The countdown is on. Everything you need
to get the edge at the end of the market
day. This is the close
>> live from Studio 2 at Bloomberg
headquarters in New York. I'm Scarlett
Fu
>> and I'm Bailey Lip Schultz. We're
kicking you off to the the closing bell
here in the US. Let's get a check on the
markets right now. The NASDAQ 100 under
some sharp selling pressure being led
lower by Nvidia. big tech rotation risk
off day after we got that uh economic
report. We're also keeping an eye on the
equal weighted S&P 500 scarlet. This
wanted to go green at one point earlier
in the day, but now down by about a
quarter of a percent 10-year yield, call
it pretty much unchanged on the day as
is the US dollar. So really seeing the
moves playing out in the equity market.
Rest of the uh market playing uh pretty
close to the chest.
>> So what it means is that we close out
August with a sell-off in big tech. the
same names that have powered the S&P 500
from record high to record high. As for
what's next, investors brace for
seasonal weakness with September
typically the weakest month of the year
for stocks. Now, a court hearing on
whether President Trump can fire Federal
Reserve Governor Lisa Cook ends without
a ruling and comes at a time when the
central bank is weighing stubborn
inflation with resilient consumer
spending despite tariffs and a weakening
job market. Here is what Ryan Wong of
HSBC points out.
At the end of the day, 3% is still not
the Fed's 2% target. If the Fed does cut
uh rates by se 25 base points in
September, it's still not going to
necessarily mean a sequence of rate
cuts.
>> Later in the program, we've got former
Kansas City Fed President Esther George
here to share her perspective. And
duty-free no more. The US ends the
dimminimous exemption on parcels mailed
from overseas, putting businesses and
consumers on the hook for filling out
customs forms and also paying tariffs.
>> And Scarlet, you mentioned we are ending
August on a sour note and heading into
what has historically been the worst
month for the S&P 500. Yes, down about
7/10en of 1% on average over the last 20
years. Want to call out the fact that
the worst month uh for the years between
2022 and 2024, all coming in September.
So a brutal period heading into the
final month of the third quarter.
>> All right, so let's kick things off with
Victoria Fernandez. She is chief market
strategist at Crossmark Global
Investments. And Victoria, you saw the
setup that Bailey gave us with regards
to this seasonal weakness in the month
of September. You've noted for a variety
of reasons there are a lot of risk on
tailwinds for this market right now. But
do you think we're making too much of
the seasonal weakness that has come up
again and again in people's commentary?
Well, I think it's something you have to
be aware of, right? Just like we see it
in different parts of the year. We have
the Santa Claus rally. We have other
times of the year when there's certain
things that move the market a particular
way. So, yes, I think we have to pay
attention to the fact that this is
typically a very weak seasonal time for
the markets because you take that and
then you have to add on top of it some
of the extra uncertainties that we have
right now. uncertainties around tariffs,
what the path of the Fed is going to be.
You know, are we going to see a
difference now in earnings coming into
the third quarter? Because we've had a
lot of CEOs kind of prep us for perhaps
not as strong a third quarter as many
people anticipated. So, it's part of the
reason that you want to be a little bit
cautious as we head in uh to the end of
the second quarter and begin the third.
>> Okay. So, take that a bit further. What
does being cautious mean in this kind of
market environment? Do you lighten up on
some of the big winners of the recent
past quarters or do you go full
defensive?
>> I don't think you go full defensive,
Scarlet. Right. We're not sitting here
saying we're about to head into a
recession. But there are plenty of flags
that are waving that say we're going to
have a slowdown. We see it in the labor
market. We've seen GDP expectations.
Even though they're not negative GDP
expectations like we saw in the first
quarter, they're still below potential.
There's different weakening um elements
that we've seen in different parts of
the market. Manufacturing is one of
those as well. And so I think it tells
you you need to be, like I said, a
little cautious. Have a little defense
in your portfolio, but you're still
invested in the market. You still have
some of those um sectors, your
communication services, industrials,
financials, those that sectors that have
been in uptrends and have that momentum
behind them. You want to be in those
sectors. But it does make sense to maybe
trim some positions that have gotten a
little bit overweight and have a little
cash on the sidelines to where you can
step in when you find some of these
weaker sectors that perhaps start to
form a bottom like healthcare or energy
that you can add to.
>> And Victoria, all eyes are on the Fed
right now as we go into a September rate
decision where the market's pretty much
baking in an 85% chance of a cut. How
are you recommending clients position
around that just given kind of it seems
like more of an insurance cut as opposed
to the economic data right now kind of
setting the scene for an environment
that needs rates to come lower. So I
think you're right and the last part of
your statement that I think is key an
environment that needs rate cuts right
now when we look do we really need a
rate cut? Probably not from an economic
perspective. So that tells us that we
could actually see a steeper yield
curve, not just because the short end of
the yield curve comes down, but because
the longer end of the yield curve could
move higher. We saw it at the end of
last year. We could see some bond
vigilantes come out and really push
those yields higher. So we would look to
position kind of for yield steepeners in
the fixed income market and then have
some exposure like we said to some of
those sectors that maybe would do better
as yields move higher. Um, so out of
maybe some of the small caps that people
thought were going to be um really
gaining some momentum with Fed cuts, we
may only get one Fed cut this year. And
if that's true, we'll see the equity
market start to repric that.
>> Yeah, Victoria, you kind of went right
where I wanted to go. The market right
now is pricing in two cuts by the end of
the year. What if we do see Donald Trump
be successful in pushing the Fed to
bring rates lower much quicker than the
market's expecting? And on the flip
side, if these rates cuts don't actually
play out, where are investors going to
rotate to?
Yeah. Well, you have to look at um
expectations that we're seeing right
now. You're right that there are two
priced in for this year, but a lot of it
has to do with where the Fed comes out
and says they think uh the neutral rate
is going to be. We want to get those dot
plots. We want to see what they're
looking at. Are we looking at four rate
cuts for the rest of this cycle? Are we
looking at five or six rate cuts? Um I
think you're looking at probably three
or four. So, that tells us they'll
probably be spaced out a little bit over
time. and a 25 basis cut every few
months probably would not move the
needle tremendously in where you're
positioned at least on a tactical sense.
So we would have some fixed income
exposure and maybe lock in some of those
higher rates that you see right now. So
you can continue to have that and again
we would be in some of those more
momentum uptrend sectors the ones that
have shown that they continue to be in
uptrends even in volatility. We like
financials. Those do really well in a
steeper curve. And industrials should do
well from some of the capex expensing
and increase in manufacturing that we
should see coming due to the bill that
was passed during the reconciliation
process.
>> So that sounds like a continued
broadening of the equity market and not
just this reliance on seven big tech
company names. Does that extend to small
caps? You mentioned financials and there
are an awful lot of financials within
the small cap space.
There are and I think we have to be
careful with small caps. We saw them
have a little bit of a runup but it
didn't hold right. They don't have that
solid uptrend yet. They're not showing
us that they can hold some of the gains
that they have and a lot of that has to
do with the expectations around Fed
cuts. So, I would hold off a little bit
um on small caps. I want to see them
prove themselves a little bit more to
me. I'd rather miss a little bit of the
upside and come in later when I know
that they're going to continue to do
well than get whipsawed on some of
those. So, I would hold off a little bit
on small caps, focus on those other
areas.
>> That's fair enough given how many head
fakes we've gotten in the past.
Victoria, thank you so much. Victoria
Fernandez, chief market strategist at
Crossmark Global Investments. Now,
coming up on the close, we'll take a
closer look at today's PCE data and what
it means for the Fed's upcoming rate
decision in September with Esther
George, former Kansas City Fed
President.
Plus, PepsiCo boosting their stake in
Celsius with a $585 million deal. We'll
speak with the chairman and CEO, John
Fieldy.
>> And TSA expects almost three million
travelers to hit the skies today in
advance of the Labor Day holiday. We'll
discuss travel trends with Tara Mincson,
president of Intella Travel. All that
and more coming up. This is the close on
Bloomberg.
[Music]
So sticky inflation not enough to stave
off consumer demand, at least in July.
Spending climbed the most in four
months, driven by income growth and
goods purchases. Traders not really
budging on their rate cut bets for
September as the market digests the
latest data. Let's bring in Simona
Makuda. She is chief economist at State
Street Global Advisor. So Simona, how
does this set us up for the jobs report
on Friday now that we have the inflation
picture, which is, you know, things have
stabilized, but we're nowhere near that
2% target.
>> You know, we're not at target, but we, I
think, are making progress in the areas
that matter. And it's not just inflation
that matter, I think, is perhaps the
even bigger point here. We need to pay
attention to the labor market. And there
you see some troubling signs. So I think
it's fine for the Fed to take another
step uh a careful step towards
calibrating interest rates uh lower. We
are not talking about any dramatic moves
and 25 basis point cut in September
would not endanger progress on towards
inflation in my opinion.
>> Okay, fair enough. Um we of course get
the jobs report next Friday, but in the
leadup to that there's going to be the
jolts data. There's also going to be ADP
and challen challenger jobs as well.
These are private sources of data. How
much more do you think people will
fixate on that now that there's a new
head of economic statistics at the BLS
and perhaps some questions over how
valid the data can be coming from the
government?
>> Well, we've had issues with the quality
of data not in just in the last three
months. This has been an issue not here
just here in the US but globally since
co a lot of challenges the biggest one
being the low response rate. So we've
always used uh alternative data sources
in conjunction with the public official
releases. Um I think you want to look at
every single piece of information that
you have and in my estimation everything
tells you the same sort of story that
there's a slow erosion here and you
don't want that erosion to become
something more ominous. We had the big
revisions in payrolls data again that to
me simply reinforce the story that labor
demand is moderating and you want to not
let that get out of control right we are
in a good place let's stay here but I
think in order to stay here you need a
little bit of response from policy
>> and what does that response look like is
it locking in a 25 basis point cut next
month and do you see that being the
start of a trend of three or four in
this cycle or how does play out in your
view?
>> So, you know, despite everything that's
gone on over the course of this year on
the macro front, we've started the year
calling for three cuts before the end of
2025, and we still hold to that view
today. And again, the this is a view of,
you know, gradual moderation lower. You
know, it's been nine months now since
the Fed last cut interest rates
essentially. Um, we know we are not at
target, but we think we get to the
inflation target over the course of
2026. And the truth is the Fed today or
at the September meeting is not making
policy for the, you know, economy of
September 2025, but rather the summer of
26. That's how long it takes for some of
these actions to transmit.
>> But how much does tariffs impact that?
Because we've been talking about the
potential pressure on consumers for
quite some time. in today's print for
all intents and purposes look pretty
darn good to me.
>> Uh the PC data actually look good to me
as well. Granted, you know, you're
you're on the surface not progressing
towards where you want to be, but in
fact, the print was a little bit better
than I thought. Um I will say that we
cannot simply focus on tariffs and
inflation because there's a a lot more
to the US inflation story than just
tariffs, right? The piece that we forgot
to talk about in recent months and and
I'm surprised that we don't discuss this
more is what is happening to shelter
inflation that continues to moderate and
it's a huge component of the CPI and the
PCE and as long as I as I see ongoing
this inflation and moderation there I'm
a little more willing to you know live
with u an increase in goods inflation
which yes it's happening but we are not
you know at 1% today you're probably
going going to go a little bit higher
during COVID um or immediately after
COVID we picked at 12% that we are not
having a repeat of that. So it's not
that it's not happening but it's
happening in the context of this
inflationary pressures elsewhere. So all
in all the impact is muted
>> and I'm so glad you bring that up. The
thing that we're ignoring shelter
inflation what you see there if you can
break it down for us is that through
rentals or is it through owneroccupied
uh residences? And and I ask because I
wonder how sustainable it is.
>> It seems pretty broad to me. I mean, I
you know, as with everything, I try to
look at as many indicators as I can get
my hands on. Um, and I see it in home
prices moderating uh at the margin. You
see it in the Zillow uh rental data for
the national aggregate as a whole.
you're seeing it in some of more
dramatically in some of the experiential
series like the new tenant rent uh from
the Cleveland Fed. I don't take that
that as face value. It shows a big
decline um in the last print, but I I
take it as a directional indicator and
and so it seems that even in the housing
market there is a bit of a balancing out
of supply and demand and a little bit of
price um uh moderation that can be
sustained in my view. Simona, thank you
so much for joining us today. Simona
Makuda is chief economist over at State
Street Global Advisors. Coming up, we
turn to company news because PepsiCo
boosting its stake in Celsius with a
$585 million investment. Chairman and
CEO of Celsius, John Fieldley, joins us
next. This is the close.
PepsiCo turning up the heat on its
Celsius investment, upping its stake in
the energy drink maker in a $585 million
deal. Pepsi stake in Celsius now 11%
while Celsius agrees to acquire Pepsi's
Rockstar Energy brand in the US and
Canada as part of this transaction.
Celsius shares climbing to a 14-month
high. Now joining us live for more on
this deal is Celsius chairman and CEO
John Fieldy. John, you've been quoted as
saying this deal positions Celsius as
their strategic energy drink captain for
Pepsi in the US. What does that mean?
What does that actually look like in
practice?
>> Yeah. Yeah. No, it's an exciting
opportunity on this transaction and um
when you look at the energy drink
category continues to evolve. It's one
of the fastest growing categories and
being the lead energy drink captain for
Celsius, we're able to really control
our portfolio which now includes three
brands controlling planagrams. When you
look at your your routes to market and
your different channels at retail, it's
really important that you have the right
portfolio, the right products available
for that consumer segment and that could
be a divisional level, regional and
market specific. So this allows us to
really maximize the overall value of the
Celsius holdings portfolio and today
which includes Celsius, Alani and
Rockstar, which will all be under one
distributor.
>> Okay. So let's talk about that. You no
longer have to split everything up and
use 250 independent distributors. Tell
us about the portfolio that you've
amassed here and how you've carved up
the energy drink market. As you
mentioned, you have Alani New, which uh
Celsius recently purchased. You also
have Rockstar, which has been in the
Pepsi portfolio. And of course, you have
Celsius itself. Which part of the market
does each go after?
>> Yeah. So, by the way, there's a modern
energy taking place. Fitness lifestyle
is one of the fastest growing trends.
So, our Celsius portfolio is about
Celsius live fit. We inspire you inside
the gym and outside the gym to
accomplish your goals. Uh comes in great
flavors, refreshing flavors. We have
carbonated and non-carbonated offerings.
And then Alani new portfolio is new. We
just put up a record quarter on in the
second quarter of this year. It's our
first quarter of integration. It's gone
extremely well. That that brand really
focuses on females. It's a female
focused lifestyle brand for today's
health-minded consumer. It's inviting
and approachable and comes with great
flavors. What's fascinating is it's one
of the fastest growing uh functional
beverages in the energy category uh this
year. Uh it's been phenomenal and it's
going to continue to grow in scale and
females have been coming into the
category more than ever before. And then
Rockstar has been around a while, but
there's a huge opportunity. Over 50% of
the category is really traditional
energy. And when you look at our
portfolio yesterday was really Celsius
and Alani really goes after that modern
energy. Rockstar allows us to go over
that 50% with traditional energy going
after that 25 to 35 year old male and
we're really excited about it mainly the
largest percentage of sales are in the
pack northwest but there's opportunities
to optimize the portfolio as category
captain across the country through
PepsiCo
>> and John as you look to grow sales is
that taking market share from
competitors as you mentioned is it just
strictly expanding the total addressable
market what's really the strategy there
>> well what's uh what's really fascinating
the energy category. It's one of the
fastest growing segments in beverage.
New consumers are coming in. Increased
consumption habits. We're seeing share
taken from cold coffee like cold brews
um is an area where the energy drinks
are capturing more consumers and people
need more pickups and they need better
for you offerings. So, we've been
actually incremental with the Celsius
and Alani portfolio bringing in new
female shoppers and also new
health-minded consumers into the
category. So really well positioned and
this uh really rockstar opportunity
rounds out our portfolio. And the other
thing in order to compete at the highest
level, one of the fastest growing
categories which is highly competitive
having a multibrand approach offers you
additional enhanced strategies with
pricing promotional strategies at retail
to make you that much more competitive.
>> And John, when I look at people who are
buying energy drinks, it's normally when
I'm filling up my car and getting gas.
Where are you seeing consumers really
buying these energy drinks and where are
you seeing that potential growth?
>> Well, what's interesting if you go back,
you know, energy drinks have always been
a need state. I need an energy drink for
specific occas
specific tasks mainly in convenience. It
still represents a large portion of the
energy drink sales today. But what we're
seeing is large format groceries and
mass are becoming a larger piece of the
pie. And what that means is that people
are buying energy drinks in larger
packs. It's becoming part of the pantry
and once you're part of the pantry,
you're part of the a daily lifestyle and
a daily routine. And that's where we're
seeing this category continue to grow.
>> You say it's part of the daily lifestyle
and we certainly see that. But there are
some health concerns, especially with
regard to the level of caffeine. You
look at one can of Celsius and it's
about at least 200 milligrams of
caffeine. You compare that with a can of
Pepsi, about 35 milligrams. A cup of
coffee, 50 milligrams. Young adults are
clearly a key demographic for these
drinks, but uh anxiety and cardiac
issues are a side effect of caffeine and
this generation of young people is prone
to a lot of anxiety. What are you doing
to address that and get ahead of it?
>> Yeah, I mean moderation of any products
is is very critical. We recommend no
more than two a day. But I will say when
you look at your average caffeine uh in
coffee, it your average uh coffee house
which is right around the corner of
pretty much all of us is well north of
the caffeine content in our products. So
um those coffees, those tall coffees,
those large coffees that are there and
the cold brews that are out there are
actually a lot more caffeinated than
your average Celsius Alani or Rockstar.
>> Three years ago, we saw that Pepsi
bought an 8 and a half% stake in Celsius
for 550 million. Now it's increasing
that stake to 11%. So it's only natural
that there's talk of an eventual buyout
of Pepsi uh by Pepsi of Celsius. My
question to you is why is maintaining
control of Celsius important to you
right now?
>> Yeah, I mean this investment within from
Pepsi is really solidifies our strategic
alignment. Uh brings in a additional
strategic investor also adds a board
additional board members for PepsiCo
which strategically aligns this
organization at the highest level. So,
um, you know, we're publicly traded, so
uh, you'll have to ask Pepsi what other
additional, uh, investments they're
looking to make, but at this time, we're
excited about the transaction right now.
It aligns us on a financial basis. It
aligns us strategically. It aligns us
commercially with the category of
captain over the energy uh, portfolio
uh, of Celsius Holdings within Pepsi.
And it also f further enhances our
capabilities with a total portfolio
approach.
>> All right, good stuff. Celsius chairman
and CEO John Fieldley, thank you so much
for joining us today.
>> Thank you. Cheers. Have a great weekend.
>> All right. Fantastic. You know, I look
at the cans and like that the can of a
Celsius looks pretty appealing. It's
clean compared to like Monster which is,
you know, screaming at you.
>> Well, I think the thing that's
interesting is like isn't this all
marketing? And so them being like the
captain of the brands is kind of that's
really what you're selling. And that's
kind of why it's interesting to see the
different types of cans and where
they're selling it, who's actually
buying
>> or the fact that there's a female focus
energy drink. Like that kind of took me
by surprise. I didn't know about that.
>> Would you buy it?
>> I mean, I don't drink that. I I go with
tea. What's your caffeine of choice? Uh,
I'm a big Americano fan.
>> I'm a big Americano fan.
>> Which again, to his point, caffeine. I
definitely consume too much, but in the
clean type.
>> Are you getting tall coffees like he's
referencing?
>> No, not really. Normally the small guy.
>> All right. Well, maybe we'll get you
hooked on big tall cans. Coming up,
we've got former Kansas City Fed
President Esther George joining us live
to dig deeper into the Trump Coke saga
and what investors can expect out of the
Fed as we approach that September
meeting. This is the Close on Bloomberg.
It is just about 3:30 p.m. in New York.
This is the countdown to the close. I'm
Scarlett Fu
>> and I'm Bailey Lip Schultz.
>> And of course, given that it's the
Friday before a long weekend, the last
bit of summer, there's quite a bit of
news flow, surprisingly.
>> A lot of news. We've got economic data,
consumer uh holding up strong, but
inflation coming in hotter than people
expected. We have Nvidia down 3% couple
days after earnings print.
>> Yeah. And it makes you think about how
we're set up for September, which tends
to be a seasonally weak period for
stocks. A lot of people talking about
that given that there are so many
different catalysts uh recently for the
month of August.
>> And there's a lot of uncertainty
obviously around what the economy is
showing. We do have a key Fed decision
next month, but as you mentioned, you
have a Fed potentially cutting in a
month that is seasonally weak with
investors maybe taking some chips off
the table.
>> Yeah, all good points. So, and in
addition to that, you have some drama
unfolding as well at the Federal
Reserve. And here's the latest between
that saga, the ongoing saga between
President Trump and Federal Reserve
Governor Lisa Cook. An emergency court
hearing on whether the president has
proper cause to fire her did end without
a ruling. So, this power struggle
rattling global financial markets and
raising questions about how the White
House pressure might weigh on policy
makers. I'm pleased to say that we are
now joined live by former Kansas City
Fed President Esther George. Esther,
thank you so much for joining us today.
From where you sit as a former regional
Fed president, do you see this as a
legal dispute between President Trump
and Lisa Cook, the private citizen who
applied for mortgages uh before she was
named to the Fed board, or is this more
a dispute between President Trump and
the Federal Reserve as an institution?
>> Yeah. Well, good afternoon. Um I think
clearly this is another step in an
ongoing uh pressure and attack on the
institution in terms of uh the
authorities of the executive branch
relative to the Federal Reserve. And so,
uh, however this plays out in terms of
the details of the specific case that's
been brought forward, I think what's at
stake here for the American public is
really to understand who will be
influential in the decisions that the
Federal Reserve makes in the years to
come.
>> And personnel determines policy as we've
heard so many times from this
administration. And the concern here is
that the president will next target the
appointments or the renewal of
appointments of regional Fed presidents
uh in February of next year. How
concerned are you about that?
>> Well, I think it would be very
concerning and I'll tell you why. Uh
Scarlet, if you think about the origins
of this institution, they were firmly
anchored in making sure that political
pressure would be as limited as possible
in terms of the critical decisions that
the Federal Open Market Committee has to
make for the long run. And so the idea
that you would structure the institution
in a way that would protect that long
run view and not drive it in the
direction of shortrun decisions was
critical and it proved to be relatively
durable uh over the last 100 plus years.
So that's what's at stake, I think, as
we look at how this unfolds is how will
the decision-making process of this
institution
play out and really take a more
long-term focus as opposed to shorter
term interest.
>> And Esther, how much of a distraction is
this for Fed officials? Again, we do
have a closely watched Fed decision next
month given the back and forth uh with
President Donald Trump.
>> Yeah. So there there is a lot of noise
going on and I think it's most
unfortunate because there is already
enough uncertainty that's coming at the
decision they have to make relative to
the performance of the economy. This is
a time as the economy is showing shifts
whether it's from policy whether it's
from cyclical factors that you really
want the committee to be able to focus
on the debates they will be having at
their meeting in September. And I
suspect they are doing their best to
spend their time focused on those key
issues so that when they come to the
table in a few weeks, they can really
make those decisions in a manner that
serves the public, serves the economy
longer term.
>> And with that in mind, how does cutting
interest rates next month, again, the
market's pricing in an 85% chance? We
have inflation still hotter than people
were expecting. We have a jobs market
that is strong and consumer spending
showing no signs of slowing down. So
what does that signal if and when we do
get a Fed cut next month?
>> Well, I think that's at the center of
the debate and we've heard the the
narrative that has come out of the
committee talking about the balance of
risk, where they see upside to
inflation, where they see downside
potentially to the jobs market. And of
course, next week we will get another
piece of what I call the economic puzzle
to see how is the job market fairing as
they come into this meeting. So the
economy looks to be performing pretty
good. The decision is do they see
something uh ahead that suggests the
economy will slow in a way that the job
market will be damaged in a way that
requires them to ease policy at a time
when inflation is holding in there
pretty strong.
>> You point out the jobs report that's
coming out next week. We know that the
president fired the head of economic
statistics statistics over at BLS and we
don't know whether that will affect the
quality of the data immediately or in
the long term but it does open this door
to doubt creeping in over uh the the
quality of that data. If you were a
sitting Fed president still how would
you broaden out your reliance on other
data?
Well, as a regional Fed president,
Scarlet, you know that uh there were a
lot of confirming uh sources of data.
So, obviously, you do rely on official
statistics to guide how your
understanding of the economy. But when
you serve a regional uh area, as I did,
some seven states, you spend a lot of
time talking to those that are working
in the economy. How are they making
decisions six months ahead, 12 months
ahead which give you tremendous insights
to things like hiring uh to things like
pricing uh for their products. So that
is a key component. It has always been a
key component and I think at a time when
you're beginning to see a transition
around thinking about the stance of
policy, it becomes ever more important
for this committee to lean into those
anecdotal as well as their official
statistics.
>> Right. the on the ground research that
keeps you close by to what your region
is telling you. If the president
successfully remakes um the Fed to
reflect his priorities, which is lower
rates and a lower rate cycle overall,
what would that mean for debates on
things like the neutral rate, the 2%
inflation target, the framework overall?
Do they just become academic discussions
and not as relevant to the actual
policym?
So, Scarlet, I don't know how those
conversations will unfold obviously, but
I think the point you make is this is an
institution as with many institutions
that we want the public to trust. We
want the public to believe that the
decisions are made in the interest of
long-run economic stability for this
country, that growth can be promoted.
And if people begin to see cracks in the
ability to trust an institution making
decisions on that basis, that can be
problematic. So we will uh continue to
hope that people that come into these
roles will carry out that tradition,
carry out that very important role of
focusing on what serves the long-term
interest of this country.
>> Esser, we really appreciate you're
joining us today. Esser George is a
former Kansas City Fed president. Thank
you so much. Uh fascinating
conversation. I loved how opinionated
she was. She's very firm in her
conviction here.
>> No, very firm. And there's so much
uncertainty and we're living really
headline by headline, social media post
by social media post. So there's so much
uncertainty again around the
independence of the Fed and what this
actually will look like and how long
it's going to take.
>> Right. That's a good point because it
might not be something you see
immediately, but over time it becomes
normalized and it becomes something
where perhaps we took the independence
of the Fed for granted.
>> Yeah. I feel like we've used the word
unprecedented far too much this year.
>> Absolutely. All right. Coming up, Dell's
decline. We're looking at shares falling
after the tech company reported earnings
yesterday. We're going to take a closer
look at this uh maker of AI servers next
in our stock of the hour. This is the
close on Bloomberg.
Time now for today's stock of the hour.
Dell shares down more than 9% after the
tech company reported fewer sales of AI
servers than in the previous quarter.
Along with that, profit margins missed
expectations. Joining us now to discuss
that is Bloomberg's Andrew Pollock.
Andrew, want to start with that headline
beaten raised, but as I mentioned, the
servers and margins falling short. Why
are we seeing the stock down so much?
I think there's a couple of factors like
you mentioned the uh this the amount of
servers that they shipped was fewer than
the previous quarter. I think that
concerned people but also combined with
um results from Nvidia and Marll. I
think investors are a little worried
that the AI boom may be softening and so
that was part of the concern in addition
to like you said the profit margin
selling those servers uh while it
generates a lot of revenue they don't
make as much money because they're very
expensive to build so I think that's a
that's kind of what's going on here
people are a little worried that Dell
which has been seen as really a benefit
beneficiary of the AI boom it may be
slowing for them a little
>> gotcha there. You know, to that point
about the profitability, the margins, uh
the COO did answer a lot of questions
from analysts on the call about that and
uh apparently there are some expenses
tied to that that really eroded the
margin. Are those one-time items or is
this something that investors need to
get accustomed to?
>> Well, that's what the COO Jeff Clark
said that they were one-time items. Now,
you know, today is Dell's worst day
since the President Trump first
announced his tariffs in April and Dell
has had to manage like the other
hardware companies the tariffs and so
from time to time I think their supply
chain it affects their supply chain and
affects profitability. Now they're very
confident that they can handle this over
the second half of the year but again I
think these are concerns that investors
have and that's showing up in the stock
today. And Andrew, as we look at the
entire ecosystem is under pressure
today, obviously it's a riskoff tape,
but when you look at kind of the
commentary that we saw, how does the
outlook for, as you mentioned, the rest
of this year, but even as we get into
2026, how is that shaping up? And what
are we hearing from management?
I
>> I think for Dell particularly, it's
still very positive. I mean, they uh as
you mentioned, they raised their
forecast on how much they're going to
ship in AI servers to 20 billion from 15
billion. uh they have a very close
relationship with Nvidia, the you know
the world's most valuable company and
the maker of the powerful chips that go
into these servers. So going forward I
think the um the outlook is good for
them at least they're very confident it
is.
>> So it seems to be a case of
profitability concerns rather than
demand uh per se. I'm wondering if there
continues to be demand and Dell can't
fulfill it uh certainly without uh
sacrificing some margin. Who is its
biggest competitor in providing these AI
servers?
>> Super Micro is one of the competitors um
uh Huelet Packard Enterprise is another
competitor but really I think that yes
the profitability is an issue but it's
an issue for all the companies that make
these servers again because the
components that go into them are so
expensive. So, as the analysts say, you
know, it generates a lot of revenue, but
it doesn't really push up your profit
very much.
>> All right, good stuff. Bloomberg News's
Andrew Pollock. He is our senior tech
editor joining us from San Francisco.
Thank you so much. Coming up, we take
you to the closing bell. Mark Lucini,
chief investment strategist at Janney
Montgomery. Scott will be joining us
next on this Friday before Labor Day.
You have an S&P 500 down twothirds of 1%
being dragged lower by the big tech
names. The Russell 2000 holding up a
little bit better here. uh and that it's
only off threequarters of 1%. This is
the close on Bloomberg.
>> Welcome back to the close. Just a few
minutes until the closing bells. I'm
>> and I'm Bailey Lip Schultz. We are
ending August limping in to Labor Day
weekend. As you can see, big tech
selloff. I'll call it big, but lowercase
B on that big. NASDAQ 100 down 1 and a4%
being dragged down by Nvidia accounting
for 82 points of that. Want to call out
the fact that Google though is trading
higher as is Pepsi and Co. We're seeing
the S&P 500 equal weight under a touch
of pressure but really outperforming
that 10-year yield essentially flat as
is the Bloomberg dollar. Scarlet, it
feels like we've been waiting for
equities to catch up to at least some
form of a riskoff move. Volumes are
lower. Volumes are lower. We'll
acknowledge that it is a sleepy summer
Friday, but finally seeing a bit of a
pullback.
>> Yeah, I'm looking at a drop of 29% in
volume from the, you know, typical
3-month average for the S&P 500. So, it
makes sense given where we're at. A lot
of talk about this idea that there's
some September seasonal weakness that
people need to be positioning for. I
don't know if I buy it or not.
>> I don't know either. I just want to call
out we were at an all-time high. The
NASDAQ's up five months in a row. So, a
lot of gains on there for equity
investors. But with that in mind, for
market more market analysis, we welcome
Mark Lucini, the chief investment
strategist at Janney Montgomery. Scott,
Mark, we're talking about a strong
market running into what is a seasonally
weak period. We got some economic data.
What are you keeping an eye on and what
are we uh should we be expecting on the
other side of Labor Day?
>> Well, the jobs report uh you know, next
Friday is going to be key. obviously is
a setup for what the Federal Reserve is
likely to do a couple of weeks
following. Uh we want to know whether
what we saw from last month's report was
anomalous or the beginning is something
that is uh delotterious relative to its
impact on economic activity. So
certainly have all eyes on that. But
having said that I mean the market's
obviously misbehaving a little bit
today. Clearly a defensive bias to the
sector returns with the historical
leaders, tech, communication services,
even consumer discretionary industrials
being the laggers today. But that's not
true for the week. Overall, we're kind
of flattish for the S&P 500. And anytime
you get up to kind of a round number,
particularly something like 6,500 on the
S&P with a valuation at 22 times forward
estimates is not being inexpensive. You
know, you're right for an air pocket. So
no surprise that we see some weakness
here at the unofficial end of summer.
And I think again this setup given the
seasonality factor that you had already
talked about that September's
notoriously a weak month for the stock
market. I would expect that we'd see
perhaps some volatility. But all all
said and done um you know we're still
constructive on the equity market as we
go toward year end. Yeah, Mark, we were
kind of joking on our desk that
sometimes you see the market pull back
just because and that was really when
you hit an all-time high, investors are
looking for a reason to take some chips
off the table. Are we going into a
market with all eyes on that jobs data
where we're going to still be in kind of
a holding pattern on the other side of
Labor Day or what are you expecting,
call it Tuesday, Wednesday, Thursday as
well?
>> Well, I mean there's no lack of data
coming out next week. uh set up even
before the BLS report comes out on
Friday is the Jolts report. That
certainly got my interest as it relates
to reports on job openings and the the
vacancy rate and that can have uh some
impact on the market overall perhaps
being somewhat preient in nature
relative to what we might likely see on
Friday. Uh but otherwise, you know, the
market is right now baking in, you know,
close to a 90% chance that we're going
to get a a cut in midseptember at the
FOMC meeting. Uh and over two cuts
between now and your end. And of course,
uh Governor Waller and uh even Governor
Daly did nothing to dissuade market
participants from thinking that a rate
cut is all but assured at this juncture
given their comments here over the last
uh you know, 24 hours or so. So, you
know, anything that would cause a
disappointment on that rate cut front uh
could cause, like I said, some
indigestion that notoriously we'd see in
the month of September. If anything,
perhaps an excuse just to take a little
money off the table off of the
valuations and uh maybe even sell a
little bit more of what we've seen here,
which is some pressure on the tech
space, right? relative to a couple of
these companies reporting good news
overall but just failing to meet the
full-blown expectations of the market.
>> You know, you talk about the rate cut
expectations that's certainly reflected
in the yield curve. Uh two-year yields
down two basis points. Uh and we have
this continued curve steepening. It's
kind of what everyone's saying they're
expecting. What does a continuously
steepening yield curve mean for
equities, for cyclical sectors versus
growthy sectors like tech?
Well, I mean, I think first of all, it's
good for cyclical sectors because if the
steepening is a reason to believe that
the market is baking in prospects of
sturdy, if not even better growth uh
ahead out in the latter quarter of 2025
and into 2026, we know the market tends
to live in the future that cyclicals
would be behaving pretty well in that
environment. taking the evidence from a
steeper curve which is anticipating more
rapid growth perhaps a bout of uh
inflation remaining somewhat sticky as
we know we got the PCE report today the
core PCE uh well above the 2% handle
that the Fed is targeting y um so you
know we see financials um acting real
well in this environment certainly and I
don't think it's necessarily an
encumberment on the tech sector uh so as
long as they continue to deliver you
know the results that we've been
accustomed to. Um they should be among
the leaders anyway. But I think we've
also seen a boost in the industrials as
a consequence of not only the one big
beautiful bill act and the prospect for
uh infrastructure investment reshoring
onshoring. Yeah. Uh but I think overall
um it is u there is good news if you
will if one is looking at the yield
curve steepening as evidence of what's
likely to come. Mark, how are people
positioned right now when it comes to
the rotation out of the big cap tech
names and into other sectors like
industrials, like financials? Would you
say that we're, you know, twothirds of
the way through that rotation or um is
are we still at the beginning?
Well, if you look at the performance uh
the significant outperformance, if you
will, of the tech and tech adjacent
companies, it would suggest that any
rotation, which we've been teased by
many times over the last couple of
years, um is in its early innings. Uh
I'm not suggesting that we necessarily
see a rotation that is persistent in the
defensive sectors. You know, today's
leadership, consumer staples, even the
belleaguered healthc care sector is
among the leaders today. but rather to
see that broadening out as you mentioned
into financials, industrials, other
corners of the market that also
represent in terms of their waiting in
the S&P 500 uh a sizable enough amount
that uh in the aggregate uh can still
prop up the overall cap weighted index
even if tech is weighing on it. And
we've seen some recent outperformance by
the equal weighted S&P 500. I note that
you posted that before our conversation
got started. Um, and it's up about uh 3
and a half% or so uh since uh August 8th
uh against the less than 2% return for
the cap weighted S&P 500. And uh like I
said, I think that may be an early
inning situation in which some of the
broadening of the market would actually
be viewed very healthfully, if you will,
uh by investors.
>> All right, Mark, really appreciate you
joining us and giving us your take. Mark
Lucini is chief investment strategist at
Janney Montgomery. Scott, have a great
long weekend. Uh, and of course we are
headed towards a close. I like the way
you put it earlier where we're limping
>> to the end of August.
>> It's slow. It's a slow summer Friday,
but if you look at the red on the
screen, we are really seeing all of the
momentum that we saw earlier in the week
kind of fizzling out.
>> Yeah, it's a really good way of putting
it. Nvidia was kind of the high point in
terms of what everyone was looking ahead
to, thinking it would be a big catalyst,
but because it had powered the big tech
rally uh out of the April 8th low, it,
you know, had to deliver on all
cylinders and it didn't quite get there.
Well, the interesting thing was they
report earnings. We see the immediate
kind of knee-jerk reaction, selling
pressure. The stock uh trades higher and
kind of flip-flops between red and the
green yesterday. And today is the day
that investors are deciding, you know
what, maybe I don't want the exposure to
these big tech winners when you're
talking about the biggest company in the
world again going into a seasonally weak
month.
>> All right, so with that in mind, let's
bring in Jess Menon of Bloomberg News
and Jonathan Leven uh who is down in
Miami to parse through the most crucial
moments of this trading day. Jess, what
are you paying attention to? Well,
volume for one thing, just since we're
about to go into a holiday weekend, so
when you look at AVAT being down
compared with the last 30 days,
basically volume's down around 20% at
this point. And so, typically the stock
traders Almanac was talking about, you
shouldn't be surprised to see that
Friday leading into Labor Day weekend
where investors typically take profits
and usually the S&P 500 does average
decline about 10 basis points going over
the last two decades on a day like
today.
>> And John, you are down in Miami. What
are you seeing in this market that maybe
uh those of us stuck in New York in the
New York mindset are missing?
>> Well, I don't know if it's a Miami
thing, but clearly a change of sentiment
about the AI story that has powered us
uh for so long. And you know, it's just
this change of mood. People talk about
it as a September thing. But remember,
Nvidia is the unoff unofficial end of
earnings season. And now, what do we
have to look forward to this Fed
decision? And there's a lot of
uncertainty uh heading into that third
week of September, starting with the
jobs number that we're going to get next
week.
>> Yeah. All I know is that when I look at
my own commuting into the office, it was
an empty bus and an empty subway. So, as
Jess mentioned, low trading volume, but
we are ending August in the red. But
keep in mind, guys, this is another
month in the green all things considered
for both the S&P 500 and NASDAQ 100 on a
pretty solid tear.
>> And I'm so glad you mentioned that. All
right. So, even though there's a lot of
red here on the screen for equities, the
Dow, you can see they're losing about
210 of 1%. Uh, the S&P 500 retreating
from a record high because it did close
at an all-time high yesterday. Uh, now
down 6/10en of 1% and the NASDAQ losing
more than 1% really reflecting the
weight of those big cap tech names. And
we should mention as well, the Russell
2000 losing ground by half of 1%. So,
holding up a little bit better than the
S&P 500.
>> Yeah. And just looking at the areas of
the market that outperform today, we're
talking about safety net companies,
healthcare, consumer staples, real
estate outperforming again in a day that
tech and consumer discretionary as well
as industrials under selling pressure.
So you are seeing at some marginal level
a rotation back into those safer
investments, the value uh stocks and
those dividend payers.
>> All right. And uh within the S&P 500,
285 stocks gaining, 216 declining. So
Jess, you're looking at gainers. You
should have had plenty to choose from.
>> I know. It's looking today though the
leaderboard for the S&P 500. It's
Autodesk. ADSK is the ticker software
company jumping on a strong earnings
report also raised its fullear forecast.
If you look at that stock up a little
over 9% so it was its best day since
April 9th there. And then from the
sellside city was saying it has a price
target of around $376.
If you look where it closed today
though, actually around $314 there. Uh
so still a way to go but that company
obviously and the firm more optimistic
on that stock and then of course US
listed shares of Baba that being more of
a bright spot too. So if you look at
that stock obviously when it came to US
trading and where it's been up almost
13%. So that was its best day since
March of 2023 there. So if you looked at
what was happening it saw a surge in
revenue really tied to what was
happening with its China boom with AI.
So that helped offset a surprise when it
came to a decline in profit. And then of
course you and I and Scarlet were
talking about Petco yesterday. So
obviously Woof is the ticker symbol on
this. Soaring almost 24%. So it's best
day since July 22nd. But we were talking
with Bailey about this yesterday when he
was pointing out if you look at the
short interest in the percentage of
float being above 20% going into that
earnings report. So that's a big key
there. But it's third quarter guidance
feed expectation also had a brighter 20
uh 26 outlook. But again, still trading
around $3 a share when it was trading
around $30 in 2021, guys.
>> Yeah. Big move for Scarlet. My favorite
ticker as you mentioned, Woof. Jonathan,
I just want to ask, what is on your
radar? And do you have any cool tickers?
>> Yeah. Well, I I I think we got to start
talking about Nvidia, right? Because
this was this was the big turn and the
thing that really drove the market
today. Uh closing down 3.3%. It
basically looks like uh you know, post
earnings hangover. Again to recap, the
midweek uh earnings basically told us
that this is a stock that is moving from
extraordinary growth to great growth,
but that uh that step change in
enthusiasm is resonating in the market.
Should also point out that we have this
Wall Street Journal report that Alibaba
is developing a new chip to compete
domestically in China with Nvidia's H20.
I don't know if that's uh playing into
the sentiment here. Moving on. Uh got to
call out Dell down 8.9%
uh as of the end of the day. Uh it had
that earnings report again. Uh you're
looking at at a stock that's declining
after the company booked fewer sales of
AI servers than the previous quarter.
Dell booked 5.6 billion of AI server
orders in fiscal 2Q. According to
Bloomberg's Dina Bass, that's down from
12.1 billion in the previous period. And
then lastly, I got to go on to Cas
cosmetics. That's my specialty as you
guys know. Uh Ulta Beauty down 7.1%
on the day. The the shares are falling.
This was a little bit of a a
headscratcher. The initial reaction to
the earnings report was different, but
the shares end up falling on the day uh
on a company warning of a pullback by
consumers.
>> Huh. the the interim CFO saying that uh
the cosmetics retailer's comparable
sales would be flat to low single digits
in the second half of the fiscal year.
Although it did raise its fullear
outlook but that apparently was not
enough.
>> Okay, that confuses me because I thought
cosmetics was supposed to be some kind
of a recession indicator and they're
raising their full year outlook but then
saying that people are pulling back. Um
I guess we'll have to unpack that a
little bit. In terms of the yield space,
let's go there. Steeping of the yield
curve is what we saw. You could see that
there was some declines at the short end
of the yield curve. The two-year yield
goes down about one basis point. Uh we
did get data on consumer spending,
personal income, as well as uh consumer
confidence and PCE. Stubborn inflation.
Uh people are spending even though
there's concerns about tariffs and
weakening labor market. It all is kind
of part of the drum beat to the big jobs
report next Friday. And you could see
yields moving higher at the longer end
of the yield curve. The 10-year up two
basis points, the 30-year up five basis
points. And that's what's going on in
the markets, guys. But want to have a
little bit of fun on a call it Friday
going into Labor Day. Not call it
Friday, actual Friday going into Labor
Day. Looking at the story that hit
yesterday. Amtrak debuting a new
high-speed Asella train after years of
delays. I'm talking about this because
I'm someone who yesterday had a delayed
commute into the office and going home.
It took me two hours each way when it
should be an hour and 10. So, it seems
like after a long time coming, this is
going to make it easier to connect DC,
New York, and Boston. $2.35 billion
project, guys.
>> It's pretty unreal, especially when you
think about how Asella trains are
capable of going much faster than they
currently are able to because of some
tight turns in the Boston area. I I'm
not someone who makes this trip
regularly. I know Michael McKe does that
quite a bit. And I think anyone who uh
needs to go on this, go along the
Northeast Corridor is looking forward to
high-speed trains. Jonathan Leven, you
are in Florida and I I you guys don't
rely on Amtrak there, do you?
>> No, but we do have the Bright Line. One
thing that I I'll tell you about the
these things, these are great to have.
They're they're good for the for the
community. Uh but at the end of at the
end of the day, it's all about changing
the culture. That's that's certainly
been the experience here in South
Florida. I mean, you build these things,
uh but is the price point right where
people are going to ride them on a
regular basis? Are people actually
willing to get out of their cars? I can
tell you here in the Sunb Belt, that's
been the real discussion, not can you
actually bring the product to market?
>> Yeah. As someone who's from Los Angeles,
you go from the opposite coast where
everyone's driving, everyone's sitting
in traffic, whereas here in the
Northeast, everyone gets on a train.
Scarlet, I don't know about you, but it
seems like we've got the MTA, we've got
NJ Transit, we've got Metro North. What
do you ride?
>> I ride the Metro North. I ride the
subway. And I actually the most reliable
ways to get anywhere in this city is to
walk, even if it's raining. So, um,
Jess, are you a commuter?
>> So, I either walk to actually like to
take the bus more because I found that
in recent years, it's actually been a
lot easier. Uh, for me personally, so I
actually prefer it and there's fewer
people and it's quicker for me to get to
work, so it works for me.
>> Love it. Love it. I mean, some people
might take the Asella to get to
weddings, you know, this summer or maybe
not even this summer because apparently
this is a new thing where people don't
want to host their weddings in the
summer because it's too hot, there's
extreme weather, there's rain. Uh, so
they're moving more and more to holding
weddings in the fall or in the spring to
avoid the discomfort of super hot
weddings.
>> Yeah. As someone who got married in
June, it was almost 100°. Was it?
>> But uh we took our photos at the end of
the day uh inside because we had to
escape the heat. But I only can imagine,
Jonathan, that that heat is even hotter
in the summer down in Florida.
>> Oh yeah, totally. Well, little known
story, I got married in Mexico. My wife
is Mexican. We got married in the desert
of uh of northwest Mexico. So, I don't
know what these people are complaining
about. Come on,
>> Jess. Would you go to a wedding in a hot
area in the middle of summer?
>> Well, I'm from Texas, so I've been to
tons of and I can confirm it's pretty
hot out there, but I got to say it's
really beautiful. They'll have the
sunset there and then usually there's an
indoors in case it rains, something like
that. The band's inside, the
refreshment, so it works.
>> Yeah. A lot of the wedding planners have
figured out ways to work around it,
right? They have misters, they have like
the the cooling area, the patio. Oh,
it's it's all like kind of planned out.
You as long as you pay for it.
>> Everything costs some money. Hey, New
Jersey, I will say, is the best when it
comes to cocktail hours and alternative
options, indoor, outdoors, and in the
fall, especially when it's foliage.
>> Okay, there's a thumbs up for New Jersey
from Bailey. All right, that does it for
us this hour. I want to thank our Jess
Menon and Jonathan Leven for joining us
as we close out this closing bell
segment. Coming up on the close, we're
going to wrap up the last trading day of
the week and the month with Jim Biano.
He is president at Biano Research. This
is a close on Bloomberg.
>> The countdown is on. Everything you need
day. This is the close.
>> Welcome back to the close. I'm Scarlett
>> And if you look at what happened in
markets today, a pullback from record
highs for the S&P 500, a pullback in
tech stocks overall. And that's why the
NASDAQ 100 down 1.2%. A clear contrast,
Bailey, to the minimal move in the S&P
500 equal weighted index.
>> Yeah, we're seeing that kind of trade
happening in real time where you're
seeing investors rotating out of big
tech and pushing their uh money into
some of those safer bets as it broadens
away from Nvidia. But want to now take a
look at some of the day's biggest
movers. We've got some winners, we've
got some losers. Ulta down 7%. This
comes after cooling consumer spending.
We were just talking about it with
Jonathan. uh a lot of kind of mixed
messaging, if you will, Scarlet, in
terms of kind of setting uh guidance
that analysts saying could prove
conservative. Also, when you're talking
about a stock like Ulta, you're talking
about one that in my opinion uh could
have been priced to perfection. We saw a
big run up in the last few months, a
firm up 11%. This is so key to me
because we are expecting Clar's IPO next
week and then Caterpillar down more than
3.6%. This comes after they're calling
out tariffs impacting the business. So
certainly an area to keep an eye on.
>> So Clara's IPO next week. Thank you for
bringing that up.
>> Launching it. Sorry, not pricing.
>> So, when would it price?
>> The following week.
>> Okay. So, in two weeks, uh, that's going
to be a big catalyst for the market
here.
>> That'll be a big one. We are expecting a
busy period for the IPO market on the
other side of Labor Day.
>> All right. So, just add that to the list
of things to watch for in September. Our
top story this hour is we closed out
August with a sell-off in big tech. The
what's next, investors bracing for some
seasonal weakness. September is
for stocks. We'll get into that in just
a moment. In the meantime, let's kick
things off with factor Friday with Chris
Kane of Bloomberg Intelligence. So,
Chris, get us started here in terms of
what you're paying attention to because
um the S&P, as we mentioned, closed at a
record high yesterday, came back a
little bit from that today. What does
the data say to expect from the markets
after an all-time high is set?
>> Yes, Carl, like you said, we just set an
all-time high yesterday. You know, it
was quick to forget because today was a
bit of a bad day. uh but you know to not
bury the lead the clear thing that the
data shows is higher returns and lower
risk after an all-time high and that's a
little bit counterintuitive but
quantitatively is true higher returns
are basically another way of just saying
that the market itself has momentum I
think most people know that uh the more
striking thing is the lower volatility
and this is very quantitatively um
consistent so we looked at all months
since 1950 a after an all-time high that
forward six and 12 months had an
annualized volatility of about 11%
>> Mhm. when you use all the days, it's
about 14%. Uh the S&P 500. So, it's a
significant reduction in volatility
after an all-time high. I think a lot of
people would be surprised about that
because it's kind of counterintuitive,
but it is true.
>> Yeah, that's interesting stuff. Focused
on the US. I want to ask you, how has
the value factor worked in Europe? Is it
better than it's been doing here in the
US?
>> You know, I think this is a totally m
uh, you know, under reportported story.
I mean, value is absolutely rocking in
Europe. Um, factors generally are
working very well in Europe, much better
than the United States. uh you know when
you look at the Euro stock 600 breaking
them up into five uh you know groups the
cheap group you know is up about 20%
over the last year the expensive group
is only up about 5%. You compare that
with the United States it's almost the
exact opposite where you have expensive
stocks really beating cheap stocks or
another way to say that value isn't
working. uh you know we run a
multifactor model in Europe called the
uh European BMVP model and that's up
about 27% this year that uses momentum
value low volatility and profitability.
Uh so value and factors generally are
really rocking in Europe.
>> So let's connect the two. Um how does
the US value group differ or compare
with the European value group?
>> Yeah, this is something we always look
at, right? Because you have factor
portfolios but then you want to see like
what are their attributes? what are they
like other than the the direct factor
that we're forming on. So certainly
value stocks in in Europe and America
are obviously cheap. That's what value
is. But the value stocks in Europe are
much more momentum. They have, you know,
they load positively on momentum because
they've worked much much better than
United States. And I would say both
United States and Europe, it's kind of
like anti-growth, anti-profitability of
these value uh portfolios, but Europe
even more. So very anti-p
profofitability, things like low ROE,
very anti-growth, things like low EPS
growth. That certainly has not stopped
the factor from working very well in
Europe this year, but it's something to
keep in mind.
>> All right, Chris Kane, really appreciate
it. Chris Kane of Bloomberg Intelligence
with our factor Friday. And as August
trading wraps up, investors bracing for
turbulence in September, historically
the weakest month for US stocks. Nataly
Kenovich has been going through the
numbers and has more. So Nataly, what
does seasonality tell us specifically
about September? What do the numbers
show?
>> Yeah, so the numbers show that September
is the worst month for US stocks. Data
going back to 1950 show that the the S&P
500 is typically down by 0.7%.
Data going back to 1927 showed that uh
80 56% of times in September we saw
declines and declines are by about
1.17%.
More importantly, when there's the first
year of the US presidential cycle,
declines are even bigger. So we could
potentially expect something around
1.6%.
>> And Natalia, last year we were in the
green for the S&P 500, but really sharp
losses the four years uh before that.
Why why is September so weak?
>> So we have to keep in mind uh that there
are some factors that are typical for
every September and then the current
setup. So for example, we know that
pension funds, mutual funds, they
typically rebalance their portfolios
ahead of the year end, fiscal year end.
They sell uh losers. They also have to
rebalance across all asset classes also
retail traders. So they typically buy in
June July but then they slow down a
little bit in August and September. Now
I'm citing data from Citadel Securities.
Uh so potentially everyone is already on
vacation. So this is also important. And
finally buybacks. We know that ahead of
the next uh earning cycle uh the the
so-called blackout period starts in
midepptember. And we know that buybacks
are really huge this year
versus historical levels, right? So
they're going to pause in around
midepptember. So we won't have this
demand from US corporations,
>> right? That's a that's a key point
because they've been a consistent source
of uh demand in this equity market. So
put that all together with what current
positioning might show. What what are
how are institutional investors
positioning right now?
>> Yeah. So we also should uh keep in mind
that as Chris just mentioned, we saw a
crash in volatility, right? The VIX is
low. When that happens, other types of
institutional investors such as
so-called systematic funds, right, CTS,
wall controls, they buy stocks when
volatility declines and this is what's
been happening now. And when we look at
positioning across all these systematic
funds, they are pretty full. So it means
that there is no more room for buying
and in case we see a downside move, they
were going to be forced to sell. And
when they do it, we really feel it
because they did very quickly. Yeah,
we're talking about an S&P down today
6%, NASDAQ down about 1.1%. Are we
already seeing investors positioning for
the seasonality weakness?
>> I think so. We also should keep in mind
that the options market is also
signaling that some people are
positioning for potential losses ahead.
So bear with me. So there's a a really
good indicator. It's called uh 10 delta
put versus 40 delta put. Basically, this
is protection against steep declines
versus shallow declines. So it hit the
highest level this year. It means that
people are expecting some volatility
losses in September, October. And keep
in mind also if you look at seasonality
and data for the VIX index, October and
September are two months when the VIX
typically hits 20. Now it's about 15 14.
So we could see more volatility and it's
not going to be bad just for the stock
market, but as Bailey knows, for the IPO
market as well. All right, good stuff,
Natalyia. Really, really appreciate you
joining us on the season seasonality
factor for the month of September. There
is some breaking news surprisingly for
the Friday before later Labor Day after
the market closes. This is from Spirit
Airlines uh aviation holdings that is
the holding company for Spirit Airlines
and they have filed for a voluntary
petition for Chapter 11 in New York. So,
basically they're preparing a new
bankruptcy filing and they've begun this
voluntary restructuring process. Uh
Spirit Airlines uh says that it expects
to execute comprehensive restructuring
overall and it expects to be delisted
from the New York Stock Exchange NYC
American Stock Exchange and it expects
to continue to trade in the OTC off uh
over the counter through this process.
>> Yeah. And this is a company Scarlet that
had tried to merge, tried to sell itself
to a competitor. So, when you're looking
at the fallout that we're dealing with
with this bankruptcy filing or
preparations for that bankruptcy filing,
uh it's a lot of questions around what's
best for the consumer and really when
you look at this restructuring, how that
ultimately will end up impacting people
who rely on Spirit.
>> So, we'll be all over this because
coming up this hour, we're going to dig
deeper into the airlines with Deutsche
Bank airline equity research analyst
Mike Lindenberg and talk to them about
what's going on at Spirit. This is the
US stocks are retreating from record
highs following an inflation report that
remains above the Fed's 2% target.
Though, despite today's losses, the S&P
500 posting its fourth straight monthly
advance with expectations intact that
the Fed will cut rates twice this year.
For more on that, we bring in Jim Biano,
president at Bianco Research right now
joining us. Jim, we saw inflation report
coming in hotter than expected, though
we did see the consumer hanging in
there. What are you expecting as we head
into a critical jobs report next week as
well as a closely watched Fed decision
next month?
>> Well, I think the Fed has pretty much
communicated that they're going to cut
rates at the September meeting for the
first time in about 10 months. Now, that
I've said that, I would also say I think
that this is a soft number. What I mean
by that is if next week's payroll report
or the September 11 CPI numbers are more
than expected, that could basically push
this uh probability back to 50/50. So, I
don't think the final chapters written
on this rate cut for September, but it's
pretty likely that we're going to see
one.
>> What kind of fallout would we see in the
market across assets if we do get
economic data that makes this, to your
point, more of a coin flip than a locked
in decision?
I actually think it would be supportive
for the bond market. I I'm one that
looks at what happened last year because
the Fed at the same September meeting a
year ago after JPL went to Jackson Hole
and said that there was problems with
the labor market. We have to cut rates
just like he did last week, they cut
rates and long-term interest rates
rejected it by going up in yield. And I
think that that's the risk we have now.
The 30-year yield is actually higher
right now than it was 1 minute before
the payroll report on August 1st. So,
all this talk about the Fed's going to
cut rates, saying that they're going to
cut rates, the weak payroll report, it's
not moving long-term yields down. And I
think the risk you face is that they're
going to go up if the Fed cuts rates and
what they perceive as the weakness in
the economy does not come to pass. So,
if they actually threw that into doubt,
it might be supportive for the bond
market.
So, you mentioned the 30-year yield. I'm
looking at it right now, 4.92%.
Um, and, you know, it's kind of been
stuck in a range over the past three
months. Uh, it hasn't gotten to that 5%
level we saw in mid July, which of
course is the highest going back to, I
think, something like, um, you know, a
couple of months, if not longer than
that. What breaks us out of that range?
I mean, yields can go up, but are they
going to get past 5% again?
>> Well, I think it's going to be one of
two things. It's either going to be
signs that the economy is really slowing
down. Um, we don't really have that
right now. If you look at the Atlanta
Fed GDP number, it was revised up big
today, suggesting that the third quarter
is looking like 3 and 12% growth. Or
it's going to be signs that the economy
is heating up and that inflation is
starting to percolate as well. Remember
now, we have core inflation at PCE at
2.9. We have core inflation at CPI at
3.1. I'm old enough to remember a couple
years ago this these would have been
completely unacceptable numbers from the
Fed, but now they're going to cut rates
in the face of those numbers. So, if
they keep going up, that could actually
push yields much higher if the market
feels like the Fed's making a mistake
again. So, it depends on what we get
because right now we're kind of stuck in
this range and it's the end of the
summer and nobody really cares. But
eventually when they they're coming back
after Labor Day in three days and maybe
they'll start caring again.
>> Yeah. Well, we'll keep an eye on that
one. I'm curious how you think the drama
over what's taking place at the Fed, uh,
between the president and the Fed as an
institution, how that's going to weigh
on policy makers as they deliberate over
what to do in September and how they set
themselves up for the rest of the year
into 2026.
>> I think it's going to weigh a lot on
them and I think it is mattering a lot
for the institution. Um, it is going to
be highly disruptive whatever happens
with the court ruling with Lisa Cook
next week. either way. Either she gets
an injunction, she gets to stay, or she
doesn't get an injunction, and she has
to fight this as a non-fed uh employee.
And I think that we're starting to see
that show up with the way that J. Paul
has been reacting to the market and
everybody else. I I think this is going
to have long-term implications for the
Fed. Um I know everybody likes to say
it's going to be loss of independence.
It doesn't necessarily have to be that.
But I do think that the more immediate
impact is going to be the role of
dissents. The Fed never has any dissents
in their v voting. I've been one that's
argued that this is the biggest weakness
that the Fed has is this group think
that everybody has to agree with
everybody else. And if they break of if
this breaks them of this, this could be
actually a long-term good for the Fed in
addition to all the other risks that
they face.
>> All right, Jim, really appreciate it.
Jim Biano, president at Biano Research
and a lot of people say maybe it should
be more like the Bank of England where
there is a lot of dissension and it's
okay.
>> It's interesting.
>> This is the close on Bloomberg.
>> Spirit Airlines filing for bankruptcy
earlier this hour. The airline also
expects to delist from the NYC American
Stock Exchange, but says that flights
are still operating normally as we head
into one of the busiest travel weekends
of the year. Joining us now to discuss
is Mike Lindenberg, airline equity
research analyst at Deutsche Bank. So
Mike, um, can Spirit get this done on
its own or does it need to team up with
someone because there are discussions it
was having reportedly with Frontier?
>> Yeah. No, I wouldn't be surprised um
that if ultimately what comes out of
this is the Spirit assets find their way
into another carrier or multiple
carriers. I mean, we saw them come out
of bankruptcy earlier this year. uh at
that point you know they were presented
as a as a viable operating plan and then
subsequent to that you know they ended
up not performing all that well. In fact
just recently their June quarter results
indicated that you know the plan wasn't
really going according to what they had
originally laid out. um the losses were
pretty significant and so I think um the
markets weren't surprised and if you
look at just where the bonds have been
trading recently and where the stock has
been trading I mean people were calling
for this and you know the fact was that
was probably going to happen sometime as
we headed into the weaker the seasonally
weaker shoulder period of September. Why
are lowcost airlines having such a hard
time? Because it's not just Spirit. I
mean, you've seen some of these lowcost
carriers try to work their way up, try
to attract a higher premium customer
base. Uh Southwest among them as well.
No one likes inflation and there's
always a market for lower airfares. So,
I'm not sure I understand why they can't
survive.
>> You know what? I think the root cause
right now is that we just probably have
too many of them. If you think about it,
if you want to fly to a place like
Frankfurt or Sao Paulo or Japan, you
know, there are three major US airlines
and some foreign carriers that can
provide that service. But if you want to
fly from the Northeast to Florida, you
can get there seven or eight or nine
different ways. And so there's just too
many seats in the market. And I think
that what's happening with Spirit, this
rationalization, it's a winnowing of the
space.
>> And I'm just looking at the performance
total return over the last 12 months.
United up 146%, Delta 50%. And uh
Southwest, I know they're dealing with
an activist and reshaping their business
up 17%. Why are we seeing such a sharp
divide or sharp outperformance for some
of these companies that are even
targeting similar uh consumers as
opposed to the lowbudget operators?
>> You know, at the end of the day, it's
the earnings that are being discounted
in the marketplace. So, if we look at a
company like United and Delta, they're
on track to report, you know, four four
and a half billion of pre-tax this year.
Southwest is going to be closer to break
even. When we look at Labor Day, a busy
time, are we seeing companies that are
better positioned to capitalize or as
you mentioned, offer flights that
consumers want for a holiday weekend in
the summer?
>> Yeah. No, absolutely. I mean, I think
it's a story of bifurcated demand. You
know, the classic K curve, what we have
here is that even though Labor Day we're
going to see record volumes, they're
going to be up slightly from what they
were a year ago, which is actually
pretty surprising considering that
capacity is going to be down actually a
little bit as we head into the weekend.
But the fact is you're going to have
some airlines that are very profitable
and some carriers that are probably not
going to perform all all as well. I mean
peak periods are when they actually do
fairly well, but overall as we move
through the month of September, what
you're going to see is that the airlines
that are more exposed to the revenue
segments that are doing quite well,
which right now that's cargo, that's
premium, that's international, that's
corporate. It's the carriers that cater
to that price sensitive customer who, as
we know, and we've heard from other
sectors, that customer is hurting right
now. And if that's your primarily
customer base, you're not going to be
generating good returns. And that's what
we're seeing in the numbers right now.
>> Yeah. You're really um being whipped by
the forces, the macro forces around you.
Where's the opportunity within the
airline sector? I think about Alaska
Airlines and how it's pushing really
hard to expand routes to Asia for
instance, uh really fending trying to be
a bigger player in that space. You know,
it's great you bring up Alaska because
that is one of the one of two what we
would characterize as an idiosyncratic
investment story because Alaska is in
the midst of a merger. So, we're not
seeing that with any other carrier and
they're also taking over an airline that
is in the midst of a turnaround. When
they actually bought Hawaiian, it it was
viewed as extending a lifeline to that
company. Hawaiian without absent the
Alaska merger, you know, there was talk
about, you know, would they ultimately
end up in in restructuring? And so we're
seeing that company turn around. And so
Alaska gets the benefits of both the
merger synergies and the turnaround of a
very storied franchise.
>> I will say I flew business class on
Alaska. Not quite the experience that I
had online.
>> Full recline. The seats are smaller.
There's no TV. So how is that impacting
some of these businesses?
>> So that you must have flown them on a
transcon route. So when they purchased
Hawaiian, they did pick up some 787s and
some A330s. They do have lie flat
seating. I would think that over time
some of those wide bodies are going to
find their way into the New York maybe
Seattle market, New York LA market. I'm
not sure where you normally fly.
>> It was SFO to JFK. I thought I was
flying. Yep. Me too.
>> Give it time. Be patient.
>> The outrage from Bailey Lip Schultz
about his business class flight that did
not recline. Mike, thank you so much.
Really appreciate you joining us. Mike
Lennenberg is airline equity research
analyst over at Deutsche Bank
Securities. And we're going to stay with
travel here because domestic travelers
might catch a break this Labor Day
weekend with flights, hotels, and car
rentals actually cheaper this year
compared to last year. That's according
to data from AAA. And if you pair that
with today's data showing consumer
spending is still solid and it's shaping
up to be a solid stretch for travel. Our
next guest has a key perspective on
these trends. We want to bring in now
Tara Mincson, president of Vintella
Travel. It's a platform offering online
travel advisory services. So, Tara,
where are you seeing the demand show up
the most in uh these I don't quite
believe it, but lower airfares compared
to last year?
>> I know, I know, I know it is really
unbelievable, but it's true. We are
predicting a record-breaking Labor Day
travel weekend to round out what has
honestly been the most heavily traveled
summers in over a decade. So, it is fast
becoming the summer Black Friday
weekend. Uh where they're traveling
mainly domestic, right? A lot of the
flight data is revealing that travelers
are flying to Orlando, New York, Los
Angeles, Denver, Atlanta for sightseeing
attractions and events. We're seeing a
big uptick in event travel. So going to
a destination domestically, getting
those airfare prices that are 6 to 10%
cheaper and uh perhaps going to a
concert, a festival, a Formula 1 race,
NFL, MLB, US Open right here in our
backyard, right? Uh and then kind of
building a whole itinerary around it.
So, it's it's the reason that we
purchased a massive ticketing company
this year because travelers just want
more experiences on their holidays.
>> And Billy, you're flying tomorrow,
right?
>> Fine to Nashville.
>> Okay. So, Billy's flying tomorrow on
Saturday. What? Which kind of strikes me
as surprising because I think most
people travel like Thursday or Friday,
you know, since it's a three-day
weekend. What tends to be the best deals
in terms of flying for this short
weekend?
>> So, I think he's smart. He's traveling
outside of that window, right? So you're
more likely to get better prices when
you're not traveling within the Friday
to Monday or if it's a holiday on a
Monday a Friday to a Monday night. So
take that early morning Tuesday flight
and go right to the office. You know, uh
leave Saturday morning and just cram a
lot more into the weekend. So I think
that that's smart. That's a great
traveling tip.
>> I will say I normally badge in at 7:30.
So I don't know that I'm going to, you
know, fly Tuesday morning because I I
think I'm going to sleep in in
Nashville. When we're talking about some
of these areas that people are flying
to, the younger generation wanting to
maximize into their opportunities, where
are you seeing consumers spending
though? Are we seeing the thriftier
budget traveler who's Gen Z who's using
AI to find the cheapest ticket possible
on a plane or are we seeing people
embracing the kind of YOLO lifestyle and
just going on these trips?
>> Well, first of all, I mean AI is really
great, but it doesn't replace a human.
That's the reason why all of our agents
are really successful, right? even a
Jenzir. Uh we are seeing more Jenzers
and the younger generation using travel
advisors because they really truly know
that traveler and what they're looking
for when they say budget, when they say
authentic, uh when they say culture
immersion. So that's what that's why the
benefit of using an advisor is really
great. Uh but the truth is it's it's a
little bit of everything. Who we're
seeing traveling is everywhere. Yeah. So
Jenzers, you know, this entire
workforce, we've all gotten used to
working remotely. So, you know what? You
can actually, you know, work from home
in Nashville and extend, you know, a few
extra days out of it. But we all got
used to that. And what they're looking
to see, uh, is actually just more. So,
really see more of the destination, not
hit those typical tourist locations and
destinations that quite honestly AI
might give you. So, it's those more
authentic experiences.
>> Yeah. I'm going to let you talk about me
being able to work from Nashville. I
will not say that. But when we're
talking about flying to maybe off the
grid or maybe kind of less, I don't
know, well-known places to travel, how
are consumers spending though? Because
again, we saw economic data saying that
consumers still paying up, but there's a
lot of uncertainty about the ability to,
I don't know, pay $150 for a food tour
that takes you around a few restaurants.
>> So, we did see a little bit of softening
in the market, honestly, when there was
inflation concerns, uh, geopolitical
concerns. We're not seeing that anymore.
Uh I think what we've learned I think we
what we've learned throughout these past
few years honestly is travel is not
something that people nor now feel that
it's an extra right they don't need to
spend on. So if they're going to a
destination they're going to really
immerse themselves. They want to really
experience it and they might tighten the
wallet a little less. They'd rather the
experience than maybe come home and and
buy that new flat screen TV that they
wanted. Right. It's a better experience
and it's it's memories versus things.
>> Yes. Memories versus things. I like the
way you put that. So Intellletra which
you head up uh is a host travel agency.
You have humans helping people figure
out their ideal vacation. We know that a
lot of people want to get reward points
and you know maximize their reward
points and the credit card companies
like Chase Sapphire for instance or um
Ammex are really steering everyone to
use their platforms. Chase Travel or
Capital One Travel. Are those your
competitors those those platforms?
>> No. So, I mean, listen, those those
reward programs and points have been
around for decades and they won't go
away by any means. And if there is a
traveler that wants to use their points
because they want their business class,
you know, airfare completely paid,
that's fine. But the truth is is again,
it's their personal relationship with
their adviser to know that they can
still help them with the other verticals
of their trip, right? So experiencing
the tour, knowing that their kids has,
you know, maybe some sensory issues and
they won't like certain experiences and
tours, but they will like this one. Or,
you know, maybe they already did other
tours in other countries, um, you know,
and they want to give them something a
little bit of a different experience, a
food experience, a history experience.
So that's where the adviser comes in.
But, you know, advisers are able to use
those loyalty points and have the the
traveler use award, redeem them, and
still get a great experience.
>> All right, Tara, really appreciate you
joining us and sharing some of your
expertise. Tara Mincson is president of
Intella Travel and you know that's a
that's a really important thing you know
if I don't know that Chase travel can
help you book a tour with your kid who
has some sensory issues.
>> No definitely and as you mentioned
though we are seeing such a big push to
use those points on the platform and
it's kind of like all right what are
your margins? Why are you maximizing on
me staying on your platform versus
trying to find the best deal?
>> They just want you to stay on that
ecosystem for as long as humanly
possible. All right let's take a look at
how markets closed on day. We're just
going to recap what happened on the day.
It doesn't really reflect what happened
for the month, but we did finish with
losses here uh led by big tech. The
NASDAQ 100 losing 1.2%. Uh you have
yields moving up at the long end of the
yield curve and the dollar little
changed on the day. Uh certainly a lot
of people looking ahead to uh the jobs
report next Friday. This is the close.
I'm Bloomberg.
Dutyfree no more. Deminimus tariff
exemptions for packages worth $800 or
less are ending today. The Congressional
Budget Office estimates the exemption
just for goods from China would result
in more than 23.5 billion dollar in
additional customs revenue and fees over
a decade. Bloomberg's balance of power
co-host Joe Matthew has more. Joe.
Yeah, the dimminimous exemption or
loophole, depending on who you're
talking to, went away at 12:01 a.m. This
just happened this morning. The
provision had been in place since the
1930s, and this could mean many fewer
packages on people's front steps here.
This was actually the second wave, by
the way. It began ending back in May
with some goods from China and Hong
Kong. Today, it took effect for every
other country around the world. And as
you mentioned, this affects packages
worth $800 or less. And this development
has already caused a lot of foreign post
offices uh to suspend their shipments to
the United States as the new rules are
implemented. There's been some confusion
here cuz we're talking pretty big
numbers. There were nearly 1.4 billion
dimminimous shipments last year. That is
the equivalent of 4 million a day
according to Customs and Protection. So
why are they being imposed now is the
question. And President Trump says that
these exemptions had allowed fentinel to
be smuggled into the US and put American
companies at a disadvantage. By the way,
dimminimus is Latin for too small to
matter, which I learned today.
Apparently, guys, it matters. Now,
>> thank you for that lesson in Latin. Joe
Matthew, Bloomberg Balance of Power-Host
Joe Matthew, too small to matter. I'll
remember that one. All right. Well,
speaking of tariffs, our next guest says
that her skincare business, the
specialty skincare business that she
founded, is in limbo as the removal of
this dimminimous exemption hits. That
brings us to next up, where we highlight
the entrepreneurs and trendsetters
moving the needle in business and the
economy. And today, we spotlight Feather
and Bone, which makes plantblaced
plant-based cleansers and bombs with a
focus on simple natural ingredients and
sustainability. I'm joined live in
studio by Feather and Bone CEO and
founder Shubangi Prakash. Shangani,
thank you so much for joining us and
thank you for having me.
>> Your situation is that you do
manufacture your products in the US, but
you do need to import some key
ingredients, right?
>> So, as you mentioned, we are no water,
three ingredient products. So, this
means all of our product is 100%
ingredient. We're all plant-based, all
botanicals, and a lot of these are not
grown in the US. So some some
ingredients like hoba mite but you have
a lot of other ingredients like turmeric
which is uh key to India arganoi which
is called Morocco and these are all
imported into the country.
>> So what has your last couple months been
like? I mean have you had to find
alternative suppliers?
>> I definitely have to expand that
supplier base but uh what I've learned
from suppliers is that they have stocked
up through this year. So I think that's
been sort of a bit of a saving grace. Um
it's going to be interesting to see what
happens next year. Um the question
becomes do they raise the weight weight
the weight the raise um in terms of how
they do the t uh price rises and if a
country is 50% do they go 50% for that
ingredient or they just do a weighted
average so that's the piece that we
don't know yet.
>> Well you talking about pulling forward
orders were you able as a small business
owner to when Donald Trump announced
these tariffs in April at least kind of
ramp up and get your hands on as much as
you could?
>> Definitely. We definitely did that. Uh
we brought in a ton of packaging. Um you
know with ingredients there is
unfortunately an expiration date so we
could only sort of buy so much but with
packaging yeah we did.
>> Yeah. And when you look at kind of the
operation as a small business owner
margins typically are very small. It's a
very competitive tough business. How
does this uncertainty impact your
ability to try to forecast how long you
can keep the lights on? What 25 and even
26 look like?
>> Yeah I think on the cash flow side is
where the difficulty becomes. Um, we've
definitely thought of solutions to
continue to make that cash flow stay
strong as possible. So whether that
means evolving what free shipping looks
like, whether that moves packaging, so
we do mostly aluminium based packaging,
whether we switch to a more circular
economy type of thing where it's like a
deposit kind of like how milk bottles
used to be.
>> Um, you know, so you get your package
back and and so we are sort of thinking
outside of the box to deal with that
cash flow. Yeah, a lot of unanswerable
questions here that you'll have will
that force you to be very nimble. What
about pricing? How are you thinking
about pricing and whether you have the
room, the cushion to raise prices on
your customers?
>> Yeah, I unfortunately I I don't think
increasing prices is an option for us.
Uh we're in skincare, it's a hyper
competitive market. Um so if we increase
our price even $5, it seems like a a big
amount as a percentage given what's in
the in the environment. It actually is
quite small but that is a massive
change. Um so we're looking at
alternatives to keeping demand as is one
of the reasons I started this company
was because I believed in accessibility
to skinincare. Um and so making sure
people have access to good quality. So
increasing prices for me is a last
resort which is why we're thinking
outside of the box like circular economy
changing shipping expanding our sales to
international even. And how's that going
right now in this current environment uh
where perhaps customers outside the US
may not be too excited about the
prospect of buying US products?
>> Um well it's definitely an interesting
one. We're in the early stages. Um I
think if when we expand internationally
it would be a full international
operation. It wouldn't be something
where the products are manufactured in
the US.
>> But you're a US brand, right?
>> But we are a US brand. So we would
retain that. Um but then we would have
sort of a second office if you if you
may um and and do it that And one thing
I always find interesting with small
business owners like yourself. So I'm on
your website, free shipping on orders
over $50.
>> At what point does that number have to
get closer to 75 or 100 for you to be
better protected?
>> That's the question that we're trying to
answer right now. It may be where we
have to just completely eliminate it.
>> Um unfortunately because the laws are
moving because it's such a moving
target. That's the part that you know
it's hard to predict. Um it may be
something and that has a little bit more
movement where you can change that lever
probably in a more sort of reactive way
so to speak. Um but not for long. Um so
it it is something that we're
considering that
>> again we don't know.
>> Well one thing that I find interesting
your your face wash cleanser is tablets.
Does that help in terms of shipping? Is
it lighter?
>> Oh yeah absolutely. Um yeah we are 100%
water. So most traditional skincare
companies do between 70 and 90% water.
We are 100% waterless. So that makes a
huge difference. Um we're also much more
sustainable. Um so you know as you know
while there are cons to the dim deminist
um there also hope is also you know
space it's a very popular retailer in
the UK. Um they are no longer shipping
product to the US. So the hope would be
that potentially we are getting some of
that clean demand for European products.
So we'll have to wait and see. I thank
you so much for joining us. Uh she is
the founder and CEO of Feather and Bone,
a plant-based skin care line. Still
ahead, what investors need to watch for
over the coming week. From New York,
this is Bloomberg.
There is a lot of noise going on and I
think it's most unfortunate because
there is already enough uncertainty
that's coming at the decision they have
to make relative to the performance of
the economy. This is a time as the
economy is showing shifts whether it's
from policy whether it's from cyclical
factors that you really want the
committee to be able to focus on the
debates they will be having at their
meeting in September.
And that was former Kansas City Fed
President Esther George speaking with us
earlier airing her concerns around the
uh Trump Cook situation and that was in
our uh last hour of the close. Uh she
says of course she wants the Fed to be
able to focus amid all this uncertainty
and there is a lot of uncertainty.
There's data that sometimes feels
conflicting. There's the ongoing tension
between the president and the Federal
Reserve as an institution. And then you
have just people trying to parse through
uh what they expect the impact from
these tariffs and other measures that
the president is taking will be on the
economy going forward.
>> And the interesting thing has been
people talking about the need for a cut
next month is like okay yes the economy
is in a good state now but we think the
Fed should get ahead of the curve and we
still haven't seen that really showing
up and obviously when you look at
inflation data it's still well above 2%.
So if you want to keep that dual mandate
and keep a focus on 2% it's hard to kind
of walk both ways. So you kind of wonder
whether the 2% target is going to go
away. Does it become twoish? I mean it's
kind of unofficially twoish, but no one
has said that in as many words.
>> Now mixed messaging it feels like at
best.
>> Well, I mean it's it's hard to work
through this fog and so that is why uh
the FOMC has a lot to to put on its
plate in terms of figuring out how to
proceed. All right. Um clearly a lot of
that debate will continue, but you know,
we're going to take a look at what is
what else is coming up over the coming
week. Monday, of course, is a public
holiday for the US, so no market action
there. But Tuesday, Bailey, Congress
returns to Capitol Hill.
>> Yeah. A big focus on what's going on
with DC and obviously Congress, how
things are going to play out now that
they're back in session after their
summer break. I don't know why we don't
get summer break.
>> Yeah. Well, we're not elected officials.
Uh the Fed's Beige Book is due out at
2:00 p.m. Eastern on Wednesday. And
there's still some earnings.
>> Earning season carries on. Really
interesting mix. You've got Salesforce,
so you're going to get a read on the
data on uh technology companies, but
also consumer with Dollar Tree, Macy's,
how kind of that K divide is playing
out.
>> And more earnings on Thursday from
Broadcom and Lululemon and and and the
NFL season kicks off.
>> I think that's more important arguably.
>> Dallas Cowboys at Philadelphia Eagles.
And finally, on Friday,
>> payrolls.
>> Payrolls. The August payrolls report at
8:30 a.m. Eastern time. That does it for
us. Balance of powers up next. Have a
great weekend, everyone. This is