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Black Friday is certainly underway. We got a great live blog on the Bloomberg terminal that's following reporters who are all over the country. Check it out because they're dispatched checking out the crowds, seeing what people are buying. Vonnie, a lot of people apparently in line to get the Taylor Swift book at Target.
Did you hear about this?
I'm loving this blog because we're just talking to people all over the huntry of these Moles of Paradise and Moles of America and all these different moles, and it's really fascinating. And yes, Taylor Swift merchandise is some of the best selling.
I saw it today.
I was down at Macy's and I saw massive crowds coming in by ten o'clock, and I think the weather had a lot to do with it. Tim So at six o'clock there weren't too many people around. It was twenty nine degrees six am six am when Macy's opened in Herald Square, but by ten am it was a little bit warmer, and you know, there was no rain. Everyone had been stuck indoors on Thanksgiving because it was so much rain in the Tristate area. At least people
were out. They wanted to see what else, What are the discounts, what's available?
What did it seem like there were discounts.
It seemed like there were massive amounts of discounts. Everything was forty percent off or everything was fifty percent off. But I have to say one comment from our.
Life blog really did strike me.
This man that we spoke to, Jonathan Overton from DC, said, I don't really know what sales are going on, to be honest, there's not really a lot of signage.
No one's really telling you what's happening.
And I did feel a little bit like that because it was a bunch of merchandise and then you know at the side assigned with forty percent off and some small writing underneath, and it wasn't quite clear whether this was forty percent off the sale price or the full price, or you know, sort of a little bit of a grab bag.
You get to the counter and you've out what you're going to own.
Okay, so we got the great anecdotes from thirty fourth Street where you were at May season, from all over the country over on the live blog. We also want to get an idea for what data folks are seeing out there. For that, let's bring in Julie van Uhlin. She's Rakutin chief rewards, chief revenue officer. It's a cash back shopping platform. It's a subsidiary of the Internet Services giant Racketin Group.
Good to have you with us, Julie.
Just give people an idea of the insight that you have with this tool, because you know, if you're shopping online, you know about how you can how you can use this tool. But just give people some insight into the real time data that you get over at Racketin.
Yeah, I'm happy to do that, and thanks for having me on this glorious Black Friday. Racketin is a massive shopping platform with the best rewards out there, especially this time of year, but all year round, where we have about five thousand brands who are working with us in order to attract the best shopping possible by offering rewards by way of cash back that are stackable on top of the amazing deals and promotions that are happening during big promotional periods like this.
It's entirely free for consumers to join.
We have about seventeen million consumers today and growing.
And where are these consumers July because obviously you know, we're looking today, particularly at the US consumer, but Rocketon would have tentacles around the world, right we do.
However, the business that we're discussing today and the data that the rich data that we'll talk about in terms of what we're seeing from a consumer behavior standpoint, is really a North American business racketin rewards.
So you say seventeen million consumers sign up and roughly on average, you know, in a year, what kind of reward would a consumer expect to get.
Oh, it's entirely dependent on the shopper. Right.
It's a rewards platform that rewards a consumer for frequency and for average order value.
Right. So the more you buy, the more.
Likelihood it is that the brands that you love the most are going to be paying at ten to that and giving you more rewards to come back more frequently. So it really is engendering loyalty and frequency, and that's how the brands and retailers view us differently than what they can do on their own with their own base of shoppers.
So we're already starting, you know, we're in the midst of the holiday shopping season, Julian, We're already starting, even in recent months to get some of those consultant reports out with how much they think consumers are going to spend. We talked about a Deloitte report out earlier this week that said that over the holiday period and especially today between today and Cyber Monday, consumers are expected to spend fifteen percent more than they spent last year six hundred
and fifty dollars, So a new record there. What are you projecting over at Rakutin.
It's been a really interesting year so far.
I think that we are also projecting what would be a record year both online and also growing in store sales. But I think that a lot of the data that we've been showed going up until now over the past couple of weeks, as well as yesterday and even this morning, speaks to a couple of really interesting trends that are specific to this year. The first one I would say is around consumer intent. That we see consumers browsing less
but shopping more. So we see on our platform sales are up, average order value is up, but browsing is a little lower. So I think that that speaks to perhaps the very intelligent consumer doing their research, making their list, checking it twice, and making sure that they are ready to pull the trigger when they see the best possible value, whether that value is by way of promotional discounts, cash back,
free shipping, whatever it is, they're ready to go. And in tandem with that, I think it's also been a very by now moment since the week after the election, which is to say that we saw a fifty seven percent increase in shopping the week after the election versus the week and that has continued where there's been a
record amount of early shopping happening. So I think that again speaks to the consumer sentiment, perhaps the turbulence from an economic standpoint, and then wanting to ensure that they get in now when they feel comfortable that they've gotten the offer that's good enough for them.
Julie, you say you have a mound of rich data, and I'm just curious who is the Rocket and Rewards sign or opers. So there's so many rewards programs out there now, and you know, no matter where are you shop, it seems like you're invited to be part of the loyalty program. What would the niche sort of offering of Rocket and Rewards be that would make me want to sign up for yet another program?
I think the really interesting part about what we do is that it runs the gamut of categories, So we aren't even just focused on traditional retail categories. We yes certainly have the apparel, health and beauty categories that folks are so interested in buying this time of year, consumer electronics, but also verticals like travel, like consumer banking and financial products.
So given the fact that it's a one stop shop for being able to kind of weigh the value of what brands are willing to deliver across categories, it's particularly fascinating to consumers in a way that spans the gamut that a singular rewards platform might not be able to do.
Julie, what do you get out of the Rakertin rewards program in the sense as a company, you know you have to entice people to use it. Do you get paid by the retailer, or is the data so powerful that you can then make money selling it.
That's a great question, and it's a very simple model.
We are highly protective of consumer data and we are in no way, shape or form interested in using it
from monetization. The model is entirely an advertising model, whereby all of the brands and retailers with whom we work see our platform as a way to get access to shoppers who will shop more frequently and buy more when they get that cash back, which is effectively the permission to buy that they need, and when they give us those advertising dollars, just like any media platform that would get advertising dollars, we simply pass about half of those
dollars back to the shopper in the form of cash back.
So we were talking earlier about the you know, the amount that somebody spends then dictating.
How much they get back in rewards.
But you must have an average figure or even a mean figure for the rocket and rewards devote.
Hey, let's say.
It's a very tough one, I'm afraid, but certainly what I think it speaks to is the fact that it varies year by year, in person by person.
I did want to mention.
One more trend to you, guys, which is super interesting this year, which is that we're seeing, still to this moment, as we're monitoring real time data, that there's this fascinating trend happening where it's a first me, then you season where and by that I mean shoppers seem to be shopping categories that are much less traditional giftable categories. They're very interested in areas like pet care, financial services, health and wellness, particularly CBS Walgreens.
So what we see is.
People out there again, probably because of concerns around potential economic trends. They're saying to themselves, I need to get myself shored up with these deals and my family shored up first before I move ahead to think about gifting.
We do predict that that's likely to change shift over a little bit later today, especially as we go into the weekend in Cyber Monday, but it's a particularly interesting trend of consumers interested in using this moment a very high promotional free shipping, cash back stackability to do what's right for them and their family first.
Julie.
One thing we talk about a lot is what retailers who are traditional brick and mortar retailers have to do to get consumers in the door, given that it's so easy to buy so much of this stuff online. What's the message that you have based on the data that you see what consumers are doing online to retailers who are trying to figure out this omnichannel approach.
It's a great question.
Part of our business is an in store capability whereby when a consumer links their credit card on our site, then you're able to achieve the same level of cash back that you might get online going in store when you use that credit card, and it just automatically happens. And that part of our business has grown dramatically year
over year. And to answer your question, I think the reality is that we are dealing with a very value seeking consumer who isn't just content with discounts and prices that a brick and mortar might be able to offer, even during a time like Black Friday.
They need to know that they're getting more.
So a lever like cash back enables these retailers to offer something more that gives the consumer a permission to buy. What I will also say about retailers and brands is that there is certainly and this is more just holistically as an omni channel event is that there is a
democratization around where brands can be purchased by consumers. And by that I mean retailers are in a way starting to compete with the direct to consumer brands themselves that they sell in their stores, because those brands may be able to offer higher cash back, but they may have a level to do things like free shipping with the larger infrastructure that they have. So it really is about figuring out what levers do you have and using.
Them all right, Julie, let's leave it there. It's Julie van ullin Rakatin Rewards, Chief revenue Officer joining us on this Black Friday. Julie, thanks so much for taking the time. Always good to check in with you.
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President elect Donald Trump had dinner with Meta CEO Mark Zuckerberg at his mar A Lago estate on Wednesday. Zuckerberg meeting with Trump and members of his team as the President elect prepares to return.
To the White House in just fifty two days.
Now for more, we're joined by Bloomberg's Kurt Wagner.
Kurt, do you know anything about the conversation.
I know, representatives for Zuckerberg did let out a few little comments they did.
They were very vague.
They said, you know that it was an important time for innovation, which is one of the things that they want to talk about. I think we can extrapolate from that a little bit to assume that they probably touched on AI, because this is something that's been a key priority for Meta over the past year, year and a half. They're investing very, very aggressively in all types of AI products and features, and as you can imagine, there's a lot of concern about what the incoming administration might do
in terms of regulation with AI. So I do think, you know, that hint about innovation, to me is a sign that AI was probably at least one of the many topics of conversation at that dinner.
Maybe I'm a cynic, but my takeaway, Kurt, and you know this better than I to, was not that at all. I mean, my first reaction was, like Mark Zuckerberg's got to get on the Trump administration's good side, given what we've heard on the campaign trail. Now that Elon Musk is their NonStop, and we know that Elon doesn't have a great relationship with Mark Zuckerberg. These guys are like nemeses. I mean, am I too cynical here?
No?
I definitely feel like there's a little bit of damage control being done here, right, And it's not just from the last couple months. I mean, remember two years ago, or I guess more than two years ago. At this point, Donald Trump was suspended from Facebook and Instagram for two years, right, and that created a huge issue since then. When he was on the campaign trail, he talked about, you know, wanting to keep TikTok around simply because he knew if
TikTok was gone it would help Facebook. He even insinuated that he might want to try to put Mark Zuckerberg in jail.
Right.
That was just a few months ago.
And so we've seen Mark Zuckerberg sort of in the last couple months since this summer, really you know, say flattering things about Donald Trump. He called the president elect before he was elected back in the fall. Now he's
showing up at mar A Lago for dinner. I think your instinct is pretty spot on, which is that this has been a tumultuous relationship for several years now, and it's certainly in Mark Zuckerberg's best interest to make sure that Donald Trump at the very least things him as neutral, right, so that he's not coming after him and attacking his businesses.
For sure.
And he did make a comment after the assassination attempt, the first one saying seeing Donald Trump get up after getting shot on the face and Pump's fist in the air with the American flag is one of the most badass things I've ever seen in my life. So he has been quite you know, complimentary of the president elect. What could the president elect do though, and just in terms of the company, not Zuckerberg personally. You know, you
can blacklist him from mar A Lago. He can do whatever he wants to Zuckerberg personally, but he would need someone like Alena Khnon board to actually hurt the company, you know.
I think, well, it sort of depends on what you described by hert or what you mean by her right. I think what we saw after the twenty sixteen election was that Facebook really got bogged down with you know, all of these claims of Russian interference and Mark Zuckerberg being summoned to d C every year to answer these questions.
It's just a lot of distractions, right.
I feel like that's the kind of world that Donald Trump and Congress could create for Mark Zuckerberg.
They could just make his life much less enjoyable.
Now, on top of that, as you guys mentioned, Elon Musk is in the picture right, and Elon and Mark Zuckerberg are not friends.
They have a very healthy rivalry.
And so you know, now you have the president's sort of top advisor who's an anti Facebook guy. And so I do think that there's this, you know, potential threat that the administration could simply make Mark Zuckerberg's path these next four years very difficult if they want to. And so that's again why you see him showing up to have dinner the night before Thanksgiving.
Kurt.
There's this idea, and we saw this actually play out a few months ago in the vice presidential candidate debate with JD Vance talking about censorship on social media platforms and this idea of this anti conservative bias. And you know, I haven't seen these numbers in a while. But what we have tended to see is that actually Facebook as a social platform is really good to conservatives in terms of the most prominent voices. You know, they get a
lot of their traffic coming from the social platform. Is there any credence to the idea that there is anti conservative bias on some of these social platforms that that Zuck and company run.
I mean, gosh, Tim, We've been talking about this for years at this point, right, and I feel like it's always sort of been a perceived bias, right. I think if you no one's really come out and shown real hard figures to say like, hey, look, the companies are intentionally down ranking someone simply because they are conservative or
simply because they are liberal. What I find very interesting is that ever since Elon Musk took over X, certainly these past six months, he has been the most pro you know, Trump owner of any CEO or excuse we have,
any social platform we've ever seen. And yet there have been no concerns about that, Right, There's been no concerns on the other side that hey, what about you know, you're suppressing left leaning voices or you're suppressing you know, democrats, right, and so I just find it very interesting that for years we heard about this anti conservative bias when there was a perceived attack, and now when we have a CEO and owner who's very blatant and openly picking a
side at political side, no one seems to have an issue with that, right, So it is a very interesting dynamic. I don't know, this narrative has sort of died down a little bit on the Facebook front, but now that Trump is back in office, I wouldn't be shocked if we start to hear this thing come up again.
Just briefly, cards the representatives for Zuckerberg said that the conversation was taking place at a crucial time for US innovation. I'm just curious, is there any chance that the two would have spoken about bydowns and what Donald Trump should do about TikTok.
I mean, I'd be speculating, but it seems very logical that would be top of mind that date. The January date for the potential ban of TikTok is just a few months away. Donald Trump talked about it on the campaign trail. We obviously know it matters a lot to meta, right. I think if TikTok is out of the Picture Meta stands to benefit more than any other company out there, so I do have have to imagine that that came up.
It's probably a little bit of a tricky situation because Mark Zuckerberg has to sit here and probably he can't say exactly what's maybe on his mind right for anti competitive reasons. But I again, the timing is such that it's hard to imagine it wouldn't have at least been brought up.
Kurt, Thank you so much for following all of this so closely. For us, that is Kurt Wagner, and we will be talking to him again no doubt.
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Officials rejecting the busiest Thanksgiving travel season yet still going to see some final numbers in the coming days, but check this out. In the past two days alone, the TSA has screened more than four point two million passengers. Join us now to share with us what travel trends he's seeing as the season kicks off. Is Clint Henderson, the Points Guy, Managing editor, Clint, I'm always good to see you. Have things gone off without a hitch so.
Far, you know, remarkably, I was a little nervous about yesterday because we had all those storms across the country. The airlines were covered really quickly. I do feel like all the staffing moves they've made over the past couple of years are starting to pay dividends. You know, a lot of airlines have invested in technology after spectacular meltdowns.
I think all that's paying dividends.
The one area I'm really worried about still is air traffic control staff shortages.
So that's something I'm.
Watching closely, especially in Newark. But other than that, it's been really smooth.
Why are there shortages.
It's a job that's really hard. It's really stressful, especially in the Northeast region, the busiest part of the country. You know, you've got Newark Airport, You've got JFK, You've got LaGuardia. Imagine the number of planes coming in and out of the area. One of the reasons we've seen a little bit of an issue with ATC is because they've moved Newark Control over to Philadelphia to try to ease the training issues.
And so twenty.
Four ATC workers moved over to the Philly area. And you know it's going to take some time. It's a long term solution to a long term problem. This has been a problem for years. Apparently a bunch of the people that they train end up dropping out because it's just too stressful. So that's a little bit of the back seat there.
Okay, Clint, I want to shift gears a little bit because now is the time of year where the airlines start coming out with updates to their rewards programs. Delta's certainly taken a little bit of heat for changing its rewards program around. At the end of the day, are these rewards programs actually still worth it given what you get in as a reward, and given how hard it is to achieve certain levels of status.
So you put your finger on the raging debate in the points in Miles world right now, a lot of my coworkers are giving up on top tier status. You're not getting the upgrades you used to get. There's more people, it seems like in the top tiers and the juice is just not worth the squeeze for some people. Now that said, I am going to keep Delta Diamond and American Airlines Executive Platinum because I'm a tux.
Yeah but I will.
But that's not going to continue long term because it's gotten too expensive. So one of my colleagues in the United program is going to drop down to gold this year. It's just it's getting harder to redeem points in miles and you have to be more aggressive and more invested into how to maximize it to squeeze out the perks. But here's what I will say. We're still seeing a ton of deals. There's still good sign up bonuses, there's still amazing business class redemptions you can get on programs
like Air France or Air Canada Aeroplan. We do see those those unicorn fairs we call them, even in the US program. So for me, that's why I'm still all in, even though I'm not getting upgraded on most of my flights these days.
What about the hotels, Clint, You know, some of the branded hotels are perhaps worth signing up to their loyalty programs for because you may eventually get a night for free. But some you know, you really have to spend a lot of time in them. I'm thinking of JAMAIRA and some of these really top to your hotels.
Yeah, and the truth is or seasons, some of these other.
Programs don't even have loyalty programs.
Right exactly. So that's the thing for me that I know.
Yeah, I was, how do you know that that's pretty impressive?
So you're staying at.
The Yeah, that's why my team focuses on Hyatt, Hilton and IHG and Marriott because we know we're going to get something for all those days we're putting in. But I will say World of Hyatt to me gets the gold crown because they really do take care of their best customers. If you get sixty nights a year, you get upgrade certificates, there's all kinds of goodies, and their points have not been devalued like some other programs have.
So you can stay at a park Hyatt anywhere in the world for thirty forty thousand points.
So to me, that's a really valuable program.
Okay, so hotel is still some value out there to be found.
Airlines.
Perhaps my problem with these airline loyalty programs, Clint is if you get to the next level and something, it basically oftentimes just means you can check another bag, Like I'm not seeing the actual value here.
You're not.
It doesn't seem like you're being treated any different. You're not getting space at the front of the plane. It's sort of like kind of a joke.
Now.
Yeah, So it's a really big problem for the last minute business travelers because if you're flying Delta, for example, hub to hub, you're not going to get even a main cabin extra seat, even if you have taught your status, because those seats are all sold. They're all gone. And that's just coach. That's not even to say upgrade list. I've seen upgrade list of fifty people, fifty five people. So yes, it is a truth that if you want first class these days, you have to buy first class.
I will say, though, even gold level status on most of the airline programs, if you're booking a month out, you're still going to be a to get extra leg room seats, extra baggage allowance, early boarding, and a possibility of an upgrade. So for me, there's still some value to be had there. It's just getting harder and harder to the possibility.
Okay, maybe, Hey, before we let you go, Clinn, I want to talk a little bit about what twenty twenty five is looking like. It certainly seems like this year and last year were huge years for Americans traveling to and from Asia. A lot of folks, at least anecdotally, who I spoke to, a lot of colleagues making some big trips to Japan and the like. What's hot comes twenty twenty five, so.
You hit it. Japan is hot, remains hot.
The the US dollar wo yes, very In fact, that's the one part of the world that I'm not seeing a lot of deals. So you're still not seeing I'm seeing five hundred dollars sub five hundred dollars round trip coach fairs to Europe regularly. I'm not seeing those same deals to Japan these days. And Australia and New Zealand also very hot. But you want to go where the US dollar is stronger, especially if you can find a.
Decent price ticket.
I'm going back to Japan, but I'm using points of miles for my trip.
So you got to be smart about these things.
Okay, So we need to know a little more detailed where with carriers.
Okay, So I used Alaska miles to book Starluck's a New Asian New Taiwanese airline in business class seventy thousand miles one way. And then I was able to use American Airlines miles to book Japan Airlines via American for sixty thousand miles in business class. So the deals are out there. You just have to really hunt and peck, and you have to you have to educate yourself a little bit on points and miles.
But the deals are there, I promise, do you.
I mean, I've tried to do the things that I see online on sites like yours Clint, where it's like, okay, sign up for this plan because then you can redeem miles for this domestic carrier, and have never had any luck doing it. It's like sign up for the international plan, do a search that way, and there's still no flights.
Like, what's the secret?
Yeah, So this secret is flexible calendar is flexible dates. So if you're if you want to travel when every other family wants to travel for spring break, you're probably not going to score. But if you can hunt and peck and find that availability, plans like Air France Flying Blue KLM their program. I like the Aeroplane Air Canada program because you can usually find availability. It's just sporadic,
so you just have to really hunt and peck. And the other thing is there's these new points search startups like points Me that you can sometimes find in big sweeping searches of the calendar. You can find those those dates that do have that Unicorn availability.
So kening those sub five hundred dollars Europe trips so regularly.
American Airlines right now has a Black Friday sale under five hundred dollars from cities like Charlotte. From cities like New York to London for under five hundred dollars round trip. But tap air Portugal some of the you're lesser known Europe go.
To cost eight hundred dollars to get from New York to Charlotte's well.
But those flights are available from New York to London under five hundred dollars on American Airline.
Just take the bus, take the bus to Charlotte.
I don't need to yeah, I just need my American in.
London American Airlines.
Yeah, Hey, it's what about sort of warm places to go as it gets cold outside. What are you seeing over the Christmas holiday and what are you seeing in the early part of January for like President's Weekend and stuff.
Yeah, so hot tip the places that were the hottest coming out of the pandemic, so Florida, Hawaii, Las Vegas. Those are on sale now, so we're seeing more reasonable prices. And Maui regularly, I'm seeing three hundred dollars under three
hundred dollars round trip tickets. The problem with Maui is the hotels were still pretty expensive, but there are deals to be had to places that maybe you didn't get to go to out of the pandemic because they were just too expensive, including Miami and including what is like Maui, Kawaii and Hawaii.
Glenn Henderson managing at her at the Points Guy. Next time I have a Points question, I'm just going to send him an email. I got these United plants. They feel like they're not worth anything because I can never find a flight.
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Uriam Timmer is Director of Global Macro at Fidelity Management and Research. We were just saying a little bit earlier, Urian, that this has been quite the fall and winter for macro, global macro, in particularly US macro. There was a lot of surprises now in a season where we weren't quite sure that we'd be that many surprises.
It sure has and by the way, it's a pleasure to be here. But really the last four years has been full of surprises. Really that we're still dealing with sort of the how to interpret market cycles in the aftermath of the pandemic of course, and all the things
that change. You know, two years ago with the inverted curve, we roll expecting that recession, and here we are with the economy remaining quite resilience, resilient inflation or at least the rate of inflation getting closer to the FEDS target, although it is being more stubborn in the last few months, with the core PC now taking higher to two point eight. But the earnings have come through and that is the most important thing, you know, you ask anyone at Fidelity
in Boston at the Mothership. It's price follows earnings, and earnings is what we are looking at. And earning season, of course is pretty much over nine percent growth year over year, and the growth rate for the calendar year will be around ten percent. It looks like this year and expectations for twelve next year that might come down
a few points. But you know, if we are getting into an animal spirits cycle after the fairly decisive election, and a new capital formation cycle begins, and the AI boom already is sort of forcing all companies to go into the CapX mode. The hope is, of course that we get a true productivity boom. We'll have to see
if it actually happens. But if that's the case, then you can get a higher sort of speed limit for the economy, which means the economy can grow faster without inflaming the inflation rate, right, and I think that is the great hope for this market. My biggest not a concern, but I think one of the impediments will be next year that this is not like twenty seventeen, right when the first term of the president started, and obviously we
had the tax cuts happening in twenty seventeen. That year was a very robust bull market, led by both earnings growth and valuation expansion. But you know, rates from much lower. The FED was barely off of zero. Back then, inflation was not a story. And in twenty twenty five, you know, that is a different landscape. And so one of the things that I look at is interest rates. You know, the ten years behaved, it's four twenty, it was at
closer to four fifteen. It was at five percent a year ago, and so so far, so good there, but occasional flare ups in yields. I think is likely to be not a bull market ender, but at least an interrupter.
There's this policy proposal or a series of policy proposals from the Trump administration that we got on the campaign trail, and I'm wondering how you're factoring that into your analysis.
And it's the.
Idea that, Okay, if these if he goes through with these tariffs that he actually announced earlier this week, what could that do to inflation here in the US? And then also what about mass deportations? And whenever I talk about this, I say, obviously the human can you know the human side of the story, putting that aside, and just thinking about the economic effects of deporting millions of people over a short period of time, many of whom
do work in jobs here in the US. So I'm wondering what you're looking at in terms of economic shocks there.
Yeah, it is a concern, and of course no one really knows whether the tariffs are going to be just a bat that the president carries around to try to get better deals. I mean, certainly the announcements with Mexico and then the meeting or the phone call with the Mexican president kind of give an indication that this is really to start negotiations for better trade deals. But it of course is a risk because if importers have higher costs, they either need to pass those on to consumers or
it eats into their profit margins. And then it's a question of to what degree other things offset. Right, the dollar is very strong, so that would be an offset, for instance, So it remains unclear to what degree it would be inflationary, and of course deportations would presumably be inflationary as well. And if you think about what the FED and the economy has accomplished in the last couple of years, right with the great reset in twenty twenty two.
The FED was trying to obviously slay the inflation dragon, which it has at least partially done, and it was trying to rebalance the labor market, which was in overdrive back then, right because the economy when it shut down during COVID, obviously many people left the labor force, and then when it reopened, those people did not return right away, so that there were lots of job vacancies that were unmet.
Now that supply has returned, and immigration, I think is certainly part of that, and so the labor market is in perfect balance right now. It has reset itself, not through layoffs but through people coming back in. If you start deporting people who are working in the labor force, obviously you run the risk that you then upset that.
Balance, right exactly, So, if the market is only expecting two to three interest rate costs next year, should it really be rethinking that in the sense that the FED should possibly get in front of some.
Of this, Yes, I think so.
So the FED is cut, of course twice by fifty and by twenty five. I look at various iterations of the tailor rule. Of course, the rule made famous by John John Taylor back in the early nineties, and no matter how you slice it, the Fed is in the right place having cut rates a few times, like the tailor rule completely supports lower rates than they were. But going forward it is by no means clear that a
lot more rate cuts are in line. And of course, when we started this year, the market was expecting seven rate cuts just this calendar year, and then a few months ago and we had the growth scare, it was down to a two handle on the terminal rate. Now you know we got sixty six percent chance of a rate cut in December. I think the Fed can go either way. The economy obviously is not falling off a cliff waiting for another rate cut. But my sense is that the Fed was right to do what they've done
so far. But I would hold some more rate cuts in reserve rather than giving them to the markets and running the risk that you don't have to take them back, because I think one of the risks sort of economically is that inflation went from nine to three in twenty twenty two to now. If you look at the CPI, the core pc PCE went from six to two point eight, So inflation is better than it was, but it's still above two, right, and oftentimes the pendulum has to swing
all the way through to stay at two. So if the economy now re accelerates at a time when inflation has not yet been slayed, you run the risk that then that reaccelerates and then the FED is in a much more difficult position.
Yeah.
I don't envy the job that Jay Powell has right now for many many reasons.
Hey, I'm just finally switching gears.
A little bit seven trillion dollars in cash on the sidelines right now, at least in money market funds as of just a couple of weeks ago.
Where does that cash go?
And when I've been asked that question so many times, and my sense has been so I follow this. You know, for Ally's one of the big players in the money market fund industry. So the way I look at the cash on the sidelines is I look at it as a percentage of the equity market cap. And there's a percentage of the market cap. It's around ten and a half percent, which is exactly in line with the historical average.
So there's a lot of cash, but equities are worth a lot, So how much comes out and can it move the equity markets is to me the big question. But the caveat with the mountain of cash thing is like, for instance, during COVID, money went out of the stock market into money markets earning zero because people were panicking, and so that truly was a flight to quality trade then, which was then later reversed of course when the market was at a high. Right, it came out at the low,
comes back in at new high. So it shows you the perils of market timing. This mountain of cash came out of the bank except two years ago during Silicon Valley bank and banks paying for half a percent. So there is some cash there, maybe a trillion, but it's not seventral.
All right, Urian, we have to leave it there, But we got to the end of the answer.
So thank you. That is Urian Timmer, who is.
Director of Global Macro ad Fidelity Management and Research.
Much much appreciated.
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