Daybreak Holiday: Markets, Fed Policy, Travel Tips

Thanks so much for joining us on the special edition 0:00:04.120 --> 0:00:07.880 of Bloomberg Daybreak. US markets are closed for the Memorial 0:00:07.960 --> 0:00:11.200 Day holiday. I'm Nathan Hager, and coming up this hour 0:00:11.520 --> 0:00:14.319 will the Fed cut rates this year? And if so, 0:00:14.680 --> 0:00:17.960 when and just how strong is the US economy? Will 0:00:17.960 --> 0:00:22.119 have a roundtable discussion with Michael McKee, our International Economics 0:00:22.120 --> 0:00:27.800 and Policy correspondent, and Bloomberg Economics Chief US economist Anna Wong. Plus, 0:00:27.840 --> 0:00:31.320 Memorial Day unofficially kicks off the summer. Are there any 0:00:31.400 --> 0:00:34.519 good travel deals to be had? We'll ask the founder 0:00:34.600 --> 0:00:38.239 of the Points Guy, Brian Kelly. But first let's take 0:00:38.240 --> 0:00:41.120 a look at the direction of travel for the stock market. 0:00:41.240 --> 0:00:44.320 Equities hit all time highs earlier this month. In fact, 0:00:44.320 --> 0:00:47.640 the Dow Jones Industrial Average crossed forty thousand for the 0:00:47.680 --> 0:00:51.120 first time. Plenty of analysts are racing to adjust price 0:00:51.159 --> 0:00:54.240 targets for the broader indexes. So what's in store for 0:00:54.280 --> 0:00:57.160 the rest of the year. Let's discuss with two expert 0:00:57.320 --> 0:01:00.640 voices on this market. Alisia Levine is this head of 0:01:00.680 --> 0:01:04.280 investment strategy at bny Melon, along with Brian Levitt, the 0:01:04.319 --> 0:01:07.680 global market strategist at Investco. Thanks to both of you 0:01:07.720 --> 0:01:10.640 for being with US. Of course, stocks have certainly defied 0:01:10.760 --> 0:01:13.240 expectations from the start of the year. So Alisha, I'll 0:01:13.240 --> 0:01:15.800 start with you, where do you see the momentum right now? 0:01:16.400 --> 0:01:19.200 So I think the momentum is really coming from the microside, 0:01:19.240 --> 0:01:21.920 which is earnings, and then of course the macro side, 0:01:21.959 --> 0:01:25.360 which is the data are holding in better than feared 0:01:25.600 --> 0:01:29.480 twelve months ago, six months ago, and the US economy 0:01:29.840 --> 0:01:32.880 is not overheated, and it's slowing down in a way 0:01:33.720 --> 0:01:37.480 that allows the FED not to have a hiking bias, 0:01:37.760 --> 0:01:40.160 and so therefore we just think it's a pretty good 0:01:40.240 --> 0:01:43.839 place to be. There is the possibility of volatility around 0:01:43.840 --> 0:01:46.959 the election, of course, and other hot data prints we 0:01:47.040 --> 0:01:48.720 might get on the inflation side, which really is the 0:01:48.760 --> 0:01:52.840 most important thing right now for where yields go. But 0:01:53.120 --> 0:01:57.160 other than that, we think the overall picture looks very good. 0:01:57.240 --> 0:02:00.360 So we'd say the negative side of sort of left tails, 0:02:00.440 --> 0:02:02.840 not that they're nothing, but they're not as big as 0:02:02.840 --> 0:02:05.680 they were. Let's say call it a year ago. And 0:02:05.760 --> 0:02:07.400 so we look at the world and we say, this 0:02:07.480 --> 0:02:09.320 kind of feels a little bit like the nineteen nineties, 0:02:09.600 --> 0:02:13.200 where good enough growth rates have normalized. We can grow 0:02:13.280 --> 0:02:15.480 from here and the economy is humming. 0:02:15.800 --> 0:02:19.480 Let's take that point, Brian. Looking like the nineteen nineties 0:02:20.080 --> 0:02:23.160 we saw a bubble back, then, is this a market 0:02:23.160 --> 0:02:25.920 that could see a bubble start to burst. 0:02:26.200 --> 0:02:29.080 Well, the late nineteen nineties we saw a bubble, so 0:02:29.160 --> 0:02:32.079 I think what was being referenced there is perhaps more 0:02:32.160 --> 0:02:36.359 the mid nineties we did see the green span fedback 0:02:36.440 --> 0:02:40.920 then raise interest rates in the mid nineties by a 0:02:40.919 --> 0:02:44.760 pretty significant amount. The market didn't love it, although I 0:02:44.760 --> 0:02:49.200 don't think an eight nine percent decline is anything terrible. 0:02:49.840 --> 0:02:54.600 But when it became clear that the Federal Reserve could 0:02:54.639 --> 0:02:57.560 back off, that the economy was still strong, the proverbial 0:02:57.680 --> 0:03:03.519 soft landing of that, it ended up being a very 0:03:03.639 --> 0:03:07.400 nice number of years for markets beyond it. So I 0:03:07.400 --> 0:03:10.160 don't think Alicia was mentioning it to suggest that this 0:03:10.280 --> 0:03:13.480 is a market that's in a bubble. More that there's 0:03:13.520 --> 0:03:17.120 a nice setup for markets to continue to climb higher. 0:03:17.160 --> 0:03:20.520 And if it is nineteen ninety four nineteen ninety five, 0:03:21.600 --> 0:03:24.440 you know investors would would then be quite happy over 0:03:24.480 --> 0:03:25.760 the next few years. 0:03:26.160 --> 0:03:28.919 Of course, Alicia, you set up a pretty strong bullish 0:03:28.960 --> 0:03:32.919 outlook there with the setup just now, how much further 0:03:33.040 --> 0:03:35.720 upside do you see for this market, what's going to 0:03:35.760 --> 0:03:39.040 be the catalyst for where things go for the second half. 0:03:39.520 --> 0:03:41.560 So I think the catalyst clearly has to come from 0:03:41.560 --> 0:03:45.640 the earning side. I think the excitement over AI and 0:03:45.680 --> 0:03:51.120 sort of fellow travelers, so the hyperscalers of Magnificent seven 0:03:51.200 --> 0:03:56.400 plus the chip beneficiaries, plus the power of the utility beneficiaries. 0:03:57.120 --> 0:04:00.960 That feels like it's well locked into place, and it's 0:04:01.000 --> 0:04:03.560 not an unknown, right, It's not an unknown. So I 0:04:03.560 --> 0:04:05.520 think you have to have earnings come in from the 0:04:05.520 --> 0:04:09.840 rest of the market. I think it's clear that another 0:04:10.080 --> 0:04:14.800 hot inflation print could cause volatility here. We would expect 0:04:14.800 --> 0:04:19.560 something like that. I think the models for predicting inflation 0:04:19.720 --> 0:04:23.640 are clearly not working and that's okay, But it does 0:04:23.680 --> 0:04:26.760 look like we're sort of in this disinflationary period with 0:04:26.839 --> 0:04:29.159 some hiccups here or there, so that could cause some 0:04:29.279 --> 0:04:32.520 volatility in the bond market. Overall. What we've been saying 0:04:32.600 --> 0:04:37.840 is the FED pivoted in December. We don't think the 0:04:37.880 --> 0:04:41.520 FED pivots from the pivot. So in terms of rate 0:04:41.640 --> 0:04:44.360 cuts this year, we've always said less and later. We're 0:04:44.400 --> 0:04:47.560 really at one cut for the year that would be 0:04:47.920 --> 0:04:52.440 sufficient to keep the market moving higher into the end 0:04:52.440 --> 0:04:54.600 of the year. And let's just point out, Nathan, you know, 0:04:54.800 --> 0:04:57.760 we're in a re election year and administrations tend to 0:04:57.760 --> 0:05:00.640 do everything they can to get reelected, and I think 0:05:00.680 --> 0:05:03.160 we see that with some fiscal support. So I think 0:05:03.200 --> 0:05:05.359 it's just very hard if you just put a timeline 0:05:05.400 --> 0:05:08.560 on this, even though we're as strategist Brian knows well, 0:05:08.600 --> 0:05:10.320 you don't put a number and a date in the 0:05:10.320 --> 0:05:14.040 same sentence. I just think, yeah, I just think that 0:05:14.120 --> 0:05:18.160 it's just hard to get that deep sell off from 0:05:18.279 --> 0:05:20.360 here into the end of the year in a re 0:05:20.440 --> 0:05:24.080 election year with the setup that we have of two 0:05:24.080 --> 0:05:30.440 to three percent growth and inflation that possibly sticky but 0:05:30.560 --> 0:05:31.640 still on the downward trend. 0:05:31.720 --> 0:05:35.200 I want to pick up to something that Alicia talked 0:05:35.200 --> 0:05:39.120 about at the beginning in terms of companies meeting their 0:05:39.320 --> 0:05:43.800 expectations for earnings. We've gotten through most of the earning season, Brian, 0:05:43.839 --> 0:05:46.640 and you've seen a lot of these companies put out 0:05:46.760 --> 0:05:51.120 pretty strong forecasts, some pretty positive outlooks in terms of 0:05:51.120 --> 0:05:53.920 where they see things going. Do you think companies are 0:05:53.920 --> 0:05:56.600 going to be able to meet or exceed their earnings 0:05:56.640 --> 0:05:59.560 expectations heading into the second half. What's it going to 0:05:59.560 --> 0:05:59.920 take for. 0:05:59.839 --> 0:06:00.560 Them to do it? 0:06:01.000 --> 0:06:03.599 It's so far they've been able to. And this was, again, 0:06:03.680 --> 0:06:06.440 to your point, another good earning season in a time 0:06:06.480 --> 0:06:08.920 when you know, many investors a year or two ago, 0:06:08.960 --> 0:06:12.280 we're thinking a recession was coming and we're contemplating what 0:06:12.640 --> 0:06:15.960 a decline in earnings could look like. So it's an 0:06:16.040 --> 0:06:19.320 economic backdrop, both in the US and globally that continues 0:06:19.360 --> 0:06:23.000 to be supportive for corporate earnings. The irony in all 0:06:23.040 --> 0:06:26.240 of it, Nathan, is that for all the focus on 0:06:26.320 --> 0:06:29.400 the FED, and for all the focus on will they 0:06:29.520 --> 0:06:32.320 or won't they and by how much and when the 0:06:32.400 --> 0:06:37.800 reality is that good nominal growth and no rate cuts 0:06:38.080 --> 0:06:41.919 is just buying for markets, and in fact perhaps maybe 0:06:43.000 --> 0:06:47.440 preferable to weaker growth and lower rates, which is what 0:06:47.520 --> 0:06:49.360 a lot of investors had been expected. 0:06:49.520 --> 0:06:54.960 Speaking with Brian Levitt, Invesco's global market strategist and Alicia Levine, 0:06:54.960 --> 0:06:59.720 the head of investment strategy at bny mellon interesting point 0:07:00.160 --> 0:07:04.160 and had just their Alisha about the setup still being 0:07:04.279 --> 0:07:07.680 positive for companies even if we don't see a FED 0:07:07.800 --> 0:07:10.520 rate cut this year. Do you share that view? Is 0:07:10.600 --> 0:07:15.120 there really that much of an expectation from companies that 0:07:15.160 --> 0:07:18.760 they FED needs to deliver in order for the momentum 0:07:18.840 --> 0:07:19.920 to continue for stocks. 0:07:20.360 --> 0:07:22.800 So for thirty percent of the SMP, which is about 0:07:22.800 --> 0:07:25.520 the top ten stocks, they don't need to borrow. So 0:07:25.600 --> 0:07:28.160 what the FED does in some ways is not relevant 0:07:28.200 --> 0:07:31.200 to their business models. Where you feel it whether the 0:07:31.240 --> 0:07:34.440 FED cuts or not, is as you do go down 0:07:34.520 --> 0:07:36.800 cap into small cap. You know a lot of the 0:07:36.800 --> 0:07:40.960 small cap index over half has floating rate debt that's 0:07:41.040 --> 0:07:43.640 due much sooner than the fixed rate debt that the 0:07:43.720 --> 0:07:46.640 larger cap companies took out in twenty twenty and twenty 0:07:46.640 --> 0:07:49.400 twenty one when rates were near zero. So that's why 0:07:49.520 --> 0:07:53.120 the rustle, for instance, is still fifteen percent below it's 0:07:53.160 --> 0:07:55.720 all time high in twenty twenty one, because you do 0:07:55.800 --> 0:08:00.840 have some business models that could be threatened here. Overall, 0:08:01.280 --> 0:08:06.360 the SMP is more resilient to what the FED decides 0:08:06.400 --> 0:08:09.600 to do with rate cuts if the FED stays here, 0:08:09.600 --> 0:08:13.280 which is very possible. A lot of the debt in 0:08:13.320 --> 0:08:17.240 the SMP is fixed rate and that maturing until twenty 0:08:17.320 --> 0:08:20.680 thirty or later. That's just a structural change. And so 0:08:21.200 --> 0:08:23.760 I think this kind of obsession with the FED is nice, 0:08:23.800 --> 0:08:26.800 but to Brian's point, you know, when the FED cuts 0:08:27.080 --> 0:08:30.320 many times, it means that the economy is weak, we 0:08:30.360 --> 0:08:34.080 have higher unemployment, and we're headed into a recession or 0:08:34.120 --> 0:08:37.959 we're already there. So I think most of us as 0:08:38.000 --> 0:08:40.839 strategists would take you know, five to five and a 0:08:40.880 --> 0:08:44.680 half percent nominal growth with you know, a FED funds 0:08:44.760 --> 0:08:48.959 rate meeting that more or less. And don't forget earnings 0:08:49.000 --> 0:08:53.720 are nominal and the SMP reflects nominal growth, and so 0:08:53.880 --> 0:08:58.800 you are in a sense already participating in all those 0:08:59.040 --> 0:09:01.000 parts of the market that you may be a little 0:09:01.000 --> 0:09:03.840 worried about with higher rates, as long as your companies 0:09:04.200 --> 0:09:06.240 don't have to go out and tap the debt markets. 0:09:06.600 --> 0:09:08.360 Bran, I want to pick up on another point you 0:09:08.400 --> 0:09:12.360 had earlier about looking beyond the US market. We've been 0:09:12.360 --> 0:09:15.400 talking about the resiliency of the US economy, but the 0:09:15.400 --> 0:09:19.360 potential as well for some other opportunities outside the US. 0:09:19.440 --> 0:09:22.920 Where are you looking? Where are you advising clients to 0:09:22.960 --> 0:09:27.079 put their attention when it comes to x US investments? 0:09:27.840 --> 0:09:31.160 Yeah, and investors clearly have preferred the United States for 0:09:31.200 --> 0:09:35.160 a variety of reasons. The catalysts that tend to unlock 0:09:35.280 --> 0:09:40.439 the value in other parts of the world will either 0:09:40.520 --> 0:09:45.200 come from economic surprises or will come from policy changes. 0:09:45.320 --> 0:09:49.400 So if you look at places like China, or in 0:09:49.480 --> 0:09:55.000 Europe or in the UK, where valuations are more reasonable, 0:09:55.080 --> 0:10:00.480 are their catalysts, and you're seeing policy that likely moves 0:10:00.600 --> 0:10:03.240 ahead of where we are in the US in terms 0:10:03.240 --> 0:10:06.400 of supporting the economy. You've seen trying to take some 0:10:06.440 --> 0:10:10.959 steps now to support their property sector. The European and 0:10:11.559 --> 0:10:14.120 UK central banks may be lowering rates ahead of time. 0:10:14.120 --> 0:10:18.040 But what you're also seeing is those parts of the 0:10:18.080 --> 0:10:22.679 world that were hit harder over the last year or 0:10:22.720 --> 0:10:25.600 so are now starting surprise to the upside a bit, 0:10:25.640 --> 0:10:29.720 while the US surprise in disease in terms of whether 0:10:29.760 --> 0:10:33.319 we're outpacing economic expectations are coming down a little bit. 0:10:33.400 --> 0:10:37.320 So it's a sea change. It's not necessarily one where 0:10:37.320 --> 0:10:40.679 we say go out and you know, swing wildly to 0:10:41.200 --> 0:10:44.600 move from the US to international. But if you believe 0:10:44.760 --> 0:10:48.040 we're in the recovery phase of the cycle in those 0:10:48.080 --> 0:10:51.559 parts of the world, then you would want to increase exposure, 0:10:52.360 --> 0:10:55.880 will help the evaluation of the portfolio, diversify some of 0:10:55.920 --> 0:10:59.520 your dollar exposure. And if we're right that those economies 0:10:59.520 --> 0:11:02.560 are recover intends to be a good backdrop for their markets. 0:11:02.960 --> 0:11:06.320 Now, Alisha, I'm curious where you're looking for surprises. I mean, 0:11:06.360 --> 0:11:09.520 we've got wars still happening around the world, We've got 0:11:09.520 --> 0:11:12.520 a US presidential election coming up in the fall, We've 0:11:12.520 --> 0:11:15.600 got a UK election coming up in the summer. What's 0:11:15.640 --> 0:11:16.360 got your attention? 0:11:16.760 --> 0:11:19.000 So is this the question about what makes me worry 0:11:19.000 --> 0:11:19.360 at night? 0:11:19.600 --> 0:11:20.720 What makes you worry at night? 0:11:20.760 --> 0:11:26.000 Alicia n So, Look, I think the geopolitical risks are 0:11:26.160 --> 0:11:29.240 very real and heightened in a way that you know, 0:11:29.320 --> 0:11:33.360 typically markets don't really factor in geopolitical risk for more 0:11:33.400 --> 0:11:35.800 than a few weeks at a time, I think, you know, 0:11:35.920 --> 0:11:39.960 and typically it's through the commodity cycle. So you know, Ukraine, 0:11:39.960 --> 0:11:44.440 Middle East clearly oil and in the Ukraine case a 0:11:44.480 --> 0:11:47.840 fertilizer and for food that could be still at risk there, 0:11:49.080 --> 0:11:51.920 but the market knows that. And in fact, you know, 0:11:52.080 --> 0:11:55.320 WTI oil prices have actually come down from the peak 0:11:55.360 --> 0:11:57.439 when there was probably a ten dollars premium in oil 0:11:57.480 --> 0:12:01.320 prices for a hot war in the Middle East. I think, 0:12:01.800 --> 0:12:05.200 you know, maybe there's some volatility around the election, and 0:12:05.280 --> 0:12:07.360 I would say this, I think the best thing that 0:12:07.400 --> 0:12:09.440 can happen for all of us, is that we wake 0:12:09.559 --> 0:12:12.200 up or we go to sleep with a fifty three 0:12:12.360 --> 0:12:15.679 forty seven win for whatever party it is, and it's 0:12:15.679 --> 0:12:17.439 a clear winner, and I think that would be the 0:12:17.480 --> 0:12:20.400 best case for the market regardless. I think if we 0:12:20.440 --> 0:12:23.320 have one of those where it's really too close to 0:12:23.440 --> 0:12:26.360 call and may take weeks to find out, that's not great, 0:12:26.400 --> 0:12:29.120 and that won't be great for the market either. And 0:12:29.120 --> 0:12:31.080 so that's just I think probably the risk out there. 0:12:31.120 --> 0:12:33.080 The other thing is the deficit. Of course, neither party 0:12:33.400 --> 0:12:35.680 is really serious about addressing this, and in fact, both 0:12:35.720 --> 0:12:41.280 platforms have enormous fiscal spend attached to their political promises. 0:12:41.360 --> 0:12:42.960 So I'd say that's something we have to keep an 0:12:42.960 --> 0:12:43.320 eye on. 0:12:43.640 --> 0:12:46.800 Our Thanks to Alisha Levine, head of investment strategy at 0:12:46.800 --> 0:12:50.960 bn Y Melon and Invesco Global market strategist Brian Levitt. 0:12:51.080 --> 0:12:53.280 And coming up next, we'll take an even closer look 0:12:53.320 --> 0:12:55.880 at the economy and whether the Fed will cut interest 0:12:55.960 --> 0:12:59.280 rates before this year is out. I'm Nathan Hager, and 0:12:59.400 --> 0:13:06.640 this is Bloomberg. Welcome back to this special edition of 0:13:06.679 --> 0:13:10.600 Bloomberg Daybreak. US markets are closed for Memorial Day. I'm 0:13:10.679 --> 0:13:13.079 Nathan Hager. Thanks for joining us. Now we want to 0:13:13.120 --> 0:13:16.360 turn from the stock market to the economy. Twenty twenty 0:13:16.360 --> 0:13:20.800 four began with high expectations for interest rate cuts. So 0:13:20.920 --> 0:13:24.160 far we haven't had a one. So what will it 0:13:24.200 --> 0:13:26.520 take for the Fed to finally pull the trigger and 0:13:27.200 --> 0:13:29.520 will they even do it? To dive into those questions, 0:13:29.559 --> 0:13:33.520 we have convened a special economic roundtable. Anna Wong is 0:13:33.559 --> 0:13:36.920 with US, chief US economist at Bloomberg Economics, along with 0:13:37.040 --> 0:13:41.720 Michael McKee, International Economics and Policy correspondent for Bloomberg Radio 0:13:41.800 --> 0:13:44.280 and Television. Thanks to both of you for being with us. 0:13:44.280 --> 0:13:46.560 And I'll start with you, Mike, because you talk with 0:13:46.600 --> 0:13:49.040 these FOMC voters like all the time. So what are 0:13:49.040 --> 0:13:50.440 they telling you in terms of policy? 0:13:51.040 --> 0:13:54.320 Basically, their story hasn't changed. They're waiting for inflation to 0:13:54.400 --> 0:13:57.240 show signs that it is going to continue on down 0:13:57.280 --> 0:14:00.320 to two percent. Now, one important thing to remember is 0:14:00.600 --> 0:14:04.000 they're going to start cutting interest rates before they get 0:14:04.000 --> 0:14:07.440 to two percent. They've made that clear. But right now 0:14:07.480 --> 0:14:11.080 they're not seeing any progress at all since basically inflation 0:14:11.160 --> 0:14:13.839 has stalled out. So it's going to take a little while, 0:14:14.120 --> 0:14:18.240 several more months, and then we'll see whether they get 0:14:18.280 --> 0:14:19.880 anything this year or not, a lot of them moving 0:14:19.920 --> 0:14:23.040 out sort of on the curve, and more and more 0:14:23.080 --> 0:14:25.560 of them talking about end of the year as a 0:14:25.640 --> 0:14:29.120 possible first timing for a rate cut. 0:14:28.920 --> 0:14:31.360 Several more months. And of course you worked as an 0:14:31.360 --> 0:14:34.720 economist in the Federal Reserve, and it's so funny because 0:14:34.760 --> 0:14:36.520 at the beginning of the year there was all this 0:14:36.560 --> 0:14:39.560 talk about maybe six or seven interrast rate cuts. Now 0:14:40.080 --> 0:14:41.960 there's no way we can get that the way the 0:14:42.040 --> 0:14:45.040 calendar is going. So what do policymakers need to see 0:14:45.360 --> 0:14:48.640 to get that assurance that they can start the interest 0:14:48.720 --> 0:14:49.520 rate cutting cycle. 0:14:49.800 --> 0:14:52.000 Yeah, So, you know, in the beginning of the year, 0:14:53.000 --> 0:14:55.600 when the market was pricing in one hundred and seventy 0:14:55.680 --> 0:14:57.880 base point of right cuts, that was a little bit 0:14:57.920 --> 0:15:02.239 overdoing it. But even then time, given the inflation trajectory, 0:15:02.600 --> 0:15:06.240 a fair assessment, given the you know, inertial tailor rule, 0:15:06.440 --> 0:15:09.480 which the Fed has followed quite closely over the past 0:15:09.520 --> 0:15:12.600 two years, is that one hundred to one hundred and 0:15:12.640 --> 0:15:16.440 twenty five bases cut was reasonable. And now we are 0:15:16.520 --> 0:15:21.160 down to the model, the tailor rule saying that a 0:15:21.200 --> 0:15:25.480 fair assessment would be forty basis point of cuts, and 0:15:25.560 --> 0:15:28.240 that would be the result from a reasonable range of 0:15:28.280 --> 0:15:32.000 inflation numbers. And the reason why that rule has come 0:15:32.080 --> 0:15:35.160 down from one hundred and twenty five to now forty 0:15:35.280 --> 0:15:39.160 is because mostly because of the inflation data as you suggested. 0:15:39.520 --> 0:15:42.440 So I think the expectation that the Fed will cut 0:15:42.600 --> 0:15:46.560 once or twice this year is still fair. And whether 0:15:46.720 --> 0:15:48.920 it would be more like one cut or two cut, 0:15:49.000 --> 0:15:53.160 it depends on whether inflation is going to be closer 0:15:53.200 --> 0:15:56.280 to ending the year closer to two point six percent 0:15:56.560 --> 0:15:59.240 or is it three percent. So in our forecast, we 0:15:59.360 --> 0:16:04.600 do expect inflation to be drifting back up from a 0:16:04.600 --> 0:16:08.480 low of two point seven percent mid year to closer 0:16:08.520 --> 0:16:10.520 to three percent by the end of the year. But 0:16:10.560 --> 0:16:13.760 we still do think the Fed would cut because unemployment 0:16:14.040 --> 0:16:17.800 is we think it's going to rise about four percent 0:16:17.920 --> 0:16:18.920 by the end of this year. 0:16:19.120 --> 0:16:22.360 Mike, from what you're hearing from Fed officials, are they 0:16:22.440 --> 0:16:26.440 feeling that pressure to deliver the first cut before the 0:16:26.560 --> 0:16:29.960 year is out? I mean, it does get harder to 0:16:30.560 --> 0:16:33.320 make that move once we get closer to an election, 0:16:33.560 --> 0:16:34.000 doesn't it. 0:16:34.040 --> 0:16:37.680 They would argued no, and past history supports that idea 0:16:37.720 --> 0:16:40.560 that the election doesn't make any difference to them. They'll 0:16:40.560 --> 0:16:44.360 do what they think they should do when the time comes, 0:16:44.920 --> 0:16:47.240 But at this point they don't seem to be feeling 0:16:47.320 --> 0:16:50.440 any pressure because the economy is not demanding it. They 0:16:50.480 --> 0:16:53.320 look around and they see where unemployment is well below 0:16:53.360 --> 0:16:58.520 four percent, and they see the economy growing basically at potential, 0:16:58.720 --> 0:17:02.040 and they don't think they need to cut rates at 0:17:02.040 --> 0:17:04.840 the moment. The biggest concern they have going forward is 0:17:04.880 --> 0:17:08.439 that if inflation does start to fall again, then you 0:17:08.520 --> 0:17:12.520 get a rise in real rates and that would tighten 0:17:12.640 --> 0:17:16.600 conditions even more. So maybe they don't want that. The 0:17:16.640 --> 0:17:19.960 other side of that coin is do they need to 0:17:20.080 --> 0:17:24.119 cut rates because the economy slows so much and that's 0:17:24.160 --> 0:17:26.840 not in anybody's forecast there at the moment. 0:17:27.359 --> 0:17:30.040 Well, so what is the forecast and when it comes 0:17:30.160 --> 0:17:34.160 to the path for disinflation. Obviously we did see that 0:17:34.400 --> 0:17:37.840 little bit of a bump the first quarter of this year, things, 0:17:37.880 --> 0:17:40.960 as you said, have been stalling out. Where do you 0:17:41.080 --> 0:17:45.320 see the disinflationary path going, if at all, into the 0:17:45.359 --> 0:17:45.960 second half. 0:17:46.240 --> 0:17:48.959 Typically in the beginning of the year you do have 0:17:49.080 --> 0:17:55.160 these unfavorable seasonal factors, and for this year, the unfavorable 0:17:55.200 --> 0:18:00.600 seasonal factors for inflation lasted beyond February, which is a 0:18:00.600 --> 0:18:04.160 little bit unusual. But then if the past is a guide, 0:18:04.200 --> 0:18:07.719 from here on out to the end of summer should 0:18:07.760 --> 0:18:11.480 be a favorable period for disinflation. So our forecast, and 0:18:11.560 --> 0:18:14.960 I think the Fed's forecast, is for the year over 0:18:15.080 --> 0:18:19.280 year core PC deflator to continue to edge down from 0:18:19.320 --> 0:18:24.240 now to mid year. Possibly by August we will see 0:18:24.280 --> 0:18:27.040 a core pc E twelve months change of two point 0:18:27.080 --> 0:18:30.080 seven or two point six percent. But our forecast for 0:18:30.119 --> 0:18:34.280 the second half is more pessimistic because then all these 0:18:34.320 --> 0:18:37.200 favorable factors we see from here to end of summer 0:18:37.280 --> 0:18:41.480 will reverse and then it gets harder. And that's when 0:18:41.800 --> 0:18:45.800 we also think that the base effects of inflation would 0:18:46.000 --> 0:18:49.600 turn against all these measures, because that's because last year 0:18:49.640 --> 0:18:51.720 we called last year, the second half of last year 0:18:51.840 --> 0:18:55.720 was very favorable for inflation. So you have this low 0:18:55.800 --> 0:18:58.480 base effect which tends to push up the year over 0:18:58.600 --> 0:19:01.119 year in the second half, and this is why we 0:19:01.160 --> 0:19:03.040 think that at the end of the year core PCE 0:19:03.680 --> 0:19:08.360 deflator would be closer to three than mid twos. 0:19:08.680 --> 0:19:12.720 Speaking with Anna Wong, the chief US economist at Bloomberg Economics, 0:19:12.800 --> 0:19:18.600 and our Bloomberg International Economics and Policy correspondent, Michael McKee. Mike, 0:19:19.000 --> 0:19:21.880 you've been talking, of course to FED officials. We've heard 0:19:21.920 --> 0:19:24.760 from Raphael Bostik of the Atlanta FED talking about how 0:19:24.760 --> 0:19:28.679 there are active discussions about where the neutral rate is, 0:19:29.280 --> 0:19:35.639 the rate at which policy neither slows nor grows the economy. 0:19:36.280 --> 0:19:39.800 What's the thinking about where that stands right now? 0:19:39.880 --> 0:19:42.639 Well, it's becoming more important because now we're getting into 0:19:42.680 --> 0:19:46.320 the possibility of rate cuts, and so the question for 0:19:46.359 --> 0:19:49.600 everybody is once they do start, how far do they cut? 0:19:50.200 --> 0:19:54.160 And I think most FED officials would tell you they 0:19:54.160 --> 0:19:56.560 don't really know. They don't think they will be going 0:19:56.600 --> 0:19:59.920 back anywhere near the zero rates that we had for 0:20:00.080 --> 0:20:03.080 a while. But how fast can the economy grow right now? 0:20:03.160 --> 0:20:07.920 That's not clear. And unfortunately, the neutral rate is something 0:20:07.960 --> 0:20:12.640 that's not observable as an individual number. It's something better 0:20:12.680 --> 0:20:16.239 seen in hindsight. But they're looking at the inflation rate 0:20:16.320 --> 0:20:18.800 and they're looking at the growth rate, and they're thinking, 0:20:18.840 --> 0:20:23.880 maybe we have seen the economy move up its neutral rate, 0:20:24.520 --> 0:20:27.800 but would that last. As Anna said, forecasts are we're 0:20:27.800 --> 0:20:30.880 going to see a cooling as we go along. So 0:20:31.320 --> 0:20:35.640 they don't really have a good number yet. They're thinking 0:20:35.760 --> 0:20:40.160 in terms of somewhere around four percent, maybe a little higher, 0:20:40.160 --> 0:20:43.679 a little lower, but it's going to depend on the 0:20:43.680 --> 0:20:47.639 conditions in the economy at the time, and that's going 0:20:47.720 --> 0:20:49.919 to be several rate cuts down the road, So we 0:20:50.000 --> 0:20:54.280 probably won't get a neutral rate view until sometime next year. 0:20:54.640 --> 0:20:57.720 And when it comes to conditions in the economy, And 0:20:58.200 --> 0:21:02.720 is there some thinking within the FED or among economists 0:21:02.760 --> 0:21:06.920 like yourself that there may need to be some further 0:21:07.040 --> 0:21:11.200 damage to the economy to get inflation to the fed's 0:21:11.240 --> 0:21:15.440 target in terms of the labor market, in terms of 0:21:15.760 --> 0:21:16.879 goods and services. 0:21:17.400 --> 0:21:22.119 I think from reading the community public communications of the FED, 0:21:23.480 --> 0:21:25.840 it's pretty clear to me that the FED has moved 0:21:25.880 --> 0:21:30.040 away from that view that you do need damages to 0:21:30.119 --> 0:21:33.920 the labor market to bring down inflation. In fact, the 0:21:34.000 --> 0:21:38.160 confidence within the committee has been building that you don't 0:21:38.200 --> 0:21:43.159 need that They are banking on productivity growth and also 0:21:43.520 --> 0:21:51.080 immigration to provide support to the economy without introducing inflationary forces. 0:21:51.280 --> 0:21:54.080 And there's a lot of discussion as well about whether 0:21:54.640 --> 0:21:57.680 the two percent inflation target even makes sense. I mean, 0:21:57.680 --> 0:22:00.800 we hear from the likes of muhammedel Air saying that 0:22:00.800 --> 0:22:05.240 that level is arbitrary. Mike, why is it so important 0:22:05.400 --> 0:22:08.960 for this FED to get to that two percent target? 0:22:09.560 --> 0:22:12.520 It's basically a credibility issue for them. One of the 0:22:12.520 --> 0:22:15.160 things that was pointed out at the Atlanta FED conference 0:22:16.119 --> 0:22:20.160 last week was that during the great inflation of the 0:22:20.480 --> 0:22:25.280 nineteen seventies and eighties, inflation expectations soared along with the 0:22:25.480 --> 0:22:29.239 inflation rate, and that didn't happen this time, and so 0:22:30.480 --> 0:22:34.640 they fed credibility. People believe the FED will do what 0:22:34.680 --> 0:22:37.159 it takes to bring inflation doubt, and they have the 0:22:37.200 --> 0:22:41.239 two percent target, so they need to stick to that. 0:22:41.280 --> 0:22:44.680 They need to make sure people understand that they're going 0:22:44.720 --> 0:22:47.760 to fight inflation, they're going to bring it down. We 0:22:47.840 --> 0:22:51.600 may never actually get there because they will start cutting 0:22:51.600 --> 0:22:54.480 before they get to two percent, and if inflation gets 0:22:54.520 --> 0:22:57.840 sticky at two point three percent, I don't think they're 0:22:57.840 --> 0:23:01.680 going to risk damaging the economy by trying to push 0:23:01.680 --> 0:23:05.440 even harder. But they want people to know they're going 0:23:05.480 --> 0:23:09.320 to follow up. Now. They start later this year, a 0:23:09.560 --> 0:23:13.600 review of their policy framework probably taken another year, and 0:23:13.640 --> 0:23:17.240 so sometime in twenty twenty five or early twenty twenty six, 0:23:17.359 --> 0:23:21.120 they may change their view. Right now, I didn't find 0:23:21.119 --> 0:23:23.960 any support I haven't found any support for changing it 0:23:24.000 --> 0:23:28.240 to a higher number, at least firmly. But there are 0:23:28.280 --> 0:23:31.400 people who are thinking about it that this world we're 0:23:31.440 --> 0:23:35.000 going into a post pandemic is going to have a 0:23:35.040 --> 0:23:39.720 little bit faster inflation on a regular basis, but they're 0:23:39.760 --> 0:23:41.320 not ready to commit to anything yet. 0:23:41.640 --> 0:23:43.439 Well, what do you think, Anna, is a two percent 0:23:43.480 --> 0:23:46.480 inflation target still achievable? I mean, it's taken quite a 0:23:46.520 --> 0:23:48.520 while just to get to where we are right now. 0:23:48.760 --> 0:23:52.240 Yeah, I think you know. Our view is that inflation 0:23:52.359 --> 0:23:56.639 is sliding down the nonlinear and steep part of the 0:23:56.640 --> 0:24:00.000 Phillips curve or the beverage curve, and we're about getting 0:24:00.160 --> 0:24:02.840 to that part where it starts to get harder to 0:24:02.960 --> 0:24:07.280 generate a percentage point of disinflation, which is what we 0:24:07.320 --> 0:24:10.800 need right now. We need another percentage point of disinflation, 0:24:11.359 --> 0:24:15.560 and we won't know exactly whether that's right, whether we're 0:24:15.880 --> 0:24:19.320 indeed stuck at three percent inflation until twenty twenty five 0:24:19.720 --> 0:24:22.800 or twenty twenty six, And as Mike said, and that's 0:24:22.840 --> 0:24:27.119 when only the sentiment today is that we're the FED 0:24:27.280 --> 0:24:31.840 is definitely sticking with the two percent mandate, price stability mandate, 0:24:31.920 --> 0:24:34.480 but in twenty twenty five and twenty twenty six, it 0:24:34.480 --> 0:24:39.199 will be very clear whether inflation is indeed stuck. So 0:24:39.600 --> 0:24:44.280 from my view, I've looked at arranged models and also 0:24:44.359 --> 0:24:48.840 looked at bottom up way of looking at inflation forecasts. 0:24:49.080 --> 0:24:52.040 I do think that there's a hard mile to inflation. 0:24:52.280 --> 0:24:55.000 It might not be a whole percentage point, but it's 0:24:55.160 --> 0:24:58.680 very likely that inflation core PCE deflator could be stuck 0:24:58.720 --> 0:25:02.080 at two point seven percent or above, and the Fed 0:25:02.280 --> 0:25:06.480 might decide to live with it, even though verbally they 0:25:06.520 --> 0:25:08.879 would say they are still trying to achieve the two percent, 0:25:08.920 --> 0:25:11.600 because it is very hard to get from two point 0:25:11.640 --> 0:25:13.280 seven to two percent. 0:25:13.680 --> 0:25:15.879 Now, we've certainly seen how hard it's been just to 0:25:15.880 --> 0:25:18.199 get to where we are right now. Thank you to 0:25:18.240 --> 0:25:21.400 the both of you for joining us. Michael McKee, international 0:25:21.440 --> 0:25:25.200 economics and Policy correspondent for Bloomberg Radio and Television, and 0:25:25.359 --> 0:25:30.080 Anna Wong, Chief US economist at Bloomberg Economics. Up next, 0:25:30.119 --> 0:25:32.719 If you're still looking for travel deals this summer, we'll 0:25:32.800 --> 0:25:35.639 check in with the Point Sky Brian Kelly on this 0:25:35.800 --> 0:25:40.040 kickoff weekend for summer getaways. It's thirty seven minutes past 0:25:40.040 --> 0:25:46.680 the hour. I'm Nathan Hager, and this is Bloomberg. Thanks 0:25:46.680 --> 0:25:49.000 again for being with us on this special edition of 0:25:49.000 --> 0:25:52.679 Bloomberg Daybreak. I'm Nathan Hager. US markets are closed for 0:25:52.800 --> 0:25:56.320 the Memorial Day holiday, but the roads, rails, and airports 0:25:56.359 --> 0:25:59.720 most certainly are not. Of course, Memorial Day marks the 0:26:00.080 --> 0:26:03.440 official kickoff of summer travel season, and to hear the 0:26:03.440 --> 0:26:05.600 folks at Triple A tel It, this could be one 0:26:05.640 --> 0:26:08.800 of the busiest travel weekends since they started keeping track 0:26:08.880 --> 0:26:12.600 more than two decades ago. That pent up demand post 0:26:12.640 --> 0:26:15.760 COVID could be ready to burst big time, even with 0:26:15.960 --> 0:26:19.600 inflation and interest rates sticking with us through these warm months. 0:26:19.640 --> 0:26:23.160 So who better to help us stretch that travel dollar 0:26:23.240 --> 0:26:25.320 as we make our way through summer than the Points 0:26:25.400 --> 0:26:29.119 guy himself, Brian Kelly is with us. Brian, thanks for 0:26:29.160 --> 0:26:31.000 taking time out for what I am sure is a 0:26:31.240 --> 0:26:32.159 very busy time for you. 0:26:33.160 --> 0:26:34.199 Of course, thanks for having me. 0:26:34.400 --> 0:26:37.760 So you were calling last summer the summer of domestic travel. 0:26:37.840 --> 0:26:39.640 This year, you say it's going to be the summer 0:26:39.680 --> 0:26:43.520 for international travel, even with prices where they are. 0:26:44.440 --> 0:26:46.720 Yeah, you know when you actually look at the prices, 0:26:46.760 --> 0:26:49.440 And I've been booking a lot of European trips this summer, 0:26:50.359 --> 0:26:53.480 especially in business and first class. There's actually a lot 0:26:53.600 --> 0:26:57.159 of great deals out there. There's an interesting dynamic going 0:26:57.240 --> 0:27:00.000 on in the marketplace. You know, the airlines have actually 0:27:00.359 --> 0:27:06.320 upgauged a lot of routes, adding more capacity to Europe 0:27:06.840 --> 0:27:10.280 than we've seen before. There's about three hundred thousand more 0:27:10.320 --> 0:27:13.399 seats that the US carriers will have to all of 0:27:13.400 --> 0:27:16.280 Europe this summer. So it's had an interesting impact on prices. 0:27:16.320 --> 0:27:21.000 We have not seen the spike in prices that would 0:27:21.240 --> 0:27:24.800 go along with the increase in demand. We're also seeing 0:27:24.840 --> 0:27:30.600 now more increased competition from lower cost carriers, and you know, 0:27:31.200 --> 0:27:34.600 broadly speaking, you know, two summers ago, especially when the 0:27:34.600 --> 0:27:37.479 world really started to open up, we were seeing you know, 0:27:37.960 --> 0:27:41.920 not as much demand, but such less capacity that prices 0:27:42.119 --> 0:27:44.680 were you know, I was seeing routinely five, six or 0:27:44.720 --> 0:27:47.320 seven thousand dollars round trip business cost tickets from the 0:27:47.400 --> 0:27:51.600 US gateways to Europe. This summer, I'm looking at three 0:27:51.640 --> 0:27:54.399 thousand dollars four thousand dollars fares from the West Coast 0:27:54.720 --> 0:27:59.159 for majority of the summer, and some airlines like British Airways, 0:27:59.200 --> 0:28:02.520 are even having four thousand dollars for first class round 0:28:02.520 --> 0:28:05.720 trip to Europe, which I'm kind of shocked by. 0:28:06.119 --> 0:28:10.560 Yeah, not terrible. So the airlines are providing the capacity. 0:28:10.880 --> 0:28:12.800 What has you thinking that they're going to be able 0:28:12.880 --> 0:28:14.200 to fill those seats. 0:28:15.600 --> 0:28:19.720 It's an interesting question, and I think why we are 0:28:19.800 --> 0:28:23.119 seeing prices not through the roof. You know, there are 0:28:23.160 --> 0:28:30.120 certainly some routes that you'll see increase pricing, specifically Paris Paris. 0:28:30.440 --> 0:28:32.240 The thing about Paris you have to worry about the summer. 0:28:32.440 --> 0:28:36.360 I was actually just before chatting with you, looking at 0:28:36.440 --> 0:28:38.440 a June trip. You know, the Olympics start at the 0:28:38.560 --> 0:28:41.240 end of July, so you know, really end of July 0:28:41.320 --> 0:28:45.560 and August Paris. You know, gird, you're loin prepared to 0:28:45.600 --> 0:28:49.160 pay through the notes, but she was looking, you know, flights. 0:28:49.160 --> 0:28:52.880 Flights in June were much higher than normal. But what 0:28:52.920 --> 0:28:55.240 you really need to look out for is hotels, man 0:28:55.400 --> 0:28:58.880 especially luxury hotels. This is where I'm seeing real inflation. 0:28:59.080 --> 0:28:59.400 Stay. 0:28:59.760 --> 0:29:02.760 We're seeing those twenty twenty three numbers, twenty twenty two 0:29:02.760 --> 0:29:06.280 when hotel rates. You know that the average luxury hotel used, 0:29:06.320 --> 0:29:07.800 you know, seven hundred bucks used to be able to 0:29:07.840 --> 0:29:10.720 get you a nice room at a four seasons. You 0:29:10.760 --> 0:29:14.280 know that's now seventeen hundred and in Paris. If you 0:29:14.400 --> 0:29:17.520 like luxury hotels in Paris, the new norm is twenty 0:29:17.520 --> 0:29:21.560 five hundred to three thousand euros a night, wow for 0:29:21.680 --> 0:29:24.800 those top twenty hotels. And it is and it seems 0:29:24.840 --> 0:29:28.200 to be persistent all summer long. So this is the 0:29:28.280 --> 0:29:31.760 summer where it behooves you to look outside the box. 0:29:31.800 --> 0:29:36.920 There's still plenty of affordable, beautiful destinations in Europe that 0:29:37.000 --> 0:29:41.600 are not a Malfy coast south of France, you know, 0:29:41.920 --> 0:29:42.840 Greek islands. 0:29:43.040 --> 0:29:45.360 Yeah, I mean some of those places obviously are going 0:29:45.440 --> 0:29:47.600 to be high demand, not just because of the Olympics 0:29:47.600 --> 0:29:51.520 in Paris particularly, but we've had the Taylor swift Eras 0:29:51.560 --> 0:29:53.640 tour going there as well. It makes you think that 0:29:53.760 --> 0:29:57.320 maybe August early September might be the best time frame 0:29:57.680 --> 0:29:59.680 to go to the City of Lights. But what other 0:29:59.720 --> 0:30:02.680 desks to nations are you looking at where we might 0:30:02.760 --> 0:30:06.600 be able to stretch that kind of strong dollar that 0:30:06.640 --> 0:30:09.640 we still have given where rates are right now. 0:30:10.600 --> 0:30:13.480 Absolutely, the US dollar is still a beast no matter 0:30:13.760 --> 0:30:16.320 how you look at it. You know, I was just 0:30:16.360 --> 0:30:19.720 in South Africa. That's a perennial favorite for me. You know, 0:30:19.760 --> 0:30:22.400 of course, you notice, you know, with Argentinas, you know, 0:30:22.480 --> 0:30:25.600 even though they're trying to turn their currency around, huge 0:30:25.720 --> 0:30:28.680 value to be had. Now, just note, obviously our summer 0:30:28.840 --> 0:30:32.520 is their winter. But you know, winter in Buenos Aires 0:30:32.640 --> 0:30:34.760 is not like winter in New York City or Chicago. 0:30:34.920 --> 0:30:40.920 So you can still have incredible travel experiences, less crowds 0:30:40.960 --> 0:30:44.680 than you know, going to Europe in peak summer months. 0:30:44.680 --> 0:30:47.480 And I'll just tell my fellow Americans out there, haven't 0:30:47.480 --> 0:30:49.200 been to Europe in a while, you know, especially with 0:30:49.280 --> 0:30:53.800 sweltering heat records constantly. You know, I foresee that again 0:30:53.880 --> 0:30:57.120 this summer. I was in Florence two summers ago when 0:30:57.160 --> 0:30:59.959 it was in the nineties. And when I tell you these, 0:31:00.280 --> 0:31:02.520 a lot of these European cities are not equipped for 0:31:02.560 --> 0:31:05.080 the level of heat they're about to see. And you 0:31:05.160 --> 0:31:08.600 see restaurants, you know, the air conditioning units petering out 0:31:09.520 --> 0:31:13.960 and it's just hot on the street. So be careful booking, 0:31:14.280 --> 0:31:19.320 you know, in Europe peak dates in July and August, 0:31:19.520 --> 0:31:22.280 because you're not going to get the greatest experience. Also 0:31:22.320 --> 0:31:24.480 in August in Europe, a lot of the locals leave, 0:31:24.560 --> 0:31:26.960 so you're going to be paying a premium to be 0:31:27.040 --> 0:31:30.959 sweating with fellow Americans, which sort of defeats the purpose 0:31:31.040 --> 0:31:33.000 of going to get the European experience. 0:31:33.400 --> 0:31:33.640 Yeah. 0:31:34.280 --> 0:31:38.160 Yeah, it's pretty difficult, a pretty difficult time all around 0:31:38.240 --> 0:31:41.480 in Europe anyway. I mean, given the way the geopolitics 0:31:41.520 --> 0:31:44.840 are in some ways and a lot of what you mentioned, 0:31:44.920 --> 0:31:48.200 I mean we've seen like wildfires last year. I mean, 0:31:48.240 --> 0:31:51.240 are you thinking, like, other than some of those more 0:31:51.360 --> 0:31:55.480 obvious events that are happening in Europe right now, that 0:31:56.000 --> 0:31:59.160 maybe some of the more off the beaten path travel 0:31:59.200 --> 0:32:02.320 destinations might just be a better bet all in all, 0:32:02.360 --> 0:32:04.800 given the what the dynamics are in Europe right now. 0:32:05.520 --> 0:32:07.920 Absolutely, And this is I think a great time to 0:32:07.920 --> 0:32:10.840 talk about travel insurance too. I've never really been a 0:32:10.840 --> 0:32:13.320 big travel insurance person. You know, most of the time 0:32:13.360 --> 0:32:17.320 with our credit cards, you get basic coverage if you know, 0:32:17.400 --> 0:32:20.719 something crazy happens, your flight gets canceled even now due 0:32:20.760 --> 0:32:24.880 to weather delays. You know, you can get good protections 0:32:24.920 --> 0:32:27.520 if you've got a premium travel credit card. But what 0:32:27.520 --> 0:32:30.120 people don't realize is, you know, for example, Mali, you 0:32:30.120 --> 0:32:33.480 know when Mawy had those wildfires that appeared out of nowhere, 0:32:34.480 --> 0:32:37.120 You're not going to get refunded from your hotel. Most 0:32:37.160 --> 0:32:40.200 of the hotel chains did not refund their customers, and 0:32:40.480 --> 0:32:43.160 I actually think it's a wake up call for consumers. 0:32:43.200 --> 0:32:48.480 When you're buying travel, it does not come with protections 0:32:48.520 --> 0:32:51.080 from these events, and you should not expect, especially if 0:32:51.080 --> 0:32:54.200 you're staying at a boutique hotel, you should not expect 0:32:54.240 --> 0:32:56.760 that that small hotel owner who's going to go through 0:32:57.440 --> 0:33:00.480 a horrible financial time to also underwrite the risk for 0:33:00.560 --> 0:33:02.880 you and your room. You know, I think in America 0:33:02.880 --> 0:33:04.440 we've got this sense of well, if I don't get 0:33:04.520 --> 0:33:07.560 what I paid for, I deserve a refund. But in 0:33:07.600 --> 0:33:11.640 these cases, especially strikes, strikes are happening all over Europe. 0:33:12.160 --> 0:33:14.880 When a strike happens, you know, even your credit card 0:33:14.920 --> 0:33:17.959 may not come through. So more than ever, paying five 0:33:18.120 --> 0:33:20.520 to ten percent of the total cost to your trip 0:33:20.560 --> 0:33:22.640 and travel insurance to give you the peace of mind. 0:33:23.200 --> 0:33:25.160 And now to your point, going to some of the 0:33:25.200 --> 0:33:27.240 more far flung destinations where you're going to get a 0:33:27.240 --> 0:33:31.840 better experience. I love Africa. Africa in the summer, you know, 0:33:31.920 --> 0:33:35.760 certain African safaris, the great migration happens in June. I've 0:33:35.800 --> 0:33:40.239 done that in Tanzania and Kenya. Absolutely spectacular these are 0:33:40.240 --> 0:33:42.040 the trips where you might want to invest in that 0:33:42.120 --> 0:33:45.640 comprehensive travel insurance. And you know, especially if you get sick. 0:33:46.200 --> 0:33:48.640 I just you know, did a piece on you know, 0:33:48.800 --> 0:33:52.240 I got food poisoning recently. Luckily it wasn't so bad. 0:33:52.320 --> 0:33:56.280 But I've had thousands of comments from my followers who 0:33:56.320 --> 0:33:59.520 have said travel insurance is a godsend when you're abroad 0:33:59.520 --> 0:34:02.960 because most American insurance, you know, health insurance does not 0:34:03.040 --> 0:34:05.760 cover you abroad, and the credit card coverage is shaky. 0:34:05.880 --> 0:34:09.759 So my final point on travel insurance I'm not paid 0:34:09.760 --> 0:34:12.200 by any one travel insurance company is never get it 0:34:12.200 --> 0:34:16.000 through your airline or hotel. Always go. There are sites 0:34:16.040 --> 0:34:19.239 like ensure my Trip where you can compare and contrast 0:34:19.400 --> 0:34:22.360 and price match policies. But never just buy a policy 0:34:22.400 --> 0:34:24.719 one off from a travel provider because it's easy in 0:34:24.760 --> 0:34:28.160 the point of sale. Always look, but you'd be surprised. 0:34:28.200 --> 0:34:30.160 Even if you get laid off from your job, travel 0:34:30.160 --> 0:34:31.840 insurance will let you cancel your trip and get all 0:34:31.840 --> 0:34:32.399 your money back. 0:34:32.520 --> 0:34:34.839 Yeah, to your point about the Africa experience, You've been 0:34:34.840 --> 0:34:36.840 doing a lot of reporting at Bloomberg here as well 0:34:36.920 --> 0:34:39.880 about how a lot of countries in Africa are starting 0:34:39.920 --> 0:34:42.080 to invest a lot more in sort of that luxury 0:34:42.120 --> 0:34:46.320 safari experience as well. But what you're talking about higher 0:34:46.320 --> 0:34:51.400 hotel prices advising people to get insurance, The costs start 0:34:51.480 --> 0:34:53.880 to add up, don't they. So I mean, how do 0:34:53.960 --> 0:34:57.320 you stretch that travel dollar if you're going to be 0:34:57.400 --> 0:35:01.200 running into you know, pretty elevated once you get to 0:35:01.239 --> 0:35:02.040 your destination. 0:35:02.280 --> 0:35:04.400 Absolutely so, say you're still hell bent on going to 0:35:04.440 --> 0:35:06.680 the Amalfi coast, right, I guess a lot of people 0:35:06.719 --> 0:35:10.800 are most of those hotels now because there's such high demand. 0:35:10.920 --> 0:35:14.359 Not only are you paying two thousand euros a night 0:35:14.480 --> 0:35:18.400 or more, they're non refundable months in advance. And this 0:35:18.560 --> 0:35:22.120 is a risky game. So well, first off, and that's 0:35:22.160 --> 0:35:24.440 where I would say travel insurance that paying the extra 0:35:24.520 --> 0:35:27.120 five percent to give you the peace of mind. Say 0:35:27.239 --> 0:35:30.359 you your spouse kid gets sick, it's covered, You'll get 0:35:30.360 --> 0:35:32.680 that money back. That's when it really starts to make sense. 0:35:33.600 --> 0:35:36.160 But back to your point of how to save, there 0:35:36.200 --> 0:35:41.000 are still incredible, incredible points deals. Air France has been 0:35:41.040 --> 0:35:42.919 the star of the show this year. If you ask 0:35:42.960 --> 0:35:46.600 any frequent flyer in the know, Air France has released 0:35:46.640 --> 0:35:51.520 more fifty thousand point business class awards from major US 0:35:51.560 --> 0:35:55.600 cities across the country to Europe, you can find fifty 0:35:55.640 --> 0:35:59.400 thousand dollars one way business class flights. And when you 0:35:59.600 --> 0:36:03.360 if you compare that to the American airlines, you know, Delta, 0:36:03.400 --> 0:36:05.799 their partner for the same flights, will often charge five 0:36:05.840 --> 0:36:09.719 hundred thousand miles for four hundred thousand. So there's been 0:36:09.760 --> 0:36:15.239 this huge inflation in the US airline currencies. The international 0:36:15.239 --> 0:36:19.200 airlines are where the tremendous value is. I love air 0:36:19.640 --> 0:36:21.960 you know the Flying Blue program. It's a transfer partner 0:36:21.960 --> 0:36:25.040 of all the major credit card companies. So my one 0:36:25.040 --> 0:36:26.960 tip there too is don't just put all your miles 0:36:27.000 --> 0:36:29.360 with one airline. I know, even if you fly the 0:36:29.360 --> 0:36:31.759 one airline, you want to be loyal. What happens is 0:36:31.760 --> 0:36:33.920 when you just get that co branded card for that car, 0:36:34.080 --> 0:36:37.080 you're banking up in a currency where it could you know, 0:36:37.120 --> 0:36:39.200 the inflation could go through the roof. And actually, the 0:36:39.280 --> 0:36:43.160 US government just had a hearing on airlines being naughty, 0:36:43.719 --> 0:36:46.200 and you know they're issuing these frequent flyer miles and 0:36:46.239 --> 0:36:49.240 then just continuously, year over years, they'll double the amount 0:36:49.280 --> 0:36:52.440 of miles you need to go to Europe the international 0:36:52.440 --> 0:36:54.920 programs are where it's at, and they often have transfer 0:36:54.960 --> 0:36:59.400 bonuses from AMX and Chase to Flying Blue to Aeroplan 0:36:59.520 --> 0:37:03.760 to Virgin Atlantic. So become an expert on these foreign 0:37:03.760 --> 0:37:07.400 freaking flyer programs, and there's a whole new crop of 0:37:07.880 --> 0:37:10.439 tools that will you know, like when you buy a flight, 0:37:10.520 --> 0:37:12.960 Google flights, Google dot com, slash flights is where you 0:37:12.960 --> 0:37:14.719 know you should go to start your flight search. When 0:37:14.760 --> 0:37:16.839 you're going to pay for a flight, we'll say you've 0:37:16.840 --> 0:37:19.880 got a lot of different AMX and Chase points in delta. 0:37:19.960 --> 0:37:22.279 It's really confusing because historically you have to go to 0:37:22.320 --> 0:37:24.440 each and every one of those websites to see what 0:37:24.480 --> 0:37:27.200 they're offering for points. But now there's a site called 0:37:27.239 --> 0:37:30.759 point me. It's so the website's point dot me and 0:37:30.880 --> 0:37:34.120 it's basically like Google flights, but for your award miles. 0:37:34.200 --> 0:37:36.080 It'll pull in a ton of options for all the 0:37:36.120 --> 0:37:39.040 different airlines so you can compare and contrast, Oh, hey, 0:37:39.080 --> 0:37:41.480 maybe I should use my United miles on this flight, 0:37:41.840 --> 0:37:44.319 or actually American has a much better deal. It'll pull 0:37:44.360 --> 0:37:46.799 it all together on one screen, which can help you 0:37:46.960 --> 0:37:49.840 get the best value on flights. So when you have 0:37:49.880 --> 0:37:52.040 to shell out for hotels. Hey, look, if at least 0:37:52.040 --> 0:37:54.680 the flights are free, that is a tremendous savings for 0:37:54.719 --> 0:37:55.560 your travel budget. 0:37:55.719 --> 0:37:57.839 Thanks for this, Brian, really great having on with us. 0:37:58.400 --> 0:38:00.600 Thanks for having me, Safe travels, and to you. 0:38:00.760 --> 0:38:04.960 That's Brian Kelly, The Point Sky with us on Bloomberg Daybreak. 0:38:05.360 --> 0:38:08.360 Our thanks to The Point Sky founder Brian Kelly, and 0:38:08.400 --> 0:38:12.080 we also want to thank BN y Melon's Alicia Levine, Investoes, 0:38:12.120 --> 0:38:16.040 Brian Levitt, and Bloomberg's Michael McKee and Anna Wong. Thanks 0:38:16.080 --> 0:38:18.200 as well to you for joining us on this special 0:38:18.360 --> 0:38:22.160 edition of Bloomberg Daybreak. It's fifty nine minutes past the hour. 0:38:22.239 --> 0:38:25.040 I'm Nathan Hager. Stay with us. The top stories and 0:38:25.239 --> 0:38:28.640 global business headlines are coming up right now