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First Move with Julia Chatterley
U.S. Consumer Spending Surges Almost 18 Percent In May; China Extends Lockdown Measures As COVID-19 Spreads; Singapore's Foreign Minister Talks Timing, COVID Tracing, And The Road To Recovery. Aired 9-10a ET
Aired June 16, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:19]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York, I'm Julia Chatterley. This is FIRST MOVE, and here's your need to know.
Retail rebound. U.S. consumer spending surges almost 18 percent in May.
Beijing's battle. China extends lockdown measures as COVID-19 spreads.
And ready to reopen. Singapore's Foreign Minister talks timing, COVID tracing, and the road to recovery.
It's Tuesday. Let's make a move.
Welcome once again to FIRST MOVE. Good to be with you as always. It's a day where the power of Powell -- Jay Powell, I mean -- of the Federal Reserve
is on display as he testifies in Congress just a day after announcing that the bank will be buying individual company's debt. We'll discuss later on
in the show, but I'll tell you what, the mighty U.S. consumer also fighting for the top spot and the spotlight here, too.
Let me walk you through the numbers. U.S. retail sales, as I mentioned, spiking almost 18 percent in May after falling by more than 16 percent in
April and over eight percent in March. So, admittedly, bouncing back from a low base, but that's double what analysts had been expecting in May.
Now, pent-up demand may be at play here, too. We had people receiving stimulus checks and of course, them spending them in many cases. The big
question now though, of course, how quickly can spending continue to recover when you've got millions of Americans unemployed? You've got
enhanced jobless benefits running out next month if Congress don't act. You can expect Jay Powell to argue for more support today, yet again.
All of the details on these numbers coming up.
In the meantime, as you can imagine, futures are well and truly in positive territory. We've been higher earlier on yet more stimulus chatter.
Bloomberg reporting that the White House is now eyeing a $1 trillion Infrastructure Spending Bill to help support the economy. Support and
stimulus are the buzzwords globally once again today and that means lots of green arrows.
The European Central Bank, an official there suggesting they could consider expanding their corporate bond buying program to include bonds that have
lost their investment grade rating, so more risky companies we're talking about.
The Bank of Japan today leaving rates unchanged, but they also said they were open to fresh support if needed. As you can see there, Japan and South
Korean stocks rallying some five percent in the session.
Plenty to discuss as always. The good news is, Christine Romans joins me now. Christine, I wasn't sure where we were going to start, but that number
did it for me. That's a bounce back, and it's happening again quicker than we expected.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: And you know, it's interesting, too, because when you look at the prior month, it was a
little shallower than we had expected. They revised that one to 14.7 percent, the previous decline, so this bounce back, bigger than economists
had been expecting is leading to a lot of chatter that the worst is behind us.
And consumers, armed with all those stimulus checks and some of them going back to work, 2.5 million jobs added, are starting to spend again. Online
spending, of course, big here, but look at clothing spending, up 188 percent. Furniture spending up big.
We know that some of the malls have been opening. Macy's and GAP and others with social distancing and with no open changing rooms have been beginning
to open very carefully, so you're seeing that consumers are following suit.
Now, I don't want to sound like an Economics Professor, but I will for a moment.
There's the level and then there's the direction of change, and the direction of change clearly important here. It shows a bounce. But we are
still at pre-pandemic levels, bouncing from a very, very low base.
There was a lot of damage done and the consumer essentially stopped for a couple of months and now is starting to peek back out there.
CHATTERLEY: And therein lies the key. Pent-up demand. All the things that people weren't able to buy for a few months, in addition to all the money,
the stimulus checks, the bump up in unemployment, and I raise the question at the top of the show, and I'll pose it to you here, too.
What next? Can we bring jobs back? What happens with the money? All of this is going to be determinative of how the consumer reacts from here.
ROMANS: And I think that there's an assumption here and a need that there's a next phase of nurturing along this economic recovery, right? You've got
this Bloomberg article talking about a trillion dollars in infrastructure spending. That would be under the guise of, you know, a Transportation
Bill, but put a lot of stimulus in there on 5G and rural broadband and the like. That's an interesting play that people are talking about now.
You've got, of course, the Democrats who want to spend a lot of money to help state and local budgets. Those are going to have to be addressed in
the weeks and months ahead, no question.
[09:05:07]
ROMANS: There's talk of new stimulus checks. Will we do more of those? What happens to those enhanced unemployment benefits? Is there some sort of
reward for going back to work? A payment for going back to work?
We're seeing the contours, really, of what the next phase of recovery will look like.
You know, and depending on the player, there are different objectives and goals and tools for this, but we know the Fed is doing things it has never
done before to support this economy. We're assuming that Congress knows it's going to have to do more to support this economy and maybe Jay Powell
from the Fed is going to make that point again today.
CHATTERLEY: I'm sure he will, to your exact point, don't let good news in the bounce back phase here distract you from the need to do more and the
risk that we double dip in the U.S. economy. Never mind anywhere else.
ROMANS: No more.
CHATTERLEY: Christine Romans. Yes. Thank you. Yes, we have that habit.
ROMANS: Yes.
CHATTERLEY: Thank you. All right. A new reminder, we're not out of the woods yet with coronavirus, we're clearly not.
After nearly two months with no reports of fresh infections, the City of Beijing has now locked down dozens of neighborhoods to tackle a widening
outbreak.
More than a hundred cases of COVID-19 have been diagnosed in just the last five days. Ivan Watson joins us now. Ivan, Beijing authorities clearly not
shy of taking stringent measures to try and lock down the spread of this virus. What's the latest?
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, they haven't completely shut down the Chinese capital, but we are seeing the incremental
tightening of activities and of movements in the city as the outbreak does continue to grow.
Now, if you look at the bigger picture, as of now, in a five-day period, the Chinese authorities say they have detected only 106 locally transmitted
cases of coronavirus in a five-day period. Compared to what china saw in January and February in the City of Wuhan, the original epicenter of the
pandemic, that's relatively small.
But they're clearly concerned that this could continue to grow and spiral out of control. They don't want a repeat of that, a Wuhan 2.0 as one
Chinese journalist put it.
The infections have spread to at least three other Chinese provinces, so you have had an expansion of the number of residential compounds that have
been locked down, where residents are not allowed to leave, where food is being delivered to those compounds that the residents can then purchase
food at.
We have seen postponement of the reopening of elementary schools, that sports and cultural entertainment events have been canceled, and there's a
massive testing binge of tens of thousands of people as the Chinese authorities also try to contact trace some 200,000 people that were
believed to have moved through this enormous Xinfadi Wholesale Food Market where the cluster is first believed to have emerged.
Since then, the authorities have had to shut down two other food markets and disinfect, as they say, tens of thousands of restaurants.
One of the key questions here, Julia, is how did this cluster of infections begin in the first place? And we haven't gotten an answer from the Chinese
authorities on that yet.
This food market supplies more than 70 percent of the fresh produce to the Chinese capital, and there's a constant motion, until it was shut on
Saturday, of people delivering produce, leaving, and motion through this crowded place.
So, it's going to be very hard to figure out who could have brought this virus back into this market -- Julia.
CHATTERLEY: Just one of the questions, to your point, I think, the other -- this is a relatively aggressive response. Is that what it takes in order to
lock this down? Or, again, are we getting all the information on what they're tackling here in terms of numbers? It will remain a question.
Ivan, great to have you with us. Ivan Watson, thank you for that update there.
North Korea has blown up an office building that was used for joint liaison talks with South Korea. North Korean state media said it's retaliation
after northern defectors used balloons to drop propaganda leaflets across the border into the north. It prompted this warning from the South Korean
government.
(BEGIN VIDEO CLIP)
KIM YOU-GEUN, SOUTH KOREAN DEPARTMENT OF NATIONAL SECURITY ADVISER (through translator): It is an action that broke the expectations of all people who
hoped for the development of inter-Korean relations and lasting peace on the peninsula.
We sternly warn that we will respond strongly if North Korea continues to take measures to aggravate the situation.
(END VIDEO CLIP)
CHATTERLEY: Will Ripley is live in Hong Kong for us. Will, the South Koreans are saying it's a betrayal, too, of all those that were hoping for
peace on the peninsula. Why now? And what next?
[09:10:02]
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Well, I think that the reason why now is certainly complicated. North Korea says it was these propaganda
leaflets that were infuriating, and they are, certainly. Whenever North Korean defectors drop leaflets down on North Korean border towns that
defame, in their view, the Kim regime, that's truly upsetting to the North Koreans.
But this goes deeper than that, Julia. This is frustration over the lack of progress of more than two years of diplomacy, and this inter-Korean liaison
office is a physical symbol of that diplomacy.
So, how else could North Korea send a very strong message that, in their mind, diplomacy is dead than to blow up the building? It's a way to get a
lot of attention, and yet to not take things so far that they're actually creating a military situation, because remember, this building, although it
was shared by the North and South, it sits in the North, paid for by the South, but it sits in the North.
So, they blew up a building on their own territory. They didn't fire shells over the border at the sites where those leaflets were sent from. And they
haven't, as of now, brought troops with weapons back to areas where, you know, the troops had been patrolling over the last two years without
weapons as the symbol of this kind of new era of peace.
But this certainly does, basically, bring us back to where we were before. You know, the two Koreas signed that agreement back in the spring of 2018
that led to the agreement with the United States that President Trump signed with Kim Jong-un, all of that now feels like a distant memory and
we're now back in this repeating cycle of history with North Korea at the moment trying to ratchet up tensions to get what they want, which is
sanctions relief and attention at a time that the world's eyes were largely turned away because of the coronavirus pandemic.
CHATTERLEY: Yes, so what response is trying to be provoked here as well, Will? Just to be clear, because we were just showing pretty dramatic
pictures of this building exploding. It was empty due to the pandemic, there was no one in the building, we believe?
RIPLEY: It's been empty since late January, Julia, because of, you know, social distancing measures and the fact that North Korea quickly shut down
its borders at the onset of this pandemic.
So, there was never any danger to anybody inside the building. In fact, where it sits, the Kaesong Industrial Complex, that has been largely empty
for a number of years now.
It used to be a place where North Korean workers would work for South Korean companies. There actually are a lot of other empty buildings in that
particular area.
If the two Koreas did decide to revive their relationship yet again. I'm sure they could find another office. But yes, this is a very significant
setback to any sort of diplomatic process between the North and South.
It seems that right now what the North is doing is trying to ramp up military tensions to get what it wants. Interestingly, it's Kim Jong-un's
younger sister, Kim Yo-jong who has been the public face of a lot of this.
It's almost as if she is being positioned to play the bad cop, maybe so that Kim Jong-un, who still holds on to some sort of friendship with
President Trump, maybe he can play the good cop and they try to salvage all of this.
Because clearly, yes, the North is aiming its messaging at the South, but this is an attempt to get the United States's attention without doing
something far more provocative like a missile launch.
CHATTERLEY: Yes, also potentially stamping her mark as a potential leader one day, too. Interesting. Will Ripley, thank you so much for that.
Now, on to another story making headlines around the world. With protests continuing across the United States to demand police reform, including this
one in Atlanta on Monday, President Trump is expected to sign an Executive Order later.
It's designed to encourage higher standards in police departments, though the President is expected to leave more detailed reforms to Congress.
John Harwood is in Washington and joins us now. John, always great to have you on the show. I think the President also expected to walk a fine line
here between responding to the uproar over brutality, but without demonizing the police force. Is that what we get today?
JOHN HARWOOD, CNN WHITE HOUSE CORRESPONDENT: Exactly. It's action, but it's modest action. It's not mandates, but it's more encouragement to local
departments using the carrot of Federal funds to improve their practices in a couple of ways.
One is certification requirements that would be linked to the discouragement of chokeholds, which are controversial, but it doesn't
outright ban chokeholds as some of the legislation on Capitol Hill does.
It would encourage police departments to share information about use of force complaints against officers, so if somebody left a job in one
department, tried to get hired at another, the new department would have access to information about that officer's record. That doesn't exist under
current practices.
And third, to try to provide police officers some assistance with particular kinds of calls that they may not have the expertise to deal
with, things involving mental health issues.
So, you might have mental health experts accompany officers on those calls. This is something that the President will sign today. It will be something
that he could say, I responded to the protests, but the real heavy action, if it's going to take place, is likely to occur on Capitol Hill.
[09:15:16]
HARWOOD: Negotiations will accelerate this week once Senate Republicans lay out their proposal. House Democrats have a more aggressive proposal. Not
certain that they can reach a deal this year, and Democrats might want to wait until next year where they think they're going to have a Democratic
Senate and a Democratic President to take more ambitious action.
But we're going to have to wait and see on that, not just whether action occurs, but when it occurs, whether the Senate is going to act before the
Fourth of July.
Julia, I need to add one other thing in the news department. That is, Vice President Pence has just indicated a few minutes ago in an interview on Fox
that the White House is considering shifting its rally, the first big rally of the President's re-election campaign, outdoors in Tulsa.
This is something that public health authorities think would be safer than an indoor rally where masks are not required. It's not a done deal, but the
Vice President having talked to the Oklahoma Governor last night, having heard appeals from the public health authorities in Tulsa, is considering a
shift in venue for that rally.
CHATTERLEY: Yes, in a state where cases are rising. John Harwood, thank you for bringing us that news and we'll continue to track that outcome. Thank
you.
Still to come, Singapore gets ready to lift a host of restrictions on movement and commerce this week. We'll be speaking to the Foreign Minister
next.
And General Mills joins the call for police reform, the CEO on what that might look like. Stay with FIRST MOVE
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE with a look at what we're seeing for stock markets this moment, and it is a positive open expected.
We've had that stronger than expected retail sales number as well from the United States rising almost 18 percent last month, a huge turnaround from
March and April and almost double what consensus was expecting.
It's the largest monthly gain in U.S. retail sales ever. Remember, we made that point earlier, though. You're bouncing from incredibly low levels and
it's also about the what-next.
[09:20:13]
CHATTERLEY: Also, I think, helping sentiment here, too, Fed's corporate bond buying, the hopes for a long-delayed Infrastructure Spending Bill as
well potentially coming from the United States. Bloomberg reporting that, also adding to sentiment.
The message here is that Congress plans to do more, it seems. The question on timing is when.
All right, let's move on. Singapore is entering the second phase of reopening its economy, which means from Friday, people could go to the
shops and eat at restaurants.
But the government has dropped its plan to use a contact tracing system developed by Apple and by Google, saying it's not suited to local
conditions.
Last month, Singapore warned GDP could shrink as much as seven percent this year. That was the third time the nation downgraded its 2020 economic
growth forecast, so plenty to discuss.
Joining us now, Dr. Vivian Balakrishnan, he is Singapore's Foreign Minister and also head of the country's Smart Nation Initiative.
Minister, fantastic to have you on FIRST MOVE. Thank you for joining us.
The hope and the expectation here is that you will be pretty much fully reopened by the end of this month, admittedly with conditions attached to
that. Is that still the plan?
DR. VIVIAN BALAKRISHNAN, SINGAPOREAN FOREIGN MINISTER: Well, we are well on the road and it's going to be a long and careful road to recovery.
The number of infections are down. We've ramped up our medical capacity, contact tracing, and testing have all been reached -- have reached new
heights, so we're confident, we're ready, but we need to be vigilant.
If you look at what's happening in other parts of the world, you know that you cannot take this for granted. But we are definitely on the right track.
CHATTERLEY: Part of that vigilance, Minister, is about tracking, it's about tracing. I mentioned there the decision not to use the system that Apple
and Google have put together, but your own version with a token and an app- based system.
Explain why your system is superior.
BALAKRISHNAN: No, I will not make a claim of superiority. I think the key point is that if you are going to open up and you know that the virus is
endemic, the only way you can open up safely is to have sufficient testing capacity and the ability to trace efficiently, quickly, and at scale.
Without that, opening up is just going to lead to another second and third wave, so that's the first point.
The second point is that every society has to find the right balance between protecting public health on one hand and to balance that with
respect for personal privacy on the other hand.
And I think every society, depending on its own circumstances, will have a slightly difference balance point. In our case, we have a system which
still depends on human beings making human judgment and decisions, and technology is only a supplement.
So for instance, if you are positive or you're a close contact of a positive person, we want a human being to inform you of the options and of
the implications.
So in our case, our system provides a little additional information to the human contact base, in particular, it will provide information on how,
when, and where and from whom you got the infection from or whom you may have passed the infection to.
It's that ability to trace the chain of transmission, and in fact, if you think about it, in the case of COVID-19, we know there's a significant pool
of asymptomatic patients and potential carriers, and in that case, again, the ability to track transmission chains in detail is the only way you're
going to find asymptomatic carriers in your population.
So, for that reason, we've embarked on a voluntary exercise using technology to supplement human contact tracing, and I'm glad to say right
now, today, we have about 1.9 million people who have downloaded the app on a voluntary basis.
The purpose of having a token is for digital inclusion, because even in this day and age, there are still people who don't have a smartphone or who
may not have the latest smartphone. And yet, we need to offer them the protection that contact tracing offers.
So, that's really what we're doing, just rolling it out, making it available. Nobody is excluded. But it's voluntary, and this gives you the
added level of protection and confidence to open and in particular to get your economy going again.
CHATTERLEY: All critical features. What we saw in Singapore was the highest number of COVID-19 cases in Southeast Asia and it threw a spotlight, I
think, on the migrant population.
Will these tokens or apps be mandatory rather than voluntary for this subset of the population?
[09:25:08]
BALAKRISHNAN: Well, first of all, the impact of this pandemic in the migrant worker population was aggravated by the fact that they live in
close proximity. In fact, it goes beyond living in close proximity.
Because, whether you live in a dormitory or in a six-star luxury cruise line or an aircraft carrier, the fact is if people interact, work, eat,
cook, socialize, and go for picnics together, you know that it's going to set up a situation where you are at risk. So that's what happened in our
case.
Now, these migrant workers are essential for us, and in fact, they would be going back to work right now as well, and we need to make sure they also
have access to this protection.
Many of them do not have smartphones which will work with these new technologies, so we will have to make some of these additional tokens
available to them as well.
And we do need to protect them because if you think about it, if you have an outbreak in one work site, if you don't have more detailed proximity
data, the risk is you'll have to shut down the whole site again, and it causes enormous impact on the livelihoods --
CHATTERLEY: So that sounds like you are saying it will be mandatory. Tokens will be mandatory for these workers, as you point out, they are essential.
BALAKRISHNAN: Some form of contact tracing, either an app on a phone if they have it or if they don't have a phone, then we'll offer them a token.
CHATTERLEY: I'm just trying to get a sense of what the future is going to look like. This is great, but I want to move on if you don't mind and talk
to you about economic recovery at this stage, because this is also vital to how Singapore looks over the coming years.
The Prime Minister said that jobs are the priority. The sense here, though, is that jobs for Singaporeans are the priority at the expense of what is a
large proportion, not only of migrants, but expat workers as well.
Is that the reality now, that Singaporeans will be prioritized?
BALAKRISHNAN: Well, let's take a step back. COVID-19 has not altered the course of history, but it has accelerated trends which are already in play
beforehand.
What do I mean by that? For instance, the trade war between United States and China didn't begin or end with COVID-19. The pushback against
globalization, against free trade, is something which, in fact, has been going on for years.
The digital revolution and its impact on jobs also began years ago. But what COVID-19 has done is that it has accelerated all these trends. We are
now at a confluent point where suddenly you have not only a crisis, but you have an opportunity.
Now, my take on it is that all of us, all countries everywhere, have to focus on jobs, jobs, jobs. But it's not just a matter of protecting
yesterday's job, because we all know that there are new jobs emerging. There are old jobs which are disappearing. Creative destruction is going to
occur at a massive scale.
And it's not a matter of who is in or who is out, but who has the skills, who has the networks, and which countries have positioned themselves well
in terms of policy, in terms of infrastructure, in terms of finance to capture and harvest these new opportunities.
So, what we are doing, to use the 3Rs as an example, we are trying to reboot the economy, reskill our population, and restructure the economy.
Now, in this new configuration, obviously, our priority has to be citizens, because citizenship has privilege. Having said that, there will be a role
for expatriates and foreigners because no one country has a monopoly on skills, on the entrepreneurship, on the fervor and the risk that comes with
this new economy.
So, I wouldn't --
CHATTERLEY: Less of a role right now.
BALAKRISHNAN: I think some jobs are -- let's walk through a few examples. Construction will depend upon the pace of construction in a post-COVID
world.
In the case of Singapore, we still need construction for activities to continue. We still need construction workers. But if, in other sectors,
where you're going to get a cutback, obviously, our employers, like employers everywhere in the world, will favor our own locals and I don't
think that's an unreasonable position to take.
CHATTERLEY: No. I think many nations would understand that, to be honest, Minister, particularly at this point in time.
I'm running out of time with you so I want to ask specifically about what we saw overnight between North Korea and South Korea. What's the
Singaporean government's response to that?
[09:30:00]
BALAKRISHNAN: Well, we're not directly involved in that. I think it's a rather, how shall I put it -- dramatic gesture. It's a call for attention.
It's a symptom that underline all this significant communication that's going on and this is just one of many trouble spots all over the world.
So in summary, I think we're facing a period of creative destruction. We're facing a disrupted world. We're facing a world where risk against peace has
gone up. We're facing a world where there's a pushback against trade and globalization.
But the answer is not for us to fragment. It's not for us to stop talking. The answer is for us to look forward, to work together, to believe in the
rules-based international order, to negotiate agreements, to seek peace, and to look for prosperity, because there is money to be made. There is a
future to be harvested. And we need to get our eyes focused forward and to work together, and I --
CHATTERLEY: Minister, I have to cut you off because I'm going to lose you because we have to take a break. It was fantastic to speak to you. Please
come back on and talk to us again. And I apologize. We had a few I.T. issues before the interview began. Fantastic to chat to you. Thank you.
The market open is next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and the market open where the bulls are off to the races this Tuesday after the release of what we'd call a
blockbuster report on U.S. retail sales, admittedly from a low base. You can see stocks are rallying across the board in early trade.
Futures were higher, in fact, though all morning on news that the Fed is expanding its corporate bond-buying program to include individual company
debt as well as hopes for fresh U.S. infrastructure spending.
The sentiment was also given that further boost by the U.S. retail sales numbers spiking 18 percent last month, the highest jump on record.
[09:35:08]
CHATTERLEY: We're chalking it up to pent-up demand after huge sales drops in March and April.
In terms of stocks, airlines, banks, retail -- shares that have seen big price swings in recent weeks on economic uncertainty are some of the
biggest gainers today.
Take a look at some of the airlines as well. They are advancing on word that major carriers will be allowed to resume limited flights to China.
Meanwhile, Fed Chair Jay Powell's testimony before Congress today will be key too and that begins at the top of the next hour. No shortage of things
to discuss.
Great news is, we're joined by Brian Belski, Managing Director and Chief Investment Strategist at BMO Capital Markets. Brian, great to have you on
the show. What do you make of the retail sales number?
BRIAN BELSKI, MANAGING DIRECTOR AND CHIEF INVESTMENT STRATEGIST, BMO CAPITAL MARKETS: Well, pretty darn good. I mean, we were basically at zero
and, you know, one of the things that we cautioned people in February and March, Julia, is not to be too negative, and we saw some very, I like to
say it, bombastically negative forecasts from people just claiming that we weren't going to spend any money.
I mean, what we know -- we know a couple of things. We know for sure that the U.S. loves to spend money and the consumer is strong and we also know
that the consumer, through COVID, did not stop spending. They just spent a little bit differently.
And so I think that some of these forecasts were way too negative and way set up to under-promise and over deliver. Forecasts in general with respect
to economic data is really beginning to turn into this, what we like to call second derivative math, meaning less negatives.
Clearly not positive overall for the longer term, but we're starting to see that major turn with respect to the economy that, of course, we have been
calling for since the beginning of this, and we just think people were way too negative in February and March, really set up the broader, stronger
rebound in stocks.
CHATTERLEY: The counter to that, I guess, would be that we knew a lot of stimulus cash, whether that's from Jay Powell at the Federal Reserve or the
money from Congress was sloshing around in the system. Stimulus checks bumped up. Unemployment benefits. That all ends in August.
Do we need to see more money coming from Congress in order to fuel a further rally here? What's in the price?
BELSKI: Great question. You know, we think that 20 times earnings of markets are decently valued here. We still think that there's upside. We
have a 3,400 target on the S&P by the end of March of next year.
We still see that as being very, very likely. I think the key thing for the second half of the year, Julia, is that earnings are actually going to be
able to know what earnings are.
First and second quarter earnings were obviously excessively negative and how these companies are going to operate. With respect to unemployment, we
have nowhere to go but up.
Clearly, we had a surprisingly positive employment report. People seemed to have forgotten about that already and I think the trend is going to be
recovering from there.
There are jobs and retraining of jobs and remember, too, you mentioned in your hit prior to this that there's an Infrastructure Bill potentially on
the docket, which is something that we've talked about in the United States for several years, if not since 2016 especially.
So with this potential theme of on shoring, repatriation of companies coming back to the United States, there's going to be jobs available and I
don't think people are thinking about that right now.
CHATTERLEY: You know, it is interesting. And I know you're a much longer- term player and you said, look, we're in a 20-year bull market. You said that back in 2010, so the sort of short-term and the medium and the long-
term has to be considered here, but when we look at the second half of this year, we've got election risk. We have got second wave risk, which the
markets seem to care about for 24 hours at the back end of last weekend into this week. How do you view those risks?
BELSKI: It's a great question. And you know what's really interesting with the headlines with respect to second wave and the election, tend to really
increase in terms of their volume when the market is down. It's just such an interesting thing.
Especially last week, I was just inundated with questions from clients around the world talking about the second wave. First of all, we don't know
what the second wave is going to be and the government here in the United States has basically said we're not going to shut down again with respect
to the economy and that was really the big threat in terms of how we've gotten into this in the first place, in terms of shutting the economy down
and people not being able to spend.
But in terms of the election, you know, our take is this. It's way too early. I think fortunes in terms of what's going to happen in the election
are going to be very volatile heading into the fall. We have the conventions coming up.
And like you said, we have the potential for a second wave. We have held that the shape of this economic recovery clearly is going to have an impact
with respect to the election. We're not going to know anything until the fall.
CHATTERLEY: But it does perhaps put the emphasis on Republicans and clearly on the White House to want to spend more, which is stimulative either way.
BELSKI: I think so, but also, too, you have got to remember that the growth we've seen in the economy was due to less regulation, in tax cuts in the
first place and then we started saber rattling with the tariffs with China and that kind of steam rolled that. and now, we're kind of back into how we
are going to get business going and growth going overall.
CHATTERLEY: So, message to investors? What do you buy?
BELSKI: Message to investors. What do you buy?
CHATTERLEY: Yes.
[09:40:06]
BELSKI: You buy those -- don't be a growth or a value investor, be both. You want to buy those companies that were leading prior to COVID, during
COVID and after COVID. That includes some of the big tech companies. It includes the Amazons and Costcos of the world, but it also includes, don't
be too negative with respect to the big banks, especially the Bank of Americas, JPMorgans, and some of the Canadian banks that do very strong
business in the United States because we need money and these stocks have gone through massive secular change in the last ten years.
CHATTERLEY: Yes. This is such an important point because the divergence between an Amazon versus a JPMorgan here tells a tale of two halves for
Wall Street versus Main Street and you're saying actually that gap, arguably, should be narrower.
BELSKI: Right and you don't want to own either/or. I think you want to own both and you want to be selective on when you own it, but from a longer
term perspective, have these stocks as part of your portfolio.
CHATTERLEY: Makes perfect sense. Brian, always great to chat. Brian Belski, Managing Director and Chief Investment Strategist at BMO Capital Markets.
All right. We're going to take a break here on FIRST MOVE, but coming up, 100 brands in 100 countries. That's a corporate voice that's hard to
ignore.
The CEO of General Mills tells us what needs to be done to heal America's racial divisions.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Later today in Washington, we'll see President Trump sign an Executive Order addressing police conduct.
Meanwhile, in Minnesota, where George Floyd died, business leaders want lawmakers to consider their demands to improve accountability,
transparency, and police conduct.
At its heart is a simple message, to make the sanctity of human life a core value for the police force.
Jeff Harmening, the CEO of General Mills, he is a member of the Minnesota Business Partnership and he joins us now from Minneapolis.
Jeff, fantastic to have you on the show. The tragedy of George Floyd, personal for Minnesota, but I think it's become personal for the entire
world as we've seen protests gather.
As the CEO of a big business, have you ever felt such pressure to respond to a societal issue like this?
[09:45:13]
JEFF HARMENING, CEO, GENERAL MILLS: Well, Julia, first, thank you for having me on the show, and you know, I wouldn't call it pressure to
respond. I would say, I feel a need to respond.
Now, as do all other business leaders in Minnesota and I think what we see with the death of George Floyd is that it is bigger than just Minnesota, as
you've noted.
Unfortunately, it's one in a long list of tragedies and racial injustice at the hands of police, and that's why you see the outpouring of grief and
demonstrations across not only U.S. cities, but across the world, and now is the time for us to act.
But importantly, we can't act alone, either as business leaders or politicians or community leaders, because when you have something systemic
injustice like we have here and racism, it is a complex problem which requires all those groups to come together.
CHATTERLEY: Leadership comes in all shapes and sizes, in all forms, too. I mentioned the President today. What do you want to hear from the President?
HARMENING: Well, we just need to make sure that we continue to unite. I mean, it's what I talk about in our company all the time, is that we want a
company of inclusion and belonging and we need the same thing across the United States as well.
We need to make sure that we're all working together because as I said, the social injustice is deep rooted and it is complex and it can't be solved by
one person or one group alone. It has to be all of us working together.
CHATTERLEY: You know, businesses can play their part, clearly, though, when they look at what their diversity mix is within their company when it comes
down to some of the lowest paid workers in the company.
How do you think General Mills is doing?
HARMENING: Well, for a long time, General Mills has really fostered a culture of belonging and inclusion. If you look at our Board of Directors,
it's very diverse.
We have five of our 11 directors are women. We have people of color on our Board of Directors, the same with our leadership team, and we have -- we
have had a Black Champions Network internally at General Mills for more than two decades.
And interestingly, about three or four years ago, we started hosting what we call Courageous Conversations at General Mills where we took on tough
issues, whether it's the LGBTQ-Plus community or whether it's racism, and we had one recently after the death of George Floyd and it's interesting.
We had more than 3,000 employees participate voluntarily on company time all across the world, and participate in and a big group discussion and
small group discussions. So it's very clear to me that General Mills has been leading in this for a long time and one of the things we're doing now
is taking what we have learned internally over more than two decades and helping apply that to the broader Twin Cities community and making sure
that we're helping convene different companies and making sure that we lend our voice to legislation as you mentioned earlier.
CHATTERLEY: You know, it's interesting. We spoke to a nonprofit last week, the CEO Year Up that tries to foster retraining and provide people with
year-long training programs, and he said to us, if companies and CEOs like yourself would talk to their HR Department and work out where you could
drop the four-year degree requirement, you would automatically, in many cases, bring back 86 percent of Latinos that are excluded, 79 percent of
African-Americans.
Does this sound like something really proactive that you could apply at General Mills that perhaps would open up the pool of potential talent?
HARMENING: Well, I'm not sure about that specifically, but what I can tell you is that we have been opening up the pool of talent at General Mills for
a long time and whether it's in our offices or in our manufacturing locations or our sales organization, we have been hiring people of color,
whether it's Latinx or black, and we have been hiring women at a very high rate and not only for entry level jobs, but also into our executive ranks.
I'm really proud of what we have done.
And so whether that particular proposal would work or not, I'll leave it to the policymakers to decide. But I am very proud for what we have done at
General Mills.
CHATTERLEY: Yes. Your Board certainly is a credit to you.
I want to move on and talk what we are seeing as far as the U.S. economy is concerned. We've clearly had strong retail sales data today. The jobs
market seems to be picking up perhaps, quicker, but there's huge challenges ahead. What's your assessment of the outlook?
HARMENING: Well, the jobs market has been tough. It is picking up due to quite a bit of proactivity on the part of the Fed and some economic
stimulus, Federal stimulus, and -- but I think we're in for a long road of recovery when it comes to the economy. We certainly see that in our
business.
We saw that in our China business, particularly as it relates to how people eat, and so even though the economy is certainly getting better, I think
it's still going to be a long road to get back to full recovery.
CHATTERLEY: Just talk to me about what you're seeing now in China. We're clearly watching this very closely in terms of what recovery looks like,
the speed and of course, the ongoing challenge of trying to tackle outbreaks there of COVID-19. What are you seeing in your business there?
[09:50:03]
HARMENING: Well, in our business in China, we have two separate businesses. One is a food away from home business, which is Haagen Daaz Ice Cream and
the other is an at home business, Wanchai Ferry Frozen Dumplings, and we've seen two very different businesses.
In our Haagen Daaz business, what we have seen is that it has taken many months to recover. In fact, at one point in February, all of our Haagen
Daaz shops were closed and now they're all open, but they're still only operating at about 70 percent of what they were before COVID.
On the other hand, our Wanchai Ferry Dumplings business, we can barely fulfill all the demand for Wanchai Ferry Dumplings, which are primarily at
home, and we see this all over the world is that some people think that a recovery happens and we say we can go back to restaurants and everybody
floods back, but that hasn't been our experience.
People come back slowly to restaurants and continue eating food at home, which we see happening in Europe and which we think will play out the same
in the United States.
CHATTERLEY: Yes, it's such an important point. Reopening doesn't necessarily mean full re-engagement at this stage.
Jeff, fantastic to have you with us. Thank you so much for sharing your views on diversity as well and what you guys are doing at General Mills.
It's great to see.
HARMENING: Thank you for having me this morning.
CHATTERLEY: Thank you. Jeff Harmening, the CEO of General Mills.
All right, up next, the CEO of Japanese drinks giant, Suntory on what the post-COVID world looks like for his business.
(COMMERCIAL BREAK)
CHATTERLEY: As we've discussed throughout the show, consumers around the world are key to economic recovery. One of Japan's biggest drinks companies
says more than 20 percent of the nation's restaurants will not survive because consumers won't want to go out. Kaori Enjoji reports from Tokyo.
(BEGIN VIDEOTAPE)
KAORI ENJOJI, JOURNALIST: From Michelin star to street food like this, Japan's food scene is known the world over, but people are still afraid to
go out, despite being told that it's safe.
I asked the CEO of Suntory Holdings, one of the country's largest beverage makers, how many of these are going to survive.
(BEGIN VIDEO CLIP)
TAKESHI NIINAMI, CEO, SUNTORY HOLDINGS: I don't think that will come back to 100 percent. Eight percent even -- 80 percent is optimistic. Because the
people feel so anxious about the future. And they can't move around and reactivate their businesses.
So definitely, the government has to increase the number of testing, both PCR and antigen. So, that is must for us to reactivate our economy.
(END VIDEO CLIP)
ENJOJI: It's a sobering reality that has forced Suntory to rethink its supply chain and reconsider ways to bring production back home.
(BEGIN VIDEO CLIP)
NIINAMI: Supply chain is very much famous for just in time. But we have to now change our policy toward just in case. That means we have the over
reliance on certain countries, so we are shifting to some other countries to produce and plus, we are bringing production facilities or supply chain
or ingredients to be produced in Japan.
Produce in Japan may be a good option now instead of just talking about only going abroad to produce our products.
(END VIDEO CLIP)
[09:55:27]
ENJOJI: Niinami says he is faced with falling gross margins as people stay in and economize, and while other CEOs maybe talking about a post-
coronavirus world, he says that's still three if not four years away.
In Tokyo, I am Kaori Enjoji.
(END VIDEOTAPE)
CHATTERLEY: Wow, and the emphasis on staying home, exactly what the General Mills CEO was saying, too.
All right, a quick look at the markets. We are stronger this morning, boosted by those retail sales and optimism over further support.
All right. That just about wraps up the show. I'm Julia Chatterley. Stay safe as always, and I'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
