Columbia Business School Professor Abby Joseph Cohen Talks Consumer Data

**SPEAKER_1** (0:02)
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**Romaine Bostick** (0:07)
People are feeling confident about the here and now, but not so confident about what's around the corner.
And that is actually the similar backdrop that we're seeing actually play out in the markets. You see that in the price action. A lot of euphoria or at least a lot of optimism about the short term, but a lot more trepidation about the long term. Abby Joseph Cohen has seen quite a few economic and business cycles, a legendary economist and financial analyst. Now a professor at the Columbia Business School, also of course former partner and chief US strategist over at Goldman Sachs. And Abby, I do want to start off talking about what the market is kind of telling us. Because we talk about equities of course right now, still camped out near record highs. But then you look at some of the moves that we've seen in Treasury yields, which seems to suggest at least among bond investors, that they're a little less sanguine about the longer term picture. What do we pay most attention to? What should we?

**Abby Joseph Cohen** (1:00)
Well, Romaine, you've laid it out quite well in your introductory comments. Basically, this is an equity market that is being driven, at least for now, by very favorable earnings outlook.
We've had great reports, and the expectation is that many of the leading companies will continue to be very profitable, strong margins, strong returns on equity. However, when we look at the rest of the economy, things are looking okay, but not great. And that's what those consumer confidence numbers are saying to you. We basically see, for example, that middle income consumers are not feeling all that great about either their own financial situation or perspective employment and wage gains. And that's something that's quite telling. Among the things to be looking at, by the way, will be a real time metric of consumer confidence. And that, of course, is consumer spending.
Back to school sales will be important, but let's keep in mind that many of the retailers are trying to juice up those sales by doing their Halloween offerings very early. So that's something that will make the year on your comparisons a little bit difficult to read. We're also looking at a situation where the consumer balance sheet is looking more awkward than it has in the past. We see an uptick, for example, in subprime borrowing for autos, for example. And let's not forget, we're now seeing the pinch from some of those changes that were made in that big omnibus bill that was passed in January 2025 We know that many middle income and lower middle income households have lost their medical insurance coverage. And that, of course, says something about whether they can afford to be spending on other items.

**Romaine Bostick** (2:55)
I do want to go back to the consumer spending thing. And this also gets to a lot of questions about the economic data we get and how reliable it is in the moment.
I was looking through a lot of the corporate earnings that we've had, particularly among some of the folks in the retail space. And they have not necessarily been good. I mean, we're going to talk a little bit later in the show about Dick's Sporting Goods, which I missed because of higher promotions that it had to make to get people back in the store. Last week, Walmart posted its slowest comp sales growth in about six years, on holding, under armor, Nike, you name it. A lot of these companies in their most recent earnings report seem to have suggested a choosier consumer and a consumer for some of them that isn't choosing at all. Should we pay more attention to what we're hearing out of some of these companies, rather than maybe what the official economic data says?

**Abby Joseph Cohen** (3:45)
I think it's important to look at both.
Those retailers that you cite are very important because these are the large public companies. But one of the things that the aggregate data from the Commerce Department picks up is what's happening for mom and pop retailers. What's happening for those retail companies that are not included in the market indices? Those numbers don't look particularly good either.
We see that personal consumption spending is just about 2 percent, 1.8 percent, that's not as robust as we might like. In fact, when we look at aggregate GDP numbers, where is the vigor coming from? A lot of it is just coming from business fixed investment, and even there, it's primarily equipment which is growing something on the order of 11 or 12 percent on an annualized rate. Business fixed expenditures for structures, buildings is actually down 4 percent. So this is an economy that is very uneven in its growth, and the middle income, lower middle income consumers are not where the vigor is, not at all.