Markets 'Jittery' Over Data Dump: Morgan Stanley's Caron

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00:00The consumer has had a really tough time, you know, more than 40 million on food stamps.

00:07A lot of them didn't get all of that food support through the shutdown, which was the longest in

00:13history. And we're starting to see like more auto delinquencies than ever before since record

00:19keeping began. Isn't this a concern? That's absolutely a concern. And it's why the Fed

00:25should be cutting interest rates. So like the way that I would think about this is effectively

00:30we are in a soft patch for the economy right now. We have, by the way, been in a soft patch for the

00:37last several months. And Danny and I have spoken about this. The market's not the economy. The

00:41economy is not the market. So essentially, the markets had powered ahead despite some of the

00:47weakness that was already existing in the markets. Sorry, in the economy. So sometimes the markets and

00:53the economy do overlap and intersect. And that's what's happening today. As we get these as we get

00:59the data releases, people are jittery. People are nervous. Prices and valuations have moved very

01:05aggressively higher, particularly in the third and fourth quarter, which means that the markets are

01:09fragile to any bad news. And that fragility is what's being seen right now. Now, the question is,

01:15does that change the trend going into 2026? And no, I don't think it does, because I still, you know,

01:21most economists are still forecasting higher GDP growth in 2026 versus 2025. And I think that's

01:27going to support earnings, also higher productivity. So a lot of the onboarding of this capex and

01:32technology and everything else is bringing higher levels of productivity into the markets. This labor

01:38force now that seems a bit more abundant should mean that you can get labor at a reasonable price,

01:44which means that companies, you know, in terms of their expense on labor should be, you know,

01:49relatively stable and essentially allow margins to profit margins to continue to widen. So I think

01:56the markets will be supported. I think this is a buying opportunity. I don't think this is a change

02:01in trend, but it is turbulent right now. And we expected that for the fourth quarter.

02:07Can we just talk about exactly what that turbulence will look like over the next two,

02:10three weeks, Jim? Bloomberg Intelligence puts it as thus. Bond trader hell is coming. 17 days and

02:15the mother of all data dumps, because we'll get the September PPI, retail sales, October CPI,

02:21September and October payrolls report, although maybe not the complete picture. Oh, and by the way,

02:26NVIDIA earnings to next week. Just what are you bracing for, Jim?

02:30So I think everything that you just mentioned is very well anticipated by the markets. I'm anticipating

02:36that the data releases are going to be not very good. I think the data is going to show significant

02:43weakness. And I think that's what the markets are pricing in right now. So the question is,

02:48is will the data be weaker than what market participants are currently pricing in at the

02:54moment? And or might they be a little bit better? And then that's where the surprise is going to be.

03:00But I'm firmly in the camp that fourth quarter is really the trough of the soft patch. And this is

03:07where we're going to get that data dump. Let's rip that bandaid off quickly. Let's get through this.

03:12And then let's start to focus into 2026. But we have to get through this data dump first.

03:18And that's what's causing the markets to have a lot of jitters.