>> mixed signals coming from markets. active risks including the middle east and israel risk. >> this is both an international and domestic story, but also a and market story. >> on the 10 year the dollar and oil are supercritical. the macro trio is what will dictate what happens going forward. >> the market does not care. the market has been concerned with earnings. >> when the dust settles on 2024 will be talking about a

situation where the u.s. economy is growing. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning, good morning. this is "bloomberg surveillance." let's take the temperature in the middle east. fruit lower 1%. brent crude down almost 1%. an unprecedented direct attack on israel over the weekend. i ran lighting up the sky on saturday night, launching more than 300 drones and missiles. nobody killed, limited damage done. one word -- contained. jonathan: de-escalation. what efforts will be there be to de-escalate on the part of u.s. and france and germany. to me the market will not pricing a geopolitical risk that has yet to transpire. this is a market on edge with the new redline crossed. iran has never directly attacked

israel. even if it is an immediate retaliation it raises the temperature. jonathan: the consensus view on the street. this from citigroup, "iran's attack unlikely to lead escalation in the near term." we emphasize the near term. annmarie: it is the near term which is why you see the oil market starting to recalibrate the risk friday. we saw a big price premium building into the oil market and then monday morning you sought israel and its allies were able to strike down 99% of these more than 300 missiles and drones. the biggest take away from this weekend is a recalibration of these redlines. completely erased in terms of direct response on iranian soil to israel. down the future when you look at what could be retaliation for any movements in the middle east, this is now an option iran may use.

jonathan: the president focused on defense. the president came out and said don't, they did. annmarie: they did, now the president is telling israel to slow down. israel's war cabinet has yet to make a decision, and if they do they probably will not tell the press. for israel this is existential. iranians send more than 300 drones and missiles, including ballistic missiles, directly to their airspace. at some point israel will have to respond. it is a matter of when. jonathan: the first thing you will have a look at when you wake up is markets. equity futures positive .5% on the s&p. the bond market releasing some of that haven bid from friday. yields higher. there is. crude down almost 1%.

lisa: crisis over. everyone is calm. everyone is not come. this is the question. how do people have to start gaming out the price of higher oil prices? there are three prongs come economic data, earnings, and the fed speak. we have logan, williams, daily, bostick, goolsby. interesting to see how much they recalibrate given we are seeing confidence coming in and inflation expectations picking up. we have goldman sachs and morgan stanley tomorrow and tech later in the week. we do have economic data. we have the idea of retail sales. later in the week we have the beige book and jobless claims. to me the question will be how do you filter all of these events through the lens of the potential for higher quantity prices. that will be a running theme because of the geopolitical

framing. jonathan: goldman sachs earnings coming out. michael catching up with president williams. coming up will catch up with a former senior intelligence official following iran's attack on israel. the odds in commodities. in into bowls of pimco saying u.s. growth has hit its peak. we begin with the top story, iran's ever first attack on israel from iranian soil. the war cabinet is expected to decide on a response. the former senior intelligence official saying "the u.s. will not participate in a counterattack but will insist israel advises of the attack ad will likely bring in u.s. participation if only for defense." serious events. we are try to work out whether this is a new phase or whether we just witnessed as a highly

choreographed billion dollar episode of skeet shooting. which is it? norman: it is a new middle east where israel must wonder whether some action might provoke iranian missile attacks on israel's territory, and it is a new middle east in which israel is now in theory open to do the same against iran. united states, europe, and others will certainly not want this to happen. but by allowing iran to conduct an unprecedented attack which was certainly not just symbolic you now have this new world. jonathan: the president has told the leader of israel to take the win. what did you make of that? norman: the president is correct in saying the israelis have achieved an extraordinary victory over iranian arms and should pause and deal with the problem of gaza, the challenge of lebanon before doing something that might escalate the region into a conventional

war. all that is well and good. if you are in the is work and you have a serious issue. how do you deter iran from doing this again? that cannot be put off too long. that is not something you do with the diplomatic note. annmarie: if the israelis are looking at how to deter iran from something like this again, what kind of retaliation could we see, the scale of the retaliation? norman: israeli retaliation will likely be proportional. it will likely be limited. it'll be something meant to demonstrate we can touch you in ways that hurt. for that region i think israel is not looking for a conventional war itself. this takes time to work out. what you are looking at is the goldilocks position. something that does not start a war, something that resets deterrence, and allows them to focus on the issues the biden administration correctly addresses. annmarie: the biden

administration went to pains to dell craft to the world -- to telegraphed to the world that they do not want to see expansion of this conflict or a wider war with iran. what did the u.s. have done to deter this attack instead of being in a position of defense? norman: the white house is correct in doing what it can to contain a very fragile and turbulent situation. based on previous actions of the united states, it could have been a decision to move u.s. military assets closer to iran, not because it is necessarily needed to conduct an attack, but to demonstrate to iran we are prepared to do something to deter an attack. a lot of this has to do with iran's assessment of the u.s. willingness to engage in such a strike. whether europe would join us. i do not think the iranians feel

the biden administration is seeking a confrontation. lisa: there were a lot of precedent set over the weekend, it was interesting to see that not only the u.s. backed israel would the u.k. and jordan and also areas in the region who hate iran more than they hate israel. what could take place in terms of pressuring the region into a peace agreement? norman: there were a number of firsts. israel deployed the first naval iron dome, and you saw this unofficial coalition of the united states and united kingdom but also france, jordan, and saudi arabia. this is a very ad hoc grouping and it took a fair amount of diplomatic work and we have to praise the biden administration for their work in building the partnership. unless the administration believes the united states has their back, they will not be willing to enter in to such formal entities.

lisa: i was going to push this forward to the idea of freedom of the seas. we have seen the idea of trade challenged. we are not even talking about the straits of hormuz and the fact that iran went after a ship in that region and what this raises in terms of questions about the willingness to curtail that transportation. how much could this coalition go after to try to reclaim some sort of freedom of the seas? norman: such a coalition will not be effective unless it believes the united states is fully committed to deterring as well as defending aggression in the region. the red sea example says that is not the case. the united states and its partners have done a superb job defending integrating houthi cassidy there is no evidence we are seeking to push this into yemen. unless you take that model and applied across the region come if you a member of the region

you are exposing yourself to retaliation by iran and its proxies. jonathan: what is the best way of influencing decision-making? what are we doing that we should be doing? norman: a multilateral approach involving economic and political isolation of iran with patients and a willingness to take their test of our fortitude has traditionally been the best approach. we do not have such a coalition at present and i do not see a lot of efforts to build one. jonathan: norman roule, thank you for your input. former senior intelligence official. the president said no, they did. u.s. and allies have struggled to prevent iranian backed rebels from disrupting the red sea. it feels like over the last year the ability to influence iran has diminished. lisa: when we talk about additional sanctions you have to wonder, have the sanctions that have been placed on and haven't had any affect?

there questions going forward in terms of how far iran will push this considering they did cross what was believed to be a redline. the focus in this administration has to be preventing escalation that could cause oil prices to spike ahead of the election. annmarie: it is very difficult for this administration ahead of a u.s. election, which is why they have a lack enforcement policy when it comes to iranian policy. norman got to that. his economic coalition. after pressure china to stop buying the barrels china has an oil output. this is where it comes down to the deterrence factor the u.s. could have been taken. jonathan: there is a believe things are contained. yields are higher. the commodity market is lower. on wti, we are -.8%. let's get you update on stories elsewhere.

let's get you bloomberg brief with dani burger. dani: german chancellor olaf scholz has begun his second visit to china and is expected to say beijing has not acted on european warnings to end discriminatory billing practices and he wants to persuade the chinese president to act as soon as possible to avoid tariffs meant to rebalance the trade relationship. schultz is also expected to question president xi about china's support for russia's war machine. the biden administration plans to work samsung as much as $6.4 billion in grants to increase to production in texas as part of the u.s. efforts to help domestic semiconductor manufacturing as it has grown in china and elsewhere in asia. the money will be used to expand samsung's existing chipmaking facility in austin. the 128 boston marathon kicks off today. the city thinks it will get a $200 million economic windfall, which would be the largest since

the pandemic. 300,000 runners would be competing with a title and a $1.2 million prize at stake. that is your brief. jonathan: best of luck to all of the runners. earnings season ramping up. >> if the fed does not cut rates , you could have pressure on valuations. how you offset that pressure? higher topline growth and higher earnings growth. jonathan: live from new york city this morning, good morning. ♪

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economy but may be several things working in its favor. that is why we look to the u.s. to have some of the highest earnings momentum but also japan. that is why we look to industrials and materials to have some of that upwards earnings momentum. if the fed does not cut rates you could have a little bit of pressure on valuations. how do you offset that pressure? higher topline growth and higher earnings growth. jonathan: equity markets rebounding on the heels of a turbulent weekend in the middle east. northern trust writing "earnings will support global equities but higher bond yields could weigh on already high valuations underpinning our neutral stance with our multi assets portfolio. " she is with us around the table. to what degree are bonds or challenge in the equity market? you think we are moving back to the new lending scenario for

equities and bonds? >> for equities it seems like that given how strong growth has been. for bonds it is still very much an inflation story. if you look at what moved rates this year, that was a reasonably substantial move in the 10 year. if you break it down into what drove that move up, it was still predominantly growth being priced higher and some inflation expectations also. it remains a growth story. as markets we do not see labor markets weaken. i think equities do all right. lisa: i have seen a lot of challenges to this rally. they do not like it right now. they see earnings being unable to fulfill lofty expectations and the prospect of no rate cuts in the face of higher commodity prices. are you in that same camp where you are shifting to a more negative view because of some of these overhangs?

>> how long can the rate rise be digested? as long as that growth momentum stays all right, markets will be ok with it. what is surprising is how it seems to digest any geopolitical tension. that is u.s. exceptionalism, seems to be an island that is isolated from most of the events. the key is to watch what happens in oil and if oil stays contained. that seeps into inflation expectation and complicates the picture for the fed and that makes you wonder will any further rate hikes be digested. lisa: is that a more important gauge to watch even as the inflation data or the fed rhetoric, oil prices and how much they respond to the geopolitics? >> oil prices and labor market,

two sides of the spectrum. the one tail risk is labor market start weakening. this enormous 400 or 500 basis points of tightening comes to bite the markets. we see recession risks coming to the forefront. the other is oil. inflation expectations seeps into broader cpi numbers and then the fed's hands are tied. two tail risks. for the moment we are staying the course. very neutral. do not want to miss out on the strong equity momentum rally either, but at the same time not a time to learn about duration. annmarie: when you look at oil. say you parked geopolitical risk. what does the supply and demand picture tell you? right now the world seems flush with enough supply. >> there are lots of sanctions and it is hard to figure out who is breaking those sanctions and where the oil is going.

the demand picture is not a bad growth picture because the demand picture means people want oil because the economies are growing. even economies across the globe are looking for oil. that is coming through the demand side. it becomes negative if it is through supply disruptions. all of the stockmarkets seem to have digested pre-well over the last six months or so. annmarie: your other concern is the labor market and you talk about immigration. how do you prepare for a 2025 or 2026 labor market of immigration policy could be different? >> that is the wildcard. so far the labor market has had a positive boost from immigration. that is borne out in data and that has kept wages contained. they are still around 4%. the fed would like them to go lower. so far that has been the support.

elections are potentially a wildcard. we do not know what happens then and that is not something you can prepare for. i go back to saying stay the course, stay invested, do not panic on moments like this. jonathan: stay the course appears to change in terms of whether to go to bonds for risk or not. friday felt like the classic risk off with a layer of geopolitical risk into the weekend and treasuries rally. the relationship between stocks and bonds has been so inconsistent. what is your understanding of what bonds do for you in a multi-asset portfolio? >> there is still a perfect hedge for a day like friday will stop you want to have duration. you do not want to be overweight duration. we are not overweight duration. we have duration. if there is geopolitical risk becomes real, or the first tail risk i talked about, which was

recession coming back in of the forefront, you will see treasuries give you enormous protection. lisa: it seems like a lot of people are seeing -- a lot of people are saying they are hamstrung. sebastian page said he was aggressively neutral, there was this trepidation of what you do not know. there was this risk if you look at oil prices and safe they crossed $95, i am sure you have your bogey, then we do have aggressive protection. >> i do not anchor on a single price number. it is all of the data they are looking at. i love that expression, aggressively neutral. i would say they are passively neutral, not very aggressively neutral. to us a lot has been priced in in terms of valuations in the equity markets and what i am looking for is the broadening of equity markets. that, we have not seen.

there been sparks of it in march. it has not followed through across all of the portfolios. we have not seen china rally massively. we have not seen small caps rally. it is still been a u.s. large-cap growth trade. jonathan: small caps got battered last week. great to get your thoughts. breaking news. a report on tesla, that they will reduce global headcount by 10%. elon musk cited as saying duplication of roles and job functions in certain areas is the reason for cuts. that is based on reports the stock is down .5%. if you take the 10% and assume it applies companywide we are talked about 14,000 employees. lisa: a little more color in terms of the email. "as we prepare the company for our next phase of growth it is important to look at every aspect of the company for cost reductions and increasing productivity."

this sounds like a car company, this does not sound like a tech company. it sounds like a company beset with questions on how many deliveries it can make to china given the low cost options and geopolitical pressures. jonathan: without a doubt this is a company confronting a tough industry in the industry is the auto market in general and more narrowly is eb's which have struggled. annmarie: piercing the ev market slow down in terms of sales, particularly with tesla in china. chinese rivals continue to cut prices. elon musk is saying cost reduction. they are trying to find ways to trim on the margins to make sure they are profitable. jonathan: we will look for confirmation from elon musk. the stock is down .6% in the premarket. coming up, oil shrugging off tensions in the least.

-- tensions in the middle east. will be joined by nadia martin wiggan. jonathan: is this comp -- lisa: is this calm? is this the market taking a sigh of relief or is this the market saying there's nothing we can trade on so we have to go with what we see? it is not escalating right now. jonathan: not going to attempt to read the emotions of people. the big takeaway seems to be is contained for now. we wait to see what israel's reaction will be which is why we are looking forward to catching up with john kirby later this morning. that conversation two hours away. good morning as we pick up a brand-new trading week. later, u.s. sales. ♪ your network. don't risk the health of your business. crowdstrike. we stop breaches.

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jonathan: welcome to the program. equity is bouncing back just attached. the nasdaq up. coming back from the biggest weekly loss of the year so far. small caps last week, absolutely punished. the relative performance, the big story versus small. lisa: somehow it is though can entered big.

geopolitical concerns are spiking at a time when stocks already seem do for a pullback. the rotation trade has just got a lot more complicated. jonathan: double digit moves. some new levels to talk about. i for the year. we are just short right now. lisa, the front end of the curve. note after note from morgan stanley. all talking about the same thing, the challenge to the equity market. lisa: all these people talking about the fact that possibly we are looking at bonds not being haven trade that they were. this question of, can we look at bonds the same way in a portfolio, if we see this potential inflationary shark underpinning a significant concern about a commodity shark?

jonathan: let's go to the commodity market. talking about crude. down by 0.9. annmarie: this is because of the immediate concerns of damage are in the rearview mirror. you cannot say that the geopolitical risk has gone away. but at the moment, it has been contained. this was a garage, a huge assault on israel. a breather from what we saw on friday. jonathan: under surveillance this morning, israel's war cabinet is good to decide on a response to iran's first ever direct attack on the country. they launched hundreds of drones against israel that were interrupted by allied forces.

that is the risk around some of these stories. lisa: as we heard, there has been a lot of unprecedented moments over the weekend. the first time i man has attacked israel on direct ground but also a coalition put together. here is the key question. how does a market price something that is so ambiguous and unknown? you do not. right now, it is hard to say that the market is really digesting. maybe there is a new risk premium under the price. annmarie: the biggest take away is the red line has evaporated. you cannot put that back together. they'd attacked directly on their soils. jonathan: especially when the president is saying, take the wheel.

the president of the u.s. is saying take the win. annmarie: this is something that israel is debating. they are saying, slowdown, take this win and look at the fortitude that we showed and others are saying, in order to create deterrence, the landlord must go crazy. this is what we are dealing with . jonathan: talking about the commodity market. i want to shift and talk about apple continuing to face headwinds in china. this marks the steepest clients in's covid lockdown in 2022. facing growing competition. the stock is down. lisa: it relates to the tesla story as well.

it is something that peter scheer has been talking about a lot. china is not just part of the supply chain. the key question is how does a country like apple -- company like apple diversify with respect to buying but also producing said fountains. frankly, it is the same. tesla. jonathan: a report coming out suggesting that tesla is ready to cut 10% of its global workforce. elsewhere, reacting to new sanctions. aluminum surging. restrictions put in place late friday are aimed at russian metals, including copper. joining us to discuss, saying, to assume the war is now over is

premature. let's talk about it. potentially a new floor for crude. how high is that ceiling now? >> it is great to join the show. it is a first target. we know that there is a lot of option length, so that is the next question, whether we meet that price in the coming weeks. jonathan: can we talk about the potential for retaliation? we keep hearing this word around the table, contained. how do you think the commodity market would respond if we saw headlines that israel is ready to retaliate? >> we would characterize it in the goldilocks scenario.

we believe that if things were to occur in terms of more tangibles, that israel would -- how a counter attack, or if we saw additional tax on the shipping industry. they are stepping back. as early as last week, there were discussions about a permanent cease-fire. any sort of attack, especially within the straits, that would absolutely impact the oil market and the shipping market immediately. annmarie: i know congress and house of representatives want to be a stricter enforcement on iranian barrels. how much would it take the -- take that off the market? >> we have seen this since 2019. exports have risen.

the u.s. is largely turning a blind eye. it could be supplied instead by saudi arabia. it would also impact the shadow sleep because it would mean that crude would have to be chance. by the ships that are involved. that would lead to price appreciation as well. annmarie: when you look for a place for opec to step in, at what price point d think it would be willing to add more supply? >> in the mid-90's, upper 90's, they would absolutely be forced to. they do not want to see $100 oil, according to themselves in recent interviews. they would be compelled to step

in. we did not see balances built or industry's built in first quarter. we are at a five-year low in terms of oecd company stocks. there will be a lot of pressure to increase production. in europe, that comes in june. it provides more crude to the market so that they can run and so we see it much higher than what they put out on friday. we think it is closer. that includes growth. lisa: how much potential ammunition do they have to counter this, given the fact that oil prices -- gasoline

prices are the highest going back to october? heading into an election where gas prices win or lose it. >> it is premature, starting four months before the election. they really want to hold that ability to easily throw in, until they see a supply outage or until we are closer to the election. we are so many months away way that they do not want to use up that bullet before we are close to the election. lisa: we are pricing in goldilocks. can you identify what would not be there where's -- where prices would be lower?

>> there is some priced in. that length rises quite a lot. there is definitely some priced in. we have a bullish view going into the rest of the year. it makes the situation difficult to say. maybe they are putting it on a little earlier because they see demand coming but right now there is a higher risk. we would really have to see permanent cease-fire come out of this in order to see prices trend down. we see up to 1.3 million barrels a day being impacted by the fact that these drones have 12

successful strikes. right now the market is assuming that everything is up and running perfectly. what if that takes longer because western companies are not involved in refinery maintenance in russia? that is another element that all is not at ease there. that is political risk that i think is a little bit underappreciated right now because the focus is on the middle east. jonathan: big assumptions out there. crude is down. a quick correction. aluminum. my british friends reached out. i hope we are down. annmarie: aluminum. lisa: we will call the whole thing off.

jonathan: let's get to your bloomberg brief. >> donald trump is set to be the first former u.s. president to face a trial. his hush money trial starts today. jury selection begins today. he is required to be in court every day. the charges do not bar him from becoming president. singapore's prime minister is set to step down. the deputy prime minister will become the fourth premier the same day. scottie sheffler has claimed his second green jacket in only his fifth start in augustine. the fourth youngest to win multiple masters. for tiger woods, his score, it was the worst ever.

jonathan: getting another match from tesla. tesla but a cut over 10% of the workforce. that story later this morning. up next on the program, the fed officials are urging patients. >> i do not see urgency and i see a lot of reasons for patients. my expectation is that we will ease and that over the longer, inflation interest rate will be at lower levels. jonathan: we will catch up. that conversation is around the corner.

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under surveillance this morning, fed officials urging patients. >> over the longer-term, my expectation is that we will ease and over longer-term, interest rates will be at lower levels. we would start to ease later this year. it is likely later than what i have been thinking. jonathan: why fed speak later today. 8:30 eastern time. williams -- reacting to data. we believe that u.s. growth has likely peaked and will gradually decelerate. they continue to support the economy for longer. let's get straight to it. what is behind that divergence,

that exceptionalism? >> part of it is the fiscal policy continuing to provide a supporting role. part of it comes from the investment around ai. i think that has been a positive factor as well. it continues to be hired in the post-covid environment to figure out exactly where we will shake out. there has been less impact from the monetary policy tightening. that is compared with interest rate sensitive markets where mortgages -- a combination of these factors, but it does look like you have this u.s. exceptionalism, compared with the rest of the world. recent data suggests that continues into this year.

jonathan: is that fiscal impulse a reason to avoid duration? >> overall, the level of interest rates now look a cut -- look attractive. fixed income year looks attractive in the u.s.. from our point of view, non-us duration looks like a really good complement. europe, australia, canada, the places where you can have a little more confidence that the slowdown has already happened. it can give you a little bit more confidence in terms of the inflation path. the strength remains an issue. they need to cease slowing down to be confident in terms of the inflation path.

it looks pretty good, but complementing this with the rest of the world makes a lot of sense, and terms of the balance of risks. maybe there will be more ongoing u.s. exceptionalism. lisa: a couple weeks ago, you are quoted saying you are looking because of the concern about sticky inflation. are you saying that given the rise that we have seen, that it is fair value and you would be a buyer? >> the first thing, the yields looks attractive. it looks good to have that positioning, but i think the level of income looks pretty attractive. there is a nuance.

you like the rest of the world as a diversifier. the second thing as you alluded to, we put on some of these positions that the trade has been moving in our direction. it was interesting with some of the be pricing in terms of policy expectations for the ecb. it has been moving in our direction, but in the global portfolios, i manage the way -- it continues to make sense, but as u.s. yields creep higher, we will need to reassess. lisa: at some point, the federal reserve will have to start thinking about rate hikes. how are you thinking about that?

>> i think that is a low probability. the federal reserve clearly expects to be easing policy, the second half of this year, chairman powell has been quite clear on that. but the market has been pricing out expectations in terms of rate cuts. there is a lot priced in at the start of the year given what has happened. i think it is a low probability. as they reduce expectations in terms of cutting, we have to become larger in terms of how

you think about it, but it is an important distinction. you have had the pricing out rate cut expectations in the u.s. that has gone along with perfectly good assets. it would be more of a surprise or market event, were you to have a shift to expectations hiking. market pricing looks broadly fair for the u.s. lisa: -- lisa: the ecb indicated that they were laying the groundwork. how far cannot go given some of the -- >> that is an important point.

i do not think there is a deal to stop the bank of england and others from using policy. you are seeing differentiation in terms of the gdp and inflation data. these countries have gone through significant slowdowns and technical recession. i think there is not a great deal to stop them moving ahead. i do not think it will be a concern for the ecb. it is different that they have expressed concerns. not the level only but there have been concerns. it is not at all obvious.

jawboning in japan. keep an eye on that. i do not really see anything significant in terms of currency markets that will hold them back. but i think greater differentiation across countries , it makes sense for us to position for that in fx markets and rate markets. jonathan: does that mean additional dollar strength? >> given the path for the ecb and given valuation, something like australia and canada, they expressed their differentiation using interest-rate my. in the case of europe, baseline is not quite as attractive but the position with currencies

like the euro, the swiss franc -- a broad european currency is a good way to position for the risk of ongoing. the baseline, they should slow down the second half of the year and deliver pretty much what is priced in, in terms of using. the fx positioning is another way to prepare for that. jonathan: this was brilliant. it may be of that through. the fx market is looking for a stronger dollar. time to diverge. coming up shortly, marilyn watson of black rock.

the second hour of bloomberg surveillance is up next. ♪

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>> you have mixed signals coming from the market, including the middle east. >> this is an international and domestic story but also a markets toy. >> they are supercritical. it will dictate what happens going forward.

>> the market does not care. they do not care about earnings. >> we will be talking about a situation where the economy is growing. jonathan: good morning. the second hour of bloomberg surveillance begins now. u.s. retail sales and do not miss this. sitting down with the u.s. fed president. down on brent. the prices on the board. lisa: it could have been worse. a weekend of fireworks.

this raises the question of what is next? crossing is really airspace at a time where a lot of conflicts are brewing. jonathan: this is a new middle east. we are still waiting to find out if they see it the same way. annmarie: i do not think they see at the same way because they will have to respond to this line that was erased with drums and missiles sent over. national security advisor said this. it was a worst-case scenario but a best case in terms of outcome. that is by the market is taking a breather, but this may not last. jonathan: the president of the u.s. told the israeli leader to take the win. lisa: there is so much that can

happen. it is difficult to know how to price this. what is the risk premium being baked into markets? there are a host of issues. how do we factor that in given that we are seeing inflation take up. it creates an unsettling backdrop free market that already wants to pull back. jonathan: trying to work out how high the new ceiling might be. just a programming note. the coordinator joining us at about 8:20 eastern time. just to get you started. yields a little bit higher there

is you move in the crude market. coming up, we will catch up with peter on managing risk. blackrock on the prospect of much higher for much longer. markets are study with little risk of tensions in the middle east. staying neutral on rates, bearish on equities and looking for a pullback in credit. pete, good morning to you. you better about the difficulty of pricing in geopolitical factors. how difficult is this moment? >> it is so difficult. talking about the direct attack,

let us not pretend that they have not been helping thomas. it is a new evolution and i think it will get worse before it gets better. jonathan: what were they telling you in real time and how did davis run to? >> it was a family telegraphed attack. so many nations helped to shoot down the missiles and drones. it is that they are still maybe a little bit isolated in their attacks. that has to way on how a thanks, going forward. i think it is very depressing. attempted murder is still attempted murder. annmarie: when you look at the

middle east waking up this morning, no supplies have been hit. oil continues to flow. how concerned are we? >> we believe that we are the ones who can control the streets. we think we have the capability to defend it and stop it. they're not too concerned about that. everyone realizes that iran is shipping missiles to russia. some of those are coming off of sanctions and will be allowed. it is not something that has been easily be enforceable. it has not been stopped and it is interesting when you look at the globe. it seems like there are nice disrupting close and more disrupting western potential flows.

that is a risk that we are starting to face and i think it gets worse. annmarie: so prices would go high and russia would have a higher premium to bring in more dollars. how do you view what the u.s. might potentially do? >> i think we are hoping not to force sanctions? so there is a lot being played out in the oil markets. going back to strategic oil reserves, we have less tools at our disposal to do this. every incumbent is worried about this. the one positive side is that as data centers get built up, you look at the success that india is having. it is becoming a bigger

commodity. there are a lot that i do not think artfully priced in unit. lisa: how is it? >> it has been tricky. they have experience in the region. they know what they would have done. we get a pretty good read on what is going on. there is still a lot of range. it is hard to figure out how the various countries will respond. we never quite so directly told israel what we want them to do. lisa: that has been almost no consistent pattern between maids and stocks. halite you shifting your

understanding given that earnings are inconsistent? >> pulling up the top stories on bloomberg, going back, suppressed sales of brands. something that we are not facing is earnings pressure. i keep coming back to it. i never knew what it was three years ago. now it is this ev company. you see this kind of pressing across the globe. what do we do as we face competition from chinese brands? it is starting to filter into the market and it will put pressure on the -- on stocks. jonathan: what is the haven

right now, with that in mind? >> i think it is a growing use. at -- even as we build data centers, getting access to the power is one of the biggest problems they are facing. where do you put these? it will be a domestic phenomena. more companies realize that if they are going to be using aia, you want to be doing it on domestic soil with domestic people. it does reduce that, so that is a growth area. i do not think we are seeing anyway year what was happening. jonathan: you have quite the view on this. a reason not to like treasuries. can you build that up a little bit? >> i think this time will be

very different. everywhere these hot spots are, it will affect oil prices, potentially dramatically. fewer things to combat that the near term. i think people will realize that we all need to spend more on defense. the conversation is, this will be bad for global trade, which is already deteriorating. oil prices going higher and everyone will run bigger budget deficits. given positioning on where we have been with yields, i think we can go higher. it is hard to be pounding the table, but there is much more risk. jonathan: peter over securities. we are -0.7% reagan let's get an update on stories elsewhere. dani: tesla is set to cut part

of their workforce. those cuts would be more than 14,000 employees. in a letter, elon musk cites a duplication of roles and job functions in certain areas. reviving plans for an ipo in amsterdam. investors in a listing that potentially paves the way for other firms to go public. the biden administration as more -- increasing chip action. it is all part of the best effort. the money will be used to expand stem son's existing facility in texas. that is your bloomberg brief. jonathan: up next, trump slight -- slamming died in on israel.

mr. trump: we were respected all over the world and today we are can heard a joke. ukraine would have never happened. israel would have never happened. 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.

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like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: let's get you over to the price action. yields bouncing back. crude a little bit lower. under surveillance this morning, trump slamming biden on israel. mr. trump: i want to say god bless israel. that is because --

it would not have happened if we were in office. everybody knows that. we were respected all over the world and today we harkens entered a joke. ukraine would have never happened. israel attacked october 7 and today. it would have never happened. jonathan: claiming that the events would not have happened if he had still been in the white house. kailey leinz joins us now with more. kaylee: the first time a former president will be in a trial like this. charged with 34 felony counts of falsifying business records. saying that he illegally concealed payments to stormy

daniels. we could actually see him testifying, taking the stand himself. we expect testimony from stormy daniels herself. all of that will come later. what starts now is jury selection. of course, high name recognition -- recognition. they will be asking questions as to whether they have ever at -- ever attended a trump rally. it is a process that could take some time. annmarie: what are the political implications for today. they say that they like trump but they are potentially sour on him because of the legal issues. >> we have seen that in january. in the states that are likely to

decide the election, more than half of voters said they would not vote for trump if you are convicted of a crime. being convicted does not prevent him from running or obtaining the presidency, but it could change the minds of voters. donald trump will be here today. he has to be in the room every day of the trial. that will take him off the campaign trail and cost him a lot of money. what we have seen historically is that trump uses court appearance is -- appearances to galvanize his base and use it to obtain free media. he feels that it is aimed at keeping him off the campaign trail. this is a strategy that has worked for him so far, but we will see if things change as we

potentially see him ultimately be convicted of a felony. jonathan: terry, compare and contrast. how is this playing out with the electorate? >> it is not a good look for trump. he is struggling to unite the party. my prediction is that he will not and cannot. he is already underwater with independent voters. he needs a majority to win. i think this drives people away. at the same time, biden has a terrific opportunity and a political sense, to come out, not only looking like a leader but to be a leader. unifying his party, attracting

independent voters by showing a lot energy. we will see if that happens. annmarie: we know -- lisa: we know they have been talking about next steps when it comes to providing financial aid to israel or ukraine. do you know what that influence does to the likelihood of getting something through this week? >> all it does is -- let me start here. what the house will do is very much in the air. they are very focused on israel. a vast majority of members in the house want ukraine aid. use of the current member -- you saw the current member going out saying that now is the time to unify around doing something on ukraine. i think what is happening is

that trump probably has johnson's back on the alternative ways to fund things with forgivable loans and other things that have been banding around. it puts the opponents of that, the greens of the world, on the back foot. lisa: what do you make of the fact that the u.s. was so quick to say that they would not support israel that they retaliated in any way against iran? >> your word is contained, mine is constrained. i think that is a restraint. i think it would be naive to expect israel to make no response to this. but it will be proportional in the western sense of how we understand that. i've been's response was not proportional. i think what you have is a very ad hoc coalition.

it will take things more or less on a case-by-case basis. there is a lot of encouragement. not least among those was how they stepped up to defend their own aerospace and to send a message that they have greater interests than iran and they will defend those interests as well. annmarie: you say the president could make a win of this domestically, talking about being a strong leader. biden told iran do not, but they did. and then they are telling israel to take the win. how does that exude confidence and strength? >> i do not think it does. i went strongly on that point yesterday. this is not a administration

that has been defined by -- they would be better off not straddling and better off talking about what they are for, how they are for and what they are trying to do. it will not only get stronger support from the american public but even those who disagree will respect the idea that they are pushing in a particular direction and doing things in a particular way. you cannot have this always. these are fresh examples of that. annmarie: why do you think that the president left for delaware before the strikes? i want to know what this administration is learning or not learning. why continue to leave the white house when you are trying to project an image of strength? >> that is a better question for

admiral kirby and for me. i think they are trying to protect that things are normal until they are not. they are trying to project the image of normality. the president is plugged in from anywhere in the world. but the visual is that it is more dramatic and shows him energetic and on top of things. jonathan: we will catch up with john kirby in about an hour. in about six minutes time, we will catch up on banks and 8 -- bank earnings. big bank earnings kicking off on friday and then tomorrow, i think we get morgan stanley. lisa: the expectations are

higher for goldman sachs. that is simply because banking revenues came in significantly higher. there is this idea of debt issuance coming in higher. jonathan: what did you think about that? the global landscape is unsettling. terrible wars and violence causing tensions to grow. some comments in the mixture as well on quantitive tightening. we do not know how these factors will play out. lisa: this is a bank making incredible revenues. margins did not exactly allow the buddy, but they are looking at companies trying to straddle some really challenging moments. i think that right now, that is what we are going to hear from a

lot of executives. annmarie: i was a slight cynic. and -- jonathan: we are focused on the numbers. 4.32 against an estimate of 3.64. that is a tidy upside surprise. we will get into that be in a moment. we will catch up with sonali basak. ♪

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jonathan: goldman sachs looking pretty good this morning. the market actually looks like this. investment banking, advisory -- sonali basak, it is hard to find a miss in this report. >> there are almost no misses this report. they came at nearly 15%. you look at fixed income trading , and it more than doubled from the prior quarter. coming in above where morgan stanley is expected tomorrow,

they not only eat expectations but they set the bar higher. remember, they were trading at a lower price. of course, there is citigroup. jonathan: 4.3 2 billion. is the pie getting bigger or have they just taken someone else's slice this quarter? >> remember that goldman is sending out a calling card. willing to lead with the balance sheet. not just the idea of volatile markets but financing. they had six financing and the second largest quarter in equities financing. you are looking at goldman meeting in more on those traditional businesses and bang, remember that consumer foray an we are almost done with it. a lot of those messy figures that you used to see? that is almost gone.

they are cleaning up their act and they are leaning on the businesses. lisa: basically going back to the bread and butter. can you give us a sense, as we try to put this into scale? what part of the reboot is this for david solomon as he tries to refocus? >> there is one big question. there is one slight miss. as they shift the firm and focus on investment banking and trading, they are trying to show that they are almost a $3 trillion asset manager as well. how do they keep setting the bar higher? the miss is very much attributable to the changes you are seeing. the sustainability of the business is going to help it tried to get that morgan stanley premium.

jonathan: you have mentioned morgan stanley a few times. >> the bar is very high for equities training. that was his business. what i am hearing on the ground is that he has been pretty aggressive there and trying to take back the share that goldman gained the last few months. jonathan: looking at morgan stanley, the stop -- stock is up. with this around the table, tom, you have had a few minutes to go over this one. tom: it is a few things. one is it is what is happening in the industry. investment banking was on a real downturn over the last 12 months. what you see at goldman is not even full power. we think the industry is operating around 70% of what we would think is typical.

as ipos pick up, especially if we get lower grades, we think the business has even further to go. i think it is a big moment in the goldman reboot. they sold green sky, which is putting some of the consumer efforts behind them. they will focus on what has been the core of the company over the long term. we have been positive on the shares. we will continue to recommend it even after the move. it is a signal that they are starting from a very healthy point with this reboot. lisa: something that stands out, it seems like a lot of banks are implying the same thing in their numbers. using the balance sheets more aggressively. is this the new model, going back to the old one as they try to compete with private asset

managers? they find ways to do it even with all the regulatory? tom: i think that will be key. i personally believe in a 5% yield world with a flat or inverted yield curve. it will be harder to get financing when money was free during covid. having access to radon sheet that is reliable will be more important to bank's clients. it could help regain some share from that moment in time. lisa: there were years when they were saying that they could not do this, that their hands were tied because of financial regulations. what changed? tom: i do not think any bank is going to step out of the regulations. i think it is about having reliable acts. the other markets are not as easy. it was very easy to not raise

financing to be able to enter the market. i think that is what has changed. i think it is the other items and conditions. annmarie: talking about how the whole business has been about trading and potentially beating through morgan stanley tomorrow. what else do you like? tom: we like truest. they sold their insurance broker for a whopping price recently. what you do not see now is that they have them put it -- the stock is trading at a low valuation for one of the best banks in the nation. the next time that dividend changes, it is going up, not down. a bank that has one of the best franchises in the country, that is probably our largest bank

idea at the moment. they are also doing a restructure. we think that the new management team is focused on fixing things. annmarie: you talk about the seasonality of it. tom: loans have been a little bit lower than a acted. we have had three coming out for banks reporting. we have a long way to go, but i think delay in the pivot. the case, we are pretty balanced, but we are going to get a acceleration into earnings going into 2025 to the extent that we get less rate cuts and growth. it probably pushes it back a little bit. jonathan: how aligned are you?

what did you make of it? on friday, these kind of changed, so what do you make of that? tom: there are still macro risks. it is almost like i feel like i am having a credit analyst discussion. they are very focused on their own balance sheet. i think strength and stability seems to be a bigger present in the boardroom room of these banks. they are building to make sure that they can withstand any challenge. >> morgan stanley is down. doesn't deserve that? are these kind of businesses just something that people do not want to pick up on in this environment? tom: i think it is a preference. we have pulled back. it is just the dynamics of

earnings at the moment. we just think there is more upside because there is more coming. they can do more improvement, so we like it more. we think the dynamics do not have as much to them. jonathan: looking through the numbers, how would you frame it any other way. >> morgan stanley at 1.5. it sets the bar superhigh for its mild. there is a big cloud with a lot of questions about investigations. the earnings are one thing but then the story is also equally important. jonathan: it is positive off the back of what you are seeing from goldman sachs. we talked briefly about the

nature of the surprise. a longer. the estimate, 3.64. that is a solid beat. lisa: they are taking things down in market that might look liquid. but it also raises the question of how much they are taking share from some of these other countries in terms of private asset managers. tom: we do not have credit suites anymore. it disappeared overnight. when you look at the statistics, that market share is pretty much captured by many of the other banks. on a year-over-year basis, that had been something. jonathan: is the pie getting bigger or did they take someone else's slice.

tom: i think morgan stanley will benefit from the market being better. believe me, as someone who operates, i pay attention to market share, believe me. the biggest firms have picked up the most share, and a few firms have done that. morgan stanley and goldman would be in that bucket. lisa: some of the others that are smaller regional banks, how much is the gain of big banks and the loss of regionals? tom: they tend to do different things. the world that they live in is similar. as we get away, they will be more attuned to what is happening in the interest rate environment. six months ago, we would have been talking about the quantity of deposit.

the nice thing is that the pressure has ease and you are already seeing it in the numbers. we are waiting for the fed to take some may he off. we need the u.s. treasury made to back off a little bit to do a little bit better. it is about deposits more than loans. jonathan: we are waiting for them to pass on higher interest rate. tom: online. it is easy to do. jonathan: positive by something like 3%. here is your bloomberg brief with dani burger. dani: olaf scholz has begun a second visit to china. saying that beijing has not acted on warnings and discriminatory business practices.

they claim that fred's fourth having. the amount will be cut in half. it usually supports prices. and it is the 128 boston marathon kicking off today. seeing an economic windfall that would be the biggest since the pandemic. sent to welcome 30 thousand miners, competing for a title and a prize. that is your bloomberg brief. jonathan: is david running this morning? lisa: i'm not sure. but i am thinking he has run at least nine. jonathan: good luck. pushing back. >> i think that the federal reserve is clearly expecting to

be easing policy the second half of this year. i think it is a low probability that the next move is higher. jonathan: that debate, up next. this is bloomberg. ♪

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jonathan: goldman sachs is doing better. across morgan stanley, looking for more of the same tomorrow morning. lisa: it is interesting that bank of america has yet to report earnings. it speaks to the dominance of the industry, but this is sort of the revival that people have been waiting for. the expectation implied in the market action. jonathan: smile, the focus will be turning. if you are just joining us, this

is the set up. positive by 0.55%. equity is pushing higher. yields pushing higher as well. a risk aversion. yield to lower. we winding some of this price action. in sympathy with some of that, we are seeing the move with crude moving. some risk aversion. we are down on could this morning. lisa: it could have been a lot worse. a lot of people were looking for the potential of further escalation and now it is all but contained at he point to the question of the treasury response and whether friday was a read through. it is a good question that is still out there. jonathan: we will get you the retail sales. immediately after, and exclusive conversation with the new york

fed president sitting down with bloomberg's mike mckee. may cut expectations. >> i think that the federal reserve expects to be easing policy the second half of this year. the market has been pricing out expectations, in terms of rate cut. we think there is a lot priced in at the start of this year, given what has happening with the data. i think it is a low probability that the next move is higher. jonathan: the latest retail sales data coming in. inflation continues to run hot. investors betting on two rate cuts in september. we had expected this to a certain extent. looking very aggressive at the start of the year. we believe it is possible that the fed may begin to cut prices

in june. marilyn joins us to talk about this a little bit more. let's talk about the big changes. lego from june all the way to the back end of the year. why haven't the expectations changed as much relative succumbing information? >> good morning. this year, there were very aggressive rate cuts priced in. almost seven at the beginning of the year and now the market is pricing in the futures. we think it is reasonable to expect a couple this year, but there is a lot of data to come. it is possible that they could cut in june. i think the fed has been emphasizing its communication over and over again that they want to see more data and that

they are data dependent. when you look at the economic data that has been coming through, it has been very resilient in terms of economic activity and the labor market cooling. it remains this -- every means surprisingly strong. when you look at the inflation data, actually, it has remained above expectations. you take the cpi data last week and when you look at the component of the inflation, the component that is actually supporting and keeping inflation higher than expected. i think we expect to see rates higher for longer. do something is highly likely that there will be some cut i think two is probably reasonable at this point.

annmarie: based on the fact that a lot of the tension goes into higher prices for commodities, how much do they serve as a haven play as they have in the past? >> that is an interesting point because we have seen treasuries to a certain degree, i mentioned last week, maybe friday acting a little bit like a safe haven. i do not think that they are asking the same way we would have been in previous or similar events at risk. or in previous cycles as well. at the moment, i think they do not know what to expect. at the moment, looking through what is happening in the middle east again and focusing on what they think in terms of the

economic situation in the u.s. but also in europe and elsewhere. more encouraging data out of europe today in terms of production. i think the market does not know how. just again, focusing on the data and the market as they see it at the moment. lisa: about the divergence between the ecb and the federal reserve, the ability to cut rate . they have been on their own planet. i wonder how much you are on the same page, where you are avoiding fixed income but you are trying to diversify to areas that are on a path to cut rates more aggressively this year. >> we do have a diversified positioning.

we do continue to like u.s. investment grade, in particular. we are getting some very decent carry where there is not that much interest rate risk, but particularly a lot of the corporate scum you get some attractive carry. we are very diversified from us that have european investment grade, particularly in terms of valuation, they are very attractive. we have positions in asia as well. also, securitized asset and a variety of those. i think in this environment, given the divergence we have already seen and the pricing across the fixed income market, we can also see a lot more attractive opportunities in that

perspective. there is a big price differential that we did not have a couple years ago come in terms of some of the corporate. they have very different underlying fundamentals. at the moment, there is a lot more in terms of income managers as well as looking across markets. compared to some investment grade bonds. now, we have been thinking about the perspective but also making sure that we are managing liquidity and risk, and understanding that in this environment, there is a great deal of uncertainty in terms of central-bank. we want to being able and we want to really understand where the income is coming from in our portfolios.

jonathan: wonderful perspective. it always is. lisa talking about the extent of central-bank divergence that we can expect. the limits of it. we heard about this last week. comments from president lagarde saying we are not fed dependent. the president of greece saying, now it is the time to diverge. deeming 100 basis points in the fed does absolutely nothing for the rest of the year? they are different stories. if you are going to push this through the market, are we taking the euro-dollar to 105? does that happen with crude rallying another 5%? i think it is too simplistic to say that you can diverge and then talk about the extent of the divergence without understanding a host of issues. lisa: very well said, especially

in terms of prices. it is not that big of a problem unless you get a surge in oil prices. become somewhat more difficult. jonathan: a double whammy of crude. how many are we going to hear about in frankfurt, germany? i think that might change pretty quickly. we'll catch up with cameron. we speak to the national security coordinator. john williams joining us, speaking to michael mckee, exclusively, following u.s. retail sales. we will break down that number. if you are just joining us, equity futures point 5%. yields are higher as well. up six basis points. from new york, this is bloomberg. ♪

>> new gonvarri mixed signals coming from markets, active risks and parts of the world

including the middle east. >> this is both an international and domestic story but also very much a markets story. >> that macro trio is what is really going to dictate what happens going forward. >> all of these talks about rate cuts and the market doesn't care. the market is concerned with earnings. >> we will still be talking about a situation where the u.s. economy is still growing. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning. the third hour of bloomberg surveillance starts right now. 30 minutes away, u.s. retail sales, then an inclusive conversation with new york fed president john williams sitting down with mike mckee as a look at an aggressive repricing of fed expectations over the last

week. lisa: we are hearing some pushback. they may have to be two rate cuts instead of three. how does oil change that perimeter? does their hand get forced by the fact that commodity prices are rallying for the right reasons, some for the wrong reasons? jonathan: brent crude is negative by 0.9%, down by a almost 1%. annmarie: we've been talking all morning about the idea of what the containment might have been. it was a worst-case scenario in what iran launched, but best case in terms of outcome. that is why you are seeing those drivers in the oil markets taking that edge off. jonathan: i love how you talk about people pressing geopolitical risk. lisa: every time i try to hedge, i get my face ripped off, so what do i do?

that is how i view today's reaction in markets. it is not like things are cooling off to a dramatic degree but people can take a sigh of relief. that is what markets are saying for now. jonathan: i know this is a story you are on top of. typically, the preferred haven is defined by the nature of the dominant risk, but the risk is changing from day to day. bonds on wednesday were there at the center of risk. friday, they received some demand. work that out for me please. lisa: i can't. people are looking at treasuries and saying at what price do they act as an haven? may be 4.6 on the 10 year they are starting to look more attractive, but if you listen to peter tchir, that will be the haven. .

ultimately the haven of yore is not the haven of now. jonathan: gold apparently keeps sitting all-time highs week after week. goldman sachs in the premarket positive by 3.66%. beats across the board, advisory, sales and trading revenue. morgan stanley reporting tomorrow morning. that stock is up 1.35%. lisa: fixed income currencies and commodities, sales coming in at $4.3 billion versus the expectation of 3.6. people are seeing a revival of the trading industry, banking industry especially with the balance sheet behind that. are they just taking share from other places, taking share back for some of the private asset

managers who are facing higher cause to raise money? jonathan: pretty incredible execution from goldman sachs this morning. we will catch up with national security council coordinator john kirby. we will speak to new york fed president john williams as markets price out fed cuts. and tom porcelli reacting to retail sales due in about 45 minutes time. retail sales data 30 minutes away. cameron dawson recently saying, cpi and ppi and a short move in bonds i let the reality that the fed and the bond market stick and they called the all clear on inflation in the fourth quarter of 2023 and made the assumption that policy was tight enough to justify cuts. the fed cannot cut as much as they would like. are we deciding they are insufficiently restrictive after telling us that they are sufficiently restrictive? cameron: the empirical evidence

what support they are not that restrictive based on the backdrop of the aggregate balance sheet of this economy. meaning you have turned up so much debt, the diffusion of fed policy has not been as sharp as it has been in the past, which is why the entire time the fed has been technically restrictive with the real right positive, the u.s. economy has grown above trend. jonathan: are we at risk of a 2022 market? how much of a threat is bonds to u.s. equities? cameron: 2022 wasn't just about rising yields, it was about fallen growth expectations. the economy and the market. that if the fed raises rates, growth would plummet. the good thing is it didn't plummet. the bull market of 23 and into 24 has been about rising growth expectations. if the fed stays higher for longer, do we have to start cutting gdp forecast for 24 into 25? that could move the market into

risk off. without that, risk on can continue. lisa: are bonds the same kind of haven they have been in the past, if you believe the fed is committed to getting down to 2%, if they hold higher for longer, presumably you'll see a bid. cameron: it speaks to a haven against what kind of risk? the risks we've been dealing with what the past two decades have been deflationary in nature, credit crisis in nature. 2022 was the sharp awakening to the fact that if it is an inflationary issue, bonds are not that safe haven trade, which is why if you want to put safe havens and portfolios, it is not just bonds, it's also commodities, energy stocks, in order to have some protection against an inflationary stock. lisa: how much have you shifted that haven bucket away from treasuries to, say, gold,

bitcoin, maybe not, to other commodities? cameron: we have not materially. over the long-term, when looking at commodities, we keep a 5% or so allocation because they don't necessarily trend. you have commodity super cycles. not that we have seen as backup higher in yields, we are having the conversation on let's get ready to buy. once we get to that 4.75, 5% range, you would have to see an uptick in yields to offset the base income you are receiving which just means you want to be buying into weakness, not selling into it. jonathan: this has been a difficult market. gold has climbed with yields. high yield didn't hurt tech. tech outperformed last week and small-cap got hammered. the big positioning that everyone was taking got undone in the markets. wasn't that the recipe for them

to do well, for the banks to do well? cameron: it is all about the balance sheets. big tech has great balance sheets with a lot of cash and little debt. if you have a higher for longer environment, you keep waking in that interest rate and your costs are not going up. small caps don't have nearly as much cash, floating debt, higher for longer is back for them. the driver for upside is about the balance sheet. the fed backdrop means that higher for longer is bad for lower quality balance sheets. annmarie: so when does the rotation take place in earnest? cameron: i think at the beginning of an economic and market cycle, meaning you are seeing these blips of outperformance, short-lived, but they cannot sustain because we think we are still fundamentally late cycle. there are parts of the economy that are early cycle, parts of manufacturing doing better, which is why high quality cyclical companies can still be

a part of the rotation. but lower quality names typically only do best early cycle when the fed is flooding the market with liquidity. lisa: if i think about big tech in particular, i'm struck them he got news overnight about apple's shipments coming in at some of the lowest levels since the height of the supply chain troubles. tesla is reportedly laying out 10% of their workforce in part because of weak sales in china. at what point does this tech trade get challenged? cameron: such an important point. the customers a big tech companies are the rest of the economy. they can only live on an island for so long. meta is 98% advertising. if you see small business issues, what happened to the trajectory of that sales growth? amazon still being a consumer company. you cannot have tech be the only

thing that does well if you are stunned to see economic weakness in other places. when you think about the names like apple, it's good to remember, trading at 25 times earnings. that is not nearly as magnificent as what you're getting from meta, amazon, google and the like. lisa: meanwhile, talking about the potential for a selloff. geopolitical concerns are spiking at a time when stocks already seem to for a pullback. do you buy into the idea or do you think there is enough cash waiting to get in that it cannot happen but you cannot get to bearish? cameron: if you were to see a slight shift in narrative, you might see people stand back a little bit to see what is going on. i think we've seen a deterioration in momentum over the last month or so. you have seen breadth

weaken a little bit but not to the point where we are oversold. we could just be in this turning environment. you are just shifting positioning around. lisa: 90 minutes away from retail sales at a time when the data has made an impact on people's perception, that policy. how important is the number, how much of a sense are you looking for how durable this economy is? cameron: we have been in this debate as to whether or not we can trust the employment data. the way we can judge the data under the surface is how much consumers can spend. if retail sales are strong, it means employment data is holding in better than the bears are expecting. the ratio we would watch closely is the equal weight discretionary versus stable stocks. if that breaks down, that tells you there could be trouble within the consumer. if it holds up, that says the consumer is fine, supporting gdp estimates. jonathan: this was great, great

to see you. cameron dawson from newedge wealth. a must watch conversation with new york fed president john williams and michael mckee. let's get an update on stories elsewhere. dani: tesla is set to cut more than 10% of its global workforce. the carmaker is grappling with a slowdown in ev demand. cuts would amount to more than 14,000 employees. in a letter to employees, elon musk cited a duplication of roles and job functions in certain areas. oil prices are using after iran's attack on israel. axios reporting the white house would not support an israeli response. some say the markets are underpricing escalation risk. >> i think it still is. we actually increased our aunts of a material disruption from

arabian oil and gas flows from 30% to 40%. dani: you can watch the brief every morning. scottie sheffler has claimed his second green jacket and on his fifth start at augusta. he won by four strokes. tiger woods' score was his worst ever. jonathan: i think the fact that tiger made the cut was phenomenal given the fact that he has hardly played. iran's unprecedented attack on israel. >> it is a new middle east, a middle east where israel must wonder whether some action may provoke an iranian missile or drone attack. jonathan: the latest on that story. we will catch up with nick wadhams in d.c., and then john kirby, the white house national security council advisor. i'm thinking... (speaking to self) about our honeymoon.

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jonathan: equities on the s&p 500 positive by 0.6%. just a little bounce after last week's losses. going into u.s. retail sales 14 minutes away. yields higher by six basis points on the 10 year. 4.58. under surveillance this morning, iran's unprecedented attack on israel. >> it is a new middle east, a middle east in which israel must wonder every day if some action might provoke an iranian missile or drone attack on israel's territory direct, and also a new middle east in which israel is now in theory open to do the same against iran. by allowing iran to conduct an unprecedented attack which was not symbolic you have this new world. jonathan: president biden and

you seven leaders urging calm after iran's first ever direct attack on israel. president biden speaking to prime minister netanyahu, take the win, calm down. nick wadhams joins us now for more. what do we know? nick: the big question for me is two fold. what will the israeli response be? the messaging we are hearing is revenge is a dish best served cold, which suggests they may wait to respond, but a response is a certainty. the other question is what leverage does president biden actually have to shape outcomes here? as you mentioned, the u.s. has been very clear, things that israel should take the win and not respond, but there will be a lot of pressure put on prime minister benjamin netanyahu. on the other hand he says he is

determined to go ahead. we will see the limits of u.s. influence on israel in the weeks ahead. annmarie: does this mean there is no longer a redline? have they completely evaporated? nick: that is the great question, another thing we are trying to figure out. this does change the equation significantly when you have iran launching a direct attack on israel. the issue is this proxy war has been going on for so long, israel has taken pretty aggressive strikes against iranian officials, taken out iranian nuclear scientists on iranian territory before. there is a lot that has happened that has seemed explicit but not acknowledged. now that this is so out in the open, you would think, in some ways, at least they are saying, israel will be provoked to respond. certainly it feels like all the guidelines and rules of the road, such as they are in a conflict like this, have not

been put aside. jonathan: nick wadhams of bloomberg down there in washington, d.c. joining us now is national security council advisor john kirby. busy week and i'm sure for you and the administration. we have heard from iran, indicated the matter can be deemed concluded. we all want to know, admiral kirby, whether israel has indicated the same thing john: i will not speak for the israelis, you can understand that. the war cabinet is still making their decisions. the president had a good conversation with the prime minister toward the end of the attacks saturday night. the president was very direct that this was a huge success, that israel can be proud that it does not stand alone, has superior minutes larry -- military capability. iran utterly failed and what they were trying to achieve. that sends a message to the

region about israel's place there. jonathan: can we define success? how can we define the actions of the weekend as a success, direct strikes on israel? john: let's talk about what didn't happen. hardly any damage. the only impacts were to an airbase in central israel. no real casualties except sadly a young civilian girl who was critically injured. the vast majority, as the idf said, 99% of what iran threw up in the air, drones or missiles, never landed, either failed or got shot down. what did happen, israel proved it has superior military capability. critically, they don't stand alone. the u.s. stands with them.

i think maybe people are not cognizant of the fact that the president put u.s. forces in harm's way to help defend israel. for the first time, american fighter pilots in the air shooting things down things heading for israel. and they were extraordinarily successful in doing so. jonathan: you are talking about a successful defense. a lot of people also focus on the unsuccessful deterrent. the president said don't, and they did. we are trying to work out in what way the president is able to influence iranian behavior? john: the president repositioned military forces in the region allowing that defense. the president met with g7 leaders yesterday to talk about a unified diplomatic response, could consider other options and alternatives to hold iran accountable for what it did on saturday night. iran is increasingly isolated in the world, certainly in the region.

israel has proven it has friends. annmarie: if israel doesn't respond, is the new status quo that iran can strike israel from its own soil and there will not be retaliation? john: i cannot speak to that. that is up to the prime minister and the war cabinet to make those decisions. we respect it is a sovereign nation, they have to make those decisions. annmarie: a lot of reporting that the biden administration does not support a counterstrike. isn't that in a sense taking one of those tools out of the toolbox and brandishing it to the world? john: the tools that we took out of the toolbox were pretty significant on saturday night. ballistic missile destroyers shooting down ballistic missiles, fighter aircraft in the air, other partners participating. there were a lot of tools in the toolbox that no question iran recognizes the coalition that was put together to help israel defend itself. i cannot speak for what either side will do going forward.

all i can do is speak for president biden as commander in chief. he has, since october 7, and will continue going forward, make sure we are meeting our commitments to israel, but just as importantly, meeting our security couldn't sue other allies in the region, and the missions that we are conducting in the middle east. annmarie: 60 tons of arsenal fired on israel directly from iran. 16 months of iranian-backed houthis disrupting global trade. we also had an uptick of uranium enrichment by iran. to get to this deterrence, what is the u.s. willing to do? we have sanctions in place, is the u.s. willing to enforce them? john: we have been enforcing sanctions. in the past three and a half years of this administration, we have targeted more than 500 entities and individuals.

again, i will not preview coming sanctions or anything like that but i can tell you additional sanctions are certainly not off the table in terms of holding iran accountable. take a look at the additional military resources president biden has added even before october 7. this is something he has been keenly focused on. as we saw saturday night, iran is increasingly isolated on the world stage, increasingly making it harder for anyone in the international community to be sympathetic to any of their interests there. we will continue to look at our options going forward. i suspect that we will continue to hold iran properly accountable. annmarie: how are they isolated? they had a call with the saudi's, they are sending their oil to china, drones to russia. oil output hit a five-year high. where is the enforcement? john: this is one of the most

heavily sanctioned countries in the world. we will hold them properly accountable and sanctions are not off the table. neither is making sure that we have the capabilities in the region , and we do come intothwart some of their destabilizing activity. you talked about uranium enrichment. when the previous administration pulled out of the deal, that increased the rate that they could spin up some centrifuges and get closer to breakout capability. iran was not negotiating in good faith to get back into that deal but the president also made clear we will not allow iran to achieve nuclear weapons give ability. we would rather achieve that through diplomacy but there are other options. annmarie: the armenian envoy is still under investigation. his leading these double medic efforts? john: the diplomatic efforts are no longer being pursued because iran was not negotiating in good faith which is why we will make sure we have other options

available to us to prevent them from achieving the group weapons give ability. lisa: one question around what the response could be to iran seizing a vessel in the strait of hormuz. the idea of freedom of the seas. what is the u.s. response to that given the fact that companies have started to rejigger their trade routes, bake in extra cost as a result? john: i had some trouble hearing you but i think i got the gist of the question. we certainly condemn this maritime attack, a tactic the iranians have used in the past. we have, when able, and able to interdict, thwart other such maritime attacks, not all of them of course. also making a concerted effort over time, been successful intercepting goods that the iranians have been trying to ship by sea to some of their proxies. lisa: one thing that a lot of

companies and executives are saying is that they have to make contingency plans because they are not sure there can be such safety. is it appropriate for the u.s., for israel to more directly respond to iran at some point, just not now? john: again, i cannot speculate about future operations or decisions that we might have to make. the president has been clear. we will hold iran accountable for their destabilizing activities. he's also been clear that we are not looking for another war in the middle east. we see the conflict are only underway in gaza. we don't want that deep across the region. we will see how things unfold in the coming days here but we don't want a war with iran. everything the president has been doing since the seventh of october have been designed to bring the tensions down, make sure the united states is best ostrich to defend our interests in the region. jonathan: you are in a fight

with a lawnmower, so we will let you go. we appreciate your time. far too disruptive. some serious points. how they define success over the weekend, i think there will be a camp that will not define that as success. if you view success as excess will defense, success. limited damage, no casualties. if you define success through deterrent, difficult to do that based on how this has escalated. annmarie: there has not been deterrence. when it come to the more than 300 missiles and drones fired from iranian soil to israel, also what's been going on in the red sea for the past six months. how many times have we heard admiral kirby say we do not want war, don't want escalation?

some say you have to put that on a table to not get more. jonathan: a former u.s. senior intelligence officials saying, whatever you think about the weekend events, we have a new middle east. equity futures on the s&p 500 positive by 0.6%. going into u.s. retail sales, a little bit of a bounce in the equity market. up by 0.7% on the nasdaq 100. late october was when this equity market rallied. in the bond market, yields higher through last week by double digits. the two-year reaching briefly 5%. this morning, 4.9596. just to round things out, foreign-exchange, u.s. retail sales, the euro at the moment, 1.0646. retail sales, upside surprise,

advancing month on month, 0.7%. the estimate was 0.4. strip out autos and gas, 0.3. the input into u.s. gdp, upside surprise as well, 1.1% against an estimate of 0.4. the price action looks like this, holding onto the gains in the equity market of half of 1% on the s&p 500. in the bond market, shooting higher again. on the two-year, higher by nine basis points. 4.99. the 10 year, 4.6158. that is a hotter than expected retail sales report. lisa: revisions from the prior month are all upside revisions. if you are looking for a dampening effect, you don't get it. it goes to what cameron dawson said. if you see a strong retail number, that confirms the strong

employment number. people have jobs, they are spending regardless of inflation. jonathan: yields are up, equities are just about gone. the 10 year at4.62. joining us now is michael mckee, sitting down for an inclusive conversation with new york then-president john williams. mike: good morning, everybody. we want to thank john williams for joining us on bloomberg radio and television worldwide. the numbers came out. pretty amazing. are you continually surprised by the american consumer? john: first of all, welcome to the new york fed, we are celebrating our 100 anniversary here. consumer spending is strong, driven by strong fundamentals. job growth has been solid, real wage grains. -- gains. that is a part of the story.

what we realize is we are getting a nice tailwind from the supply side of the economy. go to labor force growth, strong productivity, good real wage gains. with that, consumers are spending. mike: what is the thinking among your colleague, does this last, is this a surprise that go away at any minute? john: one thing that makes it hard to forecast as we are still feeling the effects of the pandemic, russia's war in ukraine, everything happening in between. we are still seeing an adjustment process by the consumer in the economy overall. overall, i think the economy will continue to grow at a solid rate this year, probably not as high as a 3.1 we saw last year, but we are still in a good place. just not rapid as growth as we saw last year. mike: speaking of international events, i have to ask you about

the middle east right now. how do you think about economic and policy implications of these events? john: be asleep -- obviously, we are watching this closely. first, through commodity prices. second, what we think of as a flight to safety. investors, when they see risks in the global economy, they tend to bring money to the u.s. dollar, and that tends to push yields down. right now, markets are pretty stable, not seeing big movements in that way. generally that is what i would expect to see when you see heightened geopolitical tensions. mike: when you think about what the markets are reacting to, what could come out of this, is this more of an inflation worry or growth concern? john: really hard to say. it depends on how the situation evolves. right now, i don't think of this -- maybe in the near term could

affect financial conditions and commodity prices. i don't see this as a major driver in the overall forecast or outlook for economic growth or for inflation. mike: speaking of inflation, cpi came in much hotter than expected, sort of freaked everyone out on wall street. markets took that as a turning point in fed policy. you see it that way? john: i don't see it as a turning point. we saw inflation come down maybe quicker than expected, we saw lower readings in inflation the final six months. i never thought it was going to stay that low. that was unusually low. we are now seeing some unusually high readings. overall, i think the picture is one that the economy is getting in better balance. we still have a strong labor market and we are seeing inflation gradually come down. for me, what do i see in the data? you pointed out retail sales

today, but more broadly, the economy continues to be strong. i think we are being helped by strong demand and supply, helping growth. we are seeing inflation come down slower than expected. markets are taking all of that information into account, how they expect policy to be. for me, i am data-dependent as always, take the totality of the data, think about what it means for achieving maximum employment and price stability goals. i think it's important information that will clearly affect my thinking and my forecast. mike: even those that have thought about what pce might be after ppi, cpi, inflation is not coming down rapidly anymore, but you have strong growth, very low unemployment. why cut rates if the economy is doing fine at this level? john: first of all, monetary policy is working at the rates that we have now.

monetary policy is in a good place over the past 18 months, we have seen it pretty much all the measures of imbalances in the labor market and economy receipt, many of them back to levels that we saw in 2018, 2019. we are seeing a slow decline in inflation. i do think monetary policy right now is in a good place. i am not fixated on where rates need to go over the next year. what i'm focused on is how we best achieve our maximum employment and price stability goals. the data we are seeing shows the economy is strong, labor market is strong. at the same time we are getting better balance, some decline in overall inflation. to me, it's about getting that right, and then whatever we need to do to adjust monetary policy we can do to best continue our policy toward our goals. that is how i am thinking about it. we just have to keep watching the data and make our decisions

based on those goals. mike: is your base case that you will cut rates this year? john: my own view with inflation continually, gradually coming down -- gradually being the operative word, the economy remaining strong -- given where rates are, real interest rates are now considerably higher than before because inflation has come to quite a bit, so we will need to start a process at some point to bring interest rates back to more normal levels. my own view is that process will likely start this year. but again, riven by the data -- driven by the data and achieving our goals. mike: so it's possible that you don't do anything this year. john: you are asking me to speculate. [laughter] right now, monetary policy is in a good place. we are seeing progress. it's a bumpy road on the inflation front. we have to figure out how to adjust policies as needed.

mike: is policy tight right now? john: i think we have a strict of monetary policy. so what do i look for? the economy is growing over 3%, we are adding about 275 thousand jobs over the first three months. that seemed like an economy that is strong, not held back by monetary policy. if you take a step back, all of these measures of imbalances in the market, job openings, quit rates, all the other indicators are moving from being very tight to less tight, most of them back to a strong labor market or getting closer. job openings are still high, wage growth is a bit high, but moving in the right direction. monetary policy is helping to bring inflation down to 2%. mike: is that something you can affect or are these not

interest-rate responsive sectors? john: monetary policy can affect through multiple channels. maybe some sectors that are not as interest-rate sensitive the economy is. we have seen over the past couple of years, moving from accommodative policy to restrictive policy. monetary policy is working, i continue to expected to work to bring inflation down. you will see it show up in different parts, goods and services, but over the past year and a half we have seen a broad-based decline in inflation in all of these categories. we just need to keep policy in the right place to achieve that 2% goal. mike: a question i always ask is what are ceos of companies telling you about their hiring plans, what they have to pay, inflation, whether they have to pay higher prices? john: if you were to ask me this

question to years ago, that is all they would talk about, price increases, the challenges of hiring employees. today, those comments are still out there a little bit but far less than before. we are hearing that it is easier to fill positions that used to be. wage compensation pressures are less. price pressures are less. that is what is consistent, what we are seeing in the data. annmarie: has potential growth moved up? john: i am getting more optimistic about potential growth in the economy for a couple of reasons. through the pandemic, everything that happened after that, i, like most people, have concerns that the economy had suffered. the labor force participation. as we have watched the data over the past few years, we have seen an increase in labor force participation, increase in labor force growth, and increasing

productivity. i'm not saying that we are in a new high-growth world but i do think potential growth is probably closer to 2% or higher which is well above estimates of the past few years. that's a very positive sign for u.s. real incomes, for the economy, honestly, for helping to get inflation down. mike: a question for our friends around trading desks. you had a briefing on qt from fed staff. members generally agreed it should start soon. does that mean may, june? john: i think we said fairly soon. the reasoning for slowing the pace of reduction of our balance sheet makes a lot of sense, prudent course of action. we are indeed increasing the balance sheet quite rapidly. by slowing that, we will be able to assess and analyze as we essentially get to an ample reserves kind of world that we are aiming for.

everything is going as planned, things are going well. when we decide to slow the pace of the balance sheet, that is a decision of the committee. we will get together soon and discuss this matter further. to me this is a sign of success of the plans we laid out two years ago to reduce the balance sheet. very little disruption in markets. it has worked exactly as planned. we are just executing on that plan. mike: so qt could come before rate moves? john: these are separate issues. we are focusing on getting to ample reserves. on monetary policy, we are focused on achieving our price stability and employment goals. mike: john williams, thank you very much, president of the new york federal reserve. jonathan: absolutely brilliant exchange. thank you. appreciate it. sitting with one of the top

three of the fomc following a hot retail report. sometimes in an attempt to say nothing, you say something, and that something is this. i think monetary policy is in a good place, monetary policy is tight. that is meaningful given that we have had three so-called bumps in inflation, and that conversation follows a hot retail print in america, repressing in the bond market that looks like this. we can start with fixed income. big readjustment in treasury yields, up seven basis points. the 10 year update basis points. conversations we have had ever since we got that hot print last week, r.o.e. sufficiently restrictive? what you hear from a senior official at the federal reserve, they believe monetary policy is still tight even with this data. lisa: they are willing to watch the data, the idea that i'm not concerned where rates are going. the rest of wall street is.

the question is how much do they look at this data and say it prevents them from cutting rates again? he didn't answer the question directly. he tried to move around it but the obligation was nothing has really changed. he said that point-blank. that data point doesn't change our view, neither does retail sales. what will it take given that wall street thinks that something has shifted? jonathan: 1.54 dollar-yen moments ago. yields up for the right reasons. retails coming in hot, equities holding on. up 1% on the s&p. coming up shortly, we will catch up with tom porcelli, reacting to the upside surprise on retail sales. we will get into that conversation with new york fed president williams. this is this is bloomberg. ♪

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jonathan: fairly interesting 20 minutes. retail sales coming in hot. equities holding up, positive by .75 percent on the s&p 500. update basis points on the 10 year. up seven on the two-year getting closer to 5%. stronger dollar against the euro. 1.0640. lisa: we were talking about the redline which was 1.52. that got blown out by the idea of hotter prince. this go to the question of divergence. how parking other central banks diverge when the currency channel is getting increasingly challenged? jonathan: retail sales in america coming in at 1.1%, the estimate, 0.4%. that is the kind of upside surprise. the view remains the same.

president john william changing expectations following a hot retail sales print, not changing on inflation eventually coming down. tom porcelli joins us now. that's get into these comments from john williams on the back of that retail sales data. monetary policy is in get a good place, monetary policy is tight. do you agree? tom: it's been really interesting. we have had this string of really strong data, yet the fed doesn't seem to be changing baritone all that much as it relates to cuts. some people are pushing cuts out that they still seem to cut. john williams literally said those words. i cherry picked one of his comments. we will need to start the process at some point of normalizing policy. my own view is that likely starts this year. that was his own quote. this is a fed that wants to push ahead. it's becoming fairly challenging

to do it in the near term. we should talk about that. but this is a fed that clearly has a view that they want to cut. i think they are going to. jonathan: let's get to that, that you picked up on. we need to start the process at some point. says who? tom: [laughter] says them, the way that they view how restrict the policy is. there are 10 officials who think they should cut three times this year, at least that was the case before cpi. they are arriving at the conclusion, because i think monetary policy is rather restrictive. our own view is that if you look at their long-run estimate, we think the estimate is way low. we think it will come up pretty meaningfully. in fact, we would argue that it should have come up meaningfully already. you have folks like president williams who believe that policy is restrictive enough for them

to start the process of cutting. lisa: what struck me is he also said i'm not overly concerned about where rates are going, speaking to the terminal rate. it is unique that the fed is not worried about that, everyone else is. why is it important to worry about that? tom: it goes exactly to this idea that we were talking about, how restrictive are you going to be? you could easily make the argument, if you look at nominal, long-run rates, they should be closer to 3.5%, not 2.5% that the fed is putting in. i think it is sort of nice to say we are not so worried about what will happen down the road but the market is. 10-year yield's are supposed to be a reflection of what you think the fed fund average will be. the market is trying to figure that out. this is subbing that we have talked about over the months. the market is still very much in

price discovery mode. the move that we have seen over the last week or so, the market is trying to gauge where this will shake out. again, i would argue, if you want to put a pin in a number, 4.50 looks right on 10's. just as a starting point for the conversation. that, to me, is an instructive way of framing president williams' comments. lisa: he also set to take each data point as they come. we have seen hot data points. is this a flawed process, the idea of coming without a thesis, coming from backward looking data points, pushing them forward, we will revise them anyway, could be problematic? tom: i do. seemingly the way that we have defined data dependency, which is allowing the market and even

fed officials to shift their views on every single data point, i don't think that is the right way of crafting monetary policy. i think it lends itself to a lot of volatility. i think about the cpi report. i get it, the fed is not cutting in june anymore, but it is worth understanding what did a lot of damage in that cpi report. there are two things that the fed cannot control in that, auto insurance and health care. if you are going to be hanging your hat on every singular data point, then i think you have to go through the process of dissecting every signal data point, to make sure the reason is a legitimate reason, something that policy can affect. i would argue that the recent cpi is not some thing that policy can alter. lisa: how is the fed going to respond if we get a spike in oil prices, but also brought the a more structural bid to the

commodity sector? should we be thinking about it more of a long-term story because of all the infrastructure spend, all the different features going to give a bid into precious metals and beyond? tom: the way the fed will think about that, the classic channels, through the lens of inflation expectations. you get a lift in commodity prices. how does that alter people's expectations of inflation through that channel? if you see expectation start to drift -- and they haven't -- that is what the fed will respond to in the end. jonathan: i just want to finish with one question. i'm on your best guess. we saw some big revisions last week. bank of america. where are you at now? tom: i have become bimodal in some ways.

you were either getting to zero or a lot of cuts. i think july will be very complicated. you have to get a string of really palatable inflation report between now and then, and you get three between now and the july meeting. july is on the table. if you don't get july, they are not going in september or november. i know the fed likes to say we have adjusted policy around elections, but they have only done that when policy has unquestionably needed an adjustment. if they don't go in september or november -- if they don't go in july, that leads all the way to december. if the fed gets one in this year, maybe two, the calendar is working against them. jonathan: interesting. tom porcelli of pgim. we have heard that in the last few weeks, the last pre-election option on the window is july. once you get into july come you start creeping toward december.

lisa: who was it again that came on the show and basically was talking about december? we also you are crazy. he seems to be on a page that everyone is coming toward. remember how crazy he thought he was at the time? not crazy. jonathan: not mental, but out there. not bramo crazy. interesting because out there at the moment. at the moment, you look at global growth, front and center, u.s. exceptionalism. we saw that a lot coming into this week. the u.s. versus the rest of the world. the man who wrote the article on that will join us tomorrow morning. mohamed el-erian alongside the pgim ceo david hunt. wei li. that conversation coming up tomorrow morning. the opening bell, 34 minutes

away. equities looking ok. from new york, this was bloomberg surveillance. ♪

the equity markets read galvanize themselves. the consumer is strong, retail sales are my day. cap down to the open kicks in right now. everything you