Yu: Welcome to Asset TV. I'm Michelle Yu. Thanks for joining us as we have a great panel discussion here in our New York studios with our friends at Thrivent Asset Management. Joining me today from Thrivent are Steve Lowe, chief investment strategist, Eric Johnson, equity consumer research analyst, and Tracy Pamperl, director of investment grade research.

All of this consumer health data is definitely a mixed bag of some positives, some negatives. How are the markets dealing with this? And I want all of your takes on this. Steve, I'm going to start with you.

Lowe: Yeah. Markets are doing really well. Equity markets are up. It's driven by the mega cap tech companies. The Metas and NVIDIAs, Microsofts. And so, breadth is very narrow, but the equity market is still up pretty significantly. And if you look at credit markets like high yield bonds and investment grid, those are also good. The areas that have laid behind are cyclical sectors because there's still this concern over the economy and still concern over there might be a recession. And I think we're at this inflection point right now where there's a lot of uncertainty.

There's signs of slowing, unemployment is going up. And if you look historically economies can be doing really well, same thing with the jobs market, and then they can go nonlinear, in other words. They can fall off a cliff very quickly. So, they hold up until they don't. And it's a bit like you're out hiking, you knock a rock down, and then that hits more rocks and then you get this avalanche. But overall, I think the economy will remain relatively solid. We have an internal index that we track the economy with, and it got to pretty deep recessionary levels where it's always been in a recession.

But it's come down a lot and more to a soft landing. And we expect more volatility going forward, but we also expect the economy to hold up relatively well. Our forecast is not for a recession, but for more volatility overall. So, what does that mean for investors? It means taking a balanced approach, staying in the market, be sure to have fixed income because if the economy does deteriorate rates are going to go down and that helps fix income. You still want to be in the equity market. But the important thing is to stay in the market.

Yu: Tracy, quickly, your thoughts.

Pamperl: Yeah, the corporate bond market, quite frankly, has performed very well, but I think it's been very focused on macroeconomic indicators and then what's the read through to the Fed potentially cutting rates. It's also had an increased sensitivity to any individual company whether it's earnings or at a conference, any comments around the consumer. And what's that read through? Is that a specific issue for that company? Or is there a broader issue across the industry into the economy? So, for the consumer-focused names I think it is more of a mixed bag at this point. Some are benefiting from consumer shifts and behavior, some are not. Retail sales have been quite strong, but I do think we're about to face more headwinds than tailwinds at this point.

Yu: Eric, you're going to get the last word.

Johnson: Sure. So, equity markets are very focused on the debate and have been for two to three years, month to month iteration of is the consumer weakening? Can the consumer spending levels remain durable here? Or are we having signs of increasingly fragile backdrop? And so, this debate that's been going on has been favoring higher quality, better capitalized companies, often larger caps with higher margin rates. And so, the lower quality names with more leverage on the balance sheet, lower margins, lower reinvestment capacity, those names tend to perform their best when we think consumer spending is going to accelerate.

That's not really been a discussion point on the table in the last couple of years. It's more can we hang in there or do we worsen? And so that's been the lay of the land in equities. And ultimately the market is highly focused on unit volume recoveries in these durable goods categories as if we get interest rate cuts. So, you've seen stocks start to front run expectations for volume in flooring, furniture, remodeling, autos start to accelerate in anticipation that cuts will deliver volume acceleration. So that's something we're going to need to see to continue to support equities in some of those areas. But from a consumer perspective ultimately if jobs hold up, it's difficult to bet against the U.S consumer. And so, if you're going to watch one metric over the next 12 months, that's where I’d point you to.