>> the fed is at the risk of losing confidence. they open the door for rate reductions too soon. >> there is more inertia to inflation than the fed is giving credit for. >> the challenge has been everyone is waiting for certainty. i do not think we will get it. >> the fed would like a scrap of certainty about what they're going to do later this year. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning. bloomberg surveillance on tour. home of bank of america here in new york city alongside lisa

abramowicz i am jonathan ferro. lisa abramowicz actually going to 731 lexington avenue and just making it in time. good thing brian moynihan does not join for another 60 minutes. lisa: really, that is how we are going to start? i was prepared to be here early. jonathan: you want to trade? this will fill out for the next two or three hours. brian moynihan will join us in 60 minutes. we want to start with the price action. we begin with dollar yen. something truly historic just happened, something since -- not since 2007. the japanese yen is weaker even though we've just seen the first interest rate hike in 17 years. lisa: on one hand people were expecting this. some of the rhetoric out of the central bank was not hawkish. they were indicating they were not prepared to hike again.

that is why this currency pair is dead in the water. i do not understand this. this is what everyone was waiting for. michael: -- jonathan: there is a big difference between the end of negative interest rates and the end of easy money. this is not the end of easy money. the governor going out of the way to say they need to keep things accommodative. the end of negative rates, yes, but the end of easy money, not yet. i got on the phone and i said what matters is not the first move, it is how far they go. how far you think the boj will go after this move overnight? lisa: i think to where they are right now. eventually they go higher. right now there is no indication there will be any further rate hikes because they they do not have to. when you take a step back, this is the end of the negative rate experiment.

this is the last central bank to remove the negative rate policy. when we write the book will be considered stimulative or suppressive of growth? i wonder what the history books will say? jonathan: i think a lot of books will be written and they will be inconclusive. every thought in the negative era is what you'll think in the next 20 or 30 years. will be arguing about this forever but let's hope we never get to a situation where we need to have a conversation about negative interest rates. the federal reserve has gone from zero to 550. the global fund manager survey from bank of america is out this morning. will be talking about highlights. global growth expectations, two your high. risk appetite highest since november 2021. eps optimism the highest in two year. that is interest rates with the five handle in america. does that look restrictive based on the fms survey? lisa: bonds and stocks are

operating on two timelines. they are looking at the inflationary. stocks are looking at is what he happening in the tech revolution. they are talking about all these other things. at what point to stocks wake up to bonds? that is what it seems like. are we going to test the threshold at which stocks start waking up to the prospect of higher for longer? jonathan: but we spend more time talking about j and less about jensen. equity futures negative .2%. a bounce back in yesterday's session. in the bond market yield still high in close to the highs of the year. 4.3183. grinding higher over the last five or six sessions. euro 1.0 841. the currency pair -.3%. lisa: this raises the question on how much emphasis will there be tomorrow on jay powell in deciding whether the dollar will keep rallying? let's see what you've got.

will that be the deciding factor? the boj is off the table. jonathan: fed decision just around the corner. we'll will catch up with mark cabana as investors continue pushing back bets. liz everett on the bank of america and marcy macgregor of merrill bank of america private bank. we begin with the top story. the fomc meeting getting underway as traders push back bets on the first cut beyond june. mark cabana is looking for discussions on the balance sheet , writing "the fed needs to prioritize how and when to slow qt given the reduction of excess liquidity in the system. slowing qt is fed priority number one." mark kicks off our show this morning. good morning. mark: thank you so much for being here. jonathan: let's kick it off with the balance sheet. what are the considerations that

go into making a decision like the one they have to confront for next when he for hours? mark: we think the balance sheet will be an important point of discussion and the fed will have to answer the question of how far and how much excess liquidity so they want to remove from the system and how comfortable are they pulling that cash out of the banking system that appears to really be wanting to hold an elevated amount of reserve levels and cash levels. lisa: we are talking out of balance sheet that strunk from $9 trillion. to what effect has the balance sheet shrinking by $1.5 trillion had on the market that seems intent on rallying? mark: the clearest thing that has done is pulled cash out of money market funds and pulled the excess cash with the fed. that has caused money market rates to rise. bills are not as rich as they

were a year or so ago. that is the only impact it has had. in terms of a broader marketplace it has not done much. the fed will have to ask how much do they want to keep pushing the balance sheet reduction and how much do they want to risk pulling excess liquidity out of commercial banks that have been clearly bidding up to hold that excess. lisa: the fact it has not had a clear and obvious impact on markets is a reason a lot of people are not paying attention. a lot of people's eyes glaze over and say we want to see where the dots are. you think there is too much emphasis on the dots? mark: priority one was with regards to the balance sheet discussions. the fed's real focus will be what to they want to do with the overall setting of interest rate policy, how long to they want to keep rates at current levels and how much restrictiveness are they comfortable exerting on the economy. the market is right to focus its attention on the dot plot,

keeping the balance sheet secretary but slowing qt when they think about all the considerations. that is the number one priority they have. on the dots come the big question is will they show three cuts or two cuts for their expected 2024 outlook? that will have a notable rate and market response either way. the market is quite divided on this. you talked about the fund manager survey. we do our own survey of rates and fx clients. when we asked them, 68% said the fed will keep three cuts, 75 basis points of total rate cuts. that survey closed about a week ago. that has probably shifted a little bit as you look at how much the market is taking out fed rate cuts for this year, the fact that the june meeting is around 50/50 in terms of whether the fed will go. the responses we've got suggest the market is closer to 60/40 in

terms of investors thinking they will show three cuts versus two cuts. that will be the big question and the market will respond in either direction. if they only show two cuts for this year, so they take out one cut, we think the two year will sell often basis points, we think you'll will see the dollar rally and you will see risk assets take it on the chin to some extent. that is because the market will be questioning how accommodative is the central bank going to be? if they show three cuts as they had in december and as our economist expect they will we think the two year will rally five basis points, the curve. in and you'll see the dollar weaken and risk on. it is a pivotal point for markets. i know if been talking for a while. lisa, you asked how long until the equity market catches up with the bond market. i do wonder to some extent how long before the bond market

catches up with the equity market? you can look at price action and say monetary policy is too easy and rates are too low and that is why the equity market is doing this. when i talk to our equity market folks, what they say is we do not care about interest rates. have you seen the growth profile these companies? have you seen how strong the economy is running? we talked about the fund manager survey. risk appetite very high. they do not think that whether you have tends at 4.30 or 4.75 or 5% disrupts the investment narrative. that is a real question the market will have to rebalance. i wonder if the bond market might have rebalanced what the equity market has done. jonathan: we are in your home so i will not cut you off. i want to talk about something you said. the equity market will take it on the chin then he laid out as to why the equity market will take it on the chin. if you think about what has happened this year, january 4

.1% on a u.s. two year, we have gone from 4.1% to 4.70 this morning. over the last weeks we've been in and around that level and equities have done nothing in the face of that which tells me yields can go even higher and they can keep going higher until they become a problem. is that the right way of thinking about this? mark: i think if you are look at what financial markets were telling you and you are only looking at financial conditions, i think financial conditions would tell you monetary policy is not too restrictive. jay powell says monetary policy is that well into restrictive territory. financial conditions are not telling you that. i cannot help but rewind to where we were last summer and fall. as we know at that point in time we saw a rates selloff very materially. the 10 year rose over 100 basis points. the 10 year real rate rising a similar amount. risk assets were relatively stable.

the equity market did not go down. credit spreads did not widen. the fed told us they were very worried about higher term premium and they felt higher interest rates were doing the work for them. when we looked at risk assets we set risk assets do not care about this. risk assets do not care about the rate rise because we thought it was all about better growth expectations. the market was taking fed rates cuts and risk assets were generally ok with that and then the fed subsequently eased in the face of that and drove rates lower over the course of november and december through very dovish rhetoric and the treasury department also did their part. they issued less long dated bonds than we thought. the treasury and the fed eased financial condition substantially and assets kept rallying. i going to this to make the point that risk assets are telling you the economy is fine, growth expectations look very

healthy. may be interest rates are not that restrictive. that is the key question they have to grapple with at the meeting the next couple of days. the balance sheet will be a focus. it is secondary to the setting of monetary policy. they have to ask themselves how restrictive our week? that is an opening question for them. jonathan: can we wrap it up with the target. 4.70 on the two year. what are you saying? mark: we have been saying to clients that clients can be patient on adding duration because we think rates will continue to rise in the near term and that is due to the fact that growth has been so strong. risk assets are not telling you financial conditions are particularly restrictive. as a result of that we think investors and wait until rates are around 4.50 two at long positions and be comfortable with that -- around 4.50 to add

long positions and be comfortable with that. our end of year 10 year forecast is for .25%, well above consensus. is to be well above the forwards, not really anymore. we think that is consistent with his expected strong growth backdrop in the u.s. economy and may be a reassessment of the fed in terms of how much they will be able to cut this year. ♪ great ticket -- jonathan: great to kickoff the program with you. mark cabana of bank of america global research. let's get it update on stories elsewhere. here is your bloomberg brief with sonali basak. sonali: president biden and benjamin netanyahu held their first call and weather months to try to ease tensions over israels war in gaza. benjamin netanyahu agreed to send a group of advisers to

washington about his planned invasion of roof and antony blinken is heading to the -- to the region. it will extend his trips with stops in saudi arabia and egypt to push for a cease-fire between israel and hamas. donald trump is narrowing down his list of potential running mates for november. bloomberg has learned trump has ruled out vivek ramaswamy as his vice president. sources tell us trump told the entrepreneur personally he will not be his vice presidential pick but is considering them for a cabinet position, including possible homeland security secretary. the bank of japan has ended its era of negative interest rates and is signaling easy financial conditions will continue, giving clues on when to expect further hikes. the central bank is shifting from its negative interest rate policy after seeing its 2% inflation target had come into sight and the move has prompted a slide past the 150 mark against the dollar. that is your bloomberg brief. jonathan: making the case for

tesla. >> my view on tesla is it is easy to give negative. they will gain more share in the leverage will be there. i believe ultimately numbers and growth will start to go back up. jonathan: daca -- that conversation is coming up next. live from new york city, good morning. ♪ 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: live from new york city, good morning. live from the home of bank of america, we are new york throughout this morning for the next two hours and 41 minutes or so. on the s&p 500 futures pulling back ahead of the fed tomorrow. equity futures softer. yields pulling back. very close to 2024 highs. 4.31 on the u.s. 10 year. dollar stronger against g10 yesterday. 1.0 842. under surveillance, making the case for tesla. >> my view on tesla is it is easy to give negative. they were going through a white knuckle period. china demand has been soft.

my view is on the other cited of this this will be a company on its way to 2.5 and 3 million units and they will gain more share, the leverage will be there and numbers and growth will start to come back up. jonathan: tesla looking to raise prices on the model y and regain investor confidence after becoming one of the worst performing s&p 500 stocks of the year. john murphy maintaining a neutral rating with a 12 month price target of 2.80 -- of 280. john murphy citing tesla's ability to remain agile. let's start without difficult this industry is at the moment. who got this right and saw where this market would be? john: i've been doing this for 25 years and it is an industry that is difficult to get right. one company that has been very good and very agile and foundational has been toyota. when you look at this rule they

have where they say basically for all the precious metals and everything they can make six hybrids or 90 hybrids. with those 90 hybrids they save 37 times the co2 as you do with one ev. the consumer will be a lot more adopting and a lot more accepting of hybrids. that seems like a good interim solution until we get hydrogen fuel cells worked out. lisa: to underscore a point that is implicit, are you saying electric vehicles as we know them are not the environmentally friendly vehicle that say a hybrid would be? john: when you look at well the wheel there is a lot of debate about how environmentally friendly ev's are. the reality is that ev's work very well for folks that are in large suburban houses that can put a charger in and have a

second car. for the masses and folks that live in cities they do not work so well. it is a challenge. what you need to do is make a better product for most folks at a better price and they are not there right now and we've major issues with the charging infrastructure. lisa: do you think the answer is to allow imports from china at cheaper price points or do you think china has its own interests for creating an electric vehicle ecosystem that is dominating a marketplace that is a shorty? john: one of the major complicating factors is it is soap macro and has a much to do with the broader economy. if you are xi trying to drive your economy you are pushing the auto industry. it is the biggest industrial manufacturing base. they have a real position to drive forward the industry and builder national champions and they are doing it with ev's because they can never get

around on the powertrain. their motivation is to drive the economy forward. what you have seen from china is three years ago net import export on vehicles was zero. last year it was about 5 million net exports. they have become a big player on the global stage. jonathan: do you think this could spell the end of the global auto market? will we see regions with pause eyes state sponsored national champions operating in different places? john: we're kind of already there. the japanese support japanese companies, u.s. support u.s. companies. we took chrysler and gm into and out of bankruptcy in the u.s.. many people think germany supports the g3. south korea supports hyundai and kia. it is a major part of the economy. is a larger portion of your employment base. secondary market is twice that.

if you're trying to support an economy this is where you start. then you get the political aspects of support from that labor that creates a reference for politicians. jonathan: you have to help us pick stocks but i wonder if the government is doing that for us? john: some of the intervention, whether incentives or regulation are something you have to consider. the whole industry is limited in the utility and value it can drive for consumers by speed limits. the ultimate function is to get you from a to b quickly, and because you have a limit, that is called limit, it is a limit on the value you can deliver to consumers. lisa: there's a question between subsidies on electric vehicles and the trend shifting towards hybrids. wishful win and who is best positioned to toggle between that vision? john: usually the market wins out.

the consumer is pushing in a direction of hybrid. the beauty is you improve the fuel economy by 50% and the consumer has no idea they are driving a different kind of powertrain. it is cost-effective. he did not have to worry about charging or plugging it in. in the near term we will see hybrids continue to gain in popularity. ev's are stagnating. in the u.s. we saw ev's drop to 7% of the market. in china and europe, you are starting to see a fade and the rate of increase on penetration. we will see a market that gets hybrids. toyota is very well-positioned, ford is well-positioned. gm is playing catch-up. toyota has taken the lead. jonathan: john murphy of bank of america. every time we have this conversation i get the green activists starting to email in. the bottom line, it does not

matter what they think. when you speak to the experts, they are not that environmentally friendly. they are just not. lisa: which raises the question on how much can you backpedal on some of the policies and expectations baked into the market? ♪

[alarm beeping] amelia, turn off alarm. amelia, weather. 70 degrees and sunny today. amelia, unlock the door. i'm afraid i can't do that, jen. why not? did you forget something? my protein shake. the future isn't scary, not investing in it is. you're so dramatic amelia. bye jen. 100 innovative companies, one etf. before investing, carefully read and consider fund investment objectives, risks, charges expenses and more in prospectus at invesco.com. her uncle's unhappy. investment objectives, 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: live from new york city, it is federal reserve decision even. is that a thing? it is now. they are not even awake yet. lisa: they will be. jonathan: down .2% on the nasdaq. took us about 30 minutes to take a dig at chairman powell. two year, what a repricing we have seen. back through 4.7%. catching up with mark cabana at bank of america about 30 minutes ago basically saying we are not sufficiently restrictive and that opens the door for yields to go higher at the long end. lisa: i love what he said. maybe stocks are not listening

to bonds that may be bonds are not listening to the stock market. rates can be substantially higher and allow the economy to keep chugging along. there is a reason stockmarkets are not paying attention to the of rates where they are. jonathan: yields keep pushing higher. monday morning we were pushing higher. this morning we are down two basis points. on the 10-year down a single basis point. let's which of the board and turn to foreign-exchange and check out euro-dollar and a bit of dollar-yen. one point -- dollar-yen 150.54. another day of yen weakness in the face of the first interest rate hike back to 2007. we should draw the distinction between ending negative interest rates and ending easy money. i'm not sure the bank of japan wants to call at the end of easy money. lisa: which is the reason we are not seeing more of reaction. kit jukes has the best explanation.

"the fx market thumbs its nose at the boj and history." that is what we are looking at. the fx market thing you think this is a move, check out the world, you are so far beyond you. jonathan: i love the title of his work yesterday. someone tell the japanese yen this is not a historic moment. if you looked at dollar-yen you would have no idea what happened in japan overnight. if you looked at dollar-yen he would have no idea whether there was a boj meeting. lisa: was this the goal for the bank of japan to make it a symbolic move and not something that tightened monetary conditions? they do not want to enter another lost decade of growth and that will be their priority regardless of what the rest of the world is doing. jonathan: 100 50: -- 150.52 on dollar-yen. liz everett krisberg seeing

signs lower income spending growth is slowing, saying "this could partly reflect some loss of momentum at the lower end of the labor market. hiring spending remains weak but is stronger at the top end." what is happening with the u.s. consumer? we can ask liz. this quote from your work. i have let this three or four times. can i share this with you? "monthly median value of savings and checking balances are more than 40% higher than 2019 for all income levels." you are looking across 69 million consumer and small business clients. that is not a typo. 40% up? liz: we have been working at the bank of america for two years to leverage the data to telus us real-time what is happening. this is been the statistic that has shocked me but it is what we are seeing.

everyone thought the consumer would run out of money. this year the consumer has been very stable, keep in their checking and savings deposits 40% higher than they were before the pandemic. jonathan: that is not coming down, it has remained stable. liz: it is coming down by tenths of percent but it has remained 46 -- has remained 40% higher. jonathan: how much of a cushion is that for the u.s. economy? liz: the push and is not necessarily on the saving side. the question has been in the labor market for the lower and middle income consumer. what we look at is the actual money coming into the account. the after-tax wages and income getting deposited. we saw for lower income consumers the tick back up 3.4%. when you see the labor market remaining strong, there is not as much need to draw down onto that savings. you mentioned the difference

between the higher income consumer and the lower income consumer. the big difference there is the higher income consumer is generally also participating in the markets. even though there wage growth has been negative for quite some time, they have the cushion of equity market performance. lisa: some people would say that sounds great, but there is weakness under the surface. it comes in the form of leverage and credit and we've seen credit card outstanding's go up so much, we have seen the by now, pay later cushion. what you say to that? liz: have we seen delinquencies move up? yes, but not to an area where particular concerned about. the other thing is what is the ratio of spending people are putting on their credit card relative to their debit card? that would be an indicator those ratios are the same. he talked about by now, pay

later and that is interesting to consider. when by now, pay later first came out it did boost retail spending for the people using it. up 40 plus percent relative to non-buy now pay later users. what is the population using by now pay later? when we looked at our data, just under 9% of our customers made a payment. that number is growing relative to last year, but at half the pace it was. it by now pay later going to be the boost of less than 10% of people are using it? lisa: nothing you're saying speaks to recession or weakness or anything close to a material slow down in spending. is there any historic corollary to this moment suddenly turning south quickly with the labor market that still looks good and people having that cushion?

liz: we keep looking for that. we are just not seeing it. if we were talking a year ago i would've said resilient, resilient. there was nothing. what we are seeing now is not recession on the horizon by any means, but the consumer is softer. they are stable. they are softer and staying there. like the deposit balances they are stable. if we were having this conversation a year ago, lower income household deposits were up 200%. they have come down from that peak and spent the stimulus but they are stabilizing 40%. labor income continuing to increase. jonathan: you think there is space to lever up for the consumer? any time we see signs people start to worry. everything you've said it sounds like we have space to do that in this economy. liz: i think everyone is looking

for the consumer to rollover the advantage we have at the institute's we are looking at the data as it is happening and we are not seeing the rollover. jonathan: what about small business clients. is there a difference? liz: small businesses have been very resilient and behaving very much like the consumer. i think they are little bit softer than they have been. not rolling over. small business was such an engine of growth through the pandemic and continues to be. jonathan: is it across the board? what are the differences from sector to sector? liz: there is a great question and i need to come back to you on that one. jonathan: when i talk about how restrictive we are a lot of people point to large companies that can come to credit markets and issue debt. i wonder if small businesses are having the same experience borrowing as their larger cohorts. liz: i think small businesses are behaving like the consumer

is in there a great engine of growth. we continue to love doing business with small business. they are doing ok. lisa: taking a step back as jay powell wakes up, what are some of the fundamental structure shifts have been the economy to allow people have more cash in their balances. i wonder how much the housing market has to do with this. the fact that a lot of people have to save money they would then put as a down payment to a house. that was the massive purchase. the fact that is not so much on the table but it is so difficult to get to this market, is that why cash balances are so persistently high when in the past they would be put toward something? liz: i do not know that that is true. you have people who are not necessarily getting into the housing market because rates are what they are. at the same time if you are in a house you are not necessarily

moving. if you look at rental prices we have seen rental prices in terms of what people are actually paying. not necessarily what is being advertised is going up month after month. if you're in a rental apartment you are in there for the year. the rental prices are ok. are they investing? no. where are they putting the money they do have? they are it into the market. liz: this -- lisa: this brings us full circle and we were talking about a structural shift with retail investors accounting for a greater proportion of the overall investing base. how much is that a structural shift that materially changes the business of banking in some ways? all of a sudden people have money and instead of putting it into a house there putting it into a market and looking for wealth managers? liz: that is a really good question and one we have not looked out and one we consider looking at across the board from

what people are doing in the consumer bank versus how they are investing? lisa: what are you watching for to know whether the cycle is truly shifting or rolling over? liz: i focus on the labor market. the labor market is the driver of spending and how people are able to engage and if we continue to have a strong labor market, particular in the lower end, we will have a consumer that can engage. jonathan: your work is fascinating. thanks for sharing that with us. liz everett krisberg. just repeat that line. monthly median value of saving and checking balances are more than 40% higher than 2019 for all income levels. isn't that amazing? lisa: it defies what everyone has been saying what happened. this was supposed to be the year of the shrinking consumer balance sheet. it is not happening. that has vast implications.

it is the reason people looking for signs of weakness in the labor market they're having a hard time finding. it goes back to mark cabana's point -- our bonds listening to the stock market? jonathan: let's get you an update on stories elsewhere. here is sonali basak. sonali: u.s. lawmakers reached a handshake deal to fund the government through september 30. the agreement comes after the sides resolve the dispute over the funding of the department of homeland security. lawmakers will race to pass the agreement before midnight deadline that would lead to a partial government shutdown. bitcoin considers its slide from an all-time high after a record daily outflow from the world's biggest etf. that when he $5 billion trust -- the $25 billion trust posted the most outflow since the etf begin trading january 11. the etf's have attracted in at $12 billion which helped push

bitcoin to a point of $74,000. the nvidia ceo has unveiled the company successor to its ai processor. he unveiled a -- a processor multiple times faster at handling the company's ai models. >> the industry is being transformed because the computer industry -- the computer is the single most important instrument of society. fundamental changes affects every industry. sonali: that is your bloomberg brief. jonathan: up next, the fed's number one priority. >> the fed's focus will be what they want to do with the overall setting of interest rate policy. along to they want to keep rates at current levels. how much restrictiveness are they comfortable inserting into the economy? jonathan: that conversation is up next. from new york city, this is

bloomberg. ♪ and there's not a no look pass, double double, or buzzer beater he won't wax poetic on. ad nauseam. but oh how he can nail a software solution like the best high screen pick and roll you've ever seen. you need ron. ron needs a retirement plan. work with principal so we can help you help ron with a retirement and benefits plan that's right for him. let our expertise round out yours.

jonathan: stocks pulling back something like .1%. no drama ahead of the federal reserve. if you're looking for drama may be you are looking for tokyo to do something and they did. will be curious where dollar-yen is off the back of that. 150.53. yen weakness. that princi pay or breaking out another .9%. it is an interest rate hike. lisa: they talked about weakness from other economies in the region and they are talking about the potential for that keeping price pressures under control. the bottom line is no one is expecting this to be a rate

hiking cycle which is the reason people are not responding. jonathan: this will take time. this does not just happen overnight. the bank of japan will say we worked on this for 17 years, let's start hiking interest rates. this will take time. this is the first move of how many moves? jonathan: it is not the end of easy money yet. it might be the beginning of the end. under surveillance, the fed's number one priority. >> federal focus will be what to they want to do with overall interest rate policy, how long to they want to keep rates at current levels, and how much restrictiveness are they comfortable inserting on the economy? those are the big questions. the market's right to focus its attention on the dot plot, keeping the balance sheet secondary but slowing qt.

that is the number one priority they have. jonathan: the fed rate decision to out at 2:00 eastern. the market implied odds of a june rate cut falling below 50%. bank of america upgrading the outlook for u.s. equities driven buying upgrade to small caps. marcy mcgregor anticipating some choppiness as crosscurrents, including the fed adjusting policy but overall and upward trend. i am pleased to say that marci joins us for more. we caught up with mark cabana and he raised an interesting point. how relevant are higher interest rates to the market given how little equities have moved back? marci: i think interest rates will be really important for the small caps space. as long as interest rates stay reasonable they are reasons small caps can shine. valuations historically cheaper.

big picture themes like re-shoring and infrastructure development that would all benefit small caps. interest rates need to stay at a reasonable level and that can lead to an extended period of small-cap outperformance. lisa: define reasonable? marci: our view is interest rates remain sideways. i keep talking to clients about what matters to the market and what is just noise. one of the two things that matters is the event. the other is earnings. lisa: sticking with the fed because at some point jay will be getting out of bed. jonathan: you are really focused on that. lisa: you think he gets nervous? jonathan: 6:30 in new york is like 4:30 in washington dc they are hours behind us. lisa: there in the same time zone. what to make you reassess your

thesis in small caps? marci: when i think about what matters from the fed it will be how clear is the communication tomorrow. how transparent will felt -- how transparent will powell be. the risk of cutting too soon versus the risk of cutting too tight for too long. he will try to take this bounced view. the rationale for why they cut rates when they do. are they recalibrating policy or are they cutting rates because the economy is slowing? the messaging is almost more important than whether it is june or july or what the exact timing is. jonathan: at the moment they appear to be pushing back the time. we heard from neil dutta yesterday. nominal gdp is solid which is a reason to like equities. you like the u.s. over international. why retain that bias to america? is it a risk we are not doing

too well? marci: here in the u.s. we see so much resiliency in earnings. we are starting to see the rotation under the index level. that is driven by earnings picking up. that is really important to the u.s. story. if you look outside the u.s., you've parts of europe flirting with recession. china has been cautious in terms of easing and stimulating the economy. there is more exciting story of resiliency and earnings growth. the earnings path may be slow in the u.s. but i think the trend is improving. jonathan: energy, health care, discretionary, industrials. how do energy and discretionary work? energy breaking out recently. brent crude closer to $90 a barrel. how do you reconcile your view on energy with discretionary? marci: we have been adding cyclicality. on the one hand we like energy.

energy has perked up with wti over $80 and that is still a pretty reasonable level for oil prices. i like energy for a couple of reasons. it is inexpensive in terms of free cash flow and in terms of earnings. i also think it provides you a little bit of a way to position for a world where energy security is an issue. red-hot geopolitical world. we just heard from liz on the consumer. we have a consumer that is largely stable. our data shows the consumer's on two feet. we are seeing normalizations in spending patterns but i think you have a strong labor market and as strong as labor market stays the consumer will go with it that leads to an opportunity for discretion. jonathan: let's deal with health care. traditionally that would sound defensive but health care is a couple of names. i'm trying to work out when you suggest health care, are you saying more broadly something

else is happening? marci: i think more broadly it is at crossroads of innovation and technology and health care and wellness and all of these things. i also think health care gives me a nice mix of quality. it gives me a little bit of a buffer with the ups and downs of growth and can withstand macro pressures. you mentioned atlanta fed gdp is showing some slowing, some moderation in growth while the economy stays strong. i think it comes off the boil it had been on. lisa:, chip the gains in the sectors are driven by nvidia? i say this because yesterday there was a conference where they announced a bigger and better chip that cost twice as much. i wonder if you will leverage the gains in productivity in your portfolio, why not just three times lever nvidia shares? marci: we already saw the magnificent seven go to the fantastic four. you are seeing a broadening and

they'll be the story for the rest of the year. so much enthusiasm about artificial intelligence, but as we saw it is about real demand and the follow-through. that is the story for 2024, what is next for artificial intelligence. there can be so many beneficiaries. 80% of the s&p is trading above their 200 day moving average. that gets me excited this rotation may have legs. lisa: what is the buffer asset class? is it cash or is it still bonds? marci: it was a view of adding risk on the equity side or being invested, not of you about bonds. we still like high quality fixed income. we would be slightly beyond benchmark duration. fixed income is providing real yields and diversification. lisa: you said geopolitics concerns you. where does that come into play? marci: industrials, defense.

especially international defense spending, that is less of u.s. story and more if we look at the rest of the world defense budgets will be rising and i think we are in the early innings of defense and cybersecurity. jonathan: to wrap things up, bank of america private bank, you do not think we should be three times lever nvidia. bramo getting excited about the big single name trades. lisa: this is what people were doing. did you see what the options market was doing around nvidia? jonathan: alex webb of bloomberg says it feels like the new apple conference get together. lisa: on steroids. jonathan: good to see you. marci mcgregor there. clearly that was a no. next, will be catching up with brian moynihan, chairman and ceo of bank of america and we'll

will catch up with candace browning and wendy stewart. that is a stacked 60 minutes at bank of america. lisa: i am looking forward to it . i also enjoyed being everybody's different homes where you hear the different noises and understand with their environment is. jonathan: what you mean the different noises? it is nice to hear the bloomberg terminal. lisa: is enjoyable. jonathan: that is music to mike's ears. it is a beautiful thing. that is the alarm in the morning. the second hour of "bloomberg surveillance" is up next. ♪

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>> this rally is all big tech. it has been broadening out a little bit but very early days. >> in terms of getting more bullish on the equity side, we will have to see some broadening. >> the mag7 side, they were down last year, the think they will be up. >> there is a broadening out happening in the market and i like the cyclical strength. >> this is a favorable operating environment for corporate america. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and an reordering. jonathan: maybe it is a

coincidence that brian arrived and everything got very busy. lisa: he did point out that some maybe work in early enough. jonathan: from new york city, good morning. the second hour of "bloomberg surveillance" begins right now. the s&p 500 softer this morning. the term of the -- the theme of the first hour right here, this economy is looking resilient based on what we have seen so far. lisa: bull bull bul. it was incredibly bullish. maybe it is not stocks not listening to bonds, it is bonds not listening to stocks. jonathan: we have said this a few times. the start of the year we were talking about six rate cuts in 2024, the markets coming down, the federal reserve takes it from three to two. the front end of the yield curve around 4%. equities, super calm.

as long as they remain calm and spreads remain tight, does that open the door for yields to push higher? lisa: we have asked this question to people who have led to small businesses and said is it difficult for them to pay back interest rates where they are? the answer, no. is it just survive until 2025 or is this a new reality where marches are increased and inflation has been beneficial for businesses that can charge more? jonathan: we will get into that new reality in a moment. let's start with some price action. equity futures on the s&p 500 softer, negative on the s&p, down by 0.1%. foreign exchange, the boj did hike interest rates for the first time since 2007. who would have thought that event would be a snoozer. dollar have been yen breathing out by almost another full percentage point to --

lisa: their disabled the ardennes with negative interest rate policies. they are still putting a priority on getting invasion of to 2%, not down to 2%. jonathan:. the strength yesterday come on the review today. brian moynihan, the chairman and ceo on the outlook for the bank of america. candace browning-platt and wendy stewart, the president of global commercial banking. we begin with our top story. the s&p 500 snapping a three-day losing streak as investors begin to turn their attention from jensen to jay. joining us now, brian moynihan, ceo and chairman of bank of america. we have to say thank you for having us. brian: these talented teammates are out hopefully making money for the shareholders. jonathan: it is getting noisy. we can talk about how much

they're making in a moment. i want to start with a close -- with a quote. i find this stunning every time i read it. "medium value of checking and saving balances are more than 40% higher than 2019." just how resilient is this economy still? brian: liz and the team do a good job putting this out and we created the institute so we can get this data out. it is a reflection on what you see in the past. 60 million plus customers, 37 million checking account customers. we were sitting here last year this time, we would be talking about our team predicting a recession sometime early this year. they took that off of the tables. now they are but acting growth this quarter. you've gone from negative to slightly positive. that is returning to the mean.

it is not as as growth, it is slowing down so people can forget we're going for my 4% to 5% growth rate to a -- percent growth rate is low down. the consumer is very resilient and that is providing an anchor. the fed is providing latitude a lot of purses don't have so they can be restrictive and let the economy catch up. they have to be mindful of the change. they have slowed down their spending. last year it would have been to percent growth and this year in the fall it is 5% and now down to 3% to 4%. this is the tension we are in, this resilient economy. actually trying to bring inflation down. most central banks are to get inflation up. it's a different execution. jonathan: you are dominant in small business lending, i wonder how much confidence there is any corporate america at the lower level and smaller companies

across this country? brian: it is strong. line usage has come down a bit which means the cost of borrowing went up and therefore i am a bit more careful. equipment purchases, more careful. they are fine making money and the prophets are strong and the team talk about profits driving this market, even midsize companies. the american economy is the dominant economy in terms of activity and interest and investment and lots of good trends. where are they using the line so much? it is more costly. that is the tension we're going through, trying to figure out how this economy will perform. four months ago people were worried about recession. now they are not. do they really want to invest heavily in it? that is where you see tension. everything is fine. it has to work the next twist in

the economy. lisa: the people work from you -- for use out incredibly bullish. visit your job to look around corners and see what potentially could be the problem? otherwise things are suggesting 4.5% 10 year rates will be just fine for the activity. brian: you were seeing we are adjusting as a company and an industry and a society to a simple thing. from 2007 or 2008 until 2017, you had no interest rate. and then. you had an interest rate. and then dropping rates. and then covid so they drop. we have never had a normal interest rate environment. in sloping curve, a real interest rates -- it is not occurred for anybody under 40. they literally weren't working. that sounds curmudgeonly but that is true. everybody is adjusting so these hybrids at 4.5% are not hybrids

in the grand scheme of things, high rates in the last 15 years. we have to adjust to that and that will take time. our team is the best team in the world and you will hear a lot from them in the day. as you look more broadly, my job and the team's job is to make sure we are balanced for all outcomes. that is why we are ready by tomorrow. lisa: the balance is leading to some frustrating -- frustrated board traders. a lot of people say there's not a lot to do because you cannot get an edge. are you seeing that in trading revenues, people have no incentive other than to hold nvidia, hold on to the credit that keeps on reading and make bank? brian: our team has come off of last year a record amount of revenues. we think they are going to farewell this quarter.

the team that is out here, the research team under candace and investment banking team are driving the business in gaining share. investment banking, we gain some share there. we are actually up and that is different in this business. they made money every training day last year. they do it the right way. is that work or not? you'll -- is that boring or not? you will have to ask them. that ability to keep delivering for clients and make money at it. jonathan: have you obtained -- have you maintained that momentum from the fourth quarter? brian: we think this quarter started off well. when you get bigger and bigger, it is harder to get that growth going. jonathan: camtek about the m&a slump? -- can we talk about the m&a slump? our working away out of that? we talked about a big deal at that type about it they could close it or not because of

antitrust. are you looking to exit the slump this year? annmarie: -- brian: until there is a clarity on policy, that question is going to come up every time a deal. is announced. the companies are try to figure out strategic moves. then the question is can the deal get through. we need to get this resolved and have a more rational predicted outcome to have four people to put their company at risk for the sell side. that comes out of of the buyers so put themselves at risk because the company hanging is a tough taste to be -- a tough place to be. having been there and cause people to be there, it is a tough place. we need to get a faster turnaround. the idea is these transactions don't change this much from month or year from now. people need to look after them and decide what they're going to do and get clarity. the good news is investment bank

revenues have stabilized. that is good. the m&a piece is a piece that could come under pressure. jonathan: you find reluctance to make deals based off of what you said? brian: 100%. jonathan: they don't want to attend the conversation? brian: not everybody has distinct power to fight flute -- fight through lawsuits and things like that. if you said you needed 10 points strategic import out of 10, you might need 74. you might say this is worse hanging on to. that is a different environment. you are saying deals announced and that is because they make strategic sense for that buyer. it has been slowing things down and there is rationality here and around the world. none of these deals are simple. the end of the day, consolidation comes because

strategic import and you have to let capitalism run. lisa: let's talk about the policy shift which is a gentle allusion to the election later on. they could offer more certainty. what other m&a boom could you see after that certainty has been established? brian: we will see. elections are elections. this company has been around since 1784 and there have been a lot of elections since that timeframe. do you have a drawer from 1 -- a drawer for one outcome, the answer is no. we run the company and drive it. the election process around the world, we know what we are dealing with and go on. we have to be careful to say one thing leads one way. politicians have to get things right for the state of the economy. they are all struggling with it. lisa: we talked to a lot of strategists and they say no one

can quite believe it is trump versus biden again. they are trying to figure of who it is really going to be. is it going to be you? brian: me what? lisa: running for office. these are the things that are coming up. brian: i have a great job here. lisa: [laughter] jonathan: i had a feeling. brian: at the end of the day, our colleagues in their ship across all industries is to help any administration be successful and that is what we try to do. those are tough jobs. i don't think i am running for office. i think i have a great job here and i have got to continue to do it and help this team and everybody be better. jonathan: there have been some fires to put out in the industry, one year since svb failed. it seems less sugar was a rate shock and this year worries about a credit shock. have you seen any positive light

from regional banks and and shape? brian: there hasn't been the kind of change that was last year -- kind of change there was last year. their unique business model is not involved. we see a lot of flow. the industry is well-capitalized, has good liquidity. from last year to this year, people shored up liquidity. commercial real estate is a slow burn. it is a classic burn. we had a rolling commercial real estate recession. there will be difficulties. the trading attitude isn't the way the banking system works. that is the value of the banking system. we work with clients comedic a building and figure out what the ultimate mental walls provide, you refinance it. sometimes that wipes out the equity. the top 30 banks go to the stress test which in effect says

if your underwriting this if your underwriting in any way, you prove it right before you get a chance. the capital requirements reflect your underwriting today even though recession may never come. it reflects your underwriting commitments in an area where commercial or the state drops instantaneously -- personal over the drops instantaneously. there is any effect which is much more building and slow down the capital provision to these companies but on the other hand is not a bad thing. we feel very good. does that mean banks might fail? there have been thousands of banks that failed. business models change. the quality of the banking system is strong. jonathan: in switzerland, we talked about the change in capital reserve rules. chairman powell appears to back away from that. what is your reaction to what chairman powell has said?

brian: we believe we have tremendous amounts of capital liquidity. the stress test, we don't need to keep moving the rules around. as people look at this are sent what is the reason. the u.s. banking system and the u.s. economy coexist in the u.s. economy has grown from pre-financial crisis. the european economy is growing less. the u.s. economy is more vibrant. it has recovered faster. everybody says that is because x, y, or c. but that is because capitalism in a country is good and the kind of banking system helps that happen. we have weathered storms. since early 2000 we have had a pandemic, recovery from pandemic , the fastest rise in interest rates -- rise in interest rates, trades debates around the world, shipping restrictions, all of

this. the shipping industry made $1 billion after-tax and build huge reserves. we dealt with the pandemic. a flood of deposits, some of those came out. that is the resiliency of this system and that is where we have to be careful about adding capital. lisa: there has been a shift in terms of consolidation of market share in the bigger players. you were talking about how you are gaining market share. who are you gaining market share from? is it for smaller banks? europe -- from smaller banks? europe? brian: each banks have -- they came from. whether it is the investment bank with matthew and the trading team, that is largely coming from the longtailed people. this business is hard. it requires $1 billion of technology investment a year to have a trading platform. when it is that hard, that means people who don't get the return don't come this way.

that is different than the consumer bank. they give you the statistics about constant accounts, we have grown our consumer base probably 4 million core checking accounts since the pandemic. the deposits are up because of the extra balances. it comes from different places. our ids suitably in the market. lisa: when you check with investment in technology, how much is that going to be any ongoing benefit to a bank like yours that can invest in your visual intelligence we are hearing about everyday? brian: we have to be careful about our full intelligence versus machine learning versus digital practice. in 2010 we had 100,000 people on our consumer business. today we had a 60,000 -- today we have 60,000.

we had 400 billion deposits and now we have 900 billion deposits. the amount of transactions going through is light years bigger. the expense base we run the whole company on, nominal expenses of $64 billion is the same we had around 2015. that is all of stuff we are talking about, supplying technology over and over again. are we perfect? absolute not. if there plenty ahead of us? unbelievable. everybody says you are not hiring, we are hiring people and businesses and putting revenue generation out there and taking it out of the expense space and that is a constant stream. it is remarkable what you can do. if you can snap your fingers and change the whole thing, you would have done it. jonathan: what you said is so important. i was going to ask if we are going to be replaced by a big supercomputer in five to 10

years and people behind us were like to know the answer. in the next five to 10 years, i we sing each additional dollar of revenue is going to be less and less labor-intensive because of this adoption of technology? brian: we had 300,000 people, we have 212,000 people. it is going to have less labor content. if you think about it, it would have less labor content because that is the expensive part but more value-added from labor because that is we -- the way mathematics work. if you think about these trends, they keep going on. people forget these are already going on. one person's ai is another bag with neck model -- is another person's -- you don't have to wait for that

potential, you are taking it out everyday if you're working it. jonathan: no three day work week coming for bank of america get? brian: i am not -- sure i understand the method there but our team does a good job. jonathan: thanks for having us. brian moynihan, the chairman and ceo of bank of america. equities obviously 500 it softer. ahead on this program, nvidia unveiling blackwell. >> this is how we change the world. this is blackwell. jonathan: that conversation up next. ♪

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starting with the s&p 500 come equities softer this morning. no real drama, negative by one -- negative by 0.4%. not much to talk about. in the equity market we have been okay the past few weeks including this price we have seen in the treasury market. lisa: two straight weeks of losses, it sounds scary. weekend it back in a couple of hours. the question is what is going to shake the conviction this market has that there is ultimately strength, ultimately promise and we seem to be in a market that wants to rally. jonathan: nvidia announcing its newest ai processor, the follow-up to its signature product that fueled sales and sent valuations during. mandeep singh joins us for more. it felt steve jobs-esque. how much of that was a repeat of what we used to see from apple? mandeep: their product cadence

continues to improve. focusing on llm's, training, inferencing, nothing a lot of partnerships. almost tech company -- most every take companies partnering with nvidia server 12 months they're going to come up with new architecture. they will find it hard to catch up at this pace. lisa: where shares. today -- why are the shares down to the? mandeep: expectations were for them to do $100 billion in data center sales. the boy keeps going higher and higher and at this evaluation, we could argue stock is not going to twox from here. they can run into that cycle cyclical slowdown. that will happen whether it is a six month from now and that is why multiple expansion is very

unlikely. jonathan: this is what alex webb told us when he was talking about this event, maybe it would be a -- event in the same way the apple events used to be under steve jobs. lisa: there was so much hype. in the options market, i'm fascinated by the options market. jonathan: the bullishness? lisa: there were people betting dish share prices would double, double d evaluation. jonathan: in short period of time. it is crazy. we will be catching up with candace browning-platt the head of research at bank of america. ♪

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jonathan: if you are bullish about anything, i hate to bring bramo around to the office and she will talk you about -- talk you out of anything. lisa: you are projecting. you would do the same thing if i was not here. jonathan: i'm just not as bad as you. from the houma bank of america in new york city, good morning to you. my take away from that conversation around mergers and acquisitions, the amount of companies and clients they could entertain a deal that don't want to entertain a deal because they'd be hanging around for so long waiting to see if d.c. would approve it is a problem. lisa: particularly about the size.

if you think about companies that have cash and they want to make a purchase, the smaller companies are suddenly really attractive acquisition targets won't get caught up in the antitrust issues. jonathan: we will return to that theme in a moment. we begin with equities. in on the s&p 500, pulling back a touch, we snapped a three-day losing streak on the s&p in yesterday's session but a decent day. every single sector on the s&p 500 was posited by the time got to close. negative by 0.6% on the nasdaq. on the bond market, the prospect of yields drifting higher. we are at 4.32 but nowhere near the highs of last year but we can came into this year and consensus is that yields will be lower by the end of the year. the front end of the curve is pushing back against that. we've gone from 4.1% to 4.70 and a couple of months. lisa: people were calling for

seven great cuts this year, remember when that was a base case and it was the assumption that the fed was putting three rate cuts out there because they wanted to say the market is back? this is one of the biggest surprises. ultimately, is it bonds that have to catch up to stocks? jonathan: the economy is ok we will talk about that in a moment. we are seeing that this economy is better than ok according to fund managers. dollar-yen, is this the sixth day of yen weakness? lisa: it is. jonathan: positive by 0.1%. they had their first hike in 17 years. lisa: you can get the direction right in the trade wrong because you look at the rhetoric we heard from the bank of japan, it was here you go, we are doing what you asked and we will remove your curve control and we

are concerned about economic weakness. we don't know whether the price pressure can handle it. we don't know what will happen with china and all of a sudden, the end just gave up. jonathan: you have to compare and contrast the start of the rate hiking cycle of the federal reserve and compare it to the cycle at the boj. the boj wanted this inflation. they've been fighting for for it. it was a chance to reset inflation expectations and the federal reserve did not want this inflation. that's why you're getting different communication off the back of the first hike from the boj compared to the federal reserve and the ecb. lisa: i wonder whether this is turbocharging equities in japan because now it's more of a discount of those buying internationally. if the bank of japan gets nervous, if the fed is more hawkish, what does that due to the weakness in the yen and whether that becomes a problem in terms of bad inflation

imported from outside. jonathan: $1.50 for dollar yen. let's turn to the survey, bank of america's fund manager survey showing risk appetite at the highest level since december 2021. candace riley joins us at around the table. >> good morning, how are you? jonathan: i want to talk about the highlights of the latest survey. global growth expectations, two-year high, risk appetite, eps optimism two-year high, how does this stack up to the one we had last month and the month before that? >> everything has ticked up a little bit across the board. even some sentiment regarding china the people are still very negative about china over all and think it is in a secular decline as it relates to the markets. what i think is interesting about this fund manager survey is what you said in the title of it is bulls go global.

what this fund manager survey is showing is that expectations around growth and the performance of equities is expanding outside of technology and outside the u.s. and into the rest of the world. that's why this fund manager survey is different than the prior months. jonathan: let's get into the growth optimism. are we saying it's not just the united states? are we hoping for better growth internationally? >> that's exactly what we are saying and we have a proprietary indicator called the global wave which is different than the fund manager survey because the global wave is an amalgamation of economic data. things like industrial production, consumer confidence, earnings vision ratios, things like that. is just facts amalgamated together and that global wavetroughed in january of 2024. statistically after it troughed, emerging markets perform the best and on average, they are up about 19% in the 12 months

following the troughed. u.s. does well and japan does well, asia does well, the u.s. just does a little less well than all of the other areas. it's this broadening out of growth. lisa: how predictive are these fund manager feelings? is this a contrarian indicator? if everyone's going bullish, is this something we should get concerned about or is this a forward leading indicator? >> we do have an indicator called the bull -- bear indicator and when it's a of i couldn't the number is eight, that is a contrarian indicator. people are too bullish. that indicator is around 6.5 right now so we are not in that extreme bullishness area yet. lisa: with these indicators you are putting out there, is there competition between the surveys?

>> internal competition can be a good thing. lisa: what do you find the most reliable northstar at a time when we are looking for what can have predictive value in -- in a messy data environment? >> i try to look at these as a mosaic rather than have one northstar. we have 84 of these predictive indicators. the bulk of them have been rising since 2022. we've seen a real breakout in a number of them, particularly the industrial indicator. the semiconductor memory indicator is at a seven-year high and that's very important because we know semiconductor cycle leads the global economy statistically. then we got an indicator which looks at digital advertising that's a relatively new one.

that one has also been breaking out and that's good for consumer and service economy particular in the u.s.. you've got industrial indicators, tech indicators and consumer indicators all breaking out which fits with the global wave and what the fund manager survey was saying. jonathan: help me understand sentiment. sometimes it feels like this, everyone is bullish and then they catch up. she will tell us the market is not euphoric. how do you gauge sentiment off the 84 proprietary indicators? this >> the main's syndicate indicator is a fund manager survey. the global wave is just pure economic data. the contrarian indicator i was talking about before would indicate that sentiment is bullish but it's not extremely bullish yet. it's not euphoric.

jonathan: re: benchmarking to extreme times like 1999? >> yeah, the fund manager survey goes back to 1994. a long time and as a matter of fact, the jump in the allocation to e wasm its highest since 2017. that's a big jump. lisa: you started talking about it's not euphoric, it's optimistic. defined euphoria. everyone is talking about how incredible everything looks and how surprising and strong it looks and you start to wonder. jonathan: how valuable is it to benchmark to an extreme to say that it's not 1999 dozen this early mean it's good. is it useful? >> history does not repeat itself. but you can learn from history. having these indicators and having these benchmarks and looking at prior times is very healthy.

the way forward will be different. it will look different. lisa: let's talk about the third rail or perhaps the first real for certain executives which is the use of machine learning and ai and some of these indicators. how much are you deploying the ability to take data points from data sets you have, put them together, stick them through machine and get a response, bull or bear? >> that's exactly what we are trying to do with these indicators. we use machine learning, we use all different techniques. most of them are aggregates. we never would have been able to do these indicators five or 10 years ago. we didn't have the capability of aggregating all this data together. i think you will see more and more of this done across markets and what i think it means is we will get better and better real-time information. you heard liz talking about the institute.

we are looking at 69 million accounts. that's a lot of data. that's not sending somebody a survey in the mail and getting them to respond. real-time data on 69 million accounts i think this is a wonderful thing about ai and i think it will allow policymakers to respond more quickly to better information. jonathan: let's talk about the future of global research and what it will look like in five or 10 years? we spent time talking about a shift away from public to private markets from single names to passive investing. that is the nature what you're doing changing as well? what will this look like? >> we've been dealing with that issue for a long time and one of the things we've tried to do is change the types of research we are doing. a great example is etf's. we cover more than 400 etf's. people think all etf's are the same. if you buy a sector in the bank

sector, you will get the same performance. you don't. there are dramatic differences. the etf research, stuff on passive, we are changing the kinds of things we are focusing on but at the end of the day, we still need to do the basic single stock in single security to build up to those broader passive securities. jonathan: if you are thinking about your future in the college, is there a future for them? >> absolutely. it's a great job because you get paid every day to come in and think. how great a job is that? jonathan: and you get paid more than academics. lisa: i'm thinking about woody allen in sleeper and you have a machine putting in your data points and spitting out buy, buy, buy. jonathan: we will leave it there and it's great to catch up. >> it's great to see you. jonathan: let's get to an update on other stories.

sonali: good morning. the reserve bank of australia has signaled its finished hiking rates. the central bank kept its policy on hold for a third straight meeting and made no reference to further in races to rates that already sit at the 12 year. reserve bank governor michelle bullock says they need more of a trajectory and inflation before more cuts. they want to return to target in late 2025. antony blinken will make his sixth visit to the middle east since the israel-hamas war broke out making stops in saudi arabia and egypt. this comes at a time of increased tension between the u.s. and israel over the situation in gaza. cinema will test chuck schumer and benjamin netanyahu exchanged verbal blows in recent days. hong kong is fast-track to measure further cementing china's control over the global financial hub. the approval of article 23 completes a two decade campaign

to pass local legislation protecting the chinese state. new crimes like treason and insurrection carry life sentences in the measure defines a state secret offenses in line with china's vague legislation around espionage. the move raises questions over the city status as an investment in tourist destination. that's your bloomberg brief. jonathan: thank you. up next, commercial real estate in focus. >> commercial real estate is a slow burn. it's a classic burn. you go back to the late 80's and early 90's and we had a commercial real estate recession so there will be difficulties. jonathan: that conversation is up next. live from new york city, this is bloomberg. ♪ 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.

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jonathan: the two day fed

meeting begins in a couple of hours time in washington, d.c. and here the price action with equities pulling back a touch on the s&p 500. yields are pushing higher over the last week, 4.32 on the 10 year and 4.70 on the two year. check out dollar-yen, the dollar a whole lot stronger against the weaker japanese yen. that's a move of .9% in the face of the first interest rate hike and 17 years from the bank of japan. you wouldn't know it. lisa: it's just what they were hoping for. there was a report saying we will do it and no one cared. jonathan: a full rate hike for the boj, we will see what comes next. commercial real estate is in focus this morning. >> commercial real estate is a slow burn. it's a classic earn. go back to the late 80's and

early 90's, we had a commercial real estate recession so there will be difficulties and we feel good but does that mean banks will fail? many banks failed in the past decade but the folly of the banking system is strong. jonathan: the bank of america commercial bank soaring as it moves to limit its exposure to cre. joining us now to discuss is wendy stewart, the bank of america global commercial banking president. >> good morning and thank you for having me. jonathan: thank you for hosting us. let's talk about your business and how much things have changed. when we talk about commercial real estate, i don't think we narrow it down enough. how much have things change for this business over the last decade? can you put numbers on that for us? >> it has definitely shifted. our business is much more than commercial real estate. that's part of it than not the only thing we do.

we work with middle-market sized companies and we do find his company's that generate revenue that is 50 million and growing rapidly to $2 billion. some companies are publicly traded but a lot of them are privately held. these companies are companies around the united states. they are typically third of fourth generation and we are working with these companies not only in the united states but also in canada and their international subsidiaries around the world. lisa: it's related because some of your potential competitors in the past for some of these regional and smaller banks that are constrained with respect to lending because of the commercial real estate loans that are on their books. how much are you gaining share from the smaller banks that don't have the same kind of capacity you do? >> we did have a fantastic year in 2023 which was a story of growth area there was a lot of market disruption across the board that we saw last year. we did take share as a result of that. lending is not something where we are constrained. we also have a lot of other

capabilities we deliver to clients that have nothing to do with their balance sheet. whether it's their digital capabilities were a lot of unique cash management solutions, the investment we made an international or the investment in investment banking and also the focus we have a new economy companies which is something that's relatively new for us over the last couple of years as our economy is changing. lisa: i wonder if there is an opportunity to go step further with the weakness we are seeing in some of the regional banks to acquire whole units to expand. is that something in the potential outlook at all? >> li bin focused on organic growth, responsible growth has been her mantra for vet many years and we will continue to focus on responsible growth through organic growth. we have the solutions we need to be able to deliver for our clients. we continue to invest and we are making investments in our team so we continue to hire more bankers and we are making a lot

of investment in digital because our clients want to be able to bank when they want, where they want and they wanted to be fast, safe, secure and easy and we got great solutions to help clients on that front. we have a client recently, new company we were working with that was doing business in 13 different countries in asia. they were working with a variety of different banks and they were concerned about the exposure they had and they couldn't manage the risk well and didn't have a lot of visibility into the day to day transactions plus they had a lot of currency risk. we were able to sit down with them and look at their needs and put together a global solution and they were very happy with that. we are now their sole providers of these are the types of ways we are going with our clients. there is really not an acquisition out there that can help us with that. jonathan: is that a trend using more of that in asia? >> we are seeing a trend all over the globe. when you think about u.s. based

companies and canadian-based companies we cover, they have historically done business in north america. they are really looking at taking advantage of the global growth that exists for them. we actually have three companies we covered today and we are not even through the first quarter. we've got these three companies looking to grow. it never done business internationally, they know they need to increase their exposure and so we helped three different companies in different parts of the united states in different industries that have one goal and that's to grow internationally. one acquired a company in the u.k. and one in italy and one in australia. we helped all of them and it's not just about m&a, it's about the core banking needs these newly acquired subsidiaries will have and we can help them with all of it. jonathan: i would've thought the life for a company is getting harder to go international. i thought it would be more difficult because of policies in countries around the world seemingly putting the walls up.

is that your experience? >> when you think about a multinational company versus a privately held company, they have very different considerations. privately held companies can think about things over the very long term were multinational may have different considerations. what we find is there companies that we cover want to grow we are well-positioned to help them with that. lisa: who are your main competitors? there has been this discussion around the apollo or the aries or the other kkr's of the world trying to eat your lunch. are they the main competitors or is the other big banks, is it everyone? >> we compete with everybody but some more than others. the large banks you would think of in the u.s. are a big competitor. we continue to compete with the regionals. as far as private lenders go, we don't compete with private lenders as much.

we've seen really nice loan growth. we saw a great growth through last year and we see it through this year. lisa: it's interesting you mention europe, is it stronger there? do you see cross-border transactions as stronger because the domestic ones are so difficult to actually get approved? >> we see a lot of good opportunity internationally all over the place. there is good opportunity and we will continue to invest their and we decide where to invest based on where our clients are doing business. we also see asia as a good opportunity. we have seen a lot of the reassuring that happened last year back into mexico and into other areas and that was another good opportunities we added bankers there last year to take advantage of that. jonathan: don't tip your toe into politics but we heard from the former president over the weekend that if you are chinese ev maker and you are positioned

in mexico, we will slap you with a 100% tariff. i'm wondering about the future of near shoring. >> we don't focus as much on the politics, we focus on the needs of our clients. if our clients decide that's a good opportunity for them to move business back into mexico as an example, we have bankers on the ground that can support them and that's what we will do. jonathan: great to get your perspective on things, thank you. a monster year growth last year. wendy stewart of bank of america. not the story we've traditionally heard on the international scene over the last couple of months. lisa: but the sexy speaks to the idea that there still is trade. people are looking to where the opportunities are and it's more of a global story. it's fascinating to think about where the lending opportunities are and that some of the people still want to borrow. jonathan: next up, the third error looks like this --

the special continues from bank of america and. i've got to ask about the prospect of those median dots may be making another shift for this year from three- 2. lisa: claudia sahm said she is i a. hater. the idea is are they tracked by their own projections of where the rate cutting cycle will go? is that a problem at a time like this? this to me is i want to see how they message that given the uncertainty and given that some people are looking to them for certainty at a time when they cannot provide it. jonathan: how confident as the chairman of the federal reserve, that news conference a day away. ♪

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>> the fed is at the risk of losing confidence. they opened the door for the conversation of rate reductions too soon. >> there is more inertia to inflation than the fed is getting credit for. >> rate cuts are being pushed back for the right reasons but they are so coming.