Summary: The American economy is doing pretty well at this time. The consumer is resilient, and inflation has ebbed. But labor markets appear to be slowing. AI may be having an impact. Jerome Powell sees no risk free path.
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Macro
The American economy is doing pretty well at this time
“There is, across the entire economy, a real surge in business investment taking place right now, and in artificial intelligence and other areas in the technology space that is helping to propel growth we saw in today’s GDP number. Between consumer strength and business investment in the future, the American economy is doing it’s doing pretty well right this minute.” – Citadel Founder & CEO Ken Griffin
The consumer is resilient
“I think that a lot of U.S. companies have really swallowed the tariff at one point of time, this will come to the consumer, what will impact at that time. But what we know, and that’s the last 3 years’ experience, that the U.S. consumer is the most resilient in the world. They just keep buying. So hopefully, it will continue.” – JD Sports Fashion CEO Regis Schultz
Inflation is still present but lower
“Inflation is cooling around the globe. Everyone talks about sticky inflation, but our data tends to show otherwise. Now, goods inflation in the U.S., as the parenthetical says, will be sticky, will be higher because of the tariffs. But if you look at the headline CPI that came out last week, embedded in it is rental housing costs at 3.6%. That is very different than what we see as the largest owner of rental housing in the United States. By the way, this is the biggest category, 35% of CPI. We would say that BX-derived shelter costs from our portfolio are a little over 2%, which puts CPI reality at 2.4%, much closer to the Fed’s target.” – Blackstone (BX 0.00%↑) President Jon Gray
“Overall, inflation remained in the low to mid-single-digit range. Fresh and Food and sundries were relatively similar to last quarter, with higher inflation in key commodities like beef, coffee, sugar and corn partially offset by lower inflation in produce, eggs, butter and cocoa. In nonfood, we saw inflation return for the second consecutive quarter, primarily driven by imported items.” – Costco Wholesale (COST 0.00%↑) CFO Gary Millerchip
The risk of a recession is perceived as low
“What I would say is that in the last few months there has been some softness, particularly around labor, that has gotten a lot of attention in the press. But the economy is chugging along pretty well. One of the things I’ve come to believe is that our economy is so large, diverse, and complex that it is more resilient to different shocks than it might have been 25 years ago. That does not mean we can’t have a recession—we absolutely can. But when I look at the combination of fiscal policy and monetary policy at the moment, we would need a very significant exogenous shock to put us in a recession in the next six months.” – Goldman Sachs (GS 0.00%↑) CEO David Solomon
“When you have rising sales, rising margins, that is not a formula for a recession.” – Blackstone (BX 0.00%↑) President Jon Gray
But labor markets are slowing
“So every quarter, we do a survey. We say to our CEOs, what are the things that are keeping you up at night? Is it tariffs, technology? And if you went back to Q1 of 22, the number one thing they said was how hard it was to hire people. When we asked that same question last quarter, that had dropped to number nine. So something is happening here in the labor market. And we see it now in our numbers. I would tell you our numbers are often six to 12 months ahead of what you see in the government data. But these are heads of human resources at our US companies.” – Blackstone (BX 0.00%↑) President Jon Gray
“I think the Fed, Fed is nervous about the labor market because we did see this decline in number of jobs being created, and in terms of balance of risks, they chose to focus on the unemployment side rather than on the inflation side.” – Citadel Founder & CEO Ken Griffin
Jerome Powell sees no risk-free path
“Near-term risks to inflation are tilted to the upside and risks to employment to the downside—a challenging situation. Two-sided risks mean that there is no risk-free path. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation. If we maintain restrictive policy too long, the labor market could soften unnecessarily. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate.” – Federal Reserve Chair Jerome Powell
International
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