Stocks Slip from Records; U.S. Consumer Comfort Climbs

say slightly weaker than I expecting. Nothing major, but again on the margin, a little bit weaker. To kind of break down what we're seeing on the economic front, we welcome a good friend, Danielle di Martino Booth. She's a chief executive officer and chief strategist at Quill Intelligence. She joins us here in our Bloomberg Inactor Brooker Studios. So, Danielle, on the margin, what's some of the recent data telling you, well,

there's there's good and there's bad. Uh. You know, the power printing press is powerful, and I think that it is It is the FEDS, not Queie, that is a much greater force in propelling the nascent recovery that were seeing on the industrial side Empire State Philly fed this morning, we're seeing future inventories rise appreciably. That tends to be

a precursor to I s M new orders increasing. That's going to be very well received by markets because they're gonna say, okay, we've escaped the third industrial recession of the current longest expansion in US history. You know, the flip side or some of the things that we're seeing coming out of initial jobless claims. Continuing jobless claims were falling very closely, because if continuing jobless claims stop falling, the improvement in the labor market has been exhausted. So

we've seen seven straight weeks of of that stagnation. Continuing jobless claims are up zero point seven percent, so pretty hard to see on a graph, but nevertheless they're They're up for the first time since December of two thousand and nine. And for example, in this morning's existing home sales report, we saw homes priced under two dollar. We

saw those sales fall. That's not what J. Powell wants. J. Pale wants for his transmission mechanism of lower interest rates to work for the people who need to buy home So this doesn't all sound absolutely dreadful when it comes to the consumer, because we still are near historic lows and very full employment. What is the practical takeaway from the bottoming out or sort of the hitting of a sort of peak perhaps in the consumer? Yeah, I think

I think what the message is. And again initial jobless claims have surprised the upside now two weeks runing two seven and twenty seven UM. These are the highest levels we've seen since early uh this year. But I think that the takeaway is that we have had the most

extraordinary expansion in US labor market history. I mean, it blows away prior cycles by a mile, and a lot of that has had to do with the skills mismatch and how very valuable any employee has been two companies, and how how hard they've held onto them through these ups and downs in the economy. So for us to see companies finally relenting and pushing through the beginnings of layoffs I think is concerning because companies have been so

remissed to let go of their employees. So just looking at the FED funds futures rate UM after the FED minutes were released yesterday, looks like the markets discounting a rate cut maybe sometime mid to third quarter next year, September, right, Do you think the FED can wait that long based upon maybe some of the rolling over a little bit? You know, I think that, uh, we have to bear

in mind. John Williams is the Vice chair of the Federal Open Market Committee, so he's technically second in command, not Rich Claradat, who's vice chair of the board UM and his comments I've felt a few days ago were very devish in nature, and I think that the market may be over discounting how data dependent that the FED is going to be and whether or not they will be forced. And we have no idea what December is going to bring in terms of the repo market and

liquidity issues and year end window dressing at banks. We don't know how much disruption there might be going into the new new year, and how whether or not that

September realistic. So you know, when you came in here, we were talking about this bottoming out, some of the data having to do with the consumer, some signs of brightness in the industrial sector, and you said that you see a shift coming or the consumer, which has powered the economic expansion, is going to start deteriorating in terms of its economic condition, and we're going to see a

resurgence in industrials. Can you explain a little bit further And I'm you know, I'm not I'm not certain how strong it's going to be. If you look, for example, at Manufacturing Powerhouse Germany, it did not slip into recession. And I think Germany Germany is a great barometer for our industrial sector because we've been lagging. We've been following what happens in Germany, and what we're anticipating right now is stagnation overseas, not a major rebound, so you know,

we might rebuild stockpiles in the coming months. That's going to be again seeing very very favorably. The market's favorite leading indicator is I s M new orders and one of the reasons market's got a little shaky was because we had three months in a row of negative prints on I s M new orders. That popping back above that fifty line between expansion and contraction I think would

be seen as favorable. I want to see how much momentum it's going to have going into the year, whether there's going to be followed through because we're not seeing coming out of Detroit. What we would prefer with the with the U S automakers, that's going to count next year. Danielle de Martino Booth, thank you, thank you, really smart, chief executive officer and chief strategistic Quill Intelligence, also a

former FED researcher and employee over in Dallas. There is a consensus of sorts heading into twenty that it will be a pretty good year, potentially if in double it's yet again with respect returns on US equity industries, although perhaps Europe may outperform. But how contingent is this on a trade deal on a lot of things that are all but certain joining US now? Katerina Seminetti, she is UBS Financial Services private wealth advisor. Katerina, how much do

you buy into this consensus? I think it's primarily because phase one. To me at least, it's a sure thing because when you look at the components that go into phase one, right, it's all the pieces that both parties basically agree on and they I will even say more so the pieces that they need. So China agreed that to buying UM to buying US agricultural goods, that's a done deal, right, you know, in our case we would like to see more UM currency transparency, We would like

to have their markets open to our financial institutions. So, despite of the news of the last couple of days, I believe that Phase one is going through and also think that market is almost taking it for granted. It's almost like it's it's bought in and you know already built into the consensus that it's going to happen. And I think when this happens, we're going to have a

pretty positive reaction. My concern is not Phase one, it's Phase two, because I think the components of Phase two are significantly more important and also is something that we don't quite have an agreement on. So as one of the other things obviously moving the markets, Number one is Lisa raised, is the trade deal that seems to be such really driving kind of market sentiment and market performance.

Number two might be the Federal Reserve, which has been very accommodative through the market, seems to be discounting maybe one more rate cut next year. Is that kind of your view and the view of UBS So we had a you that Fed is going to cut continue cutting grades. As a matter of fact, our view even just from quite recently was that they're going to cut another seventy

five basis points going into the next year. But we are holding back on that view now because we think that the benefit of what's happening right now is we had fed that is extremely data driven. An economic data that is coming in is not negative, you know, it's mixed, but it is still quite positive. So I think that FAD's reaction is going to be very much linked to

the results of the trade negotiations. So if we have a positive outcome, if Phase two starts off, well, they might not cut, they might hold off because it is such a powerful tool in their arsenal, those rate cuts. I think they're going to be reactive to, you know, what they see, all right, So if you buy into the census idea that things are going to be pretty good next year, how do you square that with surveys out of ubs showing that wealthy individuals are getting increasingly perished.

That is very true. So I think that we have to look at the time frames. I believe there is going to be a very positive reaction to phase one. Once we get to phase two. It's an uncharted territory. It's quite frankly, you know, like the the you know, the the season two of Succession that I know so so many of the radio hosts here seem to love. And it's a great show because it isn't charted territory.

And we've leave that there might be a sell off. Now, we think that there might be a cell off, but we think the severity of the sell off will not be quite as extreme as markets anticipated. And as a matter of fact, you know, we think the likelihood of actual recession is very low. We think it might happen again, It all depends on the trade. But we think sell off is likely. And that's what we're getting from our clients.

When clients call us and they're concerned, they are concerned about the cell off, they are concerned about the makeup of their portfolios, and they're asking us, you know, quite frankly, what to do in repositioning. So what are you telling them now about positioning? Because we you know that the fourth quarter last year, particularly December, was such a shock

to the marketplace, to the decline in the equity markets. Um, and I'm sure as we get, you know, come up to that anniversary again this year, some of your clients are gonna be calling and asking what do you how do you telling them to position themselves? So we tell them to broader the time frame, And to your point, I think that the fourth quarter of last year was a really good practice. You know, it's almost like a really good test for all of us for what's to come.

And there are several pieces in the portfolio design that come into playing here. First of all, liquidity, so we tell clients number one, going into turbulent markets, going into volatile markets, have enough liquidity on hand, because then you know, if we go into the prolonged period of volatility of negative markets, we will not have to liquidate their portfolios. The second side is of course focused on yield, focused

on the counter cyclical asset classes like real estate. UM really really changing around and rebalancing and repositioning of fixed income portfolios because when people think, um that we need to pursue recession prove their portfolios, they focus on equity, but but fixed income quite frankly, it is just as

important going forward. What's your biggest concern. My biggest concern is that investors who are not prepared are going into this market with too much of a bullish outlook, and that concern goes back to you know, my days when I started as a new financial advisor in and if you remember, the timeframe was very similar when the talks

were about upcoming uh possible upcoming recession. But yet that was the best performing here and people almost got a little cavalier, you know, a little too brave and you know, overweight and equities Karatism and any Thank you so much for joining us, Katarina uh sim in any ubs Financial Services, Private Wealth Management. Let's continue our discussion of economics. The

Conference Board this morning released its leading economic indicator. To walk us through the details, Bart van Ar, chief economist at the conference aboard Bar, thanks so much for joining us here on our Bloomberg in our Actor Broker studio. What did the data tell you today, Well, the data shows for the third month that we have a moderate decline. But perhaps what's a little more important is that on a six month basis, it's averaging it out a little bit.

We now see your very modest decline. It's only a point one percent points, so it's nothing to really hugely panic about. What's interesting are some of the underlying changes that we're seeing in the index. So just carry on. Well, what is most important is that in the previous months, which was to a large extent driven by the decline in manufacturing. Uh and that actually is still a little bit of that. They're certainly obviously you know, new orders

have still is still quite negative. But um, what we see now in this month, actually the labor market shows a little bit of weakening. So one of our underlying indexes is the average work week. One of the underlying indexes initial claims. Both of them are now adding negatively

to the index. Now that sounds like bad news, but let's not forget that the labor market has been extraordinary, extraordinary strong, so at some point we would expect this, So on balance, we actually think this is actually not a terrible result. We really need to see how that's

going to evolve over the next few months. Is your leading economic indicator weighted similarly to the US economy, which is you know, two thirds seventy the consumer well leading a con get next to always put a little bit more emphasis on production and manufacturing, and a lot of that is to that's where you have a lot more of the volatility, and a lot of that is playing through in the rest of the economy. Services tend to

be much more stable. The consumer tends to be very strong, but it are exactly those elements actually services and consumers that sort of keep us again a little bit more moderate on making sure the huge implications from this negative

number today. It is interesting though that the trend is shifting away from the steady improvement that we had been seeing, particularly with the consumer, and we saw that again today with the jobless claims just taking up a touch and really just a fraction and from very very very low rate. But at what point do you have to start paying more attention to this is a sign of a weakening consumer, Well,

you first have to see it from multiple months. You have to see considerably more layoffs happening over time, and again there's nothing of that in the works. We get a holiday season coming up. It looks actually pretty strong as far as the numbers are are giving us projections right now, But is that a leading indicator or a lagging indicator By the time that it gets to the point where where where companies are like consumers, it's a good point. Consumers and labor markets to a large extent

are a coincident indicators. So there are actually an assessment of the current situation, and again when we look at the coincident part of this index, so assessment of what's happening now, it's actually even stronger than it was in previous months. So from the Federal Reserve, they seem to be suggesting if you look at the FED fund futures, right, you know, maybe one more cut in September. This zer leading economic indicator kind of kind of makes sense given

kind of how the Fed's thinking about it right now. Absolutely, I think, you know we have to cut. We just had this past month. We do you really think that the Father is not going to wait and see how these numbers are going to evolve. And again, you know, this sort of slightly negative number was to be expected this This market has been so strong for such a long time, this economy, that we would expect this leveling off. So yeah, it's going to be a pause for the

time being. Earlier the show, we were speaking with Danielle T. Martino Booth and she was talking about a bit of a resurgence that we're seeing on some industrial measures and that she expects some sort of gains to be had in that sector next year. What are you saying, well, actually, this morning, the Philadelphia fat manufacturing surface showed up a little bit, So there are some numbers that are pointing in the direction. But look, let's that's not full ourselves.

Manufacturing production is in deep trouble and it's still thinking. But I do think that there might be something happening here. We're particularly looking at China because a lot of this decline in manufacturing production really or sort of originated in China about two years ago. There we actually see a little bit of a silver lining, A lot of overcapacity is gone. China actually begin to stimulate the economy a little bit in order to avoid a further slowdown, and

that will spill itself through into the global economy. So yeah, we would tie onto this idea that that we might see in an easy or perhaps even the bottoming out of many production off there, you have a recession in your model at any point, Well, yeah, at some point, at some point, the recession is going to happen. But you know, these indexes are looking sort of six months out. I would go as far as say, you know, I

dare to say something about the next nine months. I think until the sun rock next year, I'd be surprised if the US economy would run into huge trouble with the big R word, the big word. There you go, all right, So what did you think in terms of the response from CEO is with respect to trade, we are getting headlines every day that give us a different story. How much is that imperative for their modeling forms. There's something unusual, of course, at a moment about this situation

where the consumers are still very confident. Our consumer confidence in the confidence world keeps you at a record levels, a little bit more volatile the last few months, whereas this business confidence index, which is the other thing we do, has actually been declining over and over again. We know that a lot of that is tied to the trade disputes. We've asked CEO, is this We see it in our

service that they do tie these kind of things. So there was a little bit of a feel in the last two three weeks that we will be getting somewhere. But you know, has the spread ever been further apart in terms of the business confidence versus consumer confidence? Not in the past two decades. Would say this is this is pretty unusual. But again it's also, of course, this whole trade dispute is pretty unusual, so it's perhaps not surprising that CEOs are reacting so much strongly to this.

Do you see that in your is it shopping your data anywhere? Maybe business investments something like that. Yes, we we do have manufactures new orders in there, and again that actually picked up a little bit this month. But you know these numbers are very val volatile, so we we never take too many implications of a month of a month. It's the six months average that is important for it. And there again I would say maybe easy

at this point in time, but you're right. I mean linking it back to business confidence, the key driver of business investment will be that confidence number going back up. So a deal with China, even if it is a small deal, will be enough in our view to actually get business confidence in its right. Bart Vynark, thank you so much for being with us. Bart vyan Ark is the chief economist at the conference board talking about the slight decline that we saw in the leading consumer confidence figures.

Let's switch gears here and get take a look at the business of pets. Ron Coglin is the CEO of Petco. Petco was taken private I believe back in CBC Capital Partners and some others. H Ron, thanks so much for joining us. Love to just get an update on pet Co and kind of where the market is right now for you guys. Absolutely well, thanks for thanks for having me.

A year ago I joined you and uh we were talking about taking a hundred million dollar bet on our business by ticking out all products in our official ingredients. And today I'm proud to say that not only have we moved one point five million pounds of food with artificial ingredients, but our business is gone from declining three to four to up three to four percent. So we've had this contention and what's good for the pet is

good for Petco and it's proven true. Ron are we reaching peak pet where people are buying health food for their dogs. One of the wonderful things about the pet market is it's a growth market, so I would say it's not peaking. Um more and more, there's an adage pets used to be in the outdoors, then they were in the backyard, and then they were in the house,

and now there in our bed. So more and more folks are wanting to take care of the pets the way they take care of themselves, and that includes avoiding artificial ingredients. So interesting here, so give us a sense of kind of the growth dynamic of kind of the global pet food industry or the US pet food industry. Yeah, so it's a six percent growth business. Um, you have

lastly one percent growth in the number of pets. But in terms of how folks are taking care of their pets, that type of food that they're serving pets, you know, they're more and more they want to move away from, you know, the old roys of the world and towards the better for you foods. And a perfect example is my my dog Yummy. He's a yellow lab he goes. He's going on eleven years old, and before I joined pet Go, I was feeding him the middle of the

road food and shame on me. And I switched him to a productal just Food for Dogs, which is a human grade food, um, fresh fish and sweet potatoes. He medi lost fifteen towns and he's back to acting like a puppy. I feel like this is a p s A. You know, this is the reason why. Yeah, but I wanted to talk about, you know, the growth market. There has been a shift people having fewer kids having more dogs, and I'm wondering, you know, how far along in an

evolution are way. Wasn't it something like people adopted more pets than than had kids last year or something. I've heard that statistic. I I know more about pet when I do that kids At this point, my mine are essentially the house. But um, I have heard that statistic. You know in your first comment about p s A. One of the things that we're moving the artificial did was it regained the soul of pet go and really unlocked our partner's passion for pets, and it was really

powerful for us. Um. But people are they're waiting longer to have kids, and the pets are replacing some of that that loving being in the house, and I think it's good for for people and good for America. I will just say this, given the fact that dogs are more likely to be consistently loving than your children, perhaps people are getting annoyed with getting talk back. So n give us a sense of seeing my kids. Give us

a sense of the competitive environment. Is is the pet food business one of those retail or consumer businesses that's been disrupted by say technology, much like Amazon has done. So give us a sense of the competitive environment. Yeah. Absolutely, I'm not going to claim that that has an impacted the pet industry. You have the Amazon factor, you have the Chewy factor, and they've seen success in the pet market UM and quite frankly, Petco had to go back

and retool, and that was the bad news. The good news is we did and it's working so UM. In the last year we've launched buy online, pick up in stores and hugely successful. We reached over a million downloads of our app. We have repeat delivery, and so our online business is growing twenty plus right now. So what was a was a threat is now turning into a

tell went for us. One thing that we've seen recently is a bit of volatility in the speculative grade credit market, and I'm just wondering how much money you need to raise at this point, given the fact that you have a BU to your credit rating and things are getting a little bit more challenging for some companies. Yeah, we we don't need UH. We don't need to raise money and we have access to capital as we need it. So from that standpoint, we're solid. We have two great

private equity primary partners in CBC Partners and CPP. They can't pension fund UH, and we're back to growth on the top line, and we're looking forward to sharing a result on the bottom line with our lenders in a few weeks. So we're good on that front, uh, and we feel good about our execution and our financial health. Where's the biggest opportunity for growth for pet Go. I'd

say two things. One is digital, continuing to drive our digital business, and the second is we're shifting to services and those are services that those digital players don't have. So we've taken our grooming business from a declining to planning near double digit business, our training businesses and growth, and we are driving probably the fastest vet network build out in history. And what's significant about that is too for the benefit of the pets. We're talking about affordable

vet care. A lot of pets don't get the vet care they need because of affordability. And the second thing is where we put a vet, we get the bet income, but we also get a UM four to seven point lift in our center sorece sales. So it's good for the pet and it's good for our business. Ron Coglin, thank you so much for being with us. Ron Coglin is Petco chief executive officer. Talking about a push toward more natural ingredients for people's pet Thanks for listening to

the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on Twitter at Lisa A. Bram wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio