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The University of Michigan sentiment data came out today weaker than expected. Sixty four point seven was a headline number. The consensus was sixty seven point eight last month sixty seven point It's a little bit weaker there. Let's break it down. Johanne Schue joins US Surveys of Consumers Director at the University of Michigan. Joanne, what did the number numbers tell you today?
Essentially, consumers are feeling less optimistic about the future inflation. Sorry, consumer sentiment declined over the course of the month of February, and consumers do see that things the outlook is looking a bit weaker than it was about a month ago. The main reason for this is that they're becoming much more concerned that inflation is going to come surging back
in the future. Inflation expectations really got quite a bit worse, both in the short term as long as the long as well as the long term.
So all five components of the index deteriorated, including a decline in buying conditions for big ticket items. How do you interpret, You know, what kind of macro signal you get out of something like that.
Consumers are seeing signs of weakening throughout the economy. We see it again in terms of buying conditions for durables. So that's mainly because people are really worried that it might be too late to avoid tariff related price hikes
in the very near future. But consumers are also expecting unemployment rates to get worse over the next year, so they're seeing weaknesses, potential weaknesses and business conditions in their personal finances as well as in inflation and big buying conditions for big ticket items.
Our moves of this magnitude again sixty four point seven and was the actual sixty seven point eight was kind of last month. It was also the consensus for this month. Our misses of this magnitude are they common in your survey work.
What's a little bit unusual is that we're seeing declines across the board usually the five index components. Some are moving up, some might go sideways, and some might move down, but this time we're seeing all five index components all moving down at the same time, both inflation expectations figures moving getting worse at the same time, as well as
unemployment expectations. This not necessarily saying people think things are getting a lot worse, but they're seeing concerning signs across the economy.
Interesting and again, the Universe emission five to ten year inflation a look. The consensus was three point three percent was the outlook. It came into three point five percent, So Joan was mentioning a little bit higher there.
A little bit.
Concerning joeyan Shoe Surveys of Consumers, Director at the University of Michigan. They don't just make good football players and make some pretty good economists out there in Michigan.
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Looking for some trends in the marketplace today, you know, just kind of a risk off kind of day. The United Healthcare News weighing on the DAL certainly, but people trying to get a sense of economic data and earnings growth and all that good stuff. Looks like the Fed's going to be more less on the sidelines for most of this year. Katiekiminski joins us. She's a chief research strategist Alpha Simplex Group up there in Boston, Mass Area. Lots of MIT stuff going on in her resume. I
don't know what's going on there. It's a lot of math, I think, Katie, thanks so much for joining us here. How are you guys thinking about these markets today? Where are you guys seeing interest, opportunity value?
Well, to be honest, it's been a little bit of a reversal the last two days. We've generally been following that US exceptionalism theme across multiple asset classes, and you know, it seems to be stumbling a little bit, and you know, the market is definitely a little concerned.
Today really doesn't seem to be any different from that.
So we'll have to see what that means, I guess in the next few weeks.
How are you thinking about correlations between stocks and bonds right now? I know we said it was a risk off day, but I mean today we're seeing I guess people piling into treasuries exiting stocks. I guess that could make sense with the risk theme, but we haven't seen that correlation kind of play out every single day over the last few months.
That's that's a really good point because we actually have seen on aggregate positive stock bond correlation often more recently. And what that means is that the market is trying to figure out how much is inflation important, because that's what we've anytime the market's concerned about inflation, the correlation
being stocks and bonds changes quite a bit. But today just seems to be a classic risk off type of day where you know, people are nervous, consumer confidences down, long term inflation expectations are up.
So I think people are just a little nervous about what all this.
Means, Katie.
One of the trades that's been pretty solid for a lot of people for a long time has been just buy the dollar. It was certainly part of, you know, quote unquote the Trump trade. We've had a little bit of a pullback in the dollar here. How do you think about that long dollar trade here?
Well, the long dollar trade, you know, just had everything going for it earlier this year, you know, you really saw given the FED being on the sidelines, that means that there's less pressure on the dollar. Uh, the idea that the US was looking strong and that was making the dollars strong as well. But as some of those narratives have petered out a little bit or perhaps extended quite a bit.
We've started to see some reversion in that theme.
This month, and so I think a lot of people are starting to wonder, you know, could this theme come back or is there just a lot of noise around a lot of the geopolitical and also the changes in the US administration that could sort of shift dynamics.
Actually have a colleague on the FX team you asked me today, have you seen anyone turning bearish on the dollar? So maybe I'll throw the question to Katie. Is it time to turn bearish on the US dollar?
That is actually a good question.
I think people are asking that question, especially versus things like the yen where there's a more clear narrative, you know, where you know boj is doing something different. But I think the question is just is this just a reversion from the consistent theme or you know, have we kind of shifted course?
And so far it doesn't look like it yet, but there.
Has been some indication that the dollar is backed up, particularly this month.
Another trend that's been pretty pervasive has been gold here and I you know, the Bloomberg Intelligence commodity strategist Michael mcglohan is said, for years and years and years in terms of commodities by gold and short everything else.
What's that.
I guess the fundamentals for gold look really solid.
Yeah, I mean, gold has been one of the tried and true trades for trend in the last few months. I mean, of course it reverted a little bit this week, but there just seems to be a lot of structural reasons why people want to hold gold. There's a lack of supply of gold, people don't want to loan out gold, so it just seems to be sort of that safe haven that it, you know, especially in.
A world where there's you know, more of supply chain and other you.
Know it issues globally across central banks. So I think, you know, gold seems to be your sort of safe haven asset and that doesn't seem to be stopping yet.
I have to ask a question about managed futures because Katie wrote a book about managed futures And without getting too technical here, I do write about ETFs and we have seen this year Blackrock Invesco, and I also believe Fidelity file for Managed Futures ETF.
What do you make of this?
Is this like a really a vehicle that should be in the ETF wrapper and you know, something that retail should be looking into.
I would say absolutely yes, it's a very exciting and you know, we wrote this really exciting paper recently about this new fields or the managed futures ETF, the rise of it. And what's exciting is since there were changes in US transparency in the regulations for active ETFs, now there's a lot more uh, you know, ability to incorporate dynamic and active strategies in an ETF rapper, which allows people to you know, invest in such strategies on an inter day basis as opposed to sort of a typical
mutual fund structure. So I think you're going to see a lot of opportunities for beta like products that give investors access to a dynamic range of asset classes over time. So it's an exciting field and something I'm super excited about.
So thanks for asking.
That's awesome. Who needs I mean ETFs for everything. Katie Comminski ch you Research Strategists, Alpha Simplex group up there in Cambridge.
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Stock story of today, United Healthcare off about nine percent.
Here.
We've got some oversight potentially some people probing, some regulators probing United Health. We want to get some of the details there. We go to Glen Mooseef, Bloomberg Intelligence senior Ecroyannel's covering some of these healthcare names here. Uh, Glenn talks about you and h What's what is the news today? Moving the stock?
So the news good morning. First of all, good afternoon. The news basically that the Wolsetet Journal broke the story that there is a Department of Justice investigation into Medicare advantage up quoting from United Health group. Upcoting means that doctors usually upcode the diagnosis, make diagnosis more acute, so companies likedic like United for example, or any other Medicare advantage plan get much higher payments from the government, and that's the issue.
How do you anticipate United is going to respond to this?
So United issued a very short statement saying that Wolf Street Journal has been sort of pursuing, you know, putting in that gative spin on what United Health Group is doing and completely unite the accusations. That being said, Department of Justice is investigating and you'll see what common is it for?
I mean, this goes to the heart of what an insurance company does. Diagnosis, you know, submit, get payment. I mean that's what they do. How common or uncommon is it for the government to look into.
These type of investigations are very common? Common or relatively okay, this is nothing new usually, so investigations key. The other thing is investigations can take up to a few years. Usually they have resolved in the settlement. Government is looking to make some money and company just wants to put it behind them.
And they said, what is the reputation of United Health that they's such a monster company? What's the reputation industry for this kind of stuff?
Well, it's very difficult to say. Especially over the last six plus month, you know, the company has been heavily scrutinized after the murder of one of the executives. That being said, you know, every company, as I always said, is there to make Every business is there to make money. So you know, unless they're doing something illegal, which I you know, very difficult to prove. You know, I don't think there is anything.
What do you make at the share price reaction?
Is is it an overreaction to this news Because the company's medicare advantage division it is kind of small compared to the overall business, right.
Right, so, so relative to overall business, it's pretty small, but United is the largest Medicare advantage plan in the United States. That's one thing. Another thing is a lot of revenue comes from Medicare advantage for United It and the other thing that I think the reaction of the stock where it is, even though I do think that it's probably an overreaction, which sort of you know, today's use adds to what happened over the last six months
with the company, you know, all the negative sentiment. But I also think that investors are thinking that today's announcement is sort of the Pambindi introducing herself and also partly you know, the Trump administrations showing that federal agency are not the only target of you know, waste for the abuse those agenda.
So you think there is a political aspect to this pot.
I mean, I can't say for sure, but you know, what's what's.
The feeling about the managed care business in general? See the stocks haven't been great performers. Has the market feel about the managing care business?
So, you know, first of all, United sets the tone for the whole industry, right, It's the biggest company and sort of manage care companies usually trade in tandem with United sort of setting the tone and everyone else follows as United sort of has these issues that they sort of try to navigate. You know, the whole industry is sort of under pressure right because of it. So I think over the last couple of years medical costs were going up. Everyone is expecting medical costs to continue to
go up. My thesis that it's gonna they're gonna start to ease because three years after the post pandemic recovery began, I think there are less people that will sort of seek here at the levels that they did after differing seeing a doctor during the pandemic. So that could sort of provide a tailviinon for United. Earnings from Hunt as well as the only Indus ship. But we'll see how it plays out, all.
Right, Glenn, thanks so much for journey. US really appreciate it. Glenn Losev. He's a senior equianols Bloomberg Intelligence, following US managed care companies, United Healthcare the big mover in the market.
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Speaking of tariffs, let's get the latest here, because it is a fluid situation. We know that tariffs are an economic policy that President Trump likes to employ in various ways. And the current joins us Bloomberg Global Economy Reporter and to kind of where are we here on the tariffs? I mean, I think people are trying to get a sense of what tariff discussion is real, what tariff discussion is maybe just a negotiating point with other countries. How's the thinking around tariff's.
Evolving well and moving fast. If you consider the action so far, there has been a ten percent tariff put on all goods from China. That's actually happening. It's real, and it's it's new because it's covering all of the goods from China, not just targeted. Then, of course, we have various executive orders that have been signed asking the Trade Represents, the Office and Cumberence Apartment, excuse me to go out and analyze how the US to doing business
with the rest of the world. They're going to come back with a lot of reports by April one, and this in the meantime, we will see new tariffs going steel around the middle of March. I think it is so. Yes, there is obviously some rehetoric and a lot of headlines, but at the same time, there is also concrete action that's happening, and we're seeing companies respond, we're seeing consumers respond.
You just had joined talking there about the impact and consumer sentiment, and we're speaking to companies who make similar points as well, and.
That you have a wonderful piece of reporting out on the terminal today all about small businesses and how they're reacting to the prospect of tariffs and the tariffs that are already in place.
Tell us about what you're reporting.
Showed, sure, well, So the thinking when it comes to tariff is that big multinational companies are better resourced, they can shift supply chains, they can adapt, they can maybe absorb somebody hit into their margins. But the real pain comes to those small business operators, those small manufacturing in US who rely on saying import the components from China and the rest of the world. And we found out
we spoke to a lot of these people. They make all kinds of products, whether from lighting to fasteners, two tonke toys, and all of them made the same point that if tariffs on the goods they're bringing in at port go up, then their margins are at a point or squeeze, the point where they can't absorb that and they're going to have to pass those costs on their consumers.
So it's a small business people warning about the hit to their companies, hit their investment plans, and the fact that they have the pac these costs along.
What's the feeling and about reciprocal tariffs if if in fact the US does move forward on tariffs against certain countries, is he just the expectation that almost a knee jerk reaction to those countries will react and put tariffs on our goods as well.
I think that's the reaction function for training partners. We've already had China respond. China's put tariffs on US agricultural equipment going to China, for example, and have put some many trust investigations on US companies. The EU Trade Commissioner was in DC this week and I went along to his events, and he was making the point that he came here to talk deals. They're happy to buy alng buyside beans, ready to bring down tariffs on US cars.
But he also made it clear of that isn't enough, and tariffs go ahead on European goods, well, you're will respond to. They have their list, he said, and their lists agrievances, and they're ready to go. So this is a big danger that people make the point about. Yes, headlines are on tariffs. Maybe its leverage, maybe reaches some kind of a deal, but if tariff's go in and you get this tit for that spiral of a trade war, then ultimately it will weigh on business confidence and sentiment.
What are you seeing so far about just the extent of all of the talk of tariffs actually affecting inflation Because you see headlines every day that you know, analysts are saying that the tariffs are going to increase inflation, And what is your reporting showing about just how business is preparing for the prospect of tariffs. How does that actually affect inflation.
Well, we're still early, right, the inflation story is still very much kind of about stubborn services inflation, I think, more so than goods prices. But we're rather delicate point in the inflation story when hang on a second, wasn't it meant to be all about this inflation and it looks like that might be a little bit rocky. Now throw on top of that the point that maybe there will be these tariffs going on, typical consumer goods coming
to the country. Well, then the thinking among economists and businesses. As I saying, business are warning you'll have to pass on. Economists say price.
So we'll go up.
We'll have to go up near term. That's where it becomes more pointy. I mean, okay, near term prices go up. But what's the second round effect. Is is it one off inflation impact that kind of policemakers owners look through, or does it set and chain longer term higher inflation expectations? Maybe that's the hint coming out of the Michigan survey today, for example, that's where the big economic crunch does come. But right here, right now, of course, companies and consumers warning.
What it means for prices, what it means for inflation a longer term, what it means for confidence.
Very good, Endercurrent, Thank you so much for joining us at an acurrent global economy reporter Bloomberg News. Joining us from Washington, DC via.
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