The Exchange (CNBC)

Episode: Record Shutdown, Fast-Casual Falters & Barry Sternlicht’s Warning for New York City
Date: November 5, 2025
Host: Dominic Chu (in for Kelly Evans)

Episode Overview

This episode of "The Exchange" dives into:

• The record-breaking U.S. government shutdown and its broad economic impact
• Key Supreme Court arguments over the legality of Trump-era tariffs
• Wall Street’s continued resilience amidst political turmoil
• The state of the U.S. restaurant industry, with a focus on consumer behavior and labor issues
• An exclusive interview with Barry Sternlicht on the implications of New York’s new mayor for real estate
• Hot takes on recent and upcoming corporate earnings, with a focus on tech, retail, and animal health sectors

Dominic Chu and a lineup of CNBC correspondents and industry analysts dissect the biggest news shaping markets, business, and the economy.

Key Discussion Points & Insights

1. Record-Breaking Government Shutdown

Segment: [00:29–04:29]

• Context & Impact:
  • The government shutdown reaches Day 36, officially the longest in U.S. history.
  • The Congressional Budget Office warns it could cut Q4 GDP growth by up to 2 percentage points.
  • President Trump acknowledges the shutdown hurt Republicans in recent elections:

    "The shutdown was a big factor, negative for the Republicans. And they say that I wasn't on the ballot was the biggest factor. But I don't know about that. But I was honored that they said that." – Donald Trump [02:04]

• Political Dynamics:
  • Trump pressures for the end of the Senate filibuster but lacks support.
  • Bipartisan talks are ongoing, discussing short-term spending paired with ACA tax credit votes.
  • Emily Wilkins reports that while optimism for a resolution exists, no clear movement is visible:

    "If something has changed, it’s not immediately evident… Republicans and Democrats seem equally dug in." – Emily Wilkins [03:55]

  • Only five more Democratic votes are needed to reopen the government.

2. Supreme Court Takes Up Trump Tariffs

Segment: [04:29–07:43]

• Legal Stakes:
  • SCOTUS hears arguments challenging presidential authority to impose tariffs under the 1977 IA law.
  • Trump’s Solicitor General, John Sauer, argues tariffs are regulatory, not revenue-raising:

    "These are regulatory tariffs. They are not revenue raising tariffs. The fact that they raise revenue is only incidental." – John Sauer (paraphrased by Eamonn Javers) [05:10]

  • Justice Neil Gorsuch pushes back:

    "Congress, as a practical matter can't get this power back once it's handed it over the President. It's a one way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representatives." – Neil Gorsuch [05:37]

  • The decision’s urgency: Tariffs are being collected daily and, if overturned, will require Treasury refunds.

3. Market Reaction Amidst Political Turmoil

Segment: [08:00–13:00]

• Larry Adam (Raymond James CIO) Remarks:
  • Markets remain strong; current political risks (shutdown, tariffs) may bring only "normal" pullbacks (5-10%):

    "If we do get a pullback, I think it's going to be rather normal... 5 to 10% is probably likely." – Larry Adam [10:34]

  • Consumer spending is trending lower, with 88% planning to spend the same or less this holiday season.
  • Pullbacks in Mag 7 mega-cap techs are notable, but Adam still considers these names fundamentally strong.

    "The best fundamentals are in those mega cap tech names. Their earnings are expected to grow 19% this quarter versus 3% for the rest of the market." – Larry Adam [12:07]

4. Fast-Casual Restaurant Industry Falters

Segment: [15:23–19:05]

• Kava’s Forecast Cut:
  • Kava downgrades full-year same-store sales guidance, citing a drop in visits from 24–35 yr-olds.

    "They don’t have the steam that they had last year... it’s just that they don’t have the vigor or frequency they did last year." – Kava CEO Brett Shulman (quoted by Kate Rogers) [15:53]

• Consumer Bifurcation:
  • McDonald’s sees affluent diners trading down but warns lower-income consumers are "continuing to struggle":

    "QSR traffic for lower income customers declined nearly double digits across the sector while upper income consumer traffic increased nearly double digits." – McDonald’s CEO Chris Kempczinski (quoted by Kate Rogers) [16:38]

  • Overall, consumers are growing more selective as economic uncertainty rises.
• Starbucks Labor Tension:
  • 92% of unionized Starbucks workers vote to authorize a strike, aiming to leverage "Red Cup Day" for impact.

5. Restaurant Analysts on Trends and Top Picks

Segment: [19:05–21:40]

• Greg Frankfort (Guggenheim):
  • Lower-income consumers ($45K and under) have been pressured for 18–24 months; the impact is spreading upmarket.
  • Fast food chains like Taco Bell (+7% comps) and Domino’s (+5%) are more insulated than fast-casual; casual dining (serving higher incomes) outperforms fast-casual.

    "There are places in fast food that are insulated. Restaurant stocks have underperformed… but there have been some bright spots.” – Greg Frankfort [19:59]

  • Texas Roadhouse is his top pick for resilience and value through 2027 growth.

6. Wall Street’s Perspective on NY’s New Mayor

Segment: [33:08–36:21]

• Barry Sternlicht’s Warning:
  • Sternlicht, Starwood Capital CEO, offers a candid outlook on NYC under incoming mayor Zoran Mamdani (a democratic socialist).

    "Maybe the million people that voted him won’t realize that socialism’s never worked anywhere on the planet Earth… Especially what we’ll watch is safety and security. If people feel like their kids aren’t safe, they will leave." – Barry Sternlicht [33:27]

  • Concerns:
    • Exodus of people and businesses if crime and costs rise
    • Onerous union and construction costs make new housing unfeasible
    • Predicts things will "get a lot worse before it gets better" for real estate
  • Starwood is openly considering relocating its own office.

    "The core issues are not what he's focusing on. We need to increase housing. That's not going to happen easily. ... I think the city's in for a really tough time." – Barry Sternlicht [34:43]

7. Key Earnings & Market Movers

Segments: Throughout (22:30–32:00, 36:30–39:32)

• Upcoming/Recent Tech Earnings:
  • Tim Seymour (Seymour Asset Mgt.) weighs in:
    • Qualcomm: Value + AI growth potential; positive on the stock ahead of earnings [28:03]
    • Robinhood: High growth, "digital proxy" for new financial trends but pricey [29:20]
    • Snap: High risk, structurally challenged, but an upside surprise possible if expectations are low [30:50]
    • Lyft: Operating improvements; potentially attractive "as normalizing trends continue" [31:30]
• AMD AI Story:
  • Despite hype and guidance beats, investors seek tangible AI earnings. Export restrictions in China remain a headwind.

    "Investors wanted proof that those big AI deals are starting to pay off… the street is left to contend with two big holes: China and AI." – Mackenzie Sagalos [37:46]

  • Big upcoming catalysts: actual revenue realization from new platforms/products.

8. Animal Health: Growth in Pets and Protein

Segment: [39:32–45:00]

• Elanco Animal Health CEO Jeff Simmons:
  • Company posts 9% organic growth; nine straight quarters of expansion.

    “Pet owners are willing to spend… veterinarians are giving more puppies Credelio Quattro because of what they see in the drug.” – Jeff Simmons [41:10]

  • Growth across both pets and livestock segments; innovation (e.g., dermatology, parasiticides) is driving share gains.
  • On industry competition: Focus on delivering value and innovation to both farmers and veterinary clinics for robust future growth.

Notable Quotes & Memorable Moments

• "Congress, as a practical matter can't get this power back once it's handed it over... It’s a one way ratchet toward the gradual but continual accretion of power in the executive branch."
  — Justice Neil Gorsuch on executive tariff power [05:35]

• "We have a big office here ourselves and… for the first time, the team in New York is saying maybe we should leave."
  — Barry Sternlicht on NYC business climate under incoming mayor [33:58]

• "Pullbacks have become shallower over the course of the last few years… the biggest drawdown since April has been just under 3%."
  — Larry Adam on market resilience [10:34]

• "Consumers are just being really choosy right now about where they want to go out and spend their money because the economy, the economy is feeling a little bit more uncertain."
  — Kate Rogers on fast casual/restaurant sector [16:51]

Key Timestamps

• 00:29–04:29: Record government shutdown, political fallout, CBO economic impact
• 04:29–07:43: Supreme Court tariffs case, conservative pushback, implications
• 08:00–13:00: Larry Adam on markets, pullback expectations, sector trends
• 15:23–19:05: Fast-casual/restaurant earnings, consumer trends, labor issues
• 19:05–21:40: Analyst Greg Frankfort on sector winners, labor, Texas Roadhouse pick
• 33:08–36:21: Barry Sternlicht exclusive: New York City’s business future
• 36:30–39:32: AMD, tech earnings, China/AI pressures
• 39:32–45:00: Elanco Animal Health CEO on pet/livestock spending, innovation

Episode Summary

This episode delivers a comprehensive look at the immediate economic and business impacts of the nation's longest-ever government shutdown, the ongoing uncertainties related to international trade and regulatory power, and the shifting dynamics affecting American consumer sectors—from fast-casual restaurants to tech stocks and the office real estate market.
Big-picture political gridlock is seen translating into choppier market dynamics and growing caution among both consumers and corporations. The stakes for cities like New York are highlighted through frank commentary from business leaders openly reconsidering their presence under shifting local leadership.
Despite macro turbulence, pockets of investor and executive optimism remain—particularly in innovation-driven sectors like animal health and select tech verticals—while fast-casual dining faces stark consumer headwinds in an era of heightened economic selectivity.