♪ >> if you look at the fed. >> we still think the fed will begin cutting late this spring or summer but it is not going to be a straight line. >> we think that the fed is probably going to be on hold here at least until june. >> what we are looking at going forward is higher for longer rates. >> quite a bit more dated to come before you get to that meeting. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: i've been practicing this.

good morning -- i can't do it. good morning. this is bloomberg surveillance alongside annmarie hordern and manus cranny. jonathan ferro is not here. i am not him, he is on a well-deserved couple of days off, returning with us next week. i have to say i want to kick off with a market that is tough. for a hot second we have some inflation concerns and then those were a dip that was viable. what do you make of the fact that nothing seems to matter in this market? manus: it is almost as if the entire market has gone to a visa and already started partying. we've gone from rock hot cpi and then we got #hysterical. lisa: yesterday we had a were the sizable rebound as people shook off the feeling that we would get some sort of resurgence in elation. we heard from austan goolsbee.

basically we are looking at pce, not even at cpi. there seems to be a complacency. are we starting to see cracks under the hood when you look at some of these other manufacturers? started to talk about margin compression, layoffs, uncertainty. >> if you look at some of the reporting numbers that have come through in the past 48 hours, it is about margin especially for the bigger playmakers. but go back to what the op-ed is about. it is folly to completely ignore the cpi data. it's almost an infantile attitude to take toward the data. it has got relevance at some level. lisa: infantile. very well done. i'm wondering, we are hearing from the administration, we are hearing from janet yellen who doesn't think it is infantile, who think that probably should look at the progress. it is going to be bumpy but this

is what you're going to expect. >> and we keep going back to the fact that wages have kept up with an elation although we should note that real wages are lower than when i took office. yesterday she said americans should feel confident inflation is down to levels that will no longer with noticeable or recent them. the issue, inflation is still bothering consumers. lisa: this is what we are going to be watching heading into retail sales given the fact that we do get that as well as initial jobless claims. the expectation is for it to come in again at a pretty low number, 220,000. coming up this hour we do have julian emanuel with u.s. stocks bouncing back from the cpi surprise. wendy schiller as donald trump doubles down on his criticism of nato. and the u.k. and japan dip into recession, even though people don't seem to be paying

attention to it. u.s. stocks looking to gain back losses from this week's hot inflation trend. julian emanuel, not surprised saying the reaction to cpi was foam overturned fear. the good news is cuts are now appropriately priced given the potential for economic slowdown in late 2024. congratulations, you have the price of the week saying goldilocks gets a gut punch i absolutely love yesterday. why does nothing seem to matter? >> this is a truly extraordinary environment because nothing seems to matter on a lot of friends and frankly when you come down to it, this is still an economy, a market that is actually still working off despite two years of record tightening the extraordinary stimulus. maybe we are starting to appreciate how extraordinary the amount of stimulus that was put into the economy in 2020, 2021

and that was actually still buying bonds to start 2022. that has gone much longer than people would have thought, and frankly you are now at this point where a lot of the data is counterintuitive to a market that keeps rising and so you gotten the most -- emotional, and now we are in this chase. we haven't had these kind of conversations is 2021. lisa: i'm getting a little bit emotional. you're talking about how there are all these extreme yet not irrational valuations, yet the headwinds are there. how difficult is it for you to convince people of this given the fact that people can look past it and see a lot of names respect to earnings, particularly with leaders in this market? >> what you are seeing day today in the small-cap indices, up two, down four. and again this morning, meeting

lots of lots of cognitive this it's -- cognitive dissonance. this is a point where people are paying more attention, as they perhaps should, to the price action rather than the fundamentals. we think there will likely be a time where the fundamentals do sort of take a front and center stage that says ok, let's pause here, let's digest the gains, but we are not there yet. manus: if we got to have a moment of pause, i know they are historical and they are from before christmas, but you see people like michael burry capitulate. if the put option on semiconductors, and i was wrong. so he has cut his losses. i use the word capitulate. do you think we see more of that or has that run its course, those kind of movie where people throw in the towel on possibly being short on this market and trying to fight against? this is a rising wave, i can't

afford to be out of this. >> if you look at the past, he got to 28 times earnings at the top of the bubble in y2k. you are at 22 times now. our work says that on a one-year forward basis your expected historical return is zero. that being said, we will probably get a better look on the pitch elation next wednesday -- capitulation next wednesday when the stock is the market right now, and we all know what that is report earnings. you look at the move in those shares up 45% year to date and you could go 20% either way next week. manus: you actually think on reporting day they could swing by as much as 20%? it is going to have a much more

pervasive and wider influence apart from just its own movement, isn't it? >> it absolutely has and it has in the last several quarters. in fact if you go back to the may quarter where there was the original my goodness, this company can actually report earnings that we've never seen before, it catalyzed an entire market run-up from may into july. lisa: you've talked about the defense of the position. is it also having a larger than average portfolio of bonds at a time where people are concerned about inflation, people are concerned about the fed, but not concerned about a downturn? >> and they are not concerned about the inverted yield curve. when we talk about bonds we are just as happy to be in cash right now because again, part of the narrative around bonds this yes, japan is falling into

recession, as we learn of the u.k. is falling into recession this morning that the atlanta the gdp is 3.4% and in that environment, you will clip your coupon and you will probably get some capital appreciation if the economy slows as we think it does toward the end of the year. lisa: two people throw straws at you when you walk into a room and start telling you go into caching defensively positioned stocks? >> here is the rub. first of all, that is never an option because let's go back 40 years. you don't time the market in that respect because when you do, you sell your stocks in march of 2020 and you don't hold on next four years. but there is a way, and this is part of the conundrum of this

year, his strong u.s. economy. what sectors are underperforming this year? consumer discretionary, industrials, materials and energy. go figure. manus: i was going to talk about japan but you have curveballled that. what does that say about the silent recession that many people say to me is happening? we are coming to the end of savings, to the end of covid money. what does that say about the underbelly of the economy? >> that message is not yet clear, the concept of that message not being clear is the flipside, is what it says is everyone is buying technology, communication services which is actually in air view has a lot of defensive properties and we like that sector and strangely enough, health care. it is that kind of environment

but you need to stay invested, but you can also have an eye toward defense as well. annmarie: how much can the u.s. continued to grow when you wake up and japan is in recession, the u.k. is in recession? >> th that we all thought coming out of the pandemic there would be this element of synchronization and if nothing else, china really interrupted that calculus by staying in covid zero for too long and that is part of the story. the thing about the u.s. economy is it is much more insulated and self-contained than the rest of the world on the order of 70-75%. it can go on until it doesn't and frankly, the most important economic number is the every thursday at 8:30 jobless claims number.

that is on the ground real-time data the health of the economy we have inserted back yet at all. lisa: so we are two hours and 20 minutes away from the most important indicator of the week of all indicators that we might potentially get. what is the trade ability of this number and retail sales which is another rate on the health of the u.s. can tumor -- consumer? >> the clear implication is don't trade the numbers. because if you traded cpi, you didn't have any time to sell or short the market. if you went and did that after the number, you are already far underwater given the bounce back had yesterday. this is one of these times were you have to think about your risk reward and know that there is a difference between the institutional investor whose own risk is probably greater missing the upside vs. the retail

investor who should probably be thinking as we encourage at times how do i feel here? do i feel a little degree? if i do, -- greedy? if i do, let's reconsider. and let's make sure you make money by buying pullbacks. and if you think that you're going to be a seller down 10% or 15%, you should be trimming your holdings down. annmarie: you're sticking with us. we will ask are you feeling greedy? julian emanuel of evercore. an update on stories elsewhere, here is the bloomberg brief. >> celebration turned into chaos in kansas city. at least one person dead and more than 20 others wounded in a mass shooting during the kansas chiefs super bowl victory parade yesterday. authorities say at least eight of the victims are children. three suspects are in custody. mayor lucas says the white house and federal agencies have offered assistance while president biden renewed his call

for an assault weapons ban. morgan stanley is planning to cut several hundred jobs in its wealth management business. it would affect less than 1% of the 40,000 workers. the cuts will be the first and the new ceo who took the helm in january. morgan stanley cut more than 3000 jobs last year at the bank looked reduce expenses amid a drought in dealmaking. for the second time this year a u.s. company will try to put a spacecraft on the moon. the moon lander built by houston-based intuitive machines took off this morning on a spacex rocket from the kennedy space center. it will attempt to land on the moon in about a week. if successful it would be the first privately built lander on the lunar surface. lisa: thank you so much. ukraine aid facing an uphill battle. >> $60 billion, with a b.

they want to give $60 billion more and i said wait a minute, do it this way. loan them the money. if they can make it, they pay us back.

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♪ lisa: retail sales and jobless claims, this is bloomberg surveillance alongside annmarie hordern as well as manus cranny. jon ferro on a well-deserved a few days off. right now we are seeing markets with another lift after an incredible retracement yesterday. stocks futures going still above 5000 after clawing back some of the losses made on fears of inflation. what inflation? 5024 on the s&p. the euro gaining vs. the dollar.

even with some weaker than expected data out of europe go into that in just a bit. the 10 year yield down just slightly again. a time when people are expecting the fed to still cut even if inflation is a bumpy road lower end of course, crude a little bit lower as we talk about the oversupply. under surveillance this morning, ukraine aid facing an uphill battle. >> $60 billion, with a b. they want to give $60 billion more and i said wait a minute, do it this way. loan them the money. if they can make it, they pay us back. if they can't make it, they don't have to pay us back, loan them the money. why should you just handed over to them? do it as a form of a loan. lisa: defense ministers meeting today with u.s. efforts to further assist ukraine deadlock in congress. donald trump doubling down on his criticism of nato, bloomberg reporting that trump may scale back nato commitment and push

ukraine to negotiate with russia if elected. brown university joins us now. i've got to be honest with you. at a certain point i can't parse out the noise from the signal. how much are you looking at this and saying that there was something behind here other than just luster -- bluster? >> trump is trying to remind people that he was president, he did deal with world leaders, he does have a position or a philosophy which is that you don't spend u.s. money on conflicts abroad when there is no direct u.s. interest and he has said repeatedly that rush is not our enemy and this is not our war. and he is tapping into a strong vein and the american public of avoiding deep military conflict for deep military assistance. what is basis thinking that they

have fallen behind and they are not getting things in the u.s. government domestically, it is a powerful argument to say we shouldn't be sending $60 billion in aid abroad. lisa: i mean, the whole idea of this aid that it is money, is actually weapons, u.s. money back into the industrial complex in that old weapons will go to training. but when he talks about a loan to ukraine, how much is that putting pressure on congress republicans to continue this paralysis when it comes to the ornate bill? >> i think he is putting tremendous pressure. you seeing yet another republican member of the house who is chair of the homeland security committee say he will not run for reelection. having almost a record number of members of the house step back and republicans walking away from house representatives the republicans were walking away don't want to face a trump onslaught. they don't want to have to do his bidding not only now, but if you win to the next two to four years. you are seeing a reverse trump effect on the actual infrastructure in the house.

and you are right, the biden administration has done bad messaging on ukraine in the sense of asked leaning what those dollars actually buy, and they support the u.s. economy through the defense industry. lisa: we woke up this morning to new comments from vladimir putin talking about president biden. he says to russia state tv he is a more experienced person, he is predictable, he is an old-style politician. what do you make of this? who do these comments actually help when it comes to the race in november? >> it's an interesting sort of muted attack, if you will, on biden. obviously the trump-putin connection, trump has said favorable things about putin and it has not hurt him among his base. i think the russians technically want to stay out of 2024. i think they would prefer to see trump come in and i think they are testing the messaging in the american public of making russia the enemy. is it still working for biden,

is it still working for the democrats? that is what they are doing. certainly trying to dig at biden and see if that plays in the american voting public. manus: it is only a backhanded slap, he is predictable, old-style politician. i want to hear your take on this bifurcation proposition that trump puts on the table about nato. how concerned -- we're talking very clearly, an attack on one is an attack on all. but for the nato allies, this is a very clear indication, that if trump arrives in the white house, the real risk is that the u.s. close out of nato or is that just extrapolating too far? >> i don't think president trump will pull directly out of nato if he is president in 2025 but there is a pattern. he pulled out of the iran deal, he pulled out of the paris accords, multilateral. he is not a multilateral and he will not support sending lots of

nonintrusive or the nato, which is something created out of world war ii because it is poised -- for its mission is really to support russia. i don't think that he would feel supported and pulling us completely out of it or not coming to their aid when he looks at the polls. he doesn't technically have the right to run for reelection again, so that is another thing to think about. what does he want to do it for years because this would be it for him, for years in office if he believes that. these are the kinds of things europeans and nato allies have to calculate but i think he likes generals, he typically listens to generals so i think there will be a huge push against complete withdrawal from nato. lisa: as a political historian, does it frustrate you that with all of the calls on the democratic side for joe biden to consider somebody who is younger and newer and fresher to the political scene, that there has been no movement on that front? >> as i've said before i do think that joe biden will run if

he is healthy enough to run in his own mind. he has time and he is the leader of the free world. yet the leader of what is now the most vibrant economy or close to the most vibrant economy on the planet and he doesn't think that anybody else in the wings can beat donald trump. at the convention if there is a real push, they could nominate somebody else. party conventions used to actually select the presidential nominee so there is a way for the democrats to do this. clearly, his allies in the white house and he himself do not believe that he will be tanking in the summer. he is waiting for donald trump to trick himself up in more public appearances. that has been the pattern in the last six weeks. ask us in april or june, i think that will be the biden response. lisa: we will ask you in april or june, hopefully before then. thank you so much for being with us. so glad to cs, julian emanuel of

evercore. all of these people who come on say the market is not going to go down in an election year. the fed is not going to hike rates including and despite some of the concerns or talk recently that maybe they need to combat inflation. how do you factor in the silly season of elections into some sort of thesis? julian: let's decompose that. the fed is not going to hike rates in an election year and that is part of why the market rebounded yesterday. when that cpi number came out, we had a number of people say the reflexive reaction is oh, the next move is a hike. no way, not happening in front of the election. goolsby came it on camera to remind people that that is the case yesterday. this is an incredibly complex environment i don't think i need to tell that to anyone. it is no great surprise. but when you think about politics, the temptation to say it is an election year, they are

stimulating and that is good for the market, that has proven to be the case so far, but our work says that this is an extraordinary election year. the control of congress as we see by the incredible focus, normally no one would really care about, but when the house has 10 or fewer seats in the balance of power and the senate, two or fewer, that means volatility this year and that is what we are going at. lisa: that's what people keep saying, buckle up. the buckle seems to only matter because it just keeps going up. julian emanuel of evercore, thank you so much. always wonderful to have you, a wonderful friend of the show. coming, airbus shares falling after the company admits it is evidently not just boeing. kes it easier to find the right plan for my team. i think i'm going to need new glasses. no problem. you're covered. choose benefits without the mess.

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lisa: two hours until the most important date of the week. we also get retail sales, a look at the u.s. consumer that has powered a rally that has defined almost all expectations. getting a little bit more added to it, up 1/10 of 1% in the u.s., after crossing at 5000 line again yesterday. basically cpi hotter than expected. nasdaq futures up about the same amount. russell 2000, the idea that it sold off dramatically in the wake of the expectation that may

be the fed would have to hold rates higher for longer and yesterday, retracing how much exactly is the sort of the trade that is the way to play rate expectations and interstate fears? frankly, the first place people go when it is risk on. manus: if you think goolsby came out, and his comments yesterday took some heat out of the cpi. stop getting hysterical over this cpi print, focus on what we've been known to focus on which is bpce. we don't have to make it all the way to 2% basically to begin the cutting cycle. one of the interesting conversations i've had this morning which was the slowdown in japan, in u.k. and europe is more malevolent from an perspective. not an equity market perspective, i know you would cry heresy that the u.s. equities can survive without anything from the rest the world. but from a rates perspective, the ecb and japan are going to be on different trajectories because their economies are so under pressure. lisa: which is the reason perhaps people are piling in.

fears basically tempered africa got some of the comments from austen goolsby who as you just heard manus say was wheeled out. not sure it was particularly orchestrated. the two year yield down from a sigh as 450 six as people really try to figure out whether the fed will still cut rates. seems as if they are still on that path. you take a look at the differential, this idea of weakness over in europe, over in japan. and if you bring that through the currency exchange, what is interesting here is this idea that not as many rate cuts could actually bolster the euro region, though we did hear from christine lagarde saying is premature to cut, still trying to sound hawkish as they try to getting ration under role. let's get to one of the topics that just doesn't seem to go away. israel will not sent delegates to cairo for talks.

prime minister benjamin netanyahu is calling demand from the militant group illusion a. they are demanding a total withdrawal of israeli troops in gaza in return for the release of hostages. meanwhile israeli forces are preparing an assault on the southern gaza city where it says hamas fighters to remain. i have to say i don't really understand the back behind the stories. i don't understand where u.s. influence is, i don't understand, does this mean we are not going to get some sort of cease-fire or that we are making progress and this is part of the negotiation? annmarie: a few things we need to remember. according to israeli press, this a lot of pressure on netanyahu to send a delegation for those talks earlier in the week in cairo. so to say that israel is not going to go to the second one, i'm not surprised if they were really reluctant to go to the first. the new york times and the last hours reporting that israeli troops had entered a medical complex and gas already.

what the israeli military is saying in their statement is that they are conducting a precise and limited operation inside this medical complex in southern gaza, and this is going to draw a lot more condemnation from a lot of individuals around the world who are saying enough, given the death toll of palestinians. lisa: do we have a sense of whether president biden's policies shifting at all or if there is a shift in rhetoric? annmarie: we've seen a lot of those reports about what he is calling benjamin netanyahu the scenes. this administration is definitely frustrated. i democrats in congress have said they don't want to send more aid to israel without strings attached. that bill is still shuffling around. we are not sure when that will see the light of day for a signature from the president the fact of the matter is you do see democrats starting to definitely take a shift and it is a true enzymatic pressure on biden turley tried to get israel to what he said with over-the-top. manus: he had a meeting with the

king of jordan the other day, where joe biden said we need a credible plan for more than one million people sheltering in the king of jordan goes on to talk about the catastrophe certain to produce a humanitarian catastrophe if this scales up the way it is presumed to do. lisa: on a lighter topic, hedge funds are helping to fuel the rally in big tech and ai. it is a hard pivot. according to reports, amazon, intel and nvidia were among the top targets for investors. just this week nvidia has surpassed both amazon and alphabet. it is now its own country, the country of nvidia. when i look at 13f filings, do i care about them? they are looking at a moment in time at the end of the quarter that happened a year ago -- not really, but you'll like it -- it seems like it doesn't really take into effect short

positions. is it tell us they are praying like everybody else? >> what is he doing? yes capitulating the theory. it gives you an insight into emotion. julian emanuel just summed it up. the stock that he can't name, and that is the more pressing move. you have to be living under a rock not to realize that tech was widely scoop up. lisa: so it is good for storytelling. manus: it helps bloomberg surveillance. lisa: more fed speak, a different kind of storytelling on deck. rounding up the week, investors looking to retail sales and jobless claims about two hours from now.

we also get u.s. ppi and the consumer sentiment survey. to me, this is the conundrum. you either have good economic data that lead to inflationary pressures for you start to get a slowdown that creates some sort of pressure on both political sphere, but also potentially enough to bring down inflation. to be here any acknowledgment yesterday from janet ellen about this difficult moment and how it has been difficult to messaging typical to forecast? annmarie: the administration will continuously say there is more work to do when it comes to inflation. look where we started, look where we are now. and they understand that this is heading especially when you look at the recent inflation report. these are food prices going up, some energy bills when it comes to electricity going up, insurance going up, daycare going up. they understand it is hard for the everyday american consumer

but they are going to say people are starting to feel better about the economy. but will that remain the same as inflation continues? lisa: this is going to be a key question especially given some of the stimulus that evidently keeps accounts full. meanwhile it is not just boeing. airbus striking a cautious tone. the playmaker saying they expect to deliver a lower than expected planes this year due to -- you got it -- supply chain issues that are continuing. the ceo speaking on bloomberg brief earlier today with the one and only manus cranny. >> we have for 2024 for around 800 deliveries. coming from the guidance last year that was 720. we are on track with a ramp-up to reach 75 planes per month in 2026, so that is basically what matters for us. we are roughly in the ballpark of what was to be expected in

terms of ramp-up so i consider we are on track with plans. lisa: george ferguson of bloomberg intelligence trends us now. it is not just boeing. are the airbus issues on par with the same that we've just been lambasting in their american counterpart? george: they are not, because they are not having the quality issues. the ramp-up actually was a little better than we expected, but i'm sure there were some more exuberant people out on the street who thought he could go even higher. but i think they are really trying to control quality here. they are probably going to hold that as it increases a little bit and it is going to cap the ability to take market share from boeing. maybe the market is a little disappointed about that. if one company is having problems, it is a good bet that the other manufacturer is, two.

manus: how credible is the argument that now is the moment that they can really make a at boeing's expense? he wouldn't answer during the process of renegotiating with boeing. this is a classic moment where you go on an aggressive marketing campaign, sales campaign. do they have the capacity to deliver on those, and will they get a tailwind, excuse the pun, from the debacle on the other psych? >> that would be a very good case in point. you want to win those customers for a long time. you want airlines to buy a lot of airplanes. and that just makes it really hard to get wins because you've got to find a lot of capacity for airplanes. those airlines want it in the near term, not in the long-term. the backlog is seven plus years long.

you can't move supply chain that quickly in this is this. it is already stretched. you can't push it that hard to get 150 airplanes for united in the next three or four years. it's really hard on this business, especially where we are now with backlogs because boeing is having a problem. this one of the saving graces right now. manus: do the evolving and the ceo have responsibility in the end? they were negrete -- aggressive negotiators and that is ultimately the objective, to deliver equity shareholder return which is about delivery margins and to a certain extent, the ceos of these airline companies are going to take responsibility for the negotiation practices with the supply chain. will it change? >> i think it has to. boeing already changed part of

it, adjusted some of the reimbursement for the aircrafts, especially 737, 787. we saw better results this quarter. right now airbus is in the middle of those negotiations as well. at spirit our expect -- i would expect results. at raytheon, i think the engine makers have more power so i think that is less on the manufacturers and the negotiation for better margins and more on rtx management and what they've done to accomplish the plan. lisa: george ferguson, thank you so much for catching up with us. let's catch up with other stories in the world this morning. let's get over to the bloomberg brief. >> bitcoin is once again leading the crypto market higher, climbing past 52,000. the move is part of a broader rally that also sends ether back

above where it was before the stablecoin collapsed two years ago. bitcoin has surged 22% year to date, pushing its market cap above $1 trillion for the first time since december 2021. cryptocurrencies have been gaining the menton thanks to the debut of that coin etf. cisco shares are falling in the premarket after the largest maker of networking meant slashed its full-year forecast. it also said it would cut about 5% of its global workforce, about 1000 jobs. the restructuring will cost about $500 million. cisco is grappling with a slowdown in corporate tech spending as companies worry about the state of the economy. nvidia scorching rally continues with the chipmaker surpassing the alphabet market value. it comes just one day after the company overtook amazon's market cap. the chip giant is up 49% this year with the company now worth $1.83 trillion, making it the

world's fourth most valuable after microsoft, apple and saudi aramco. lisa: up next, u.k. sliding into recession. >> we've moved from how restrictive do we have to make policy to get back to target sustainably to for how long do we have to maintain to achieve that? >> that is next. you are watching "bloomberg surveillance."

♪ lisa: building on gains, welcome back. jonathan ferro, lisa abramowicz, annmarie hordern. john is off today, anne-marie is

in and so is manus cranny. markets continue to climb. why not buy if you can? that seems to be where people are at. the euro gaining just a touch, a question of policy response after weaker than expected data from that area. 10 year yield up just about three basis points but really markedly higher after that cpi print that came in hotter than expected. this to me is a really interesting story. i'm wondering what you think. supply outweighing some of the demand. we've heard that today from a couple different groups including opec. annmarie: what is interesting at the fact that you still have oil under pressure when there is huston the in the middle east. the fact that the who these still remain to be able to hit vessels going through the red sea and you have supply having to take this very long, cumbersome journey around

africa, yet oil is still holding up. how much lower would it actually be if we saw no hostilities? and a lot of this has to come down to china. until demand gets back in china this is where levels are going to be. lisa: demand in the u.s. has been so different from elsewhere. this idea that the u.s. kind of stand alone when it comes to some of the exuberance and we see the u.k. falling into recession, we see japan falling into recession. markets don't care. manus: even abroad, the rates market has responded in the u.k.. nearly 80 basis points because from yesterday. so there has been a reaction function in that. maybe they will have to go a little bit earlier and a little bit more than we presumed just a week ago. inflation as well in the u.k. came in a little bit better. there's a couple of different facets going on in the u.k., and

in the european market, the european economy. this is where the narrative might shift. we've been talking about the u.s.-u.k. and europe. now we talk about a more concerted monetary policy reaction function, perhaps a little bit earlier than anticipated. lisa:lisa: the u.k. sliding into recession. >> the big changes that we've moved from how restrictive do we have to make policy to get back to target sustainably to for how long do we have to maintain these policies to maintain that? services inflation is still above 6% so that is not compatible with 2% sustained inflation. it has got further to go. lisa: you kgb falling in the fourth quarter of last year, sliding into a technical recession. the campaign to bring down recession is taking its toll. japan is also the latest country to slip into recession.

the economy now falling behind germany to become more largest in the world. joining us now to let us know what we are missing, chief economist at axa. it looks like a recession, it sounds like a recession. markets are treating it like a recession. do you have an excellent nation? >> because it really doesn't feel like a recession on the ground at least. here we are talking about the european definition of recession. contraction in gdp which is what we had in both the u.k. and japan. my guess is that if we were to use the definition of what is a recession, i'm not sure the u.k. would qualify. i'm not sure japan would qualify. one key ingredient which is missing if the reaction of the labor markets, and what we've seen is actually the opposite in the u.k., the employment rate remains extraordinarily low even by historical standards what makes the bank of england's job

very complicated is that we have a concerning news about wage growth. so it is a very strange situation where yes, indeed is stagnating and slightly contracting, but there is no impact whatsoever on the way the labor market has been operating. so i think that if you asked people on the street in the u.k. they would probably complain about the level of interest rates, the difficulty to buy houses and so forth. when they treat this as a proper recession? as long as possibility of losing one's job or main limited. manus: good morning, we are pricing at 80 basis points of cuts before the end of the year. we had a little bit of a jolt in the rates market. to what extent would 75 basis points of rate cuts and the united kingdom dramatically change or significantly change the growth trajectory if japan

is in recession, europe is in recession, the u.s. might even slow down. what impact with those rate cuts have if at all? >> you are right in the sense that we are talking about a fairly muted response. at this stage, you would move from very restrictive to restrictive stance which would not necessarily change. i still think that there is one signal at least that the bank of england could give even moderately, which is on the housing market. it is a key focus in the u.k., always has been. in the u.k. you have higher than -- a very quick transmission of changes in the bank interest rates to what people actually pay at the end of the month on their mortgage. it has been muted a bit in the

last few years but still there is a quick transmission. other european countries and certainly what would find in the u.s. even at a psychological level if you want, creating some relief. manus: how concerned should we be that we are already in a deep policy era in europe? we have mr. nagel yesterday giving germany for out of 10 for its health status and i would say it is a bit like a pug, one breath away from a heart attack but how desperate is germany, how desperate is the position? for out of 10 is not a good scorecard for school. >> september rate hike was probably not necessary, is sufficiently restrictive level to bring about inflation.

i think we have to be cognizant of assertive control shift that has taken place at the ecb since the departure. a higher power of -- balance of power within the governing council. yes, it is very possible that it is going to be a bit late in the reacting and getting rates. however, when it comes to germany, i really don't think that it is the stance which is the main issue. germany is in a status of recession because interest rates are too high. they are in this situation biggest structurally they have made decisions which are coming back to bite them right now. so yes, rate cuts would probably

help the margin, but i don't think it would literally move the dial in the german case. that recession is ok, a product of global conditions, but it is also the product of structural shifts which have been happening in this country to the last 10 or 15 years. lisa: we just have about a minute left. i'm wondering if you see the neutral rate, the rate of inflation, the rate of growth in lower. that rates will reflect that. >> i sympathize. one of the big differences between the u.s. and europe is about proximity. we don't fit in europe. one of the key ingredients to think about equilibrium interest rate is potential growth gains. in the difference between the

two sides i think is massive. so i agree there is a good case for a persistent gap between the two on policy rates but don't forget, the dominant bond market in the world is the u.s. if there's resistance of long-term rates in the u.s., it has an effect on europe as well. >> thank you so much. really interesting to hear about just the structural differences and how that is going to play going forward. coming up next, carlos of stellantis and ira robbins of value national bank breaking down some of the hottest topics of the moment, whether it has to do with the vehicle transition as well as, worse, competition with china and worse, commercial real estate on some of the smaller banks, some of the issues. no issues and equities which are climb back losses after a higher-than-expected cpi print. yields just a touch lower heading into retail sales and jobless claims with a seemingly

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>> if you look at the fed, they have been talking about patient. -- patience. >> it will not be a straight line. >> we think the fed will be on hold until june. >> leslie cuts the market expects. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz and emery. lisa: good morning. jonathan ferro is off today. i am here with amory and manus. i cannot get over the resilience of a market that is immune to the potential for a down side surprise, whether it is economic or not. manus: i think our guest really captured the narrative. that comes on isolation was very real in the equity market. what happens outside the border, it leaves you with this

isolation. lisa: the isolation of company but also for good reason. you have the upside surprises. it is also share buybacks dividends. you have to wonder. manus: it is not just buybacks here. we have seen a number of other. it is about rewarding shareholders. can the margins hold up to continue to deliver? lisa: it raises the question of some of the cost-efficient. we hear about layoffs being announced that are otherwise

performing well. manus: 5% of the workforce. lisa: how do you make sense of this? it is a difficult economy and this is why it has been a difficult stage to communicate at time. the economy is a little different. anne-marie: all the other companies that they cannot afford further demands. they had a huge fight. now you have the cash on hand. lisa: i really do want to use specifically how some of these negotiations affected the ability to cut in certain places.

is there an acceptance that there is a trade-off and a difficulty, keeping the margins but also meeting some of the demand by labor? annmarie: they are going to want to be on the side of labor. one of their biggest, compelling pictures when you look at a swing state like michigan. the biggest issue will be retail sales. how much is the growth on the back of the consumer? overall, it is coming down, but at what point does the higher inflation actually impact sales and consumers? lisa: there is a push back further lower-priced items, but maybe not as much. coming up, we will be talking

about the equity rally. like we mentioned before, stellantis ceo will be joining us. and valley national bank ceo will be running us on what he is seeing on his own balance sheet. stocks regain some of their games, hotter than expected. equities will likely see volatility in the first half led by a rally in the second half. see moshe -- i'm curious. this, what we're seeing right now, does that count as volatility? >> one of the things is there is an upside, but what happened is there is enough ambiguity about

the backdrop to enable a lot of the momentum to continue pushing equities higher. that could be some seasonality. but there is the consideration of what is the most important indicator for the fed and corporate is taking a lot of notice. a lot of it is related to evidence that you have a strong economy. look, it is early days. we do not want to make any major decisions but we do know we need to watch carefully because as were talking about, there could be significant implications later this year if you do not see cpi continue to fade. lisa: what you do with this?

that should boost valuations later on but not now. how do you arrange your portfolio when everyone seems to be buying ahead of the debt? >> trying to trade these numbers is so tough. we are taking a six to 12 month perspective, expecting a slightly lower economy. historically, if you have that soft landing coupled with peptides, that is going to affect equities. we are looking at more cyclical trades. things that have had more of a volatile period. that is what we are trying to take advantage of now. manus: good morning. when it comes to equity

allocation, is it still america first for allocation? we have u.k. in recession and japan is in recession. >> absolutely. we have maintained the u.s. -- we have a number of consent for this year. not just on the basic economic side. we think they are potentially concerned about the fallout from the u.s. election discussion and what is going on there. from japan, there has been a bigger conversation. we have had overweight japanese equities, but we have had some concerns starting to grow. one of them is that the economy looks like it is slowing down.

i think, given valuations, you could see them closing out the trade and looking for something else. it is all about u.s. equities. manus: you detect any semblance? highest level since 1989 and the dollar-yen above 150. our guest on bloomberg coal talking about a conservative estimate. is there any sense of really long, overly exhausted? >> we are starting to hear those conversations with clients being a little bit more cautious with more questions about the japan trade. it has been pretty good and worked out pretty well. but can we honestly expect it to

continue? when you look across the economy and where is the real economic strength, what parts of the global market will be the most impacted, it feels like the u.s. continues to come up on this. there is a waiting interest in the markets. lisa: are you following in? >> we continue to be very cautious about china. we know policymakers the past have introduced significant policy schemes, but at this point in time, going from the narrative to avoid over leverage , we think it is quite likely that they will do anything that

will significantly improve sentiment towards china. that is what we are more concerned about. latin america, seeing the fundamental valuation and a positive way. but it still kind of bleeds back to the u.s. manus: all roads lead back to the u.s. we are about to talk to the ceo of stellantis. the buybacks in the u.s. have been phenomenal. in the european sector as well. how sustainable are those? how much do you pay to that? >> the fundamentals are looking a little bit more concerning. we are watching that.

it has come back to those margins. one of the areas, you have to relate back to that margin pressure. happy times can company continue surveys prices? on the third time, they start to lose interest. at that point, did they start to cut labor or as an investor, do you think, led company will be able to maintain that pressure? manus: what makes me laugh is post again, it was heineken the other day that said volumes will be done next year because cannot sustain these prices.

consumers are voting with the euro, the pound and the dollar. lisa: it is a very different cohort of where he can get the pricing power. let's get an update on stories around the world. >> a celebration ended in chaos in kansas city. at least one is dead and 20 others injured. authorities say at least eight victims are children. three suspects are now in custody. white house and federal agencies have offered assistance while president biden renewed his call for an assault weapon ban. cutting the profit outlook for the year. farmers are buying fewer tractors due to falling crop crisis.

the machinery makers has been under pressure due to declining income in the sector. it came as a reported first quarter earnings that beat estimates. for the second time this year, he was company is embarking on a mission to put a spacecraft on the moon. it took off from the kennedy space center this morning. it led to submit -- it will attempt to land on the moon and elite. mission comes after failed attempts from companies like israel and japan. >> we think 2024 is a tricky year, but you will see things picking up. lisa: that is next.

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lisa: welcome back. we see a little bit of a lift markets. classing that line. people still see supply as overwhelming demand. one of the key question than the auto manufacturers. a bumpy road ahead for electric vehicles in particular. >> we think 2024 be a tricky

year but 2025, you will see things picking up. that is my view. ev will be dominant. it will be they strong, i think. lisa: warning about a turbulent year had. a drop in market share and softening demand. i am so pleased to say the ceo of stellantis is joining us. is it because of the lack of demand or competition from china? is it because of politics? >> i think it is because of all the things you said. we said it was turbulent.

it is now used diminished turbulent situations. economics and geopolitics, geology, competitors, we expect 24 to be quite turbulent and dynamic. stellantis is all about sports. it is in our dna to race. we like turbulence because it is competitive. you can demonstrate that you are better than the other guys. we like to show competitive age for the company. lisa: i'm curious about some of the increased costs due to the labor she nation and the state. i wonder how that is featured into potential cost-cutting or other measures to offset some of the higher.

carlos: what is the most important is that we deliver on our mission. this is our mission. we have a challenge on affordability. it is around 30% to 40%. we need to absorb it and we need to absorb it by a better design. by more efficiency in everything that we do. we need to make sure that the end of the day, when we go to market, we have the most optimized strategy. all of this is creating a huge area for optimization that will mitigate the additional cost, in

order for as to make it simple. this is the mission that we have and we ask act to work hard at that. we are recognizing that we did not do everything right. all the things that we did not do a perfect way 2020 three represents many opportunities to do it better in 2024 and give a chance to rake in knee-deep products. annmarie: does this mean more wage layoffs? ira: carlos: it means -- carlos: it means that we are in a transformation. it is not an addition.

we are expected to transform our industry to a more tech oriented industry. what we are going to do is transform. let me give you an example. we have been creating a significant division of software engineers. just take care of the new electronic architectures and making sure that the consumers -- we are getting tons of jobs on software engineering. so, transformation mean it is not an addition. it is a change from what happened today something different. it is something we are instructed to do.

manus: can we discuss the further transformation? the market wants to know where you and the chairman are. the market expects you to produce $30 billion. how aligned are you? you are talking about it and he is pushing back. you are the ceo and we know you are an advocate. are you actively lobbying to engage? are you odds or together? carlos: i think you just have to be carefully what was said by the company and our chairman in the sequence. when those speculations appear,

we said there was nothing ongoing. there is a statement and press release from the company at that time. hours later, it was confirmed. i do not know where you see a misalignment. i want to confirm that there is a perfect alignment. there are no ongoing discussions. there is a perfect recognition that in the future, the companies that are not fit to face competition may put themselves in trouble. we are not among those because we are one of the most profitable on the planet. we expect to stay healthy. if those opportunities come, we will be there. but it was confirmed either chairman a few hours later. so there is no misalignment and

no discussions right now. that was speculation from a number of media. if you know where it is coming from. lisa: even without making any -- carlos: i think we can. the only question would be this being at which we progress. i think we have enough ideas and nothings that we are not doing perfectly well that we can do better. i think the supply chain has been changing significantly and gives us more cost competitiveness in everything that we do. when we look at the pool of ideas that we have to bring it down, it is quite large.

and of course, we are embracing that in a very exciting way because we want to get the job done quickly. are we going to be able to do it as fast as we want it to? that is something we will see in the future. the european market, we are looking at a new trend. $25,000 with full equipment and features. it is perfectly fit to face the competition. it has some profit. it is already there. lisa: unfortunately, we have to leave it there. this is bloomberg. ♪

lisa: an hour until key economic data and retail sales. right now you are not seeing much drama in market as they continued to claw back gains. fittings some -- creating some turbulence, climbing above 5000. nasdaq also gaining. people are retracing some of their higher for longer. in the bond space, it is similar. all yields lower as people look

at 4.22%. i have to say that this is kind of where we are at this morning. quite a bit of weakness, gaining just a touch. let's get straight to it. under surveillance this morning, considering a nato makeover if trump wins a second term in office. some advisors also discussing getting ukraine and russia to negotiate an end to the war. vladimir putin praised joe biden for being better than russia than trump. seemingly trying to pile on other concerns about his age. what you make about that comment? annmarie: last time i was in a room with putin was added the

2016 election. he did not want to weigh in on it and said he was willing to work with anyone. there has been some reporting that people in the kremlin said they did not understand trump because he is too unpredictable. this is likely putin trying to weigh into u.s. politics because that is what he does. annmarie: everyone -- lisa: the u.k. slipped into a mild session. marking the second straight quarterly decline. japan also slipping, pushing back bets on when the bank of japan -- economists at this. a pretty big mess. you would expect there to be a pretty big selloff in stocks

because it raises concerns about the health of the economy. exactly. it speaks to this fear and that we have in the market. manus: the rights market did react. it looks like a recession does not feel like a recession. we still have jobs. lisa: what is the monetary impulse and response? meanwhile, nvidia passing alphabet. showing little sign of slowing. making it the best performer. basically the best performer ever. the third-largest company behind apple. julian was saying that the

earnings could single-handedly shake the enthusiasm that we have been seeing in the market. manus: it can either fill or kill the motion. it will still work kill the ai trade. lisa: as long as they beat above 20% more, everything should be fine. there have been so many questions. more than 10% this year. concerns about inverted yield curve. targeting roughly. the company saying nice. we remain comfortable. we value and benefit from regular dialogue with leaders.

i robbins joins us now. can you talk about what people have wrong when they talk about the concentration of commercial real estate and this being a significant concern? ira: everyone looks at it and assumes it is the same type of loan with the same type of borrower. every loan has different things associated with it. whether it is a single-purpose loan or an occupied individual. the geography makes a significant difference as well. our average office is a very small type of loan. a doctor in an office new york city. it is different than what you see in other portfolios. lisa: there is concern that we

have not seeing a real pricing. how much have you had to be price assumptions of your holding at a time when mortgage rates have skyrocketed and there is a lack of demand in certain areas? ira: there are different variables. the other is behavior. what is happening from a behavior perspective? are people changing behaviors on what offices they want? that is important when you look at the risk. we have not had to be structure. other portfolios have had -- it goes to the uniqueness of each organization.

every commercial real estate loan is not the same. manus: we say in this room and talk about commercial real estate and the pressure that can be brought to bear the economy. what have you brought the credit committee together for? have you given the credit team a new, definitive lien that is tighter and smarter? ira: credit across the entire piece has been back. we want to hundred to 300 basis points of stress test. the environment, 3% to 6% on what we are doing. now we are testing hundred basis points up. i think were always about what happened with the actual cap pre-. we have them get down to 3%, which is crazy.

we are trying to be more granular. manus: it is about the long look capital. 550%. commercial real estate book is 550% of your overall capital. are you comfortable with that? are you really comfortable with that? have they come in and said it was excessive? ira: once you get over 300% in capital as you are describing coming there is additional scrutiny that to be performed. they have looked at our portfolio and there are standards with the. we only have 421 million regulated in new york city. the type of concentration you have is very different. much of it is occupied.

those are actual borrowers. it is their cash flow that supports the payment. it is important to have a good time. we feel like we have a good dialogue and much. look, they have to do their jobs understand what is going on in the market. there is scrutiny and they are coming in to spend more time looking at that. i do not think it is anything out of the ordinary. lisa: when you take a look at the way that some congress members are trying to propose new regulation, you. why are you laughing? ira: it is an unbelievable irony about the sector today. what we want for 2024 and how

think about? we want to make sure that every business has an opportunity that there is a diverse system. is this the regulatory structure that you create? the answer would be absolutely no. we have frb that is responsible. credit unions -- it is a challenging environment, especially in the banking industry where they are focused on competent of trust. people are concerned about keeping their deposit as certain banks. one week link creates that confidence and trust. lisa: you expect a number of banks to go out of business? ira: we have challenges with what our banking system looks like.

look at canada and other countries. are they better off? it is dynamic. it is not as dynamic as the u.s. it is done by the explict valley and banks that are smarter than us. when we do not have a level playing field based on the dichotomy of what is going on, it is bad for the u.s. economy, bad for jobs and bad for the future of our country. manus: we debate about this room . i'm curious as to if there is pent-up demand. there is a board of people waiting to borrow. talk us through here jesus and the strength of the business without rate cut. ira: just look at the slope of the curve.

manus: the longest in history. ira: you have crazy actions that happen. that is what is happening. business models were not made to make an inverted curve. for how long? any type of normalization will be positive for the banks, whether that is long or on a server. i think the banking environment and country will do better. lisa: the problem is a lot of the things you are talking about right now, you do not have a lot of control over it. he did not have a lot of control for appetite in certain areas. how do you survive, thrive and make money and environment stacked against you? ira: i always said, we are not creating franchise -- franchise

values relationships that you have. that is what our focus is. once again, it is hard when you're in an environment with a curb. 10.6% commercial household. franchise value growth is definitely happening. lisa: in the upcoming segment, we want to talk about commercial lending and retail lending at a time when the u.s. consumers seems to be very strong. iva robbins will be sticking with us. let's get an update on stories elsewhere. max -- >> it would affect less than 1% and a group of about 40,000 workers.

the first after he took the helm in january. the bank looked to reduce expenses amid a drought and dealmaking. colorado is the second state standing in the way of kroger's acquisition of albertson's. seeking a preliminary injunction that would prevent the deal from closing. the merger would leave communities with less access to groceries. it comes after washington filed a lawsuit over the deal. they have been reviewing the proposed takeover for more than a year. airbus is planning to deliver 800 aircrafts this year, slightly lower than what analysts expected. striking a cautious tone. investors had hoped for a more ambitious output.

boeing was forced to cap delivery plans after accident saw a fuselage panel blowout. lisa: up next, aia is driving nvidia higher. >> the ai revolution is playing out. who is leading eight? it is the godfather of anti-. now this title wave is coming. lisa: we will talk about dan ives and his incredible wardrobe. he wants to give advice to jonathan ferro when he returns. you are watching bloomberg surveillance. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options.

but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. lisa: figuring out whether we

need to carry. it is the everything rally, sort of. not a lot of drama here. 107 point 46. crude is off just a touch. supplies will continue to outweigh demand. under savannah this morning, guess what? ai is driving nvidia higher. >> this is the biggest tech trend since 1995. who is leading it? it is the godfather of ai. now this title wave is coming. whatever the knee-jerk reaction, this will be another massive quarter that shows monetization of ai is here. lisa: a lot of people are banking on that. the latest is nvidia's market cap. no one heard about it a couple years ago.

earnings are due next wednesday. could this shatter the market rally perception? or will it be just another blockbuster that we stock up to the books. >> i think they will probably deliver as they have done in the last few quarters. the question remains. the market is treating everything -- there are a lot of incumbent companies like intel. they are going to get cannibalized in terms of existing chips that they sell. that is not being priced in perfectly right now. everyone is bullish on ai. but overall, and i spending will, but it will come at the expense of existing ip revenue.

that is what the market still needs to figure out. manus: in terms of what they deliver relative to their peers. this is what you get relative to other people. >> the market still seems constrained. you're looking at what they are doing and what the governments are doing. the governments are looking to build their own because they want proprietary. that is a schiphol demand. i would argue that nvidia is probably over earning. the normalized lever -- the normalized level would be lower than this but the are setting the bar so high. it will continue for a couple of quarters. manus: what could cause nvidia

to trip? is it capacity? is a constraint? what is the constraint that nvidia might face? >> they want to use their own vertical integration. about what apple has done with smartphones. they used their own ships. at the data center server level, which is very dry seeing a massive cycle, this is randy's companies -- they would want to use their own ships. governments will still die from nvidia. it gives them ubiquity in terms of being used in any data center. even the pricing, these companies do not would suspend every year just buying from

nvidia. lisa: thank you, as always. we will be catching up with you either tomorrow or the day after. iva robbins is still with us. before we get into some of the lending picture, i want to ask about and i and how it is affecting your business model. is it theoretical at this point? ira: i think technology is something that we are focused on. but i took over as ceo -- today we are $62 billion. being able to take technology and embed it in an organization is critical to growth. i think ai still needs to be played out. and it affects how you are making decisions.

it is -- until you see the actual input being used. lisa: interesting about the fair lending and how you acknowledge that. you have increased your consumer book quite a bit. are you seeing the resilience and strength that we keep talking about but faults underlying those loans? ira: we have a lot of consumer loans. i think the consumer is a little bit more stressed. but i think there is a resiliency. while we see a little bit of take -- uptick, they are pretty anemic numbers to begin with. annmarie: this is the latest data that we have on credit cards. how concerning is that with delinquencies? ira: it is scary.

someone was describing their individual income. we stress that out. consumers are focused on the payment. it is a lot of money. credit across the country, they are extending and creating the ability to live in debt. at some point, there is a day of reckoning. manus: your job is to grow the business. you see fraser taking in -- the city has been in constant change since i was a child, but she is doing major changes. dropping off, where is the opportunity for you? are you happy being who you are?

is there an acquisition? as distressed points come, more issues will drop. are you prepared to stand up? is that your ambition? is that what you want to do? ira: we serve our clients. we will do teen -- we will do two to $3 billion in loans this year. we focused on making sure we serve our clients. there are only 11 banks our size in the entire country today. do we serve a purpose? the answer is absolutely yes. i am excited about the opportunities for us. lisa: coming up, we have these young and the chief economic strategist.

scout motors ceo is an offshoot and is looking to create some electric vehicles at a time of incredible transition. we are still talking with stellantis' ceo. take a look at the u.s. consumer. yields are lower as people pare back some of those inflation expectations and take a look at supply that continues to dwarf demand. this is bloomberg. ♪

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>> if you look at the fed, they have been talking about the need

for more data. >> we had it late spring or the summer, but it will not be a straight line. >> we think the fed will probably be on hold until june. >> we are looking at higher for longer rates, less rate cuts than the market expects. >> there is more data to come before you get to that june fomc meeting. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: 29 minutes and 20 seconds away from the key data point of the economic dump we have gotten this week. welcome back. from new york city, this is bloomberg surveillance, alongside annmarie hordern and manus cranny, i am lisa abramowicz. jonathan ferro off for a well-deserved couple of breaks. i will not say he is ditching his duties, but i will say it is a good thing to take time off when it is deserved. markets are treating water, a

sense of positivity, yields off some years highs, but to me, the retail sales number will be incredibly important given the incredible strength an upside -- after upside surprise and economic data. manus: you will need retail sales longer to corroborate the dispensing with the showdown you had in the bond market earlier this week on the back of the cpi, so you have that disruptive moment, #hystericalresponse, so you need a strong retails number to help you with the tailwind. lisa: but not too strong, a goldilocks. manus: you cannot have it all. lisa: we can try, and that is what markets are looking for when there is the expectation of retail sales coming in negative, which are a softening without some sort of mass layoffs. if you get an upside surprise, when is it too much of a good thing? manus: i think, you know, to

send a message, look, we don't need to get fully to 2% before we start cutting, and can everybody calm down? we have had several people react to that, and several people have said that is a folly. lisa: i am very calm but concerned because i am looking at jobless claims and i am trying to figure out if we see a labor market that hangs in there, and it is somewhat dissident. if people have jobs and feel good, they spend, and that creates a tailwind to inflation, which is not good. at what point do start seeing concerns about a labor market that otherwise have been incredibly strong? annmarie: a good question for the white house, when you look at unemployment over two years below 4%, they may know that inflation is hurting american consumers and this is something they are trying to stamp out, so what happens when people start to lose their jobs?

and then you have higher inflation at the same time. at the moment, people are not. we are seeing some layoffs, but the data is showing that it is a resilient economy. lisa: what i find fascinating is the difference in generations. i am excited to talk to our next guest to focuses on young investors. if you see younger households, we talk about things of that nature because they cannot afford to buy homes because prices are too high and mortgage rates are too high, as well. how is that coloring the political discussion? younger households have not been able to enjoy the same kind of boom with investment returns of a certain level of housing equity and other types of benefits that markets provide. annmarie: the younger generation has put a lot of pressure on the administration to do things like student loan buybacks or student loan relief and help. they are pushing the administration to do more, basically saying to the biden campaign, we need to see more equity, more relief given the

property ladder and in order for us to vote for you, so there is a bifurcation. lisa: the bifurcation is playing out in markets, as we head into about 1.5 away from the trading day. a lift across the board as we retrace from the worst selloff of the year, at least for the russell 2000. quick blip and then hysteria died with the rebound. s&p 500 up about one -- about .1%. people play the rate game. 1.0744. 10-year, 4.22 percent and crude lower as people parse through the 13 billion barrels of surprise demand where there is

greater weakness. coming up, liz young, chief executive scott keogh, and citigroup's veronica clark, as we look ahead to win this economy will this inflate. we begin with the countdown to key economic data. retail sales and jobless claims coming in less than 30 minutes. investors hope it will provide more clues on the fed's path forward. liz young said a few short weeks ago, marcus expected a total of six rate cuts beginning in march. current pricing shows four cuts not beginning until june. that was fast to read stocks are not shown yet much fear over delaying the first rate cut, not the persistent yield volatility, and the reality is people are still buying or at the very least holding. liz joins us now. do you think this is a sign of the strength of what is to come or do you think this is a cautionary tale of our exuberance?

-- over exuberance? liz: if you look at the state of the state right now, there is classic late cycle behavior going on. we have seen a resilient market, perhaps not as strong of a rally as last year, but resilience in the face of what would have been considered bad news, so the rally at the end of last year predicated on the idea mainly that without the fed would come back and pump liquidity in, lower rates in march, and investors got excited because it sent the message that we could support valuations at this level. so, slowly, in 2024, we are chipping away at that thesis. can we support valuations at this level? if cuts come later in the year than expected, i would say probably no. some of the data continues to be strong. gdp data continues to be strong. at this point, investors have not yet gotten enough bad data to feel like they needed to exit markets. that is why there is still buying appetite, even after this

week. we saw the huge selloff on tuesday in reaction to cpi, but it was one day and it has not recovered it all of it yet, but you did see some buying at the end of the day on tuesday. and then we had marginally up yesterday. you look like we will do ok this morning so far. -- we look like we will do ok this morning so far, so there is not a lasting fear baked in yet. lisa: and you are suggesting people should be more worried and there will be more ripple spelt of freight cuts are pushed out and you expect higher for longer? what has been the response when you tell people to be more cautious? liz: i think intellectually, people agree that we are not really sure what is happening. it feels like the uncertainty of this year is higher this year than last year and 2022. at least we knew what path we were on from the fed. 2020 four seems uncertain and we are hanging on data that we have not paid as much attention to in

the past, so now we are hanging on labor data, consumer spending data, we are concerned about credit card delinquency rates rising, so i think people agree with the idea that they have to be more cautious, but this late cycle behavior in the market just breeds fomo. you watched the stocks rise up, and people signal believe in the moment, so momentum has been strong. investors continue to see that. there has not been a big enough reason to jump out of the market and not take part so far. manus: good morning. one of the phrases over christmas time on the show was weaponized market. it feels like that. we talk about jobless claims, and they are uniquely important fingerprints of what is going on in the economy. but i wonder have stock reports taken on a similar kind of heft? we talked about nvidia the past couple of hours, putting 9% on the year, taking over amazon,

and it has got the capacity to shift this sort of exuberance at the magnificent seven level. do you think this is a dangerous mark of where we are that we will be so focused on one stock, one report defining our sentiment? liz: that one concentration is dangerous and i would caution investors, especially in some of those names, i think the magnificent seven has turned into the magnificent four, but when you look at them and you have triple digit gains in those names, it is something to take either. make sure you are not overly exposed to that, but here's the good part about hinging on some of these reports. we want the market to trade on stock fundamentals. if that is the case, that is a much healthier market environment than one that is overly sensitive to every macro data print. the other piece of that is if

nvidia, for example, in this space they are in, let's say they get guidance different than what was expected, the risk, because we are listening so closely to one name, that name bleeds into the entire sector or the industry group, and that is what i think investors are overly concentrated in, so we are hinging off one company is reports to tell us what will happen in the rest of the group, and i don't think that is the right way to look at it. i would like to get their next week and have it just to be done and over with, survive it and then get back to a more rational environment where we expect rate cuts at a normal time, not too soon or too late, and then starting to think about what do earnings look like through the rest of the year? earnings expectations on the whole are pretty lofty for 2024. i would still expect some to be revised downward. manus: i love a more rational market, i love that. earnings are going to be driven,

i presume, in part by the ability to sustain margins. one of the arguments is about wages being higher, eating into those margins. we just saw stellantis, giving away $30 billion, and a huge pay date with employees and the uaw union workers. i know it is different sectors and margins, but what will that mean to solidify the rally in equities? liz: i have had an issue with margins, and story about them for a while because the math doesn't really work. if the fed is expecting less than 2% gdp growth, i am having a hard time figuring out where 11% to 12% earnings growth comes from. you are talking about the wage story and eating into costs for companies. that is true. it has been absorbed through 2023 and parts of 2022 because

companies raised prices, so they were able to raise rice's and revenue in order to offset the increased cost from wages. now we are at a point where the cat is out of the bag and inflation is down, so there is no more justification to raise prices. the issue for consumers is that companies have not really dropped prices so we are at an elevated level, we just stopped raising them so much. if we continue to rise, that eats into margins and pressures companies, so then they have to go back and see if i would like to preserve my margin, i will have to cut costs somewhere. it has been my take that companies have already cut a lot of costs in advertising, labor cuts. tech companies made a bunch of cuts over one year ago, so at this point, what is left? the things left to cut are typically labor, the last thing companies would like to cut, that is at risk in 2024. i heard a guest earlier talking about how the consumer is still

spending and strong because the labor market is still strong. that is strong, but the risk with that is that the labor market is always the last thing to crack, so right now it is strong but that doesn't mean it will stay strong if companies are trying to preserve those margins. you have to think about the entire thesis all the way through and how that will work out in the math equation. lisa: which is a reason why some people are focused more on jobless claims and retail area thank you for being with us. let's get you an update on stories, here is bloomberg's update. >> bloomberg intelligence police believe russia is considering a nuclear weapon in space. the news comes after mike turner warned the public of an unspecified national security threat and demanded the u.s. seek material. jake sullivan is expected to meet with members to provide more details.

when asked yesterday, sullivan said he was unable to comment further. bitcoin is once again powering the crypto market, climbing past $2000, part of a broader rally that sends ether back above where it was before the d stablecoin collapsed two years ago. it coin has surged 22 years to date, pushing its market cap above $1 trillion for the first time since december 2021. cryptocurrencies have gained momentum thanks to the debut of it coin tx. -- bitcoin tx. the u.s. company will try to put a spacecraft on the moon. it was built by intuitive machines and took off from the kennedy space center this morning on a spacex rocket. it will attempt to land on the moon in about one week, and if successful, it will be the first privately built lander on the lunar surface. it comes after failed attempts by companies from israel and japan. that is your bloomberg brief. lisa: th you.

next, an electric vehicle makers expanding, despite challenges. >> right now, we know that we have challenges on affordability, meaning we need to absorb the additional cost of the ez technology. that is -- ev technology. lisa: that is next. you are watching bloomberg surveillance. ♪

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what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. lisa: taking a look at markets with a lift, about 13 minutes to go before key economic data. yields lower, as is accrued at a time when people wonder about demand -- as is accrued at a time when people wonder about demand. ez makers are expanding despite challenges. >> we have challenge on affordability, and that means we need to absorb the additional

costs of the ev technology, around 30% to 40%, so we need to absorb it. and we need to absorb it by a better design, a better designed to costs, by more efficiency in everything we do, in our supply chain and logistics. lisa: subsidiary scout motors expanding vehicle production in the u.s., as headwinds, including price, structure and mass-market adoption impact legacy brands and startups. joining us is a scott keogh, president and ceo of scout motors, in front of the new proposed manufacturing plant in south carolina. i would like to start with why you would like to get into electric vehicle making at a time when so many larger auto manufacturers are trying to get out? scott: it is a long game, not a short game, so a few disruptions is not where the action is at three of the market is at 8% and will move to 40% to 50%, that is

millions and millions of cars, so there was an opportunity, and we would like to pursue it. lisa: you are building something in the u.s., which i am assuming is deliberate in response to some of the recent policies. i am wondering how difficult it is going to be to compete with china at a time where costs elsewhere are more expensive, both with labor and some of the actual raw materials based on where they come from. scott: competition is what we are used to, that is what the automotive business is about. if you look at what scout is doing, the strategy is nearly perfect. america is a huge market, we are localizing the supply chain and attacking costs. the fact we are starting with a clean slate and we have the purchasing power to give us good terms of trade on cost, you have to compete, but that is why we have a roundup platform and factory to compete on costs and make a great vehicle.

manus: good morning. the design looks great. i have done a little of the desert bashing when i lived in another country, and it is great fun, but how sick can the market -- thick can the market get for you here in the u.s.? who are you going to compete with in this space? scott: i think you are certainly in the zone. there are two types of suv's in the market, mainstream, going around town, suburbs, the malls, and then there are can-do vehicles, things like that offender, broncos and wranglers to what do these vehicles have? strong communities and loyalty. manus: where are you going to make the most money, at the upper end? scott: write down the middle. we are building a car for mainstream america, pricing it

around $50,000, and that is where we will make our money. if we can make them at that price point, great, and if somebody would like to equip the car higher, that's fantastic, but you have to make money at the base and not just high-end. lisa: to get tax relief from your government, a lot of what you put in the car has to be made in the u.s. or a u.s. allied, but when you look at how batteries are made for the ev's, the entire supply chain to make that battery, the processing comes from china. what is the mix in your car? scott: we have not fully identified everything, but there is the consumer side and the industrial side, where you make it, the power and everything else. our goal is to take maximum advantage of the incentives on the table. there is a strategic opportunity in america that will last a couple of years, and we would like to take advantage. do we have every last detail laid out? no, but our goal is to seize the moment. there are a lot of people seizing the moment.

when you look at that industrialization in america, it is through the roof. it is the chance of a lifetime frankly. that is why we are pressing our advantage now. annmarie: one ceo talked about how he is staying on the sidelines when it comes to how he will deploy the money he has for ev's depending on the upcoming election. do you plan to potentially change the path forward for your company depending on who wins the white house in november? scott: no, i think the northstar is the same, build a great electric vehicle in america, make product and brand americans love. that is the northstar and will go for decades. you cannot run a business on the moves and shifts of politics. at the end of the day, the money is going towards american jobs and manufacturing. i think americans support that. you see it across the board. i think the core infrastructure will stay there, but we run our business based on the consumer and the cost, not just political movements. lisa: do think if there were no

tariffs or barriers on chinese electric vehicles coming into the u.s. that u.s. auto manufacturers could compete when it comes to selling ev's? scott: this is conjecture and speculation if this or that could happen. frankly, the automotive business in america has been here in a long time -- been here a long time and competed a long time. if you look at the vehicle we are making in the percentages targeted for, they will love scout, what we are offering, but we do need to compete, and we will. there have been competitive threats across the globe and in all sorts of countries. america is used to competing and will compete. the smart thing about the brand is make a product americans love. i have not seen it yet, and that is why we are making it. lisa: what has the barrier been with respect to electric vehicle sales and why they have not taken off as quickly as others expected in the u.s.? scott: i think there is a fair amount of noise, before you say

disaster is here, first and foremost, one million were sold last year, 8% of the market. it was zero a little bit ago. there are focused on. the double-headed of material cost increase, plus the financing and charges. financing at 250 dollars a month for a car payment, so when we head into a normalized inflation environment, look at the cost of batteries going down, so cost is number one. number two is infrastructure. when we come to the market, there will be 10 times more chargers in america than today. third and final is a standard. there is no standard. now, rallying around in acs, there will be one standard. so it is classic adoption, get the cars on the road, get them seen, and away we go. what i have not seen is the consumer saying i don't like it. the consumer is saying, this is cool, i like them, so that is what you need to attack.

the others are adoption challenges. we need to address them. lisa: scott keogh, thank you. president and ceo of scout motors. we are five minutes away from some key economic data, breaking retail sales and jobless claims. we will speak to veronica clark to react to those numbers. the expectation is for some sort of ongoing just sort of slow growth of initial jobless claims, 220,000. we expect a negative figure, but when we strip out autos and gas, the expectation is for it to eke out a small gain, the goldilocks, as many talked about. this is bloomberg. ♪ psst. hey, sarah. hi. if you had to choose, would you listen to elevator music all day or deal with payroll compliance? payroll compliance, for sure. wait. for real? switching to gusto made staying compliant much easier.

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lisa: just about 25 seconds until key economic data. what is more important? retail sales or is it initial jobless claims at a time when people say the key is about the labor market? the expectation is for 220,000 initial jobless claims. expectation is for a headline decline of retail sales of 0.2%. key question across the board, will there be ongoing strength? running us to break it down is michael mckee -- joining us to break it down is michael mckee. what do you see?

michael: we expected bad news on retail sales and it is down .8%, the forecast was for .2% of decline. cap the country was under piles of snow in january and that may have had something to do with it. autos down .6%, and the control weight down .4 percent, expected to rise 5.2%, so not good news anywhere in the retail sales report so far. jobless claims at 212,000, they dropped from a revised 220, so better news on that front, continuing claims at 8,195,000 to rise by 30,000 during the month, so people may be slower getting jobs, but that is two weeks delayed, so today's drop in last week's claims has not made it into that yet. the philly fed comes in higher, a 5.2%. we looked for -8.1, so good news. import prices up .8% on a month

over month basis and year over year basis, down 1.3%, so inflation pressure on a monthly basis not working its way so far into the year-over-year numbers, and finally in this palouse a of data, empire manufacturing, -2.4, better than the -43.7 that we saw in the month of january, so an awful lot of numbers. i will go through them and breakout retail sales numbers while you break down how the markets react to this. lisa: i am looking forward to see what you parse through. it is what you would expect given the fact you have a downside surprise and a lift to equities. basically no change because it does not change the picture, the fed is going to be on the cutting bias, and that will give a reprieve. s&p futures up .1%, same with the nasdaq and you could see a

bigger pop and the russell 2000, and talking about rate sensitivity, what you see, yields lower, not much lower but lower than what they were on the session, down five basis points for 20 on the 10-year, two-year yield on five basis points. people looking forward and seeing more likelihood that if people are spending less, maybe the fed can cut rates sooner than expected when we got the cpi print. wen yu translated, weaker dollar, stronger euro, stronger pound, almost down to flats with the pound, even after the pound reeled on the face of a u.k. potential technical recession, 1.2563 on the pound-dollar cross, and the euro at 1.0764. you have been parsing through the numbers. there is a question of it all comes down to jobs. if people have jobs, they keep

spending. so what went wrong in january that caused a much bigger than expected decline? michael: it does look like the theory that the weather did play a big role held true here. the biggest declining category was building materials, home and garden supply dealers, down 4.1%. i suspect that is because nobody worked outside, and many already had enough snow shovels, so we saw a big decline. smaller clients in other places. gasoline prices went down, so gas station sales down 1.7%. furniture stores were up, as were food and beverage stores. up slightly, .1% for food and beverage stores, and then you look down the list, general merchandise stores, department stores, little change. non-store retailers down .8% rate food and drinking up 0.7%,

so perhaps it was the weather or a little exhaustion from spending all that money in november and december. the thing to realize always with retail sales is it is volatile, and we will revise it next month as retail sales were reported up .6% in december, revised down to .4%. so not a good start with retail sales for february, but jobless claims numbers suggest companies are not reacting. manus: let's talk about the jobless claims. 8000 212,000, and they said this is the most single important print every week, so this is still well-behaved, isn't it? michael: it is and gives an indication of what companies are thinking on a fairly timely basis. of course, we have to realize that jobless claims are always revised heavily, so while we are

at 212, we could go up or down a little when we get new numbers next week. the continuing claims numbers have not moved that much. we did see an increase in claims the prior week, and that is what the continuing claims is based on. so continuing claims probably go down next week. overall, the labor market remains healthy, and people spend when they have paychecks, and that is a reason we have seen strong spending up until this month. lisa: thank you. we will catch up with you throughout the day to understand more details as they come out. veronica clark joins us now, citigroup economist. how do you make sense of numbers that are disparate and don't necessarily cohere with one another? veronica: in one sense, you have numbers for december and january that will be hard to interpret, maybe because of the weather but also seasonal adjustment around the holidays. i would not read so much into

this sales report read we have had a string of six or seven months where we have surprise to the upside and the consumer has been strong, and maybe there is a seasonal adjustment issue, but we are watching for signs that may be things are slowing down, and this is an early indication. lisa: jobless claims arguably are even more important and we are not seeing it to cap but it is -- tick up, it is slowing down. it has not shown up in cpi, jobless claims, or other metrics like job openings. veronica: that weekly jobless claims number is the most important to watch, and initial claims are still low, consistent with what we have seen for many months where widespread layoffs are not quite happening yet in terms of the data. we have seen an increase in continuing claims, especially after the reference with the january payrolls report, so those are adding a bit higher,

consistent with what we have seen in hiring and slowing down, if you do lose your job, maybe it is taking you longer to find work, which could be the early sign that broader things are slowing down, so definitely watching the initial jobless claims number. if that takes up, that would be a turning point. manus: i see you still have a call for recession, and you look at the survey data, but fund managers survey is the first time in a number of years that the call recession has ceased, so what are you on the other side of that trade? veronica: one issue is it comes down to you believe this high level of rates is restrictive or not? we do think it is, and the longer financial condition stay tight, you will see that impact activity and slow down. we did see the early signs of that back in october and november, and the unemployment rate ticked up slowly, hours of

work that are falling, all those early signs you would expect to see, six months or nine months before recession, and we are watching the data for the spring to see that turnaround because some of the december and january data has issues with seasonal adjustment and might be hard to read into, but nothing has told us yet that that weakening is not happening. manus: we have had severe whiplash this week in equity markets, bond markets, and we have been guided by the only thing that matters is the pce, perhaps the more important facet to keep in mind. should we completely ignore what happened in cpi? say it is a one-off? and it is not where we should be focused? veronica: no, i don't think that's right. we did see genuine strength in cpi, and the fed is targeting

core pce inflation, and we've had six months where it is around 2%, 1.9, and that may change when we get a stronger pce report for january because those elements of strong cpi are going to go into that number. but i do think we saw some pretty genuine strength that was consistent, strong services inflation, and that is in shelter prices and non-shelter services. i think it is telling you that companies experienced a larger than usual labor cost increases the past year, 4% to 5% wage growth, passing that on to higher prices. manus: are you a believer in the evangelist movement that ai is going to deliver such phenomenal productivity gains, as we saw during the greenspan era, referred to as the new paradigm? do you believe in this productivity nirvana that is being proposed? maybe it will come in time. your take. veronica: i don't have a strong opinion yet, but if we do get

these big productivity gains from ai, it probably would be over the longer medium-term. i don't think that is the story this year. we have had very strong measure productivity growth the last year and strong activity, but i think that is also just making up for this funkiness we have experienced in the macro data the past four years. lisa: you have had a real bold call, and i have been struck on how you double down on the idea that this is a hotter than expected inflationary environment that will require a longer time that the fed has to hold rates where they are and will lead to a hard landing. how much have you pushed back your timeline for how long the fed will have to hold rates high? veronica: it does seem like the fed is set on cutting rates this year, and our first basis was june, but there are a number of ways that even with stronger inflation data, they can get there, and even if the monthly

print stay a bit stronger than comfortable, i do think they are cutting, but we are fairly firmly in the not soft landing camp, and you need to see a broader slowdown to get 2% inflation. lisa: have you pushed back your expectation for when the fed will cut? does that matter less than the cumulative effect of rates where they are as they have been the past couple of years? veronica: we have not really pushed back the expectation. i know markets a month ago were pricing, you will cut as soon as march. we have been more middle of the year. we expect the cut in june, but the question is that six months, until we get there, less than six months at this point, is that going to keep financial conditions tight enough to slow things down? it may or may not. if it doesn't, i expect you still see some uncomfortably high inflation data. lisa: veronica clark of citigroup, thank you. let's get an update on stories elsewhere.

here with your bloomberg reef -- brief. yahaira: colorado is the second state blocking kroger's $25 billion acquisition of albertsons. the state attorney general is seeking a preliminary injunction that would prevent the deal from closing. he says the merger with leave some colorado communities with less access to groceries. the move comes one month after washington filed lawsuits over the deal. the ftc has reviewed the proposed takeover for over a year. nvidia's rally continues with the chip maker surpassing alphabets market value. it comes one day after the company overtook amazon's market cap. the chip giant is up 49% this year, and now worth 1.80 $3 trillion. making it the fourth most valuable company in the world after accra soft, apple, and saudi aramco. microsoft -- microsoft, apple

and saudi aramco. spacex is looking to move from delaware to texas. it would be the latest elon musk venture to ditch delaware. muska's criticism of the states cost after a judge struck down his $56 billion pay package for his tesla ceo. he is threatening to ask shareholders to incorporate tesla in texas, as well. lisa: i have got to say, he was saying he would do it. everybody said, of course you would say that, but is this sort of the beginning? annmarie: he did it with spacex, but can he do it with tesla given it is a publicly traded company? he is encouraging more, calling governor abbott saying we are moving to texas. this is how much this is lipservice versus a call to action. lisa: next, investors parsing through disappointing retail sales and what it means for the fed. rob waldner of invesco joining

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thanks, bro! you've got more options than you know. book now. lisa: this is bloomberg surveillance. annmarie hordern is here, manus cranny is here, jonathan ferro is back next week. retail sales data, much lower than expected, the latest coming in, down 0.8%, estimates called for a decrease, 0.2%. futures rising, bond news falling, good news is good news, bad news is good news, s&p up .2%, the euro gaining a bit more than the dollar, 1.0766, a bit of strengths and treasuries, yields lower, down.

what i am looking at now is how this translates into a longer term view of a market that was on the brink of overheating with the cpi data, thendashed, and now who do you trust when it comes to economic data providers? rob waldner, head of macro research at invesco, joins us. what do you make of the data? rob: i think if you add the data that we got today, which is retail sales are disappointing, some of the regional industrial surveys are better, and then you add that to cpi data we got this week, and you are getting a lot of noisy data today, probably affected by seasonal somewhat, but i think it all fits within this context where we think the u.s. economy continues to move forward with decent growth, and we have seen the highest inflation.

we are in a disinflationary environment, but as cpi data was pointed out, as it continues to come down, disinflation continues to last, and a few bits will probably be slower and bumpier then we sought earlier throughout much of last year. lisa: i am struck by which data point is more important, initial jobless claims or retail sales? veronica clark said it is the jobless claims and the fact that we still see that health in the labor market. as long as that is the case, you will have a risk of inflation having a bumpier path, so at what point do you start gaming out june, july and september rate cut for a federal reserve that seems to be pretty patient? rob: i think i would agree that the labor market here is very capable, and retail sales, there is a lot of seasonality, credit card spending seems to be ok, so i think looking at the labor

market is key here, and we do see signs of labor warming, so that has kept income stronger for people then typically we see at this part of the year. i would look for the jobless claims, but we think the level of growth we have, and if disinflation continues, and, of course, the cpi data this week added uncertainty, but we think the trend is toward disinflation and the fed will probably cut in may or june. manus: good morning. that is a little bit ahead of where the market managed to push the rate expectations the other day, pushing it into july. given what you are looking at, delinquencies are not hi, and people are talking about measure delinquencies, so they are not that worried about the real estate exposure, etc.. you still quite like credits.

those spreads are tight. rob: there is a basic conundrum, which is that the macro backdrop is positive. so it steady growth, disinflation, the fed moving towards cuts, very good macro backdrop for all markets, which is why credit spreads are tight. equities are doing well, and the technicals of credit are strong. there is terminus demand for credit. valuations -- there is tremendous demand for credit. valuations are tight. i think the thing we need to remember is what matters to investors is you can get something close to 535 or so and investment-grade credit today, and over a longer term, that generally looks attractive. manus: that looks attractive to me if i am sitting in a cd and looking at the investment-grade credit note, when it comes to $6

trillion and money market funds, the migration of the money would be much debated long after i have gone back to bloomberg brief and off surveillance, but that flow of money, do you think it goes more to equity than credit or vice versa, given that kind of ease at the moment? rob: well, you point out there is 6 trillion out there and when the fed starts to cut, the rate they are getting paid on the money markets will come down, and first, to fixed income, eventually equities, but first, to fixed income, and i think high-quality credit, that is one of the reasons why it is so well supported, if you can lock in for a long time high-quality credit better than you get in your money market, now is a good time to do it. manus: so if the flow goes to credit or into credit, as you say, and then equities, it is not going to all through in all

out and it took a considerable amount of time for an incidences to arise to put that money into money market, one was yield two was idiosyncratic risk in regional banking, so that portion will cash play as a defense mechanism for the rest of 2024 because we have got some hop, geopolitics, and election coming up -- rob: yeah, we need to watch carefully because you pointed out the amount in money market funds. actually, it has still been growing. even now, with the fed saying they are done, expecting a rate cut, it has still been growing, so it is not that there has been massive flow up yet, so when does that start? in any substantive way. that is probably when the fed cuts rates because two-year

point, cash is a safe asset in that it is basically government credit and you are getting a good deal for it, but the only risk is reinvestment risk, and once you start to realize the reinvestment risk, that is when investors will be motivated to look for alternatives. lisa: we got remarks from the director of the white house, prepared remarks, and she talks about the u.s. experiencing faster disinflation than peers, and the united kingdom falls into recession, when will this catch up to the u.s.? rob: that is a great question because, the u.s. just seems to be well ahead of most other countries. you pointed out that the u.k. data today points -- technically it puts the u.s. at a technical recession, and the u.k. in a technical recession, and

european growth has been tepid, unexciting. chinese growth has been unexciting, and the chinese economy is now an outright deflation, both in ppi and cpi levels. in the u.s., we have had good, nominal gdp growth outpacing the rest of the world and very substantial, so at the endgame is there is hard to know, but it involves the fed getting through this rate or starting its rate cut cycle in an environment where the dollar or the pressure can come out of the dollar and the dollar can come off and that is supported for growth elsewhere. lisa: what is your most contrarian bet right now? rob: the most contrarian right now? lisa: yours, yes. rob: well, -- a great question. i think the contrarian bet would be that we get a recession and

rates rally substantially. that was the narrative the beginning of last year, and if that develops this year, not consensus, but a risk. lisa: thank you for being with us. wonderful to get your thoughts. coming up, sarah hunt, greg valliere, jp morgan's cassie barrow and steve ricchiuto. manus will be with us tomorrow, and will be plowing forward with the uscentcom survey. annmarie: i have not gotten the call, and i would also like to be on the under end of those. lisa: would you do what jon does? come up with skewed projections? annmarie: and see how much of an impact it makes. lisa: i think basically just looking at gasoline prices, and then plot out your feelings. this is bloomberg surveillance.

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dani: surprisingly, market after the cpi surprise tuesday. .the countdown to the open starts right now. ♪ >> everything you need to get set the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪

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