A Look At Retail, Markets, And Supply Chain Struggles

Angie Solanki joining US, National director of Retail for US Colliers. Uh, Angelie, thanks so much for joining us. Here is Greg was just mentioning really strong retail sales coming out this morning. You know, what do you make of it, because again across the board the West, some concerned about the consumer, but some really strong numbers this morning. Yeah, we're actually

quite surprised and also excited. I mean, we're forecasting for year and somewhere around six percent increase in holiday sales, and we just feel that people are still looking to get back into the stores. The traffic is back. We saw about eighty three to increase in foot traffic, whether it was department stores, apparel stores, or beauty So people are getting ready for the holidays. Is there going to

be enough stuff for them to buy? I mean, I'm I'm already having visions of walking into the Toys r Us and seeing the shelves empty, although I don't know they'll be walking into a Toys are Why aren't you walking into a Toys r Us for Steve there? Yeah, find a different store. But yeah, there aren't any more or less in terms of physical stores. However, we do

still have the same concerns. So, you know, holidays shopping, although it is starting early, we definitely think the reason why is because shoppers are a bit worried about the supply chain, may feel Holidays away from them, so they're going to be potentially less merchandise well just may not arrive on time. So there is you know, those concerns still do exist. Um, so we'll probably see an early shopping spree and that's going to actually, I think help,

although um retailers hopefully are well prepared for this. Yeah, that's kind of where I wanted to go, because we don't hear from the retail companies in terms of earnings for a couple more weeks here. I mean, what are the retailers saying about their inventories are about their ability to get product when it's needed, because boy, we're hearing it from so many others that there wrote backups at

the ports. For example, there's lacks of lack of truck drivers, trains are backed up, the containers and everywhere you look. It seems to really be a big issue. Yeah, it's a bit of a mis uh mismatch. And what I mean by that is possibly what is occurring right now. Some retailers are receiving shipments that were prior season, so that now they're conflicted with hold on a second, I don't even have my holiday shipment. Now I have my prior season merchandise. How am I going to put that

into the store? Do I need to discount that? So the pressure that is being pushed onto retailers is just it's just all over the map. And I feel for them because it's a big struggle. Um, not only are they struggling with you know, the merchandise coming in on time or over a merchandise meaning that they probably have either received multiple orders two or three times what they planned for, So now they may have too much merchandise during the holiday season, and will that extend their holiday

potential sales into January February. By the way, do you think we saw savings rates jump during the pandemic and they've come back down stabilized a couple of percentage points above the historical average. Do consumers spend down back to

you know, the norm? I know we're actually going to see an increase in spend based on some surveys we've been reading, we actually see that consumers are going to spend either a little bit more compared to prior year UM, but probably roughly around you know, about six to seven hundred dollars on the average spend for gifts during this

holiday season. I think if people are still really in the mood to celebrate, you know, the mass mandates are relaxing quite a bit, especially in our more dense urban cities, So we will definitely see a bit more spend occurred this year, and then we'll start to see hopefully and softening UM and next year with the with the savings and so forth. And you talked to us about real estate, retail real estate. I'm here on Lexington Avenue between fifty

eight and fifty nine Street, UM. All of the retail space with the exception of one very small Swiss chocolate store remain empty. Are what are we thinking about? What are the retailers saying about, you know, getting back into the physical stores now? They're definitely retailers are very excited. It's actually been a very busy year. I have to stay within our organization at Colliers. We've just and the transactions are speeding up. I think what we're seeing is

the falling right now. Fifty fine million square feet of retail has been absorbed across the US year to date, and there's another fifty million square feed about that is under construction. So we are seeing momentum. There's movement from other markets, global markets where retailers are coming into our into the US. But what we're seeing is a very strategic approach. So they're really taking the time to say, Okay, if we're going to expand, where should we expand first.

So what I mean by about is, of course, a lot of people left the city and so when they left, um retailers follow. And so the retailers are saying, let's go into some of these suburban markets where we're seeing you know, year over year sales increases from our competitors. Uh, and there's some great locations. Let's try to get in now and then we'll start to look at or relook at some of our urban markets. But it's not going to you know, there's still it's still you know, viable space. Please.

You know, remb umber that rechire not going away, and the physical footprint is definitely not going away. I wonder if anybody wants to move back to Midtown. Our stores are empty, right, Paul? Is it still pretty empty around the Bloomberg office. Yeah, but the tourists are slowly coming back. I was again, I was out in the city having dinner last night, and I noticed that the tourists are starting to come back. So it's the worst of both

worlds exactly. They're always welcome, of course. Of course, Hey, Angie, thanks so much for joining us. Angie Solanki, their national director of retail for the US. Over at call, you're talking to us about what do you expect this holiday season after we had some real bang up numbers on the US economy. Let's bring in a j Odin right now. He's an investment strategist at b n y Melon Investor Solutions, and um, we're looking at another rally today after yesterday

we had the biggest games. I believes in March. What's driving us higher in the face of inflation concerns, supply chain issues, labor shortages. Thanks for having it, That's a great question, and I think a lot of it has to do with we're chipping away slowly at that wall

of worry that we saw in September. September were sort of everything sort of came together in this perfect storm, and we saw the death ceiling issues sort of added to that persistent inflation question, and then the news that's trying to about the potential for real estate um position more contagion issue, but obviously became more contained. And so all of that created a lot of volatility in October and now obviously I mean in September, but obviously now

we chipped away a little bit. The death citing issue pushed off until December, and although supply chain issues haven't been resolved, the labor market numbers that we're getting being a little bit stronger, moving from five down to four point eight were we I think the market is digesting the fact that although we're still going to have some persistent inflation, supply chains are gonna take a little bit time to normalize that the markets are still supportive of

rich assets and inflations. Clearly here that's why you're seeing fixed incomes fell off, But where investors are going is to where they can get some sense of inflation protection. That's I guess, while you're also seeing movement in the crypto market as well. So clearly the quality names, the ones that have pricing power, are going to have staying power and the age and ability to ride out some of this inflationary turbulence that we're gonna see for the

next few months. And I think that's why you're seeing the doubt out performing the rest of the major industry. So a J do I Do I stick with that rotational trade? You know, a lot of folks made back boys September of last year really arguably into the more cyclical names, maybe the banks, the energy names. Do I stick with that? Order? I try to again take a look at the quality top line growth stories, whether it's tech or healthcare. How do I think about that? I

think it's gonna be a little bit of both. You want some income, right, you want diving in um yield as well, all as you want those quality names. UM We're gonna see turbulence overall, But it seems like this is reopened three point oh in a sense. Right, we keep coming back to to you know, it's reopening the economy.

Then there seems like we pull back a bit. But even seeing the news about international travel restriction being lifted for vaccinated UM consumers, that's that's that's all positive news. And and it seems like this time hopefully that we're gonna we're gonna be staying in that reopen trend. So to your point, I think it's gonna be a little bit of both. It's gonna be income quality with those with pricing power, but also reefs as well. We like those, um,

going going forward as we we we navigate this inflationary pressure. Um. What about property here? I wonder you like reads, Um, do you buy real estate even even in this inflated market? Do you think you're so you're saying about the actual individual housing? Um? Yeah, you know, I think I think prices prices are a bit high, um. And so from from individual perspective, I mean, if I think about myself,

I would probably probably hold tight a bit um. And but I mean from a reef financing perspective, it seems like that's what a lot of consumers are doing, and it doesn't make sense while rates are low, um, even though they are creeping up, creeping up a bit um, you do you do get the value. I mean, you know,

housing prices, Hopefully you'll hold the value. I mean it in a sense that that real act, that the ability to just sort of in a sensive access as an equity in and keeping keeping too inflation trends, so I I would caution it just because of prices and hopefully you know when when things normalize a bit, maybe prices

come back when it comes to individual housing. But from the res perspective, we do like the income um and and instability to sort of deal with the tapering and the potential for area likes that are coming into Paul Paul is not the best time to buy an individual, but converse league a great time to sell a j We've we had some good financials. Have earnings results in the financials UH this week capped off here by Goldman

Sax today. What are you looking for UH in this earning period as we kind of get into the meat of over the next couple of weeks. I mean, it's super spinning is so important, right, I mean, we have to think about with this pandemic, everything sort of came to a stand cell and we've been looking for organic growth to take over, and it's to be it's that handoff for that bridge between fiscal and monetary policy to come over into really just from the economy itself sort

of standing on its own. And so continuing to see strong earning numbers is important for us because we need to know that that baton handoffs can happen, and that as we see capering and potential for rate hikes down the future, that we won't see any sort of pullback in the economy. So I think to continue to see stronger earning numbers is going to be important overall. And the earnings that we've seen so far, you're impressed, I mean you're be with the for example, the financials we've seen.

I think it's showed divertification from the banks. I mean, when we think about the banks, can we think about uh, it's usually it's a lot of it has to do with the yield curve, but their ability to do so in a low interest rate environment and still produced is a positive for the market. So I think that strong financials. Uh. Overall, it's definitely a positive seeing as that we're still at you know, a zero percent fund. Ray All right, A j thank you so much for joining us. We really

appreciate getting your thoughts here. A j Oden investment strategist for b n Y Melan Investors Solution. So, Matt, not a good time to be a buyer real estate. I think that's terribly unfortunate in my case. Um, I'm if it's your if it's your primary residence, I think there's not much you can do. And yeah, but you're just not going to be headed home pretty soon. I feel like if I if I rent a place, I'm just

gonna be I feel like I'm just giving money away hurt. Yeah, but you gotta think that the market's not gonna be this crazy for this long. But who knows. Um so, but it's even a rental markets in the city, it's gotten very tight, very quickly. But maybe on the burbs it's a little bit better. Well, they buy the dippers seemed to have won the day again today. Let's get

a sense of maybe where we go from here. As we get into the meat of this third quarter earning season, we bring in a grizzled voice from the investment community. Christine Hooper, chief Global market strategist for Investment, Well, I say grizzle because listen to this. They have one point five trillion dollars in assets under management. So when Christina speaks, people listen, and we are so approached to having Christina

on our show over time. Christina again. It feels like, just when people were starting to get a little worried, a little bit spooked about this market, the wall of worry and all those things that are out there, the past couple of days, I kind of erased that a little bit. Well, certainly, but I wouldn't say we're out of the woods yet. I would expect continued volatility. What we learned from the f O m C minutes is that the FED is full speed ahead and likely to

announce and begin tapering in November. I think that will contribute to volatility, as will the continuation of earning season. Not so much. I think for any negative surprises, I certainly will get a few of those, but I think it's more about the guidance for the future and issues like supply chain disruptions. So what about um inflation? Is the FED moving you think quick enough to keep this under control. Well, um, hopefully it is. I think so, just because I'm of the camp that that most of

the inflation we're seeing is relatively transitory. Now keep in mind that transitory doesn't mean that it goes away in a month or two um. In fact, there's some some dictionaries that would define transitory is not permanent. But I do think we're likely to see elevated prices, higher inflation war of the coming months, and that it may not uh may not moderate until the middle of next year. So we have to to buckle our seatbelts and expect that to be problematic, and that some of the headlines

could be scary, but this really shouldn't impact long term investors. So, Christina, we had a lot of the big bank's report results this week, have to buy some just some eye popping numbers out of Goldman Sacks today. What did you take from the financials and what we saw this week? Well, I certainly expected financials to be a highlight of earnings. Right that there are certainly far more tail winds than

headwinds for the financial space, So this isn't surprising. I just don't want us to be lulled into a false sense of security because some some sectors, some industries are not going to fare as well in this environment as financials have. So which ones are are you most concerned about? Well, I think certainly the ower marchin industries um UM, transportation, general retail, um, autos um, those that are certainly being

um impacted by supply chain disruptions. I think that's where we're going to see some of the pain uh this this earning season. And again though I don't think it should deter investors. I think we just need to be prepared for this. Yeah, I'm looking at my map go function on the Bloomberg terminal and I like to look at, you know, the the number of ships cargo ships that are outside Los Angeles or Savannah, New York and some of the big U s ports. It ain't get any

better out there. And I'm kind of concerned over the next couple of weeks when we hear from consumer products companies, technology companies, industrial companies that we're going to hear a lot about supply chain issues. It just feels like it's going to be a longer term issue that perhaps the market is not fully discounting how do you think about that? Well, I think the market is certainly store in to discount it. Um. This is very understandable. We're coming out of this incredible

economic disruption in the pandemic. UM. So it makes sense that we're experiencing all these issues and it makes sense that it will take some time for them to be worked out. Um. Having so, having said all that, I would expect, especially not only companies UH in those areas, to talk about difficulties thus far, but to give guidance for the fourth quarter. I'm quite frankly this situation has gotten worse in the last couple of weeks, so it's it's more going to be about UH next quarters earnings

and the impact there. So I think guidance is absolutely critical. UH to the extent that companies have visibility, I was going to say, don't you think visibility is lacking right now? Um, Certainly some have greater visibility than others. I think as think companies have. Some companies at least have a better sense, for example, of semiconductor supplies and how that situation is of versus what we're seeing in in in other areas in terms of supply chain disruptions. But yes, UM. In general,

visibility is going to be a challenge. Do you think earnings have come down enough to reflect some of these margin pressures that we might see in Christina or do you think there's maybe some risk to this market from from earnings. Well, I certainly think that that earnings UM are are going to be negatively impacted. And I think it doesn't mean that we're going to see anything terrible UM, but certainly for those companies with the narrow margins, it's

going to have a significant impact. But again, it's a relatively short term problem in the grand scheme of things. It seems like a long term problem right now because it could last several quarters UM, but UM for those with a long time horizon, these are kinds of issues that could present buying opportunities if they're reflected in stock prices. I just want to quickly get your take on rates. We've seen the ten year climb back up to one

sixty basically right now. One where do you see rates going? So? I think that that the movement is going to be higher, but I don't think that it's going to be a smooth move and they're certainly going to be headlines events, data releases that can send the yell lower temporarily, UM. But in my mind, we're going to be closer to two than one percent when we finished this year, and I think we're going to be higher than where we

are today. So and again, just following up on that, Christine UM, just wondering about the FED, UM, do you expect this tapering, in this eventual rate increase policy that we're likely to see over the next six and twelve months. Do you expect this to be I guess well received by the market or rational received by the market. I

think it will. Let's keep in mind that the stock market has become so incredibly dependent upon accommodative monetary policy, and so this is a situation in which UM, the market is going to welcome, UM a a very slow normalization process. And so I think in particular, things like when J. Powell says that there has been a very conscious un coupling of tapering from rate hikes, I think that's a very well received because right now markets have come to accept the fact that we're going to see

tapering start soon. UM, They're more wary about rate hikes and where that might take us. So I think that this this approach is and will be well received by markets. All right, thanks so much for joining us, Christina. Always great to get your insight. Christine and Hooper their chief global market strategists over at Investco. As Paul said, they have about one and a half trill billion dollars of assets under management out of Atlanta. That does it for

this Friday. This is Bloomberg. Now let's get to Mark Noble. He's the executive VP of E T F Strategy at Horizons E T S and we want to talk about the supply chain issues the semiconductor industry, how that's reshaping supply chains. Um, Mark, what do you think about where we stand right now? Is there any light at the

end of the tunnel here? I? I don't think so. Um. I actually think that you know right now the semiconductor issue with supply chains and the fact that semiconductors have become probably the most highly politicized industry globally, means we're probably looking at three for us to get some sort of supply chain movement where these can get to market.

UM very much viewing what's happening with a semiconductor's market to be similar to what we saw in the seventi three oil shock, where the pandemic has really shown the fragility of the supply chain where we've been so heavily reliant on Asian manufacturing. The vast majority of semi connector components are manufactured in Asia, the majority of i P

is in North America but not manufactured there. And it's resulted in a situation where you know, the United States and China are very much at odds to get control of the semiconductor, which has really come to the four as the key technology used for all consumer electronics, from everything from you know, smart TVs and artificial intelligence to

of course what we've seen with automobiles. So it is almost at a crisis situation, and you know, no amount of money being thrown at it is probably going to allow us to have reassoring of this commodity. And I'm very much unu as a commodity until there's you know, more excess manufacturing capacity, which will take a couple of years to built. Mark, I don't even know how we out here. I don't even have cocktail our kind of

knowledge of this topic. How did we get here? Well, the reason that we got here was that for the last fourty years, globalization has occurred where supply chain has all been focused on just in time delivery of technology. And so the United States benefit in technology has really come from the I P which is developing the technology. You know, you have Silicone Valley providing sort of the brain trust for development of technology. But to actually build components,

you have components built all around the world. So for example, if I'm doing etching on semiconductors, that's likely happening through a SML in in Netherlands, but I'm actually building the key components that go into you know, glaphics processing units, which are the major driver of things like artificial intelligence

even automobiles. Now that's being done in Taiwan, and then I have shipping coming through China, and I have you know, Japan and Korea also offering different pieces, and all these these uh uh supply chain opponents would come together to create this just in time manufacturing. When you have any disruption of the supply chain, which we've seen with the pandemic UH it results in a breakdown of any one of these components, you end up with complete gridlock in

getting these semiconductors to market. But that's only one piece of it. The more important piece is that data is really you know, the idea of data. If we talk about where the economy is going for the next two decades, really what we're moving forward is a digital economy, and a digital economy requires semiconductors to move data. Very much view data as the new oil. So semiconductors are the new engine of that data. And if you want to be you know, the lead economies in the next couple

of decades, you need to have exposure to semiconductors. And what's happened is China, for example, realize that they have a huge vulnerability relative to the rest of the world, and that they use semiconductors for all of their technology development, but they don't actually manufacture them. So they've been holding semiconductors. They've been taking you know, I p and people from

Taiwan to come and work there. And the United States has now double down, even introduced an act in called the you know uh Chips in America Act where they're also trying to double down to control the supply. So really, for your listeners, it's almost viewing it like the oil shock in the nineteen seventies, again where the safety and security of these massive global economies is focused on controlling supply of semi conductor is the way that they were

focused on controlling supply of oil in the eighties. So, um, what's an investor to do in this situation? I mean, what's the best way to hedge against these problems? Well, it's interesting, you know, you would think this would create volatility in the space, but actually creates an interesting opportunity because one, there's only excess capacity being built and demand increasing. So where we expect the semiconductor market to probably be about a trillion dollar market by it's roughly a five

billion dollar market now. And the one thing that's interesting in this market that doesn't exist with other technology markets is that there's going to be I believe, hundreds of billion of dollars spent by governments globally to support an underpinned development and manufacturing in semiconductors. So your baseline revenue of these companies or subsidies is very well controlled, even

if you end up with volatility. So as a long term buy and hold investment, uh, it's probably extremely attractive simply because demand is not going away and you've got massive public investment going into this, like you would with an infrastructure investment. So even if you end up an inflationary market, you have that being supported with money coming

in from the public. And then long term semi conductors are only going to be more widely used in all facets of our life, which means long term demand does not decline. So this is definitely a long term investment play that has a lot of opportunity even if it becomes a political powder keg at certain periods during the supply chain disruption. All right, Mark, thanks so much for

joining us. Really appreciate that. I certainly have a better understanding here, but I'm disappointed that we can't just throw money at the problem. It's usually my strategy their Mark Noble, executive VP of et F Strategy at Arise and ETFs. Why can't you just throw money and build a more a new fab plant. But apparently that takes a while. I guess takes a while. It takes some time to do that, and um, Unfortunately it looks like companies like t SMC are willing to throw more money at it

than companies like Intel. Yeah. Interesting, but we got to get some of that back on short. Sounds like as we talked to some of the experts like Mark. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Put on false Sweeney I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio.