Bloomberg Surveillance 05/10/2024

the market can live with an environment where growth is strong and maybe the FED only cuts a couple times what makes me question the degree of restrictiveness is really the strong activity data that we continue to see the FED are very focused on that domestic labor market Dynamic and I think that will continue to be the case if there isn't more of that doish paw type of language this is a market which is a bit more vulnerable we're still in the early Innings of seeing the data really cool in the way that the market wants it to this is Bloomberg surveillance with Jonathan Perell Lisa abowitz and Anar hurn let's get you to the weekend live from New York City this morning good morning good morning for our audience worldwide this is Bloomberg surveillance heading towards 3 weeks of gains on the S&P 500 before we get to the weekend already looking forward to next week just look at the lineup absolutely stacked full of economic data PPI on Tuesday Wednesday CPI and retail sales Thursday jobless claims you've got some retail earnings in the mix as well you're here from Home Depot and Walmart by the end of next week Danny Burger we should have a decent read on the American Consumer let us hope so because at this point it feels like every piece of data that's come in is just Choose Your Own Adventure you decide with the data that comes in what you think about this economy it's been contradictions ISM goes into contraction some consumer stocks have bad earnings but oh earnings overall is great and GDP now tracker 4% make sense of that John same as last week Danny in many ways whip sord by the economic data you all remember last Tuesday hot ECI fed might have to talk about raising interest rates at a Wednesday meeting then all of a sudden a cooler payrolls read just whip sword narrative from one side to the other more fed speak a little bit later talk about lineups fed speak just repeat repeat the same line again and again and again you'll hear from Bowman Logan kashgari gby Bar and mea and what we heard from daily yesterday Danny we are restrictive it might take more time to just bring inflation down more time seems to be the phrase on repeat yeah I was going to say replace daily with literally any other fed speaker and that's all you've gotten over the past few weeks cuz John we used to trade on this idea you know don't trade on what the FED should do trade on what they will do we don't know what they're going to do anymore because they don't know what they're going to do anymore so we get this same refrain that essentially tells us nothing we have a decent idea of their reaction function which is what a lot of people around this table have been talking about over the last couple of weeks just the idea that we don't have to be afraid of strong data they won't hike but if we get Soft Data they will eat how well do you think we're set up for that going into next week given the move down we've seen in yields across the curve from the 2-year out to 10 well the animal spirits have have been Unleashed so basically this Market is set up as if we are in The Cutting cycle John if we get anything contradictory towards that what happens to this Market where you've seen all these people flood to the bond market cuz spreads are so thin when you have all these companies announcing all this cap backs again acting like cuts are not only on their way but they are here and in CER of Mogan Stanley looking ahead to CPI next week this phrase stands out The Descent begins we'll see much more on that a little bit later in the program equities at the moment on the S&P 500 positive by 0.4% there is a lift in this Equity Market in the bond market yields just about unchanged on the session but down big time over the last week on a 10 year 44512 in the FX Market the Euro not doing much at all 10777 coming up this hour Larry Adam of Raymond James as stocks look to make up on April losses John Libra of your Asia group has Israel responds to threats from president presid Biden and Dan IES of wed bush with the White House expected to impose new tariffs on EVS out of China we'll catch up with Amar Dan in Washington in about 10 minutes time let's begin with our top story US stocks looking to AR raise April losses the S&P 500 less than 1% from alltime highs Larry Adam of Raymond James with this to say we believe Equity momentum is likely to continue in the long run because we are in the early stages we are 1 and a half years into this bull market versus the average of 5 and a half Larry joins us now for more Larry you and I have talked about this theme before and it stands out every time we talk we've got to bring it up again why you believe we're in the early stages of a bull market at a time where a lot of people are looking at the economy and calling it late cycle no I still think we're uh early because I do think that the FED is going to cut rates before the end of this year I think they'll take out some insurance cuts which will elongate the recovery that we're in and that will ultimately set up this bull market to last for in the years to come 5200 seems to be the epicenter of your thinking what is special about that level you know that's our Guiding Light when we get above that at least in the near term we tend to turn a little bit more cautious if we get below that we turn we tend to be get a little bit more optimistic and as we had that pullback over the last you know couple of weeks that was a time to you know maybe put a little bit more money to work into the equity Market but I think going forward the risk are more balanc as you mentioned uh as we sit here right now some of the good bad news is good news at some point in time that bad news turns to bad news so I think the FED will come out cut rates and make sure we do again elongate this recovery okay so if we're at SLS slightly above 5200 right now Larry are you in that more cautious mode at this moment yeah I mean we've gotten more cautious over the last couple weeks as it's started to Rally I think selectivity becomes much more critical at this stage of the game you want to be in the sectors that have the best earnings growth and that's why if you look at our favorite sectors we still like technology we like uh Industrials and we like healthcare because those have the most sound earnings growth going forward and the best visibility well the weird thing is after that 5% pullback Larry and here we are again as John said less than 1% away from new high the thing that led us there was utilities utilities are up something like 8% in the last month when the S&P as a whole over the last month is pretty much flat as a pancake that is a safety sector you would not think would lead you for the next leg of the bull market so something going wrong then no look I agree with you if you look at the leadership as you just mentioned over the last month it's been the defenses it's been utilities it's been Consumer Staples what has lagged has been the more cyclical sectors it's been energy it's been materials it's been consumer discretionary that's a message from the market that this economy is starting to slow I think the FED should take note because they have the ability to do something that very few feds have been able to do and that's actually engineer the very elusive soft Landing that everybody talks about I think they need to take note of that Larry what about the data next week what will that change in your call for there to be Cuts what do you need to see to guarantee that we are going to get those Insurance Cuts you think the FED is going to deliver I think we need to start to see the actual data reflect what's actually happening on the surface of this economy so when we see CPI next week hopefully we'll start to see those rental parts of CPI starting to decelerate because that's really been the one Lynch pin that's really kept us elevated hopefully we'll start to see that move lower in the direction that we're looking for that'll start to give the fed the ability to put less focus on inflation and turn its sights onto this economy to make sure as I mentioned they can cut lry let's not forget retail sales or jobless claims either particularly after the read that we got yesterday this is what Andrew HH horse has got to say companies are conserving on labor cost by slowing hiring cutting working hours small business hiring intentions have dropped to multi-year lows he goes on to say individuals are becoming more concerned about finding a new job and are quitting at lower rates are we at risk here of a Shar a weakening in the months to come I think we are seeing a Slowdown let's keep in mind that that 175,000 jobs that was created that's just slowing that's a normalization as we still think you're going to continue to see positive job growth through the remainder of this year but it is going to slow right I think we've gotten you know lulled into thinking that you need to get you know above 200,000 every month that's really not normal for this economy somewhere around 100 125 would still get us to a soft Landing going forward but it is something to keep an eye on against that backdrop where do you think earnings growth comes from I think it's the sectors that we talked about if you look at what's happening right now in this earnings season it's the areas that tend to be more dedicated to business spending as opposed to consumer spending and you're going to get the best results in technology Industrials and healthc Care those are the areas that that I would continue to see uh earnings growth we saw that in the cloud spend Larry from the big players that's for sure just reinforcing everything you're saying can we talk about the consumer a little bit going into next week we're here on Tuesday from Home Depot Walmart on Thursday really mixed stuff on the consumer Daniel we're talking about that yesterday theme park business at Disney pretty decent but the read you get from McDonald's from Starbucks there's some warnings out there Larry how much weight you put on either company well look the consumer is the biggest part of the economy so it's critical to get the insights to what these companies are saying you know one of the things that we've been watching for you know we've had restaurants previously and the consumer is starting to be challenged right restaurant tends to be one of the harbingers first areas that consumers start to pull back on and when you look at restaurant specifically it's which companies can actually convey their value oriented menu I think when it comes to these companies that you're talking about coming out the report that are going into report are they providing the consumer with the low cost the value to have them come into their stores that's a story that we're going to continue to watch ours consumers dipping down looking at more value oriented uh generic products as an example those will be some of the stories and dynamics that we'll be looking for Larry is that even enough because I wonder how strong the trading down narrative is this time around when you have someone like McDonald's which let's be honest is the most value of value you can get when it comes to any food warning about the consumer when you have Amazon saying that they also see consumers feeling the pinch when you can get a lot of Cheaper generic stuff on Amazon is the trading down tendency not as strong this time around so it's strong I agree age with you that the consumer clearly is slowing but I don't think they are collapsing you have to remember that consumer wealth is at a all-time record high when you look at the jobs still being created that creates cash flow for consumers to spend but it's okay that they start to slow but they are starting to prioritize what they're spending on and being much more frugal in the areas that they're spending but that ones that do order that do offer that value are the areas that I would continue to look for to succeed in this market Market okay going back to the other side of this coin that you like the big Tech players we're going to get Nvidia earnings on May 22nd as we were discussing Larry it hasn't been Tech that's LED this rally does Nvidia change that well I don't talk about specific companies but I do think that this AI trade is in its early stages and I think when you even look at some of the big players haven't really even announced their strategy when it comes to AI that'll be another Catalyst for that particular theme going forward and I think one of the biggest things that I've taken away from earning season is that the profitability of these tech companies is fantastic they're the most profitable companies in the world and what are they doing with those profits they're investing in the future to make sure they can keep their Competitive Edge when it comes to driving those earnings and with those earnings they're doing two other things when it comes to shareholder value they're either initiating or increasing their dividends and they're doing BuyBacks and both of those also serve as Tailwinds for the sector Larry it was great to catch up Larry Adam there of Raymond James can't speak to single names but that is the only name we'll be talking about on May 22nd shortly after 4 p.m. Nvidia let's talk about the consumer Danny want to go to what data Peterson had to say over at the conference board confidence retreated further in April reaching its lowest level since July 22 consumers became less positive about the current labor market situation more concerned about future business conditions job availability and income that speaks to the consumer franchises that you named but the weird thing about that though is even if there's a consumer who is not very confident more concerned about jobs the savings rate is somewhere around 3% right now of disposable income I I just don't understand that John if you are worried about the world about your job presumably you would save money that's not what we're seeing they are spending again it comes to the contradictions we're seeing in the data and the anecdotes let's see if we get more contradictions next week getting you set up for a major week just to around the corner Equity Futures right now going into the weekend positive by a third of 1% let's get you an update on stories elsewhere with your Bloomberg brief here shanali bassek hey shenali hey on the UK bounced back from a shallow recession to post the strongest quarter of growth since late 2021 GDP jumped 6% in the first quarter higher than economists had expected and the data marked the end of the mildest UK recession in almost 70 years but it could complicate the bank of England's rate cut path with potentially stronger grow growth feeding inflationary pressures and Bloomberg News is reporting that UBS is considering introducing a reward system for investment bankers who offer clients to the firm's wealth management business some Bankers would likely be in line for payouts when they successfully attract new money to the lender's private banking unit and the referral fees would be a first for the Swiss lender echoing earlier incentives that credit SS had offered to its dealmakers and Apple has issued a rare apology for Tad touting its latest iPad in a certain ad the commercial shows musical instruments and other creative tools being crushed drawing criticism on social media for what many are calling the depiction of the destruction of humanity the app Apple vice president of marketing Communications telling ad age quote we missed the mark with this video and we're sorry Apple says it won't air the ad on TV as planned and that's your Bloomberg roof John shali thank you I think we've all got stuff to say about this Dan I've this too if you're apologizing for the ad I think you're apologizing for the product yeah because that product is basically what that ad is it's about creative destruction and that's literally with that I mean people take stuff too seriously Apple isn't going around taking a sledgehammer to guitars I'm I watched the ad before I saw the headlines didn't feel anything read the headlines watched the ad I was like I can see it but really and I feel like a lot of people have seen the headlines and now watch the ad yeah and now criticize the ad that's true you know you kind of have that bias of what what other other people are saying back to front but if you can afford a 110 billion buyback you can maybe direct some of that money to to ad spend and avoid some of these mistakes if you believe they are mistakes equities right now positive by third of 1% Dan IES coming up a little bit later up next on the program Netanyahu vowing to fight alone I've known Joe Biden for many years 40 years and more uh you know we often had our agreements but we've had uh our disagreements we've been able to overcome them if Israel has to stand alone we'll stand alone we'll catch up with amarie Dan and Washington up next on the program live from New York City this morning good morning [Music] live from New York City Welcome to the program taking you into the weekend alongside Danny Burger I'm Jonathan phoh bro's taking a long weekend Amry is going to be with us in Washington in just a moment Equity Futures on the S&P 500 positive by a third of 1% yields just about unchanged on a 10-year 444 92 under surveillance this morning Netanyahu vowing to fight alone I've known Joel B for many years 40 years and more uh you know we often had our agreements but we've had uh our disagreements we've been able to overcome them I hope we can overcome them now but we will do what we have to do to protect our country if Israel has to stand alone we'll stand alone so here's the latest Israeli Prime Minister Benjamin Netanyahu vowing to continue the war in Gaza with or without us support and President Biden getting pushed back on Capitol Hill Senator Mitch McConnell saying quote Biden cannot have it both ways he cannot claim his support for Israel is Ironclad while denying Israel precisely the weapons they need to defend themselves let's head down to Washington DC where Amar is joined by John Leber of Eurasia group morning amarie good morning John and not only is John Liber now at your Asia group but he also was a former um top policy advisor for Senator Mitch McConnell who we just heard from there um I want to first talk about the division not just of the foreign policy Hawks we saw McConnell and Biden actually stand side by side in a lot of issues when it came to Russia sometimes when it comes to the Middle East but the growing division we see with Benjamin Netanyahu and this Administration how big is that Gap now I don't think these two guys like each other all that much that's pretty clear uh there's personality differences and there's big policy differences and even before October 7th you had a lot of the uh American supporters of Israel who were not big Benjamin Netanyahu fans and now over the last six months of this bloody offensive into Gaza uh Israel's become a very big political problem for President Biden and it's starting to impact policy and just in the last week we've seen the Biden Administration really shift quickly uh on its views of how supportive it is of Israel they say that they're going to keep sending weapons and give Israel the right to defend themselves but they're just now starting to do what the far-left has wanted them to do for a while which is condition Aid uh military aid going into Israel on conditions on the ground we heard from Senator McConnell Lindsey Graham also yesterday was quite feisty when it comes to how this Administration is conducting itself with Israel the was joural editorial board this morning talks about how it was the Democrats for months pushing the Republicans to sign up for more Aid and now they're the ones that don't want to send the weapons so we have that divide between Israel and this Administration but what's the Divide like in Washington between some of these Republican foreign policy Hawks and the Biden Administration yeah I think the interesting divide isn't the Republicans and the Democrats here I mean the Republicans clearly benefit from criticizing Biden at every opportunity they can they clearly want to align as much as possible with Israel and be the pro-israel party what's more interesting to me is you've got Senators like John tester from Montana Democrat running for a reelection in a race he's probably going to lose uh uh saying that he does not support what the Biden Administration is doing and declaring his ongoing for support for Israel against the wishes of the Biden Administration so that divide is is a really big one it's and it's not just across party lines this comes as they're trying to really walk this fine line because of the push back they're getting from the progressive left and also the protest on the ground and also the fact that they are concerned about this densely populated area in Rafa and what these type of bombs would do potentially to civilian casualties when you lay that all out though what does this mean in terms of their off-ramp because Bill Burns already left KIRO there's no hostage negotiation how do they have an off-ramp this Administration from this crisis the administration doesn't the only off-ramp here and the Israelis have been really clear about this is that they need to succeed in Gaza they need to achieve their military ends and they need to Route out Hamas now that's not going to be easy and an operation in Rafa won't be the end of that because even after they do whatever they think they need to do in Rafa they're going to probably have to be fighting an Insurgency in Gaza for the foreseeable future and there still looks like there's no plan in place for how to govern the area once the military has withdrawn which means that Israel is going to be involved in this conflict for a long time potentially years to come and that means the Americans are going to have to make this choice about how much Aid they're willing to Sur uh Supply and what weapons they want to give the Israelis to fight this war given this is going to go on for months and as you say potentially years what is this mean for this Administration in terms of policy heading into the election how much tougher do you think they'll get in terms of rhetoric and action on Israel uh so just today we heard about this report uh that could be released from the administration criticizing the Israelis for human rights violations in Gaza that would itself would be a big rhetorical step up which on top of the threat to withhold weapons suggest that there's an accelerating split between the White House and Netanyahu which is the Israelis are signaling is not a problem for them they're going to continue to fight this offensive but it is a big problem for Joe Biden who has this massive split within the Democratic party has been acting somewhat indecisively on the issue saying he really supports Israel all the way to the end and then now pivoting a little bit to maybe say no there's limits to our levels of support that's a huge political vulnerability and he's going to be on his back foot for the remainder of the 6 months of this presidential campaign he's got to fight that's what axio is talking about this morning some of these big donors with the Democratic party saying to the administration you say you're Ironclad but we feel like there has been a shift in terms of your policy on Israel we also have a Bloomberg scoop overnight that this Administration next week is planning on finally coming out with which been they've been signed posting now for months higher tariffs on Chinese EVS what else can we see them pull levers they can pull before the election yeah I think this EV story is actually a pretty big one I mean if you look at the two two of the big Battleground States is Michigan and Wisconsin which are traditional hubs of the Auto industry uh heavily unionized Auto Workforce there and Donald Trump has been pretty explicit that on the attack that Joe Biden's electric vehicle subsidies in the ira are hurting these Auto Workers so Biden by putting out this 301 investigation gets his chance to say no I'm also I don't like China in this country I don't like all this Chinese competition and I'm going to make sure that all the electric vehicles are made here in the United States there's a lot of programs like this you got student loan forgiveness is a huge huge theme of the administration leading up to the uh to the campaign but this EV is going to be a big vulnerable vulnerability for them when it comes to the EVs do you think it's the economics the fact that even the Europeans are also complaining about all these cheap Chinese products are being dumped on their markets or do you think it's politics the Trump ad Trump campaign is almost forcing their hand well Gina Rondo called these Chinese electric vehicles iPhones on Wheels and basically the idea is that they have so much information they're Gathering about everyday Americans who drive around in these cars that the US like we've seen with Tik Tok does not want that type of information getting in the hands of the Chinese Communist party so I think there's both an element of politics and policy here uh and right now the Chinese EV share in the United States is basically non-existent and I would be shocked if any either Administration uh allowed that share to grow at all so well that's the other question why do they need higher tax tariffs it's already 275% yeah it's not the EVS themselves that are the big problem for the us right now it's the components and CH one of the big geopolitical concerns uh as the US is trying to push a green energy transition is that China ends up dominating the green energy supply chain whether that's batteries or critical minerals or solar panels or whatever the components are that the US right now is deeply subsidizing through this very aggressive industrial policy their goal is to make sure that this is not only an industrial policy it's a reinvestment in America they want that money to stay here and they don't want any of that money going to China John Liber thank you so much for your time this morning John of course that was John Liber of the Eraser group and former policy adviser to Mitch McConnell and you heard it there I mean these stories are going to continue until the election when it comes to the EVS potentially we'll finally get those details next week we expected this didn't we amh don't go anywhere we need to talk more about it if you just caught the tail end of that conversation exclusive reporting from our colleagues here at Bloomberg Josh wingrove Jennifer Jacobs Eric Martin according to people familiar with the matter President Joe Biden's Administration is poised to unveil a sweeping decision on China tariffs as soon as next week we've been waiting for this one Danny for weeks if not months now yeah we have because in the buildup to the campaign it does two things one it's the rhetoric of who's stronger on China Biden or Trump and then also it's something that the United Auto Workers have been complaining about so this also goes to Biden's union vote too what does this mean for Tesla we'll catch up with Dan IES of w bu in just a moment he'll join us after the commercial break we'll talk about Tesla EV is out of China the competition there and we'll have a conversation about Apple the Apple iPad and a commercial was it really that bad we'll get the official review from Dan Ives himself in just a moment Equity Futures on the S&P 500 positive by a third of 1% yields just about unchange going into the weekend 444 92 from New York this is Bloomberg [Music] heading towards three weeks of gains on the S&P 500 check out the NASDAQ positive again by 0.4% on a Russell up by a half of 1% if you take the sector breakdown Danny I'm so pleased you brought this up utilities what is it about I I've heard someone say oh it's an AI play I mean come come on everything these days is an AI play but yeah up nearly 8% this month amazing all roads seem to lead to the same theme even when maybe they shouldn't switch over the board and get to the bond market yields lower once again for a second week on a 10year to 4 4492 we're down not even a basis point this morning but check out the 2-year let me go through some levels for you the 2-year last Friday closing at 48160 and right now 48129 we have been pretty anchored at the front end Danny Burger given we've got pretty much no data this week apart from jobless claims and you Mitch going into a heavy data slate next week yeah how anchored are we next week we've also seen Bond auctions come through 125 billion this week sure 10 you're a little bit weaker but for the most part the market absorbed it but at what point does it not hurt the front end but of course duration the longer end at what point do you need more return in order to actually buy those bonds that's where the flexibility in the yield curve has been over the last week or so it's all at the long end I want to talk about foreign exchange just how much movement we've seen in dollar Yen so last week dollar Yen had its biggest week against the dollar going all the way back to I think December 2022 we had a 3% move in the Yen's favor on the same week we also broke through 160 which it's just bunkers this week we've had another 1.74% move but against the Japanese Yen doly Yen at 15573 and Dan as you've said repeatedly it doesn't matter what Japanese authorities say this week the yen is moving against them theoretically this should be the week where job owning works right because we didn't have any us data that would really strengthen the dollar there should be when Japanese officials and even UA himself coming out and saying okay we'd look at changing monetary policy if there oneway moves but again it's a credibility issue the Traders are not buying it until perhaps they see the white of the eyes of a hike from the boj 15574 on that currency pair under savanas this morning our top stories Israeli Prime Minister Benjamin Netanyahu vowing to continue the war in Gaza with or without us support Netanyahu is saying in a US television interview if we have to stand alone we'll stand alone the comments coming after President Biden threaten to withhold Us weapons happens if Israel continues with a ground Invasion into Rafa our next Story another investigation into Boeing the SEC is said to be scrutinizing statements the company made about its safety practices before and after the door panel blowout on an Alaska Airlines fly in early January if the agency finds the company or its Executives made false or misleading statements it could lead to fines we're down by 2/10 of 1% every single week there seems to be another negative story about this company the thing that I can't get over is that now we have the SEC looking into Boeing and and we still don't know who's going to replace David Calhoun we still don't have a new CEO who's going to come in that should be job number one if you want to alleviate some of the concerns of investors perhaps even Regulators if they're now looking at executive specifically surely this is what you would do and we are still not there keep hearing 1800 Larry CP again and again and again we'll see let's turn to this story President Biden set to impose new tariffs aimed at strategic sectors including China EVS blo reporting the measures come after a review of terrorists imposed by the Trump Administration people with familiar with the matter saying a decision could come as early as next week am Marie joining us now from Washington DC for more amh we've been waiting for this you've been waiting for this we thought maybe it would come later this summer closer to the election could we hear from them next week potentially what we're reporting here at Bloomberg overnight in this Bloomberg scoop led by Josh wingrove one of our reporters on the ground John is that it can come as soon as Tuesday and this would would go into some strategic areas the Administration has talked about when it comes to this competition with China and the concerns also of National Security and most notably it's the EV sector but remember around this time last month we spoke you and I to Katherine Tai the US trade representative and she said quote they were coming soon the issue of course Jonathan has been the fact that the trade rep has been going over these tariffs from the Trump Administration that were enacted in 2018 since 2020 so we heard from John Liber there is that he feels like the administration's been on the back foot why did it take so long but we do know that it's potentially coming next week they've gone to Great Lengths this Administration to sign post it but we're still waiting to hear on exactly what these details are remember it's hard to buy a China EV in the United States now you can't they don't sell here and the Tariff right now is north of 27% so is the symbolism enough then anarie is it enough to convince voters that Biden is the choice if you're a China Hawk well that's on the political side and John leeber really feels like part of that is that the Trump Administration pushed Biden into this I think one thing is for certain when you we get the details of this and you see the direction of travel of this Administration whether it's export controls whether it's more tariffs on China Goods coming into the United States most notably EVs and some of the components that go into them it is clear to China and the rest of the world that whether or not we get Trump or Biden in the white house next year you're going to get a very similar policy director ction when it comes from what Washington is doing and their concerns for Beijing and by the way we've heard from Beijing and this is one of the quotes I'd like to bring you quote instead of cor correcting its wrong practices the US continues to politicize economic and trade issues to further increase tariffs is to add insult to injury so that's the response overnight from Beijing amh stay close we'll catch up with Amar in the next hour and much more on this story as well the reporter behind the story Josh wingrove joining us in about 1 hour and 10 minutes time with us around the table Dan Ives who covers Tesla and General Motors for W bush Dan good morning to you great to be here if the barriers go up if the wall gets a little bit higher for Chinese players do the Chinese do the same thing to us players that's the worry right I mean the retaliatory is the last thing that you need from a Tesla perspective and I think this is something everyone's been waiting for because the reality is given the prices of the Chinese EVs and what I've seen firstand it would be very tough from a competition perspective retaliatory definitely could happen Game of Thrones continues to play out you mentioned the product can we talk about that a little bit more I don't think enough is said about that I think a lot of people often consider Chinese products to be cheap imitations of maybe us Innovation are you seeing that out of China how good is the product I mean byd is special I mean so and I think that's I think from a competition perspective Tesla seeing that in China I still view it as there going to be many winners there but when you look at byd you look at Neo and others that comes to the US that's a major competitive issue especially when it comes to Detroit the 313 area three has bet so much on EVS so that you're really protecting that for Detroit as well as ultimately even for Tesla domestically uh byd gave an interview to the Ft yesterday where they basically said by 2030 we're going to be the biggest EV car maker in Europe no one else is going to be able to hold a candle to us is Europe up next is that the ne next risk for the Chinese EV sector yeah Europe's front and center I think that's going to be the Battleground and look and that's something not just for Tesla for a lot of the German automakers and others and Beijing has their SES there and I think what we're seeing here is even though EVS is moderated globally and of course that's been a black eye for the industry it's still the massive transformation probably the biggest one we've seen since 1950s and that really I think Europe's going to be the next Battleground I say that black eye for the industry it hit Tesla really hard and they're saving Grace was that they went to China that musk met with shei and he got these measures that seem to indicate autopilot can exist in China so if that's taken away what happens to Tesla what happens to share prices and our confidence in them look and that's why must 10% politician 9% CEO we say the same thing with cook China is the hearts and lungs of the Tessa growth story when I look at FSD autonomous I in the first step now toward what could be you know I think a ultimately a golden vision now from a from an autonomous perspective but China is the hearts and lungs of the growth story and that's well known it's been a headwind but we do believe that you'll start to see a to in next coming quarters it's funny you would refer to perhaps even allude to Elon Musk being somewhat of a diplomat because a lot of people in America wouldn't share that perspective whatsoever how much distance is he able to put between the view of his government and his personal views in the face of Chinese authorities it's a balancing act right but how many CEOs could fly over to Beijing and 10 hours later come back very few and look it and I think it just speaks to that power of must despite the controversy China him and cook have been able to navigate China better than any two CEOs and that's why for apple and of course for Tesla China is a key growth engine that's not changing anytime soon let's talk about the power of the iPad and the power of Apple let's get this commercial up can play it in the background as we have this com ation what on Earth happened with this Apple commercial around the iPad I mean look obiously an apology from Apple is rare but but if you look at what they're doing here Apple's doing what Apple does what are they apologizing for they're basically apologizing for it's essentially showing the traditional music traditional arcade things that we've seen from ' 80s 99s they're basically consolidating that into the iPad so it's viewed as maybe a shot across the bow put look Apple's doing what Apple does and I think they definitely uh you know had some controversy from this but it's a it's a it's unusual for them to have to apologize they apologizing for the product basically given what you've just said haven't you just described the product that is the product so what are they apologizing for look again I don't know I mean that's like it's like Brunton apologizing for throwing up 40 on a night doesn't make sense doesn't make sense also isn't this completely contradictory to the whole thing about Apple the whole oh we don't give the consumer what they want we tell them what they want what are they doing apologizing look and I think right now given the scrutiny they're getting from Brussels from DC from everywhere else they they need to sort of walk the line but look this goes into what is going to be potentially the biggest event they've had in a decade going into wwc next month where they're going to unveil AI not just to their customers to developers but to the world I mean what do they need to show to really get us excited about the iPad besides you know a little smiley face toy being exploded because I mean I had the same iPad probably since 2012 nothing nothing motivates me to get a new one so what do they need to show up with to say all right an iPad cycle it's coming it's about the chip I mean if you look they have the most powerful chips in the world and they're what they're able to do is these upgrade Cycles when you look at iPad this is going to create an upgrade cycle but it's happening across the whole base because iPhone 16 combined with this combined with Hardware they essentially have a an AI driven super super cycle that's now going to take place over the next few years and that's why betting against cook and copertino into an AI upgrade cycle I personally believe is a bad bat you've been talking about this elusive upgrade cycle for quite a while you're smiling I am too we've had this conversation for a few years it never happened what is different about this year and is the iPad maybe a case study for what we could see from the iPhone later on in September I I think it's a little key I think but the big thing is really going to be AI to developers to the App Store on the services side they're going to monetize it from a Services perspective but then you're going to have ai built into iPhone 16 and what will ultimately be iPhone 17 the difference and we've talked about that upgrade cycle but 270 million have an upgrade in four plus years that install base as as we've talked about a while on the show has continued to increase and even though it's been disappointing we could say in iPhone 15 that just ultim gives I think music to the ears of the Bulls going to iPhone 16 because of the technology and because what I view is AI is going to drive I'm one of those I'm one of those individuals if you aggressively upgrade the functionality of this phone I'll consider changing it but over the last few years there's been absolutely no reason for me to do that whatsoever I want you to help me understand this developers conference what we're going to hear specifically without using the letters a i what they're going to do what these apps are going to look like that could be on this phone come September well I think the most important thing is this is the start of an AI App Store and and what that basically means is developers is they're going to build generative AI apps where are they going to build it they're going to build it within within Apple's ecosystem they're going to be able to monetize and from a technology perspective you're going to see I think what they're going to unveil at WWDC is going to be historical moment for copertino and cook and that's why bet against Apple here okay and I believe the risk reward is potentially golden buying opportunity as we look at the next 6 12 months I think you said it twice but we'll let it go Dan it's good to see you sure Dan IES red bush thank you buddy what a week for New York Sports just fantastic it's it's rers 1994 all over again that's right look betting against Apple like betting against Rangers and nicks okay you think the Knicks get it done this year oh I think this is the year interesting did you make it to the Grand Prix over the weekend in Miami I was in I did not make it to the Grand Prix but I watched the Grand Prix and you're dressed for it Dan you could have come straight from Miami look I'm just I'm just I'm just following pharoh's lead on F1 I was an F1 I was an F1 fan Pharaoh combined with the Netflix now I'm I'm I'm in about it in just a moment Dan it's good to see you let's give you an update on stories elsewhere this morning here's your Bloomberg brief with shanali bassek hey shanali hey John tsmc sales jumping 60% in April the world's largest contract chipm from reporting sales of $7.3 billion last month on the back of sustained demand for AI aided by a recovery in consumer electronics the jump follows a 34% sales increase in March with shares of the stock rising to an all-time high in April and Target won't sell lgbtq themed merchandise in some of its stores during Pride months after a backlash dented Revenue last year the Minneapolis based retailer plans to offer the full assortment online according to people familiar with the matter and Target face threats from some customers last year over its Pride merchandise in the month of June and campus protesters at Harvard University say they will stay in their tents and continue an encampment in Harvard Yard the school newspaper reporting that the Harvard out of occupied Palestine group has rejected a proposal from the interim University president Alan Garber to leave the yard and avoid punishment up two and including suspension the group posting on Instagram that Garber has rejected their counter offer that would quote move Harvard forward on transparency and ethical investment and John that's your Bloomberg brief hey shenali thank you we'll hear from Chenal again in about 30 minutes I knew where this conversation would go lobster rolls 280 bucks was it actually for one lobster roll in Miami at the Grand Prix I think that's actually two two you get two it's two thank God yeah exactly I mean like look they have to some real good Ops for alls you combine that with some Ros I'm sorry that is absolutely ridiculous Dan it's good to see about once again thank you sir up next on the program a busy week of data on Deck you are seeing that impact of higher rates finally begin to filter through I think we just need to see more data particularly this CPI print uh next week to get a better sense of CPI data coming up next Wednesday from New York City this is Bloomberg [Music] on the S&P 500 Equity Futures positive by 1/3 of 1% in the bond market yields just about unchanged 44531 under surveillance this morning a busy week of data on deck one of the things that gives the FED a bit of confidence that you know they are applying the break in the right way is you are seeing that impact of higher rates finally begin to filter through we're still in the early Innings of seeing the data really cool and last week had some for the Bulls and and some for the Bears and so I think we just need to see more data particularly this CPI print uh next week to get a better sense of something for everyone here's the latest Traders looking ahead to a busy lineup of data next week PPI retail sales and the latest CPI print all on Deck lindsy paga Of Steel writing this it's reasonable to wonder whether or not the FED is at all considering the scenario whereby inflation fails to improve or worse continues to rise in a meaningful and persistent manner Lindsay joins us now for more Lindsay let's get ahead to next week what are you looking for from CPI I think we continue to see very frustratingly stubbornly high levels of inflation price pressures in terms of the consumer still moving around 3 and a half 3.6% with producer prices continuing to move further above that 2% threshold so the fed and investors alike are looking for Meaningful reprieve in infation but unfortunately I I think they're going to have to continue to wait for some time longer Lindy can you build on that could you sort of break up and divide what's happening with Goods prices and what's happening with Services prices and how different those Trends have been over the last few months Well Services is really where we've seen the vast majority of the pressure with labor costs obviously the largest component on the service side continuing to elevate this persistent and uh Rising Trend Goods inflation excuse me Still Remains the the uh the most beneficial component of the inflationary story but with International risks I think still to the upside Goods disinflation or or outright deflation May begin to soften that contribution to the Improvement that we've seen and in fact if you think about it the vast majority of the gains that we've seen in the inflation picture have come from variables outside of the fed's purview economies coming back online trade lines reopening so should we see some of that Improvement reverse course I think we could exacerbate some of this elevated inflationary pressures that we've been seeing since the start of the Year Lindsay one of the arguments of CPI coming in softer next week this is something that Ellen zetner and her team over at Morgan Stanley make is that rental inflation is going to be coming down that finally the lag that we've so long been calling is going to catch up and that's going to help CPI does that argument miss something well I I think the timing might be off we've been talking about this reprieve coming from shelter costs for the better part of the past 2 years which has failed to materialize as we continue to see housing demand outpa housing Supply I do expect the shelter cost to still remain quite robust for the foreseeable future as we do expect the FED to keep rates at these elevated levels now there have been some pockets of reprieve in terms of rental prices but we've also seen a lot of these repricing so existing leases coming back online at 30 40 50% resets in some of these more concentrated areas so I'm not yet convinced that we are seeing broader based reprieve or broader based lessening of pressure in terms of shelter costs at least not yet and Lindsay this gets back to what John started on what you said this idea is Powell considering considerating the scenario where inflation doesn't moderate but instead it gets worse Lindsay he doesn't sound like a chair that is considering it all of the FED speakers we've heard same thing they're still talking about Cuts even even though they don't know when it will be should fed speakers and should J poell be reintroducing the idea of two-way risk well when you look at the takeaways from last week's fomc meeting I think there were two first the chairman conceded that it's likely to take much much longer for the committee to gain confidence that inflation is back on this disinflationary trend but that being said even with that realization the chairman was very clear that the committee's next move is likely still a rate cut and not rate hike so even though the committee is committed to remaining on the sideline for again an extended period Beyond earlier expectations they're still very much focused on eventual policy easing and I do think that as inflation remains at these elevated levels or even pushes slightly higher I I I think that still justifies the fed's position in a steady state but what happens if inflation continues to reverse course at what point is the fed not just willing to delay rate Cuts but actually talk about re-engaging in rate hikes and I think that's the riskiest scenario for the economy and that comes with persistent and elevated inflation and to quantify that I think maybe six maybe more months of this continuing upward Trend that's going to Fed uh Force the FED into a corner and force the FED to re-engage or at least consider re-engaging in rate hikes but again to your point right now the FED is entirely f focused on eventual easing which they've said will be delayed relative to the earlier timeline but that eventual easing is on uh on the near term or in their expectations for the near to medium term these are clear and obvious risks what's your base case now with those in mind my base case is that inflation remains stubbornly elevated well above the fed's 2% Target through the end of the year keeping the FED then potentially on hold through the entirety of 2024 remember the the Fed has a very clear dual mandate full employment stable prices the FED is very clearly able to check the box on Full Employment so the focus is entirely on stable prices Paul has been very clear that 2% Remains the target it has always been the Target and they are willing to remain on the sidelines indefinitely until they're convinced we're getting back to 2% but that timeline on the sidelines now appears to be extended well beyond expectations if there are upside risk for prices and inflation could you tell us how much there is downside risk to the labor market given some of the data we've seen recently well it does appear that the labor market is is remaining surprisingly resilient now in terms of the latest data the headline number was somewhat disappointing relative to those outsized gains that we had seen at the start of the year but still the latest report at 175 even at a six-month low is still nominally a robust level of job creation on a monthly basis and even that minimal uptick to 3.9% still marks the longest stretch of above excuse me below 4% joblessness since the 1960s so we're far from talking about a a loose labor market labor conditions may not be quite as tight as they were but we're still talking about a very resilient still relatively tight labor market in the US Lindsay this was great Lindsay pxa there of Steve for going into that data next week CPI and retail sales coming on the same day May 15th amazing how many people have joined the camp over at Apollo together with Toon SLO not just Lindsay also Steven Galler over sojen saying this we expect the FED to keep policy on hold for the remainder of the year the upcoming CPI is the next major economic release but it should take many more months for the FED to gain sufficient confidence that inflation can return back to 2% we'll get more thoughts on that story in just a moment we'll catch up with Jim panco of biano research alongside Anastasia amaroso of our Capital Norman rule of csis down in Washington with Bloomberg's an Marie and Bloomberg's Josh wingrove on the latest story out of DC the prospect of tariffs on China's EVS Equity Futures on the S&P 500 positive here by a third of 1% the second down of Bloomberg surveillance up next [Music] [Music] we're not looking for a shock and awe if you will in inflation but we do think the gradual incremental increase is a risk inflation remains Public Enemy Number One and what I think would lead the FED to become more hawkish is if we saw that reacceleration in inflation we know this is a bumpy ride for inflation but they will also need further evidence in the data as we do see the FED uh reacting to a slower growth trajectory Andor a moderation in inflation repress is by some toleration of easier policy this next phase of the inflation fight it is going to require more pain and I think a bigger hit to demand this is Bloomberg surveillance with Jonathan Perell Lisa abowitz and Anar hurn the second hour of blomberg surveillance begins right now live from New York City this morning good morning good morning for our audience worldwide this is blomberg surveillance your recity Market on the S&P 500 positive on the week for a third consecutive week and positive on a session Equity Futures up by a third of 1% a stacked 60 Minutes for you coming up on the program Jim biano of biano research on why the 10-year yield could test 5% we'll speak to I capital's Anastasia amaroso with stocks on course for three weeks of gains and Norman rule of csis as Benjamin Netanyahu strikes a defiant tone we begin with our top story treasury yields holding steady with a slew of fed spe on De Jim biano of biano research moving to neutral on bonds and writing this I expect a 10year yield move to 5 to 550 to produce extreme sentiment and set up a decent Bond rally jimers are with us around a table for the next 60 minutes or so Jim good morning to you good morning to you you had phrase I think of the last 12 months that disinflation is transitory could you just tell us what was behind that Cole and where we are now well yeah I think you know that two things could be true at the same time that in 2122 you did have this transitory part of inflation with the supply chains normalizing and on CPI that produced 9% um then it came down but I think once we got rid of that transitory inflation what we're finding is is that we're probably stuck in a 3% inflation world so we're not going back to where we were pre pandemic we are in a higher nominal growth world we are in a higher inflation world but again it's a 3% inflation World which means elevated interest rates but nothing like Zimbabwe or anything like that well let's talk about the elevated level of rates that we should be used to nothing like Zimbabwe what should it be like well I think that what we're looking at with a 450 yield right now is probably pretty close to I'm talking about on the 10e yeld you know something normal this is about normal is anything lower than that would probably come about with weakness in the economy and if the economy was to show more signs of inflation or strength you could probably see us push back into the five handle again we've got to talk about what this means for the bond market more broadly as well you've got a piece in the Ft out this morning the headline is the total return strategy in bonds is far from dead what prompted this particular one uh Bill gross wrote a piece last week and he said that total return strategy is dead and I um took issue with it to say that a certain style of Total return strategy is dead just explain that yeah so in in the bond market Bill gross Pimco they really developed the idea of Total return you buy bonds to get a a a coupon a yield and then you also have price appreciation the two of them is Total return for the last 40 years the total return strategy has been driven by lower interest rates and ever higher prices well that era probably ended in 20120 but that doesn't mean that bonds as an investable class or a total return is done there's a big yield in the bond market now a 5% yield you could start off every year saying I can get a 5% yield and if you manage around that properly you could maybe do a little bit better than that or a little bit worse if you don't but I think there is strategies in the bond market that can still be very profitable Jim it's not even total return that folks have declared are over there are a lot of strategies out there that if you're right if interest rates are settling at a higher level perhaps seem like they don't work m&a is a great example of private Equity just waiting in the wings for there to be cuts for rates to go back below to where they are so what doesn't work Total return Works what doesn't well I think any strategy that was Reliant upon lower interest rates you're right a lot of the levered m&a strategies that were really the foundation of those strategies was near zero interest rates those are going to be very difficult you're going to have to look at your interest cost relative to the business you're buying and the cash flows that it throws off and that's going to make the hurdle rates for a lot of these purchases or a lot of these Acquisitions a lot more difficult uh we're not I don't think we're going to be going back to those microscopically low rates that we saw from 2008 to 2020 that was a unique era that even got us to negative interest rates in Europe and Japan that probably isn't going to be repeated anytime soon happens to the deals that have already been done that have had a lot of Leverage on them that refinance when rates are low what happens to them if rates don't go back down they struggle they struggle because the companies won't be able to throw off enough of a cash flow to actually meet those debt service costs and it's going to be a difficult period for them Jim let's build on that what's the timeline for you around that the phrase we hear a lot on this program is survive until 25 when do you start to see that pressure start to build I think it probably starts to build sooner rather than later I think when you look at the economy I like to say that every time there is a financial crisis or recession and we had both in 2020 the economy changes and this one did change now change does not mean worse change means different and the biggest thing that came out of this is you've seen lower you've seen lower personal savings rates you've seen higher levels of spending it seems like people for lack of a better term they got PTSD after the lockdown and then we had Revenge travel and that never stopped still yeah we still have it we still have people spending we have the government spending 6% deficit to GDP and that's going to continue to push this economy forward and it's going to continue to keep it running hot now that's good that's going to keep the unemployment rate which has been below 4% for 27 months probably down at those levels but the price of that is going to be elevated inflation the credit stress though that you mentioned can we just sit on that for a while longer just a couple of Beats how ring fenced is that going to be and let's go back 12 months to last spring get some Regional Banks starting to fail people are thinking it's the end of a psycho hard Landing it was dealt with we've moved on from that how ring fenced are these pockets of credit stress going to b i you know I think that they are going to be in the regional Banks is a good example of that they really struggled in the face of a higher interest rates with the case of Silicon Valley but then also the realization that came in last year that office real estate is not going to bounce back as much as everybody thought and that's why the regional Banks and um a lot of the smaller Banks got hit and it was R ring fence to the extent that if you look at their stock prices and if you look at the stress that that sector went under it never really translated to like the general economy or GDP or retail sales or anything so you've seen these Pockets keep coming through as we've tried to adjust to this world of higher interest rates so so to be clear you don't see any of those Pockets necessarily filtering through to the broader economy if there is that stress no I don't at this point um there's an economist Rudy dornbush who used to work with a lot with the fed and he had a famous line that expansions don't die of old age they're usually murdered and we don't have now the murder weapon historically has been a spike in oil prices geopolitical events or suffocating interest rates and I don't think 5% is anywhere near suffocating interest rates we don't have that and short of that I think that the general economy will continue to do okay if not better than okay uh now I'm always on the lookout like everybody else is about that murder weapon that could come I thought maybe a year ago it might have been the banks but it turned out not to be the banks well you mentioned you have the two Big Spenders still out there you have the government and you have everyday consumers the government doesn't seem like it's going to stop regardless of who's in the white house when it comes to the consumer you mentioned that that low savings rate something around 3% they're still spending is this the forever now is that PTSD just enduring from time on out here this cycle that that the the spending I I hear a lot of people talk about that the cons consum is going to slow well they'll EB and flow but what the consumer will do is they will keep spending this cycle what I mean by this cycle we get that murder we have a recession then attitudes change again um maybe they change that the um savings rate goes to zero maybe the changes the savings rate goes to 5% but for this whole cycle I think that that's not going to change at Leisa is not here in this conversation's getting dark very quickly let's just talk a little bit more about benchmarking to extremes you almost corrected yourself when you talked about inflation you said it's not Zimbabwe right and when the word stagflation comes up people often come out and say well it's not the 1970s and we heard that from chairman pal last Wednesday do you think stack flation is as much a laughing matter as maybe as it was to the chairman last week well you're right about you know benchmarking yourself because a lot of these terms when you talk about inflation or stagflation everybody goes to the extreme if you say that there's going to be inflation you they think hyperinflation or something and it they're they're not ready to think about the idea of it being you know some elevated as far as stagflation goes yeah if the definition of stagflation is elevated inflation in an era of slower growth yeah that's very possible but if you if you want a definition of stagflation of you know five six 7% inflation with Contracting growth that's an extreme definition that I don't think we need to go to just yet it's the weaker growth that I want to get my hands around Danny's done great at this over the last couple of days just going through some of the consumer facing companies that are facing difficulties others that aren't all then we get the economic data over the last week and it's actually pretty easy to construct maybe a decent story of how bad things are right now even though you might make the argument they're not at all this came from Andrew host I shared this quote a little bit earlier on the program I think it's worth going over again companies are conserving on labor costs by slowing hiring they're cutting working hours small business hiring intentions have dropped multi-year lows individuals are becoming more concerned about finding a new job and are quitting at lower rates have you got a Counterpoint to any of that no all of that's true the only Counterpoint point I would give let me take the last one that they're quitting at uh lower rates it's still the quit rate is higher than anything we saw before 2020 and a lot of these numbers that we're looking at were saying yeah they have slowed from that RedHot Pace that we had in the middle of 23 when we were predi almost 5% GDP but if you compared it to say a pre-2020 era these numbers are complet are I want to say completely different but they're in a different level than we've saw before this economy is at a different PL pace so yeah it the the economy is ebbing but I I don't you know and it was flowing big last year but I don't necessarily think that this e is going to lead to anything more than just a downturn within an economy that continues to grow at least a trend okay well let's put a bow on it and get the policy call so torsson slock Apollo no Cuts this year sock Jen no Cuts this year lining pza of Steve for on with us just about 10 minutes ago saying basically no Cuts this year where are you I'm at the same point and you're basically no Cuts I I'll give you two reasons for one I do believe the FED is political I do believe that they've noticed the schedule that June June July and September is the middle of a presidential election they'll move if the data warrants it meaning that there needs to be a shock in much weaker data uh and otherwise we're looking at November or December and only if the data does weaken enough because Paul said I need confidence and I don't have it well we're waiting for that data to show up you've got to drop that in and not move on we're going to sit on this for a while longer they are political politically biased or politically sensitive there is a difference right um um Claud Sam The Economist gave me a great term she she said that they're not partisan but they are political partisan they don't sit around the fomc table figuring out which candidate they want elected they do not do that do not consider that political they've noticed the calendar they've noticed the the winds in Washington they've noticed where their reputation is and so that what I mean by political they've noticed that the July 31st meeting is right in the middle of the Republican and Democrat convention to give you one example that's what I mean by political got it Jim you're going to stick with us through the next 45 minutes or so Jim biano there of biano research Equity Futures right now on the S&P positive onethird of 1% let's get you an update on stories elsewhere this morning Kish Bloomberg brief with shenali bassek hey shenali hey John Sony plans to sell off the historic Paramount Pictures lot in Hollywood if it purchases the company and that's according to people familiar with the matter Sony which already owns a large film and TV production facility is said to only be interested in Paramount for its IPS like The Godfather Trilogy and the Top Gun films in a report from The New York Times Sony also plans to sell Paramount's TV stations and streaming service and there's a new investigation into the door panel blowout on a Boeing 737 Max 9 plane in early January the SEC is scrutinizing the statements made by the company about its safety practices fire and after the incident on the Alaska Airlines flight the investigation is focused on whether comments by the company or its Executives misled investors in violation of the Wall Street Regulators rules according to three people with knowledge of the probe the SEC reviews don't always lead to enforcement actions but they can lead to fines for companies or officials and persing square founder Bill Amman was criticized for his attacks on diversity and inclusion policies in a closed door panel discussion at the milin conference in Los Angeles Amman has previously labeled Dei initiatives as inherently racist and illegal at least one speaker said his comments reflected a poor understanding of the civil rights movement in a statement issued afterwards Amman said he has written thousands of words about his Nuance views on this important topic and he asked people to read them fully to understand his perspective and that's your Bloomberg brief John shali thank you more from chali in about 30 minutes time up next on the program is bad news still good news as we sit here right now some of the good bad news is good news at some point in time that bad news turns to bad news so I think the FED will come out cut rates and make sure we do again elongate this recovery we'll continue that conversation in just a moment Equity Futures positive here by a 13d of 1% on the S&P 500 live from New York this morning good morning [Music] live from New York City Welcome to the program anarie down in Washington we'll catch up with amh in just a moment bro taking a long weekend Danny Burger alongside me this morning through the next couple of hours Equity Futures on the S&P 500 positive by third of 1% yields High by let's call it a single basis point 44610 as yields Retreat for8 second consecutive week they climbed just a little bit on the session under sentance this morning is bad news still good news as we had that pullback over the last you know couple of weeks that was a time to you know maybe put a little bit more money to work into the equity Market but I think going forward the risk are more balanced as you mentioned uh as we sit here right now some of the good bad news is good news at some point in time that bad news turns to bad news so I think the FED will come out cut rates and make sure we do again elongate this recovery so here's the latest this morning the S&P 500 climbing to its highest level since early April as economic data supports the case for rate Cuts Anastasia amaroso of I Capital writing this we find more positives than negatives for the environment right now so we would be adding to equity's exposure if underwe relative to strategic allocations Anastasia joins us now for more Anastasia can we start by talking about the setup going into next week with some big data points on Deck including CPI and retail sales can you walk us through that sure well good morning John and first of all I want to comment on this bad news conversation uh going into next week I don't actually think we have much in terms of bad news you know we had slightly weaker GDP report but if you look underneath the hood we actually have a very strong core demand in the economy when you look at the real-time consumer data it's actually improving from earlier in the year and then if you look at the manufacturing surveys maybe they disappoint a little bit on a one- Monon basis but I still look at the inventory levels and I think they're low enough to start to jump start a restocking cycle so I think the setup going into next week the CPI report next week and then Nvidia the week after I think the setup is fairly strong from the growth perspective and you know in terms of inflation um you know if we were waiting for the last mile of inflation guess what it's here it's upon us we've managed to go from 5.8% CPI a year ago to now hopefully 3.8% or below this year so that's almost 2 percentage points of improvement and you know if you look at the core PC metric it's 2.8% so that's a to handle so I think we are in that last Mile and that's actually positive development Anastasia you sound like someone who would be very comfortable being a bll in this Equity market right now we're past 5200 can you keep buying yes uh I can and obviously the risk reward was better when we were closer to 5,000 uh and that's why we were saying that we should be adding to uh allocations if you're underweight relative to strategic ones but still if I look ahead and if I look at the current multiple which I think can be sustained as long as this economic environment is sustained and if I apply that to $278 in S&P 500 earnings for next year that gets me to an imply price target of 5400 on the S&P I think that's the base case scenario and so I do think stocks are worth uh being in and worth staying for and you know maybe the upside to 5400 is not all that great but that's for the S&P and I think you can find pockets of opportunity within the market that should be able to outperform Anastasia it's Jim Bianco I want to ask you about the bond market we started the year at the 10year yield at around 3.9% we got as high as 4.7% a couple of weeks ago we're around four and a half now is that uptrend going to continue do you think or do you think we've kind of finding a high yield for the year yeah I think uh thanks for the question Jim and I think for now we have sufficiently priced in the new reality which is growth that is remaining uh pretty robust which is inflation expectations that have picked up and of course the Central Bank policy which apparently may not have much in terms of rate Cuts this year so I think jimd moved to 4.7 that sufficiently reflected that and when we look at the implied fair value on a 10year based on some of the some of the models out there relative to where the 10e is today it is trading above some of those fair value models so I do actually think that that that's what gives me more optimism on the equity Market is if the 10year can pause around these current levels then that's less uh drag on valuations for equities do you think that the um fed is going to move this year and would that change your outlook a lot if they were to move Look I do think the FED will likely move once maybe twice this year and obviously that has to be later in the year um look the FED I think realizes that they solve what they could solve which is slowing down demand in the interest rate sensitive parts of the economy what the FED cannot solve is the supply of labor and the supply of Housing and when you look at inflation today what's really making it sticky it's the fact that wages are still rising and the fact that there's a shortage of workers and I'm in Miami uh this week and apparently the unemployment rate of Miami is 1.9% so talk about a lot of demand and lack of lack of Labor the FED can't really solve that you know the FED can't ALS solve the shortage of Housing and the underbuilding that we've had in the economy of housing over the last 10 years they could slow to the demand and they have done that but they can quickly turn on the supply spet so I think having this realization is the reason why the FED will likely cut interest rates because they've done a lot and certain parts of the economy certain pockets are certainly feeling the strain which is commercial real estate especially an office uh and of course that's relates to the regional Banks as as well so I do think you know if inflation continues to be somewhere in the 2 to 3% range uh as we move through the year they should cut rates Anastasia you've been constructive for a while you've had a bias to buy I remember you called the pull back in April a better entry point clearly based on the last few weeks you've been right could you tell us how independent your Market call is from your fed call it's fairly independent Jonathan uh when we wrote the outlook for this year we did expect uh Cuts uh but at the same time we said what if the FED doesn't cut interest rates and the conclusion was it is still an equity Market that's worth staying in and worth being in and the reason we said that was because of the growth resilience that we were expecting you know there's this notion of the US exceptionalism of the US economic exceptionalism and it is so true because this economy is not all that interest rate sensitive and in fact when you look at the consumer uh what we pay in terms of mortgage has not actually reset higher because only 5% of mortgages are a floating rate and yet the amount of income that we earn by parking the cash that we had in a money market account is quite significant it's a significant pickup so this is why you know we've thought that the consumer can handle 5% interest rates as they have uh supporting the economy and that's why even if the FED doesn't cut rates the economic backdrop should support equity valuations and Equity uh earnings of course and so far it has Anastasia been great it's good to catch up Anastasia moso there of I capital on the backdrop for the Federal Reserve and this Market as well it's been a confusing one for a lot of people Jim help us explain it how we've gone from pricing in seven cuts to one and this Equity Market has been okay I think when we were at seven cuts in January we were under the impression that we were solidly going to a soft Landing with some wh whispers about a recession and that we were solidly on our way on that last mile to 2% then over the past four months the data has really surprised to the upside and it kind of dashed at least initially the recession call then it dashed the soft Landing call and as far as the last mile for inflation it's been pushed out and I think that that's what happened there was an expectation like I said we were going to see if you go back to the Bloomberg consensus data we were going to see something like a 1% GDP growth year and now we're two and a half and that's a big difference massive difference Jim biano is going to be sticking with us up next on the program Israel's Benjamin Netanyahu striking a defiant tone following President Biden's pause on weapons shipments we'll get the latest from former senior us intelligence official Norman R sitting down with amarie down in Washington DC if you are just joining us equities are positive by third of 1% we are up on the morning we are up on the week heading towards three weeks of gains on the S&P 500 yields are a little bit high this morning morning by let's call it almost the basis point on a 10e at 446 and in the FX Market of Euro doing not much at all 10777 to round it out and crude for you approaching 80 all over again 7987 on WTI and positive [Music] 0.8% welcome to the program stocks doing okay up a third of 1% on the S&P 500 in the green across the screen on the NASDAQ as well up by 0.4 on the Russell up by 4% to on the S&P as you might have heard repeatedly through this program so far headed towards three weeks of gains on the S&P longest weekly winning streak going back to February switch up the board and get to the bond market two weeks of falling guilt on a 10-year down again this week up on a session just a little bit by single basis point 44610 and the 2-year poised to close basically where it closed last Friday anchored at the front end without much economic data through this week with the exception of that higher than expected jobless claims print just yesterday morning at 8:30 eastern time let's finish on Foreign Exchange and the challenge posed in the FX Market to Japanese authorities from the Japanese Yen 15572 positive by 0.1% Danny Burger all over the place over the last two weeks I I just think it's so remarkable to First you have the mof coming out and saying hey we're going to intervene in this thing they do intervene they say it again we're willing to intervene and then you have U saying that okay perhaps it changes monetary policy and we are at 155 John that's the key Point does it change monetary policy and do you actually have to hike to actually get the market to believe it because right now I think they just think he's paying lip surface to what's happening oh will he actually consider moving interest rates higher well look I mean the boj is literally part of the government they are part of the government he's had conversations with kashida you know we talk about oh is is the Fed political I mean the boj has to be political cuz they are part of a political arm so in some ways yes they could easily hike under the influence of the government 15572 on dollen under svanes this morning a slew of fed speak on Deck we'll here from Bellman Logan kashgari gby and others over the next few days Traders looking for hints on the fed's path forward ahead of the next week CPI PR together with retail sales PPI and jobless claims we've got Jim Bano with us for the next 30 minutes or so what hasn't been said that can be said a little bit later from fed officials nothing I think the problem that they're facing right now is the June 12th meeting the probabilities are like 8% the fed's going to move the July 31st meeting the problems 30% the fed's going to move so the market thinks we're on hold there's nothing they can say we'll have to wait for data to see if it surprises in either direction that would get them to move off of their current stance you've nowed it in either direction this is what interests me what little data it would take to reintroduce a summer rate cut conversation how much more data would it take to reintroduce a conversation about the prospect of hikes after pal tried to bury them last Wednesday in the news conference yeah I mean we went on last Wednesday we went from asking him if he's going to hike rates on Wednesday to Friday maybe a summer cut because we had a Miss in payrolls uh but yeah you know uh CPI next week if it was to miss or to beat it could really change the narrative over the next couple of weeks but um right now we're just kind of in that weight mode so when fed officials come out right now the next meeting June 12th is kind of baked in the cake so we all know that there will be a lot more data before the meeting after that CPI next week together with retail sales you'll hear from some retailers as well Walmart and Home Depot just around a corner tsmc they posted a 60% jump in April sales on the back of seemingly never ending demand for AI semiconductors and a rebound in the global smartphone industry too it follows a 34% sales increase in March happened to stock saw to an all-time high just last month Danny this sets us up I think from video May 22nd the last big one to report remember arm the other day when everyone was like oh yeah but they were like oh arm is giving a worse forcast surely that means at some point the AI demand is going to Peter out obviously not I think it was Morgan Stanley they had something like 300 billion was going to be the capex for AI spend by 2030 as we were talking about yesterday the runway for NVIDIA it literally looks infinite at this point you mentioned Peter chair of Academy Securities Peter chair this over the weekend coming into this week talked about how 10% was a new 1% for Tech names after earnings what' you make of the outsides moves we've seen as the single name level over the last few weeks oh it's been extraordinary especially because what you've seen from a market perspective is they report after the close and then you get most of the move after the close my mother was asking me about that maybe I should have you explain how does something move after it closes you know but that's what's going to happen with Nvidia we're going to wait all day and Traders can start their day at 4 p.m. you know Eastern at that point it's kind of bizarre isn't it it's all we're going to be doing on May 22nd everyone's going to start work at 4 p.m. eastern time in the afternoon let's turn to our next story Israeli Prime Minister Benjamin Netanyahu vowing to press on in Gaza with or without us support the US pausing an arms shipment to Israel are concerns about a possible ground Invasion into Rafa Netanyahu telling us television quote if we have to stand alone we will stand alone let's head down to DC and catch up with amarie standing by with former senior us intelligence official Norman R hey amarie hey John good morning thanks so much and we're so lucky to be joined by Norman Ru former US intelligent official also a senior adviser at csis Norm you've joined us a lot on the course of this conflict in the past few months where are we now given the fact that the Biden Administration is putting some weapon deliveries on hold Netanyahu has come out defiant and this ceasefire agreement is very Elusive and the head of the CIA left the Middle East where are we in this conflict and where is it going good morning that's the number one question the policy maker should be asking themselves and I don't think we have a clear idea going forward uh the Israelis are moving forward against Rafa and in many ways they're doing exactly what the administration sought they have closed the Rafa Corridor for Smugglers they have opened safe areas to move about 100,000 Palestinians away and their operations tend to be small uh unit operations supported in a surgical manner by air air and artillery fire this said it looks as if Hamas continues to survive they were no closer to a hostage release and we're no closer to an end to the conflict when it comes to the conflict and the rhetoric from this Administration on one hand we heard we want to to see the eradication of Hamas this is from the Biden administration at the same time they said how Israel goes about it matters and the state department this week said they put proposals on the table for how Israel should go about it but now it seems like the Biden Administration is saying Joe Biden himself he doesn't want to see any invasion of Rafa can you explain where they are on what would be acceptable in terms of how Israel can go into Rafa and get to their target of ending Hamas well I think what would be acceptable is a lot of luck on the part of the Israelis that they're able to through intelligence identify the location of the Hamas leadership of hostages and then through a surgical raid uh eradicate those individuals that's just not going to happen this is not inconsistent with past views to the administration on conflicts where uh offensive activity from Ukraine to Yemen is not something this Administration uh puts forward uh routinely they've been putting a lot of pressure on Israel to sign up to the ceasefire agreement there reports that there were only minor changes to what Israel was first willing to do and then what ended up being on the table that Hamas had agreed to did you view it as minor changes certainly not so let's look at what Hamas is asking Hamas is saying first that Israel must withdraw completely at some point from Gaza that at some point that Israel must allow uh of uh individuals to return North without any exceptions which means Hamas can return North Hamas is saying that it wishes a large number of Palestinian prisoners released for every hostage and that those hostages those prisoners cannot be individuals selected by Israel but rather Hamas so you could have the worst Palestinian terrorist under Israeli detention returning to Gaza frankly to do what sinir did after his release and that is conduct operation against Israel last the number of hostages Hamas is willing to release consistently drops they're no longer willing to say which hostages are alive or dead we're in a situation where um it's likely that every week more hostages will be revealed to be uh dead that's devastating it truly is for the families involved truly when you look at what's happening on the ground and you have the fact that the administration is now withholding some of these weapons not just is this political but it is the fact that in Rafa it is a very dense population very close together more than 1.4 million people in Palestinians these kind of weapons how deadly could they be if Israel was to use them well you've got two problems here first you have an adversary that purposely hides behind civilians every Iranian proxy uses a civilian as a shield why hasn't the administration said that more we've known a lot of that since 2011 where Hamas decides to set up their control centers in hospitals in schools the same way Jake Sullivan came out and said to the world what Putin was doing ahead of Ukraine why haven't we seen the administration talk more about how Hamas conducts this War I think Admiral Kirby would would say that he has described Hamas as murderous but there hasn't been a lot of detail and this is the same modus oper nity that the houthis have used that Lebanese Hezbollah uses so if you're the Israelis you're stuck do you allowed Hamas to win or do you attack an adversary that hides behind civilians so if you're going to do the attack you need Precision weapons you need Exquisite intelligence and the Weaponry the US has provided often includes kits that enable uh uh bombs to uh hit with the most precise uh capacity possible uh at this point though I believe the Israelis have more than sufficient ordinance to conduct operations at the current Pace but over time this would become a problem where does this leave the US support for Israel well I think the administration would say it continues to provide significant defensive support to Israel for the Iron Dome it continues to provide political support when appropr but for a variety of reasons to include domestic purposes it is holding a much tougher line on uh the uh work against Rafa but we're we're we're stuck the adversar is hiding behind a million civilians and unless this adversary is eradicated they have promised to continue a murderous assault on Israel repeating October 7th the administration also talks about what would be the day after what does that look like some sort of peace agreement not just the ceasefire deal an actual new potentially revamped inian Authority but how do you get to point B well there is no such thing as the day after there is there is what what I would call the months after where you'll have a right-wing government in Israel that's got to be dealt with an ineffective Palestine Authority government's got to be dealt with and Hamas and Iran they get a vote and they're going to do their darnest to upset any peace deal and unless if Hamas feels it's got a a capacity to survive that probably kills the prospect of a two-state solution simply because no Israeli can tolerate a hamasa Stan on their border led by a government that is devoted to resuming attacks on Israel if there's no two-state solution where does this leave Israel with the rest of the region most notably the kingdom where it is at this point and the the uh Saudis the amadis and others have said there must be a two-state solution and there must be an american-led coalition to achieve this and again you can you it is difficult as this this might be with the uh uh uh Mahmud Abbas government and the BB netan government it's likely impossible if you have Hamas running Gaza so normalization not this year it's going to be a challenge but we have some very effective diplomats on all sides to include in Saudi Arabia and in the Emirates and elsewhere who will do their darnest to make this happen so you can't work the Middle East for a number of decades without being an optimist and uh so I try to be an optimist on these things but it will be difficult Norman R thank you so much for your time this morning John of course that was Norman R former US intelligence officer and a friend of this show really trying to understand the context and the difficulties of what is happening on the ground right now in Gaza amh thank you he's one of the very best thank you Norman Equity Futures right now on the S&P positive by a third of 1% if you are just joining us here's an update on some of the stories elsewhere with your Bloomberg brief herey shanali bassek hey shanali hey John HSBC and Standard Charter are among major UK terms pressing prime minister Rishi sunak to tone down proposed restrictions on doing business with China sources say the banks are lobbying ministers not to include China in the strictest risk category in New National Security legislation they argue this would impede business and Trigger negative publicity and Apple has issued a rare apology for an ad touting its latest iPad the commercial shows musical instruments and other creative tools being crushed drawing criticism on social media for what many are calling in a depiction of the destruction of humanity the Apple wife's president of marketing and Communications telling ad age quote we missed the mark with this video and we're sorry Apple says it won't air the ad on television as planned and finally Formula E the electric version of the vastly popular Formula 1 is now in its 10th season and in an interview with Bloomberg the league CEO to Bloomberg it's always open to bringing in new competitors absolutely see a byd team I could a g group team like Lotus or or zika siic who obviously own Brands like mg across so absolutely I can see a CH we actually have two Chinese teams here we have ER but we also have Envision what about a Tesla team I think Tesla's unlikely and I'll tell you why I think it's unlikely so all of the teams here are racing on a common battery so I'm not sure that Tesla would be so Keen to run on a on a battery that isn't their own CEO Jeffrey Dodd went on to say that he would love for Tesla and Elon must a call but he doesn't expect it to be on the top of the list and that's your Bloomberg brief John shenali thank you appreciate it much more from shenali again at about 30 minutes time can we just pause just for a second why are they apologizing for the second time on this show I do not get it who who believes watching that they're scared about the destruction of humanity where do that where does that come from who who is taking this thing so literally right I mean this is this is Apples whole shtick we're inventing the future and we tell you what you want but we're going to apologize for doing that apologizing too some angry people on on Twitter to Jim biano Jim you offended by this no I didn't understand it either and I all I kept thinking is you're going to apologize not run the ad so good now there'll be 100 million views on TW on YouTube for the ad maybe it's an ad strategy actually sitting at home still using VHS these people you know vinyl sort of offended by technological progress I bizarre stock is higher Whatever by 0.2% up next on the program President Biden cracking down on Chinese EVS the Chinese double down on their um what we call non-market practices it's a kind of predatory pricing practice uh worldwide that has driven out producers in other economies leaving the Chinese economy having cornered the market in production that conversation just around the corner we'll catch up with Josh wingrove on the latest effort from the White House to clamp down on Chinese EV from New York this is blimp [Music] stocks on the S&P 500 positive here by a third of 1% we are about 100 minutes away from the open and Bell we're counting you down here on blimber surveillance you to hire by single basis point 4 4649 on a US 10 year under surveillance this morning President Biden cracking down on Chinese EVS the Chinese double down on their um what we call non-market practices it's a kind of predatory pricing practice uh worldwide that has driven out producers in other economies leaving the Chinese economy having cornered the market in production um right now uh we're still 85% uh reliant on Chinese production and Supply in solar panels we've also seen it in um uh batteries we're seeing it now in EVS so here's the latest President Biden set to new tariffs on China next week targeting key strategic sectors including EVS batteries and solar panels the reporter behind the story Josh windgrove joins us now for more Josh fantastic story sir enjoyed the read first thing this morning what are you in the team learning about what we might hear next week well right now we're just trying to figure out the scope of this you know this has been going on for some time as you know since 2022 they've been doing this review and the question has kind of been you know how high will they ratchet it up will they offset it with declines in other sort of less critical sectors to try to make it a wash it doesn't look like that's going to be the case and so what they're reporting here is that certain key sectors will see tariffs rise either from existing levels uh uh or you know uh from from the floor from zero uh depending on what they are those include electric vehicles solar cells batteries but potentially other things we don't know the full list we also don't know the levels that they're going to uh on the flip side the other other existing tariffs outside of those key sectors are expected to be pretty much more or less maintained in other words no across the board offsetting decline of some of those originally Trump tariffs and so Biden is looking to sort of go tougher on China here while also stopping short of what Trump wants which is sort of new across the board tariff 60% on all Chinese Goods Democrats think that would Stoke inflation and pricing they're going to steer clear of that it seems instead looking at these key sectors of course Autos also has pretty strong election overlay as you know and Biden is trying to win an election that runs through Michigan and a handful of other states so that it's hard to ignore the 20124 angle here as well well let's get into that angle just a little bit more if we can Josh can you just explain to me as far as we're aware Chinese EVS don't exactly have a big Market in America right now so what are they addressing they think a wave could be coming if they don't do anything and it's the same thing on steel and aluminum Biden has sort of teased this announcement in Pittsburgh a few weeks ago with an a call to raise tariffs on steel and aluminum uh in some cases from 0 to 25% it's a fairly big jump and you know it's really tiny volumes that we see from China coming into the US from both those Metals uh but they were expected to rise they're worried about dumping the US has expressed concern that China will try to export or dump its way out of sluggish growth and some of the woes it's experiencing right now and it's the same thing with EVS there are broader concerns with EVs and connected Vehicles as well around data security and what information uh the US is com handing Chinese companies you're seeing debates about this in all sorts of sectors related to China of course Tik Tok being top of Mind as one of them so really on both steel aluminum and EVS this is a case of you know heading off what the US expects could be a seismic shift as opposed to addressing a big part of the market today well Josh Josh when it comes to EVS specifically the irony isn't lost on most people that both Europe and China have lobbied similar accusations against the US China even filed something to the WTO basically saying that the subsidies that you require for your EVS are discriminatory so knowing China's stance already on that how are they likely to respond that's the uh multi-billion dollar question I suppose right now some of the analysts overnight from our colleagues in Asia are saying that they aren't sure necessarily that there'll be a response immediately that China wouldn't want to trigger sort of a full tit fortat trade War at least during an election year it does seem like some kind of response would be necessary we've seen the Chinese uh government uh you know criticizing the Americans for taking this reported step I'm sure of course they're waiting to see the fine print as we all are so right now I think this is the the question is how far this will go remember Trump of course had a bit of a back and forth tariffs on American agriculture exports that hit sort of his political base so the potential to get back to that kind of environment of course hangs in the air it's just right not right now not clear what will happen and if it did happen What Goods would be targeted would they try to Target Biden's sort of political backyard or would they target Trump's or would they target both it's really unclear hey Josh great reporting sir as always Bloomberg's Josh wiro there on the latest from the team joshh Jennifer Jacobs Eric Martin the president and the administration po to un Val a sweeping decision on Chinese tariffs as soon as next week Jim biano is with us around the table of biano research Jim just some final thoughts the election is it still too early to think about some of these themes yeah I think it is a little bit too early because we still don't really know we're still so wrapped up in personalities right now with these elections and all of these other issues and brain worms and everything else and we're not really ready to talk about executing docks yeah exactly when are we going to get to talking about policy and when are we going to get to talking about contrasting what what my Administration Means versus their Administration so all we're left with is kind of these generic well Republicans do this and Democrats do that and that I always feel like is always kind of in the market anyway so David C of Goldman would make the argument not necessarily trade on policy but trade on just volatility around the election should we get a result where Trump for example doesn't accept the results again and there you get volatility and you should be prepared for that should we be prepared for that I think so but that's probably an October or November story you know actually you know it could actually be November to December story more than anything else but I don't think you're going to see that kind of volatility come into you know till at least the conventions at the earliest at many elections it used to be a difference in degree and not kind it just feels like there's massive differences now between administrations from one to another does it make it difficult to look ahead to 25 this is a conversation we started having on this program in the last week how do you construct a view on 2025 in the American economy and in American markets without a decent understanding of what policy is going to look like from the White House and it's impossible to understand because you know certain things get said all the time for instance a couple of weeks ago the Biden Administration talked about a 44% capital gains tax and everybody got all tizzy always but we forgot he none of that happens until Congress passes a law and the president signs it he's not a monarch and so we hear these kind of things and then we got to remember it's not just the president it's also Congress and what they're willing to want to do as well and they've already tried to do that and I think it was Cinema out of Arizona that prevented that from happening already under Administration yeah and and it just shows you how difficult it is to get any of these proposals through like Trump wanting to put himself on the Federal Reserve board what did you make of that story can we finish there I've heard from so many different people have all said the same thing about that journal story they have yet to hear anyone from Camp Trump say it on the record what do you make of that story you know I I I understand his his feeling he's already publicly said he would fire uh Paul if he became the president and he's already got that committee headed by Arthur laugher that is looking at potentially who would be the next Federal Reserve chairman and Arthur laugher decided it's probably Arthur laugher exactly so I I know that the expectation is is that there will be big changes at the Federal Reserve should uh Trump come back uh but as far as again as far as him putting himself on the Federal Reserve board you got to rewrite the Cong you got to rewrite the Federal Reserve Act to do it you just don't get to just you know say I'm on the board now hey Jim you'd be great on the board if we could make it happen Jim bian G research thank you Jim appreciate it coming up in the next hour of Bloomberg surveillance taking you towards the weekend with Dan Suzuki of Richard Bernstein we catch up with Oliver Chen of TD C and looking ahead to some of the big retailers next week we'll here from Walmart we're here from the likes of Home Depot and we'll talk a little luxury with him as well Neil data on the latest economic data in America rmax very best on CPI and retail sales next week and M deep sing on some of the earnings from Big Tech Equity Futures on the S&P 500 positive here by 1/3 of [Music] 1% the market can live with an environment where growth is strong and maybe the FED only cuts a couple times what makes me question the degree of restrictiveness is really the strong activity data that we continue to see the FED are very focused on that domestic labor market Dynamic and I think that will continue to be the case if there isn't more of that doish paw type of language this is a market which is a bit more vulnerable we're still in the early Innings of seeing the data really cool in the way that the market wants it to this is Bloomberg surveillance with Jonathan Perell Lisa abowitz and Anar hurn the third hour of Bloomberg surveillance begins right now live from New York City this morning good morning good morning your Equity Market positive by of 1% on the S&P 500 let's get you into the weekend the next 24 hours and then we'll have a sneak peeker next week so the next 24 hours the market day need to look ahead to University of Michigan consumer sentiment numbers a little bit later this morning and a ton of fed speak as well here's your line up for the FED speak this morning Bowman Logan kashgari goby bar you'll hear from me apparently a little bit later as well and then into next week we've got PPI and Tuesday Wednesday CPI and retail sales Thursday you've got Jas claims all over again and we from some retailers Danny we'll get the likes of Home Depot and Walmart what I'm really scared about John what keeps me up at night is the idea that we'll get really strong retail sales and then Walmart will come out and say the consumer is concerned they're feeling the pricing pinch much like we've heard from other consumers then we get to the end of next week and say I don't get it I'm so confused what do you think the most toxic mix of data we could possibly get would be an upside surprise on inflation downside on retail sales with that spook people no at any point it's all toxic right we don't know where we are in this world it CPI is is too high we say okay maybe hikes need to come back into the conversation you know what happens if it's too low we're going to say ah stack flation is that what it is James ay of abine I'll keep going back to what he said on this program a long time ago narrative table tennis that's what he said last year that's what it still feels like from week to week and sometimes from day to day Equity Futures on the S&P here positive by a third of 1% on the S&P 500 these are the scores for you going into the opening batt in about 88 Minutes time yield to hire by two basis points on a 10year four 47 and in the FX Market a Euro going absolutely nowhere 10780 on euro dollar coming up Dan Suzuki of Richard Bernstein as earnings optimism drives markets Oliver Chen of TD Cowen looking ahead to results from Big retailers and renx Neil datter weighing in on the labor market ahead of CPI next week we begin with the big issue stocks seeing a boost from earnings optimism Dan Suzuki of Richard Bernstein saying this looking past the near-term volatility the market has strong support from earnings until you see signs the earnings growth is starting to Peak the base case should be for markets to Trend higher Dan a good friend of this show is with us now for more Dan why haven't we seen that Peak already what would you say back to that well I think because underlying growth is uh is is still really strong Jonathan I mean I think we have to remember that you know basically a year ago we were in a profits recession and so things have been on the uptrend since then and I think there's nothing in the economic data that suggest that that's peing anytime soon uh so I think that's a really strong support from markets going forward one thing you've said about the cycle it's too early to position for the end of the cycle Dan can you build on that what did you mean by it yeah I mean I the way I look at John is that we're basically 15 years or so into this incredibly strong uh bull market um we've had some ups and downs in the meantime but really it's been the same leadership and the same story uh I think we're late in in in the cycle in this bull market I think we're late in the economic cycle that has been one of the longer economic expansions out of the pandemic and and I think that you know so you want to position for that late in the economic cycle period which simply means that the econom is tighter so the stronger that growth comes in the more inflationary you know that growth is going to be and so I think you want to incorporate that that into your positioning but I don't think to what we were talking about earlier that we're seeing the signs of the end of cycle that growth is peeking out that it's rolling over I think you know you're starting to see you know some signs of stress but I think there's also a lot of signs of resilience uh and and listen net worth for households is basically at all-time high Dan one argument you could make that the Market's getting ready for the end of cycle something John and I were speaking with Larry Adams about earlier is what is the current leadership it is utilities it is a safety sector something that usually does outperform when slowdown is on the way what do you make of it yeah I mean I think that's to be expected I mean we're we're still you know we we went through a little bit of a pullback and so during that pullback period you know you had some you know defensives that been extremely beaten down you know know that was the area of safety you know as volatility was picking up at the same time I think you know when you look at the leadership you know since the market you know peaked a few months ago I think that leadership has really been in the companies that have inflationary you know pricing power or they're just outright inflationary beneficiaries and I think whether that's you know some of the Commodities the commodity producers or the commodity producing countries you know those have been the more resilient parts of the market since then one part of this Market Dan that's been red hot is IG right now the issuance has been off of the charge 53 billion sold just through Wednesday already that is most since 2021 we are well on track to get a record week of issuance from these corporate markets I mean Cuts aren't here but it's almost like a market that is trading like we do have lower rates at this point Dan can that kind of action in this market continue uh yeah I think it I think it can continue because I think ultimately what that tells you is that there's a ton of liquidity out there and I don't see that you know rolling over uh imminently and it also tells you that corporate profits are very strong uh and again I don't see any signs that those corporate profits are peeking out so I think that Dynamic can continue you know the question is for IG investors are you getting compensated for the amount of risk and I would argue that you're not really if you look at where spreads are you know they're basically at the tights of of the cycle you know I think there's other places if you want to be positive on liquidity and positive on corporate profits I think there's tons of areas out there that have plenty more up side you know on that same story let's talk about them you like energy materials you like Industrials as well you're positioning Dan and we've talked about it briefly for what you call inflationary growth can you get into that at a time when economists are coming on this program talking about non-inflation growth where's that difference come from yeah I think you know there's clearly uh you know a view if you look at you know the the level of inflation it's come down from the extreme Peaks that we saw you know a little over a year ago so people are are are saying that that's going to continue but I think if you just look at the data clearly that's not continued I think it's been more of a normalization and from here you know the dictator of whether inflation goes higher or goes lower is going to be growth and I think for the meantime in the meantime I think that growth is still going to be resilient uh I don't see that it's peeking out so I think that is going to be a positive for nominal growth and so again I think you want to own the companies that benefit from nominal growth which is not everybody not everybody's going to benefit from that because some of them are going to feel the bite of of inflation on their Top Line and their bottom line well let's get into that too that might be consumer discretionary Dan is that where you're focused is that where there could be some margin pressure in the quarters to come yeah I think that would be that would be one area I think um you know if you listen to the companies over the past earning season clearly they're feeling you know uh a lack of pricing power a lack of ability to price that uh pass those higher prices on to the consumer and I think you know if you look at that the customer base you know the lower income consumer is getting a little bit more stretched is struggling a little bit more and I think that's showing up in that lack that loss of pricing power so I think consumer discretionary historically tends to not do well later in economic cycle when inflation's higher and If the Fed comes back into play or is not going to be cutting rates you know is is is going to be hurt by that getting priced into the market as well Dan why does that translate into more widespread weakness in the Equity market and even we could go so far as to say as the economy if the consumer has been the engine of growth and and you're starting to see signs of weakness and slowdown yeah I think that that's there's a there's a basically a huge bif bifurcation uh within the consumer you know let's just call the bottom 20% of of lower income consumers is struggling uh and that's where you're seeing all the the evidence and the data that's pointing to that stress and distress within that part that segment of the consumer consumer is picking up but I think when you look at the other 80% which makes up the bulk of consumer spending uh you know those consumers are actually doing pretty well if you look at all the measures of of Leverage and interest coverage and financial obligations and their net worth you know all those things are actually still pretty healthy so I think we have a Runway you know for some time before that really starts to roll over yeah a lot of folks talked about that Jane Frasier most recently talking about the k-shaped recovery Dan the thing that I come back to that still confuses me is if that is true and that engine of growth is still there why aren't the cyclical small Caps doing better yeah I think the Cal small caps haven't been doing better simply because their earnings you know have lagged if you look at the the relative earnings or just the absolute earnings you know they've come in weaker and they've disappointed I think the the inflection point that we're seeing is that's likely changing and they're likely bottoming as we speak and so as you look over the next one two three four quarters you're actually going to see an extreme amount of earnings acceleration and I think that's why it's an opportunity because you know they earnings have been terrible they've been beaten down but now you're seeing an inflection where they may become the leadership in terms of earning growth earnings growth but no one cares and I think that's the big opportunity for those stocks Dan I just want to end here getting back to your idea of positioning for a late cycle what do you do fa defaults look like in that late cycle how do you position around the idea that there might be more as you hit the long expected long awaited maturity walls yeah I think that at least in the near term what we're seeing based on some of the stronger economic data you know that defaults actually could come down from here but clearly at some point you're going to see those defaults pick up I think when you look at this you know default cycle relative to the economic cycle you know there tends to be a bit of a lag so I think that you know the the heads up that we're going to go into a bigger default cycle you'll see that when growth starts to slow slow and again I'm just not seeing that I think you're seeing a normalization within sort of the services side of the economy and a big acceleration imp pending you know for the manufacturing side of the economy net net I think that's going to be a very you know pretty strong growth environment uh and so you shouldn't see in that environment particularly where with liquidity where it is you know a huge spike in defaults in the near term eventually you know we'll see that just not just not anytime soon hey Dan I appreciate it it's good to hear from you sir as always Dan Suzuki there Richard Burnstein advisor breaking it down for you looking ahead to next week been through next week a few times we'll keep doing that for you through the next hour on this program looking ahead to CPI and retail sales not to be contrarian for the sake of being contrarian of course CPI is top of the pile but the retailers next week Home Depot Walmart really really important to try and get a clearer read some clarity on what's happening with the consumer at a time where the liks of Mike Wilson and Morgan Stanley are preferring to say Staples over discretionary at a time when you've heard this from McDonald's that the consumer is becoming more discriminating from Starbucks that they continue to feel the impact of a more cautious consumer just what is going on with the likes of Home Depot Walmart Macy's Target and loes I think for that reason Walmart will probably be the most interesting Dan Suzuki was talking about it right there this idea that it is the bottom echelons of the consumer that are struggling but the thing that confuses me is then someone like a Walmart should be theoretically benefiting from that someone like a McDonald's should be benefiting from that because folks are trading down instead that's not what you're seeing instead they're saying we're losing pricing power consumers aren't coming to our place anymore and they're not buying going to hear more on that story through next week let's give you an update on stories elsewhere here is your Bloomberg brief with shenali bassek hi shenali hey John shares of Novac surging in pre-market trading the stock Rising after the vaccine maker announces a $1.4 billion deal with French drug maker saafi saafi agreed to pay $500 million upfront and spend another 700 million as the company hits development M Milestones the deal positions Novac to commercial its covid vaccine for use in combination with soni's flu vaccine starting next year and Target won't sell lgbtq themed merchandise in some of its stores during Pride months after a blacklash to dented Revenue last year the Minneapolis based retailer plans to offer the full assortment online according to people familiar with the matter Target faced threats from some customers last year over its Pride merchandise in the month of June Pub goers in the UK are getting a little taste of us culture some of the country biggest Pub chains are now asking guests to tip 10% or more on their bills the shift is leading to a lot of confusion for customers where tipping more than a few coins has never been common the pandemic has played a role in change with QR codes giving restaurants an easy chance to ask patrons for a little extra and that's your Bloomer brief John shenali thank you I feel like I should say something put something on the record if you will traditionally It is believed that the fixed salary of someone that might work in that industry would be higher in the United Kingdom than someone in the United States and for that reason tipping culture has never been a massive thing you've lived Both Worlds I've lived Both Worlds keep the change used to be a thing you'd say at the bat which is like you know keep 20 P or something 50p whatever it might be I don't understand what the confusion is I know what's going to happen people are going to look at do you want to tip and go no thank you right and then they're going to move on yeah exactly okay I tip just for the record I know that people judge you when you sit in a restaurant there a Brit arrived not going to get a tip but you I worked in a restaurant once i' get a Brit at my table terrified you wouldn't look after them no someone else take them on you pass oh absolutely 100% what I want my tips don't discriminate based on where people are from I'm next on a program the morning Co plus looking ahead to Big Box earnings with TD cow Oliver Chen that conversation is just around the corner Futures on the S&P positive by a third of 1% from New York this is Bloomberg [Music] [Music] [Music] eity positive here by a third of 1% on the S&P 500 yields bleeding just a little bit higher up two basis points on a 10 year 4478 it's time now for the morning calls first up Key Bank upgrading Warner Brothers Discovery to overweight the analyst noting improved direct consumer profitability and the importance of renewing NBA broadcast rights next up HSBC upgrading 3M to buy the bank expecting the company to return to growth thanks to an improving macro environment calling 3M a quote quality company training at attractive valuations and finally Barkley raising its price Target on Victoria Secret to 60 maintaining an underweight rating the retailer reaffirming fiscal 24 guidance and pre-announcing first quarter results at the high end of its prior guidance range that stock is up and up big meanwhile big box earnings kicking off next week Home Depot Tuesday followed by Walmart on Thursday Oliver chener TD Cowan joins us now for more Oliver let's get into that and then we can get to what you love which is luxury sir don't worry we will get to that topic in just a moment let's look ahead to Home Depot and Walmart what are you and the team looking for next week we're excited about Walmart that's our pick uh we're more cautious and optimistic On Target Walmart is a needs retailer being 60% grocery very helpful in terms of traffic they're also managing well through this tough time where the consumer really is looking for Value very sensitive to price so we're excited about Walmart in addition Walmart as a technology company don't forget about digital advertising in the marketplace model and Walmart's getting a higher household income customer for example you can buy Apple Macintosh on the marketplace on the website as well as fragrances like Burberry Godus so the whole flywheel is working let's sit on Walmart and let's talk about price and pricing power we've heard from various Executives over the last few months that maybe they're losing some and that we're starting to see some disinflation perhaps even deflation in certain places what do you make of that and what would you expect to hear next week that is definitely happening what we have with this new consumer is a consumer who's not necessarily very loyal and doesn't want to overpay for National Brands what consumers are doing is what we call customized moderation value hacking trading down to private label when they want to or need to and trading up very selectively so that will continue to be a big issue the bottom line is Walmart wants everyday low prices they want suppliers to offer low prices too so that the consumer has more money to spend on nonf food and discretionary items that's still a work in progress in terms of the consumer what's good about the consumer is that there's low unemployment and they're still spending power given 670 billion on the sidelines what's bad about the consumer is that it's still bifurcated with pressure at the middle and lower end in part due to inflation as we look fundamentally inflation is getting less bad however consumer confidence and what the consumer feels is still fairly volatile so mixed signals here but pricing is a Hot Topic because everybody wants low prices Oliver then do you expect with with some of those headwinds you're talking about for it no longer to have the case shape that at some point maybe not the upper echelons who will always continue to spend but for it not to just be the lowest end consumer that starts to get more price conscious yeah I think everybody's getting somewhat price conscious we see this value hacking consumer this do-it-yourself consumer so consumers are looking for newness also what we're seeing in our studies is that there's so much receptivity to private Brands and private label such as Kirkland at Costco and others um so that Trend should continue what we do see at the higher end is the wealth effect some confidence uh and some pockets of strength in the US in particular China is something we're watching that's been very volatile as well can we talk about luxury then I know you love it and I promise we'd talk about it there are some luxury brands that aren't seeing that stability struggling and thinking more specifically about Gucci Oliver who's getting it right and who's getting it wrong yeah we're most excited about Louis Vuitton given Powerhouse Brands such as Louis Vuitton as well as Dior they also own Sephora which is a wonderful Beauty concept that's Global I carrying we downgraded the stock that the owner of Gucci Gucci's a work in progress they really have to reset this brand so some of these issues are somewhat specific to the Gucci brand which needs to return to Classic and time lessness it also needs to be more elevated so in in this process it's been quite painful and the numbers have been quite sharp what's been happening in luxury goods is share shifts as well so big players like Louis Vuitton offer a full range of more quiet more loud luxury all kinds as well as hard luxury and that's been working better in terms of their execution Gucci is something we're watching I do love the brand personally but it's going through a lot of change and part of that will be the are losing some customers as well well whose customers are they trying to attract can we talk about that a little bit more when we talk about the highend we're talking about the high-end luxury player we're not necessarily talking about the upper income consumer because I don't believe the last few years with Gucci has been about the upper in income consumer I think it's been across the board getting access to aspirational luxury names Oliver and I'm trying to work out who the target audience is going to be for that brand yeah it's a bit of a reset and you're 100% % right what's happened with the Gucci brand which had very massive growth is really broaden the aperture of what luxury means it was rethinking technology and gender and and very very exciting but on the other side of this this aspirational customer has been more Under Pressure um so that's something the whole industry is facing as well as Gucci and Gucci has a new designer as well so in in rethinking the brand um luxury is always about elevation and that's a big focus and then timelessness and taking you back to Classic items and hearkening back to a lot of the heritage of Gucci too somewhat specific to Gucci but they're definitely losing share to players like Hermes like Louis Vuitton and others which have a real anchor on Timeless timelessness as well well with with all that tension of the aspirational buyer Oliver it's even more remarkable that someone like Sephora all those Beauty Brands continue to do well because you could say yeah people are going to trade down go to just a uh convenience store a drugstore get their makeup there but why is that story so enduring is it just you know the 13-year-olds on Tik Tok looking at influencers then deciding to go to Sephora to buy something yeah it's all happening I mean 10-year-olds too with skincare regimes what what I love about beauty is that it's an essential good it also gets a bit blurred with health and wellness but lots of abundant innovation in cosmetics Hair Care skincare uh as we think about fragrances our favorite idea is Cody we also like Ulta which in many ways is Like Home Depot for women in terms of that routine there's a ton of innovation as well as social media that fuels new processes for Cosmetics skincare is taking care of yourself and self-care it's been a very resilient industry because a lot of the habits that were picked up during pandemic really stuck in Beauty and beauty is a profitable growing business globally we also see you're going to get us in trouble Home Depot for women do you want to elaborate on that a little bit more well the the whole uh Ulta experience is really comprehensive in terms of Mass plus Prestige you definitely find stuff you didn't know you needed but you also think about replenishment and really investing in your face and body and skin um and that that's a principle that men and women love but women can be very loyal to certain categories such as hair care and skin care and on the Cosmetics front there's a lot of newness and Innovation so we're excited about Ulta especially on the pullback and the valuation level here I'll be at the women's word daily Beauty CEO Summit talking about artificial intelligence meets Beauty it's a very vibrant industry we're looking forward to catching up with you again soon Oliver Chen of TD Cowen amh wants him on amarie writes in I have so many questions on Home Depot for women I feel like I I just feel like it's worth saying that Home Depo is also for women that it's not just for men in yeah I I actually went I went in the other day was a whole thing but they're like our policies have changed please ma'am come in you know who's never been to a Home Depot TK can't make it happen and we have a Home Depo I love it beneath the office Home Depot for men women except if you're TK TK is not allowed in coming up next on the program we'll catch up with remen Max Neil dutter looking ahead to CPI and retail sales next Wednesday I love that feutures positive by third of 1% from New York this is bling pack [Music] this whole week has just felt like a drum beat a long drum beat to next week we're almost at a weekend we're looking ahead to next week with CPI and retail sales coming on Wednesday some retail earnings in the mix as well and a ton of feds speak I'm sure in between here are the scores this morning about 1 hour away from the open and B positive by third of 1% on the S&P 500 on the Stack Up by a half of 1% on a Russell up by let's call it a third and change in the bond market 2 year 10 year 30 year new levels compared to where we were a week or so ago after we got that ECI print a hotter employment cost index sending Ys on a 2-year back 3 5% here we are all the way back down to 48318 on a 2-year up about a single basis point on the day climbing High by three on a 10 year to 44826 if you switch up the board just quickly we'll take a look at the Euro The single currency against the US dollar just about and changed at 10779 we've started to see central banks make a move cutting rates the likes of the Ricks Bank the SNB talking about cutting rates and maybe doing so as soon as June the bank of England and the ECB and you wonder how far they can go Danny we were talking about this yesterday the Federal Reserve clearly doesn't dictate whether they go or not but whether they go all the way down to say another 100 basis points over the next 12 months over at the uccb if the fed's not going anywhere that's a different question on the words of Andrew Bailey there is no law that means that we can't cut before the FED but yeah that's when it becomes to be a problem when you get that bigger difference but it's interesting to look at this Market I think Michael Brown of pepperstone put this really well that you have the fomc desperate to cut the ECB committed to cutting in June the Boe wants to go the boc wants to go the SNB and Ricks bank already have this Market has decided we're in it we're in the cutting cycle let's go will the Federal Reserve join them maybe they will if we get we data this from City Andrew host Andrew's been on top of this with Veronica Clark Prospect of maybe sharp weakness coming in this economy Neil D remx going to have thoughts on this in just a moment a range of Labor Market data has us expecting a sharp weakening of job growth in the coming months the rise in jobless claims to 231 may be noise associated with school holidays but it also maybe the start of a trend towards weaker labor markets more than that in just a moment here are your top stories under surveillance this morning Netanyahu vowing to stand alone the Israeli Prime Minister striking a defiant tone saying he will continue the war in Gaza with or without us support the comments coming after President Biden threatened to withhold Us weapons if Israel continues with the ground invasion of the gazen city of Rafa our next story President Biden looking to crack down on China yet again Bloomberg reporting that the White House is set to impose new tariffs aimed at strategic sectors including Chinese EVS the move coming after a review of section 301 tariffs first imposed by the Trump Administration people familiar with the matter saying a decision could come as early as next week and finally more fed speak to R out the week with bman Logan gby and kashgari all on Deck this is Atlanta fed president Rafael Bostic tells Reuters he believes the US economy is slowing saying the FED is still on track to cut this year even if further declines in inflation only come slowly investors looking ahead to PPI and CPI next week I'm pleased to say that joining us now is Neil data of renmac Neil have been looking forward to this I was reading a note of yours earlier this week the labor market rebalancing has been achieved can you walk through just how we've done that well we've we've you know job openings have come down job openings remember are a measure of excess labor demand uh with very little uh upward movement in the unemployment rate now the unemployment rate has gone up um but you know it does look for the time being that the Fed was kind of able to successfully um you know trim uh excess labor demand without um driving up unemployment um all that much uh and I think what's important now John is that yes the ECI which you mentioned earlier did pop in the first quarter but the underlying you know sort of drivers of that data are the average hourly earnings for non-supervisory workers and we saw in April that that's cooling over the last three months average hourly earnings growth for nonsupervisory workers are barely up 3% at an annual rate and given the growth in productivity that we've seen um even if you assume it's like half that so let's say one to one and a half% productivity you're talking about um wage growth that is broadly consistent with the fed's underlying inflation objectives which is why unit labor costs I think have been cooling so where's the inflation coming from I mean that to me is the big uh story here is if you ask someone why did inflation perk up in the first quarter they can't really point to a fundamental reason for that uh is it because expectations are perking back up no is it because the the labor market are reheating no is it because the Dollar's weakening driving up uh you know pushing up the prices for imported consumer goods no the Dollar's generally been stronger all year so you can point to things like well look Financial Services inflation picked up and health care services and oh Motor Vehicle Insurance sort of these idiosyncratic factors I think it's important for people to kind of go to First principles here and um you know this is why I think the case for weaker inflation um is still quite strong well two things to impact there first of you on the Market let's just build on that for a little bit if we can now so this is the line from City and Andrew horsse and the team they say evidence is building that the labor market is poised for a Sharp weakening you use the word cooling can you help us understand the difference between a welcome Cooling in the labor market and a prospect of an unwelcome deterioration well what you want to do is look for discontinuities in the data that's that alen Greenspan sort of line right when you have a bunch of 200,000 job numbers and then all of a sudden you have a 50 then you should be be worried but if you're talking about where we are right now I mean I don't really see much evidence for that um you know you mentioned jobless claims uh even if you assume that number is legit which it's not because it was mostly driven by one state New York uh the break even level is still around 260,000 if you look at the um the separations and hires data from jolts you can kind of back out what it what Break Even initial claims are uh so you're still talking about continued jobs growth you know in a rign of 75 to 200,000 so if you see 175 to 200,000 jobs and um you know slowing wage growth towards you know let's say three and a half percent that would be cooling if you see significantly worse than that uh then you'd be worried but jobs are something that come out of growth right jobs don't necessarily go into growth and if the economy is growing employment will follow and we know that the economy is growing uh you know if you look at underlying domestic demand I mean it looks like close to 3% in the first half of the year so I think that's that doesn't leave me that concerned about uh sort of discontinuities in the labor market well Neil to that point and you know earnings have backed up everything you've said we've seen huge cap X coming from companies too what could possibly drive a cooling then well what could drive a cooling in the labor market well I just think it's that turnover is is coming down I mean that that's that's really what it is um you know there's um there's been a pickup in labor Supply uh and there's been less turnover in the job market uh and so I think those things uh basically tell you uh and combine for you know a moderation I mean we're basically hitting equilibrium now in in in the labor market and I think that's that's the bigger story and at the same time I mean the economy isn't get getting away from the FED uh yes you mentioned capex capex could be a big driver of growth this year but there are other areas that'll probably cool I mean for example residential investment I mean that was a very strong area in q1 but given the back up in rates that we've seen it's unlikely that that repeats over the next couple of quarters uh and you should see some rebalancing in consumer spending right because a lot of the upward Mo movement in consumption and we have retail sales next week a lot of that in the last two months has been driven by a decline in the savings rate uh it's hard to see that lasting so I'd expect a better sort of more balanced mix to growth going forward so you know I don't think growth is getting away from us but you know again it's not something um I'm lighting my hair on fire for I mean it's sort of you're talking about 2 and a half% growth steady jobs growth and an ongoing sort of disinflation trend uh given the uh the Improvement in Supply conditions yeah right but the again your your words that you're using uh Neil normalized more balance getting back to averages is that a good enough reason for the FED to cut absolutely because ultimately they believe that they control inflation so if inflation slows more quickly than they think over the next several months then they should be cutting because they wouldn't want to tolerate an even higher rate of real of of real rates so you have to kind of recalibrate policy just to stay even should versus will what do you think they will do I think they will cut they will cut um at the end of the year we will still be talking about how much is the economy growing and how many times has the FED been cutting um I think the case for cuts is still quite strong um I think I put it to you this way I think they go at least once I think two is a good Baseline and I think there's an option for three if we're right about how quickly inflation slows over the next two quarters I think there an argument that that's basically what we're hearing from fed officials as well Neil Neil can you help me with something I'm wrestling with and that's this Supply Side Story in the labor market tons has been said tons have been said about the amount of immigration that's coming across the southern border how that's allowed us to have this really strong payrolls growth without the corresponding pickup in wages Neil based on basic Comm we've had over the last week or so apparently bordering Counties have dropped and dropped by quite a bit how can we sort of anticipate the data in the months to come based on that if at all I mean I don't think that I think that that's sort of a the immigration story is kind of a rationale that people are working back to it's like oh why why has the labor market slowed cooled off a bit well you know here's this big pickup in labor force growth I'm not so sure that's the uh the case I mean I think um you know unit labor costs have have moderated because is you know people are getting a little bit more productive in the jobs that they're they're in uh so we've seen a picking up of Labor of Labor productivity um so I think that's a that's a more important driver uh and to your point I mean I'm not entirely convinced yet that this is like a big um you know secular increase in Immigration I mean it could just be sort sort of one-off Dynamics related to the um uh you know to the opening up of the Visa approval process following the pandemic right so you had a lot of people that were kind of on the sidelines then they got their visas finally approved as things reopen um and and that and that may well slow down um so again I mean it's something closer to equilibrium um but I think that people are getting more productive in their roles right and I think that's that's what's important you aren't seeing quits go up as much um and uh that means that people are staying in their jobs uh longer and if they're staying in their jobs longer presumably they'll get more productive in those roles Neil one of the things that people use that that immigration piece to say this is this is an argument that Callum Pickering uses basically to say that we are in for an inflation Spike next year if we get Trump in the white house because you get more curtailed flow of immigrants given what you're saying given again this idea of what we're seeing as normalization it was from some of the Visa processes opening up is that not as relevant of a fear well sure it's I mean I think uh worrying about inflation if you have I mean if uh you know with respect to the election I think you know who knows what the outcome is going to be um but I do think it's fair to say that if uh Trump were to win former president Trump were to win then there's a probably there's a higher likelihood than that you have a Unified Government and we know that whenever you have a new Unified Government coming out of the elections they're always going to do something it's not like they're going to get into office and say hey everyone we're going to uh raise the retirement age and and cut spending um they're going to want to do something that makes people feel good and whether that's uh you know I think they'll probably lead with something like that tax cut spending uh that'll be inflationary so um you know to the extent that there's a restrictive immigration policy that comes about um it'll even it'll add to that even more interesting Neil enjoyed this thank you sir I know you've got thoughts on Gucci we'll do that another time Neil data of renmac Neil thank you thank you buddy Equity Futures right now in the S&P positive by a quarter of 1% on the S&P 500 with your stories elsewhere your Bloomberg brief with shanali bassek hey shenali hey John the US Army Corps Engineers says it has a plan for the continued cleanup of the collapsed Francis Scott keybridge workers will place small explosives in order to clear parts of the span on the stranded container ship Del the demotion could begin as soon as this week so that the ship and its moves contents can be moved the DOI struck the Francis Scott Key bridge in the early hours of March 26 slowing down traffic in the Port of Baltimore ever since and Ford is shaking up its sea Suite of executive Sherry house is set to become CFO early next year house had the same position previously at EV maker Lucid Motors current Ford CFO John Lawler will move on to become Vice chair and focus on the company's expansion plan Ford plus and persing square founder Bill Amman was criticized for his attacks on diversity and inclusion policies in a closed door panel discussion at the milin conference in Los Angeles Amman has previously labeled Dei initiatives as inherently racist and illegal one speaker at least said his comments reflected a poor understanding of the civil rights movement in a statement issued afterwards Amman said he has written thousands of words about his Nuance views on the important topic and he asked people to read them fully to un stand his perspective and that's your Bloomberg brief John Shady thank you appreciate it enjoy your weekend Shady bassik there with your Bloomberg brief I feel like I need to say on the record Neil data did actually have thoughts on on Gucci we just didn't have time for him to share them it's amazing that economists can at exactly the same economic data there's no sort of like sneak peek or anything else it's exactly the same economic data and have two very different views you've got Neil talking about a welcome calling and you've got the prospect of an unwelcome deterioration over at city with Andrew honor saying this morning in the daily over at City Group watching for weakness you also have Lindsay steel from earlier telling us probably no Cuts torson loo been talking about for a while and then you have Ellen zetner at Morgan Stanley saying we're going to get three this year it's what makes the market John without a doubt opposing views great ideas exchange as my friend guy Johnson likes to say up next on this program AI fueling demand for chips we're very confident about these growth numbers what we're seeing is people investing faster and faster into new hardware which ends up being a good thing for us we'll catch up with man deep sing of Bloomberg intelligence in just a moment to count you down to the opening bell that cash open is 45 minutes away here's the price action for you on equities on the S&P 500 we are positive by third of 1% live from a gloomy New York C how many summer head fakes have we had over the last two weeks many depressing like hot then rain warm then rain great clouds more rain and a little bit of heat maybe at some point of the weekend from New York this is [Music] Bloomberg here are your scores g into the opening B Equity Futures on the S&P 500 positive here by a quarter of 1% he always look like this in a bond market Up 3 to 448 45 in foreign exchange not much happening in the Euro just a little weaker we're down a tenth of 1% at 10769 we've been light on economic data all week had jobless claims that was a wrong kind of upside surprise at 10:00 a.m. eastern time you will get the University of Michigan consumer sentiment numbers so look out for them a little bit later this morning under surveillance AI fueling demand for chips why are we so optimistic about the future one is the business model but because we are the CPU the heart of everything we have incredible visibility in terms of a when the products are designed uh when they're going to ship what the volume looks like so we're very confident about these growth numbers what we're seeing is people investing faster and faster into new hardware which ends up being a good thing for us it's the license chip stocks riding strong momentum as demand grows across the AI semiconductor industry tsmc reporting s jumping 60% in April to the tune of $7.3 billion that follows a 34% increase in March pushing Shares near alltime highs Mand singer Bloomberg intelligence joins us now for more hey Mand it's difficult to get a clean read on this and that seem to apply to a lot of things including semis Danny said it earlier this morning I'm tells you one thing you hear something else from someone else Mand de what is the clear read on what's happening at the moment I mean the clear read is uh the monthly uh numbers seem to be accelerating and to my mind tsmc is the best proxy for chip demand across different sectors so clearly they've told us you know AI would be about low teens uh percent of their overall Revenue which is a pull forward from their earlier forecast but what this monthly number suggests is the autos and the smartphones chips demand which was weak up until now seem to be bottoming out I mean otherwise they wouldn't be reporting this kind of a bump so to my mind Apple guiding you know that the next quarter would uh they would see some growth indicates there will be a faster upgrade and and now we are seeing that uh in the tsmc monthly numbers as well man do I'm G I'm gonna try my hardest not to talk about the iPad ad again as much as I want to but how much of this is iPad demand is something different different Happening Here Dan IES joined us saying he thinks it's going to be a new upgrade cycle we've yet to see that with the iPad is what tsmc's telling us that indeed it's going to happen well so it's very hard to uh pinpoint exactly how much would flow into an iPad iPad upgrade but uh look uh when I think about you know tsmc's Revenue split smartphone chips were the largest portion of their revenue now with the pace that AI accelerators are growing they're clearly taking away spend from non-ai server spend and we saw that in their numbers there was that substitution going on in this case I think iPhone versus iPad I would still bet my money on iPhone upgrade uh being faster than iPad but uh time will tell if they come up with you know a lot of new applications at WWDC maybe it does drive a faster iPad upgrade cycle well so we know then who Apple's capex potentially benefits if it's a tsmc it's not just Apple though man deep we heard from all the tech Giants talking about just ridiculous numbers of capital expenditures in the teens of billions for every single quarter more or less who is that money going to benefit of the AI players well so I I it's uh interesting you mentioned you know Apple's capex I mean we are getting hints that they're actually thinking about uh you know coming up with their own chips for data centers I mean so far Apple's chips were more gear towards their own devices iPhone iPads now we are uh talking about you know Apple actually uh upgrading or applying their own chips in their data centers and that would be huge for someone like TSM see given how much business they get from uh Apple on the consumer handset side and I I think if apple is another capex uh player which they didn't indicate on the earnings call on the earnings call they suggested they will use more of the capacity from the cloud providers but if they're designing their own chips for data centers guess what tsmc stands to benefit the most I think in this case who stands to lose well I mean I think what we have seen is the substitution so clearly uh AI accelerator spend has taken away the capex from uh you know the CPU and the other types of Hardware spend so your Intel I mean the fact that Intel is uh you know at $125 billion market cap versus tsmc at 750 shows that you know it's already reflected in the numbers and the market sentiment but clearly the CPU portion is the one that's getting affected the most and uh I I think you're seeing more be spoke accelerators and and uh that's why The Foundry players which can customize the chips are doing so well man Danny gave a nod to it let's do it when was the last time you heard Apple apologize for anything and for the record I'm still not quite sure what they're apologizing for when was the last time something like this happened at that company well I I think uh it's hard to see you know Apple putting any uh kind of Step wrong in terms of how they do their po they've always been uh privacy focused and from a PR perspective that I I feel they do a great job but clearly you know there are things that uh they've tried to uh kind of fix when it comes to just their reputation and I I think they have the cleanest reputation when it comes to uh all the large tech companies and this is what's really odd about it I think Danny niled it a little bit earlier this is a company that talks about shaping the future this is the very essence of what these technological firms are mandate they have destroyed Industries and they've been proud of it for a long time if they're apologizing for the ad aren't they apologizing for the product Mand and it just makes me wonder what position is this company in right now have they lost a step have they lost confidence well I think clearly on the AI side uh they have been uh behind and there is no doubt that they are playing catch up here but when it comes to ads or you know specific things I mean these sort of things happen from time to time but again I I look at Apple's history and they've done a great job in being on the consumer side when it comes to a lot of the things especially the Privacy side of it so uh this to me is just a small thing I I I think on the whole they've done a very good job in terms of their reputation M deep appreciate the input sir M deep sing of Bloomberg intelligence bizarre story over the last couple of days after that product launch thank you sir sneak peeker next week for you we'll deal with the data then we'll get to the game data first let's talk about retail sales CPI PPI and jobless claims as well then you're going to have a ton of fed speak some retail earnings in the mix two from the likes of Walmart and Home Depot Danny let's talk about it what can we look forward to next week the big one is obviously CPI what stands out for you it's got to be retail I think it's the individual retail companies that are more interesting John because we get kind of the re real time update of how people are feeling how they're feeling about prices and it often isn't matching with the macro data if we get that mismatch again I just I just don't know what the market does with that someone's going to choose a narrative of economic weakening someone's going to choose The Narrative of strength there was a belief last week and coming into this week what we'd move on more that we'd move more on weaker data than we would on stronger data just off the back of this belief in the bond market at least that the Federal Reserve is not going to hike on strong data but it would cut on weak does the same apply the same rules apply going into next week given the repricing we've seen in bonds already I mean likely I don't it just does feel like like a market that that's a no man's land John because this is going to be the end of earnings right and then it's going to be a while until we get the next fed decision and so all we're going to get are these little nuggets of data and that just gives us these opportunities for volatility because we don't have anything strong to anchor on us on nonetheless fed speak you could anchor on that no you can't they say the same thing over and over again big week just around a corner coming up on Monday here's a sneak peek of the guest lineup for you Cameron Dawson of New Edge wealth we'll speak to John rying of bring Capital the NY president Lin Martin and torsson slock of Apollo to said it for a while he's looking for no Cuts in 2024 and toston has some company looking forward to that conversation next week Danny thank you for this appreciate it enjoy your weekend for all of you worldwide at home from New York City we should have Brahma a team amh back up in New York at some point next week hopefully the band is Back Together live from New York City this was Bloomberg surveillance [Music]

Channel: Bloomberg Television

Views: 21,008

Keywords: Annmarie Hordern, Jon Ferro, Lisa Abramowicz

Id: Bwf_0sOWFBU

Length: 147min 48sec (8868 seconds)

Published: Fri May 10 2024