>> it is absolutely nothing in the data that indicates that things are actually slowing down in any perceptible way. >> probably the next few months will be very choppy. >> the market always moves ahead of the fed. >> the market dynamics and structure actually of for the ability to hedge almost like never before. >> we are not really in a typical cycle. we are in a cycle that has been boosted by mega forces we have not seen before in terms of the magnitude. >> this is bloomberg surveillance with jonathan

ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning, good morning for our audience worldwide, bloomberg surveillance begins right now. equity futures on the s&p 500 are posited by 0.2% and monday looked a lot like tuesday squeezing out slight gains on the bond market is pretty consistent, four consecutive days of yields dropping down about 20 basis points on the front end. we are to for two this week. ism manufacturing weaker than expected, job openings lower than expected. a lot of weight being put on the ism and later on this morning, that's the one to watch. lisa: his bad economic news going to be bad for equities but we don't know. one thing deutsche bank pointed out is that even though you have some of these wobbles, since we got back to trading after memorial day, the stocks only

went up a couple of percent so it hasn't been a massive draw down. jonathan: you can feel the tension and the tug-of-war. a great example of that as job openings yesterday. the ratio of openings is east of 1.2 and we know where that was at the peak. it was2:1 and close to where we were in 2019. are we normalizing or are we going to a deep dark place we don't want to go to? lisa: some have called for more rapid deceleration and some of the jobs growth. there is another potential option, if we are going back to trend growth, are we pricing that in accurately? how do we praise that with the make it trends overlaid on top of it? struggling with that is sort of giving people a sense of what do valuations look like after the

ramp up we've seen so far. jonathan: the adp report is one to watch today and the ism services before that and tmi and friday is the big one, payrolls friday and the number looks like this. the previous number was 175 and a lot of strategist are trying to work out what bad news actually is this coming friday. lisa: will it be a headline number or in the revisions? it's not just to the previous month but also what we are going to get this week which is revisions 2023 numbers. this has been giving people a sense of insecurity around the data. we are data dependent on data the get shifted around. we will be focusing on what is bad news but how do we understand the trends after we get the revisions and may be reset some of the expectations? jonathan: let's talk about volatility. let's talk about india, the

benchmark index there, the biggest one-day rally since 2021 and yesterday, the biggest one-day drop. we are basically back to where we were friday and we are still trying to work out what the future of things look like in that country politically. lisa: we are trying to figure out what the policy implications are and it highlights help if we are concerned about the polling in the united states, polling in india after the election was incredibly inaccurate because it seems to be a much bigger win for modi. how he gets a coalition will be important for policy. it raises the question about political volatility in a broader sense not just in the developed market globally. jonathan: lots of interest in that story. in about 25 minutes, we will catch up with the team on the ground in new delhi. good morning and welcome to the program.

equities are positive by 0.2%. we get closer and closer to that ecb rate decision or rate cut. negative on that euro-dollar by 0.1%. abby roland of john hancock and we will speak to columbia thread needle as india's modi clings to power. they expect another slow down in u.s. jobs. bond yields declined for four straight days coming into wednesday following another downside surprise and economic data. abby roland writes this -- emily joins us now for more. how close are we to that point? >> it's been a couple of days but there's been some pretty

notable cross asset trends. you look at small-cap equities and they were down yesterday over 1% even with the decline in yields. over the past month, we've seen the 10 year treasury yields decline. small caps have not kept up with their large cap counterparts. the narrative is small-cap should be the biggest beneficiary of rates coming down because they of higher interest rates. as the cost of capital comes down, that will be a positive for those small-cap stocks that tend to be less profitable and we are not seeing that play out. cyclical stocks are getting hurt the market is reacting to maybe this isn't so great and the fed pivoting is maybe not going to be for the best reasons. jonathan: we are in uncharted territory. it's an unwelcome deterioration so what does that look like on friday? >> it's tough in its right to be watching the labor market.

we've seen some cracks forming and you mentioned the jolts jobs openings data falling to the lowest level since 2021. the labor market needs to normalize. the whisper numbers are lower than that consensus. i think we could see jobs kind of join the string of weaker than expected data. we've had retail sales and look at the atlanta fed. we are at 1.8% so we are seeing a notable deceleration in the data. overseas, the economies are looking a little bit better than expected. the u.s. make draft of a better growth in areas like europe and china pmi showed some strengthening. we will have to see when that point is. looking at things like initial claims will give us a sense. lisa: how do you understand the fed's policy and their response function?

you codified the pivot party and you talked about how it's fueling a lot of the gains in markets. maybe the fed wasn't wrong to pivot. maybe they will cut rates in july. this is the assumption of the likes of many analysts. does that look increasingly appropriate? maybe they were onto something about a weakening in the economy? >> we think they were onto something but the party just started way too early. back in our sorority days, in october, the fed hinted at three cuts and then the bond market extrapolated that to price in six cuts. the party started early and i think the challenge with that is that you had this massive loosening in financial conditions. we sought risk-taking and the better economic growth was a good thing but it comes with a nasty side effect of higher inflation. i think we saw that in the form of the resilience in the housing

market especially in the first quarter. the fed has a challenge on their hands. inflation is coming down but it's taking longer than expected. that's based on the fed's rhetoric from back in the fall. the fed is backed into a corner hear anything wage growth friday will give us more clues on the inflationary backdrop. it will probably be a little while till we see those cuts. lisa: you raise an interesting point about the optimism that was baked in the needs to come out. where does it need to come out in particular in markets? we are defining what does quality mean and a time where nvidia trades like a meme stock. >> you've got to focus on the earnings. we would be looking to the areas that are not profitable like small caps. you need to continue to lean into quality. we want to think about buying at

a reasonable price. mention technology and the valuations are looking somewhat extreme. no late 1990's but they are looking at the earnings. nvidia can, the stock is up in the earnings are up over 400% year-over-year see got to find the polity companies. we find it mostly in u.s. make it cap tech and communications and we can even bring some utilities to balance out that tech exposure. jonathan: we will talk to -- talk about that a little bit later. nvidia has changed. lisa: it's no longer the market in the same kind of way. some analysts came out and said in 1999 and today, the stock market exhibited herd mentality among the most largest and valuable companies so prone people -- so some people are drawing the analogy between

1999. jonathan: what you think about the correlation of nvidia on the broader market? >> your see a bit of a broadening out here. it was time for those names to maybe take a little bit of a breather in terms of dominance. it's still there and if the key reason for the emphasis on u.s. versus international equities, the fact that we have massive exposure to tech. we would also be looking at areas like the s&p 400 index. it's trading at the steepest discount to its large cap counterparts since the late 1990's. we think there is a nice opportunity to lean into mid-cap stocks and take advantage of the valuations but also get exposure to areas like industrials which are in a fitting from on ensuring an industrial production and picking up in the united states. jonathan: we started the conversation by talking about

bad news is bad news and then you say lean into mid-caps. >> we are balancing that out. we also had an overweight into high-quality bonds. we love the fact that bonds are giving you income even if you've got to wait a little bit for the duration to kick in, you are still collecting income in an environment where we think economic contraction is coming. it's hard to see it now as we want to maintain exposure in the areas that are benefiting from fiscal spending. we are finding that in mid-cap equities and we want to have some offense in the portfolio but we are balancing that i collecting five or 6% income in bonds. jonathan: can you tell us how important the ism services number is later this morning? >> i think it's very important. markets are very sensitive to that now. retail sales disappointed and we are seeing cracks in the consumer so we will need to see how that holds up and it's a

time were a lot of people are pushing back on higher prices. jonathan: thank you very much. on the labor market, you mentioned andrew hallman horse. has it moved from excess supply to excess demand? is that where we are now? we think this is where the labor market is now and we think including job losses is likely in the coming months. city banks is sticking with this, a july rate cut and we will see weakness in the labor market over the next few months. lisa: there has been a consistency to the negative revisions to the downward shift. you talk about the jolts in the ratio of job openings to unemployed individuals, one point two is pre-pandemic. this is a point in time that looks normal but it is on a line that is booming and i think that's what people are looking

into. jonathan: is it normal or are we going to a darker place? tomorrow, for -- veronica clark from citibank joins us at 8:30 a.m. tomorrow morning. equity futures right now on the s&p 500 are just about positive. let's give you an update on other stories. >> shares of hewlett packard enterprises surging in the premarket trade the company reported revenue that beat estimates and raises outlook for the year. increased demand for its servers and more availability on the nvidia chips led to a jump in its sales of ai systems. hewlett-packard has only seen modest gains this year. other companies experience big jumps in a share prices with their booming ai service businesses. intel and apollo are teaming up. the chipmaker announcing that the equity firm is acquiring it 49% equity interest in a joint venture related to intel for $11

billion. the apollo copresident spoke to dani burger at the conference in berlin. >> blue-chip large-cap companies are not talking about 100 million or 500 million, they are talking to billion and 10 billion plus. the ability to come up with those creative solutions in scale is really critical. we will see more and more of this. in general, just a need for this type of capital is sensational. >> celebrities and well-known brands were the target of a tiktok hack. the hacker sent a malicious link to hijack accounts including cnn. tiktok said it's taking steps to mitigate the incident and prevent it from happening again. tiktok's future in the u.s. is uncertain as the chinese parent company currently faces a

deadline to sell the app or face a ban. jonathan: thank you. more and about 30 minutes time but up next, oil markets under pressure. >> over the last three months or so, the global markets have been building by about 900 kbd so moderate bills. it's upside surprises in the u.s.. jonathan: that conversation is just around the corner, live from new york city, good morning. ♪ my parents worked hard for everything we had. they taught me the value of a dollar, and how to use it wisely. those lessons are forever, and today i share them with all our employees.

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jonathan: equity futures are doing oh k. we got a message moments ago -- it seems like your guests are tilting cautious. i need some j pelosky to cheer

me up. lisa: he comes on and says buy everything and if you're listening, jay, call in. jonathan: bond markets are slightly higher on the u.s. 10 year. oil markets are under pressure this morning. >> roughly 70% of global demand depends on the services sector and the consumer as opposed to the industrial sector. over the last three months or so, global markets have been building inventories by about 900kbd so moderate builds. it's a combination of upside surprises to survive in february and march in the u.s. jonathan: oil holding four-month lows. their boosting supply concerns and the american petroleum institute reporting the rise in stockpiles. we talk about that now. great to get your perspective.

is it demand or supply or combination of both? >> the market is focusing on the demand side of the issue. what opec communicated is that they will extend the cuts through q3 but then they would like to bring back some oil in an orderly fashion in q4 if demand merits it. the focus of the market has been on the fact that they will bring back oil and they are under pressure within the group and therefore we might have an oversupply. that's really not how we view the communication. when you look at these surprises on the supply side, we haven't been surprised. we had big winter outages in the u.s. in january and oil production came back in the u.s. in february and march. it's not really a surprise on that side but the concern has been whether opec would be a k with this rising market share

and its members with throw in the towel like it did last year. the communication from this weekend from opec suggest group is intact and they are discussing things openly and if and when production comes back, it will be in an orderly fashion. jonathan: what are your baseline expectations for demand for the next several. >> we expect demand will rise in the third quarter. we are not added $2.2 billion -- 2.2 million barrels per day but neither are we as low as one million barrels per day. we probably see 1.7 million barrels for -- per year in q3, we should see that coming. coming out of maintenance in china, we are not seeing an expectation of a run boost and we've seen run cuts. this is where we need that first

line of demand to come to the forefront and take up some of the overhang we've seen in the crude supply market in the last several weeks. lisa: it's confusing to focus on the entire world in one lump area you mentioned gasoline stockpiles and john talked about the build the last week, jumping by 4 million barrels. how do you place that into the context of the increase in driving and the increase to travel you just talked about? is that because they were power outages over the winter? >> part of it can be that. it's also a concern -- what were the refinery run rates that produced that gasoline in the first place? part of the concern has been the refinery run rates have been quite low in the u.s. since maintenance season. that started to change last week. the next set of data we receive this we're -- this week will be

on the telling side if we really have that demand or if the economy is feeling pressure on a personal level. when we looked last year, we had a lot of short covering and gasoline going into memorial day weekend we will have the data results this week. then the market was not convinced that demand was there and continued to short on the gasoline side basically until july or into the start of july. that is where we are at this tipping point whether we think there is healthy demand in the u.s. for the summer right now? lisa: a number of people say they are always in energy and bullish and oil stocks in particular. that's because of the ai trend that this will somehow increase demand in the very near term. we are seeing adoption in the number of places. do you have to calculate that at all into the demand forecast or is it more traditional types of travel and domestic demand that

has typically fed into the supply/demand -- demand dynamic? >> on the actual oil side, oil is still and ask -- and inexpensive source of energy so the incremental additional demand shouldn't come from oil immediately on the forefront. when we look at things the biden administration has done, we've had 100 factories built in the u.s.. those are building demand and that's not just in terms of ai. in terms of the administration on the marginal side, if you are looking at that last source of demand, then oil does matter but still relatively speaking, we should be looking at renewables looking at natural gas and looking at coal costs first. jonathan: let's talk about the cyclical signal. what kind of sick -- cyclical signal -- signal should we take away from crude? i'm trying to work out copper.

>> on the copper side, that long-term story is very much intact and that is being promoted by the ai picture and that is where we are long-term. it can also have an impact on this over all oil cycle. it's even more important in the national -- natural gas story and lng because we are dealing with great power that will help it, not just backup generators based on easing. i think it's a bigger story for natural gas and great investments and what you need to build grids, you need to have copper. it's an argument in that regard and finally, a little bit on the oil side. jonathan: we appreciate your input. crude is positive by about 1%. the move in crude reinforcing the general mood of the back of

economic data over the last couple of days? lisa: that's a good way to characterize it. it didn't really seem to justify the kind of reaction we got from the opec plus considering they are keeping in place a lot of the production cuts through october. people are bringing things back online in order to confirm what we are currently seeing. jonathan: you are looking for the risk of a slow down when you search for something red and fruit is shining brightly for a few days. that's what a lot of people do. coming up, we will look at indian equities bouncing back as india's modi claims to power, that conversation around the corner. live from new york city, this is bloomberg. ♪

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jonathan: three days of gains on the s&p 500 including small days of gains monday and tuesday. a very similar session for all. positive by 0.2% on the s&p 500 and the nasdaq up 0.4% and the russell is up 0.1%. i think the equity market is dazed and can used and doesn't know what to do with the data but the bond market is very set. yields look like this -- we are retracing the move lower over the next few days and we

are higher by a basis point or two on the two year and the 10 year and we've seen a double digit basis point move lower over the next few days. lisa: almost a 30 basis point move for the 10 year yield which is the biggest going back to mid-december. there is conviction we will start the rate cutting cycle and we were building in a greater expectation of the number of cuts but it seems people are resetting longer-term expectations in terms of longer-term base rates. it's a shift as people get this starting gun. jonathan: it feels like the bond market is at the mercy of the next data point. let's turn the page to foreign exchange. the euro is shaping up going into the ecb tomorrow, slightly negative by 0.1%. if i'm on the governing council, this is a fight about july. june is over with, what does the next quarter look like for the central bank? lisa: how much should they draw

a parallel between the inflation they see in the euro region with what we see in the united states? some cold water is on that this morning with german employment coming in light. look at the scenario so how do they look at inflation that's stubborn but growth that's clearly decelerating? it's the same issue the u.s. and federal reserve is dealing with. jonathan: that economic data and germany is not great at all. lisa: who will be the hawk and who will be the do? -- and who will be the data. -- who will be the dove? it's an interesting question where the ecb doesn't have the luxury of acting as one in the same way the united states does. jonathan: how divided is that governing council going to be in the next 24 hours. a downside surprised to jolt data, hitting their lowest level

since 2021. we will get the adp numbers plus the big one for most of you, ism services at 10 a.m. eastern. lisa: ism services will be potentially the one to watch this week. if services come in week, do people come around to the idea that we are decelerating at the question of what is normalization versus true weakness? i wonder what this does to stocks. it's bad news for them right now but what about some of the big tech names? are they insulated or are we looking at a 1999 moment. we've seen this incredible run up. jonathan: let's sit on the economists. i don't think you settle that debate this week. we will have the same conversation.

yesterday, the ratio of openings to unemployed people, 1.2, the lowest since june of 2021. we are very close to the pre-pandemic norms. maybe we are just normalizing and other people say that's what it looks like. lisa: i think revisions will matter a lot. in 2022, we got the revisions for that year and it totally shifted the narrative about how much resilience there was in the economy and how much inflationary pressures were building up and how much the employment market was tightening. do we get a similar type of move in reverse if we get revisions that show a decrease of jobs last year? that could settle that debate in a more material way in terms of market action. jonathan: more on that this week including payrolls. president biden is in france ahead of estate visit with president emmanuel macron. he is marking the 18th -- the

80th anniversary of d-day and will meet with ukrainian president and deliver remarks on democracy and freedom before next week's g7. one thing that was talked about a month or two ago but is not been talked about in the last couple of weeks is what happens to russian assets in european financial institutions? i'm thinking belgium and france, what happens to them next week? lisa: the financial times put out a piece in the rumor is the u.s. is working with its allies in europe to come up with some sort of loan backed by these assets which would allow them to basically monetize those assets with the loan being indefinite and something that is unique. it seems this is getting increasingly pressing as the political imperative decreases at least among the population in places like the u.s. and europe. that will be the real question was of these meetings especially with the idea of emmanuel macron and volodymyr zelenskyy.

they could get away with it by saying you have it for 50 years and we have an income stream and we can give you guys as much money as we want. jonathan: you will hear a lot about this in the next week. let's turn to india. modi can -- continuing to be in power despite exit polls which fueled expectations for a supermajority. the prime minister will have to rely on a coalition for the first time. can you give us the current state of play? what is changing on the ground and what is the state of play? [no audio] >> good afternoon from new delhi. after the shock has worn off of that week mandate that in durham modi one, the outlook is a very dish the outcome is a very big surprise to investors. we've seen some recovery in the

india stock markets which sold off yesterday and recoup some of those losses today. i think investors are coming to terms with the verdict and maybe even hoping this could likely be a stable coalition because the alliance partners have reiterated their loyalty to this coalition through the course of today. they are expecting a stable government and policy similar to the policies of previous modhi governments. that is fiscal discipline continuing incremental reformed measures and the lack of a supermajority will prevent this government for any large reform processes. the rest of the investors from across the world whether it's apple or samsung will be watching to see how modi addresses some key witnesses in the economy which is dish which has contribute it to the week election.

very weak consumption and no pickup in private investment. we will get to know more once the government is sworn in and we expect that to happen this weekend. that's what the media reports are suggesting. then we will have cabinet formation and we will know the key economic ministers and what accommodations have been made for these allies in this coalition government and eventually, the indian budget will give us the best clue on what kind of economic policy modi 3.0 will follow. willoughby close to the old terms or will it be a fresh start? jonathan: we appreciate your coverage. breaking down the surprise election result so says results. a big pop today and the biggest one since 2021 and the big drop yesterday. lisa: this goes to the question of expectations and the idea that the exit poll gave him the majority people expected. you so that massive rally and

then it was taken away yesterday. this is about expectations as much about economic policies. jonathan: let's continue the conversation. let's get straight to it, if you are a global supply chain manager at a company like apple waking up to the news yesterday looking at these results this morning, what are you thinking? >> you've got to be a little more nervous. the story in india going forward is levers to the infrastructure. indy is catching up to east asia is becoming more competitive but that will take a lot of infrastructure investment and a lot of big-ticket projects may be on hold for this coalition construction. lisa: you drew a parallel between this election with mexico saying there is a takeaway which is investor nervousness about eroding governance. what does that mean at a time

when a growing number of people have said emerging markets will benefit from some of the investment like new technologies and looking to diversify away from china. >> that's right, fundamentally, the bedrock of policy is governance. it's predictability to the extent to which we can build institutions to facilitate that investment particular in the private sector. in a lot of these emerging market economies over the last 20 years, investment and productivity is underwhelming. india grows six or 7% a year but is unable to generate jobs and unable to distribute that growth effectively. unless you have those institutions in place, the forward-looking productivity story gets that much weaker. that's across the e.m. world area lisa: is there an

investment piece that's longer term in indian stock markets? is there something you takeaway and shifting around the edges of allocations? >> i will speak to the corporate bond markets a little bit where we had most of our exposures. india disproportionately borrows on local currency. they are not as dependent on foreign investors. in the dollar bond market, most of the issuers are leveraged for the infrastructure story. so far, the reaction has been muted relative to the market but looking ahead, your previous speaker noted the budget coming out and those budget priorities will be very important in shaping our exposure. jonathan: let's build on the

outcomes not just india but mexico. we got a big majority in mexico and people were unhappy and in india, no big majority and people are unhappy and for those of us that spend a lot of time in dm and not em, we are trying to work out what we want from these governments. what is it about india specifically when it comes to coalitions that is negative for markets? >> let me go back to the story of institutions. in india, if you have a government that's to powerful and mexico is a case in point, it can erode the institutions under that government. at the moment, they are talked about potential constitutional reforms. in india at the same time, when you have a government that leaning -- leaning populace, the fact that they have formed a coalition means they will take their eye off the ball on the

economic issues and potentially pivoting more toward domestic and more nationalist issues. this is a distraction from a significant challenge india has over the coming decades. it's lifting productivity and creating a job market is much more efficient this is where india lacks significantly. as an investor, you say institutional quality matters. ultimately, we are underwriting the quality of policymaking in these election outcomes make us take a step back and reassess. jonathan: for a lot of people waking up, they are thinking about mexican -- mexico city and new delhi but not thinking about south africa. in november and america in washington, d.c., is at the same for you and the team? >> i think trade policy is on

the ballot in the u.s.. there is been an important shift in u.s. trade policy over the course of the past several administrations that's been impacting em, the relationship with china is reshaping the opportunity set for emerging markets in india and mexico are at the center of that conversation. i think the outcome of the election from an economic perspective will matter quite significantly particularly for trade exposed emerging markets. the commodity traders are separate story but if you're part of the global manufacturing value chain, indy is trying to move up in that space, mexico by virtue of being proximate to the u.s. is very important. those economies, this will be a critical election and i will set aside the issues around what the fed will do after this election

as well. jonathan: we will save that for another day, thank you. i was thinking along the lines of erosion of government. lisa: the one line i highlighted is the idea that investor nervousness is something we hear a lot in the united states. is that being priced in? what is the price for that? this is something people are grappling with a time when it's interesting. some people don't mention it at all and pimco has a five-year outlook and that's their first point underpinning white yields are higher. this is sort of a mystery depending on people's view of the future and just how significant the governance aspects are. jonathan: let's get an update on stories elsewhere this morning.

>> british prime minister rishi sunak and opposition labour party leader keir starmer sparred over taxes, the cost of living and the country's health system in a televised debate ahead of the july for election. the poll of yours found that rishi sunak barely came out on top by 51% to 49% and they both said they would maintain the close ties to the united states if donald trump wins in november. the new york stock exchange and nasdaq may be getting some new competition in texas. sit adele and other investors are backing and upstart stock market based in dallas. the texas stock exchange has raised $120 million to file registration documents with the s ec. that's according to a linkedin post. the exchange will try to entice companies seeking relief from increasing compliance costs at

thenyse and nasdaq. elon musk is confirming he is guiding intelligence chips away from tesla and into his new company. he redirected 12,000 of the nvidia chips originally slated for tesla to x. elon musk wrote that tesla had no place to put chips where they could be used. he said they would've just set in a warehouse. it was posted that has always planning to spend around $10 billion this year. that's your bloomberg brief. jonathan: up next, the labor market looking for balance. >> we think the hard labor market data is really what's important to us. the soft data has been telling us that the economy stinks for quite a while now. it's a hard data that is actually going to move the needle. jonathan: that story is up next,

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jonathan: equities are a little bit firmer by 0.2%. the labor market is looking for balance. >> i think the hard labor market data is really what is important to us. when we look at the fed's reaction function, we think is becoming more asymmetric meaning that the fed will be more sensitive to weaker economic data than they are to continued strength. soft data has been telling us that the economy stinks for quite a while now and it's the hard data that is actually going to move the needle. jonathan: job openings falling to the lowest level in three years with more labor data had a payrolls friday. they are expecting another month of continued moderation in the

labor market. stephanie is with us around the table in new york, good morning. the difference between normalization and going somewhere sinister dark and scary, what is the difference? >> the difference is layoffs and we are not seeing signs of that. historically, payroll at 165 has been the average over the past decade and that's a solid number. the concern is that we will suddenly pile into something that's more significant. jonathan: why wouldn't you be concerned by that? do you not see the ism manufacturing disappointing? >> the measures of sentiment haven't been a great measure of the economy. if you look at consumer confidence, we thought we would be in recession last year. you are to see a moderation in these measures month over month

changes and you are seeing a moderation but that's what you would expect for payrolls to go from an average of 252 something in the 100s. lisa: when you look back at the jolts, you can see that it's been flatlining for the past three years in terms of job openings, downward shift we have seen consistently. based on some of the regions coming in lower, could that shift your view about how sanguine things truly are now? >> give you go back to last year, we were talking about job openings being too high and i was a problem for the fed and now we're job about the exact opposite. that's kind of a good thing. we want the labor market to normalize and everyone will extrapolate the trend and worry about that but it comes out -- it comes down to profit margins and they are generally pretty good and companies are unlikely to do layoffs and markets are starting to get squeezed. lisa: they are got on the averages but when you dig under the hood, there are we'll -- there are real winners and losers. smaller companies are the ones

that typically employ more people and they are the ones who have been hurting more. how quickly could this turn calm. >> it could happen quickly but the good thing is for the fed, they have literally been able to cut but inflation was too high last year. there was nothing the fed could do but this time, the fed can be very reactionary to labor market data that's why we think they will cut in september. we are starting to see signs the economy is moderating. lisa: there is the question about how effective some of the rate hike said been and whether the rate hikes have been slowing and whether that's the year-over-year comps on the post-pandemic. will the cuts have any effect because they have not been percolating through the system that much? >> small businesses are the ones that struggle with higher financing costs. to the extent that lower rates

would help them improve their profit margins, that would have an effect. equipment spending has been weak in a lot of areas within capex which are labor market sensitive or other areas sensitive to interest rates would feel it and the rest of the economy on the consumer side probably wouldn't see much of a difference but that's the point. jonathan: do you expect the team at the federal reserve to engage with some of these themes next week? >> it should be interesting. what we will see is a continuation of the same but perhaps their tone will shift more dovish. the second day of the meeting will set the tone. we are looking for .27% of cpi which is a second month in a row of close to their target. jonathan: so we are sufficiently restrictive now? >> i would say sufficiently restrictive. i think the fed will cut at some point this year to reduce the

risk of something bad going wrong. jonathan: what does the dot plot look like wednesday? >> i'm looking for 2. jonathan: september and december ? >> yes. jonathan: when you think about 2025 and the policies that could be introduced that could shake this economy over the next 24 months -- >> the two most important ones will be tariffs and what happens from a labor market perspective in terms of immigration. we had the executive order today that probably or yesterday that won't have a big impact in terms of labor flows. if trump is in office, he will probably restrict petroleum coming in. that has been an important support for labor supply but labor demand will probably be soft enough that it may not be that inflationary. lisa: to bring it all together,

investors are nervous about governance and emerging-market so will we see the same kind of fear expressed in the united states in a serious way in the economic numbers but also with market reaction? it is possible. if you start to see anything unravel from that perspective, i would imagine the dynamics will change. the second important piece of the puzzle for next year will be on terra policy. it probably will get tied into a tcja impact. the year after could be -- could have more of an impact. jonathan: the s&p 500 was the big indicator of the president's policies. lisa: that's why people say he may retrace. jonathan: in the next hour this is your lineup --

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>> the fed really needs to think very long and hard about cutting rates. you have this degree of speculation still in the markets. >> the fed will be more sensitive to weaker economic data than they are too continued strength. >> the fed is not cutting rates any soon especially in front of the election. tings at the slowdown in a more pronounced way. >> you need to be

well-positioned especially with rate cuts coming. >> nothing changes until something changes. >> sitting in that space comfortably now. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the second hour bloomberg surveillance begins right now, live from new york city this morning, good morning, good morning for our audience worldwide. coming up after three days of gains on the s&p 500, friday, monday, tuesday into wednesday and equity futures are positive but 0.2% we are coming up quite a rally. weaker than expected economic data so far this week. ism manufacturing onto job openings later this morning onto adp and then the ism services read. lisa: stocks avenue eked out gains but which ones? it's been the s&p 500 and the nasdaq but not necessarily small that. bad news is bad news for small caps but on a broader level,

there's a weston if you get rate hikes and if you get declines in yields, does that support valuations even if it's for the wrong reasons? jonathan: bad news is good news for the treasury market. lisa: 30 basis points lost when you look at the 10 year treasury. the question of this is the longest stretch and the deepest stretch of declines we have seen going back to december. for the longer-term, does it matter that much? does it reset the appetite globally to buy treasuries domestically and buy treasuries at a time when there are still questions percolating? it highlights the lack of certainty people have as well as fed policy. jonathan: the dominic question this morning and over the last two days is what is normalization? are we normalizing or are we going somewhere bad and we --

next wednesday, the fomc will produce a set of forecast for the world to see. lisa: they could do anything and maybe they will keep the same thing or maybe they will move as the data came -- comes in. jonathan: a week cpi and a federal reserve decision with the chairman powell news conference and the forecast to get your hands around. on the s&p 500, posited by 0.2% and yields happen lower over the previous four days but higher this morning. plenty of checks and what's happening in the fx market ahead of the ecb tomorrow, 100 -- one dollar 8.69. lisa: people want to understand what their guidance is for july. i got some hate mail about mentioning bank of canada with a shrug of my shoulder. it said you will dismiss us? i was serious because this might be the first bank to cut rates. it's 50-50 and markets.

if they cut, what is the guide to the ecb. i care about canada. i always look at it. jonathan: who are you talking to, what is their name? lisa: i'm watching canada. jonathan: thanks for watching. coming up this hour, bob diamond on the fed's path forward and mario parker on joe biden and richard clarida do. labor market data is reinforcing speculation the fed will cut rates this year. bob diamond of atlas merchant capital says -- bob joins us for more. >> good morning. jonathan: they were looking for six cuts this year and now they're looking for like one or two. what do you think of the recent economic data over the last couple of days? >> i think it's consistent with what we see in the -- in the

whole first half. if you look at the second half last year and the numbers coming out were little bit pleasing for economic growth, probably a little bit pleasing for inflation being lower than what we expected and the labor market continued to be very robust. you get into the first half of this year and the economic numbers are probably a little weaker than we thought. the inflation numbers are little higher than we had anticipated. for the first time, we are seeing a little bit of looseness in the labor market. i don't want to overstate that because the labor market is still in good shape area in both cases, the economy is strong in the second half of last year and you can't cut. i think 25 basis points here or there, who knows? there is no precision in this. by and large, i think the risk for the fed, the risk for the chairman is to cut too early

before there is any economic weakness and having to reverse course as inflation begins to grow. my sense is they will be patient. until we see a weakness in the economy or inflation down to 2%, they're just not going to cut. jonathan: the economy surprise the market. let's talk about where we were last spring. if you set around this table, the majority of people speaking to us were telling us that what we will see is a real tightening of financial conditions and banks won't be able to lend as much namor and companies will suffer. 12 months later and credit spreads are supertight and credit availability for large companies is there and ready for everyone even with rates at 5.1%. have you been surprised by the availability of credit to this economy with interest rates where they are? >> by and large, no and

sometimes there is an advantage to travel and a lot of times they are not. i spent a fair of -- a fair amount of time in the middle east and asian when you look at people they are looking at the u.s., we waited too long on taming inflation, raised rates 550 basis points and nine months , we know the economy will collapse and it's like really? the economy is still there, the labor market is still there and it's so clear to me that we have such a competitive advantage in this country with the depth and breadth of the financial services industry and i think it's a real asset. europe doesn't have it, china doesn't have it, hedge funds, venture capital, private credit, all of these ways to get credit into the economy into small businesses in the middle market businesses, we have many investments with cascadia and marsh very investing in advisory

platform for middle-market and family-owned businesses. it is incredible how many angles we have to get credit into the economy in this country relative to other countries. looking at the u.s. from outside, there is real admiration for how do we manage this with 550 basis points in nine months and the economy is stayed relatively stable. lisa: it's how effective is fed policy and is it having influence on credit growth? there is a theory that the economy has been more resilient to rates as they go up to 5.5% area is anyone talking about how great cuts will have any effect whatsoever on the economy? >> i think there is a lot of people that have an ax to grind. if you are in commercial real estate comey want to see rates come down for the sector you are

in. you mentioned history and if we take a more historical look, since 2008, the great financial crisis, that's on till the fed started raising rates, fed funds averaged under 1% area if you look at two or three or four decades prior, fed funds would have averaged about 4% i think we are in a much more normal environment right now. i think the worst thing that could happen is we saw the fed -- if they start aggressively cutting rates, it will be because the economy is weak. that's not necessarily good news. we are not rooting for a fed rate cut but we think if you look over the next couple of years, rates at 4.5% in that range is the probably the logical explanation. a bit lower over time but not below 4%. lisa: for smaller companies, it

has been bad news over the past couple of weeks. for small regional banks in particular, the kbw index is down 12% over the past couple of sessions. do you think rate cuts will eventually be positive for the shares or is there some sort of structural issues, withholdings and other challenges that make it bad news is bad news no matter what? >> we have a strategy to invest in mutual bank so i have a bias. we see a great opportunity. if you turn that on its head and say you are a strong regional bank and you've addressed your capital issues -- we know that higher interest rates were impacting the treasury and folios as they have for every bank and have impacted loan provisions. let's pick an example of an investor investing in a strong regional banks of the capital levels are fine and no issues with the portfolio. then look forward.

you are really doing well with interest rates at this level. higher interest rates are good for banks. it's been a long time since we've seen loan demand like this. the go forward position for strong regional banks are outstanding. will we see consolidation which we believe we will and are there strong banks which we believe there are. one of the great attributes -- you go back to the depth and breadthth of the financial services industry and the fact that we have these regional banks providing a service that the larger banks cannot to small family businesses is a real strength. lisa: you talk about consolidation so i wonder how much will be consolidation and how much will be failures. some people argue that lower rates will cause property prices to go down because it will allow more sales to get on in the market. do you think there will be a

rash of failures? it's like people sniffing out cockroaches and that they smell something, they pull their money in a self-fulfilling prophecy? do you expect that activity to come back? >> in our view, one thing that is certain is since 2008 when the regulators and political leaders claimed we will never see too big to fail again, the larger banks in the u.s. have gotten bigger, more concentrated, closer to government and far more systemic. they are safe, the economy is good but it's in the gnomon's interest to allow the larger banks to continue to wire the smaller banks. what we think is appropriate is that we strengthen some of the strong regional banks whether it's the capital markets or anyone doing investments to give them the capital levels that are necessary for them to acquire some of the banks that i think are too small to succeed area

really good banks that have been more like community banks that have had good solid roe's for decades but in this environment with the shocking rates, they have to adjust the treasury portfolio and with loan loss provisions, they have to adjust that. the thing that is more permanent is the regulatory intrusion post svb will increase their cost around technology. we see an environment where consolidation is a positive as opposed to weekend failures in big banks taking them over at the last second. jonathan: we started by talking about the misconceptions people have from the outside looking in from outside of america looking inside. from inside the financial system, what you think is the biggest misconception people in washington have about the world you work in? >> i think they misunderstand what has happened over the past 14 or 15 years until the debt

since the financial crisis. larger and more concentrated and more systemic, the big four or the big eight if you look at the top banks. between that's tough two or three banks of wells fargo and bank of america and j.p. morgan, it's over 50% of the deposits. when you take four point -- 4500 banks in the u.s., jp morgan is most of the profitability so banks are more profitable. they are missing the value to the economy of having a strong, robust regional and community banking sector. for us, that is an opportunity over the next couple of years. the thing that is really key here that people mess is the go forward. if you are a healthy bank, the go forward with higher interest rates and loan demand is outstanding are you ready to be investing and ready to be living? jonathan: what is the starting point?

stick with us for the next 15 minutes or so. let's give you an update on stories elsewhere. >> president joe biden landed in paris this morning. he is in france to mark the 80th anniversary of the d-day invasion. on thursday, he will visit the beaches of normandy where rows of headstones marked the graves of u.s. soldiers who died to bring an end to world war ii. he is speaking on friday at a spot on the french coast were army rangers scaled 100 foot cliffs to overcome nazi defenses. shares of dollar tree rising in the premarket, the retailer announcing earnings that beat estimates and says it explores a sale or spin off of family dollar. less than a decade ago, dollar tree beat up its rival dollar general to acquire family dollar in a roughly $9 billion deal. ebay is dropping american express cards as a payment

option. the online marketplace says it is no longer accepting amex because of what it says are unacceptably high fees. ebay plans to notify customers this week about the change which is set to take effect on june 17. that's your bloomberg brief. jonathan: up next, present biden many battles. >> today i'm announcing actions to bar migrants across our southern border unlawfully from receiving asylum. they will be restricted from receiving asylum at our southern border unless they seek it after entering through an established lawful process. jonathan: the latest from washington, d.c., live from new york this morning, good morning ♪ ♪, good morning.

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equity futures are positive but 0.2 percent on the s&p 500 president bidens many battles this morning -- >> today i'm announcing actions to bar migrants who cross our southern border unlawfully from receiving asylum. migrants will be restricted from receiving asylum at our southern border unless they seek it after entering through an established lawful process. this will help us gain control of our border and restore order into the process. this band will remain in place until the number of people trying to enter illegally is reduced to the level our system can effectively manage. jonathan: one day after signing an executive order aimed at curbing migrant flows of the southern border, president biden touching down in france to mark the 80th anniversary of d-day. he has plans to meet emmanuel macron andenskyy later this week. we go to washington with more. can you go through the list of

items for the next two weeks the president has to confront? >> the list of items is a great way to put it. we've got the president in france this week. he comes back to washington, d.c. immediately pivots back to europe for the g7 as well. that's the week of june 13 or so. what you are seeing from the president over the last couple of weeks cumulatively is he is going -- he's taking the things he's dead he has to shore up before the election. with five months before the election, there's nothing that doesn't have at least a hint of an effort for the furtherance of him being reelected to the white house. jonathan: when you think about the agenda and you compared to the concerns of the electorate, there's not much crossover. the concern here is the domestic economy and immigration. is talking about ukraine helpful

or not helpful for the sitting president next week? >> in the polls, americans care much more about what's going on at home. they are concerned about economy and inflation in the cost of housing. joe biden scores quite poorly relative to former president donald trump in the latest polls where he has strength is in terms of character issues in terms of perverse -- preserving democracy. what you see him doing is playing to his strengths. he is essentially saying is going overseas to rally support for ukraine against russia's aggression. last week he quite publicly and full throated said he wants a peace deal -- a cease-fire between israel and hamas. the backdrop before that was his entreaty to black voters so he is trying to take off his liabilities but also play to some of his strength with the hope that voters essentially

will give him some credit there. jonathan: just before the big debate later this month, we appreciate the coverage this morning, thank you. bob diamond's back with us around the table for final thoughts. let's talk about november. people are talking about trade tariffs and the erosion of governance. what are you concerned about? what's on the radar for you going into next year? >> if there is a dark cloud my been pretty positive around the depth and breadth of the financial industries and the strength of the u.s. economy and the strength of the u.s. dollar relative -- if there is a dark cloud, when president trump started his first term, 7.5 years ago, between then and now during the for trump years in the 3.5 bidens years, the debt of this country has gone from

$20 trillion to $36 trillion and you can't say that was a bad economy. it was a goldilocks moment. it was a strong economy so where are we going to go? it's not in the markets now at least i don't think it's talked about a lot but if there is a dark cloud over the next couple of years, it's how we will manage and what changes will we make? the second piece of it is no matter who is elected president, as far as we can see, what president will come in and say no more debt. it's been the easy solution to spend. i worry about it and i think it's out there somewhere. i don't know vince one year away or three years away as this comes back to be an impact, i'm not sure but i'm surprised it's not talk about more in the markets. lisa: we talk about it plenty. we talk about it on a daily basis.

some people say it's hogwash. it will not happen for 20 or 30 years and then it doesn't matter. do you agree? >> no, i think there is going to be consequences of the debt levels. going from 20 trillion to 36 trillion comey,'s will give you all kinds of percentages. it's too high. it's become a significant burden in terms of balancing the budget each year. i think it's going to have an impact on the u.s. economy over time and i think it will have an impact on tax policy and other things. it's not discussed much in the market today. jonathan: how do you see it playing out? you are focused on what happening with liz truss. will they slowly respond to this and show the market they are serious about it or is it something where the market

starts to reject the policies that come out of the white house? >> dollars very strong right now. i don't have the data exactly but i think we are at an all-time high relative to most competing currencies. one of the implications, if i'm correct that the debt levels are too high in the u.s. would be if there's an alternative to the dollar. it's a legitimate question but there is no legitimate alternative area where will you go? in 1992 when i was with morgan stanley, we did the first euro wide european currency bond for the bank of england. there was a lot of hope that you would have a single bond market across europe but today, you do your bonds for italy or for germany. each one has different risks and there is not an integrated capital market in europe. i think they look at what happens in the u.s. with hedge

funds and venture capital and private capital and they look at what happens in the u.s. and the impact of that on the economy. they don't even have an integrated bond market. if you look at china, they have absolute no interest in the transparency or convertibility that's required. i think it's a very legitimate question to look at an alternative for the dollar but there is no legitimate alternative. jonathan: that's the problem, when it hits the fan, what will you do? great to see you as always. equities right now are just about positive on the s&p 500. coming up, pimco's richard clarida do, from new york, this is bloomberg. ♪

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♪ >> three days of gains on the s&p 500, this is wednesday's price action for you. equity futures posited by a quarter of 1%, up half of one person on the nasdaq two-year, 10 year, 30 year looks like this. yield higher by about a basis point average yields declined for four consecutive sessions. came close to 5% at the back end of may, all the way back down to about 4.78, hired by a single basis point.

tomorrow, big focus on the governing council and the rate cut we are all expecting. the euro-dollar right now, negative by 0.1% on the currency pair. india's modi that went stay on as prime minister, he will not have to rely on a coalition for the first time since he took office back in 2014. this market surprised by the last couple of days. lisa: yesterday's stocks something off the most in four years been rebounding the most since 2021. use of the kinds of actions that we've seen. he said what it highlights, this move and mexico for the opposite reason is investor nervousness about eroding governments. i'm glad that you raised this parallel with the u.s. and other developed markets. at what point does it start getting priced into markets?

jonathan: i think it is so difficult to do. i had someone asked me yesterday, what about fan independence? i sent don't underestimate the power of the institution once you set into the federal reserve. do you actually think that person is going to take the phone call? don't underestimate that. you know as well as i do perception for financial markets is as important if not more important than reality sometimes and that can do the initial damage and it is very hard to repair once you do that damage. lisa: if you start to undermine the concept of just how independent. he has every right to remove the fed chair and put a different fed chair in. the question is will he do that if that does cause a material so often markets? the former president tends to respond to market action. jonathan: i think we are all listening in the last hour ago, all thinking the same thing, thinking about november.

demand for ai service fueling a big jump in sales while it also raises outlook for the year. server railing is spurred big gains at the likes of dell and supermicro. rallying this morning big time. lisa: really we've seen the winners and losers of who is adapting ai quickly enough. we've seen salesforce fall out of bed because they can monetize until 2025, and then the likes of hewlett-packard being able to monetize a more significant way. that is what i'm watching in the months to come. jonathan: let's turn to that bond market rally, hitting pause . were nude optimism for fed rate cuts. income saying a generational reset on yields is said to spur a bond revival. the bond manager policing is secular outlook saying active fix outcome is positioned to perform well if there are no recessions and even better if there are.

the global economic advisor informal federal reserve vice chairman joins us for more. great to see you. >> as always. jonathan: congratulations for another fantastic read. last year i was with you. the aftershock economy, one of the big calls came from you getting back down to two poing som -- point something. >> as the author, i'm proud of it but i would say yes, our call last year was will be called the two point something destination. but it had a message and the message was five or six is too high but if inflation gets to two point something, the risks become more two-way, at think it happened sooner than many of us thought. the fact that central banks are no longer part of the problem, they are potentially part of the

solution. jonathan: we've got this new reality and this big reset. tell us why this is so compelling on a multiyear outlook for you and the team. >> simply because the last 15 years, and many of your viewers probably weren't in markets 15 years ago, the last 15 years curves have been very flat, yields have been low. historically, the yield on a bond is the best single predictor of the total return. investor buying a bond is going to first look at the yield and then look at the risk and other characteristics. so yields now are at levels that we haven't seen in 15 plus years. plus if you adjust for volatility in valuation, altogether it does make a compelling story. lisa: for which aspects of fixed income? this has been one of the biggest disagreements, this russian to private capital, private credit.

where is active management, where should it focus within the fixed income sphere? rich: thank you for asking. one of their team and messages is that there are opportunities in private credit. this is a super secular trend after the gmc. they banks, regulations, vision was changed so a lot of credit intermediation occurs outside of banking, so there are opportunities. but we do say that we do see froth and evaluation in certain pockets of private credit. in particular, midmarket corporate lending. we think there are much better opportunities than asset-backed ending is down really good shape. we think investors need to be discriminating. when it comes to more traditional bond, the key point is that investors can get an equity like return 6% or 7% without a lot of motility or interest-rate risk. no longer is there a reach for yields.

lisa: they've been seizing it all year. we talk about the macro risks and then there is a question of valuation risks, and i am stealing your words. you talked about that earlier. it seems like that is right now the biggest struggle for markets that are not facing off with that data, they just are trying to figure out whether it justifies the valuations where they are. rich: i think there is an element of the fact that the u.s. last year did outperform globally and so there is a u.s. exceptionalism team that is grounded in hard data and it is natural for markets to put some probability that continues. what we point out, however, is part of that u.s. exceptionalism was fueled by big budget deficits in a fully employed economy and it is not clear how long that can go on. i think that markets sometimes do get into these bandwagons, they do extrapolate and maybe we are seeing a bit of that,

especially in some other markets. jonathan: there was a phrase he used, equity-like returns. generational reset in yields. why do you and the team think all of that merits a reversal of the traditional 60-40? rich: we think 60-40 has served investors very well but it is worth reassessing. if you look at traditional equity valuation measures, equities are very expensive historically. we do think 60-40 is worth assessing. five years ago that was another opportunity to look in another direction. the reset is not a mechanical chain you should pull but it is important to step back and see if you want to adjust the portfolio given valuation. jonathan: help me understand a little bit more. rich: the traditional is 60-40

equities-bond. at these levels. jonathan: at these levels. you mentioned the debt. does the debt complicate that? rich: it does. probably what we were navigating like a lot of investors if there is not really any debate among economists or investors that the u.s. is on a sustainable fiscal path. the question is, is the day of reckoning next week, three years, november of this year? is it a 10 years when the social security trust fund is exhausted? we don't know. we do emphasize that in most sovereign market in the advanced economies, interestingly enough in the emerging world, because of all the challenges emerging market economies faced in decades past, they have much more sensible levels of debt relative to the economy than many advanced economies now. that is another thing we are

looking at is a global opportunity set not just focusing necessarily on the developed markets. lisa: should you accept a lower yield premium for apple than the united states for 30 years? rich: as a former treasury official, i do think at the end of the day the treasury will find a way to make its coupon payments one way or another. i wouldn't get into preparing the risk there. lisa: i'm trying to get to this idea of on the margins you are going to start to see distortions in the market. to sort of not necessarily have a liz truss moment, everyone comes out and says that is ridiculous. lisa: i'm not saying apple in particular, you know my point. there's this question about at what point structurally do you

start to see a breakdown entirely of the market. rich: we are attuned and attentive to the fact that in the treasury market, over a five-year horizon, we could have one or more of those moments. the reserve currency role of the dollar, the fact that the treasury, that is what has been called exorbitant privilege and the u.s. is doing everything it can to take advantage of that privilege. we would see those descriptive -- disruptions as not being permitted reshaping that maybe as a signal for washington get act together. jonathan: we were talking about the election in november. you are a trump appointee. went to the federal reserve confirmed by the senate, serve as vice chair of the federal reserve.

it is now these concerns that the former president becomes the sitting president and starts to make some funky choices. can you walk us through your experience of what it was like sitting at the federal reserve through his tenure, and are we power of the institution? rich: i think so, and here's why. that that really is an institution that was created 100 plus years ago. in some ways it has a very clunky, rk structure. 19 people around the table, 12 of whom vote, others are the reserve bank presidents. what it means that there is both pride and inertia within the federal reserve system. right now there are no vacancies on the federal reserve. at some point there will be and of course, chair powell's term ends in may 2020 six, but until there is a vacancy there is nothing for any president to do. fed officials have very long

terms and there's not really any legal dispute that they could serve that the risk of being fired, so that is not really an issue. over time, any president can shape the fed to the extent he or she can put people on the committee. but i can tell you once you get inside that room and inside that building, you really are aware of both your institutional responsibility and that the history books are going to be looking back at you in terms of what did you do in terms of achieving price stability and maintaining maximum employment? that is a pretty powerful incentive to do the right thing. lisa: there's another kind of political interference with the fed that maybe is less obvious and less sexy than i'm beholden to you, i will do this. there is a question of whether the fed will essentially be forced to lower rates make the deficit more acceptable. to basically finance the

deficit. will there be implicit monetization of the deficit in order to keep the market going on a certain pace? could you foresee that as likely? rich: we see that across global history and we see that in u.s. history coming out of world war ii. that that basically cap interest rates to help the government pay down that huge world war ii debt. as i used to tell my students, world war ii ended in 1945 for the fed kept paying interest rates until 1951. can it happen? sure. well it happened? not likely. when there is a large stock of debt there will be pressures on the fed probably from both sides of the aisle to try to keep rates low. but that i think will resist that but certainly is there a risk? there's always a risk. jonathan: what was it like when the tweets started that you were

doing the wrong thing? because you read them, i'm sure. rich: couldn't avoid it. i'm going to sound sort of like joe friday on dragnet. just doing my job. we were just doing our job. we had a very clear -- interestingly in 2018 and 2019, the economy was in a really good place. unemployment at eight 50 year low. wage gains at the bottom end of the distribution. in some ways it was a movement this concerted, like what is the problem? we just power through. it was an honor and a privilege to work with jay and the committee and it didn't really factor in. but you couldn't help but notice it. jonathan: you used to talk about an ounce of protection is with a pound of cure and that is because interest rates were very low, we were all worried about the next downturn. do you think that phrase applies to where we are right now given the current economic data going into next week?

rich: i do think there is staff dependence in the following sense. a decision that the central bank should make right now in park is a function of how we got to where we are. and the reality is inflation has been too high for three years. at least if i were still in the committee, now would be a factor in thinking about such issues as wendy you start cutting, how rapidly, and as chris weather, my former colleague likes to say, we have the ability now to see the economy in a good place, strong labor market. to me, given the history of inflation and given where the economy is right now, i would be in the mode of not being keen to either hike too soon or too rapidly. because i do think it is very important that this episode be an episode which is thought of as there was a temporary inflation shock, is transitory, it took too long to unwind ultimately it was transitory,

and you really do have to make sure that the inflation genie in terms of expectations doesn't get out of the bottle. i think that would be the way i think about it. jonathan: congratulations to you and the team for another fantastic read. let's get you an update on stories elsewhere this morning. >> donald trump once the gag order related to his hush money trial lifted. the former president arguing the basis for limiting what he could say "no longer exists" after the jury convicted him of 34 felonies last week. his lawyers said his first amendment rights are especially important after president biden, stormy daniels and michael cohen all commented on the verdict from social media. his team once the order lifted before the june 27 presidential debate. the new york stock exchange and nasdaq may be getting some new competition in texas. black rock sadow securities and other investors are backing and

upstart stock market based in davos. the texas stock exchange has raised $120 million and plans to file registration documents with the fcc according to a post by the exchange's ceo. lee says his exchange will try to entice companies that are seeking relief from what he says are increasing compliance costs. and in just a couple hours, boeing and nasa are set to try again to launch the star liner space taxi into orbit. after weeks of delays, the spacecraft is set to launch at 10:52 eastern from cape canaveral. this nation which will include two astronauts is a key test for nasa to prove that star liner can safely transport crew to the international space station. the delays have added pressure on boeing which has wrapped up roughly $1.5 billion in cost overruns on the program. jonathan: up next, taking on

risk in credit. >> the yield on a bond is the best single predictor of the total return. there are opportunities in private credit. jonathan: people talk about those opportunities next. this is bloomberg.

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♪ jonathan: equities on the s&p posited by one third of 1%. taking on a risk in credit. >> the yield on a bond is the best single predictor of the total return. yields now especially adjusted for inflation are at levels that we had 15 plus years. plus if you adjust for volatility in valuation, altogether it does make a compelling story. there are opportunities in private credit. jonathan: let's talk about some of those opportunities more broadly. bank bonds unfazed by tight spreads and risk in the banking sector.

we've been adding to it with the expectation that banking fundamentals have been fixed. not completely but certainly in much better shape and with the economy now unlikely to have a soft landing it seems like we should have more rather than less. matt, good morning. let's talk about that soft landing called first. why is it more likely now? >> i heard it was called a unicorn and he could never possibly happen and here we are. certainly feels like we have not gotten it yet, but it is on the way and we are not expecting the economy to fall off a cliff. if we don't see the economy roll over here, thanks prepared for the worst last year and they are probably not going to get that. i think that sets them up pretty well. lisa: let's imagine -- is sitting on the other end of the table and he says we've never seen a decline in unemployment, just a step down that sits there. what would you have to see to really start thinking ok, this

isn't just a soft landing, it is something else? >> i think we do want to see some slowing. but if it goes too far, yesterday's openings were a little bit alarming but still very high. we are still in a very good economy. i think if you see something along the lines of just people no longer feeling like they can't hire back employees, that would be a concern of ours. overall corporations are making the right decision in investing. it doesn't feel to us as if this is just about the stock. lisa: people who work at credit suisse are probably listening to this same where were you a couple years ago? you're talking about sort of convertible bonds that a lot of banks are forced to issue, particularly in europe to offset capital requirements. if this really where you want to focus on big banks, staying away from regionals that are still buffeted by other issues? >> i think you can get national champions and do well. talking about some of the

biggest banks out of europe that were essentially untouchable for a month or two last year. everybody staff back and said what does that mean? is it possible that you could have the equities still have value and yet i'm going to lose everything? jonathan: have you got an answer to that now? >> we still don't. but the documents that are being written are much clearer going forward to address that. jonathan: what has changed? >> certainly it talks about the waterfall of who is going to take a loss and it is very explicit who can and cannot take losses first. in the credit suisse situation, that would not be allowed to happen going forward. jonathan: so this is a europe call. can we talk about what you're doing domestically in the united states? are they sort of a head case that you want to leave to one side, or is there opportunity? >> there's opportunities. you still have to be very selective but in general, a rising tide has lifted all boats.

the fed and the facilities they put in place to pledge not having to crystallize a loss has really helped. a lot of concerns around commercial real estate which we view as a very slow bleed. companies have addressed it. you look at the win loss provision for most of these big banks, they've already reserved 10, 12, 15% losses in commercial real estate. i think it has already been addressed. we are probably going to get there in terms of losses but it is going to be taking time and you are getting 7, 7 .5%. regional banks in the senior space are closer to 6%. i like staying up in quality with the larger banks but down in the capital structure. lisa: finishing where we began, the soft landing backdrop, how much do you agree with pimco that you can get equity returns in debt markets for the next 3-5 years? >> i'm an active manager, so i

certainly like the called active management will win out from here. we came into this year thinking it would be the year of the bond and here we are five months in and returns are basically flat. they were down, so flat is starting to look like a win. going forward, we do believe there is significant money to be made within fixed income. you are likely going to get the bank of canada cut today, the ecb will probably cut tomorrow. with signs like that, i think it is sort of a wake-up call that this is actually going to happen. the soft landing can occur globally as well as domestically, and when that occurs you are going to start to see all the yields go lower, total returns pickup. jonathan: we've got one viewer who really appreciates you. james, that was for you. good to see you. coming up in the next hour, liz is at charles schwab. guggenheim, fixed income and blackrock. this is bloomberg.

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♪ >> there is absolutely nothing in the data that indicates that things are actually slowing down

in any perceptible way. >> for market i think the next few months are going to be very choppy. >> the market always moves ahead of the fed. >> to market dynamics in the market structure actually afford the ability to hedge really almost like never before. >> we are not really in a typical cycle, we are in a cycle that has been boosted by forces that we haven't seen before in terms of the magnitude. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the third hour of bloomberg surveillance begins right now. good morning, good morning. for the audience worldwide, all eyes on the calendar. one of those weeks we've got to keep returning to it. looking ahead to adp, and then it is onto the service is read a little bit later on this morning. and andrew is looking for more economic weakness. this morning the fed is likely to conclude that the labor market is coming for better

balance. a soft jobs report friday as they expect they would create more urgency for the fed to cut rates. lisa: urgency the keyword. other people are coming around to this idea. it goes to the fundamental question that you brought up earlier this morning which is essentially where are we on a normalizing path? where are we in terms of weakening? i think ism services may be the most important data point of the day if it is weak. if not it will be shrugged off as the mess that we've been seeing, but if it is, are we seeing more consistent data showing a slowdown that then you have to start to extrapolate out the direction of where that is headed? jonathan: let's say it is weaker into the bit later. you will have people at jp morgan who say a soft data overstates the weakness, look to the hard data. you will get payrolls on friday, looking for 185 in our survey. you will still have people saying we are normalizing here, we are not going to some deep, dark, ugly place. lisa: my frustration with that

is to elect people say that the payroll david is completely distorted by immigration and will be completely revised within three months. it's very difficult to get a read on hard data moving as quickly as anything else. fed officials come out saying actually, he thinks that some of the soft data and frankly even the anecdotal data has been more about what is going to come in the months to come. so when you put this together, i'm not sure. but when you get data that might be softer than expected, you could suddenly have a narrative shift for a couple days. jonathan: equity futures on the s&p 500 positive by one third of 1%. bond market yields down for four consecutive days coming into wednesday. talked about the move we've seen over the last four days. equity market hasn't done much. that grind has been like a 10th of 1%.

a 10 year by almost 30 basis points lower in four sessions. lisa: it is just shocking the pace of it. we saw the pace in the opposite direction going up with people suddenly saying maybe things are higher than expected. i keep thinking about mohamed el-erian. this is what happens when you have a data-dependent fed without a framework. the market is just responding to every input they get, and will continue to. it is only volatility when yields are going up or stock prices are going down and when they come down it is suddenly a path that you can bet on. jonathan: mama joining us friday, don't miss that. charles schwab and the bifurcating economy. why there is more pain coming for tesla and tom porcelli on signs of an easing labor market. all eyes on the u.s. labor market as investors look for more signs that they can begin cutting.

the jobs report friday is obviously pivotal but details are just as important as headlines. it weaker labor market likely holds the key to giving the green light to the fed for easing. good to see you. great to catch up. the current market environment is brought to you by the letter k. what is that all about? >> you might remember earlier the pandemic that k-shaped recovery was one of the big themes, but i think we are seeing it again across the spectrum of what is going on in the economy and the market. whether it was the original spread between goods and services. high income or low income, large-company, stronger balance sheet, less rate sensitive vs. smaller companies. you talk about soft data conflicted with hard data. how about soft data conflicted with other soft data?

we had the sp global version hot on the upside. now we have the ism version that is soft. so even within things like the soft data, you get these bifurcations. it is a tough environment. jonathan: do you see reason for this bifurcation to endure? >> some of them, yes. maybe thought of another rate sensitive or insensitive given that so many large companies are earning more interest on their cash. severe at an 18 year low in terms of net interest payments for u.s. corporations. i think that bifurcation will continue. in this recent move down and yields it has not been a significant benefit down the spectrum, and that is a bit opposite of what started to happen last october when yields came down. it provided a huge tail and for the market overall but particularly for small-cap indexes.

this latest move back down in yields has not occurred to the benefit of small. i think the shift is now toward what does it mean from a profitability perspective, not just a rate sensitivity perspective. either way, they seem to be in a weaker spot. yeah, you could say the economy is doing ok, but valuations are doing so high on a lot of assumptions and frankly on the fact that the people who are buying them are wealthy americans who have gotten incredible interest payments that they've been able to deploy. so how do you understand valuations within a normalizing economy? >> you can look at overall market value.

but then if you parse out what it is, you can segment it. you are looking at more than a 10 multiple points difference. something closer to 30 for those small groups of large-cap stocks and down into the 16, 17 range exclusive of a category like the fab four. that is not a bad backdrop particularly if assuming inflation continues to come down. the sweet spot for valuations broadly, historical average of 18, 19 times is when elation is around that 2%. maybe not coincidentally around the fed target. if we continue to move in that direction that is broadly supportive of valuations but clearly the richer valuations, that is why the earnings growth has been most significant. we are going to see a convergent this year. whether in of the magnificent seven, the fab four, seeing

earning rates trent down at the same time those stocks are trending up, by the time you get to the second half of the year you have less of a spread between the mega caps stocks valuation and the overall s&p. lisa: this is a fascinating point that washington advises picked up overnight. basically, kindly 1999 moment. not necessarily there is going to be a big meltdown, but investors should consider rebalancing portfolios that drifted, acknowledging that extraordinary growth rates cannot persist indefinitely. do you see this meeting delins or that they are quickly left behind as some of these others were? >> i think there's an opportunity to catch up elsewhere in the market. for all the talk of resilience in the market this year, and it is at the index level, i often show, and i put this on my

twitter feed every morning, the nasdaq as an example is up 11%, 12%. no more than a 7% maximum drawdown that the average member within the nasdaq has had a drawdown of here in 6% this year. so there's a lot of rotation going on under the surface, quotation corrections. that is in essence where you might find opportunity. but that tells a more accurate story of what is going on them the story you would hear if you are just looking at the index level because of that large-cap bias. it's less extreme for the s&p but even in the s&p the average member maximum drawdown is 14%. so that is correction level. i think that that is maybe where opportunity presents itself. jonathan: i just wonder how vulnerable we are. there is a stat that you've got, something we all need to hear, the correlation was 0.95 and you say it is now zero 13.

how vulnerable are we? >> not necessarily vulnerability for the overall market, it is just a simple fact that nvidia as a symbol stock does not have the power to drive the market and that the just shifted around when they released their earnings. so i think it was the four days following the earnings release which was in conjunction with the stock split release. stock was up more than 20%, yet the s&p was down a little bit. that is a real-world description of correlation coming down and how it manifested itself and i think the nasdaq was also flat. it just shows you that there is more dispersion within the market, even within groups like "the magnificent seven", much more dispersion. much lower correlations. in essence, that suggests stock pickers market, but there's also a lot of minefields you have to

avoid given the statistic of 36% average drawdown. jonathan: amazing, learn something every time we speak. thank you. your equity market posited by one third of 1% with your bloomberg brief. >> indian prime minister modi did not get a landslide victory predicted in exit polls. that outcome forcing them to rely on allies to form a government. he's gearing up to hold coalition talks after his party lost its majority in parliament. since taking office a decade ago , he will likely have to make concessions to other parties. shares of dollar tree falling in the premarket. the retailer announced earnings that beat estimates and saying it is exploring a sale or spinoff with family dollar. less than a decade ago dollar tree beat out the driver -- rival dollar general to acquire family dollar.

and google parent alphabet is naming the new cfo and senior vice president. the move is effective starting july 31. he joins from pharmaceutical company eli lilly. she spent more than two decades at the company. that's your bloomberg brief. jonathan: thank you. more is up time. up next, the morning calls plus guggenheim's run on why he sees more pain coming for tesla. that conversation just around the corner and adp report just moments away.

♪ jonathan: adp report just seconds away. looking for 175 >> a disappointment perhaps for the markets. it is a sign that the economy

does seem to be slowing to the extent that you take adp seriously as an indicator. i want to back up on that and say this, that i was talking to some people on wall street, some economists who say don't look at adp as a forecast for what is supposed to happen, look at it as just an alternative number. we don't go to the isn numbers and say they were wrong in the same way we do about adp. if you look at adp over the last year or so, it comes in pretty close. 152 is the total number. goods producing up by 3000. construction up by 32,000. that's interesting because the numbers have suggested at least the job openings suggested construction was not hiring all that much. adp says manufacturing dropped by 20,000. one had 49 thousand jobs, total

leisure and hospitality only 12,000 of those. as always, education and health services, 46,000 jobs. let's look at the pain numbers because of course, job stayers get a 5% change in median annual pay. job changers, 7.8%. that does show there is still a bit of a premium if people are looking for new jobs. that maybe works a little bit across the headline. jonathan: pretty decent bump. 175 with the estimate. we've got people coming on saying it doesn't matter and then the market moves on it. just a marginal move, but a notable one. yields were a little to higher this morning, then lower again by about a basis point. it is the fifth day of young grinding lower. lisa: it's basically confirmation of a trend which just shows you people dismiss it until it shows a trend. just to point out the revision

for last month was also revised lower. so the trendline also gets lower. if someone is looking for anecdotal data to confirm a weakening bias, here you go. jonathan: stick with us, more to talk about, but later this morning. and onto payrolls as well. 185 is the median estimate. we will see if that inches lower as we closer to payroll friday. time now for the morning calls. first up, the analyst highlighting strong earnings results thanks to ai demand. plus, hp expectation for a strong second half. next up, mizuho lowering its price target. the marathon oil acquisition is a positive for near-term cash flow but diluted from long-term inventory quality. and finally, guggenheim sticking with its rating on tesla. setting the ev maker's push it

to self-driving writing tesla is increasingly an investment underpinned by autonomy, a challenging balancing act requiring investors to buy into a vision of a future with limited evidence. i'm pleased to say that with us is ron. what is not to like from your perspective? >> i think we can all appreciate the autonomous driving is a massive opportunity. the ability to commercialize 3 trillion miles just in the u.s. alone is a huge opportunity. i think where we struggle is they tends to be more than one company, these are winner take all markets. we don't have any supporting data for tesla to bridge to an autonomous driving happens. if we just go back five years, 2019, at tesla's own autonomous event, we were expecting robotaxis in 2020, 2020 one and

people were underwriting we would have robotaxi at scale today. if you have these five-year shifts in commercialization, pay cuts your net value in half. i think there's a lot of overconfidence in forecasting this and for a business that we think is going to less than two dollars this year, there is significantly plied data that we think is just going to take a lot longer to play out. jonathan: you got a price target of 126. we can all see ourselves. what is the path back to volume growth here? before we get into the future, what about the nuts and bolts of where we are right now? >> there is volume growth in one major region of the world, china where you are seeing competitive product, competitive price vehicles, internal combustion engine vehicles. the rest of the world is tough

because i think there is a mix of consumer adoption issues, ranging zaidi, things like that. but also demographic issues. if you look at the average buyer of vehicles in the u.s. it is historically old. they are also less likely to adopt electric vehicles statistically. there are some demographic shifts that will help. for tesla specifically, new models next year will help at the margin but ultimately we seen that without cutting price, tesla really cannot grew volume at this point, it is pretty challenging. lisa: does the volume story at tesla problems or electric vehicle problem more broadly? >> i think in the u.s. and europe is a mix of both electric vehicle ain't tesla. in china it is a bit more of a tesla problem just because of the amount of competition in china. putting out a car last week with 1200 miles of range that is

priced like volkswagen. it is more of a tesla specific problem. ? it's, i think that is going to take time to play out. we talked about the demographic shift. lisa: there's also the elon musk problem according to some people, particularly with the latest news being reported where he basically said that he is just transferring all the chips that he is fine from nvidia, not to tesla because as he said, tesla had no place to put them. this sort of flies in the face of some of the ai adoption we've been hearing about a tesla. how much that this move the needle for you in terms of your expectations for tesla? >> during our discussions i think what was most noteworthy about the headline yesterday is was this done independently or

not? were other board members and their executives aware or with is a unilateral decision? that has much different ramifications in terms of the team he had control over tesla despite not having equity control. otherwise it is going to be a debate in terms of the sourcing of the ai talent, where it goes, where it goes to x ai or whether it goes to tesla. i think it is a bit of an open question, really tough to have an answer on. we are surprised how much implied value tesla is getting for their time is efforts without a lot of tangible data to support it. jonathan: can i just finish on the leadership question. we got this shareholder meeting on june 13. where you think we are going to be regarding elon musk at the end of this month? >> i would say what we've written is we expect the compact interest past.

we expect it is kind of promises kept. we expect the texas reincorporation to fail. ultimately i think that means elon stays. it is a bit tougher to say what that means for the dollar reports. but i would be very surprised if elon musk is not the ceo of tesla of a month and a year from now. it is ultimately the best funding mechanism for his goals and in patients, the lowest cost of capital of any of his ventures better private. i would imagine tesla's lowest cost of capital $26 billion plus of cash to see this out. it's going to be a considerable loss to develop any of the eponymous nai technologies. jonathan: appreciate your input, perspective and opinion. stock is higher by 0.7%.

the call was for 175. lisa: the question of course is the relevancy. the fact that markets did move highlights the nervousness and the balance of risks right now baked into markets which raises this question. how high is the bar for a downward selloff vs. some sort of rally? in other words, our markets more attuned to downside surprises because that is the narrative shift that they are selling out, or is it equally volatile on either end? jonathan: i would say they are nervous in either direction. two weeks ago, liz ann sonders said this. we had this pmi come out, then we were talking about the economy being too hard on re-acceleration. two weeks later we are meant to be measuring the same thing. and then everything just reinforces that. you look elsewhere. job openings, whatever it might

be. then you start looking at what is happening in crude of all places. if we get confirmation of the trend, yes. lisa: this trading on adp? please write in, we would love to talk to you because that is a key question. also, what is driving some of the ping-pong action we've seen? jonathan: for a moment, yields were down and then back up again. by a single basis point. it's exhausting, isn't it? up next, we will get the latest spots from mike mckee still with us around the table. from new york, this is bloomberg.

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♪ jonathan: we are one hour away from the opening bell. equity futures are positive by a quarter of 1% on the s&p 500. the nasdaq up by half of 1%. in the bond market, plenty of volatility in the last 10 minutes or so. on a 10 year, we will talk more about that data in just a moment. i want to turn to foreign exchange. looking for that first rate cut from a major central bank. none of the others are major.

i'm going to keep defending people in switzerland. just about unchanged on the euro. we believe that there. under surveillance this morning, intel announcing another investment program as it works to keep up with competitors. the chipmaker agreed to sell 49% of an irish plan to bring in much-needed funding as the ceo pursues an ambitious turnaround plan. >> this to me as one of the more interesting stories because we always talk about infrastructure week, when is the government going to finance all these plans that allow the u.s. to have some of the more advanced technology? is it really going to be corporate usa, or is it going to be some of these private management funds that have pools and pools of cash that are looking for some ai exposure? you just wonder how much that is going to be the fuel to the fire more than company joe biden. jonathan: i don't know if i'm

looking for it or just noticing it more and more. every time there is some sort of deal, our friends are in the story. you see it more and more. lisa: they are massive and they have a lot of money. when you have a lot of money, if you need to gain scale, you need to go big. as you start to see them as a major partner for more significant companies and some significant projects that are what are in all of our eyesight, which raises the question how much will these companies are going to have in financing that next tier of development that a lot of people have been counting on government financing for. jonathan: seeing it in the news, that's for sure. they are watching, i know they are. set the biggest gain since 2016 thanks to ai. generating $3.87 billion in revenue. the company seeing a big jump in

sales as ai oriented systems only grow stronger. hp finally getting a slice of the market as we see significant year-to-date gains. one at 71% so far. tilting dovish once again, the fed could cut sooner than expected. initial 25 basis point cut in november, moving up expectations from december. this as investors keep an eye u.s. labor market data. just moments ago coming in at 152,000 vs. downside surprise. mike mckee, put it altogether going to the payrolls on friday. >> i would just say nobody knows nothing. it was last week that we had a guest on the show, i can't remove or who it was but i'm going to quote him because it was great, the fed has a

reaction function, the markets have an overreaction function. and the number that we've gotten recently have been reacting to the idea of rate cuts. that may happen, april may have been a turning point in the economy, we don't know. but at this point, everybody is buying into the idea that the fed is going to cut rates sooner, that the economy is slowing significantly. but there's a lot of stuff on either side. the biggest biggest on the lowest since 2021. but it is still way higher than the average before the pandemic, and we saw hiring built up in april by 16%. the second strongest since january of 2023. so the labor market, is it weak or not? adp might suggest not, but i don't know. the other thing i would say is we are maybe getting into this trend that we are going to see rate cuts. it's only a question of whether

the fed is joining because the bank of canada today comes out with their decision and they are expected to cut rates. and i don't know where you would put them in the major, middle. but i expect her to defend them because lisa is a big deal in canada, as we know. jonathan: what i am really nervous about is anyone in tier three. i'm not going to say who is in tier three. just everyone gets a participation medal. here's the problem. destination and journey. i remember this phrase from chairman powell. when he talked about navigating the stars under cloudy skies. how do we navigate the stars under these skies? when you look at the ratio of openings two unemployed people sitting at 1.2, we are back down

to about 2021 levels. very close to where we were pre-pandemic all the way down to two to one. really hot labor market. just normalizing talking about 2019. we are going to journey to somewhere else. how do you even know? >> we don't. almost all the economic indicators suggest we are normalizing. there are some red flags out there that people are watching, the number of bankruptcies and the number of people who are getting delinquent in their loans, but they are still not out of what would be called the normal range. the issue is do they tip over the edge? we don't know that. that is one of the reason that they say, economists in wall street have predicted seven of the last three recessions. we are always looking at these numbers and people pick some out and say they are going to have a contraction and once in a while they are right, and then they come on the show a lot and we tell them that they were great. lisa: no one has ever told me

that before. literally every day someone gives me that stack. there is this question going forward about the data and the revisions. i know bloomberg economics came out talking about a potential 730,000 jobs eliminated from the labor force as reported in all of the revisions for 2023. do you buy into this credence, this idea that the data has been messy, we've seen some pretty significant revision in the past, and then we are likely to be in a significant downward trend than upward? >> i was looking at what they call the qcew numbers this morning and i don't know if i buy that we are going to have this massive revision, but certainly the data has been very messy ever since we got out of the pandemic. it's been very hard to know what the final number is going to be, because all of the seasonals have been interrupted and the patterns that we had has been interrupted.

data after data being revised more than they usually are. but it goes back to what is the ultimate goal here of everyone watching this data? to predict with the fed is going to do. and the fed can only deal with the data that it has. so you can look at the revisions, but you have to take the data that we have at face value when you are trying to predict what the fed is going to do. >> let's bring in the panel. first, let's go to the calendar later on this morning. do you expect that you confirm some of the weakness we've seen so far this week? >> as michael mckee said, the data has become so highly scrutinized that we seem quite big moves on very small amounts of data. in terms of the isn, we actually think he could continue to show a robust economy, particularly

in terms of services. we think it is going to continue to show that actually as most of the data is showing, that actually the economy is normalizing, it is decelerating, but instead of a bumpy way. obviously we have cpi next week along with the f1 see and there is plenty of data in the next few weeks as well. jonathan: we've heard that word so many times, what is the distinction between a welcome call in and an unwelcome deterioration? >> i think this is the challenge for the fed. if you look at the ratio of openings to unemployed you are basically back to where you work pre-covid. but what keeps it there? what may help keep it there is for the fed to start the process of removing some of the tightening. and i think that is sort of the

real challenge for them. the qcw that you mentioned earlier, this is like one of those great metrics that no one really pays attention to. if you take it at face value, it would suggest up to 50,000 less jobs per month, right? and that is not a small thing. the smoothing of that is a little tricky, but taking it at face value, it suggested you are going to look at some of the lower numbers for last year. but thinking about where we are right now, what we have to keep in mind is there is an assortment of data that are suggesting that things are looking a little softer. let me hasten to add i think on friday could probably see about 200,000 jobs being created. but when i look at something like the small business survey, which by the way is comported

with actual data, hard data on what small businesses are doing which is to say it is lower, if i look at something like the labor differential from the conference board which is also deteriorating, which again, soft data, the unemployment rate is up. so there are things that are actually suggesting that labor is slowing and i think this is where the fed comes into play. this is why the fed wants to start the process of taking back some of that tightening lisa: messy data was blamed for what some people said was a fed error in 2022 for not hiking rates sooner. do you think looking back at some of the messy data will be viewed as the reason for another fed error that they didn't cut soon enough? >> i think this is what is on their mind at this point, why they actually want to start. if we just take a step back, it is very easy to say that you think about what they were trying to achieve, they stop

hiking rates in july when core was at 4.2%. i think that whole process, that whole thought process was built around trying to limit the downside from the labor market effective as much as we can. i think that is already on their mind and this is why the conversation of let's cut is happening even with 2.8% pce. lisa: this uncertainty has led to this question of the incredible volatility be seen in markets. you focus on flexibility and liquidity. is that because you want to move on a dime in response to some of these data points? >> it's because we think there are a huge number of opportunities out there particularly in fixed income right now. can lock in very attractive all in with very good liquidity and limited duration risk, but that being said, it is a very uncertain time in terms of the

fed. we do think they may start to cut rates at some point this year, but it is too early right now to tell but likewise you do have the ecb very likely to cut rates tomorrow. that doesn't need to be data-dependent as well. i think as you say, a lot of the data is becoming quite messy and as we do see this normalization to a risk coming in a lot of the data, whether it is other economic data such as manufacturing consumption, regional sales, you name it. we do think it is important that we are flexible to deploy money where we see the best opportunities and to lock in the best income that we can for clients. but we also want to protect the outside events. and as you see, we don't know the catalyst for the data

trigger the swing dramatically one way or the other, but we want to be prepared in managing the portfolio. we want to be very risk-aware and we really want to understand exactly where the risks are in each position that we have. jonathan: talk to us about how to confront this negative yield curve, this inverted yield curve. you are talking about normalization, not deterioration. you're talking about one or two rate cuts, not the rate cutting cycles. so one of the argument for people out there looking at a two-year and a 10 year. why would the extended duration go out along the curve? what is the reason for that? >> certainly in the u.s. and treasury market is hard to really get a good reason why you would go out, particularly between 10 and 30 years. it is hard to see a good

rationale for taking that duration risk as you say when you can get better carrying at the front end and particularly the front end, if we do start to hearing more from the fed, potentially to cut rates this year, you can see a little shift down yields in the front in particular. but the curve is very inverted and it is hard to see yet a reason for taking duration further up the curve. that being said, when you look at investment grade, other areas of the global bond market, we think it does make sense to take even more duration risk. for example in the u.k., duration in areas of the euro zone, we've added in the been more duration there as well. i think it is about being very tactical and very specific about where you choose to take that duration risk. lisa: i love your take on it in terms of higher yield in the u.s. over the long-term. is it because of inflation or

because of something else? >> i think this is where the context part of the conversation comes into play. in fact i think we talked about this when i was on last. i hate the idea of higher for longer. it is not higher for longer, it is normal for longer. i've been saying this for a long time and i think that that is really where we are. if you look at 100 years of yield data, the outlier was the prior 10 years. otherwise, you are in this 3%-5% zone. if we are right that the fed does cut rates but this is going to be one of those fairly modest easing cycles, that idea remains true, this sort of normal for longer. jonathan: are you trying to start in this trust again? >> i wasn't trying to, this is the question. there is also the question of firebase. japanese buyers, what happens if you end up -- seriously.

jonathan: your thoughts, please. [laughter] >> i mean, we certainly think that rates will remain higher than expected and higher than they have been for a long time. even at the fed does start to cut and the ecb starts to cut, we think it is going to be very gradual. we need to see inflation come down in a sustainable way toward the various central-bank targets, and it is not there yet in most cases. so we do think that rates will remain higher than they have been for quite some time and certainly higher than has been expected both by the central banks themselves for the summary of economic projections or other things as well. and also certainly been the market has anticipated. jonathan: tom is going to stick

with us and give some final thoughts on the payrolls report. i happen to agree with you. i expect a ton of research between now and november that is going to mention things like liz truss, u.k., what happened a couple years ago, can it happen in this market? i think a lot of people are thinking about the same thing, both these candidates going into november art going to tackle the deficit anytime soon. at some point this market starts to reject some of the policies they have. lisa: i don't think it has to be the same type of moment that depends on the currency. it has basically a dysfunction of the treasury market that causes real angst and extra premium, possibly because the market has gotten to be given some of the infrastructure underpinning it. there are other aspects to this that don't look exactly like that moment. jonathan: you're not alone.

i'm not sure what you said at the end. lisa: i don't know, it rhymes. it's not the same thing. jonathan: here's your bloomberg brief. >> gold is rising as investors shift their focus to friday's jobs report and look for clues on when the fed will cut rates. lower rates are typically a boon for gold since the asset doesn't offer interest. ubs recently raised its forecast out to 2028. for next year, the bank expects the precious metal to average $2700 saying macro uncertainty and geopolitical risks will continue driving strong demand global central banks. nasdaq maybe getting some new competition in texas. black rock citadel security and other investors are backing up start stock market based in dallas. the tech six stock exchange has raised hundred $20 million and plans to file registration

documents with the sec according to a linkedin posed by the exchange ceo james lee. he says the exchange will try to entice companies from seeking relief from what he calls increasing compliance costs. and the nba is nearing a $76 billion tv deal over 11 years according to the wall street journal. people familiar with discussion same deals on track with nbc, espn and amazon. that three companies with split gains and espn would retain the right to air games on an upcoming direct to consumer streaming service in 2025. tnt owner warner still has a right to match arrival package. the nba finals begin tomorrow between the dallas mavericks and boston celtics. jonathan: thanks for this morning, appreciate it. setting you up for the day ahead. looking ahead to payrolls friday with tom porcelli. just a few days away. ♪

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♪ jonathan: equity futures positive five 4/10 of 1%. counting down to the opening bell about 30 minutes away. we will get u.s. pmi and that they wanted 10:00 a.m. thursday, ecb rate decision plus another round of jobless claims and finally, tom porcelli still with us around the table. what are you and the team looking for? >> i think it could be around 200,000. i think it is going to be a decent number. the one thing that i thought was really interesting, i don't tend

to be a big fan of jolts, i just think there are sampling tissues. but sometimes you can glean something interesting. i think one of the really interesting things was if you look at openings for health care, it has been getting deigned. and why that matters is because if you think about what has been an engine of job growth, it has actually been health care. we've been really trying to drive home the right way of looking at job growth at large, to look at cyclical hiring. if openings are an indication that things are maybe slowing down, one of the main engines of job growth. i think if the really interesting thing to sort of consider. it's been adding almost 80,000 to 90,000 jobs. to me, that is an interesting thing to entertain.

lisa: i'm just wondering whether the range of potential outcomes has gotten wider or narrower for you? >> for us, we take a probabilistic approach to forecasting. you have these point estimates, and let's just be honest, don't listen to point estimates. we take a probabilistic approach and it is a really smart way of thinking about it. what we've been saying, we've been saying that basically since then that we have a really fantail distribution, and that remains as true today as it did when i first walked through the door. i liked that idea of really recognizing there are some pretty fat tails around the distribution. i've been saying, and i think this is as true today, i like

the idea of having fantail risk out the window. jonathan: was that some by side snobbery? lisa: it was released. when you get those messages, send them over so we can see. jonathan: coming up tomorrow, your lineup. goldman sachs, wells fargo. this was bloomberg surveillance. this was bloomberg surveillance. people couldn't see my potential.

so i had to show them. i've run this place for 20 years, but i still need to prove that i'm more than what you see on paper. today i'm the ceo of my own company. it's the way my mind works. i have a very mechanical brain. why are we not rethinking this? i am more... i'm more than who i am on paper. her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

matt: looking to see how much investors care about bad news is good news today. the countdown to the open starts right now. we begin with the big issue, the bad news data point from yesterday. all eyes on the labor market. >> it is right to be watching the labor market. the jobs opening data falling to the lowest level