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By Kelly JP. Morgan, Acid Management joins us Now for more. David, Welcome to the program. How encouraging is that data this morning. I don't really think it changes a narrative much.
I think, you know, Mike m keey was pointing out that airfares are down five point four percent. Actually lodging hotels and motels and so forth was down four point three percent. So I think what we're seeing is a lot of softness in the travel industry, which I think is going to get worse over the course of this year.
It is a.
Calm before the inflation storm. We're going to get some higher inflation out of the tariffs. I mean, remember we left the ten percent universal tariff in place. That's a lot higher than anything we've seen really for decades, so that's high. And then of course there's enormous tariff on China which is going to clog supply chains and push our prices to so I think we will get some
inflation there. But what I actually see in the data looking to get the travel numbers is a sort of a deflationary tinge to the economy or or slow down tinge to the economy ready, So you know, you know, I'm glad that the market rallied yesterday, and say, I'm glad that we've got rid of the worst of the reciprocal tariffs apart from on China. But I think that we are far from out of the woods here. I think that these data do sort of still suggest that there is a slowdown coming in the economy.
So the slowdown is what worries you more than the inflation. David, if I'm hearing you correctly, at a time or CPI just came in when you strip out energy and food at the lowest level going back to twenty twenty one, are you saying that that's really what markets ought to be focused on, both bond and stock.
Yes, because people talk about stagflation all the time, but really it's always flation stag You get the inflation first, and then you get the stagnation. And the problem is that, you know, with labor for the labor supply falling away, with these impediments to trade, with cutbacks in government spending, government grants, and so forth, through a lot of fiscal drag this year, I can see a lot of things
that are going to slow the economy down. You know, we'll get a temporary surge and inflation from this, but I think we're going to be left with a pretty stagnant economy off towards And the real question is, you know, does that revolt in the House yesterday in terms of House members who are fiscal hawks, is that really something or not? Are we going to have a bigger deficit and fiscal stimulus next year or not. If we have
fiscal stimulus, then I start worrying about inflation again. But in the absence of major fyscal stimulus, I think that people need to worry about recession more than inflation.
Here, our bonds still the best bet us treasure is in that type of scenario, recession comes very much back on the table.
Well, yes, I mean I think that first of all, I think, you know, long term interest rates at four point three percent, four point two percent on a ten year treasury, I think that's fine, and I think people need, you know, i'd be level weight and fixed income. I realize that we may have a mild recession here, but you know, longer term, whatever recession we have, we'll we'll pull out of it again. And these bond deals are
reasonable for the long run. I don't expect inflation to hang around the long run, because you know, we'll get these tariffs and then then you know, tarffs just don't works, and eventually we'll pull back from them and that'll act you have a deflationary impulse in the economy. So long term, I'm not that worried about inflation. I am worried that there won't be much dynamism about the economy overall.
David, I appreciate the update. I know you're busy this morning, so thanks for making time for us. David Kelly there of JP Morgan Asset Management,