As inflation continues to be a major concern for the U.S., investors will want to pay attention to how spending, travel and sentiment are changing for consumers.-----Transcript-----Welcome to Thoughts on the Market. I'm Michelle Weaver, a U.S. equity strategist for Morgan Stanley Research. Along with my colleagues, bringing you a variety of perspectives, I'll be sharing the pulse of the U.S. consumer right now amid elevated inflation and concerns about recession. It's Thursday, July 7th, at 2 p.m. in New York. Consumer spending represents roughly 65% of total U.S. GDP. So if we're looking for a window into how U.S. companies could perform over the next 12 months, asking consumers how confident they're feeling is a great start. Are consumers planning on spending more next month or less? Are people making plans for outdoor activities and eating out or are they staying at home? Are they changing travel plans because of spending worries? These are a few of the questions that the equity strategy team asks in a survey we conduct with the AlphaWise Group, the proprietary survey and data arm of Morgan Stanley Research. We recently decided to change the frequency of our survey to biweekly to get a closer look at the consumer trends that will affect our outlook. So today, I'm going to share a few notable takeaways from our last survey, which was right before the July 4th holiday. First, let's take a look at sentiment. The survey found that inflation continues to be the top concern for two thirds of consumers, in line with two weeks before that, but significantly higher compared to the beginning of the year. Concern over the spread of COVID-19 continues to trend lower, with 25% of consumers listing it as their number one concern versus 32% last month. And 41% of consumers are worried about the political environment in the U.S. versus 38% two weeks ago, a slight tick up. Apart from inflation, low-income consumers are generally more worried about the inability to pay rent and other debts, while upper income consumers over index on concerns over investments, the political environment in the U.S., and geopolitical conflicts. A second takeaway to note is that consumer confidence in the economy continues to weaken, with only 23% of consumers expecting the economy to get better. That's the lowest percentage since the inception of our survey and down another 3% from two weeks ago. In addition, 59% of consumers now expect the economy to get worse. This lines up with the all-time lows observed in a recent consumer sentiment survey from the University of Michigan. A third takeaway is that consumers are planning to slow spending directly as a result of rising prices. 66% of consumers said they are planning to spend less over the next six months as a result of inflation. These numbers are influenced by income level, with lower income consumers planning to reduce spending more. We also asked consumers where they were planning to reduce spending in response to inflation. Dining out and take out, clothing and footwear, and leisure travel were among the most popular places to cut back, and all represent highly discretionary spending. And finally, the survey noted that travel intentions are considerably lower to the same time last year, with 55% of consumers planning to travel over the next six months, versus roughly 64% in the summer of last year. We also asked consumers if they were planning to cancel or delay post-Labor Day travel because of inflation. Generally, planned travel post-Labor Day is in line with broader travel intentions. Cruises and international travel were the most likely to be delayed or postponed. So what's the takeaway for investors? It is important to allocate selectively as consumer behavior shifts in order to cope with inflation and company earnings and margins come under pressure. Our team recommends defensive positioning, companies with high operational efficiency, and looking for idiosyncratic stories where companies have uniqu