This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
All right, everybody, a bunch of earnings crossing, as we said, metages crossing, and we are seeing that stock certainly rally in the aftermarket. It's up about six and a half percent. And again it must have to do with the outlook because it says third quarter revenue, so we're talking about top line thirty two to thirty four point five billion. The estimate on the street was thirty one point eighteen billion.
What is interesting is the comment from Remain at the end there that the cost increasing for reality Labs, which is the metaverse of meta, and that is what the company's been spending so much money on at least last year, what scared away so many investors. That's not scaring away investors today.
No, it's interesting, right, reality labs is meta, it's the VR headsets, right, and exactly they're saying, says Sez twenty twenty four. Reality Labs operating losses to increase meaningfully, all right, So let's get to it. Certainly keeping an eye on all of these numbers as well as John Erlichman, he's co anger at Bloomberg Markets on BTV, joining us on the phone from Toronto. John, good to have you here.
We are seeing Meta pop in the after hours. What's the number one or two headline that has caught your attention that you've.
Got, Basically, Carol, a couple of solid quarters from Meta
after a really sloppy twenty twenty two is interesting. I was thinking back to around this time last year when the company talked about rolling out a new automated ad platform, and ironically there was a lot of focus on artificial intelligence at the time, you know, last year, given the pressure the company was feeling, they were already starting to build a narrative around cost cutting, and you were just talking about all those cost cutting initiatives and the restructuring
charges associated with them. So, yes, Wall Street likes the financial discipline on the bottom line. Yes, Wall Street, in reaction to these numbers, likes better than expected performance on the top line. But this is a company that has invested so much in AI and acquired so much AI technology over the last decade. You have to wonder if they could redo it, if they'd leave the metaaname out.
Yeah, I leveraged John. I was just going to ask you about that, because you what you kept saying over and over again, and look what they said in the statement today. It's it's sort of like in Mark Zuckerberg's first comment in the press release, it's like the metaverse is an afterthought. It's the last thing that gets to mention the launch of Quest three this fall. Before that, he says he's got the most exciting roadmap that I've seen in a while with Lamaitu. That's kind of like
the chat GPT competitor threads. We all know what that is, reels new AI products in the pipeline, and then he gets to the launch of Quest three. Should they have not changed the name?
Well, look, I think that Mark Zuckerberg still wants that meta plan to work, undoubtedly, but I think that there's a real good reason for them to be leveraging AI because everybody is and it's interesting, like we've got these standout stocks from twenty twenty three and heading into Microsoft's results, the AI hype was tested, and I think we were schooled on the fact that they're still working a lot of that AI into the Microsoft suite of products right now.
So there's a bullish view that Microsoft will work some of that technology in, but maybe they're not quite there. Meta is there. Meta has been working all of this into their ad platforms for a long time, and the rollout of a specific platform, which is known as Advantage, was really seen as a potential boostered revenue. And so I think that there were a lot of people who felt that after a solid first quarter, that shouldn't be
a surprise if they could do this. You mentioned Tim Reels, and I do think that there's a lot of advertisers out there, you know, whether we're talking as much about Reels as we're talking about, say a new product by Threads, or certainly what's happening over at TikTok. The bottom line is the fact that they constantly talk about this suite of apps, their family of apps. They can still give a very strong proposition to advertisers on leveraging what they've got.
To be fair, if they did not give a better than forecasted or estimate for third quarter revenue, this would be a different story. And we saw those expenses, investors would be so happy. But because their outlook is upbeat and they're raising their forecast, this is why we're seeing some enthusiasm. So it's basically, Okay, you guys are spending, we get that, but you're also look at the top line. You're doing well. You're doing better than we thought.
I think a pretty good learning lesson Carol last year and how it feels when you don't deliver. And we know there's there's a certain amount of math behind sing or whatever, but you remember when they lost two hundred and fifty billion dollars in market value just as a snap of the fingers. So I think they learned their lesson, and a lot of this comes down to communication. And you're still seeing a company that wants to spend and
retool for the future. You know, Mark Zuckerberg seems obsessed with what Elon Musk is doing too, whether Threads works out or not. He's always trying to compete and stay irrelevant and all that jazz and focus on the future. But I think for today, they had a lot of easy levers that they could pull, and the fact that
the ad environment has changed. We just saw that with Google right the AD market typically dips early and between Alphabet and Meta, and now we have this view that the AD recovery is showing some signs of life.
So the question is in this for you know, a question for for managers everywhere, but also for all the people who were in my LinkedIn feed over the last few months saying that you know they, after X number of years at Meta, I no longer have a job. I'm now open to work the tens of thousands of people that the company laid off. To what extent can we attribute this success to decreasing those costs?
Oh?
One hundred percent?
Tim?
I mean, the reality is that this is a company that grew because it had the opportunity to grow. And I think the reason I the reason I brought up the same quarter a year ago and the company talking about introducing updated versions of their AD tools, well because it's even their messaging then alluded to the fact that AI would allow them to do more with less. So I think it's a pretty sobering time still at the company, given how many people, and you know, when you lose
your colleagues, that's not fun. And at the same time, we're sitting here on a day where maybe, you know, the headline is that maybe we don't see the recessionary environment that anybody thought tech overspent, tech over hired. And I think the fact that AI is as advanced as it is allows these companies to do more with less, So one hundred percent, it plays a key role there. As for the stock market reaction, you know, this is an interesting one because the second best performer in the
S and P this year, right behind Nvidia. I mean literally this is like one hundred and forty five percent coming into the earnings report. But this is still a stock that has a long way to go to get back to its all time high.
So rat still down about twenty two percent from that September twenty twenty one high, and we talk about it.
We wrote about it, you know on the Bloomberg two John As you know that with a pe of about twenty six, I mean, it's valuation, as our writers reported, might be at saving grace because if you look at some of the other big megacap tech names, they have run up so much, but their valuation has gotten really heady, and so you're even you know, so maybe that's their saving grace that they weren't so overvalue.
Perhaps, I think so already you're going to be seeing these headlines about this being, you know, a return to profitability for the company, and I think that they're definitely going to leverage some sort of but I still think there's plenty of issues that this company has to deal with, you know, I think, you know, let's let's just talk
about the landscape of social media. You know, it's hard to gauge how TikTok is doing every day, but they're definitely giving Facebook's or met I should say, properties are run for their money, so they're always having to navigate that. We haven't heard in the updates on the Elon Musk Mark Zuckerberg cage match, but we've definitely seen We've definitely seen threads launched. It'll be interesting to see if they have any more data on how that is doing so far.
And that is a bit of a for the company to take. You've got Elon Musk now creating an everything app at a time when some people have said Zuckerberg could continue doing the exact same thing because they own WhatsApp and this family of apps, and Facebook itself has tried to be a bigger player in payments in the past as well. So there's a lot on the go and I don't think there's any shortage of competition or
easy answers going forward. But this has always been that company that has set up so much advertising revenue and pulling some levers again to show their muscle.
Well, the stock, which was up more than seven percent the after market's still up about four percent here, but definitely tempering some of the gains back, but we'll continue to monitor it. Chapote also out with their numbers. Second quarter revenue very slight miss com sales were slightness as well. Second quarter just at EPs was a beat, and we're seeing that stock under some pressure in the aftermarket, down
about almost six to seven percent. Research while up about two and a half percent in the aftermarket following it's earnings, and it came out yeah with its results. All right, John Oakman, thank you so much. You're listening and watching Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
Meadows.
You know, just atworthosings as well. Then he's breaking down all those results after the close. Stock still up about almost five percent the after market, but it's off its pop that we saw of about maybe six seven percent just after it reported. You had Microsoft and an alphabet and snap last night texas instrument. So let's go over that. What we've gotten so far from tech megacaps and earnings
this week and in this earning season. Back with us is James Chochmak, partner in technology analyst at Clockwise Capital. He is on Zoom in Miami. James, So good to have you back with Tim and me. So Meta, let's kick it off with Meta. It's up about five percent in the aftermarket. Does it make sense the trade? And what do you like about the results? Are not?
Like?
No, I think the results were great. I think the aftermarket reaction speaks for itself. I think at the tale of two cities when you look at Meta on the one side and Snapchat on the other, I think that we're going to see is that these big, big ad platforms continue to accrue more and more value and more and more of the online digital ad market as they implement their AI capabilities and invest.
On that front.
So I think it's going to be increasingly hard for the niche players unless they have some type of completely differentiated value proposition.
Are they actually tracked the maximum value?
But James, James, good to talk to you, by the way, it's been a while.
Sure, yeah, are they actually.
Implementing this AI technology yet? Because if you look at some of the notes today in the wake of Microsoft earnings, this is Microsoft and we can talk about meta too. Was it was, you know, they were like, show us, you know, show us where the AI capability is.
It's going to take.
Time, let's be fair, right, Yeah, I mean, look, I think it's going to be a constant state of iteration in getting the right ad in front of the right user at the right time. And that's been the mission of digital ads since day one, as dollars moved from analog to Digital's the that's the golden value proposition that they're selling. They're just going to be able to get
better at it. But also on the flip side, as you think about the generative AI aspects of it in the production of ads, you know, there's a lot of money spent being toward the middlemen in the creation of these ads and think about being able to create a thousand ads and in several seconds, you know, tailored toward every type of constituency that you.
Can think of.
And where are you going to deploy that excess capital that you would have spent on that front.
You're likely going to deploy it toward the.
Advertising themselves, so they in essence, you know, it's not just a metas specific. I think as the industry adopts these tools and capability, I think that you will see more and more dollars shift towards these platforms.
What I find always kind of wild is the reach of META as a company overrole. And I'm looking at Facebook users topping three billion. I mean, that's real numbers, whether you like it or not, and it's up three percent like that is worth something, correct, Yeah.
It is, But at the end of the day, you still have to place a value on it. We actually, you know, we trimmed our position around three hundred. We were up about one hundred percent on it heading into the print because some of the buyside expectations have gotten you know, out of control, you know, looking for ten percent higher numbers than where the street currently is, and you saw those disappointments on the buyside, getting the head of themselves on Netflix, on Microsoft as well as on Tesla.
So you know, handicapping for that, we did take some money off the table. Well then this is a go ahead.
Yeah, Well you go ahead, James, and then I'll follow up.
Well, I was just going to say, you know, also investors are really rethinking how they're valuing these companies, you know, as the investments on the AI front require a lot of capital expenditures, so a lot of the valuation that the methodologies have increasingly shipped from an earning spasis to a free cash floard basis.
And that's kind of changing the valuation calculus as well.
What about TikTok? You look at time spent on these apps, Yeah, and you look at where the eyeballs are, how much time they're spending using these what's the TikTok factor here for meta platforms.
I think it's a factor for all of them because time is finite. Every minute I spend on this service is a minute not spent on another. I mean we're cognizant of it when it comes to meta, when it comes to Alphabet, when it comes to Spotify and any type of media consumption Netflix exactly an Yeah, I mean, if you've got to be cognizant of it, and you know, we're only here at once in this world.
For only a certain number of minutes, and whoever can capture.
That existential very quickly.
It's funny that you say that because Tim and I recently had a conversation this whole idea. You're right, like, you have a limited time on this.
You know what's funny though, that I really want to be spending the limited time I have on this earth glued to my phone exactly right.
I mean, it's really I do think there's a major rethink going on, and we all just have so much time. And you know, I went back to reading, and I'm like, I forgot how much I love books. You talk to me about reading and going back like real books, like real books. Snap. Did we talk about Snap?
We didn't talk about Snap with James yet.
Are we just writing this one off? It just seems like quarter after quarter it's a little difficult.
Yes, you.
Becoming Snap for years? James? What's what's going on?
Yeah?
I know, Well the thing that I mean, he sold me on a different value proposition than what it ended up being, which is why I was initially constructed on it. But the problem with Snap is, you know, they don't
they don't really know what they are. You know, this is a in order to succeed, you either have to be everything to everyone and then to be that you have to massive scale like a metal, like a YouTube, or you have to be incredibly niche and maximize the average value per user by a tremendous amount of engagement on a per user level.
Unfortunately, they're trying to.
Be a Meta without the scale of Meta, and that's a losing proposition and I just don't see it.
You know.
It contrasts that with a pinterest, you know, which is a different value proposition, one that requires necessary necessity, takes a different level of engagement, a different and aspirational level of engagement. You know, those are two both niche services, but one is better than the other.
So I'm looking at just a bunch of earnings in the aftermarket. I mean, we just talked about Meta in a big way and some of the other big tech this week, but you got topotely down about eight percent, the company saying inflation hit some popular menu items. You know, we've gone through Bank earnings, we've gone through, We've gotten some chip names. I mean, what are you thinking about this earning season so far?
It's a good question.
I mean, we're we're actually broadening out our portfolio. Obviously, you know, we're tech first. You know, we're called Clockwise Capital because we believe the purpose of technology is to save time i e. Productivity, and you know that that's what we booked to invest in big secular themes.
However, you know, we've had a tremendous run.
A vast majority of the growth that we've seen or the appreciation of the market has been a factor of the multiple expansion versus earnings expansion. So actually we've added a lot of names that are you know, not traditionally tech, you know, into our wheelhouse we have We've added Coke, we have added Spirit, Arrow Systems.
We're in JP Morgan Standard and Poors.
You know, a lot of names that you wouldn't really think because we think that there's going to be a rotation here from growth to value, as if things settled down on the growth side, but obviously still full steam ahead on the big names like Amazon and Navidio.
I love what you said, and I think this is like something worth repeating that the appreciation of the market was because of multiple expansion, not earnings expansion. Like when we talk about the importance of fundamentals. This is why earnings matter, right when we go through the earning season to see whether or not, especially some of these names that have run up so dramatically, whether or not they, you know, are worth the valuation that we see in the marketplace.
So James, just in the last minute.
The biggest Yeah, go ahead, I'm just gonna say on that point, the biggest disconnect in the market between earnings and multiple expansion is Nividia. Nividia has lagged from an earning standpoint, from a multiple standpoint, while their earnings have searched.
So I mean, that's why we're putting our money there.
Interesting, Okay, last minute. Next week, we've got Apple and Amazon. Give us some expectations there.
Apple is one that I can't believe we didn't add it to the portfolio. It's one that we just didn't see that much upside to it, and it's worked. But I think that Apple Apple is going to be just fine. I think that the.
Expectations around phones and.
Desktop and everything as modest services continues to grow. Obviously, China is the question mark so and that was one of the reasons why we didn't invest in the concentration there.
But I think the shares should continue to do well, and as relates to Amazon, that's one that we continue to like a lot.
I think that you're going to see the bottoming out of AWS, potentially coming out slightly ahead of the ten percent growth that the streets expecting, and then possible reacceleration as you look into third quarter. And I think that in and of itself should be enough to send shares.
Hire looking forward to get to one fifty nine of the year.
Always love getting time with you. James B. Will James Chock, mac partner and technology analyst at Clockwise Capital. Really a nice overview of the tech and some of the big names that we've gotten, but also the broader perspective when it comes to earnings and what we've seen in terms of the market reaction. He of course, was joining us on zoo from Miami.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Speaking of somebody who always gives energy to all that he does. Might drop Elon Musk, and we've been talking about him since the.
We're gonna say, Jenny Surrey, all right, that too.
I feel like I failed everybody. She does have great energy. She's also got a most read story on the Bloomberg and it's about Elon Musk, what he's up to and looking to go after Bumpa, the King of Wall Street Jamie Diamond.
Okay, come on, we've heard him talking about this for years. Jenny. I love this piece because you really did a deep dive into what X means and trying to, you know, translate what we heard from Twitter's new CEO and a tweet recently about the future of X, which sounds like it's going to tie us all together and everything.
Yeah, I mean, I think that's exactly right. I think they would like it to be the super app. And we've seen a lot of tech giants want to achieve similar ambitions and it's been hard. It's really hard in the US to pull off so we'll see they've got lofty goals. And yeah, our story today was really just trying to show it's really it's a lot harder than anything to do this here.
Yeah, I'd like to be five nine and living on an island, but hey, here I am. We all have loftys.
You said it's difficult in the US because what they're trying to do is essentially create you know, what is it, well, we chat or you know, a Chinese super app here in the US.
Yeah, so it's a very different market. You know, over in China, consumers have shown this willingness to do their banking, to do their shopping, to their social media, to do all their messaging all in one app. And so you've got these big super apps like Alley Pay and we chat pay that have billions of users literally, And so we've seen a ton of different tech giants here think well, if it's so successfu on China, let's try this model here.
And so that's really what we think we're hearing from the folks over at Twitter and now X And Yeah, I think our story today was really just trying to show that a lot of different US tech giants have tried to pull this off, and US consumers just seem to show a different willingness, like they really prefer to
have things kind of compartmentalize. You do your banking with a bank, you do your social media with a social media company, and you do your commerce with an Amazon or a retailer, and so they just haven't shown this willingness to kind of bleed through those lines.
Well, you know, I was thinking about this. It's because it's just the way we've always done it right, And I think about they always talk about emerging markets. If you want to see financial innovation, go look at an emerging market, because they just started out differently, and we've got to kind of deal with a legacy financial system of how we operate.
Yeah.
No, I think that's actually exactly right. And a lot of the cases where super apps have taken off in places like India or China, they haven't had the credit card usage that we have here, and so we find it relatively easy to send payments and make payments. Other places don't. And so we're not really trying to fix anything. We're just trying to bring kind of the latest and greatest versus other countries that really had huge, giant problems to actually fix with how payments were done.
Can we talk about what some of the other big tech behemoths have done, because it's you might know them Meta platforms, Alphabet, Amazon, what they've tried to do and not been really able to do it yet.
Yeah.
No, I mean I think Google is a great example of they got really far down this path. They had even lined up, you know, almost a dozen bank partners. City Group was one of them. They had spent months on the project, had talked about it very publicly and really tried to prime the pump for how much USA just was going to get and how great it was going to be. And then at the very last minute they kind of said, you know what, this isn't going
to work. We're going in a different direction. So you've seen really big, ambitious, i mean meta with the Libra a few years ago. They were going to revolutionize remittances and change the way we send money overseas and immediately face a lot of regulatory pushback. All their partners have been in the project and now they're out, and so I think it's just a lot harder. You know, it looks like a really attractive space financial services to get into.
It's you've got these.
Really sticky consumers that use them a lot, like you use your credit card every day, right, but it's just.
A lot harder to become loyal to banking names.
So, Jenny, you put this tweet? Sorry, what is it called?
Now?
An ex?
You put an X just doesn't We're still calling it tweets.
Okay, I'm gonna call it a tweet. You put this tweet in uh in your piece and it's it's from Linda Akarino in the new CEO of Twitter, who writes, quote, X is the future state of unlimited interactivity centered in audio, video, messaging, payment, slash banking, creating a global marketplace for ideas, goods, services, and opportunities powered by AI X will connect us all in ways we're just beginning.
To imagine, brought to you by the Twitter X no Tesla marketing.
Like I think someone said, someone sent me this tweet like a couple of weeks ago when she sent her her last week and it was it was like you know, a meme from Succession in the in season three or no, the most recent season where they're all sitting around where it's like it's masterclass meets the new Yorker. It meets The New York Times meets Bloomberg, and that's like, what is she saying here?
I mean, that is a lot of buzzwords in one tweet. I do think they're trying to get at the idea that they want to be kind of this one stop shop for folks. And yeah, so yes, there's a lot of other elements of that in there. But I think they want to be the place that you go to, not just send your tweets or do your your kind of basic social media stuff. They want to be where you go for messaging, they want to be where you go for payments, they want to be where you go for shopping things like that.
So I think that's the goal. I yes, a lot of people have probably Teaseder that time.
Can I say one thing though, Elon Musk is kind of not completely a financial virgin if you will right if you go, PayPal very successful, and I do think we're all in it getting to a point we just talked about. I know that I just think it works, but we're also at a time where we're also inundated by apps and stuff that if somebody can give me one, I would be kind of happy. So yes, financial versions, but it works. He's not one.
Elon was a founder of PayPal, and I think it's actually a really good point. He does know this space really well. He since watched PayPal and all of its triumphs and tribulations. I think two years ago is really actually a good time to look at PayPal because they actually said exactly that. They said, we feel app fatigue. We are going to be the next super app in the US. We think we can do it, mainly because
we come from a position of finance. Consumers already trust us with their money, so we have this really good leg up on the Googles or the facebooks or the Apples of the world.
We're going to do this.
Two years on, they have seen their stock completely slump, mostly because people felt like they got too distracted. You now have CEO Dan Shulman talking constantly about, you know, really focusing on the core checkout button and that core checkout experience, completely retrenching from all their ambitions and super apdom and so yeah, I mean, I think PayPal is a good example because one it shows that Elon has
the kind of payments chops that it might take. But also PayPal has gone here and has decided it wasn't worth it, So you kind of have to take both sides of that example.
He doesn't mind breaking things up either. No, and breaking things if you will. He's certainly done in the auto industry in the.
EV world, but in finance you can't do that.
It's a little bit different regulatory framework.
And people's money. I mean, cars are important to I shouldn't say.
That, Jenny, Thank you so much. Jenny's ray.
I'm brother Marc.
A journal How about you let me drive?
Oh no, no, no, no, who's gone drive?
Honey?
Please?
I'll do the riding gravel.
Let's mate, I want to try it.
It's good question.
This is the drive to the globe dot com TM thing we'll buy around? Should it on on Bloomberg Radio?
All right, everybody three? Another FED f O MC meeting. It is in the books. Carol Master along with Tim Stanevik live here on Bloomberg Business Week. Thanks so much for staying with Bloomberg on TV, on radio, and across our streaming platform as well and on YouTube. When it comes to the latest FED decision, and it's interesting to hear what our team had to say. Tim, it feels like we got a little bit of everything, kind of a little bit boring and kind of what we expected.
I think somebody's ready for vacation, you know, Oh Jay, Yeah, yeah, you know. He's got eight weeks until the next meeting of the Federal Reserve. Between now and then, there is a little thing called Jackson Hole, and I wonder if we'll hear any details then. But the fact of the matter is, I mean, one of my big takeaways is that a lot can happen between now and September.
And he said that data dependent. They're going to watch it. Every meeting is a live meeting. There's no cadence already cooked in the books, at least on the FED.
I mean a live meeting. And he talked about the descent in this one, and we'll see it in the minutes in three weeks. But you know, it was unanimous for this decision.
I will say one hot take he doesn't see inflation back at two percent until about twenty twenty five.
That's a long time away.
That's a long time away, And that the Fed will not be cutting.
Rates this year higher for longer anyone.
Yeah, it's another thing, all right, So let's see what our market guest has to say our drive to the closed guests on this FED Wednesdays. Brian Jacobson, Senior investment strategist at all Spring Global Investments with us on Zoom from Wisconsin. Brian, A lot going on. It feels like a little bit of a ho hum meeting, and I feel like markets have settled to kind of where they were prior to the FED decision. If we saw any
kind of movement coming off of it. What is the most important thing you heard from Michey?
Thanks for having me so now. I actually I'm a chief economist at Annex Wealth Management here in elm Grove, Wisconsin. And when I was talking to our investment policy committee prior to this, trying to dissect what it is that Shair Poll was saying what was really important, it seemed like it was hard to find something important. It was almost as though he was trying to be as non newsworthy as humanly possible. So I agree with you that
he seemed a little tired. Maybe he needs a little vacation, a little R and R before that Jackson Hole trip.
I think I need a little vacation. I'm so sorry about the title mess, so forgive me so chief economist, and you said, what was the firm?
Ye, we're at Annex Wealth Management Wealth.
You guys keep changing things around on us. I'm just gonna say it's the.
Same, Brian Jacobson. We know what it is, so we do. We do love having you on the program. Still joining us for Wisconsin this afternoon, Brian. So what happens between now and September? I mean, how does yeah go ahead?
YEA, Honestly, I think that uh, really this was a hesitant hike, right, So they had that hawkish hold. Now this is kind of a hesitant hike, like we're going to do it. Maybe we kind of talked ourselves into a corner of needing to do it, and now perhaps we're in that pregnant pause. I don't see any compelling reason why they needed to upgrade the economic view from modest to moderate, right, So, in FED speak, modest is
pretty slow, moderist moderate is slightly better. So I thought it was a little confusing as to why he would upgrade economic activity. And we do get a lot of data between now and September, and I don't think there's going to really be a strong case for a further hike from here.
What though. You know, it's interesting though, of what we got, and if you watch the market reaction, it does feel like we're pretty much where we were. He did also say the idea of hiking rates until inflation is at two percent is way past target. So is he acknowledging, in your view, Brian, that they could overdo it here?
Well?
I think that he is trying to remind people that that long and variable legs debate maybe where it is that he falls on that, which is that they don't have to keep hiking until they hit the target. It would almost be like if you are trying to take a medicine for a headache, and if you keep popping ibuprofen until the headache goes away, you would have overdosed.
Right.
So I think that the idea here is that where they are now is pretty close to what they think could be cruising speed, and as long as inflation continues to sort of choppily move towards two percent, they will be content with that.
As long though, as long as inflation continues to move toward two percent.
And that's going to be I think the big challenge is between now and say the November meeting, we are probably going to see that headline inflation number move higher because we do have higher food and energy prices. So is he going to have to start again talking away from the idea that well, headline inflation, we're not ignoring it, but it is very volatile because it is driven by
those volatile components. So it is going to be an interesting conversation as far as perhaps what that September meeting looks like to justify not hiking.
We all have to remember this isn't an exact science, and that's the tricky part that the Central Bank has to deal with. I did think it was interesting when he said we remain committed to bringing inflation to that
two percent goal and keeping it anchored there. And I think that's what's key, and that's why we have to think, you know, tim to some extent this higher for longer, as you were saying, you know before, it's that they've got to make sure that it's not a case if it gets down to two percent and then it pops up again.
What I thought was really interesting, Brian, is that we didn't hear much talk or any, indeed many questions about what we've seen in the equity market over the last few months, this AI fueled rally and whether or not that is indeed financial conditions listening to an extent that Fetcher Powell was not comfortable with.
Yeah, it did seem like in previous press conferences, it's almost like some people were baiting him, saying that, oh, you know, the equity markets are moving up, and so would you have to say about that?
Right?
And so he probably would have batted away some of those questions anyways, perhaps learning from previous mistakes that he really shouldn't comment about market reactions, especially short term ones. I was glad that people didn't ask about the most recent market moves. It did seem like it was more focused on, you know, sort of that outlook from the Fed,
what data are they looking at? And honestly, I came away thinking that their forward guidance is almost worthless because their forward guidance is only as good as their forecasts, and their forecasts haven't really been all that great. You know, if the staff economists are now taking out a recession. We didn't get a lot of data since the last meeting, So what data came in that convinced them that we're not going to necessarily.
Have I guess some of the data that I guess that that came in is jobs are on average showing what month of jobs reports more than two hundred thousand jobs out of the economy every month.
True, but you know that would have been a collapse in jobs if we would have gotten anything close to you know, like the one hundred thousand run rate, that might be more consistent with stable with a stable unemployment rate, or even consistent with labor force growth. And so there really wasn't a lot of data since then, and so if they maybe what happened is they moved the starting line for the recession out of the fourth quarter and put it more in twenty twenty four instead.
Your next focal point when it comes to the US economy.
I'm really interested in next week. It's the first week of the month, and so it is almost like Christmas floor economists, you know, we get the ism numbers, we
also get the employment situation report. This Sluice is coming out as far as that Senior Loan Officer Opinion survey, although he already kind of teased it, it's almost like he gave us an early opening for the gift there to say what that would indicate but is this divergence between manufacturing and services continuing or are we finding maybe some stability, some bottoming for manufacturing so we can transition from a roving recession to more of a stumbling recovery.
Roving recession, hesitant height hike, pregnant pause. I'm seeing as a pattern with alliteration. Brian, Hey, in our last thirty seconds, I'm.
A sucker for a literation, a large language model that I have in my head.
Hey, I like it. We're gonna do a lot of AI on the show a little later today, very briefly twenty seconds on the housing market and the way that a POW will describe more supply coming online.
Yeah, I'm curious about the as far as with existing home sales. If we do find stability with mortgage rates, people are eventually going to have to relocate. But from a GDP and growth perspective, it's really about the new housing naics. So new housing construction is what can triggers to real good on that.
So thank you so much for Jacobs and chief Economist and Annex Wealth Management join us on zoo from Wisconsin.
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