January 10, 2025 • 8 mins
Ellen Zentner, Chief Economic Strategist and Global Head of Thematic and Macro Investing at Morgan Stanley’s Global Investment Office discusses jobs numbers, her market thoughts, and labor dynamics. She speaks with Bloomberg's Tom Keene and Paul Sweeney on Bloomberg Radio.
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Speaker 1 (00:00):
And now from Morgan Stanley. Ellen Zetner joins us. Ellen.
Speaker 2 (00:04):
I want to go into the data and all that,
but I want to go back to early ellen Zetner,
which only you and I were around from.
Speaker 3 (00:11):
I'm coming in hot, just like ers are coming in hot.
Speaker 2 (00:14):
You made your name analyzing the American consumer. To me,
that was the great error of economics in the past.
In the past eighteen months, Paul and I opened the
show with the booming Delta Airlines. What does Morgan Stanley
see is the state of the American consumer?
Speaker 1 (00:32):
Given this bang On jobs.
Speaker 3 (00:33):
Report, Not a lot has changed, right. People are still
spending on services, not so much on goods, travel, travel, travel,
and especially the wealthy consumers, and so not a whole
lot has changed in this report. We see it too, right,
goods in the jobs sector down, Spending on goods not as.
Speaker 4 (00:54):
Strong as services.
Speaker 3 (00:56):
You know, goods are going to be impacted by Tarius
more so than service, and so we're going to continue
to see that shift between services gaining sharing at the
expensive goods.
Speaker 4 (01:08):
But this is a.
Speaker 3 (01:10):
More of the same good jobs market. And yes, there
was a lot of rebound in this number from hurricanes
and strike in the last month, and that was really
the guess on how much of that payback we would
get in this number.
Speaker 4 (01:21):
It's still the story that we've got.
Speaker 3 (01:23):
Some ever so gradual softening of the labor market.
Speaker 4 (01:27):
Man, it's gradual.
Speaker 1 (01:29):
So I mean, how do you think the Federal Reserve
is going to kind of ingest this data to the market.
Speaker 3 (01:34):
I don't know what number would have gotten them to
change their thoughts about being on hold here. I think
in December I was more in the camp that the
language that they used, the boilerplate language.
Speaker 4 (01:47):
That they used basically was a hard pause.
Speaker 3 (01:50):
And now with the January meeting, it's the housekeeping meeting
where you have a lot of shifts and voters come
in and out. You've got even more of a divergence
between doves and hawks on the fee, and you've got
uncertainty around fiscal policy, and uncertainty means policy paralysis.
Speaker 4 (02:06):
Just on hold here and we'll let you know when
it's time to move again.
Speaker 2 (02:08):
In the blur of this show, and trust me, folks,
there's like twenty people helping me and Paul get through this.
Speaker 1 (02:15):
Every morning I.
Speaker 2 (02:16):
Remember little things, whispers of things from weeks ago, and
one of them is an ellen Zeenner whisper, you were
heated at the polarity of consumption in America and your
definition of the haves to find the ellen Zenner halves
in America enjoying a four point one percent unemployment rate.
Speaker 3 (02:37):
Well, so the unemployment rate, we saw the under employment
rate also come down seven five. We're giving strength all
the way down to the most underserved in the labor market.
But that bifurcation of the consumer, the top two income
quintiles is more than sixty percent of all consumer spending,
and day.
Speaker 2 (02:55):
Fifth of America is sixty percent.
Speaker 3 (02:58):
Of consumption one two fifths one fish, one fifth.
Speaker 1 (03:02):
Is forty I just got a C minus and Marik.
Speaker 3 (03:05):
That well, you know I'm here to keep you honest. Tom,
there we go.
Speaker 1 (03:09):
But Paul, this is incredible. One two fists right, forty percent?
Now am I.
Speaker 3 (03:15):
Close more than sixty percent? We're just not getting this.
It's a whole lot.
Speaker 4 (03:22):
Let's just say that a lot lot.
Speaker 1 (03:25):
So how does that inform kind of your view of
kind of investment opportunities out there, because it seems like
the economy, whether you're looking at labor, where you're looking
at the consumer, whether you're looking at the Fed, things
seem to be in pretty decent shape out there.
Speaker 3 (03:36):
Right, Yeah, things are pretty decent shape. I think that
it means it's going to be higher, higher for longer
interest rates.
Speaker 4 (03:43):
It doesn't mean the Fed's not going to cut this year.
Speaker 3 (03:45):
And I certainly wouldn't put bets that they're going to
hike based on this this report, right, I would still
put a very low probability that they hike at some
point this year. But what you've got to do as
a policy maker, if you're doing prudent policy making, even
when we start to get a flurry of executive orders
after January twentieth, you want to look through price increases
(04:07):
from tariffs because on the other side of that, you
get a hit to aggregate demand. When that comes through,
the FED could still be cutting but later later this year.
Speaker 2 (04:16):
The tech team Seth Carpenter and Elan Zettner is the
way to go at Morgan Stanley Ellen. This headline just
out and I usually don't do this, but it gets
to what your meetings are going to be like at
Morgan Stanley. Today, traders shift full pricing of next FED
rate cut to October.
Speaker 4 (04:32):
Wow.
Speaker 1 (04:33):
That's wow, Okay for you, that's wow.
Speaker 4 (04:35):
To me, that's a wow.
Speaker 3 (04:36):
That's a wow, because I have been one of the
scenarios out there is that the Fed's gonna cut and
maybe the cut just as much as they're saying they
might cut this year, but it comes later later because
they really have to see what policies come out of
the administration and if they do hit demand later on.
Speaker 1 (04:53):
Okay, no, you're not in speaking terms of Seth Carpenter,
but the basic ideas here we are is you.
Speaker 2 (04:58):
Have a twisted economics because Texas you you are hard wired.
Speaker 4 (05:04):
I'm realrepreneur.
Speaker 2 (05:05):
No, I'm serious, You're hardwired the entrepreneurial nature of America.
Do you, Seth Carpenter, Richard Berner, Steve Roach, and everyone
else in the game.
Speaker 1 (05:14):
Do we underestimate the.
Speaker 2 (05:17):
Entrepreneurial spirit of say someone like Michael Dell.
Speaker 3 (05:21):
I don't know if we underminestimate the entrepreneurial spirit.
Speaker 4 (05:23):
But but it was it was.
Speaker 3 (05:27):
It was gangbusters during COVID when people were able to
have a rethink and take advantage of excess income, low
interest rates, and we saw a proliferation of business startups
and that's always productive of fraudy for the economy. It's
(05:48):
just just a positive all the way around. Now we're
seeing productivity gains from the labor market having been so
tight for so long that businesses sought efficiencies and that's
coming through now. That's not even AI yet. So america
An exceptionalism is real. It's very real.
Speaker 4 (06:04):
Did you change your outlook?
Speaker 1 (06:05):
Will you change your outlook now that we are having
a new administration come in and you know, a kind
of more solid Republican Congress?
Speaker 3 (06:13):
No, no, no, I think that you know pick your baseline.
I mean none of us know what's going to come
out of the administration after January twentieth, and so whatever
baseline you have, it's.
Speaker 4 (06:25):
Going to be wrong.
Speaker 1 (06:26):
Yep.
Speaker 3 (06:26):
So you just have a lot of scenarios, and one
of those scenarios will be sort of in the pocket
of what we get.
Speaker 1 (06:33):
What does it mean for the markets?
Speaker 2 (06:35):
For the stock market, I mean it's away from your
remit is chief economic strategist.
Speaker 1 (06:40):
I love this global ahead of thematic.
Speaker 2 (06:43):
Sure job is to fix the Dallas Cowboys? Is what
does it mean for the stock market? If you're sitting
down with Lisa Shallatte, what do you tell her?
Speaker 3 (06:51):
Yeah, So Lisa and I are tied at the hip
now both on the Global Investment Committee at Morgan Stanley
and look, I wouldn't be investing in aggregate indexes here
because policies are going to come fast and furious, and
they're going to infect certain pockets of the market.
Speaker 4 (07:09):
So you want to be in real assets.
Speaker 3 (07:10):
You want to be in energy, you want to be
in commodities, you want.
Speaker 4 (07:13):
To be she's got a game. I'll throw a paw
in there.
Speaker 3 (07:18):
Oh yes, today, So watch course I'm watching LANDMN.
Speaker 1 (07:23):
Okay, Well, what do you think Sweety's all into it?
I mean, is it?
Speaker 4 (07:26):
Well, I don't know a lot about the patch.
Speaker 3 (07:27):
I'm probably learning just as much as everybody else it.
You know, it's not a whole lot going on in
West Texas.
Speaker 1 (07:35):
But you're plus on oil and energy.
Speaker 3 (07:37):
Oil and American energy reads, healthcare financials because it's going
to be higher for longer interest rates, and so there
are there are plenty of pockets of investment right now.
Speaker 4 (07:48):
We're very, very big on.
Speaker 3 (07:50):
Thematic investing AI and defense and specifically software software. So
there are pockets and there are things that we're excited
about this year, and they avoid You want to avoid
things that are super impacted by the volatility around what
policies could come out of the administration.
Speaker 1 (08:07):
Ellen, thank you. Allen's with Us with Morgan Stanley
And now from Morgan Stanley. Ellen Zetner joins us. Ellen.
Speaker 2 (00:04):
I want to go into the data and all that,
but I want to go back to early ellen Zetner,
which only you and I were around from.
Speaker 3 (00:11):
I'm coming in hot, just like ers are coming in hot.
Speaker 2 (00:14):
You made your name analyzing the American consumer. To me,
that was the great error of economics in the past.
In the past eighteen months, Paul and I opened the
show with the booming Delta Airlines. What does Morgan Stanley
see is the state of the American consumer?
Speaker 1 (00:32):
Given this bang On jobs.
Speaker 3 (00:33):
Report, Not a lot has changed, right. People are still
spending on services, not so much on goods, travel, travel, travel,
and especially the wealthy consumers, and so not a whole
lot has changed in this report. We see it too, right,
goods in the jobs sector down, Spending on goods not as.
Speaker 4 (00:54):
Strong as services.
Speaker 3 (00:56):
You know, goods are going to be impacted by Tarius
more so than service, and so we're going to continue
to see that shift between services gaining sharing at the
expensive goods.
Speaker 4 (01:08):
But this is a.
Speaker 3 (01:10):
More of the same good jobs market. And yes, there
was a lot of rebound in this number from hurricanes
and strike in the last month, and that was really
the guess on how much of that payback we would
get in this number.
Speaker 4 (01:21):
It's still the story that we've got.
Speaker 3 (01:23):
Some ever so gradual softening of the labor market.
Speaker 4 (01:27):
Man, it's gradual.
Speaker 1 (01:29):
So I mean, how do you think the Federal Reserve
is going to kind of ingest this data to the market.
Speaker 3 (01:34):
I don't know what number would have gotten them to
change their thoughts about being on hold here. I think
in December I was more in the camp that the
language that they used, the boilerplate language.
Speaker 4 (01:47):
That they used basically was a hard pause.
Speaker 3 (01:50):
And now with the January meeting, it's the housekeeping meeting
where you have a lot of shifts and voters come
in and out. You've got even more of a divergence
between doves and hawks on the fee, and you've got
uncertainty around fiscal policy, and uncertainty means policy paralysis.
Speaker 4 (02:06):
Just on hold here and we'll let you know when
it's time to move again.
Speaker 2 (02:08):
In the blur of this show, and trust me, folks,
there's like twenty people helping me and Paul get through this.
Speaker 1 (02:15):
Every morning I.
Speaker 2 (02:16):
Remember little things, whispers of things from weeks ago, and
one of them is an ellen Zeenner whisper, you were
heated at the polarity of consumption in America and your
definition of the haves to find the ellen Zenner halves
in America enjoying a four point one percent unemployment rate.
Speaker 3 (02:37):
Well, so the unemployment rate, we saw the under employment
rate also come down seven five. We're giving strength all
the way down to the most underserved in the labor market.
But that bifurcation of the consumer, the top two income
quintiles is more than sixty percent of all consumer spending,
and day.
Speaker 2 (02:55):
Fifth of America is sixty percent.
Speaker 3 (02:58):
Of consumption one two fifths one fish, one fifth.
Speaker 1 (03:02):
Is forty I just got a C minus and Marik.
Speaker 3 (03:05):
That well, you know I'm here to keep you honest. Tom,
there we go.
Speaker 1 (03:09):
But Paul, this is incredible. One two fists right, forty percent?
Now am I.
Speaker 3 (03:15):
Close more than sixty percent? We're just not getting this.
It's a whole lot.
Speaker 4 (03:22):
Let's just say that a lot lot.
Speaker 1 (03:25):
So how does that inform kind of your view of
kind of investment opportunities out there, because it seems like
the economy, whether you're looking at labor, where you're looking
at the consumer, whether you're looking at the Fed, things
seem to be in pretty decent shape out there.
Speaker 3 (03:36):
Right, Yeah, things are pretty decent shape. I think that
it means it's going to be higher, higher for longer
interest rates.
Speaker 4 (03:43):
It doesn't mean the Fed's not going to cut this year.
Speaker 3 (03:45):
And I certainly wouldn't put bets that they're going to
hike based on this this report, right, I would still
put a very low probability that they hike at some
point this year. But what you've got to do as
a policy maker, if you're doing prudent policy making, even
when we start to get a flurry of executive orders
after January twentieth, you want to look through price increases
(04:07):
from tariffs because on the other side of that, you
get a hit to aggregate demand. When that comes through,
the FED could still be cutting but later later this year.
Speaker 2 (04:16):
The tech team Seth Carpenter and Elan Zettner is the
way to go at Morgan Stanley Ellen. This headline just
out and I usually don't do this, but it gets
to what your meetings are going to be like at
Morgan Stanley. Today, traders shift full pricing of next FED
rate cut to October.
Speaker 4 (04:32):
Wow.
Speaker 1 (04:33):
That's wow, Okay for you, that's wow.
Speaker 4 (04:35):
To me, that's a wow.
Speaker 3 (04:36):
That's a wow, because I have been one of the
scenarios out there is that the Fed's gonna cut and
maybe the cut just as much as they're saying they
might cut this year, but it comes later later because
they really have to see what policies come out of
the administration and if they do hit demand later on.
Speaker 1 (04:53):
Okay, no, you're not in speaking terms of Seth Carpenter,
but the basic ideas here we are is you.
Speaker 2 (04:58):
Have a twisted economics because Texas you you are hard wired.
Speaker 4 (05:04):
I'm realrepreneur.
Speaker 2 (05:05):
No, I'm serious, You're hardwired the entrepreneurial nature of America.
Do you, Seth Carpenter, Richard Berner, Steve Roach, and everyone
else in the game.
Speaker 1 (05:14):
Do we underestimate the.
Speaker 2 (05:17):
Entrepreneurial spirit of say someone like Michael Dell.
Speaker 3 (05:21):
I don't know if we underminestimate the entrepreneurial spirit.
Speaker 4 (05:23):
But but it was it was.
Speaker 3 (05:27):
It was gangbusters during COVID when people were able to
have a rethink and take advantage of excess income, low
interest rates, and we saw a proliferation of business startups
and that's always productive of fraudy for the economy. It's
(05:48):
just just a positive all the way around. Now we're
seeing productivity gains from the labor market having been so
tight for so long that businesses sought efficiencies and that's
coming through now. That's not even AI yet. So america
An exceptionalism is real. It's very real.
Speaker 4 (06:04):
Did you change your outlook?
Speaker 1 (06:05):
Will you change your outlook now that we are having
a new administration come in and you know, a kind
of more solid Republican Congress?
Speaker 3 (06:13):
No, no, no, I think that you know pick your baseline.
I mean none of us know what's going to come
out of the administration after January twentieth, and so whatever
baseline you have, it's.
Speaker 4 (06:25):
Going to be wrong.
Speaker 1 (06:26):
Yep.
Speaker 3 (06:26):
So you just have a lot of scenarios, and one
of those scenarios will be sort of in the pocket
of what we get.
Speaker 1 (06:33):
What does it mean for the markets?
Speaker 2 (06:35):
For the stock market, I mean it's away from your
remit is chief economic strategist.
Speaker 1 (06:40):
I love this global ahead of thematic.
Speaker 2 (06:43):
Sure job is to fix the Dallas Cowboys? Is what
does it mean for the stock market? If you're sitting
down with Lisa Shallatte, what do you tell her?
Speaker 3 (06:51):
Yeah, So Lisa and I are tied at the hip
now both on the Global Investment Committee at Morgan Stanley
and look, I wouldn't be investing in aggregate indexes here
because policies are going to come fast and furious, and
they're going to infect certain pockets of the market.
Speaker 4 (07:09):
So you want to be in real assets.
Speaker 3 (07:10):
You want to be in energy, you want to be
in commodities, you want.
Speaker 4 (07:13):
To be she's got a game. I'll throw a paw
in there.
Speaker 3 (07:18):
Oh yes, today, So watch course I'm watching LANDMN.
Speaker 1 (07:23):
Okay, Well, what do you think Sweety's all into it?
I mean, is it?
Speaker 4 (07:26):
Well, I don't know a lot about the patch.
Speaker 3 (07:27):
I'm probably learning just as much as everybody else it.
You know, it's not a whole lot going on in
West Texas.
Speaker 1 (07:35):
But you're plus on oil and energy.
Speaker 3 (07:37):
Oil and American energy reads, healthcare financials because it's going
to be higher for longer interest rates, and so there
are there are plenty of pockets of investment right now.
Speaker 4 (07:48):
We're very, very big on.
Speaker 3 (07:50):
Thematic investing AI and defense and specifically software software. So
there are pockets and there are things that we're excited
about this year, and they avoid You want to avoid
things that are super impacted by the volatility around what
policies could come out of the administration.
Speaker 1 (08:07):
Ellen, thank you. Allen's with Us with Morgan Stanley
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