. so, i think i had a lucky and blessed existence that way. >> inflation has been more stubborn than expected. >> inflation is insidious. that said, we have continued to think it is the second half of the year where the rate cuts happen. >> the market is content to price in a june rate cut, but the real departure point might be july. >> for quite some time we have been saying that the fed will be slower to lower interest rates. >> the market is fundamentally reassessing rate cuts for the year. >> this is "surveillance or cow jonathan: live from new york city this morning -- "surveillance." jonathan: the s&p market,

positive. last week was all about the data . this week is all about the decision. top of the pile, federal reserve around the corner. >> they are not going to do anything, but they will release the economic projections and they might start talking about when to end quantitative tightening. then talk about that neutral rate. how they reassessed the assumption of what the world looks like post-pandemic. jonathan: and they have got to go through to analyze what's going on. sticky inflation. gemma powell is looking for confidence. have they gained, loss, or retained the confidence they had at the end of january? lisa: one person on wall street will say look underneath the hood but this is disinflationary information we are looking at. others saying hold on a second, this is different. this is stickier inflation that reflects a new reality from the

federal reserve with a neutral rate at 2.5%, it doesn't make sense. jonathan: i know that you hate the bachelor, but it always entertains me. did you see that piece on the next federal reserve chair? for those who missed this, thursday there was a meeting in florida between two advisors to former president donald trump, giving their three picks, the suggestion to be the next fed chair. i have to say that kevin walsh, not a surprise. if you had asked me a few weeks ago i would have said that's a topic. but it looks like it won't be chairman powell. lisa: this is logical, even though chairman powell was nominated and confirmed by donald trump. there is -- there is always regime shift but what will donald trump be pushing for? cutting rates more? it goes to your question, what is take-two of a donald trump presidency? does it look the same or do you see a different response with cutting rates in an inflationary

moment while also trying to potentially increase tariffs? jonathan: let's say that it's kevin walsh, and i have no idea, but i have caught up with him in the years gone by, he's pretty hawkish. i'm not sure that the market perception right now of him would be -- let's rally, let's take equities to all-time highs. he might be a different person at the seat, if he takes it, but at the moment the market perception of him is that he's a hawk. lisa: what's your perception of this episode of "the bachelor"? is it trump with monetary policy or is it hold on, if this is a hawkish central banker, we don't want him. you have to wonder what the mixed-signal is. when i read this i thought that she is trying to come out with something that looks and smells like policy. jonathan: it feels like balloons but when one of the advisors is advising it, they have to be on

the list and i'm not sure how serious you take any of this. the latest this morning, on the equity market and the s&p 500, its positive by one third of 1% after forces last week had mild stuff, down 10% on the s&p. a change for every single day last week, two year and 10 year, more than 20 basis points. lisa: this comes on the heels of the data that you were talking about, stronger-than-expected inflation. we talked about the marginal weakness in the equity market, one of the reasons it's one of the most underplayed events of the week in san jose, california, starting today with a kick off from the ceo speaking at 4 p.m. eastern time. do they give a signal of how much this is going to be adopted in a way that hasn't been priced in? the bank of japan decision, that was a monumental moment, if they move away from negative rate policies. this is the longest holding

pattern have seen from a central bank ever. it has been 17 years. to put it into perspective, wednesday is the fed decision. another important moment, not because they will change anything because it might give us economic projection to clarify whether their thinking has changed, the market certainly has. thursday we have the bank of england, jobless claims, and earnings. fedex and nike, it will be pivotal to get a sense of whether consumers are pushing back or if they actually aren't and if they have the ammunition to keep spending at a robust pace. jonathan: big week ahead, big week ahead. coming up, investors looking towards wednesday's fed decision . we have a former intelligence official on the growing criticism from washington towards netanyahu. and then we have better data coming out of china. top stories, stocks easing ahead of a busy week on central bank decisions.

we are overdue for a breather, or will we pull? a rally from october with returns and utilizing over 40% since 1954 but the rally being fundamentally driven. i'm pleased to say that we can kick off trading week with ben right now. what is the biggest event of the week? is it nvidia or the federal reserve? >> got to say that it is nvidia. no respect to jay powell. it could end up being a huge yon and we could wind up being back or we started but this rally, since october with big tech, it's been one leg it and nvidia has led the charge. i don't think we can afford a rebuff from nvidia here. the rally, broadening out a bit, but it's early days. nvidia -- jonathan: nvidia feels

fundamentally driven given the numbers it has been putting up. with broadening out, how fundamentally driven is the rotation? rosa: -- ben: pretty fundamental. we have had lower s&p for two weeks, equal weight hitting the first of all time last week. euro stocks outperforming s&p. i think it's happening. it's happening because earnings either haven't been as bad as expected and the rest of the world, or the outlook is looking a little bit better the closer that we get to rate cuts. i still think that those cuts are coming. earnings have been over delivering. rate cuts have been pushed back for the right reason, so to speak, with growth better-than-expected. lisa: what would tripping up look like at this conference and what do you mean by we can't afford that? ben: i can say is much as i like

about how this rally is just, but so far it has all been about big tech, big tech driving earnings 60% in the first quarter. the s&p, flat if you are being nice about them. so, the market is very focused on that growth momentum continuing until we begin to see growth from everybody else. so, expectations are clearly quite high. earnings expectations, valuations, we have certainly seen them higher, but they are at normal. lisa: which is the reason that if something gives pause to investors after this conference there are concerns that there could be downsides. from securities over the weekends there were concerns more significantly about protracted deterioration, essentially saying that over the past week we have seen the medium bearish turning bad

bearish. set of 5% to 10% pullback in stocks, he's thinking about something far worse, a 10% or higher pullback with yields breaking through at 4.5%, but why don't you see this as a concern if you get more significant selloff in the 10 year yields? maybe that's a good reason but at a certain point they have to bite, no? ben: never say never, but i just think that these twin pillars are still in place and we have 7 trillion in cash sitting on the sidelines. we have our investor sentiment indicators, which are maybe a little bit above average, but it's still a half-full glass, not a full glass. i still think that with the fundamentals raleigh in place, any sort of pullback will be bought by investors. i still think that in the early innings, if your definition of a bull market is an all-time high, we hit that six weeks ago.

your bull market averages five years. i think we are right at the beginning. lisa: given that you think we are at the beginning and that jay powell, no disrespect, will be a yawner, is there anything he could say that would make you reconsider with these early cycles? ben: markets are brace for a hawkish pivot. three cuts to two cuts. but the market has already come for what's expected. if that's it, the markets look through it. you need to see something much more dramatic. you need to see all the cuts being taken out, along with much more hawkish rhetoric to really unsettle the market here. jonathan: this has been a subject of conversation for the last few months, how this equity market has been able to withstand repricing of interest rates, which has been phenomenal . you have seen that through the treasury curve in a move of more

than 20 basis points. the s&p 500 was down by .1%. that's impressive stuff. what's behind that? ben: earnings have over delivered, quite simply. the s&p 500 earnings of the last quarter were up 20. the expectations are building. essentially, just making money in a different way. from earnings with less of it from expectations from fed cuts at -- at potentially higher multiples. to your point, i don't have my head completely in the sand. that can only go so far. but i do not think that the market is immune to what the fed does. it's a fairly long duration market, but i think it has to be significantly higher than where we are right now. jonathan: what is a higher? ben: 450. jonathan: thank you, ben.

quite a selloff last week in the face of hotter than expected cpi and ppi as well. join the call this morning from nvidia and hsbc, buying their price target at 880, which is basically where we were. they are looking for 1050 now over hsbc. lisa: have we ever seen a selling moment forever -- nvidia after those announcements? it seems to be the playbook over the past year. jonathan: i said career risk associated with his name. you rip another 50%, that could be problematic if you are a wall street analyst. jonathan: which is i think the reason we cannot see a hiccup. people saying there won't be a downside surprise, but there will be a lot of people who are offsides, it's clear risk to not be overweight. jonathan: let's get you an

update on stories this morning with dani burger. >> russia won't be stopped from pursuing its goals, according to vladimir putin. he swept to victory in a predetermined outcome. he had no credible opponent and gets another six years as president. the boj governor and his board has one more day to decide if it is time for the first japanese interest rate hike in 17 years. the hike at the end of the meeting is like -- seen as likely after wages in their largest union group blew out last week. even with the pay moment, there is the option to wait another month as a lot of data is due ahead of their meeting. apple is in talks to build the gemini artificial intelligence engine into the iphone. sources say the companies are in open negotiation to power the new features coming to the iphone software this year. for years, google has paid apple

billions to make their search engine the default option on iphone in the web browser and other devices. jonathan: three points, there. one of them, antitrust. apple is clearly behind on the ai effort and if this is going to coming to an iphone near you, is that the upgrade cycle you are looking for? lisa: how much of this is apple needing to get ahead of son -- samsung before the end of this year? your point, they are late and that's what this story highlights. what does this look like from a -- jonathan: i wonder, also, are they behind samsung and then try to do it better? hasn't that always been the story? lisa: but if this is the case with a partner with someone else, does that mean they think they can't do it better? jonathan: more on that, a bit later. up next, a widening rift between the u.s. and israel. >> what he said is inappropriate

find a replacement for the leadership there. it's something that a banana republic does on its own. we are not a banana republic. jonathan: good morning. how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now. you know what's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does. boring makes vacations happen, early retirements possible, and startups start up. because it's smart, dependable, and steady. all words you want from your bank. for nearly 160 years, pnc bank has been brilliantly boring so you can be happily fulfilled... which is pretty un-boring

if you think about it. ♪♪ hello, mia. are you ready to meet your demise? man, we really need to upgrade your trash talk. ♪♪ nice shot... shot... taker. who programmed you?! i'll see you tomorrow. the future isn't scary, not investing in it is. 100 innovative companies, one etf. before investing, carefully read and consider fund investment objectives, risks, charges expenses and more in prospectus at invesco.com. you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai.

jonathan: big federal reserve

meeting coming -- coming up later this week. annalee is out this week. we are told that she might appear on friday. lisa: went somewhere beautiful? jonathan: tk often did this, i would guess where she is, but i'm not going to do that. it would always annoy me. lisa: calling it irresponsible? we are not doing that. she's at work. jonathan: it's for work? lisa: i believe so. jonathan: it's for work. s&p, positive one third of 1% with a three-day losing streak on the s&p. the longest losing streak since january, believe it or not. the first losing streak since october. let's sit on this for a second. weekly losses are really rare. we have had three since and october and we came off the back of two, super rare given the strength of the rally. lisa: and they have been

minuscule, we are talking about really small drawdowns. is it valuable? it is. jonathan: a big push higher, starting the week at 4:30. a widening rift between the u.s. and israel this morning. >> what he said is totally inappropriate. it's inappropriate for -- to go to a sister democracy to try to replace the elected leadership, there. that something that the israeli public does on its own. we are not a banana republic. the majority of israelis support these policies. if senator schumer opposes the policies, he doesn't oppose me, he opposes the people of israel. jonathan: rejecting the chuck schumer call for a new election removing netanyahu from power. they are continuing their planned operation in the southern city of rafah with tensions growing over the number of civilian casualties and the humanitarian crisis on hand.

for more, former senior advisor to the transnational project, norman, joins us or more. fantastic to catch up with you. i want to get to this rift between the u.s. and israel. will this influence deficient -- decision-making on the ground? norman: it's very unlikely that this will have any impact on israeli decision-making. prime minister netanyahu is correct in that the majority of israelis strongly support a cease fire and pursue a war in the defeat of hamas. in this regard it doesn't really change anything that happens on the ground. we also noted that netanyahu and his lack of popularity in washington is not a surprise and it extends back to the obama administration and many of the officials in the current administration came from that administration, so there are long-standing roots of disagreement between the two sides.

lisa: if the u.s. cannot accomplish anything on the fundamental side, why make these announcements? are they winning points with the democratic base question mark norman: normally these -- base? norman: those conversations and diplomatic channels can be frank and productive. but the growing number of statements against netanyahu, which you have seen senators schumer and pelosi make, it reflects the effort by democrats to deal with the progressive criticism of the war in israel and u.s. support for that war. lisa: which is the reason why you are perhaps hearing things you wouldn't normally hear. qatar, egypt, increasing pressure on hamas to come to the table with a cease-fire agreement. can you give us a sense of the nature of the pressure, what it looks like and how realistic it will be in getting results? norman: to begin with, there is

growing pressure on qatar itself to obtain the release of hostages and obtain a cease fire. that has not happened in recent weeks. there are reports that qatar has told the hamas representatives that they might leave -- be forced to leave qatar, where their bank accounts could be for those in. the deal that hamas has subsequently put on the table, however, has two parts to it. the first part is i think something israel would accept. released hostages for palestinian prisoners, a six-week cease fire with increased aid. the second part, however, is important, with hamas calling for the complete withdrawal of israeli forces from gaza, essentially israel admitting defeat in the conflict. jonathan: as you know, joe biden just set a redline, crossing into rafah. what are the consequences if

netanyahu decides to crosses -- crossett? norman: it would be how the israeli option takes place. reports are about how they would approach it and i don't think you would see a mass infantry tank movement into the city but you will see robust operations targeted and shaped by intelligence to take out high-value targets in hamas leadership, responding to their counterattacks to destroy the two front -- final brigades that they retain. it is almost impossible to conceive of how to remove one point 5 million people, implying that the best thing the israelis can do is move a small portion of the population to work very carefully. the downside is that implies a longer campaign, perhaps more civilian casualties in some ways , slower for israel to defeat the operatives on the ground. this will be a developing issue in the u.s. will continue to

oppose a massive attack in the city. jonathan: you have touched on it there and it is important to go through it in more detail, how different this conflict will be at this stage versus previous months. how difficult and different would it be? norman: extremely difficult, but also not a surprise. this is a small geography. the population has been moving from north to south. there is nowhere else to really move the population. you could send a small portion to the northeast next to the mediterranean border, perhaps a small portion to the southwest to a cleared area. unless you are able to get these individuals back into north gaza, where there is no housing, you really have nowhere else to move them unless egypt agrees to take tens of thousands of palestinians, which it has refused to do, and if you are the israeli military commander approaching this operational challenge is very difficult.

lisa: i have to say, we were expecting this conflict to be further along, perhaps with a cease fire by now. is there a risk of escalation or is this a contained moment with a lot of pain and suffering that just continues? norman: for some time, i have felt that this conflict could go on for weeks and months. much depends upon the abilities of israelis to kill senior leadership at hamas, destroying those final military units. so, that is a battlefield pace with lumps and intelligence issues going with it. in terms of continued conflict, it is true that lebanon continues to be an area of some risk. iran has become more quiet since the united states took out top has bala leaders. but the red sea problem continues to go on. jonathan: norman, thank you,

sir, for catching up with us this morning. former senior u.s. intelligence official on the latest comments from benjamin netanyahu over the weekend, saying that it may take a few weeks but it will happen. we will see. watch this space. it's a redline for the president of the united states and we are not sure what happens if he crosses it. up next, better-than-expected data out of china with a look ahead to a big boj decision. live from new york, this is bloomberg. ♪

her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we got him under a new plan. but then they unexpectedly unraveled their "price lock" guarantee. which has made him, a bit... unruly.

you called yourself the "un-carrier". you sing about "price lock" on those commercials. "the price lock, the price lock..." so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

jonathan: stocks on the s&p 500 doing ok, up by one third of 1%. the nasdaq up by 7/10 of 1%. a developers conference kicking off this week. already this morning, asking what is the bigger issue this week, he said jensen. it is all about nvidia for him. lisa: there is this question of how much that could potentially cause in drawdown of equity markets. what could he say other than we have tons of new products? jonathan: two weeks of losses, not much of a drawdown.

check out the two year and the 10 year. 430 after climbing every single day last week, monday through friday. into the fed a little bit later. down a couple of basis points but starting the week, highs across the curve. lisa: it's not just basic nominal rates. it is real rates. you have seen them rise. equity markets are falling victim to real yields. not by this idea of breakeven, inflation, also extra premium built in because of the uncertainty for a host of reasons. are we crossing the rubicon with respect to real yields to the point of what investors will demand? jonathan: have we already fallen victim given last week we are down 0.13%. 20 basis point move on yields, pretty impressive. lisa: if you look under the hood

it is fascinating. real estate, utilities, some of the more interest rate sensitive areas, they did really badly. energy crushed it. we saw a huge game. how much is being driven by goods related inflation that is necessarily positive? it is an interesting dynamic. jonathan: really interesting development in the past week. i want to turn to foreign-exchange. just below 150 after the boj decision. i love this, hoping they understand it is a historic moment. we are talking about the first rate hikes since 2007. the yen has hardly moved. lisa: they are right to respond without any histrionics. the bank of japan likes to move like a snail. you have pointed out they have in the past surprised.

we talked about this last week. i thought about it more over the weekend and the bigger surprise tomorrow will be if they don't hike rates. that could potentially send the yen tumbling. that is one risk case that isn't being painted. jonathan: if they do hike interest rates, that might be it. it is not the start of a cycle. maybe that's why the dollar-yen is stuck around 1.50. lisa: shocking considering there might be the first normalizing move in 17 years. it is shocking to think about how stagnant the economy has been. jonathan: they have tried very hard. a historic moment. under surveillance this morning, tough story. the boj, fed, bank of england. raking -- raising the possibility. the fed expected to keep rates on hold wednesday.

an updated summary of economic objections. on thursday, bank of england expected to hold, leaving the door open for cuts in the coming months. kind of a wait and see. lisa: what their longer-term assumption there's a story in the "wall street journal" talking about how it's so rare for a central bank, the federal reserve not to give some sort of sense of what their framework is for thinking about the world. we don't know what the post-pandemic expectations are. if we get some inkling, if they give a sense of that, that could reset people's assumption of what longer risk premiums should look like in a new way. jonathan: i think it's important . mohammed provided leadership on this. bottom line, they do not know.

they should be providing leadership and they are not. lisa: how do you provide leadership on something you don't know? do you fake it? they are stuck between a rock and a hard place. important to highlight how unusual it is to not have any type of roadmap and everybody basically darts on a dartboard with a blindfold on understanding what the economy really looks like. jonathan: claudia is going to have the answers, no doubt about that. the white house showing support for congress that would force the sale of tiktok or bam it -- ban it. the administration would like to see the buyer from the app. the timeline becoming increasingly uncertain after facing more questions in the senate. it was passed last week with bipartisan support. they are trying to push that this is about a sale and not a ban.

tiktok pushes that this is about a ban and not a sale. that is the problem for the administration. lisa: it will be a real problem based on my research. it was a heated debate. jonathan: where did it land? lisa: not good. it wasn't great. free-speech questions, this is how people make money, communicate with friends, engage with the world. i'm struck by the fact that we are not working with data from the government about the national security issues. these are the precise issues we need to solve. it is national security concerns. what i would like to see is more specifics put out there and specific solutions to remedy them. how do we know we are not mccarthy era? or in another witchhunt to figure out who is good -- who is good, who is bad? jonathan: this is going to take

a long time to work out. much longer than we thought a couple weeks ago. new data beating expectations out of china. industrial output rising 7% year-over-year. the data giving a lift to chinese stocks. the stimulus has concerns over consumer confidence. how impressed where you buy this data out of china overnight? damon: not very. the retail sales figure was actually amiss. it is kind of a big deal in china. the chinese have to be more focused on the boj tomorrow. they are both funding currencies that are one and the same. the bar for the boj to out hock this market is very high. the balance sheet and they will have to lift rates for them to really appreciate this market.

if it doesn't, look for cny to depreciate. chris and amy told me, i was talking about the boj today. jonathan: we are going to continue the trend. damian: we are still waiting for more from the chinese government, more stimulus, something on the property front. property investment numbers were not good. it is the same old story. the only thing that will move this market from where it's been too something on the others would be a really hawkish boj. jonathan: let's stick with the boj, what happens if they don't hike tomorrow morning? damian: i'm not convinced they are going to hike even though the market has 80% probability on that. they might do something on the foreign approach is -- purchase program.

it is buy the rumor, sell the news in japan. it has been this way for as long as i could remember. there was a lot of talk heading into this meeting, the data was pretty strong. they have really telegraphed what they want to do. again, the market is desensitized. it is by the rumor, sell the news. the japanese yen has appreciated in the weeks following the boj meeting. i expect more of the same in the market does as well. lisa: you don't like talking about china and i find this really interesting. china was a big part of the investing thesis for so long. is it because they are not interested or it all hinges on central planning and how much stimulus they put out there? damian: two things, the data and the lack of confidence in the data. that is first and foremost.

the data points are subject. we are coming out of china with meaningful dollar amounts. it has been this lack of transparency from ownership and investment perspective. it is difficult to make the case. the attention has not been there. other central banks, other markets and commodities are a great way to play the story. if you look at inventories, the pmi data this week is really important for currencies. we are seeing the global manufacturing cycle expand beyond the u.s. for me, you could play the china story through commodities, copper was up 5% last week, those are big numbers. lisa: we did see performance when he came to industrial output because of you could --

you could raise questions about that. are you suggesting some of these other developing markets have just as much of an impact on things like the commodity markets because they are coming a bigger proportion of the overall economy? it is not necessarily the behemoth it once was in terms of drafting trends in your world. damian: it was core goods that rose, not so much core services. let's fast-forward to this week. look at priscilla, look at columbia. they are going to do that. this tells you that despite the fact that you see things might be a little bit rosier in china, inflation is still real. it is giving banks the ability to cut rates that much more aggressively. they have much more scope to cut

rates. that is the environment we live in. if you are looking at differentials and you look at china, that is not changing. it is kind of hard to -- jonathan: did you watch the golf yesterday? damian: of course. jonathan: wasn't it heartbreaking? damian: got choked up talking about his mother, trying to cheer this in. jonathan: the interaction was unbelievable. they really were. schauffle was there to the very end. lisa: he has been trying all day to get us someone. jonathan: scottie sheffler at the moment is just ridiculous. boj, china, i always knew we would talk about the golf. let's get you up to speed on stories elsewhere.

let's get you bloomberg brief. dani: antony blinken warns of false inflation ahead of elections worldwide. antony blinken warned authoritarian governments will meddle in elections and the u.s. would keep pressing to disrupt information efforts from the likes of china and russia. big advancements in generative ai are fueling growing concerns over for content influencing voters. president biden is preparing to elect the toughest liver -- ever pollution requirements on american cars. it is seen as key to help the u.s. fulfill its commitments to the paris climate agreement. the move post a delicate political act for biden, who is trying to court voters in swing states of michigan including autoworkers who might be uneasy about the transition. the march madness are set. millions of fans set to

correctly try to predict 67 college basketball games. defending champion connecticut is one of the top seeds alongside purdue, houston, north carolina. no fan has ever completed a bracket perfectly with the ncaa saying the odds of doing so equate to about 129 quintillion -- 1-9 quintillion. jonathan: i have tried, dreadful. lisa: that's the reason people do it, isn't it total luck? there's no skill. jonathan: you know how focused students are the day after the game in front of them. lisa: when i have tried it has been a failure. jonathan: this is what damien wanted to talk about earlier. damian: it's going to be really tough. the number one seeds didn't win their conference tournament.

jonathan: a big week for central banks. >> i don't think the fed want to be cutting too soon or staying at the high levels of where we are compared to where we were before. jonathan: that conversation up next. this is bloomberg. ♪

♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪) jonathan: stocks on the s&p 500 positive by zero point 4%. lift in the yields. the euro, at about 1.09. the dollar-yen is on a five day winning streak. you'd be expecting strength. we have been getting anything

but. lisa: there's a question of if they do normalize for the first time in 17 years, then what? what is that matter if they don't move away from zero? there are signs the economy is stabilizing. a lot of questions here. jonathan: the longest losing streak of the year so far. under surveillance this morning, a big week for central banks. >> i don't think they want a legacy of cutting too soon or staying at the high levels of where we are or where we were before offering too much. we continue to think it is the second half of the year where we see the rate cuts happening. jonathan: two days away from the fed rate decision. writing, should inflation be leveled off at 4%? the fed is likely to extend its position on the sideline.

should momentum shift to the upside, the fed may be forced to reengage to elevated price pressures. lindsay, they wanted to gain confidence, has again confidence, lost confidence or retained confidence since their last meeting? lindsey: right now, the fed is at the risk of losing confidence. we were headed back to 2%. they open the door for the conversation of rate reduction too soon. we have seen the inflation data is even at best. price pressures gaining momentum at the start of the year. this has not only potentially shelved the expectation for near-term cut. should we see inflation reverse course and move back above this trend of 4%, they may be forced

to reengage additional rate hikes. they have turned the focus, shifted the focus to an eventual rate cut. lisa: where is the threshold, the bar for them to actually reengage with the idea of rate hikes at a time when people think they will keep rates where they are? lindey: to be fair, i think the bar is pretty high for that. we would not necessarily need to see inflation to your out. we would have to see a meaningful retreat in that downward pathway. we would have to see three or four months of acceleration for the fed to reengage in rate hikes. barring that scenario, inflation failing to reengage in that downward trend. forcing them to the sidelines for much longer than the market is anticipated.

lisa: do they start talking about a higher neutral rate with the 3, 3 .5 range? maybe even 4, 4 .5%. where do you think they stand on this? what do you think is the correct outlook for them to project? lindey: where they anticipate rates to fall into a neutral level. i think the fed has been very clear with when they begin to engage in rate reductions, it's going to be a slow and tapered pace. the additional support or stimulus as we move into easy policy range. i do think the market is under appreciating the fed willingness to not only delay that first rate cut.

jonathan: can we interrogate the consensus belief that june is the month, what backs that up and what do you say to people saying the same thing over and over again? lindey: if we look at what investors have been expecting, they have been calling for an end to rate hikes and pricing in rate reductions that have yet to materialize. i appreciate the notion that march is off the table. pushing out to may and june. it is starting to absorb some of this more patient message from the fed. i do think this is overly optimistic in terms of expecting the fed to initiate this first round of rate reduction. two rate reductions in the

second half of the year separated by a quarterly basis as opposed to a meeting by meeting basis. jonathan: you said look out for retail sales. they have been week for two straight months. lindey: i don't necessarily agree with the assessment that they have been week. largely reflecting one-off variables. february did fall short of expectations. it was a welcomed rebound. this still tells the story line the consumer is resilient with a welcomed amount of cooling. we are not seeing heating demand on the consumer side. this is a welcome step for the fed trying to tame inflation on the supply side and on the demand side as well. should we see very robust numbers on the consumer side, it would be more clear the fed stopped short.

this cooling is still positive. it is actually the most positive that the fed could anticipate. jonathan: he was on the program last week and had a similar tone to you. he acknowledged one thing, this is a fed reserve that wants to cut interest rates. will they move the goalposts as they have done a few times? super court looks hot. hearing more about the progress they have made year-over-year, would you expect to see that and what would you take from that? lindey: that will be a very dovish tone if we do see the federal reserve chairman focus on some of these non-key measures of inflation that previously had been top of mind. the important thing too is once the fed initiates that first reduction, that doesn't mean they continue on that pathway. we could see the fed capitulate

to market reductions in the second half of the year followed by an extended pause. that is very much an option. that would allow the fed to walk that delicate line to fulfill that expectation of rate reduction but not getting too far ahead of itself. jonathan: thanks for joining us this morning. almost echoing what we heard from raphael bostic from the atlanta fed. we could go just once and then see. based on the revisions we have seen on wall street economist, feels like that is the direction of travel as well. lisa: that will be a fun new cycle. this is when you have to start talking about longer-term neutral rates. that is how you guide the market. i also wonder if this meeting, you are supposed to talk about the balance sheet. we have seen the balance sheet

fall by $4.5 trillion. do they stop the runoff now even though things are heating up? can they signal without signaling that they are getting a little nervous? jonathan: i like the difference in how they talk about qe and qt. lisa: seth carpenter had a piece this weekend explaining why that is possible but it is completely different. at the same time, is it? jonathan: one is watching paint dry and the other is supersymmetry will save the world. coming up in the next hour, michael of barclays. george ferguson a bloomberg and james camp of eagle asset management. more to come from new york city, session highs. this is bloomberg. ♪

>> if you look at the momentum in the u.s. state, recent weeks on the activity side. >> it has been resilient. if you look at the underlying dynamic, there is some slowing. >> i think there's a nonzero probability we find ourselves in an environment where demand continues to slow more and more. >> it is not as great as people would like to see, we are not there yet. >> this is "bloomberg

surveillance." jonathan: so laid back. >> 5400 on the s&p. jonathan: that was like 20 percentage points ago. good morning. equity futures on the s&p 500, where are we? session highs. this is what she had to say. we have open the door to reductions too soon at the federal reserve. there is a risk they may be forced to reengage with the federal reserve with rate hikes later this year. lisa: there is a consensusbuilding that that maybe rates will have to remain a lot higher for a lot longer. that is the new consensus, has it been baked into equities yet. jonathan: let's take the bond

market. yields up up up on a two maturity. we start with yields very close. we look at the equity market performance. we were down 0.13% last week, 0.26% on the s&p the week before. lisa: this was driven in large part because leadership has to leave. the winners will keep on winning. that is what we have had this year. every time there's a hiccup or concern, guess what rallies? the magnificent seven. today, we kick off this conference, it might be more important than the federal reserve. if there's any semblance of a sense that maybe we are getting some sort of slowdown, could that single-handedly clear the rally we have seen? jonathan: one thing that is not

rallying is the japanese yen. the dollar-yen has grinding higher for five consecutive days. impressive in the face of the first interest rate hike we are going to see for the first time since 2007. i know there are some others elsewhere. there are two big ones, the boj and fed reserve. lisa: i'm paraphrasing now, bank of japan, you realize this is important don't you? it raises this question, will the bank of japan meet the moment by giving some sort of roadmap of what is ahead or will they kick the interest rate to zero or do nothing? the idea of this pair has been so over analyzed and talked about and disappointed with the moving at the pace of a snail, i understand the reluctance. jonathan: board of price action

elsewhere, s&p 500 positive. very close to session highs. trying to bounce back from last week smiled, marginal loss. bond market unchanged this morning. that is a real move higher we have seen on the 10 year yield. euro-dollar, guess where that is? 1.09 exactly. lisa: this has been a year of really marginal moves particularly when it comes to the macro trades. it is interesting in and of itself. why has it been so quiet when you have real divergence when it comes to an economic perspective? what will it take to create volatility and trading actions elsewhere? saying to us it has been pretty slow. jonathan: boring? they call it slow, you call it boring. lisa: nothing is boring.

you could find really interesting things. jonathan: this hour will not be boring. more to expect on chairman powell's news conference. the banks restructuring plans. james camp of eagle asset management on why he thinks it's likely the fed passes. we begin with our cop -- top story. investors turning their attention to wednesday's fed decision. michael show saying we might see some criticism within asset markets or some pressure on chair powell to comment on this issue during the presser, michael, are we going to get some criticism with financial conditions being too easy? michael: that's a bit of a tongue twister. that is the question. i think the fed unnecessarily moved its guidance back in

november-december. no one has a crystal ball. if they knew what the economic data would have been, it would've kind of moved it. you could say nothing really happened. asset markets have behaved very differently. i think there was maybe some pressure put on him. his press conferences have been fairly easy for him since november or december. he has been in control of the narrative. starting to be seen as a successful federal board chair. asset markets are strong but everybody kind of likes that. if you continue to guide lower and continue to say we will use whatever opportunities we are going to take to cut rates, the asset markets move uncomfortably high. lisa: a reason why i think a lot of people are wondering if they

get guidance longer-term. do you think jay powell is more important today when he speaks at the nvidia conference? michael: completely different issues to me. nvidia controls the nasdaq and the nasdaq controls the s&p. the economy is controlled by the fed. jonathan: made the point about stocks doing ok in the face of these interest rate cuts. gdp being a whole lot stronger. why would stocks tank even without the rate cuts? could you retain that bullish view regardless of what the federal reserve is up to? michael: nominal gdp is about 5.5%. on the others, triple be yields are exactly where the fed are. it is a favorable operating environment for corporate america. jonathan: what do you like right now with that in mind? michael: i like there is some

life in the economic stuff because the economy is ok, that stuff should really be rewarded. energy has had a pretty lousy 12-18 months. it doesn't feel like a good start to the year. it is starting to look ok. lisa: the rally last week, energy stocks rallied tremendously. is this a good rally for the economy or is this a bad rally considering it speaks to the re-inflation? michael: it depends on which part of the economy you are in. the people making the goods will have a decent year. at the end of it, the squeeze is on other sides of it. you have this crazy story of covid. we all understand the massive inflation that came with it. a favorable withdrawal of those pressures. it's going to be nothing like

covid, thank god. you've had a very long cycle that looks like it is coming to an end. you will see a reinvigoration of the commodity complex. jonathan: you think the disinflation trend is over? michael: in the goods economy, yes. the service economy never really had one. lots of ideas out there about what that is going to do. if you are looking for the goods economy it has a different experience over the last 18 months. i think you will get inflation and goods inflation. jonathan: if you had to talk about this year, how many cuts from the fed? michael: between 1-2. i think they will try and cut sooner or later. that is probably about it. jonathan: good to see you.

equities right now on the s&p, session highs at 0.4%. let's get you an update on stories elsewhere. dani: nasdaq is investigating premarket trading. nasdaq says it has determined the root cause and is working on a fix. no trades printed since 4:0 9:00 a.m. new york time. any unacknowledged orders on it system have been canceled and back to customers. antony blinken warned of a flood of false information ahead of a busy year for elections worldwide. he warned authoritarian governments would metal in elections and the u.s. would keep pressing to disrupt misinformation efforts. huge advancements in generative ai are fueling concerns over fake content influencing voters.

north korea fired multiple ballistic missiles, tokyo's ministry of defense as north korea fired three missiles off its east coast monday. they say it flew some 300 and 50 kilometers. the u.s., south korea, and japan all condemned the first test in two months as a threat to regional security. jonathan: it is a new era for barclays. >> we will continue to strive for efficiency. people aren't looking -- they are looking for a partner and counterpart who is not just a u.s. bank. we are a strong british bank. jonathan: we will catch up with the ceo of barclays, up next. good morning. ♪

[falcon screech] [ominous background sounds] hyah! sheriff! the adversaries are back! [gasps] not again. sheriff, i got this. protecting your business from cyber attacks can be unrelenting. [triumphant adventure music plays] today's adversaries move fast. crowdstrike moves faster. crowdstrike. we stop breaches.

you know what's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does. great job astro-persons. over. boring is the jumping off point for all the un-boring things we do. boring makes vacations happen, early retirements possible, and startups start up. because it's smart, dependable, and steady. all words you want from your bank. taking chances is for skateboarding... and gas station sushi. not banking. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring. moving to boca? boooring. that was a dolphin, right? it's simple really, for nearly 160 years, pnc bank has had one goal: to be brilliantly boring with your money so you can be happily fulfilled with your life... which is pretty un-boring if you think about it. thank you, boring.

jonathan: massive week coming up. i say that almost every week. federal reserve, boj on deck. s&p 500 near session highs. 10 year yield up every single day last week. 20 basis points on a 10 year as well. 470 on a two year maturity. it is a new era for barclays. >> i think it is going to be a barclays year. we have to be resilient. we continue to strive for efficiency. improvement in the types of revenue running the business. we are the leading investment bank outside of the united states. people are looking for a partner and a counterpart not just a

u.s. bank. if they had to pick one, they tend to take british banks. jonathan: barclays launching a three-year plan to shed costs and boost revenue. returning at least $12 million to shareholders through dividends and buybacks -- $12 billion through share -- through buybacks. joining us is the ceo of barclays. great to see you, sir. particularly here in new york city. we have rallied since -- pretty aggressively up 20% since yesterday evening. do you think that's evidence to share into your vision? >> it is the early stage of that evidence. what is most important for us is this plan to increase from 12%. it is a plan to return 10 billion pounds to shareholders.

it is a plan to have a broad diversified bank to have a global leader centered in the u.k., investment bank going to 50%. our job is to have a plan and execute it. jonathan: you talk about diversifying revenue and leaning more into advisory. is the talent they are on board to make that shift? do you need to hire to make that happen? c.s.: we have new leadership in the investment bank. we hired very skilled bankers in health care and technology. that has already started to have its effect. last week we announced the sale echo trance. we are beginning to feel the

momentum from those hikes. lisa: what do you think it is about the -- versus say advisory fees? c.s.: when you move into advisory fees, you have to get a better return on capital. lending is an important part of what we do. we are a very big player in the fixed income markets, the fixed income trading. lending is a part of what we do. lisa: how much is this a new model of banking? taking all of wall street and the global banks and trying to cater to the whole client rather than say go after specific deals and be focused on being at the top of a table? c.s.: i think it is an important

part of the shift happening. previously on the investment banking side we were working with corporations. since then, we still work with corporations in a big way. you have the sovereign wealth funds. the pools of capital makes it important to have this relationship with those players in market. jonathan: we ask the same question. i could take about when jamie dimon left that morning and jenkins came in. the morning jenkins cow fired, i was sitting with the chairman and we talked about the same thing, the future of the investment bank. do you find that is a medium obsession? where does that question come from? c.s.: four weeks ago, i tried to address it directly. it is important for barclays to have this. we are the largest investment bank outside of the top five in

the u.s.. it is important to have a counterparty not just in u.s. bank. it is an important source of revenue for us and we are good at it. jonathan: why is it important to have a bank outside of the u.s.? c.s.: diversifying your exposure . london has been historically a great financial center and remains a very important one. covers a lot of financial contracts. all of those things make it attractive to work with a u.k. bank. lisa: does it make it difficult to compete outside of the u.k. when you have jp morgan dominating absolutely everything? c.s.: the world is big enough for all of us. we act like a u.s. bank. lisa: when you act like a u.s.

bank with a specific focus, the five pillars of your organization. recently you offset some risk from your credit card portfolio. there is a real question here about where you see an opportunity to lend in the consumer space at a time of uncertainty in the cycle? c.s.: we view the consumer space in two ways. in the u.s. we have a great credit card business. we have 20 corporate partners, blue-chip corporations. we are looking to continue to grow that partnership business in the u.s. in a measured way because it has great synergies with our investment bank and is a great overall business for us. in the u.k. we have trends across the consumer franchise. it is our homeland, home turf.

we look to increase that strength. lisa: is there more emphasis on growing in the united kingdom outside of the u.s.? the u.s. effort will be much more bespoke, focused on clear vertical rather than the whole picture. c.s.: we have a complete banking process in the u.k.. touching customers from the very largest corporations down to individuals. in the u.s., we offer investment banking services, trading and banking. a very good, specialized partnership. jonathan: we had the rate shock, big time on both sides of the atlantic. what we haven't seen is the credit stress. as you look at the business at the moment, the u.s., u.k., are you seeing anything emerge at all? c.s.: you are seeing small signs

of it on the consumer side. just a difficult delinquency off the covid lows. unemployment is low. you see the inflation and the effects of the wearing of the consumer stimulus you had during covid. you are seeing the small delinquencies in the business. jonathan: is there a part you are being super vigilant about with lending around that particular area of the economy? c.s.: not really. as an overall matter, the economy is stabilizing. it looks like on both sides of the atlantic you are having a soft landing. it has remained strong in statistics. generally, we are constructive towards lending. jonathan: barclays and its roots go all the way back to the late

1600s, early 1700s. we are talking about centuries. do you see that as a threat in any way, shape, form? do you think the u.k. has taken that for granted? c.s.: i think the u.k. understands that. politicians on both sides understand that extremely well. there is a lot for the city of london. lisa: this week we do get a bank of england decision. is it beneficial of rates stay higher for longer? do you want to support the economic growth? c.s.: ultimately that is a decision they have to make. i think a little prudence and waiting a little is not a bad thing.

jonathan: why is the bigger risk to cut too soon and not hold too long? c.s.: the economy is stabilizing. employment is robust. inflation is coming down. on the balance and might be more prudent to wait longer. our feeling is for more rate cuts. jonathan: the same characterization in the u.s.? c.s.: i think so. lisa: would that be good for you? are high rates good for banks or bad for banks? c.s.: stable is good for banks. jonathan: very diplomatic. we appreciate your time. on the situation from the united states to the u.k., the differences, the similarities. lisa: how do you sort of rearrange when they are shifting where they are with the

sovereign wealth funds, wealth management and how much that has ballooned and how banks are read triggering. we are hearing that from morgan stanley, also citigroup with how they are thinking about the world. we are's bonding to real shifting pools of capital. jonathan: the question on the investment bank just won't go away. a bigger part, just an interest in general. repeatedly it keeps coming up. lisa: there's a question of whether that is an antiquated model. especially given the trading with the real kind of booms and busts. ultimately if you are looking at a new model as part of that full-service, it has a different tenor. jonathan: we are looking for a pivot towards more of the advisory stuff. coming up, we pivot from banks

to boeing. disastrous start to 2024 keeps getting worse. equity futures on the s&p 500 set up as follows. equity session highs of 0.6% on the s&p 500. big moves in the bond market. we start the week on the 10 year in the four 30's. foreign exchange, the euro slightly stronger. this is bloomberg. ♪

her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we got him under a new plan. but then they unexpectedly unraveled their "price lock" guarantee. which has made him, a bit... unruly. you called yourself the "un-carrier".

you sing about "price lock" on those commercials. "the price lock, the price lock..." so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

jonathan: stocks, session highs up by zero .6% on the s&p 500. nasdaq posited by more than 1%. two things in focus, one's central bank decisions, the other is nvidia has a developers conference. the enthusiasm is pretty good right now. lisa: that is an understatement right now considering people are looking for all of the applications to get from artificial intelligence, we hear how it will transform health care into banking, to the retail sector. to put way and some of the -- chipotle, some of the other retailers.

it cuts the avocado in half and scoops it out because it saves a certain amount of time. the autocado is what it is called. jonathan: how much will that cost? lisa: if it saves that much time. think about it, if you are doing it 1000 times and you have somebody opening it up, it could save a staff member. instead of investing in human, you could end up with that. lisa: could you do that? jonathan: not aggressively. in a controlled manner. lisa: they have special machines. jonathan: yields down about two basis points. big move higher in the two year and 10 year yield. in and around 4.30. the boj and federal reserve in

the week ahead. dollar-en looks like this. we have had five or six days of this on dollar-yen. coming all the way back to 2007. busy week for central bank decisions. the boj kicking things off tomorrow with the first rate hike in 17 years. wednesday we get the fed decision. the news conference could provide insight into the timeline for rate cuts. thursday we get the boe, another pause expected. likely to mean fewer calls for higher rates. the barclays ceo joined us at the table a few moments ago. some insight into the bank of england there. there may be some benefits to waiting. what is the biggest risk cutting too soon or holding too long? maybe the biggest risk is cutting too soon?

lisa: that is what the market is making it. maybe we don't understand how resilient some of the inflationary pressure is. the goods inflation is notable. that is what we heard earlier, a lot of people would agree. do we stay around here? do we have to hold it higher for longer and not have to do the worst thing possible? jonathan: could hold up to 25 pounds of avocados at once. lisa: they are vertically oriented and transported. it is time consuming. if something to take off the skin, pit, you could just smash it it is one person. if you don't have to pay somebody $40,000 a year to mash avocado, you could eventually events -- invest in an autocado.

jonathan: i've never been to chipotle. lisa: it's pretty good. this is the type of thing they are talking about, avocados. jonathan: shares of nvidia up today ahead of the ceos speech kicking off the week. a platform he has used too often introduce new products and talk about where the technology is going. stocks up by 2.8% this morning. coming off its 10th straight week of gains. close to 80% so far this year. we ask this morning what is the biggest event for this week, will it be nvidia or the chair of the federal reserve? he said is the former and not the latter. lisa: true, the question is why? what are they going to announce? i realize that is not exactly ai

, what are some of the adaptations that will change business as we know it in different places and how quickly is he getting developed? you could see a rally, other types of industries really do well. this is why it is really key. jonathan: 5% of the s&p 500 and 99% of the reason to buy stocks. it feeds into sentiment that everything around this name really feeds into sentiment for the whole ecosystem that is ai right now. especially based on that single name. lisa: we could work fewer hours, there is something that is up 12 times its initial value. we are talking about a technological seachange. how do you price that? that is the underlying enthusiasm.

it doesn't matter if you are talking technological. jonathan: let's turn to boeing, a disastrous start to the year and keeps getting worse. united, southwest are among the airlines scrambling to respond to reduce deliveries from boeing. the plane maker is focused on quality lapses with an alaska airlines flight that could lead to airlines reducing summer travel schedules and ultimately higher prices for passengers. george joins us now for more. could we go straight into production numbers? how much has this disaster held back production? george: i think it's something we don't know yet. we have all been trying to figure it out. the market has not adjusted a lot of their delivery numbers this week. cutting 50 deliveries out of the boeing 737 deliveries for 2024.

it could come down even a little more. the effect on the airlines, especially for the summer travel season will be big. you are getting your deliveries that you will use in the summer by march or april as you get the airplane in the air into your schedule. this effect will take a whole year to be felt. the u.s. still seems a little overcapacity for us with budget seats. southwest is one of the major participants in the budget seat category i would say. lisa: the good news if i'm hearing you correctly as we will not see a spike in prices off the heels of this because it will be a long process. maybe next summer we will feel the process.

boeing tries to work this out, is that correct? george: i think the bigger risk is absolutely out there. lisa: we have a sense of whether boeing is getting a lot of the issues under control? given the fact that the doj seems to be concerned. they have not been able to find or report -- a report that they asked for, where are we with this? george: i would say the commentary coming out of boeing, they provided more guidance. we are still deep into this investigation process. boeing has 90 days to come back and report to the faa on how they will stabilize the production process. haven't heard anything more on that. still from the early days on

what the game plan is going to be and what the effect is going to be on the company production. not much reassurance right now. jonathan: the auto logs at boeing stress years out -- stretch years out. when you think about what is happening with ryanair, what options do they actually have? george: the airlines flying very single type fleets like ryanair, southwest, it would be a major move for them to move from the 737 to the competitor, would probably take a decade for somebody to switch their fleet over. they are all built around low-cost fleets. pilots all with a single type.

it's going to get a lot worse. the ones you will see peel away are carriers like united that are flying dual to -- dual fleets already to use two u.s. examples. those are the carriers boeing has to be very careful about. they are starting to lose it in united. it doesn't even add another type. they are already flying airbus. it is easier for them to switch. jonathan: competition is always close by in this industry. it will be under the spotlight with this. given the very few options, what are they going to do going forward from here and not just in the united states, i mean worldwide. george: we are looking for the regulator to help shine a light through for boeing, help them get their process back in place.

the regulator has to be very careful. is very important to the u.s. industry, one of the biggest exporters in the country. i think safety has to take the highest priority. make the calls based on safety. they are really trying to help the company through the process, more than try and hurt the company, which is hard. lisa: the boeing plant -- planes going for a discount? george: there hasn't been a discount. you could probably get a decent price on it. jonathan: thank you sir, thank you very much. that right there is the problem.

you will get a good price but you will get a discount. that is ultimately what they are doing. lisa: speculation prices are going to go up. george ferguson pushing back on that just a bit. it is a duopoly. both products they are having issues fulfilling orders to begin with. why do we have this? jonathan: down another 1.1%. we could do this with the bloomberg brief. dani: the nasdaq stock market has said it has resolved connectivity issues. it has determined the root cause but didn't go into further detail. the market starting at 4:09 a.m. new york time. any unacknowledged orders have been canceled and given back to

customers. donald trump's economic advisers included three names to lead the federal reserve should he be elected. in a meeting at mar-a-lago, they recommended kevin walsh from morgan stanley. hasn't committed to the candidates but hasn't soured on jerome powell, whose term ends in 2026. a two year slump could be nearing an end thanks to stockmarket records. the watching that showed the most popular rolex models work mostly flat with the most in demand model showing declines of less than 1%. rolex's gmt remains an outlier with the blue and red model raising more than 2%. that is your bloomberg brief. jonathan: i saw you staring at it. lisa: i'm trying to understand

$20,000. have you ever had a $20,000 watch? jonathan: i thought you never sell bitcoin, i thought that was a something -- a thing. up next, you don't want to talk about it. investors surrender. >> it is more about the terminal rate, i think it has become more interesting. jonathan: that conversation up next. this is bloomberg. ♪

investment opportunities are everywhere you turn. but at t. rowe price, we're letting curiosity light the way. asking smart questions about opportunities like advances in healthcare. and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

jonathan: if you are just joining us, session highs on the s&p 500 up by 0.7%. the bond market yields are up to match last week. 4.29, big move higher, another

20 basis points. investors surrender to the higher for longer. >> we had a june start to the cutting cycle from last year. looking for three cuts this year. it is more about the terminal rate. i think has become more interesting. jonathan: the fed's next rate decision on wednesday with swap pricing at fewer than three rate cuts this year. less than the median projection in december. james camp saying the high risk to market is the bond market failing to price in a fed that may not cut at all this year? james, let's get into this, what is the inflation that suggest to you that they won't be doing much at all? james: good morning. the issue will be the inflation

data, the base effect that we talked about are going to be difficult. there is more inertia to inflation than the fed is given credit for. for me, when i work at the growth of the economy, the labor market being relatively healthy and i look at inflation not getting to the terminal rate, i don't see the current motivation. what is the fed policy cover if you will to be cutting rates when what they are doing seems to be working and not mission accomplished? lisa: on one hand you could say the fed is going to wait longer to cut rates. that is actually going to keep the long end of the curve controlled. they will get inflation under control. on the flipside they say it is a tacit agreement to keep inflation around 3%. they will cut rates because they

are less concerned about it going down. which do you think is most likely based on the communication so far? james: the truth is we are in a higher inflation economy for the next decade. the fed acknowledging that would be wise. i think that would give the fed some cover to cut rates. the rate environment is punitive for the lower income. the credit card debt, seeing those costs go up and up. that is not only an economic risk, it is a political risk. they are some of the largest corporations that have issues at 3%. it is a very interesting conundrum. i would like to see the fed come off that 2% rate. i expect sometime in the summer we will begin that dialogue, if you will. lisa: i thought this was really

notable, they came out saying a centrally -- essentially the neutral rate has gone between 4% and 4.5%, if it settles around 3% and the economy has a soft landing. the policy rate should be at least three points higher than that. is that we are looking at for neutral? james: i think the growth rates in the inflation rate suggest it is likely. the consequences for the long end of the curve is there will be less incentive to carry, i think the long end of the curve is putting in higher lows if you will. i don't know if we reach that 5% we had in october. we get into 4.75 type tenure, that will start moving off the sidelines back into the bond market.

jonathan: positioning, you are 60-30-10. is that why you want to have 10%? james: the cash option is two fold. i think the consequential part is the correlation between rates and stocks, until this inflation thing is settled, bonds and stocks trade coincidentally. we don't want to conflate the risk. i think the bond market long-term is extremely attractive. the bond market returns were previously good. the other part of the equation is those terminal growers, companies that pay and grow year after year also have a very good track record. obviously we are being paid to wait. jonathan: why not shift even more to equities versus bonds?

why retain 60-30? james: the one thing we have to be mindful of is the yields and the fixed income market, as generous as they have been, on the equity side, we are waiting for it to get a little bit better. we are having very good earnings growth. that is the objective function of an income portfolio. all things are being checked in terms of being more bullish, we will have to see some broadening. jonathan: what will underpin that? james: the recognition for the retirees that the s&p is not there benchmark. that income generation and a lot of the sectors of the economy are doing well. you could buy these companies alongside the bond and the cash market.

they probably have the best income in 10 or 20 years. lisa: underpinning this rally is obviously nvidia. i believe 4 p.m. eastern time, kicking off this is arguably the most important event of the week. the rally hinged on artificial intelligence, percolating to the rest of the economy? james: longwave, yes, short-term it is the momentum trade. it is a huge part of what is going on in the capital markets. it is a big topic. i'm very excited about ai, we see applications across the economy. these innovations could be game changing. the last couple of decades, it has been languishing.

i would point to the fed. the cost of capital is higher. companies have to figure out how to get more efficient. now that labor markets are tighter. these types of technology give us a lot of hope long-term. for markets, it will be an exciting week. these will be near-term catalysts. i think the long-term hopefulness is we will have a significant shift in productivity enhancements that is ultimately wealth creating. lisa: how have you used artificial intelligence? have you gotten rid of half of your employees? james: we have not but we have more than tripled our business. separately managed accounts, technologically intensive. we have algorithms and bond gpt

that allow us to search, source, get accurate prices on a market, which is fixed income. it has been growing with productivity enhancements across the board from trading research and portfolio execution. jonathan: finishing up there with ai looking ahead to that investor conference. 4:00 p.m. eastern time? lisa: that is where we are at. jonathan: jonathan: he's excited, i am terrified. i just don't trust the leadership on these issues at all. when you hear ceos say things like three day work week, you will be more productive, i think job losses. that is all i could think of. lisa: there will be job losses

or increase productivity. that is sort of what he is arguing they are able to do. skilled versus unskilled, how big that gap gets. you have to have people that could use ai as a tool. for people that could use that to transform the businesses. what about all of the workers who cannot? they have the skills to be able to use those tools to get ahead. that to me is pretty significant. jonathan: i have a deeper theory that capitalism will eat itself. job losses will be so big, much more dependent on stim and that will be the end of capitalism. it should be a pursuit of that. i could go on. i don't want to make you too depressed. want to get a sense of jp morgan

♪ ♪ .

>> inflation has been more stubborn than expected. >> inflation is an insidious thing. in the second half of the year we see the rate cuts happen. >> the market seems content to price in energy rate