President of Global Investment Companies, DONNELLEY FINANCIAL SOLTNS
The consumer is strong, but weakening: Cantor's Eric Johnson
Cantor's Eric Johnson, Payne Capital's Courtney Garcia and Invesco's Brian Levitt, join 'Closing Bell' to discuss markets, PCE, ...
About Eric Johnson
Eric Johnson, President of Global Investment Companies at Donnelley Financial Solutions, has appeared in media discussing the economy and investing. In a September 2024 interview, Johnson stated that the consumer is "strong but weakening," citing a declining savings rate and high prices as pressures. He said he cares most that "tightening is over" and that the Federal Reserve is unlikely to raise rates again, adding that an easing environment over the next few years would be a "good backdrop for risk assets." Johnson also noted that many corporations and households locked in low debt before rates rose, which has helped sustain spending. Johnson has also spoken on leadership and entrepreneurship. At a 2023 conference, he argued that leaders must "grow in intelligence and compassion" and avoid offering "one-dimensional answers." In a separate podcast, he said a startup's success hinges on the CEO's ability to focus, multitask, and pivot, and that startups typically fail when they run out of money due to a loss of investor confidence in leadership. Earlier in his career, Johnson presented research on financial decision-making among the elderly, finding that older adults compensate for declining "fluid intelligence" with increased "crystallized intelligence" and often perform as well as younger people on decision-making tasks.
Transcript (23 segments)
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Host0:00
Microsoft and Alphabet moved those names and the markets higher. Amazon is also up ahead of reporting their results next week. All of this taking us watching and listening in person to our 'Talk of the Tape'. Is this snap back in stocks here to stay? What a panel: Eric Johnston, Kourtney Garcia, and Brian Levitt. Kourtney, of course, is a CNBC contributor. Thank you all for being here. What's your take on this? I mean, it's hard to believe best week of the year, and yesterday we're like market alert, red across the screen, sirens going off. What happened?
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Kourtney Garcia0:40
You know, we came into this week with the S&P RSI about 31, which is proven to be a very good entry point from a short-term perspective.
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Host0:50
Technical bounce.
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Kourtney Garcia0:51
Technical bounce. You know, we also had if you look at the last two weeks of April post-tax day, seasonally the last two weeks are also favorable. Of course we were looking forward to megacap tech earnings along with the PCE, and the PCE was something that the market was concerned about. I think one of the things happened today, the print when you look at it on an absolute basis, we think was a hot print.
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Host1:14
That's what I thought too.
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Kourtney Garcia1:16
Look into the details.
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Host1:19
The market doesn't seem to care.
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Kourtney Garcia1:20
Absolutely.
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Host1:21
I thought inflation and the Fed were everything.
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Kourtney Garcia1:23
I think part of it was expectations that there was a concern that it could come in even hotter than it came in. And then clearly, obviously, earnings from Microsoft and Google were clearly a favorable dynamic. But this was really...
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Host1:39
Can I hit on that point? That idea that you bring up that inflation and the Fed are everything. Think about it, though. Nominal growth is strong, right? Growth continues to be good. Inflation a little bit more elevated. I'd actually prefer strong nominal growth and less rate hikes than what everybody was expecting, which is weaker economic growth and more rate hikes. So we'll have to deal with inflation over time. I do expect it'll continue to moderate. But strong growth...
Let me ask it a different way. I'm out there. I've been on no rate cut island. Nobody cares what I think. They can't stop me from saying it. Do you care if we get any rate cuts this year?
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Kourtney Garcia2:20
I care most that tightening is over. The conversation that the Fed might have to raise rates again, I am not in that camp. When the market was pricing in six cuts, it was a little out of whack with where the Fed was going to be. We're getting closer to alignment. Do I care about the timing or the magnitude this year? Not really. I'm more focused on the fact that over the next couple of years, we're going to be in an easing environment with the curve normalizing. That's a good backdrop for risk assets.
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Host2:52
I think that's what investors should be focusing on. What you're seeing right now is even though rates are over 5%, many corporations readjusted their debt before rates went up in 2022. Many households have mortgages under 4%. While wages keep going up and the consumer is still strong, that's how we're able to get through this period.
Is the consumer still strong? There's a show at 7:00. It's called 'Last Call.' You're welcome any time, all of you, by the way. We showed how all the consumer stocks, Ulta Beauty is down 20% this month. Walgreens, they've got a lot of problems, they're down 18 this month. The stock market is acting like they're in trouble. Maybe they're unique situations. I don't know. Are you worried at all about the consumer?
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Kourtney Garcia3:42
I don't think that's happening across the board. What's happening is people are affected by inflation. I don't think you can discount that. On the flip side, you're seeing airlines and travel is continuing to be strong.
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Host3:52
I think people are still going places, not buying stuff.
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Kourtney Garcia3:56
Which changed during COVID. Everyone said this is going to be a certain cycle of this. It's not the fact that the consumer is in trouble. They're just having to decide where those purchases are going. That's why when you're looking to reinvest in the economy, which area is the consumer strong in? You probably are going to see experiences over goods for a little while longer.
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Host4:15
I think the consumer is strong, but the consumer is also weakening. So if you look at savings rate, right, savings rate is 3.5%. Still high, but it's close to the lows since the pandemic. High prices are still eating at the consumer.
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Kourtney Garcia4:34
They're borrowing. Nobody, one point credit card debt yields going, no one seems to care.
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Host4:43
That was all Taylor Swift tickets.
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Kourtney Garcia4:45
That's half of it. That's probably not wrong. People are going to at me on the X. But debt as a percentage of income, yes, it's low and near all-time lows. But I know people getting something in the mail that says, hi, by the way, we just raised your credit card APR to 24%.
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Host5:01
But the consumers are being helped out by they're fully employed, net worth, right, between home prices where they are close to highs, equity prices at the highs, and still have that excess savings that's declining.