me might be one reason why it's a little bit slow. But as I say, I mean.
- [51:31]
Unknown
So we've talked a little bit about or you brought up how much uncertainty there seems to be around the tariff policy. Especially on again, off again. What are the risks from the tariff policy? Could this be a factor in the recession? What other knock on effects do you see from, from this new policy?
- [51:55]
Neil Dutta
Well, I think the main effect is that it freezes business investment in place. Right. I mean that to me is the big story.
- [51:59]
Unknown
Nobody wants to commit hundreds of millions of billions of dollars till they know.
- [52:03]
Neil Dutta
What the policy trading relationships will be with all these other countries. Sometimes you're announcing tariffs with countries. We may already have trading agreements.
- [52:11]
Unknown
South Korea, we have 2012.
- [52:13]
Neil Dutta
Korea is a good example, sort of bizarre.
- [52:16]
Unknown
We don't, we have.
- [52:17]
Neil Dutta
So yeah, I mean, and you know, look like this, this to me is like, it's the return of like the Trump collar strategy. Right. I mean one of the things that we thought very early on was that, you know, essentially he's going to be testing the market. Right. I mean if the market gets, you know, it's, it's sort of bounded in a way. Right. A strong stock market, maybe he pushes the trade dial up a little bit, then if the market sells off, maybe he'll back off. Right. So it's sort of he's trying to find an equilibrium for himself that he's comfortable with. And you know that to me, for businesses, right. Like to me it's as simple as part of his shtick is chaos and the business community doesn't like uncertainty. So that's a fundamental tension, but I think so that's going to weigh on investment spending. But I think in the background you still have this kind of slow bleeding in the job market. You have this ongoing cooling in consumer spending, you have this slow sort of bleeding out in the housing market that's weighing on construction and you have state and local governments cutting back. So you just don't have as many drivers for growth and ultimately that becomes a problem.
- [53:36]
Unknown
So what is going to finally push the Fed into beginning cutting rates? What do you think is the most important data series they're looking at? I really don't imagine anyone cares whether inflation is two or two and a quarter. But if we see as you mentioned, a negative non farm payrolls print, that has to get their attention, doesn't it?
- [53:58]
Neil Dutta
Yeah, I would think so.
- [54:00]
Unknown
What else might get their attention and start a new rate cutting cycle?
- [54:04]
Neil Dutta
To me the most important thing is seeing what happens with you know, essentially labor market slack. Right. I mean if wage growth continues to slow down then the ability for households to essentially absorb tariffs is non existent which makes it very difficult to see where you get inflation from. So right now they've been kind of making this point that the labor markets are not a source of inflationary pressure. If you get further slack in the labor market at this point, like at that point maybe the labor markets become a source of disinflationary pressure. And so I think that's something they have to keep an eye on.
- [54:42]
Unknown
What else might capture the Fed's attention and say hey, we're really behind the curve. How, what, what do you look at in the housing market? Is it just new home starts or.
- [54:53]
Neil Dutta
Well prices are slowing. Right. I mean that to me so it's.
- [54:56]
Unknown
But they're still, they're not negative and most especially in the coasts, in the big cities and in, in, well prices.
- [55:04]
Neil Dutta
Aren'T negative in the Northeast but if you look at like California, like inland California, Florida also prices are down. They're contracting outright in places like Texas, Florida, inland California, Arizona.
- [55:15]
Unknown
But they've experienced giant booms over the past five years.
- [55:18]
Neil Dutta
They have, but at the same, I mean I would just that that's true but to me again it's about what's happening at the margin. At the margin prices are contracting and that matters. And that matters. And inventories are rising and you know to me that's the main asset on the most households balance sheet. And if you look at home prices, I mean there is an important link between home prices and actual price inflation. Right. I mean you can Just look at the data. You know, the cities across the country that are experiencing the most home price deflation are also the places where you don't see much consumer price inflation. So I think that's notable.
- [55:54]
Unknown
So in one of your more recent research pieces, you talked about the importance of the US Dollar. Why is this such a huge factor on a macro level? What are we down 10% year to date in the dollar? How significant is the dollar to the rest of the economy? And let me know if I'm, if I get, if I'm talking, if you didn't say that. I have so much stuff in my head, I can't keep it all straight.
- [56:22]
Neil Dutta
Well, I mean the dollar is important. You know, typically when you have a weaker dollar. Right. I mean, you should assume that you get some upward pressure on core inflation. I think what's notable of what's happened with the dollar is that it kind of went the other way in terms of what people thought. Right. Remember the line was that we're going to put these tariffs on a lot of the shock is going to be neutralized because the dollar is going to get stronger. Didn't actually happen. Well, I mean it did for a day, mainly against EM, but most of the weakness in the dollar actually was against G10FX. But at any rate, yeah, I mean.
- [57:03]
Unknown
So what's the significance of the dollar to the, the economic cycle to things like foreigners buying US homes is a big driver in, in a lot of cities. How significant is the dollar to either a recession, coal inflation or, or real estate?
- [57:22]
Neil Dutta
Well, so I mean, I, I think it depends how, I mean, so it's interesting how you, how you're framing this question. I mean, I think remember in macro everything is correlated. Right. So if the dollar, to me it's really about why the dollar is moving the way it is. So if we were actually, let's say I'm right and we go into a recession, I would assume the dollar to be strengthening in that environment. Right. Because it's a safety play. Right. So if the US Economy is weakening, then people are going to seek out safety and that should push the dollar value up.
- [57:54]
Unknown
You mentioned in April that it was potentially a worst case scenario. And in that month after the big trade policy, tariff policy announcement on April 2, we saw bonds weaken, we saw stocks weaken and we saw the dollar weakened.
- [58:11]
Neil Dutta
The whole sell America trade. But if you, if you go back to that though, right Barry, I mean you, if you look at the number of times where that combination of things happened, I mean you could probably count on one hand, how many days that happened. So it was like it was one of these things where the narrative kind of got way out in front of what was actually happening. And now here we sit a couple of months later and we're talking about US equities at all time highs. And you know, so I mean, I think, you know, maybe part of it is maybe there's a little bit more enthusiasm around what's going on in Europe. Right. I mean, Europe is taking steps to reflate their economy. That's good for the euro. You know, you have at the margin, like people are a little bit more optimistic about emerging markets. Emerging market currencies have been doing better. So, you know, there's, there's, there's this train of thought that like the dollar is purely a function of like the, the Trump moron risk premium. But, but that, to me, it doesn't, I don't think that goes. That might be some of it, but I don't think that's nearly all of it.
- [59:18]
Unknown
That is, is. I've heard Taco. I can't say I've heard more on risk premium before. That's, that's a new phrase. Don't send your hate mail to me. Let me throw a curveball question at you before we get to our favorite questions. What do you think investors are not talking about, but perhaps should be, and it could be any topic, assets, geography, policy. What data point is getting overlooked but is important and people should be paying attention to it?
- [59:47]
Neil Dutta
Well, I think what's interesting is this sort of the Trump Apprentice show with the Fed chair. I think that's becoming, I mean, Scott.
- [59:55]
Unknown
Besant and there's a lot of.
- [59:56]
Neil Dutta
Right. I mean, there's this whole talk about shadow Fed chair. What if you get into a situation where by Trump doing what he's doing, do you actually get him naming a chairman in name only because Kevin Hassett. Yeah. Or no. But basically, in other words, what I'm saying is these guys are trying to get this done early essentially to kind of create a condition for some sort of shadow Fed chair. Right.
- [60:26]
Unknown
With no authority, no power, no ability to move rates?
- [60:29]
Neil Dutta
Well, that. But also maybe someone that's. But then if this person ends up becoming the chair, does he actually become a chair in name only because Powell is still sticking around. Right. I mean, that, that to me is.
- [60:41]
Unknown
What'S interesting is when does Powell's term end?
- [60:44]
Neil Dutta
Well, his term as chair ends next May, but his term as a governor doesn't end for another two years after that.
- [60:49]
Unknown
Oh, really?
- [60:51]
Neil Dutta
So that to me is something that, you know, that's a pretty. That's a card he can play. Right. And the way they go, they're going about this, you know, you talk about, you know, we talk about, like Supreme Court justices and like litmus tests when you name. Right. Like there's. They have a litmus test for judges. Trump is creating a litmus test, in a way, for monetary policy officials. Right. He wants someone that's gonna cut rates.
- [61:17]
Unknown
Someone who's not gonna be independent.
- [61:19]
Neil Dutta
Exactly. And so if. So I do think that this desire to have this kind of big show, like the Apprentice Monetary Policy Edition, and this sort of like, you know, shadow Fed chair, you know, trying to kind of undercut Powell before he's done with this term, that could potentially backfire in them because it would just mean that it's possible that if they put in it, if they actually get whoever they want across the finish line, once they're there, they're actually a quite. They're a very weak chair because Powell decides to stick around.
- [61:58]
Unknown
That's really quite fascinating. I haven't heard anybody talk about that. So that is very much an under the radar answer. So let's. In our last few minutes, let's talk about our five favorite questions we ask all of our guests, starting with. Tell us what you're streaming these days. What are you listening to or watching?
- [62:17]
Neil Dutta
What am I watching? I just finished the Handmaid's Tale.
- [62:21]
Unknown
Oh, really?
- [62:21]
Neil Dutta
That they had their last.
- [62:24]
Unknown
Did it hold up through all these seasons?
- [62:27]
Neil Dutta
I thought, I thought the last season was actually pretty good. So I, I like that. I just watched Netflix, the Poop Cruise. That was pretty fun.
- [62:35]
Unknown
Oh, really? Yeah, that's. People stuck on the boat in the beginning.
- [62:38]
Neil Dutta
Yeah, that was like, it was a.
- [62:39]
Unknown
Good, like such a horrible title.
- [62:41]
Neil Dutta
It was a quick. It was a quick documentary, but I, but I kind of enjoyed it. And yeah, those are, those are the two things that are sort of top of mind for me.
- [62:50]
Unknown
Those are, those are very eclectic, similar. I walked in on my wife watching the Gilded Age, and somehow I got sucked into this. And it's really quite fascinating because all the issues that we argue about today, wealth inequality and new money versus old money and economic strata and economic mobility, themes of the Gilded Age 150 years ago. It's amazing that everything's changed and nothing's changed.
- [63:22]
Neil Dutta
Right.
- [63:22]
Unknown
It's kind of. Kind of fascinating. Let's talk about mentors who were some of your early mentors who helped shape your career.
- [63:30]
Neil Dutta
You know, it's interesting. I mean, I think About. I mean, I remember you asked me this question the last time I was on, and I probably said, you know, Ethan Harris.
- [63:41]
Unknown
Right.
- [63:42]
Neil Dutta
I think I'd put Drew Mattis in that category of mentor. But I'm also at the point now, I feel like in my career where the people that I idolized early on are now actually like my rivals. Right. They're my competitors in some respects. Right. I mean, you talk about Rosie. I mean, he and I are both in the research business, you know, I mean, so it's sort of. It's interesting.
- [64:02]
Unknown
If you're bearish the same year, he's bearish, or at least the same quarter, that's an unusual alignment because for as long as that might be true right now, because for 15 years, you've been fairly.
- [64:17]
Neil Dutta
Yeah.
- [64:17]
Unknown
Fairly constructive. And you can't say the same of Rosie. This could be the first time, second half, 20, 25.
- [64:24]
Neil Dutta
We're aligned.
- [64:25]
Unknown
Right. But, but, you know, that just means you've shifted because he's been sort of.
- [64:29]
Neil Dutta
But so now it's more about, like, not so much mentors, but like, who am I. Who am I talking to to kind of help me work through my process as, like, an analyst? And. Yeah. I mean, some names that come to mind, like Connor Sen, your Bloomberg Bloomberg opinion colleague, I like talking to him about. About the economic outlook. We sort of think about now and come at things the same way. Luke Kawa is another one I like. So these are sort of like, you know, I guess you could call them like geriatric millennials, like myself, like, we sort of another one.
- [65:06]
Unknown
Geriatric millennials. Again, another phrase I've never heard before.
- [65:09]
Neil Dutta
Skanda Amarnath is another one. I mean, he's sort of in more of like, the public policy space, but I mean, I'm kind of glad he doesn't do it. But he'd make a great business economist himself. But I mean, these are people that I just like, talk to to kind of stress test my own views. And I think that's, at this point in my career, like, that's what I need more than mentors is sort of smart people that will help me, you know, kind of think through an outlook and stress test.
- [65:37]
Unknown
Sharpen your focus.
- [65:38]
Neil Dutta
Yeah. Or just like, where are you wrong? Like, what are you missing?
- [65:44]
Unknown
That's interesting.
- [65:45]
Neil Dutta
So, so that. That's sort of how I think about it. Now. Let's.
- [65:48]
Unknown
Let's talk about books. What are some of your favorites? What are you reading currently?
- [65:52]
Neil Dutta
You know, I don't read books. I'm not a book Reader talked about.
- [65:56]
Unknown
This last we did.
- [65:57]
Neil Dutta
I'm an, I read the news.
- [65:59]
Unknown
Right.
- [65:59]
Neil Dutta
I read. I can tell you who are the people that I like reading, you know, in, in journalism. Give us some names like Nick Timoros, Wall Street Journal.
- [66:10]
Unknown
Sure.
- [66:11]
Neil Dutta
Love reading his stuff.
- [66:12]
Unknown
Fed Whisperer these days too.
- [66:14]
Neil Dutta
Well, I mean, it's not just that, but he has like a very, like, you know, I mean he's a, he, he thinks about things very thoughtfully too. And he, and he, you know, he does a little data watching himself. So I kind of like reading what he has to say. Jonathan levin, Bloomberg Opinion so, you know, those are the, your colleague Josh Brown. I read his stuff.
- [66:37]
Unknown
So he's a very thoughtful writer.
- [66:39]
Neil Dutta
Yeah. So to me, it's really, it's really, I, you know, I don't have time to read books because I'm too busy like reading, you know, reading the news, reading opinion pieces. The most interesting Fed paper that I came across recently is just, you know, we talked a little bit about Ed Lemur before, but the Fed recently published a paper just looking at the housing channel of consumer spending. Right. Like, so they were basically making a fairly obvious point that if housing transactions or new home sales are down, like that's going to have effects on housing related consumer spending. And that's something that we should be.
- [67:14]
Unknown
Thinking durable goods straight across the board. Yeah, absolutely. Housing has always been a big driver of the economy. What's been so shocking about this economy is we've seen home transactions drop significantly just because there's no supply. But the economy has been so resilient. It's really been kind of fascinating watching that happen.
- [67:34]
Neil Dutta
Yeah, I mean, it's interesting. I mean, so again, like, housing is one of the reasons why I'm cautious on the economic outlook. And you know, I think what's different about this time with respect to housing versus, you know, early 2022 is that now units under construction are coming down. You're in a situation where starts are running below completions, which means that units under, I mean essentially units under construction will have to keep falling. And that's not what you had last time. Right. Back then, units under construction were going up. So to me, that construction piece of it is different this time versus last time.
- [68:17]
Unknown
Our final two questions, what sort of advice would you give to a recent grad interested in a career in either economics or investing?
- [68:27]
Neil Dutta
I mean, to me it's just get a foot in the door, you know, figure out the details later. You know, it's sort of, it never works out the way you think. But you just have to put yourself in a position where you have the best chance of succeeding. And that, to me, is the most. Is the best advice I can give someone. So in my case, that manifested itself in get your foot in the door at a bulge bracket firm.
- [68:49]
Unknown
I mean, you literally were working in HR before you moved into 100%.
- [68:53]
Neil Dutta
Yeah, it doesn't like. To me, it's about. Again, it's about putting yourself in a position where you can succeed. And I think that that's definitely true. I mean, for me, it's a number of ways that happened. Right. I went to nyu. I went to NYU because I knew that if I stayed in New York, I'd probably have a better chance at things than if I left. And it's just, you know, I mean, nyu, it's not like the best school. It's not like Princeton or Harvard, but.
- [69:21]
Unknown
Still a pretty good school.
- [69:21]
Neil Dutta
It's a pretty good school. And it's like the business.
- [69:23]
Unknown
Stern is a great business.
- [69:24]
Neil Dutta
Stern, yeah. And if you're in New York, you're gonna. Recruiters are gonna come after you if you went to nyu. Right, right. It's just that simple.
- [69:31]
Unknown
And so you just need the 100k a year.
- [69:34]
Neil Dutta
Well, yeah. I mean, it wasn't that much when I was going, but. But my advice would just be, you have to put yourself in a position to succeed and just let the chips fall where they may. I mean, that. That to me is, you know, and if that means taking a job, that may be not the best job, but it's at a firm that you have a lot of, you know, respect for. Or it's a good firm, good brand name. Take it.
- [69:56]
Unknown
Our final question. What do you know about the world of investing today? You Wish you knew 20, 25 years ago when you were first starting out.
- [70:07]
Neil Dutta
That's a tough one. I mean, I think my favorite thing to me, what's important is, and just trying to relay this back to my seat, is it's important to understand the time horizon of the. The person that you're talking to and you're providing analysis for, because a lot of people live in the short run. But if you're sort of a typical investor, you can tune out a lot of the stuff that we're talking about. To be perfectly honest, because to quote my friend Sam Rowe, stocks usually just go up. And so, you know, it's sort of. You see all this analysis that comes out on the street, like after the ISM goes to 40%, like to 40. You know, usually the stock market's higher six months later and 12 months later. Well, yeah, obviously, because the stock market.
- [70:51]
Unknown
Defaults depending on the decade you're looking at, it's three out of four or four out of five years.
- [70:57]
Neil Dutta
Yeah. So to me, it's sort of. Yeah. I would tell myself back then, like, don't worry so much about making big market calls. Just give people your thought process.
- [71:09]
Unknown
Really, really interesting. Neil, thank you for being so generous with your time. We have been speaking with Neil Dutta, head of Economic Research at Ren Mac. If you enjoy this conversation, well, check out any of the 550 we've done over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and check out my new book, how not to Invest. The Bad Ideas, Numbers, Behavior that Destroys wealth and how to Avoid Them how not to Invest at your favorite bookseller right now. I would be remiss if I did not thank the crack team who helps me put these conversations together each week. My audio engineer is Peter Nicolino. Anna Luke is my producer. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters and Business Business on Bloomberg Radio.
- [72:18]
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