Shifting Central Banks | Bloomberg Surveillance 07/03/23

I think the global central banks are going to keep policy restrictive well into the first half of next year see the ECB is going to hike at least twice Bank of England's going to hike at least twice I really hope the FED doesn't but our base case is still that the FED probably only has one more interest rate hike in their pocket even Powell has got to learn to stop typing policy at some point U.S economy is really doing fine this is Bloomberg surveillance with Tom Keane Jonathan Farrell and Lisa abramowitz good morning everyone Jonathan Farrell Lisa Lisa Ramekin is Bloomberg surveillance Jonathan Farrell on a Fourth of July assignment bramo somewhere North up by Tupper Lake she and the black flies the deer flies the size of a B-52 I'm here on July 3rd it's a Monday and joining me pulling the shorts to our Katie greifeld joins us after great success Thursday and Friday as well and we got a really really special lineup today I just told some of the staff that this is without question the strongest holiday show I've ever ever done let me uh tell you a little bit about it right now first though Katie it's not a boring Monday there's a lot going on not only in the world but frankly in America absolutely I mean usually these holiday shows they are a little bit difficult but there's definitely a lot to talk about today especially when you consider we have the first half of the year in the books we're looking ahead into the second half after a performance in the first half that no one really expected a reset with no one in the equity markets Cameron Dawson of New Edge will join us here in a moments she'll be with us for the entire hour to explain to us why we're going to Dow 40 a thousand in this hour and boy do you get lucky with this we booked them before the two stands spread moments ago through 110 basis points for Global Wall Street this is a huge deal Anthony crescenzi of Pimco will join us here at the bottom of the hour of course Pimco with that lead article from Isaacson and the Ft over the weekend this is perfectly timed we'll talk about that recession signal here late in the hour Katie what do you see in the you know the date of the Zeitgeist right now if you look at what we can look forward to today there actually is economic data that we're going to get to really I didn't know that yeah we do I did not know that yeah we got U.S manufacturing PMI at 9 45 a.m it you know it's not top tier but it's something so we're expected to see a deceleration there and then 15 minutes later Tom we get ISM Manufacturing expected to see a slight Improvement maybe no one cares when uh no it's a huge deal it's July 10. July 3rd it's definitely top tier data and then uh I don't know that's pretty much it for today so we got Auto Sales coming out here which has been part of the Boeing consumer and maybe the inflation part particularly with used cars but to go back to ISM I never really paid much attention to ISM and John Farrell one sat me down he said you know he said you got to look at ISM and these numbers on survey are still way below 50. yeah exactly which is interesting yeah 50 being the threshold there and I mean it feels like in this cycle particularly every data release Wall Street just hangs on as we try to piece together what the heck is going to happen with the fed's policy path but that's what we're looking forward to today of course uh then we look forward through the rest of the week we do have fomc minutes on Wednesday this is interesting of course we know what happened at June's meeting we got a lot of data we got the SCP but this is interesting to me because there were no formal descents at June's meeting and we know there's some daylight between some of the different members on the other you can see that with the dots or comedy yeah to get some color on what was actually said behind closed doors uh definitely something to watch that comes out Wednesday at 2 p.m and then let's preview it now it's Monday but Friday we get jobs day in America we're expected to add around 225 000 jobs unemployment rate expected to fall slightly to 3.6 wage growth holds steady on the fourth of July it's a fully employed America how are we going to set this up Sarah house to join us from Wells Fargo in the seven o'clock hour in the eight o'clock hour we are thrilled to bring you James Bianco of Chicago the Cubs had a good weekend so he's agreed to join us and Ellen zettner will join us on Morgan Stanley and of course she pulled forward her rate lift to the July meeting here so it's just a bang up bang up Monday here Sergio with us with a Tuesday off tomorrow we dive into the second half of 2023 on Wednesday joining us now and we really start strong is can Cameron Dawson and thrilled that she could join us today with new Edge wealth the basic idea here is Futures up to churn maybe the nasdaq's up because of Tesla I'll leave that up to you how'd you do in the first half I mean you know 2020 hindsight what's the Cameron Dawson score for the first half we've been really surprised by the degree of Market strength and the source of that market strength being multiple expansion really has what surprised us the most we thought that earnings estimates were a little bit too high going into the year we've certainly seen those coming down but the degree of multiple expansion has been absolutely astounding mostly in the context of a fed that's still saying it's going to be tight and interest rates that still are pushing higher my problem with this and you've been very responsible about it is everybody's conflating a six-month performance which for the financial media is OMG look at this stocks that went up here's the reality I didn't know these numbers folks when I went to the Bloomberg terminal to do it this morning bring it up here this is the two-year return 24 months annualized standard Force 500 is up 3.4 percent per year the Dows up a stunning 1.9 percent per year and the NASDAQ lifts three percent per year to me that's far more Germaine a naval gazing 180 days am I right I think that that is a really great point which is that part of this move is just because we got so oversold into the end of the year and that is part of what we saw within the tech stocks mostly those were the stocks that were left for dead throughout the course of 2022 so as we start to see these stocks rebound a lot of them have now rebounded past Trend and that shows you that you're starting to see some improvement in the trend but you know at the end of the day you we did have an oversold condition Katie what's so important here to me is our viewers and listeners basically have a long-term perspective whether it's six months or six years and we're all focused on six months right now which don't show the single digitness of our post-pandemic world I want to keep talking about the next six months though Tom because I was reading this morning that if you look at my place listen to these numbers I was looking at the median forecasts among strategists about what's going to happen to the S P 500 by year end so the median forecast is 4 100. we close at 44.50 on Friday you think about a 350 Point drop does that seem realistic to you at this juncture it could be realistic if you start to see the whites the eyes of a recession showing up but if you continue to have earnings resiliency then maybe that doesn't look like something that's in the cards the thing that's interesting is that Wall Street strategists continue to be very bearish but if you look at positioning it's flipped to be much more bullish which means that you have seen people chase this rally recently people are moving to be much more overweight so it's a question of how far we've come in that positioning do we get to the point yet where that alone becomes a headwind well let's talk about one of the big reasons why maybe these forecasts are still so bearish you think about what happened in March with the banking sector it's interesting I was looking at it today if you look at kre of course the regional banking ETF it dropped and then it stayed there and even if you zoom out to the KBW index it dropped and it's still near its March lows does that seem like a buying opportunity at this point Chris Verona versus always says avoid the scene of the crime and I think that that typically when you see a big earnings reset happen with names and there's a lot of uncertainty about earnings power going forward it is understandable that you'd see things bounce along the bottom these stocks are cheap but I think they're still very fairly in Falling knife mode meaning that you don't know the earning certainty you don't know the degree of Regulation you don't know the margin compression as they're having to pay to keep those deposits there and so even though they're cheap that cheapness may be very well warranted so maybe not crisis mode but sort of the long lasting impacts that grind of what happened in March exactly and one of the things that continues to be a watch item is if we will see loan growth really start to come in that senior loan officer survey is something we now all watch but it's been flashing tightening standards for well over a year almost 18 months now but we still see pretty healthy loan growth it's moderated but it's not falling off a cliff I think that's the big watch item in the second half I look at the readjust in the rebound it's going to be really interesting to see how this plays out but I want to talk about fear of missing out and you know there's Apple news this morning in Tesla Alex web scheduled to be with us on the Tesla unit sales but I'm just absolutely fascinated what you are seeing at New Edge in conversation with adults in the market who are living single digit or dare I say all cash and they're scared to get to 1231. what would their behavior be there certainly will be a Chase and we're seeing that not just within Equity flows but within options activities I agree we're seeing it in a in a call and and because people weren't positioned for these kind of stocks to do well and even with our own clients we showed them here's how we were really good at being defensive in 2022 and this is a great way to have that balance and stableness in the portfolio but then you look at the big high flying tech stocks and they go well why don't we own those and you answer because they were down 40. Harry Markowitz dying here at 95 the Nobel Laureate let's talk about rebalancing everybody watching and listening knows I'm not a fan of rebalancing and selling your winners but what do you rebail right now to get to 1231 given that you made all your money in three stocks and a 15 stock portfolio do you sell Apple you want to stay at least equal weight apple apple is as much of a portfolio she answered that question she answered that correctly how do you sell Apple here and you know there'll be people like you telling people go sell Nvidia let your winners ride is usually a great is usually a great answer but of course there becomes risk when valuations get so stretched you know we all are talking about how fantastic these companies are they're impenetrable look at the balance sheets look at the free cash flow lest we forget they were down significantly in 2022 because they got too expensive in 2021 and red head Frozen to an interest rate wall I would love to go across asset here because looking through your notes you bring up the fact that we have seen bankruptcy filings tick up and this is something I've been scratching my head over then you look at credit spreads both in IG and in high yield you'd have no idea how do you explain that Dynamic when does that actually start to make sense it is really bizarre that you're starting to see actual stress within pockets of credit and yet Within credit spreads it remains really subdued and I think it's partially because of supply and demand there's been an absolute lack of supply of high-heeled credit because funding costs are high which means that when people are looking at all in yields of eight nine percent they're saying if I can write out a little bit of volatility I'll go ahead and buy that and I think that's one of the things that's keeping credit spreads maybe artificially suppressed did you see how Katie's Channel and Bram over there yeah it's like you know brahmos Bram was waking up in some pup tent somewhere up on the racket River fire you know you're chilling with Grandma here this morning speak to the Gloom crew Cameron Dawson right now they're scared stiff they've got massive regret what's the action plan given the fact they're scared stiff the action plan is to make sure you don't stray from your long-term plan and you can have a very negative outlook in the short run of being oversold if thinking that you're overbought you might need to consolidate but that doesn't necessarily mean that you need to straight dip into that strategic allocation when we think about building portfolios we might move things tactically make day-to-day decisions but really we want to have the north star of what's the allocation we need in order to make a goal and I think that's where the Gloom crew can get you pulled off off center you can't see Polaris with a smoke case from Quebec are you enjoying us will you stay for the hour I would like you we like to have you this is great we're gonna have some people stay with us for the hour on this very special Monday we start incredibly strong uh with Cameron Dawson of New Edge well Sarah hunt Chief Market strategist Alpine Saxon Woods uh will be with us as well Ellen zettner rumored to darken the door in the eight o'clock hour we got to get we got to get her out of a trout stream she's a Fisher so I think she's she was like trout fishing in the East River early this morning uh to get here Katie I look at the the remorse here and I really think it's a time to get away from the certitude of six-month analysis to a longer term analysis which is really sobering for people for a lot of people this is subpar single digit returns for whatever reason but even still if you really do broaden out that time frame and the grand fullness of time people say stocks always go up it's maybe it's not necessarily a bad diet that you have seven stocks leading this rally the market speaks this morning no holiday for the bond market to choose 10 spread out to a hundred and ten basis points 10-year real yield one point six two percent stay with us on Monday this is Bloomberg [Music] [Music] Saudi Arabia has unilaterally cut production OPEC Plus have extended their voluntary cards there's not much more they can do for them it is about providing stability to the market provide a floor so that even when there's a lot of demand uncertainty you still have some continued investment of energy aspects she is expert on the elasticity is a responsiveness of supply and demand of global hydrocarbons not something we thought we were going to speak about on a Monday morning but there is action in the oil Market in the New York five o'clock hour about an hour and 10 minutes ago Saudi Arabia spoke Russia has spoken you wonder who else is going to speak here as we stagger to important oil meetings parachuting in Will Kennedy joins us now senior executive editor for all of our hydrocarbons on very short notice will to this catch your team by surprise that we saw a pop and oil from what's called a 69 out to Brent crude 76.05 were you surprised the Saudi move was perhaps not so surprising we knew that they'd have to make this decision in the in the next day or two and I think that we'd talk to people on Friday who said that they expected uh given uh where we were in the market for them to extend by different by another month I think the Russian move perhaps was a little bit more surprising clearly there's been a lot of focus on Russia's compliance with their existing uh commitments um and for them to make an extra commitment at this stage is very interesting I think what the market will really take from that is that the alliance between Riyadh and Moscow remain strong that they're determined to work together to keep the oil Market where they want it and this today's move and the Russian side of that was perhaps a little surprising is good evidence of that special Monday here uh John Farrell off Lisa Bremer it's off Katie gray filled in for the two of them and Cameron Dyson has decided to join us for the rest of the hour she killed it so much in the a-block so we'll get Cameron in here it was okay to Will Kennedy please to Will Kennedy let's talk about the price reaction because you look at crude it's up eight tenths of a percent then you cruise over to Brent up nine tenths of a percent put this Supply cut in context for us because the reaction in markets hasn't been that dramatic so far this morning no I think that's a fair comment Katie and I've obviously The Wider context is a an oil Market that struggled considerably in the first six months of the year I think down about just over 10 percent in the first half of the year a lot of people expect the market to title radically in the second half of the year I think that there's a view that Global inventories will start to fall um and that there is room for oil prices to go higher than here demand has not been fantastic but it's not been terrible it is increasing I think we're seeing a record number of people fly in the United States over this holiday period uh for example but the problem has been Supply the supply has come faster than people expected from Iran from Russia and I think that people really want to see uh evidence that Russia takes you know meets the commitments it's made today and indeed the commitments it's made already to see that marketing tightening that people expect over the coming months well Kennedy we're going to bring in Cameron Dawson here of New Edge wealth with a question she what she said to me in a break she goes all I want to know is a girl and a guest going to finally go down out to my secret Beach on Long Island will Kennedy's not up to speed on that no it's petrol and a leader and he has no clue about a gallon of gas on Long Island continue well I'm curious well what you think about the supply response within the U.S because we've really seen that Baker Hughes rig counts start to move lower do you think that Supply in the U.S could be an upside driver for oil prices in the second half of the year it's a it's a really good question and clearly the Shale industry is slowing and slowing fast um but right now it is still growing and I think that you know production is going to reach a a new record um it's a really important question how fast it slows where that Plateau turns that out to be um and how long it lasts and I think that's going to be a critical uh thing to look for going forward but it's worth saying that it's not there yet and that we are seeing more Supply out of the US and that's part of the broader picture of a global oil Market that frankly has been uh better supplied Than People expected so no definitive answer for you there but I think it's a key part of the equation in the second half of the year and one of the things that we continue to scratch our head about is how much recession is already priced into oil prices today meaning that is this demand fears or actual demand that's being weak and what could be on the demand side of potential upside driver given that higher oil prices could really throw a wrench in the whole decelerating inflation question I think that's an excellent point I think we should talk about China and the US I mean in China demand has clearly risen but not as fast as people expected at the beginning of the year um people were very very optimistic about how fast the opening of the Chinese economy would add to Global oil to Global oil demand uh Supply and balances and it hasn't been spectacular and the industrial side of the Chinese economy clearly has struggled and that's fed through into things like petrochemicals so there is a demand problem there I think in the U.S to me the demand issue is less clear-cut and I think there is an extent to which it is probably priced in a weaker American economy than has actually emerged so that there may be some upside potential there if we do see the kind of soft Landing that other markets are pointing to was expected maybe a few months ago I remember it was the likes of Goldman Sachs and Morgan Stanley I believe calling for a return to that hundred dollar per barrel level is that a thing of the past now is anyone calling for a move of that size at this point I think they're the voices out there who say that there could be a really uh violent Snapback in the other direction and the oil Market is a lot tighter than uh prices uh suggest but I think the mainstream view right now if you look at the balance of forecast is that it would be very unlikely to get uh triple dollar uh uh three figure uh crude this year um never say never but I think most people think it's unlikely well let me go to more short term and I just did a two standard deviation study and the lift up in Brent crew now at 76. I got to get to 78.79 before I can really start talking any excitement what's the you know the people that you know I know you don't talk to strategists but like somebody like Javier he's talking to all these oil hitters do they have in their head a four five six dollar move and Brett here is doable um I think a lot is going to depend on the um economic news from here on out and I think a lot is going to depend on what we see in inventories I think people are really looking to see big drawdowns in U.S infantries we saw a big one last week we want to see that sustain for people to think that the Dynamics of the market is turning here and that we're seeing a more balanced Market where the ample Supply that we've been talking about is more than balanced uh by demand so I think those figures as we go through the summer months when obviously demand Peaks globally are going to be crucial to getting the kind of bump that you're talking about Tom and short notice Will Kennedy at Queen Victoria Street will thank you so much for joining us here and again American oil from 6869 up to 71.36 Brent crude with a modest pop 7612. Cameron Dyson with us right now for a couple minutes here on oil every part of my body says by straw hats in Winter which is oils out except the Big Oil stocks really haven't come back where you sit in new words wealth what's the link linkage here of Brent crude was say Exxon Mobil is there is can you make the linkage from a barrel occurred in brammo's living room over to stocks not necessarily because you have seen this Divergence of oil prices and oil stocks really at different points over the last few years we like having some exposure to Oil stock simply because it adds that inflation hedge because that's where that correlation will start to kick in is that if you see a pop in oil prices and you see that probably propels energy stocks higher and that would hurt other parts of the market we think if you think that inflation will come back because of oil and we only have about a minute to the break but you think about you know just how dominant energy was over the past several years I mean it was the leader in markets because the steam finally run out of that trade though I think partially yes we did have the big boost in in oil stocks last year that really was because of the combination of a little higher pricing and a lot of cost cutting but if you go back to that two-year return oil stocks are still up 55 percent over the last two years I saw that this was the first chart I looked at this morning yeah that leg up 24 months ago was something incredible Cameron Dawson with us here we'll continue through the hour coming up on bonds without question our interview of the day he is with Pimco they made Global headlines this weekend Tony crescenzi joins us on the 2's 10 spread in historic 110 basis points of inversion this is Bloomberg surveillance [Music] Bloomberg surveillance good morning on a Monday yes there's trading today pitched battle among the team at our 4 a.m meeting like when do the markets open when do they close I guess they open usual that's all normal but when do they close I go to Catherine greifeld for the close of the markets today Bremo out Pharaoh out I'm in greifeld's Inn we close it like one and two we don't close together no of course not that would be two cents we've got it complicate it equities close at 1 pm and then the bond market an hour later at 2 p.m so all the fat cats are out doing dressage in New Jersey or they're out in the Hamptons pounding a beverage of their choice and we're working and the staff's working at all the firms I beg to work today you know I'm thrilled to be here so really yeah okay that's an HR event in itself Katie greifeld with us we're thrilled she's with us today because there's a lot going on it's not a normal Monday Cameron Dawson uh with us for the entire hour with perspective on the equity markets fear of Miss passing out the regret forward and with red and green on the screen a little bit of a lift to the NASDAQ off Tesla knows that when do we do we get the Tesla at some point with uh Mr Webb I hope so I'm looking forward to that jagundus Elon Musk uh moment and in the bond space I got to go through this before we bring in his worship and that is a 2-10 spread this is a difference in yield between the two-year yield and the 10-year yield I call it the vanilla spread it's not pistachio and it's out to a number I think I've never seen which is moments ago 110 basis points a two-year yield is 1.1 percent higher and the 10-year yield and all you need to know it's sort of like tulips and stocks a million years ago joining us now the guy that wrote the book on this we are thrilled to Tony crescenzi could join us from Pimco this morning the Strategic Bond investor is the grown-up book to read on it it's in its 14th Edition he could buy half a Staten Island off for the royalties of it from tulips to treasuries how close are we to tulips or are we buying treasuries I think we're closer to treasuries the Tulips view was a couple years ago but when treasury yields were quite low and yields globally were negative about 18 trillion or so of negative yielding bonds and that in fact that tulips idea I think will probably affect the bond market for a generation what investor for the next 20 years will purchase a German blend at minus 50 basis points again given the economy look at me and my Austrian 97 year you're looking at me yeah yeah and I say a generation because if things change think about the housing market of course in 2 2008 2009 we would have said the housing market will never rebound and of course it certainly did and vigorously it takes time but I think a low and negative yielding bonds are probably out the door out the window for quite a long time I'm looking at uh the splash this weekend from your shop in the financial times they gave one Daniel Iverson I think he's an intern with Pimco front and center headlines bond fund giant Pimco prepares for quote harder Landing for global economy how does Econo Babel fit into Total return in the fixed income Market I think that view from Dan Iverson group CIO is just a cautionary note is it and it's all relative when we say hard Landing what's saying relative to perhaps what others are expecting at Pimco we're expecting a soft Landing but that may be hotter than others are thinking so in terms of the total return type portfolio a Bloomberg aggregate style portfolio which of course is a collection of bonds treasuries mortgages corporates mostly market cap weighted uh you want to be up in quality of course we think if there is a Slowdown or a recession the credit spreads could widen the broader point is that one need take a lot of duration risk credit risk Etc to get good yields in the bond market we're looking at five six seven percent type returns in assets we think are so-called money good so you need to take a big leap consider for example Tom uh where high yield bonds are even though they may be attractive to some we'd say be cautious in the area at spreads of over about 400 basis points or so for the 400 to 450 on average uh it's kind of tight relative to what could happen in recession with the spread of call it let's say 800 basis points or more and a widening of that magnitude can in a total return style portfolio be painful because it would be losses and so we're saying prepare by keeping your powder dry and don't reach so much you needn't these days with where yields are well to that point I wanted to go to duration so I'm glad that we're there you think about where we were starting to get to on the 10-year treasury yield approaching four percent we can put that back into the conversation to your point that you don't have to reach that far when you start to see the 10-year approach four percent does that look like a good entry point yeah Pimco believes in I believe as well because we kind of different fruits within Pimco the range for the US 10 years probably now we think call it three point three percent or so to four four and a quarter or so um but when thinking about core fixed income and therefore duration relative to short-term products which have very little duration you should be thinking about the history since 1978 forgiving with the Erp is pulling out since 1978 core fixed income and this and the Bloomberg aggregate is a good representation of that as outpaced treasury billion Returns on a three-year rolling basis ninety percent of the time and by a very substantial margin three percentage points and so these yields look attractive on that basis and so one doesn't want to get into the game of Market timing because the market timing for diversifier is a very dangerous game and I should ask Katie that in core fixed in common this idea that they can outpace t-bills and have uh considerably since 1978 that the time for for entering core fixed income is typically close to the peak for the Fed fund's rate which we think and many think the markets think uh is is upon us and the typical timeline is called maybe up to six months prior you're good so you don't want to play the game of timing uh diversifier too much that's what we'd say final final view is that if I add in three components really quickly the inflation view two and a half percent the market has a term premium the extra yield you get for moving out the yield curve and the real interest rate where markets think the FED funds rate should be relative to inflation those things together put a fair value in the current zone so so again be cautious about the idea of Market timing so don't don't try to time the market but then you look at the 5.4 trillion dollars in cash like you said very little duration risk there when does that start to move out though it's a herd mentality in financial markets Tom you're quite familiar with this as well and okay to you too uh in your time in the markets but uh it it's when others when others start to LEAP but that's not optimal for an investor and that's what active management is all about it's why we would say now is the time get ahead of the herd yeah but is Schneider did he survive the first half of this year listen quite well in the short term space there's plenty to do as well consider for example you could purchase a t-bill and get in the low fives but there's asset-backed Securities assets that are backed by student loans car loans equipment are you gross in five percent on camera on uh Jerome Schneider short-term person short-term ETF we have and not to tout it but just it doesn't know please it's Monday mint m-i-n-t minting money it's the yield is currently five percent or so it's unbelievable distribution yield nobody at the table remembers this world and it's like we're back to it but the asset-backed Securities and other a lot of short-term instruments have yields close to six percent Tony is it possible to see a benign re-steepening of the yield curve uh a benignly steepening meaning that I think what you're thinking Cameron is that in a steepening uh some event has occurred to cause a flight into short-term Insurance the type of thing perhaps that Katie's thinking about that could cause movement uh not usually of course the history says suggests perhaps not but um and many are thinking can there be a soft Landing in the soft Landing that that could that could occur it may be occurring now U.S growth last year was about economic growth was one percent or so it's tracking a little higher today but we think it'll be slower than that for this year we're in a growth the U.S is in a growth recession today growth recession is something above zero but below growth potential the US has a potential to grow each year about 1.8 percent that's a combination of productivity one and a half plus changes in labor force about point three the US is growing below that which enables Supply to catch up with demand the ability to produce goods and services to meet demand it's catching up and that can enable this the steepening because then the FED can say uh we needn't to raise interest rates anymore and if Supply catches up enough if they're in a growth recession there it can happen and then eventually there are interest rate Cuts but we'd caution uh that the view on interest rate Cuts flies in the face of Paul volcker the legendary Fed chair we felt that for some time I've certainly felt that of personally very strongly for a long time now this is the idea that the chair Powell has today is to keep at it and he's quoting directly from Paul volcker in the book keeping at it and you have to persist with this view to the on the in the battle against inflation to defeat it and that's what's happening and this is why uh chair Powell will go to heaven so to speak Central Bank heaven and because Tom the The View and Cameron and Katie the only the view is that only Hawks go to Central Bank heavy well he also been saying that that history warns against cutting rates too soon so do you think that lower inflation is enough for the FED to cut rates or do you think that we actually need to see higher unemployment much weaker growth a lower inflation expectation would cut it uh it is occurring it is observable in the bond market through inflation protected securities with the price for the inflation rate to be about 2.2 percent or so but it's not observable in the general public think about about various Generations I'm from the older generation I'm a boomer born between 46 and 64. take your guests really which year that is 64. but slip right into that but new generations of Americans have experienced inflation so my generation did we've always expect it could be inflation now the generations X the Millennials and Z all believe that the prices can go higher faster and at any time yeah so you've got to get it out of their heads and so the Public's view on inflation could be enough and that's what's needed let's let's say I'm thinking about I went back and forth this morning with Dr alarion he's on a plane tomorrow he'd be with us I mean on Wednesday but let me ask you something Mohammed would ask which is the unknown unknown that's out there and to me if I look at the Bloomberg Total return index Lehman Barclays index beautiful there's there's a textbook guys bulkowski everybody had to read bulkowski with 450 so it was almost as thick as Tony's steigen's book you had to read every chart pattern known to mankind I'm sorry bonds are in an absolute textbook pennant no one's looking for price down yield up what if we get that unknown unknown unknown that I think and I wrote a book on this matter about the idea of a Keynesian endpoint the idea of the Practical limits to the use of debt there was evidence of that last fall when prime minister trusts wanted to uh increase the indebtedness the markets reacted violently the bond market collapsed the the pound got pounded so to speak uh and so what's out there the unknown unknown is whether the bond markets would react violently again okay but in all the nations to increase indebtedness on a guy out on Twitter this weekend he brought up Sheldon netenberg and all the Greek letters that christenzi frankly are world class at do bonds display gamma we all we all know equities display accelerated tendencies in a log normal space down they go when they go down if we get price down yields up do you get Bond gamma there was gamma in the UK last year it was arrested I agree and luckily the the bond market is the cop on the beat in this sense that it disciplines the fiscal authorities it disciplines the monetary authorities to say no you can't do that anymore and so any yield rise from here that gamma the the vowel of vowel if you will would be arrested by the bond market disappointing uh politicians and the monetary authorities to do to to avoid doing the things that could cause troubleizing uh Dan ivickson of Pimco worldwide headlines this weekend I don't think he's watching this morning he's on some boats somewhere in Newport Beach it's 343. that's okay maybe he's up who knows let me get you out on a line here are we going to see the bond market discipline central banks in the next 18 months and if there were proposals to increase indebtedness and the monetary Authority seemed to have supported uh I will make the BET yes but uh it looks like first of all we've got an election ahead there won't be such a plan on the fiscal side for some time and and one important Point Thomas I think it that this means that any yield wise would be self-stabilizing so don't worry Katie thank you uh very much James Athey it's 7 30 this morning Ellen zettner in the eight o'clock hour good morning I think that a lot of the good news is already priced into the stock so when you think about the march to 3 trillion it's mainly been on the back of the iPhone the iPhone continues to perform very well but when you think of the next trillion and you think of Vision Pro and augmented reality and virtual reality there are a lot of structural challenges even for Apple bottle it Tom Forte on Apple he is neutral on the stock hugely constructive long term but he's not a fanboy on Apple that was a fascinating conversation look for that on all our digital products it's out on YouTube somewhere I'll get to that in the coming week but that was a superb effort by Tom 40 of D.A Davidson to inform on the product linkage to the financials and stock performance of AAPL the same can be said about something that doesn't have the persistent cash flows of apple and that is TSLA I believe that's a symbol not that I've ever looked at it we're going to dive into this right now joining us for the hour Cameron uh uh Dawson with us here from New Edge uh well thrilled that she could join us as well and Catherine greifeld in for bramo and Pharaoh here today we're having fun uh doing this Katie why don't you go to our our Guru he's the only one I know that can fit in a Tesla well let's have that double barreled conversation on both apple and Tesla with Bloomberg quick takes Alex Webb he joins us from London and Alex I want to start with apple of course the news out over the weekend from the Ft reporting that Apple now preparing to make fewer than 400 000 units of its Vision Pro headset and those I believe were downgraded expectations already looking forward are we to expect further production goal cuts from here well the couple has never formally announced how many units it plans to sell this has all come from reporting from you know not least our colleague Mark German but over the weekend the Ft reporting that the numbers will be a bit lower even if they'd hit the higher end of of what people have been reporting it's still from a revenue perspective really going to be a rounding error when it comes to their overall Revenue story perhaps you know one and a half two billion tops is what it might have been they're projected to generate 400 billion in Revenue this year so let's put it in a bit of context the only way this probably hurts them if at all is that this first generation is really about seeding the developer Community getting these devices out there so that they can build a whole gamut of apps and services that by the time they come out with a mass Market product it is way more appealing because there are loads of things that you can use it for if this limits that slightly it might hurt around the fringes but this isn't significant Alex it's a great point that really if you look at Apple's holistic Revenue picture this is a drop in the bucket but then you think about what we've seen in the stock market of course Apple closing above that three trillion mark on Friday how much of how much optimism basically is built on the Vision Pro at this point it's probably about showing the defense they have actually so with the three trillion mark it was trading us or around about it it's 12 month average 12-month Target price uh we then sort of note come out from City on Thursday which projects perhaps 30 above in 30 Headroom above where the stock was trading which perhaps helped get it over that sort of imaginary line the real issue though was if Facebook was coming to Market with and it is coming to Market with virtual reality augmented reality headwear and Apple's not in the space and somehow that does become the really compelling product of the future does that mean they have a huge issue well now they have something out there that looks pretty compelling looks as good if not better than anything that Facebook or meta is coming out with and so it means that if they are not going to be going into headwear they still have the dominant iPhone it's the dominant smartphone um they're pretty well positioned about any incursion in that kind of core Computing interfaces what is the July 19th mystery look like Alex I mean to get up front I know it's you know it's like I know you look at the financials and all that but when they put out their beautifully clear press release on the 19th what will you look for I mean any sort of comments about earnings projections into this quarter because it will give a sense of perhaps exactly the launch date on the iPhone how they see it doing I think that like you know if the risk is in any uh upcoming product launch cycle is that people hold off right that they don't go for the uh the latest iPhones because they're expecting a new one coming up now if they're able to show strength in spite of that it really shows just how strong the ecosystem has become right if they have got an ecosystem now that like you're going to be buying an iPhone just because you need a new phone rather than because right the phone itself is that good that itself like is demonstrative of the strength but you know I think it's really this quarter is the least important it's really the Christmas quarter that people care about Kevin Dawson with us and I'm honored really good on the product stuff and of course we have industry leader Mark German as well an apple do people like you care about all the product Chit Chat of the financial Media or do we overplay you know Alex is going to get a new set of I air pods or whatever you call the things in the years and everybody goes hysterical do you care we do care but it's about what moves the needle on the earnings basis and what's interesting is that 2023 Apple earnings are expected to be down two percent and then just grow 10 percent next year in 2024. are there is there upside to those numbers because all of the stock strength this year has been multiple expansion and so that multiple seems worth it because of the high quality nature of the company but to get to that next Lake higher that next trillion you have to see it in the earnings are you going to get the vision yes ask Alex about the the goggles I mean I can see Cameron Dawson going if you're missing out oh there it is I could see well it is a question to you Alex which is that is this enough to really move the needle higher is this the next iPhone where we can have an entire ecosystem around it or do we need other product lines to get you to that next trillion I think it's the closer analogy that I think people compare it to is the watch right which in its first year didn't do brilliantly it's now meaningful but it's not so meaningful that they break it out as a separate product category I think that's also why people got quite excited about the car because even if you don't sell big volume in the car in terms of units it could still be quite a big Revenue drive you quite quickly get to given the price point of those Vehicles you quite get quickly get to a meaningful number and so I think probably if you look towards the long term that is actually to my mind more likely to be if they do ultimately get that act together and bring something together that's more likely to be the something that gives a proper leg of growth and Alex we promised a double-barreled conversation so I do want to ask about Tesla of course the news over the weekend there was those record sales numbers those record deliveries is it safe to say at this point that those price cuts are working I think it does seem that they're working I think you've got to think about what drove them which is that actually Tesla had a massive expansion in capacity and it was pretty poorly timed because all of a sudden demand started to falter so yes it's achieved that goal in boosting demand it has come at the cost of margin we've seen the net margin fall from something like 18 last year in some quarters to close to 11 12 this year but the market doesn't seem to care all that much it is driving growth and of course Tesla is still the sort of growth stock when so many others have been suffering Alex how does Shanghai and China play into the Tesla future is it really a big deal is it tangential or germane to the debate and discussion it is fascinating because I you know the nature of that factory they have there and the agreements they have what they're allowed to do in terms of selling units elsewhere how they direct the revenue something that needs to be explored quite a bit the thing that they have from a competition perspective is that they make very different cars from a lot of what the competition does the the Chinese car makers particularly EV car makers they are making cars with smaller batteries because they recognize it's more efficient most people don't need the 300 mile range on a daily basis Tesla's building cars that are kind of for this European us audience where range anxiety remains top of the list and that's why we've seen a company like byd which sells far more units in its Home Market than Tesla does you have to wonder whether that affects them in the medium to long term elsewhere thank you so much really appreciate it greatly greatly appreciated uh this morning and Cameron this this goes to you know I I don't equate Tesla with apple am I wrong on that no they're two extraordinarily different kinds of companies these one is wildly Capital intensive and one is very Capital like yeah but also the persistency of cash flow I just I mean was Tesla going to have 15 competitors something like that growing I just don't get it I I just don't get the multiple Equalization of all these seven stocks I think it is a very big question and people are still betting on this whole ecosystem with Tesla which is that you just sell as many cars as you can and then they're worth more with charging and an AI powered self-driving but I think it still is a capital intensive manufacturing business so when you look at it trading at 64 times earnings that should raise some eyebrows I love that word ecosystem because you think about the Apple ecosystem it's in every single part of our lives so yeah it is but it's not a Graham done Cottle and and I I just I just my Radar's up when I hear Alex Webb he says it so well I mean it's like you know it's like DiCaprio but the the answer is ecosystem what is that who knows it's in the clouds well she's on is she auditioning she's good she's you know maybe like you know I mean I get it John and I can just go on permanent sabbatical yeah there you go it could be the Bramble griffel Dawson at work I think we're going to continue here Cameron thank you so much Cameron Dawson with new Edge at wealth as well a lot going on on a Monday this is Bloomberg surveillance I think the global central banks are going to keep policy restrictive well into the first half of next year see the ECB is going to hike at least twice Bank of England's going to hike at least twice I really hope the FED doesn't our base case is still that the FED probably only has one more interest rate hike in their pocket even Powell has got to learn to stop typing policy at some point U.S economy is really doing fine this is Bloomberg surveillance with Tom Keane Jonathan Farrell and Lisa abramowitz good morning everyone Jonathan Farrell Lisa Ramos and Tom Keane on a Monday at a Holiday length and work week will be off tomorrow but we are here Remo On Assignment John Farrell on Simon Catherine greifeld so strong Thursday and Friday we brought her back and the list of guests today Kathy really Katie really say everything about the moment where we see two's tens out to record inversion oh big time to get the level of guests in on July 3rd on a holiday Monday almost uh really speaks to the uncertainty that's in the market that's in the economy right now as we stare down the second half it's gonna be interesting to see we'll do a data check here in a moment to get you started in the eight o'clock hour Jim Bianco scheduled to be with us and Ellen zettner will join us as well from Morgan Stanley let me go right into the data here and the News flow I guess I gotta flip it here Katie and go to oil thank you will Kennedy for abruptly oil shifted 69 American 71 Brent crude a moonshot up to 76 points 003 Saudi Arabian Russia act yeah there you go so some news today on those Supply Cuts but still not a huge reaction in the oil Market I mean we were talking about what's priced in and the fact that the supply side is getting Tighter and yet you still have oil at these levels maybe speaks to maybe there's a recession let me do a data check here right now and then we're going to do the brief to get you started on a brief Monday as well stay with us and and you know let's get well you're going to do it in a brief I'll let you do the market close in the brief I think the Market's open normally on time we'll have to see if that actually happens at 9 30. red and green on the screen with a NASDAQ a very small lift as well the bond markets where all the action is two-year yield I'm on the five percent watch on the two-year full faith and credit 4.94 3.84 on the 10-year yield two tens as I mentioned a two-year yield obscenely higher yield than the 10-year out to 1.1 percentage points move the decimal two places 110 basis points of curve inversion for Global Wall Street that is sobering here on a Fourth of July uh weekend oil as I mentioned with a lift as well dollar not giving me much love this morning a little bit of up strength China with some challenges 7.25 on Yuan as well Turkish lira not being idiosyncratic this morning please brief us on a Monday well before we get to those early closes we do have some U.S economic data coming out today we have some pmis U.S manufacturing PMI at 9 45 a.m expected to Hold Steady below 50 solidly below 50 and then 15 minutes later we get ISM Manufacturing a slight slight Improvement and expected there and then equities close 1 pm the bond market follows an hour later at about 2 p.m so that's pretty much all of today you look ahead what we're expecting for the rest of the week Wednesday we get those flmc minutes from the June meeting this is going to be interesting again we got a lot of information at the June meeting but we're going to get some more color on what was said behind the scenes there were no formal descents I know there had been expectations that we were finally going to see some descents we didn't get them so we'll get more color do you read the minutes I didn't read the minutes yet because they're not out yes Bramble read some word for word every single oh you got to every I don't every several every sum every a few Wednesday minutes be there what else do we have okay then Friday it's jobs day that's probably the biggest event of this week we'll see if anything else changes but we're expecting to add about 225 000 jobs in June the unemployment rate expected to defy Jerome Powell once again take it down slightly to 3.6 percent and wage growth of course there's been a lot of concerns about a wage price sort of spiral develop it's expected to Hold Steady above four percent when you're looking at those year-over-year figures Katie griffel there with the brief of the day and it's going to be interesting you know what's in what's also interesting to me diving into July and let's remember there is a Fed meeting in uh July and and it'll be it's just fascinating to see off of the jobs report Friday and then over to the inflation report that we will see someone focused on this uh right now and it's real simple here with uh SPX up two points is Sarah uh hunt she's uh joins us this morning here on the equity markets and really that huge issue of hummus to Market and who is in the market Sarah what's the agony here on on a mid-year correction how many people actually miss the boat well I think the agony is for the people who are jumping in possibly now hoping that it's just going to continue and if we do get the pullback that people had been looking for originally and or you start to see some real softness in earnings or inflation stays sticky energy reinvigorates inflation I think the problem is chasing it with that whole fear of missing out that you were talking about in your earlier hour and then getting stuck in a position where it finally earnings do start to come down because it has been a multiple expansion and the expectation that earnings are going to be higher next year and even this year slightly higher over last year seems to be a little bit it could be a little bit of a push given some of the margin problems even if it's single digit return are you able to identify a second leg of a bull market before it occurs well since the bull market has mostly been in the technology stocks the question is do you see a pickup in other sectors that either catches up to technology or to the technology stocks keep running and people keep chasing those the rest of the market has only recently in June started to catch up at all and even with that there are sectors where we think that there is good value I think the problem with technology is that once those headline names that are so big in the indices start running it's very difficult for the rest of the stocks in the indices because they get bigger and bigger so you have this math problem where the giant stocks get bigger and they push the indices higher and don't drive the rest of the market with it well to your point that we started to see it broadening out it caught my eye I mean you look at the equal weight S P 500 actually outperformed the S P 500 in June slightly but still an outperformance when you think about some of those other sectors that could catch up what name specifically are you thinking about there well I mean you were talking about the energy sector earlier you know the fact that oil is coming up a little bit here was not part of our major thesis in the near term but the fact that a lot of those stocks are not even pricing in the where oil is now I think that there's some value there and I think even though they run over the last couple of years you still see some places where we're going to have a longer term Tale on conventional oil production and gas production for a longer period of time than I think we were building in a couple of years ago so that's interesting because I was going to make the point that you look at uh sort of this non-reaction that we've seen in the actual oil Market to some of the supply news that we've been getting over the past couple weeks you're saying that there's still ketchup that these energy equities have to do even Beyond what's actually happening right now if you don't think that any bump in prices is only a temporary bump if you think that there is a longer term fundamental story or story for energy which we do I think there are places where energy still has some value so yes I think that there are places that you can absolutely look in that sector and I think that going forward it again we've got a longer tail on a lot of this hydrocarbon production that people were thinking were going to switch to Renewables the EV story is very good but you still have to have an energy infrastructure that can you can plug your car into right so you still need to generate electricity you still need to generate those joules of energy that people talk about are still very important and I think that that's that's going to have a longer tail what is the efficacy of share BuyBacks right now I get it off the bottom you're supposed to buy shares back in on October of 2022 it's part of Apple's story clearly but is use of cash share BuyBacks and dare I say dividend growth still part of the story it's absolutely part of the story the question is are you generating enough cash to buy your stock back without impacting your balance sheet in a negative way and if the answer is no then you shouldn't be buying your stock back I think that there is a combination of factors that show up when you have stock BuyBacks and dividend growth which is a healthy balance sheet and which is strong cash flow I think when people get over their skis and start buying those dieback just to shrink the share count and don't pay attention to how that impacts the balance sheet I think that's when you start to get it how do you identify that you got a Bloomberg terminal or fax it in front of you how do you actually identify poor use of cash I think you look at the cash flow statement I mean that's part of that fundamental analysis that sometimes doesn't seem as important when the market is just running in One Direction or another but you go through and you see where are people spending their money and what are they spending their money on and if there's a huge chunk of that definitely there's a huge chunk of that that if you don't you know if you're not paying attention to where that cash goes when money was free it didn't matter as much money is not free anymore and I think there's a catch-up that has to come with some of the higher interest rates the corporations haven't had to really go out and borrow yet I think that catch-up is coming true story and I say this with great respect to cfa's Romaine Bostic and Taylor Riggs did a tweet of them this weekend I'm coming out of the level 2 exam like every exam I'm certain I flunked absolutely positive I flunked and the iconic question this is a million years ago was a cash flow statement workout using indirect or direct cash flow I got it totally wrong and in the last five minutes flipped it and I think it saved me on level 2 CFA you passed I I passed I I'm honored to say I'm one of the people that what they say is one two three and it was the clouds parted yeah the sun's Shone down there was music and you know well I've been taken the CFA so I don't know if this is a question on the exams but I want to talk about where the Haven is in this market because you rewind back to January 2023 coming into this year this was supposed to be the year of fixed income the year of the bond it's arguable whether that's played out when you look at the next six months you have interest rates maybe biased to go higher from here Jerome Powell made clear two or more hikes coming down the pike is the Haven in the bond market or is this situation where you could look to some of those tech stocks I'm not sure I would call the tech stocks a Haven here I think that I would look at the bond market if you want that stability right so if I can lock in five percent for two years whether or not that's the best for every investor is not going to be the case but for some people especially who have not been able to invest in fixed income over the last decade or so there is a stability in being able to count on those returns that we didn't have for a long time so there is a competition there the tech stocks have obviously blown that out of the water this year and so that competition looks like bonds have lost in stocks have won but if you really have a longer term perspective or you're matching a liability going forward there's nothing wrong with saying hey five percent for a couple of years is pretty good it's the longer end of the bond market which is still lower which we're talking about that inversion earlier that becomes a problem because you can't lock that in for more than a couple of years right now and that's where the bias seems to be that the expectation is that rates are coming down we would question whether or not rates are going to come down as fast as the wirp function is showing you on your Bloomberg yeah I mentioned that on Friday as well a new wirp function and it shows a different picture than what we're hearing from a lot of our at guests Sarah hunt with us here for the hour Chief Market strategist Alpine Saxon Woods here and of course a lift of the market and quite a lift on Friday as well looking at the 10-year yield 3.85 standard and Poor's I'm going to call it flat Bloomberg surveillance good morning everyone on radio and television we reset for you Katie greifeld with us not Bremo not Pharaoh greifeld with us and you actually know the market closings today because it's Monday I have no idea why we're doing this but we're all the fancy people are away they're you know sitting large and all that and the staff's working and we're working because there's a lot of new slow one of the markets close the markets close the equity market closes at 1 pm the bond market follows about an hour later at 2 p.m it's one of those interesting days where the two markets aren't aligned I think most recently this happened around the Easter holiday we actually had a jobs report but I don't believe the equity Market yes I work Good Friday yeah Yes actually yeah I watched you oh thank you yeah with my nephew but uh the Futures were open so that was kind of fun yeah well it's a strange strange thing and again all this culminating towards a jobs report on a Friday I've barely looked at it Katie but the bottom line is is where well above two hundred thousand oh yeah yeah you know I I I don't understand how we can be restrictive with a change in non-farm payrolls of 225 000 as a survey that there's a boom year I mean the question I'm excited to ask later on to the in the program especially to Ellen zentner is is this okay do we need to crush the labor market if inflation is coming down I know you think about okay the path to two percent we need to crush the labor market to get to two percent but does that still hold when you think about the past two years of data that we've gotten well we'll see what we know is it's been a resilient Market if you're not in it you've really fallen behind after the difficulties of two years ago on Washington on the policy of the nation's capital this Fourth of July Isaac voltansky btig coming up on this Monday Bloomberg surveillance good morning [Music] China has been preparing for war with us for decades and the way we have to deal with China is not look at it tomorrow we because if we keep waiting to deal with them tomorrow they will deal with us today we have to deal with them diplomatically we have to deal with them economically we have to deal with them militarily no rest for the worry uh politicians is Fourth of July weekend kissing babies appearing on the Sunday shows on Fox News Sunday at presidential candidate Nikki Haley which goes to the August presidential debates as well it's already a full and complex uh political season we welcome you on radio and television on a Monday holiday shortened Work Week holidays shortened Monday here but we are here with terrific news flow a little bit of China weaker news flow renminby uh I'm going to call it 7.25 not much reaction there oil up off Saudi Arabia and Russian news Brent crude 75-81 that's a modest move here over the last 72 trading hours is well Bremer off Fair off greifeld in Katie greifeld in with me today and Katie I was this is one thing I was really wrong on in June I thought we slipped into July in Washington and we just don't it's busy it's busy yeah there's a lot of moving pieces here uh both domestically with of course the Supreme Court decisions and also internationally as well uh looking forward to treasury secretary Janet yellen's trip to China in the old days let's focus on that uh that was a broken by Emery Horton and I believe Jennifer Jacobs uh I can't remember exactly here by Bloomberg a number of days ago and now very much confirmed as Secretary of Treasury Yellen will travel to China Isaac poltanski joins us right now director of policy research at BT i g Isaac were you surprised that Yellen will travel to China so I think the the simple answer to that is is no and here's the reason why what we've seen from the Biden Administration is this concerted effort to keep tensions with China range bound effectively so whenever there's a negative headline you can almost bet with certainty that there's going to be a positive headline that follows and so we've got this headline now in the treasury secretary will go and hopefully their productive talks that you know ensure that there's a commitment to continue talking but that tells us that something negative is going to follow and and I really think that what follows are these investment restrictions that we've been talking about for the past few months some folks call them the outbound cypheus restrictions and I think that we've got to think about this as an ebb and flow in terms of of the geopolitical tensions and this of course the timing is interesting of course Yellen expected to make the trip just three weeks after Secretary of State blinken visited China and if you look at some of the reporting quoting senior treasury officials off the Record said that the goal of this trip is to seek to deepen and increase the frequency of communication between these two countries when you think about this trip what would a win look like for the U.S you know I think that right now the bar is pretty low I think it's that whenever they can leave the room agreeing that they will continue to talk that is a win right now it's difficult to see there being much more in terms of tangible mile markers we can look at rolling back of of tariffs for example those types of things aren't anywhere near being on the table they're not even in the room so at the moment really the the bar that we're looking for is just making sure that after each one of these successive meetings they're still willing to talk they're still willing to travel but we'll find out soon enough of course uh treasury secretary Yellen expected to visit between July 6 and July 9th let's focus Stateside though because it was a hefty week last week of Supreme Court decisions one of the headlines there of course the Supreme Court basically threw out Biden's student loan relief plan when you think about the ramifications for that on uh Biden campaigning for President Biden the candidate what does this mean in terms of him trying to sort of rally those younger voters yeah look I think if we even just view this through a politically Craven lens the young voters 18 to 35 were the ones who stopped that Red Wave from coming during the midterm elections they are a vital absolutely vital voting block for a Democratic party and that informs our our viewpoint on what the president's going to do here and so he lost in the Supreme Court lost handily all things considered but that doesn't mean that they're done and on Friday after the close he came out and said they are going to attempt to do student loan cancellation again I'm not sold on that for for statutory reasons but here's what's really important they came out and said they are going to do effectively this delinquency grace period where for 12 months if you can't make your payment on student loans there will be no repercussions and that's a big deal given that 20 of student loan borrowers are showing signs of being unable to to pay once that restart of payments hits and October on radio and television this morning Isaac boltanski with us at btig a spirited conversation here Fourth of July used to be about kissing babies those days are gone it's a battle to the first Republican debate in August we are Advantage this hour with Sarah hunt Chief Market strategist Alpine Saxon Woods joining us this morning she is riveted to the political conversation Sarah so the the student loan issue this has been one of the things that people have been worried about from a spending standpoint right so consumer spending has been very strong but student loans have been essentially in advance since we started covid so the question then becomes I think there were a lot of people counting on some form of relief so how much stress is it going to put on if that relief doesn't come if you stretched it out over 12 months it's a lot easier than saying everybody start making those payments in September I'm sure there are some people who have been budgeting for those payments and are ready to make them but I'm sure that there are many people who have not so the big question about consumer spending which leads into earnings and leads into the retail story is what's going to happen now if you have to start paying back some of those loans or if you don't and does that make a big difference in terms of earnings there's been warnings for some of the retailers on that specific issue so I think that this is a big it's a big question and how it gets resolved still seems to be up in the air well Isaac let's throw that to you when you think about some of the economic ripples that could follow especially as we head into the 2024 campaign season what's your thinking at this juncture yeah so the way I think about this is the the consumer spending side I think is fair in that you have 22 million or so folks who are going to be able uh to begin repaying in October and that's 275 to 350 dollars a month that can start going towards student loan payments that won't go to other things but here's another data point from the Consumer Financial Protection Bureau that I've been thinking about all weekend which is nearly one in ten student loan borrowers are already delinquent on other credit problems meaning that and I think we've seen this through academic papers as well that that some distressed student loan borrowers use those three years where they didn't have to pay their student loans to balloon their credit lines through credit cards auto loans whatever it may be and so for them I look at this 12-month 12 month on ramping as really a reprieve where it's clear that they will not have to pay their student loan so my question I'll push it back is you know are they going to suddenly say well now's the time where I need to start saving to pay my student loan off or will I continue to live at this pace knowing that the Democrats are most likely going to promise even more student loan relief once we get on the campaign Trail in January Isaac thank you Isaac boltanski with us with BT IG this morning with a brief hearing particularly off the Supreme Court at work we'll continue with our coverage of the Supreme Court with our terrific Bloomberg law team and Council Bloomberg opinion is just outstanding on the legal status in at Washington there's a topic we're going to touch on here somehow I think we're going to touch on it a lot more The Washington Post with a tour de force this morning is a brief I'm malaria this is what I studied in school so it's like come it's like homecoming for me a few years back and all we need to know is global warming is here mosquito territory is bigger and we have a number of cases in Florida and Texas for the first time in two decades that's shocking well that's the thing it's domestic malaria that means that mosquitoes in the U.S infected these people that's the thinking right now typically people travel outside the U.S come back and they bring malaria not the case with this current uptick so we'll see how this continues Shannon Osaka with that at the Washington Post I'll put that out on Twitter it's a terrific primer here from Florida to Southern California on global warming and mosquitoes this is Bloomberg good morning [Music] Bloomberg surveillance John emails in from a fourth island in Italy I didn't know there were four eyelids in Italy but there are he's been to all of them it sounds like it's like a north south Traverse of Naples like Naples is Over the Horizon and he's like I I can't pronounce him anymore John's scheduled to be with us at some point I have no clue when it's it's gone from holiday to sabbatical uh with John Farrell Lisa Abram was on the other escaping for three fun-filled days she's up in the rain and the racket River no she's the only one I know that still uses a wooden canoe at some old L.L bean thing yeah Portage is it herself and she can Portage into all of Long Lake in a long day it's like forever I've done it can I tell you I don't know what Portage Portage if you carry the canoe yourself okay she's so she's such a hitter up there she can guides to do it yeah but she carries a canoe on her shoulders and a Portage can be like 35 feet or 80 feet but it can also be four miles she's tough as Nails yeah I mean you see it on TV yeah it's the same anyways brammo scheduled to be like I think before Pharaoh I'm not sure how that works Katie greifeld with us really like it was a real yield exciting on Friday I mean you had something to talk about right oh yeah I mean we spent a long time on that bill Dudley column from last week four and a half percent four and a half percent in all of Wall Street against him so it was pretty good Sarah hunt with us as well sitting in for the hour uh with the equity Mark it's really really quite uh valuable there and right now we're going to look at the equity markets they're going to do it with individual names where do you there's I thought it'd be dead and boring we'd skip this no there's news no yeah there's a lot of news let's start with Tesla because a big move there I believe currently somewhere between six and seven percent higher of course the news over the weekend was that it had record third deliveries delivering over 466 000 cars worldwide that is outpacing Wall Street estimates and of course the story around Tesla specifically around its cars has been that it's been trying to push for more volume at the expense of its profit margins through Cost Cuts it seems like maybe we can say that's starting to pay off was this an earnings report or just an ad hoc unit report I believe it was a unit report it was just a sidecar report yeah these drop every couple of months over the weekend everyone gets excited and you can see the pop insurers even though uh you know there's not a lot of people working today and it's really giving a lift to the entire industry Lou said there is some news around Lucid City resumed coverage of the EV maker with a neutral recommendation uh their reasoning for doing that is that the company's technology position has been validated by its recent agreement with Aston Martin uh it did say though that the analysts there saying that near-term demand and and their gross more margin progression in the first quarter is challenge so neutral and that's giving a lift of shares of about 2.2 percent rivian also Rising I saw one on the street once really yeah fancy they're okay I don't know I just it went by me and I waved yeah you do see them on the roads not as many uh as you do Teslas it feels like you sneeze and you see a Tesla but rivian really it seems like it's just following the news of the sector higher that shares up about two and a half percent Sarah hunt with his chief Market strategist Alpine Saxon was before we did Mr Athey in London what do you do when something's in Vogue like EVS or a i how do you is a grizzled pro treat the next big thing the guy at uh Vision Fund in Japan the the billionaire yeah SoftBank guy SoftBank guys gung-ho now on AI oh my Radar's up when I see that well I mean to the extent that we've already been using AI in a lot of different applications for a longer period of time that's been a it's already been a theme it just became a I don't know how you would characterize it but after chat gbt came out it became the theme right it also I think helped Equity markets because we had a story and we had a hook that said okay we've got these things going on this is going to drive markets this is going to make things happen you look for things that are tangential but also involved with it right so you look for companies that are outside of the absolute media Darlings look at look at a sector stock look at DLR right so look at some of the companies that do or equinix look at the companies that do data data centers you've got it you've got those those servers have to be housed someplace people have to pay rent on those servers the more AI you have the more you're going to have so digital Realty equinix the stocks that are playing in the parts of the ecosystem that are very important to the to it being able to work are places that we can look where we don't think the the valuations are stretched to some of the other players Sarah again we're this year through the hour joining us right now James Athey joins us investment director at Aberdeen in Far More tots fan I didn't book them for Aberdeen and all the stock chat James cut to the choice you're in my beloved tots are they going to lose Lord Kane oh Tom I hope not I hope not that really would be a dampler on the summer um as I was just saying to your fair I don't think any Spurs fan could blame him if he saw um you know top trophies elsewhere but we're desperately hopeful we can keep him and under this new manager put in some performances in the first half of the season so he signs a new deal what do you think of the new manager John emailed me from some Italian island I can't pronounce and we're trying to figure out Arsenal Tottenham at uh at the stadium what do you think is the new manager going to get it done yeah I mean hope so at the very least what he's going to do is bring some entertainment back because you know I've got season ticket and have done for many many years and the last few years have been at times very difficult so if he brings entertaining football back at the very least that'll make it enjoyable to be there the entertainment of the stock and bond market in somebody's Institute is Aberdeen what do you do at mid-year if you're behind the market I don't mean Aberdeen behind the market but the millions of people that just missed it what's the plan at July 2. I mean you have to try and you know the whole point of what we're trying to do here at long-term investment and we're trying to apply the process and we're trying to do that as as you know unemotionally as we possibly can so you can't allow your decision making to be clouded necessarily by things which have gone on in the past you run your analysis and that leads you to make decisions based on where you think things are heading and if you do that consistently through time then you should generate consistent results and consistent outperformance even if you have experienced a period um where things have been a bit more tricky and certainly this year I've found it incredibly tricky as we shop from one narrative to another quite violently and then when we do start to Trend that trend is equally as violent well James that being said what emotion do you feel when you look at the twos tens curve 100 910 basis points inverted what message does that send to you I mean it it I'm reluctant to to call it a better recession indicator than anything else I know it's an easy criticism of of economists to say that the bond market has been right more often and then economists with respect to forecasting recessions but it definitely tells you that the bond market is nervous about the outlook for the economy and it's a stark Stark um Divergence versus the message that we're getting from from the equity market so trying to to narrow down the signal looking cross-ass it actually gives more confusing messages than it does confirmatory messages but to me it does suggest that policy is already tight and and the tighter that it gets the more that's just going to depress forward growth and ultimately forward inflation so we've seen some tighter policy in terms of higher interest rates but the question really becomes has that really tightened money flow and there is to the extent that it seems like there's been more liquidity rather than less liquidity over a period of time there's an argument that that's been fueling the equity rally there's another argument that the bond market doesn't have a lot of signals right now and it's not the same as it has been historically I'm always wary of those arguments because I think that a lot of those historical combinations do matter but you had 15 years of interest rate suppression so do we really have a tighter Global Credit situation I mean you have higher rates so for borrowing purposes we do but there's just been a lot of liquidity so how do you think about that yeah I mean it's very complicated Sarah really is because you know what we learned from the post crisis period was that liquidity provided into the financial system was not necessarily liquidity provided into the real economy so yet asset price inflation and not Consumer Price inflation and then post-pandemic the governments really did become the transmission for for Market liquidity to become real economy liquidity so the fact that central banks have been trying to withdraw liquidity from financial markets but actually have been interrupted along the way has indeed created this bounce in um in equity markets or at least it seems to have coincided with a bouncing central bank provided liquidity but when you look at some of the broader kind of more traditional money stats you still see a picture which is the declining year on year money growth whether it's M2 in the US M3 in Europe or M4 in the UK all of those monetary Aggregates are telling you that real economy money is tighter today and it's getting tighter so then the question becomes do we stay tighter for longer right because that's also been the question the the markets are pricing in or at least according to the Bloomberg function warp is pricing and the fact that we're going to start cutting rates in the six-month period do we think I think that that's going to be tough for the FED to do but what do you think about global liquidity going forward and what do you think about what the FED what the fed and other central banks are going to do are they going to be able to hold rates stronger or do you think that they are going to end up cutting rates yeah ultimately I think they will end up cutting rates I think history doesn't provide a lot of examples or analogs for where policy has has tightened as rapidly as this unemployment has been at very low cyclical or even secular lows and we've managed to find a sort of stable equilibrium in that situation it doesn't tend to be the case it tends to be the case that unemployment goes sideways for a short while at the lows and then for one reason or another it rises and that that very much is the backbone of the cycle so I was looking at this in the UK because it's such an extreme example and I use this through trial and error I just use a 600-day lag between those broad money growth Aggregates and uh and headline inflation and that 600 days suggests to me that given where we are in in um in terms of Central Bank policy right now we'll be seeing zero percent headline inflation in the UK in in kind of 18 months time quite how far the bank of England gets with its hikes before that data starts to to show that progress is obvious difficult to say very quickly here we've got 30 seconds James athe if we get that large first derivative move in disinflation that you're talking about Ed Hyman's talking about many others are talking about what do equities do well equities will find a way to turn that into a positive I think disinflation without a downside in growth without an upside in unemployment is the Goldilocks soft Landing narrative I think that's what equities are trying to price at the moment I think the reality check comes for equities and generally does cyclically when unemployment starts to tick up when we get that first very weak or negative payrolls I think that's when they have to start to think about what that means for the earnings Outlook James thanks for the roof James if you were the star of Aberdeen they're on the equity markets and um the future of the tots as as well that was my sir that was my English football moment for the day I missed Pharaoh so much I can't did you watch it did you watch the Formula One Grand Prix this weekend in Austria I did not it's very Austrian I looked at the entire there like 300 000 people no one there bought the 97 year Austrian piece that's down 70 percent I would know that because I bought it at the top standard reports this morning it is flat good morning to all of you on Bloomberg television and Bloomberg Radio Katie greifeld in for uh Elisa abremonts and Jonathan Farrell it is a Monday of substance there's no other way uh to put it uh I just I I just thought that we would sort of nail an ear make do you know how many hot dogs America eats on Fourth of July I should know because I know you put it in the chat at some point but I don't know I don't believe the number but it's 150 million hot dogs I hope that's over like the extended weekend yeah not in all one day I would hope that's a lot of hot dogs I'm not a huge yeah I like I love the Mike's mustard commercials yeah with the Yankees baseball do you put ketchup on a hot dog I don't eat hot dogs but if I do I would put I would do mustard Bramble eats Hot Dogs mustard and sauerkraut thank you you don't put ketchup on right no no Mike's mustard of New Jersey they're really big on this yeah afterthought use ketchup on a hot dog I don't know I'm weird about colors though it is thank you yeah yeah contrast say good morning to swaggle Hots white hats and Red Hots up in Western New York the best maybe I'll eat a hot dog when was the last time wait a minute you went to Haverford and they didn't serve hot dogs right it was like tofu dogs yeah it was a big chicken and stuff along those lines I had a lot of quinoa in college I didn't know how to pronounce it until I was lectured on it I had to repeat it 10 times is well we're going to continue Sarah hunt with us here uh from up in Saxon and also coming up Jim biako Alan zettner will join us as well and really important in the 8 30 hour on equities in the derivative space anahan will join us in Wells Fargo really looking forward to that what a strong day the team didn't mail it in today no I know a lot to talk about it's always one of the tears Amy this is Bloomberg good morning thank you the major problem here is that uh you know China's moving off its old economic growth model but it hasn't moved comfortably into what's next you're seeing much slower growth overall you're going to see a long-term structural slowdown in the Chinese economy and and that they haven't truly prepared the world for that or their people for that I have an offspring in China cash flows over in China and I was raving to him this weekend about Leland Miller co-founder CEO of China beige book He's just the absolute best on the granular nature getting away from the hype on China we welcome all of you on a Monday Katie helped me here 1 pm is equities or bonds closed equities first bonds later at 2 pm ridiculous can we just get this can we standardize it I get so upset at fancy Executives on Wall Street they're out in the Hamptons they're going they're going horseback riding in the mountains of New Jersey Martha Stewart they're up in Connecticut all the fancy people are off today and the staff is working it's Un-American I know I know well they're working from home probably they have the laptop they're working from home it's not the same they've got a staff name the institution the New York Stock Exchange everybody has to come in except the fancy people it's an outer rage uh red and green on the screen or NASDAQ up a little bit the vix 13.81 as well the data check I want to look at bonds here 4.95 seriously folks two-year yield we're on a five percent watch what will that do to money market funds here as well uh 10 year yield 3.8 6 in the headline number today massive curve inversion 110 basis points uh of curve and version that's a I'm going to call it a record y as well Sarah hunt with us uh with with Equity shortages how do you interpret a curve inversion what does maximum Financial media talk OMG 110 basis points what to translate to over to an equity analysis it translates into a very challenging environment for anybody who is lending long because you are not getting a good you don't have as much room if you're a bank that's very that's not helpful for your net interest margins at all and to the extent that it's supposed to pre-sage a Slowdown in the economy and or concern about growth going forward I think that that inversion I mean Michael darta was on last week and had some really good stats on how long it can stay inverted and when it finally starts to matter and the argument has been now well it doesn't matter but it's only been 11 months that it's been inverted and that's a very wide seven months to 25 months that's a very wide spread in terms of how long it starts to really affect the economy overall so I think that there's really a question as to what that's signaling right now but I think that there is it is not generally a good signal the artists in this is this newsletter like Sunday or Saturday he thank you Michael for mentioning the show and you know what we talked about and all there's a photo of him sleeping on a couch like he's like complete Sarah Dart is like comatose he's like sleeping are you like relaxed in this market can you take like the the Alpine sex and nap well I think that his style is more laconic so it's possible that he's not just relaxed he's relaxed with dogs like that he's very laconic but I think you can't take a nap I mean you can never take a nap in the equity markets I think the problem is that with this striation between what's run so far in technology stocks and where most of the market has been all year has been a surprise to people and I think the question really becomes what happens to earnings next because this are we going to get the ice of Mike Wilson or are we going to are we going to stay with higher earnings which is what the Market's pricing in because then the multiple isn't as much at risk but when you have a big multiple expansion if earnings come down then you start to see oh the earnings are coming down now the multiple contracts that's a problem that's a bigger problem absolutely brilliant Sarah thank you so much for being with us for this hour today speaking of someone who has not slept in three years and occurring with huge courage around the fort in Hong Kong he is now our global economy or reporter and student in Washington as well and to thank you so much for joining us today and uh Yellen to China who will greet the Secretary of Treasury we don't yet know the exact details on which officials will greet her Tom probably her counterparts that level in the economic space you know it's unlikely that you perhaps get to a meeting with President XI for example in the White Secretary say please blinking it a few weeks ago um remember guard rails for her kind of purview are less about trade it's pure about economic stuff so she'll probably be focused on what's happening in China's economy what's happening the U.S economy and the messaging from the treasury has really been about managing expectations they're not talking about any kind of a breakthrough on this they're talking about improving Communications between both sides and maybe looking for some areas where there can be cooperation there so no not really a breakthrough meeting but certainly a continuation of the trend of of an attempt to stabilize relations in recent weeks looking at the rewarding as of now and meet with Chinese president Xi Jinping is that correct yeah I mean it's probably uh we'll have to see if that Howard plays there but it's probably unlikely to happen it's more significant that she's going in the first place Katie remember this meeting has been talked about for so long and it's been derailed by various incidents over the past year or so with Nancy Pelosi's visit to Taiwan then of course you had the balloon incident but it's back on track now and speaking to this idea that they are trying to stabilize things and remember Miss yelling herself is pushing this idea of not decoupling but de-risking the two economies now you can argue what the difference is but that's the line she's pushing nonetheless though there might be some pushback against Missy Allen as well and the Chinese side may ask her what about these investment and Export controls that your government is talking about imposing in recent weeks so there are certainly grants for some tension even though this is meant to be a visit to stabilize things this is Young's first trip to China as a treasury secretary but as I understand it at one point the treasury secretary secretary used to visit China uh every six months or so oh yeah I mean pre-covered days this was pretty routine dialogue they had the the Strategic dialogue which happened every six months or so like you mentioned officials from either side would go to either Capital where they would meet and sit down and discuss the economic events of the day that was the Legacy from the Hang poulton era now of course the critics would say that that was a period when the U.S should have been much more forceful in some of the economic issues around with say um the access to China's Market protection of international property and all the rest of it they allow those issues to build up in that period but nonetheless there was certainly a better framework for cooperation back then than there is now we're a long way from where that was and and that's why this meeting with Yellen the treasury are only managing managing expectations that this is only about getting things back on on an even Keel trying to stabilize relations rather than any kind of substantive breakthrough or agreement on any of the major matters Cody and outside of what falls under treasury secretary Janet yellen's purview let's talk a little bit about some news that we got this morning that China is going to to impose restrictions on exporting two metals used to make semiconductors and other electronics from August first it feels like the the chip Arena has really become the Battleground for a lot of these U.S China tensions to play out oh he had a high value ad technology is really where this competition comes down to AI Quantum I mean the rest of the broad manufacturing story that ship has sailed but were the US and China are now clashing is on the race from where do you go from here and that is as I just mentioned semiconductors Quantum Computing Ai and everything else now it's interesting to see that China is talking about these export controls I'll have to see more details on exactly what we're talking about but it could be interpreted as being a kind of a tit-for-tart in response what the US have been doing and what the US is expected to do more export controls expected over coming weeks of course on investment into key technology sectors in China but it shows China has some room for retaliation to Fourth of July weekend you realize the cost is about the colonies one okay and uh as we've been talking about only mustard on the hot dogs okay no ketchup on the hot dogs Ben's Chili ball you'll love it you Street and occur in there on his way to Ben's Chili Bowl after his uh work today uh in our Washington uh office just a jewel I can't say Katie enough about seriously like I get emotional the dedication of our Hong Kong team under maximum stress was just extraordinary well I'm delighted that end is now in U.S hours because I get to talk to him more so yeah it's great sir sir hunt with us as well listening to the Chinese uh discussion how does Chinese affect American portfolios can we impute disinflation from China does that change the revenue stream the revenue analysis of equity portfolios I think that the big question with that right now is if you're going to have onshoring do does that take away some of that disinflation that we were importing because lower Goods countries and lower good lower cost countries when we were manufacturing a lot of things there that brought this inflation in if you're going to start building things in us and in places where the costs are higher does that take away that disinflationary impulse thank you for bringing that up it'll be one of my charts for Q3 Manufacturing in America stay with us Bloomberg surveillance I really do think that those recession calls will continue to be misplaced I've got a fairly bullish forecast for inflation The disinflation Narrative is going to start to become a bit more established a lot of the data that we are placing our optimism on is backward looking not forward-looking that sticky inflation is still the main concern this is Bloomberg surveillance with Tom Keane Jonathan Farrell and Lisa abramowitz good morning everyone Jonathan Farrell Lisa bramans and Tom Keane our strongest holiday Monday since I've been at Bloomberg a superb our ad Jim Bianco will join us Ellen zettner will join us for the entire hour and we do it with real significant changes in the bond Mark Bramble out pharah out I'm in greifelda here and Katie I'm sorry I'm on a five percent watch on the two year with new record curve in version can I talk about the tenure a little bit because grandma would she do the exactly she would okay I'll Channel what you're talking about let's talk about the tenure I was just fiddling with some charts we're at 3.86 on the 10-year right now we came into the year at 3.87 we are almost completely flat flat on the 10-year yield with about a 75 basis point range just incredible volatility to go nowhere and I'm gonna I'm gonna do this right now bring me up if you would uh for TV and I'll mention it to radio as well the two-year annualized return on the equity markets because everybody's going nuts about the six-month track record the NASDAQ apple and all that if you go back two years 24 months and you look at the annual return over those 24 months it's like low single digit SPX 3.4 percent Dow 1.9 percent the Industrials NASDAQ 100 3 as well I mean forget about the hype of the last six months it's been you know post pandemic we've noodled along we've noodled along I love that well you think about just two ugly 2022 was I mean when we think about the rebound that we've had since October it's easy to forget but uh we were down double digits and then some on all the big benchmarks last year had been a while since we've seen that we're not going to brief this hour were we briefing this hour I don't know we're not briefing but we're going to do this because it's important we miss John Farrell he's on his fourth island off Italy I think they're all off Naples I didn't realize there were so many islands off Naples yeah Naples did well in football this year that's soccer in Pharaoh talk and yeah write it down and uh we got ISM Manufacturing prices paid employment new orders is even Awards total vehicle sales and the answer is these are still sort of soggy numbers I mean it's not morning in America when you look at the first look of uh June here on July 3rd yeah no it's definitely I mean you look at U.S manufacturing PMI expected it 46.3 that is solidly below 50. so not great there but then you think about other parts of the economy that are still doing really really well just defying the messages that we're getting from the yield curve our schedule here to be quick is markets closing at one and two I don't know which Equity equity and then Bond's fine we're going to do that holiday short and work day or whatever it it is and then we go on to the jobs report on Friday and I feel like the earnings season starting the 14th I don't have a clue what the jobs report is going to be I don't have a clue what earnings season is going to be it's going to be strong for the first one the jobs report the earnings report on what we're expecting this season I'm not sure and it seems like neither is Wall Street data uh negative fiber and SPX a little bit of sogginess but it's got that Monday holiday feel to it the vix 13.80 percent the two-year space I mentioned two tens 109 basis points of shocking inversion very quietly the real yield elevated over the last four days from a 158 out to 1.62 percent uh as well this is a joy joining us for the entire hour Ellen zentner she is chief U.S Economist at Morgan Stanley and Ellen I'm going to join you're like 15 when you came out of Texas and joined us on Bloomberg and it was like you know a few years ago and you were expert on the America can consumer what is the state of the American Consumer so I think if you look at the consumer you have to look at it by income group um and I think we've been long talking about those lower income quintiles that have been dealing with uh having gone through their excess savings having still dealing with high rates of inflation and labor income that's been slowing but you look at the upper income in uh household so look at John Farrow on his fourth island in Italy as you pointed out the appetite is insatiable he sends me these photos he spent the entire trip on a boat yeah well it's not like it's like a George Clooney boat yeah it's got the wooden thing going the girls draped over the side the whole thing I mean it's just it's unbelievable that that economy is holding us up yeah so it's a you know look the U.S is always a Services economy the bulk of it um and you've got the upper income quintiles where their total spending is 40 percent of all consumer spending so if the wealthy are out there spending right and when I say wealthy is Middle to Middle upper income households and and above uh then it it Mass really weakness at the lower income levels and so what it looks like is that you've had the slowing in consumer spending but resilience uh and but it's being driven even it's lopsided a lot of the economy right now is lobster will be driven by certain sectors you made headlines 72 hours ago you moved Fed rate hike forward I don't you know I don't do the Parlor game like John and at least you do Katie does it 24 7. but link that into the basic idea that we're aggregating all of our economic analysis and you you just told me with consumers we partition do you aggregate to get to your calls are you looking at two or three Americas out there yeah so it's so it depends on what side of the you know do I have one I have one foot in the equity side right of the markets I have one foot on the fixed income side on the equity side you know Equity investors really care about who is doing the spending because you want to look then at companies that cater to those income groups and where what are they spending on on the fixed income side it's just is the economy growing well above potential are we creating inflationary pressures that the FED is going to have to respond to and so that's where I look at things in the in the aggregate so it's just an interesting dichotomy and this is something that we started doing after 2008. after the financial crisis I really started digging into spending not just by not in the aggregate but by income Group by ethnicity by age group because it can differ really widely well let's fold the labor market into this conversation because of course Friday's jobs report is the big event to watch this week the unemployment rate expected to fall actually to 3.6 percent how sustainable is that at this point so I think the unemployment rate you know had this big pop higher to 3.7 percent in the last month they've been really sticky around three four three five whether it's three five three seven three six it is extremely low unemployment rate and the big guess has always been well it's really low doesn't that mean a super tight labor market but it's questionable as to exactly how tight is the labor market a lot of these open positions that aren't being filled are are what we would call just sort of phantom positions Phantom openings where companies are just it's very easy to list jobs it's very easy to keep that opening out there in case you fill it and we're seeing that a lot of those Phantom openings are being closed but look at how low the unemployment rate is and inflation has been coming down right it's sticky it's high but it has been coming down so we've been able to do that without killing the labor market right and that's it I mean that's exactly what I wanted to talk about we've so far been able to bring inflation down without killing the labor market as you say but when you think about two percent and still how much distance there is to go there maybe we don't need to kill the labor market or maybe we do well yeah and and what is killing the labor market I mean because nobody wants to you hear this oh we'll chair pal in the FED they they need to or want to kill the labor market to bring inflation down no they absolutely don't right they of course would love to bring inflation down in an orderly way um and do it where um you have more sustainable rates of unemployment without a lot of high inflation um but look we're all guessing and I think chair Powell has been a very humble leader um that we don't know exactly where full employment is or what is that ideal level of unemployment what we do know is that he would like for inflation to come down more quickly than it is housing is a key element of that if you want inflation to come down more quickly and a very tight labor market with very strong income growth is going to continue to put up more pressure on that because guess what kids get out of college it's a great unemployment rate they can get a job and get paid enough and go and get an apartment that puts more demand because into the system because as you are increasing household formation you need to actually get household information to shrink if you're going to bring pressure off of home prices and Rental you've got to get all these kids to move back in with their parents Tom they're going to be living with you today so that's one of the elements right that people consolidate Katie help us are you moving back in I would love to oh that's great that sounds really good but I think I'm solid I think I've found another household at this point is there a theory right now I mean it's centered there they're all lined up with Sarah ice and the Ducks are all lined up and I'm in search of a theory is any of his theory in the textbooks or are we just literally I said to Muhammad alerian today over at the University of Cambridge great graduation ceremonies at Cambridge with Dr larion and and I said to him I I just said it's all this ex posted this waiting for the next data point is that all we got right now look the the FED is data dependent so we have to be data dependent there's just there's no forward guidance and this is there's no Ford well this is something I thought was interesting that's emerged so you have you have uh Governor Jefferson who has been nominated to be Vice chair uh and he has already begun posturing as though he's Vice chair but it's a very important executive position on the fomc so you have chirpal saying look data dependency we've not made any difference decisions we're going to come in to make a decision at every single meeting that means a lot of volatility right a lot of guesswork you have Vice chair Jefferson that came out not long after he was nominated and said this may be a time where forward guidance could be good could be useful right so starting to kind of put his toes into the water dip his toes in and say well maybe this is good yeah but the vice chair voice is very very important and I think it underscores the kinds of debate that they're having around uh in the boardroom right now you're with us for the hour we're going to come back and talk about the jobs report on Friday because I think with all this inflation has Derek Katie the the the um the labor discussion has been put aside I'm glad you asked about that earlier Katie greifeld in for Lisa abramowitz and John Farrell we are thrilled that Ellen zettner joins us for the entire uh hour lots of economic data today 10 o'clock we'll talk about that here in the next couple of minutes as well the vix 13.80 standard Porsche 500 down three I'm going to call that a fractional percent we say good morning I'm Bloomberg Radio I'm Bloomberg television Katie greifeld and Tom Keane on Monday Market's closing at one or two I don't know which doesn't matter get your orders in early and often as well Ellen zentner with us and let us continue here on ISM Manufacturing I never really looked at it I didn't care if Pharaoh says don't be an American dummy it matters the ism surveys are under 50. does that signal contraction so at a level of 46 about where ism is historically that is a recession level now under 50 doesn't mean recession but generally you can start to get to the 48 level and that tends to be sort of the average historically where you're getting into trouble now the thing about ISM and maybe this gets into sort of the the boring nitty-gritty that economists get into there is a component within the ism called delivery time so if I'm super busy and I'm trying to catch up on all these incoming orders and produce them my delivery times are going to slow down that actually means that things are tight and that's a good thing when delivery times become better it means that well I've got you know I'm producing things really quickly I don't have a lot of incoming orders and I can get them out the door quickly because supply chain disruptions meant that my delivery times were really slower because I just didn't have a whole lot of business that actually was supporting ISM at that time and as delivery times have increased because Supply chains have normal or normalizing that's actually depressed ISM now so at 46 that's not a good level right tell me if you're confused yet so this is this is good to do for years Ellen zettner with an ism lecture where's Farrell he would have taken notes he would love that stay with us Jim Bianco president of Bianco research what an eight o'clock hour our call is that the FED will probably stay in and around you know the the at current levels for the remainder of the year year it's it's not out of the question that they raised rates by maybe 25 basis points uh or even 50 basis points by the end of the year but you know that's only going to really bring the recession um you know forward if you will and that was really really timely look for that with all the Dynamics that suction brings and derivatives and fixed income as well that really sets up the debate here Katie as you mentioned Katie gray felt in for uh brammo and pharaoh and as you mentioned earlier the bill Dudley piece was the tone Setter for last week I mean it it arrived at a perfect moment because it feels like we've been sort of stuck in this range on the 10-year yield again basically flat for the year with a lot of volatility as to whether we take a leg higher or maybe we've seen the peak that is the debate in markets right now and Bill Dudley coming firmly out on the side of higher yields and many people here uh talking in these seams Ellen zettner is with us with Morgan Stanley for the entire hour we're going to devote a huge part of the back half hour to her View Ford but we're gonna have Ellen join now with Jim Bianco he's president of Bianco research hugely followed on the street and what I find is it's a it's a smart note always of course that's Jim Bianco but there'll be one sentence that hits you over the head we get that now from Jim Bianco Rory talks about inflation coming down to that before level and then it will reverse and drift higher Jim State the theory how will we get to three percent then drift higher well it's the base effect last year June of 2022 we had one of the highest monthly numbers ever 1.2 percent you may remember gasoline prices were five dollars a gallon a year ago we're going to drop that off and we're going to replace it with a much lower number something like 0.4 or in that range and that'll bring the year over year inflation rate down to three percent for June July of 2022 was Zero August was point two those numbers are going to be easy to jump over and then if you start looking at September November December you got Point twos Point ones those numbers will be easier to jump over so we should bottom at three percent and start drifting towards four percent now I'm assuming no major downturn no no kind of Crisis that comes along no heating up of the war that could change that equation but if the inflation rate bottoms at three and starts drifting higher the fed's going to find this unacceptable and that two rate hikes that we have priced in for the rest of the year will happen if not three Jim you're such a student in history is the Fed finding it unacceptable because they're wedded to a return to the great moderation or as Bill Dudley said last week in his Bloomberg opinion essay this is a society a country a nation and a Fed that has to get used to a permanent higher rate regime I don't think the fed's quite with Dudley that they need to get rid accept a higher permanent regime I think they look at the two percent and I think it comes back to May of last year when chair Powell was in the white house um in the Oval Office and President Biden pointed at him and said America this is the guy that's going to bring inflation down and he's taken that very seriously he has stated over and over again that their goal is two percent he has said that without getting inflation down you don't have an economy so he's dead serious about trying to bring it down and he should because prices for the last two years have largely been running faster than raises and so on a real basis especially people that live paycheck to paycheck they've been falling behind and they and that has to be rectified and as such we've seen expectations for the terminal rate definitely move higher over the past week or so after hearing from Pell that commitment to keep fighting inflation but let's talk about the neutral rate has your Calculus for where the neutral rate could be changed at all no it hasn't changed except that I'll go with what the FED says the neutral rate is somewhere around half a percent above the long run average of inflation now of course we could argue to the cows come home what is the long run rate of inflation is it two is it three is it three and a half I'm more in the three to three and a half range which means that neutral is four and then chairpaul put a little Nuance on it he said the entire yield curve has to be above the neutral rate not just the funds rate so some of the rates like the 10-year note at around 385 are not quite there and so that would suggest higher rates so I am with Bill Dudley on that that rates are probably going to continue to drift higher it feels like a fed to side show we got Jim Bianco and Ellen zentner with us Ellen I want you to ask a question to Mr Bianco try to be nice but but Ellen I want to get an observation from you first is this a Fed that has to make is John Taylor Stanford would say this is a Fed that has to make a regime shift away from the silliness of one point x run rate on on on the FED funds rate well I think this is something that is going to underscore how much they have to go back to the table as they said every five years and taking a look at their entire framework of how they conduct monetary policy and things like are we at a longer run higher news I think that it's that these things uh are Evolution not Revolution when they make changes I don't think that they're going to change the inflation Target but I think they can fudge around it like some of the central banks and have a band of uncertainty around that but but but Jim I want to ask you you know when you think about how long the expansion will last we're going to have a downturn at some point and probably inflation will still be higher than goal at that point does that mean that the FED is going to be less reluctant to do a steeper cutting cycle in order to offset slower growth sure and let's look back a year ago a year ago q1 Q2 we had negative two consecutive negative quarters of GDP and you remember a year ago the big debate was is that a recession and most people said no and what did the FED do during that they cut they hiked excuse me by 50 and then by 75 they were not deterred by a Slowdown in GDP so if we see the consensus forecast that at the end of the year we might see negative GDP numbers if inflation stays elevated I don't think that defer or dissuades them from raising rates what would is if we saw maybe if we saw a big slowdown in the labor market but as we all know the payroll report has beaten 14 consecutive months so we haven't even gotten a Miss on the payroll report let alone a Slowdown on it but if we did that might be the game changer but how do you feel about you know the credit impacts that we've had I mean are we too complacent here that we've had this big credit shock you know there's sort of economy pre-march 8 then post March eight you know it feels like there's one camp that says well we've just escaped that it's just not going to have a big impact on credit in the labor markets and then another camp that says well we've just not seen it yet where do you where do you stand there yeah I agree with you that you know March 8th was probably the most important economic date of the Year pre the bank failures post-to-bank failures and I do agree that we've seen a big credit shock and we're going to continue to see that now the credit shock's not going to probably result in another bank failure but it is going to result in a pullback especially for small and medium businesses and I think that as we go forward the FED will look at that but then the chair pile is already kind of hinted that that's more of a regulatory measure you know Michael Barr the head of supervision at the FED it's his job to deal with that our job is to deal with inflation so I don't think at the end of the day that the credit situation is going to dissuade the FED other than push them from a regulatory standpoint but not necessarily from a monetary policy standpoint Jim Bianco thank you Jim Bianco with us today from Chicago really interesting idea folks I think some people share this but maybe it's not articulated of disinflation inflation down and then he's calling for a tick up there that's an outlier call right now but it's tangible yeah really interesting to hear haven't heard much about okay inflation is bottoming and it sort of makes sense when you think about the FED cycle that's expected this stop and go sort of cycle uh sort of makes sense that you would also see inflation follow that path I mean it's going to be interesting to see and we're going to see in the data today and again uh we will have ISM for you later this morning that first look I I've never looked at it but Pharaoh like he's always like up at 2 A.M getting ready for it today's the day today's the day we're going to continue Ellen zentner of Morgan Stanley is where this will have a ample time with her in the back half of the next hour coming up if you are in the equity markets if you are confused anahan Equity strategist at Wells Fargo we're gonna do that next what a list today it's great I'm I'm tearing up [Music] Bloomberg surveillance and we say good morning Catherine Garfield with me uh this morning a Bremo out pharah out we are in and yes someone emailed in from Washington uh secretary Yellen yes endocrine will go to Ben's Chili Bowl on our recommendation there to boost the Washington economy uh this morning for those of you who don't know the best the best shopping food I mean you know all of georgetown's got nothing you got to go I mean it's like an emotional it's like really cool and they have they have it at the airport but it's not the same the airport sort of just doesn't count the the romance didn't translate over from it what translated as we thought Katie and I thought this would be a sleep walk today no it's actually really really interesting curve in version 108 basis uh points Katie you mentioned 4.93 up three basis points on the two-year yield you talked to Jim Bianco there and you get this the higher yield ferment there as we start the second half yeah and that curve inversion I'd be continuing today you do have two-year yields marching higher 10-year yield pretty much flat and we do have some movement in the oil Market as well and we have some uh headlines on from Tesla so there's plenty to talk about we're doing good if you're in the equity Market I'm going to get right to it Ellen zentner with us with Morgan Stanley their Chief Economist we're thrilled she's with us we'll do an ample period here where they'll on the back side of this half hour but right now it's not only the equity conversation of the day it's the equity kickoff conversation of a second half and a hot at Wells Fargo brings prodigious math and physics whether to the study of what we got I'm going to go derivative on her so I can so I can save myself I recommended Sheldon nateenberg's classic options textbook to some intern at the other day all the Greek letters and all that I look at Gamma as the accelerated Tendencies of Any Given index in this case let's take the standard room Force 500. we came off the mat from a bear Market October maybe it's a bull market can you identify with all your math and physics second leg of a bull market well I'll put in a quick plug because I prefer the whole book over the Edinburgh but you know I'll let you go on that one yeah with the acceleration in the market I think what's important is what's really dragging up the market and how much more can that go the technicals on the Uber caplet rally here look to be losing steam at overbought levels but you've seen that really the correlation Within These 500 names of the S P 500 have declined because of that separation of these handful of names versus the rest of the market and that's kind of what's bringing Equity volatility lower that might be which also has been people concerned with low breath so until we see that breath expand I don't think you see another The Surge second half do you re-allocate or do you rebalance you're not going to tell me I'm supposed to sell Apple or Nvidia right well perhaps not sell but maybe not be overweight those kind of areas so with the tech Market especially being tied with growth and the way that yields might be going higher before they come back lower we would recommend me more neutral in the space and looking for other growth options do you agree with that that we could have an option where rates go higher and the price in the Bloomberg Total return index could actually go down to new weaknesses that part of you know the mix of Mike Wilson's I mean the Morgan Stanley is different because they got 47 opinions but is the general statement there that you could have a higher yield regime at Morgan Stanley yeah I think look there's a there's a lot of um parsing the economy versus the markets here right and the economy is not the markets uh and so you can have higher interest rates trying to slow the economy but there are other factors driving different parts of the the markets I mean I think that's what is that what you're saying Anna that like because you've got just a handful of names right that are propping up the market whereas uh the economy looks you know stronger but there's a constant concern that okay rates are going to go higher but we're going to go into recession um and so I think you end up getting those differences there's definitely can be that deviation you bring up a great point there can be the economic health it can be the economic recession but what about the earnings recession I think those two can have absolutely different timings and that's what we're a little bit worried about here it's what's been in people's minds we might see a recession that might be mild and yet the consumer continues to spend as sure that you've seen but that spending is slowing so how much does that deceleration or the gamma in that and that spending really start to bleed into Equity corporate earnings and that's what we as strategists are really trying to decipher well even still it feels like some of the worst case scenarios for earnings have been lifted in the last couple weeks especially you know when it comes to profits was that premature I think it is a little premature I think you see some companies and corporates doing quite well but what's concerning is if you look on a sequential basis overall for the S P 500 you're seeing that top line revenue figures are declining faster than where the consensus EPS or consensus Revenue numbers would put it now take into account we're also seeing more margin compression than expected what happens what's remaining of that bottom line sequentially for growth now that's not to say again that could be a little different from where multiples trade and where the market can trade perhaps the market is already looking to next year's earnings but we do have to keep in mind that we need to still get there we have another six months I also want to get your thoughts on Equity volatility you brought it up and you look at the vix right now it's below 14. Equity ball has been declining but does a vix below 14 feel right at this moment well when you say feel right I would say given what's happened with the actual bounds and what's leading the mark and it's not I think that's part of what it is that index correlation that brings it down but on the other hand you know who thought with this post a pandemic regime we would see a 13 handle again so soon particularly with still the fear of recession so I'd say that I don't know if it feels right I can't say I feel quite comfortable but mechanically it seems to be the right value and now the part of the show folks where you go nothing to love on Anaheim we do this to Punisher the essay of the of last uh the first six months rather was Larry McDonald wrote a brilliant essay went out on Wall Street it was viral and all that and he starts with a massive lump of money in ETFs index funds the wall of 401k institutional money out there and then he walks through on top top of it X number of derivative strategies almost like tranches of a buildup of notional value do you in the quants at Wells Fargo feel that we are going into a second half with notional derivative instability potentials or is there Integrity to the system now that's a great point when you bring up instability because are people hedged right now when ball is cheap you'd expect the hedges are cheap but why buy this downside protection if we're only going one way upwards feels like you're tearing up money so it feels like 1987 but continue and so in that kind of environment it comes to maybe it is prudent to have some protection but we're not calling for a major pullback here or a major downturn but perhaps again that deceleration in this upward Trend we've seen so I think that if you want to put on those option strategies maintain your upside exposure but also take some off the top in terms of your stock positions and consider rotating that to the less explored in parts of the market is your study that rebalancing works I mean Harry Markowitz dying the Nobel Laureate 95 years old he's the one that gave us diversification and rebel I'm not a big fan of rebill sell your winners where are you on that well I think it depends on timing and here again we're not saying get out of your winners completely but take a little you know it's been six months and you've already gotten 33 on some of these uh names in the UTF and your passive you know you can't be too mad about that one and it wouldn't be the worst thing to take some of that home or pocket it and put it into something of the last she sounds like a traitor I mean well she was a Trader yeah let's take that home no profits you know lock in some of those gains I want to go back to uh that essay that Tom brought up I think you were having a conversation with Amy will Silverman a week or two ago about covered call strategies some of the most popular ETFs out there on the market right now are covered call strategies they sell call options and when you think about the stability of my markets and this drag lower in volatility do those sorts of strategies have any volatility masking effects it is possible and you think about if the average investor is selling calls then the broker on the other hand has to buy those calls and they need to Delta hedge so when they buy those calls they need to sell the underlying to hedge those Delta positions so you have this kind of dynamic where some people are holding these calls on their own outright other people are holding them hedged what we do here folks is when any wise derivative strategist mentions Delta Hedges we always turn to The Economist to translate she's going on derivatives in Greek letters on us would you save us with a question for Anaheim okay okay I'll say this so um it's it's been really difficult with the incoming data being strong especially when you think about jobs for anyone to believe that there's any other direction but up for equities and so you know we're looking for another big print uh on Friday and so you know it's just very difficult for investors to get get past that right so it is it that what it's going to take just a really clear slow down in jobs or really clear increase in jobless claims something in order to get people to start to think that maybe there could be you know more nefarious outcome for the economy in the back half of the year I certainly think that the employment picture is probably the linchpin that we're all looking for and that's why we're so focused on every single jobs or wages related release and so right now we expect the consensus we're in line with about 3.6 on the unemployment rate if that holds I think the market has some of that priced in already but unless we see like you mentioned something really concerning a big uptick in unemployment or some big deterioration in the wage picture for us it seems like somewhat sideways to steady going what's your SPX level we're still at 44.20 in terms of for a soft Landing now we've reached through that take the summer off what that means well you know we they are that selling may go away maybe it's the sell and June go away but we wouldn't say quite go away I do think that you could see some further upside but the question is how much more and towards the end of the year as we start realizing that consumer spending continues to deteriorate and that starts to take hold and that earnings picture kicks in I think you see a little pullback yeah thank you so much with Wells Fargo on an interesting Monday is well I I'm absolutely fascinated Katie about the idea of q1 Q2 go back and look at what people actually wrote the third the second and third week of December the second and third week of December also the second and third week of March if you think about it you know there was a lot of bearish cases built on what we saw in March that haven't come through yet it's every Economist nightmare is that people will go back and look at what we were writing but very quickly here Ellen to me it's just an extension of a pandemic we under weight the medical disaster and the timeline off of that medical condition yeah I think we do I think I think we underestimated how long the tales of covet stimulus would last I think we underestimated just how long the pent of demand for services would last especially among the wealthy like there's still a lot of tales out there supporting the economy and we're just all wondering does it just evolve into okay a nice slow down as that Fades or do we fall off a cliff at some point Alexander fall off a cliff where are you Bremo Alexander with us with Morgan Stanley and we'll continue we're really going to dive into the American labor economy here with zentner in our next section and again thank you so much with Wells Fargo today the Market's churning it's a Monday markets close at 10 20 a.m whatever it is a few SMB Futures now down a tenth of a percent and we say good morning on radio on television Bloomberg surveillance Katie gray filled in for Lisa abramowitz and Tom and we've got lots to talk about here Ford but to me and Katie let's sum up here the whole debate of through the hours this morning and the answer is there's there's six opinions you know for every five discussions for every five discussions in the markets and in the economy uh we're gonna get of course another big piece to some of the answers when it comes to the economy on Friday perhaps when we do get that jobs report expected to fall Tom that's amazing 3.6 uh near some of the lowest levels in decades well before that you know it's a really eventful week I think we're up for the colonies tomorrow but fractory orders durable goods we start on the sixth with ADP that's delayed let me figure that out that's a Thursday statistic I think with claims we get ADP with claims on the six we get the jolts in there too so the fed's going to have a lot of vision yeah Monday next than they do right now it's Hefty and then we also get another CPI print before July we know that this fed uh is looking at every single data release every meeting is live and thus we hang on every single print we got our Bramble and Pharaoh back by the CPI print I hope so I don't know yeah I don't know we're gonna we're getting a lot of talk on this this morning I mean people they they never miss me they miss Pharaoh that's what that's about green on the screen the NASDAQ up EV rivian they did something rivian did something big this morning Tesla did something big as well we're all gonna go over Fourth of July and buy an EV for 2025 delivery coming up Ellen zettner of Morgan Stanley on Friday's jobs report this is Bloomberg's surveillance [Music] U.S growth last year was about economic growth was one percent or so it's tracking a little higher today but we think it'll be slower than that for this year we're in a growth the U.S is in a growth recession today growth recession is something above zero but below growth potential the US has a potential to grow each year about 1.8 percent that's a combination of productivity one and a half plus changes in labor force about 0.3 the US is growing below that Tony crescenzi of Pimco this is what we try to do which is bring a Zeitgeist to you directly to you he is the short-term Bond expert with Jerome Schneider at Pimco and of course off uh Dan isaacson's uh Pimco interview in EFT this weekend which made Global headlines and people a little bit cautious there on on what we're going to see in terms of price up yield down duration coming in there really informed conversation Katie I'm going to say just to get out of the way before we get to the show close the teams of it just a tour de force job on a Monday yeah no the the guest lineup has been fantastic I've been spoiled you know because I'm a guest here I had some great conversation yeah James from Australia emails in thank you so much for having Ellen and it's nice to see her working from Office uh today James thanks for watching uh this morning we're this Ellen zentner of James Gorman's Morgan Stanley with us right now I saw a hockey stick chart on Manufacturing in America does doesn't matter what the details are the answer is it's something we're not used to I have a chart that went back I got a big splash with it a million years ago of manufacturing labor to our population in America and basically the back was broken in 1970 and then really broken in 2000. can we have a manufacturing Renaissance in America well we can we can have uh increasing share of manufacturing uh in the economy but these things are slow-moving beasts and the decline in manufacturing over time has taken decades to play out with larger step Downs as you said in the 70s and then as after the WTO and China's rise right more more pronounced after that and so I think you know I think we've got something exciting going on right now I think we're digging into the data and we're seeing that and especially if you go around the country and you talk to small manufacturers in the country which I have done and they'll tell you that they're starting to get more and more domestic orders of people that are onshore manufacturing they at least feel that their business is picking up now uh this feels like it could be the start of something we're seeing something there is some onshoring story there there's some near Shoring story there I think the story around Mexico's uh benefit from uh near Shoring is exciting there's a lot of infrastructure building going on across the country state and local governments have been ramping up hiring around that as well so I think there's something going on in manufacturing here that is exciting but that's a smaller share of the economy than the services side and Katie one of the unspokens here through June is is Mexican peso stunning in its Mexican peso strength through 20 through 19 through 18 you're going to get a 16 handle on Mexican peso at some point which is I never ever thought I'd see that yeah and it's you know important to remember because we talk about how strong and resilient the dollar has been all the time but there's definitely some pairs where that is not quite true but Ellen of course we have you on Monday we get the jobs report on Friday is there anything that we could get at 8 30 a.m on Friday that would take the FED off the course for a 25 basis hike later this month yeah so we've given this a lot of thought so we we have these road maps to each fed decision that we produce of here's the what we think the data will look like in hand and this is what we think their response will be and because it seems like yes they're data dependent but it feels like they're sort of locked in for this July hike I think the bar is just a lot lower than we thought it would be um that they you would have to um uh for the data to say don't hike and so I think it would be a payroll print less than a hundred thousand right because really that would get the market thinking maybe they're not going to hike in July and then still wait for that that CPI print to do the rest of the the job Horton if you've got a downside surprise in CPI as well then I think that would be the final uh um you know box to tick off that says okay it doesn't have to be a July hike right I think it would still keep the FED saying hey there still may be more to do I think there's still going to be an asymmetric hiking bias but I think it would have to be some pretty big downward misses for them to not hike in July yeah definitely an important point that we do have a CPI uh before we do get to that July decision but when you look at and I don't want to get too short-term here but when you look at sort of the expectations that are baked in for the FED to go ahead in July for you know probably the labor strength that we've been seeing to continue with June's report what do you think would prompt the bigger reaction in markets is it is it an upside surprise or a downside surprise you know I think it would be a downside surprise because the the market is is you know the fed's been really successful here the market is saying okay they're on this hiking bias and we're gonna to give them the benefit of the doubt that it could be two additional hikes from here not just one additional hiker no hikes or even pushing out the expectation they could be cutting before the end of the year I think the market has really grabbed onto that narrative and the data has helped support that so I think it would be a downside surprise it would probably get the bigger reaction are we partitioned we're part of the American public has a two percent unemployment rate and another part of the public has a seven percent unemployment rate yeah how does Morgan Stanley see the quintile makeup or decile makeup well look it's it's more around you know sort of education level uh you know the uh but the poor the bottom decile has done well off the pandemic right they have from government support which has now ended they have off of a tight labor market which has increased labor income and wage growth especially for low wage paying service sectors but we're only just now seeing real wage gains positive so it was really you know inflation was still outpacing wage gains for those folks but that Divergence between sort of those with a seven percent unemployment rate and those were the two percent it's really you go all the way to like a 13 unemployment rate and those with a two percent that has always been the case it's always been the case so what I look at is has the unemployment rate been improving across all uh uh all of of um by ethnicity uh by age um by geographic location like has it been improving across all groups yes it has and we are back to the kind of um tight labor market for the the most underserved um in the country being just as good or as tight as it was pre-pandemic yeah I look at this and Alan you know they said to me can we get zentner for the Monday before Fourth of July and I said well she's probably going to be in waiters in some trout stream in in and Chile as well but you know folks this is really a sacrifice on the part of Ellen zettner because she's going to take an infinite fly rod that I can't afford and go out in the river this is a center you don't know fly fishing with zentner the the do you do the salt water thing the Seychelles and the Bahamas not as big on salt water fly fishing I don't like salt water but uh not to fly fish you know you go to Jacksonville that's far enough yeah you go to Jackson all the Smith River Salmon River Jellystone River and all of it but Patagonia we had listeners today emailing in from Chile uh with your appearance here today and there's like the Rio Simpson like Chili's like huge trout fishing and the fish are ginormous right they're ginormous yeah they're so much bigger down there you know they don't get a lot of pressure there's not a whole lot of people going down to Chile it takes quite some time to get down there to fish and do you know that the trout are not native to the region they were introduced the brown trout was introduced they were introduced in the 1930s by the British yeah yeah and so we've got them to thank for that because so they're invasive they not invasive listen to you [Music] there's not evidence that they have killed off the native populations of fish but they have really thrived there and it's been a great industry now in Chile what's your favorite River in the Rocky Mountains of this nation oh gosh in Montana probably well I there's one I can't say publicly because I think everybody will go oh here we go see this let's say like the beaver head in Montana because everybody knows that when it is a great River but I won't say the one that's my absolute favorite because then it will get more pressure could you get the makeup when next time was that now can we get a beeper in here so we can see that someday in Montana is a is the fishing good near Jackson Hole Wyoming the third or fourth week of August hey right the runoff was really big big this year a lot of those record snows right the river levels are high and it's not been high like that in quite some time August has been really dry but if you love Cutthroat fishing then you want to be around Jackson Hole James Gorman thinks she's cut through she's going to be on the phone the first week of August I just really think I need to go to Jackson Hole to read academic papers this has been a joy Ellen zettner with us here on radio and television running Katie greifield I'm going to tear up here I'm going to miss you this was great I think it was wonderful I had a lot of fun I wonder if I still have a job Wednesday good morning thank you

Channel: Bloomberg Television

Views: 62,396

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: vt-InvrmAUc

Length: 145min 47sec (8747 seconds)

Published: Mon Jul 03 2023