♪ cartels we've got a broad story read economic fundamentals look good. the growth story is pretty good. inflation is coming down. >> i think it's a very balanced sort of message. >> we are seeing slowing growth but not such severe slowing that monetary policy makers seem like they really need to act urgently. >> i don't think there's a lot of concerns about the u.s. economy going into recession. >> that that is telling you they're going to cut rates even if the labor markets cut down. there is a support network that is happening now. announcer: this is bloomberg surveillance with jonathan

farrow, we sever, anne-marie hard-earned. -- >> this is bloomberg surveillance. jonathan is all for the week. we have the lucky ones because danny berger has agreed to join us throughout the week. thank you so much for being with us. a week of so much fed speak. we have some key data and this they tension that has been culminating this week. over the weekend, a series of s&p forecasts to the outlook for years end. at a time when it is really being driven by a fewer and fewer group of stocks. we look at julian emanuel is that this upgrade is because of ai. i think it interesting to turn it on its head.

should we be worried that the rest of this market isn't playing ball? >> this is something that is making her really uneasy. she can understand the logic but this is a record divergence with the small-cap stocks. you have to wonder at what point people don't participate. it just raises the question of the vulnerabilities. the fed maybe is going to cut this year. if this a market that is broken and there are too many price insensitive fires? -- buyers? lisa: it raises the question of what could potentially go wrong. when it comes to the political risk, it is impossible to be able to really price that out and yet last week it really was what happened in france.

how much was that really hanging over the g7 in a way that a lot of people didn't expect? >> domestic politics was almost the theme. they were able to get some deliverables over the finish line but the issues at home, that is what was striking for some of the leaders. i think it was politico that had the headline. that is exactly what it felt like because what is going on in france. peter chair had this note saying that europe is making market interesting again. he says ok, that as long down the road but the fact of the matter is you can have the far left and the far right potentially win big in what does that mean for the center when it comes to france? >> french and german bonds, i'm just wondering when you forwarded to the u.s. which is the stalwart market that everyone seems to be coalescing around, what are some of the vulnerabilities over the next two weeks?

as we talked about fundraising and a whole host of domestic issues that are coming to the floor. lisa: it is full on campaign mode. biden went immediately from international gathering to this campaign event, star-studded event. he raised some $30 million, of the issue of his age was on display at the g7 as well. that was on display as well in los angeles. this is going to be something he needs to overcome at that debate in the next two weeks. >> unclear exactly how he's going to do that. let's get a sense of the state of play as we get the 29th record high last week on the s&p 500. starting on a softer note. albeit, this is not a softer note. as futures just a touch away from 5500. ever court talking about 6000,

about 10% upside from where we are. the euro gaining just a touch after a really punishing session. 10 year yields just marginally upward but still so much lower than last week before we got a slew of data that spoke a lot louder from the federal reserve. prude basically hovering around that $78 mark. i want to take a look at the week ahead. retail sales on tuesday, jobless claims wednesday and the s&p global pmi on friday to get a sense of how much we could get some sort of upset. it is not the quiet week. such a loud week. it is every single one of them. we are going to be coming out and giving their sense of how bifurcated this fomc really is.

at this point we are looking at herding cats. coming up, terry haynes as biden and trump ran up their campaigns and kneeler richardson looking ahead to a slew of fed speak this week. stocks coming off two weeks of gains as investors -- a clear path of disinflation, growth and policy set that they constructed outlook across markets. but beyond year end, many uncertainties drive a wider than normal skew, reflecting a greater range of potential outcomes of the next 12 months. andrew, talking about looking beyond the end of this year is like staring into the sun or beating your head with something over and over again. what do you make of the moment

we are in where you have record highs with a smaller and smaller cohort of companies that are really keeping it all going. >> look, i think you framed it perfectly. this is a pretty unusual set up and i think it is interesting to kind of claim that this is a very macro driven market. there are obviously a lot of really important macro stories that the phenomenon you just described is inherently micro-. it is about a small number of stocks having an outside effect on the markets and we see that within credit markets as well, where you see very low levels of correlation between individual credit similar to how you see low levels of correlation within the equity market. i think it speaks to first a very idiosyncratic market. second i think it's important for investors to appreciate that this is really important for how volatility is so low. if you think about a lot of

different stocks running in a lot of different directions, they helped to stabilize the overall index. for the moment that lack of correlation is a helpful factor in helping to keep overall markets stable, but i think it does suggest an environment of major winners and losers. you can very quickly have a lot more volatility in the market. lisa: it depends where you look. if you take a look at the vic's, sure. the mega caps, they are spinning around, albeit one direction up. this isn't exactly a stagnant market or some kind of study klein -- climb upwards. is it the risk to the outlook of nvidia and microsoft? it doesn't really matter about the other 493 stocks.

>> that's exactly the right way to think about. the average of the assembly of a stock is not particularly low at this point. they help dampen each other out. if everybody is going to one side or the other at the same time i correlation, the box a lot. if everybody is running opposite directions, the boat is more stable. certainly that means the earnings outlook for these very large companies has broader implications across multiple asset classes, credit, equities. the other concerning factor is this very odd dynamic we had last week with inflation and the fed. you had a very good inflation number, 0.0 month over month on headline inflation, and then the fed comes out later that day and raises the estimates for court inflation.

i think that confuses the market, quite frankly, fed was clear in the press conference that those summary numbers didn't fully reflect the good cpi data that they just had, but i think that has left the market more concerned that maybe the fed is more backward-looking it not interpreting, not fully appreciating some of the recent slowing of some of the data. certainly for credit markets, good is good. the market this week once better data. it wants to be assured that the economy really is strong and i think weaker data will drive more years at the fed is kind of looking in the rearview mirror based on the summary of economic projections last week. ann-marie the first bit we got wasn't exactly encouraging in that they would have changed their dots today. we heard from kashkari saying that he thinks one cut is reasonable if the end of the year. that doesn't exactly argue that

they would have put two cuts in have a had the data in hand. so what do you need to hear from fed speakers this week to make things less can using? >> i think it's less what the fed speakers themselves say. i think it will come down to the data. we have retail sales, industrial production both on tuesday. morgan stanley expecting those numbers to improve, to bounce back. i think if the markets is helping david become a little more relaxed. it will say that's fine, the economy is still coming along, inflation is coming down. we care a little bit less exactly when the fed makes its first cut or exactly the pace, but i do think the way that last week played out, it makes the market more sensitive to weaker data print in a way that is a little bit different. the caps on times were good data -- four week data has been interpreted positively. there is a risk that is no longer the case, that the market

is rooting for better data and weaker data will be more challenging. ann-marie what has changed? bad news now being bad news, why is that the case this time? >> i do think some of the set up from the fed could have changed that. i think the fact that you seen some of the economic data has been a little bit softer, the economic surprise indices are quite weak. i think the fact he started to see the unemployment rate go up a little bit. we think immigration is a reason for that so unemployment rate is sticking up for maybe better reason of the labor force is growing, but i think it is kind of a combination of factors. in small doses, that correlation can be more uncertain. but i think with the markets probably most worried about, over both cycles is a scenario where the data weakening, the fed is slow to react over

multiple economic cycles, and that is often the worth outcome for markets. morgan stanley are expecting the data to be mostly better so back and help, but i think it's important to watch and investors should also be watching the correlation closely for any potential shift. lisa: thank you so much. glad you mentioned the fed speak that we heard last week because frankly it was all over the place. it wasn't exactly one commentary. it was basically some people saying i want to be hawkish, others saying i would have cut rates. ann-marie but they do continue to have this refrain. we can be patient, we need to wait for 2%. but then we make this mistake before? we can just pay attention to the data and not the fed speak, isn't that the mistake we made the start of the year would be set they are going to cut six times and then know they are not, we have to pay attention to that. are we doing it again but to a lesser degree? ann-marie kashkari was asked

specifically about that report that that the that will only cut rates once this year. i think that is a reasonable prediction and it looks like december. lisa: and that's what a lot of people are coalescing around. let's get you an update on stories elsewhere. here is your bloomberg brief. yahaira: oil edging higher after mixed economic data out of china. this at the biden administration is reportedly ready to reopen the u.s. stockpile if prices jump in the summer months ahead. and president biden's closest visor on energy told the financial times the administration do everything they can to make sure the market is supplied well enough to ensure as low prices as possible for american consumers, which includes releasing more oil from the strategic petroleum reserves. the u.s. has mopped up almost one third of all the global investment flow since covid. analysis by the international monetary fund showing that the u.s.'s share has climbed with

higher interest rates a major draw for overseas investors. the u.s. has also pulled in a fresh wave of foreign direct investment there may be challenges ahead from fed rate policy in the presidential election which can affect the fiscal deficit. in pixar's inside out to is hollywood's best debut since harvey. the movie grossing $150 million at the box office in the u.s. and canada, bestingd dune part ii. the film also notching a record, the nearly $3 million haul globally if the biggest opening weekend in history for an animated film. >> thank you so much. it is nostalgic, it seems like. you want to see it but you've not been to a theater. campaign season kicking into gear. >> the supreme court has never been as out of kilter as it is

today. >> four years ago our border was there, inflation was nowhere to be seen. we didn't have inflation. the world was at peace and america was stronger and more respected than ever before. dark that's coming up next. this is bloomberg. i can't believe you corporate types are still at it. just stop calling each other rock stars.

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lisa: we are still debating inside out 2 and we are going to take anne-marie straight from italy to a movie theater. not much market action after a week where we saw about four straight record highs. 29th of the year on the s&p today, down about 1/10 of 1%. not a lot of drama as we take a look at the concentration here.

again, not a lot of drama. really flat. under surveillance this morning, campaign season kicking into gear. find: the next president is likely to have two new supreme court nominees. two more. he's already appointed two that have been very negative in terms of individuals. the supreme court has never been as out of kilter as it is today. >> four years ago our border was secure, inflation was nowhere to be seen. we didn't have inflation. the mold was at peace and america was stronger and more respected than ever before. >> here's the latest. donald trump and president bynum ramping up campaign efforts over the weekend. ahead of next week's first presidential debate, that coming is a pure research poll shows that one in four voters don't like either candidate's, so-called double haters.

joining us now is terry haines was on top of everything. where is your center of focus on a week where we have a lot of rhetoric and frankly, and a lot of concerns about voter enthusiasm given those double haters? >> other than inside out two, i think what will happen is you are going to ramp up 27 debate over the next couple of to get there won't be much going on politics. everybody will wrap themselves into a tizzy about this stuff, but it actually is consequential in a lot of ways because as you are pointing out before and it is one of my analysis points as well, buying has got to show up pretty much every day between now and november that he's up to the job and that he is kind of the saner, calmer alternative. that is the frame of the election to me because then more people are likely to pull the lever for biden.

if they can't get there, this election gets upended. anne-marie: how difficult is that when the frame of difference is out reporting from the g7 over the weekend was how other delegations for keeping a careful eye on biden. they say he jumped in on conversation about ukraine. but then looked a little bit to the zoning out when the conversation moved on. if that is already the base case, how much work if this administration need to do? >> they need to do a lot of work to continue to have him show that he is up to the job they can't do it for him. a lot of these clips over the past week or so are concerning. they are going to need to dissipate bad and biden is going to have to be on his toes, not just because he's talking to an audience that is a huge audience around the world, but also he's

on stage with his major competitor is going to do everything possible to try to discombobulated him. i think he's up to the challenge, but there is a bar there that is not insubstantial. ann-marie you still think five is going to win this election. you do right trump has his own issues as well. what is going to be his biggest test? >> frankly, not going off the rails and coming into hot. the joke around washington last week while you were eating gelato was trump comes to washington and all of a sudden he is sounding reasonable in meetings with business leaders, house republicans and where did they put the other trump guy? his major problems are twofold. the republican is split, as you can see from the nikki haley vote in the primary and trump hoarding haley, and that he is

not doing that great with independent. he needs to do both, consolidate the republican party, appeal to more independents. he's going to have to calibrate himself in that way and not worry too much about making biden jumpy or feel worse. anne-marie: if it is sunday, it is trump vp day and you see a lot of potential except the airwaves yesterday. where do you see the shortlist right now for the trump camp? >> honestly, where it should be. i have no personal idea what trump is thinking. what it should be is nikki haley because she is the only one that unites the party and begins to make that independent appeal. i know there is some dissent about that, but point of fact is within the party and moving toward likely independent voters, nikki haley is the pick.

i think there is precedent for that frankly with the pick of mike pence in 2020. not the same person but in 2020 what trump understood he needed to do was appeal to traditional conservatives who were somewhat put off by his all over the map performance, and mike pence succeeded in that. both in the campaign and the general election. anybody else other than nikki haley i think is second-best or third best area no offense to senator cotton, for example, or senator scott, but they are going to be on the campaign trail doing what they do anyway, being attack dogs anyway. you don't get that much out of having cotton or scott be the vp pick. >> you say it should be haley, but what is the actual, realistic probability of that happening? you have her very much so distancing herself from trump, even her so-called endorsement was basically a guess i would vote for him because he's the republican candidate.

they don't seem like people who particularly like each other or would be willing to foot the ticket. >> politics is full of people who don't like each other making combinations together. nikki haley is playing an interesting game and trump has been courting her of the past several weeks. there is a small window between the time in which trump is sentenced to new york and the republican convention starts that nikki haley gets to make a decision. the decision essentially is whether her political future is better off not only in the tent, but in the tent at the vice presidential nominee, or whether her preference is to stay out of it and stay aloof from the general election and try to pick up the pieces after she would think trump loses. it's going to be a very interesting next few weeks. lisa: terry haynes, thank you so much.

next couple weeks ahead of june 27 debate on cnn, what are you looking for most of all? ann-marie: i just want to see how they act. does biden look like he up for the job? this is one of the concerns, and to his point on trump, how does he try to look like potentially he is not coming in super hot and he looks presidential? >> is an actually going to happen? >> yes, it's happening. lisa: there was a real question about that for a while. a slew of fed speak on deck this week. right now, you're watching bloomberg. ♪

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he said: a new leak after a week of record highs. good morning. we took a look at the nasdaq up by 3% versus the s&p's almost one .5% gain. today we are pulling back just a touch. nasdaq still up. really being punished. this is what we have been focusing on. >> we heard it from andrew sheets that bad news is bad news

again. you would not know that from looking at the index. finally concerned about some level of slowdown in the economy. lisa: we are looking at whether they can diverge. or does it have the potential to undermine? in the bond space, we saw a massive rally last week, a huge set of flows into u.s. duration. we are taking a little bit of the back. yields hovering around that mark. 4.37%. a riproaring value. -- rally. a slew of fed speakers this week. or is it what we have seen in the data and a growing concern that this is tipping over?

>> i go back to this idea. we decided this was the year of the bond market but because they were not ready to cut, it is wrong. lisa: how do you fight the fed? you translate this through the channel that has been pretty consistent and dramatic. we see a continuation of that. let's get to that. under surveillance, the far right french leaders saying she will not try to oust president macron. his speaking to the french newspaper, the pen saying she is not calling for institutional chaos and that they would simply

be cohabitation. cohabitation. what does that look like? annmarie: she said she would be respectful of institutions. she has been vying for influence for decades and is on the cusp of getting it. she is on the verge of telling everyone to calm down. having a far right rhetoric but also being able to govern when it comes to the eu. what this looks like will be a disjointed government and can a lot actually get done in that place? >> maybe that is good news. maybe it kind of looks like america. that the worst is not that much because of an action. lisa: maybe america is looking a little more like frank.

disappointing data out of china. the slump deepening in may. a slower rate than forecast. picking up a bit more than expected. what more they can do and frankly what will revive the slump? >> the pboc did not trim their rate this morning. they had an opening from the ecb cutting. therefore they would not have to worry about the currency weakening as much. maybe this is just a pboc waiting for the fed. annmarie: other news out of china that we have been looking at, they said they would start. it is very tiny, but this could be the start of a more heated

trade war. lisa: similar overcapacity type of arguments. it is sort of, two contango. a slow fed speak on tap this week. there are six more speakers tomorrow. richardson of adp writing this, jobs are not everything. labor market has been decent news. we see big changes afoot. i love that you can dig beneath the data at a time when it has been so confusing. can you give us a look at what could be warping some of the levels? question it is great to be with you all today. this is -- every data point

seems important, but it is sometimes a cacophony. we are looking at what we think is important in the economy. that has changed significantly. we have seen shifts in geographic. not, we find that people who actually go the distance for employment make 16% more than people on their own teams. that is a huge change and it is under examined in the market. we are seeing pay distribution changes. it has grown by our estimate five percentage points.

we are seeing occupational changes. what should be an end demand job with all this talk, there are fewer software developers now than in 2018. hiring is in focus. in look strong in terms of jobs but not for pay for these young people. they all feed into the narrative and distribution of the worker. >> that is part of why it has been confusing. so what do we do with the data? should we ignore it or discount it? >> we cannot discount it because we know an important institution is looking at an important decision. that one move will not shake the

economy. whether you lower interest rates by one this year or three full not change the distribution i think that is what we are seeing in the data. this low level of wage growth was really keeping the economy on track and is not here now. it is evolving and that means inflation may go up, maybe higher for longer and the fed always has to be watchful. annmarie: the director of the survey had this to say. were you saying that the wage gains are not on par with the

inflation that middle and lower income individuals are feeling? ? they are seeing are price levels. they are looking at their paycheck but also what is in their basket at the grocery store. as long as there is a disconnect between their take-home pay and how much their basket has shrunk -- it does not necessarily translate to lower retail spending. last april, retail spending was flat. how long, how permanent they are, whether they affect spending will be important. we have seen resilience from the consumer. they have been carrying this economy. it is an interesting situation. what you are seeing is that firms are raising prices.

but the people who actually benefited the most are high earners from higher wage gains. you have this combination, this cohabitation. between high spending high earners and low income workers wearing not able to spend at the same rates. lisa: i kind of raised alarm bells for me because it is atypical. they were kind of in the middle when it comes to how they feel relative to the high-end and low-end. it raises the question for a lot of people. already seeing a beginning of a shift downward in the labor

market? is this a problem for you? whatever it is, you cannot reject people's feelings. it will have a significant impact on the economy. >> if you are seeing a diffusion of bad vibes through the income distribution, it does not spell good news for the economy. i am being like the fed. i'm going to watch before i take on that new lease in my new car. let waiting and watching has an effect on the economy. lisa: some people are thinking that this is the beginning of a

real weakening that we will see in the labor market. do you see that an -- ci? -- see that? >> you are going to have some weakness here and there. that does not mean that it is a persistent diffusion. what we are trying to figure out is when the fed can feel comfortable cutting rates. that does not mean that the economy is bad and it does not mean that they are necessarily good. i think the fed as a whole feels like they are more restrictive than they want to be. >> feeling better about the session, maybe. the idea of everyone is feeling a lot worse, jim beyonca

basically looked and said there has been something strange happening with it. it has really turned. i wonder if you look at it and say the same thing. maybe trump will be elected. it is still the influence but on the others as well. >> we know that it has had a change as well. we have seen for the past two months. i would be hesitant given the changes that we have seen to put too much on the political differences right now, but we know that politics does affect the opinion and does affect vibes lisa: thank you so much

for being with us, always. let's get you an update on stories elsewhere. >> the israeli military is beginning to increase the delivery of aid. it will be in effect until further notice. humanitarian aid has faced major delays since the invasion of russia began -- rafah began. bill gates saying he is money to throw billions of dollars into a next-generation nuclear power plant project in wyoming. the billionaire telling face the nation that has company relies on sodium rather than water.

it could make your energy -- they are on track to start producing power by 2030. the season's first heat wave stretching from the great lakes to the atlantic ocean is set to raise electricity demand and slow transportation networks. reaching 91 fahrenheit on tuesday and steadily getting hotter through the week. some areas could experience the longest heat way they have seen in decades. lisa: up next, is this a liz truss moment? quest strong comparisons versus the budget crisis, is anyone proposing fiscal consolidation right now? it does not sound like it.

lisa: that is coming up next. you are watching bloomberg. ♪

lisa: looking at where markets are. it really climbing to record high after record high. all tied to the ai trend. what we are seeing now, pulling back a touch on the s&p. looking for 6000 and at year-end. the euro wavering around 107. the crude levels, you can see it is lowered by just a touch. we are seeing increased demand due to the heat wave.

annmarie: talking to the ft, talking that they will step in if they see gasoline prices going higher. election strategic petroleum reserves as jonathan would say. lisa: is this a liz truss moment? >> it is not really fit. fiscal policies are worrying. i have heard a lot of questions. those are the scenarios people are talking about. let's have a look at the policies. it does not sound like it. lisa: six we close. the pen is making it obvious that she will not try to push

out. president macron's party -- do you think that the risk is sufficiently priced in? the idea that there could be some kind of shift away from the collective region by a major economy, me -- mainly france? quest it depends on what market you look at. -- >> it is dependent on what market you look at. the euro's west has had a fairly decent move. the bull market is being a little bit different. you have seen a lot of interest from investors but even that, monday, given the news over the weekend, not looking to push

macron out. the initial question, is it priced in? no. annmarie: we could see a hung parliament. do go sideways? >> it is possible. that is why people -- the fact is that we have seen cohabitation before in france. we have not seen it in this set up, whether it is the far left or the far right but they both have fiscal policies that are pretty extreme in some cases. we have been here before. we have seen it in italy. it does not really ever play out. >> if that is the case and it is unlikely to be anything

disastrous, let me put this idea to you. they are simply trying to test the ecb. they want to see if they cap spreads. is that what it is? >> efc more of a reaction that you have in the fx market. part of that is then pushing to see where is the limit? this is a repricing and to some extent, they are quite comfortable with investors repricing because that is part of the market mechanism. if it looks like it is getting out of control than you might expect them to step in my but otherwise, i think they will be reluctant to rush to the rescue.

>> could ecb then act? >> that is not what we are seeing at the moment. a lot of the observations people were making was around the fact that france was trading through other countries. that, in itself tells you something. it tells you that people have reassessed how they are perceiving. i do not think -- this is far more about the fiscal agenda and what will be the policy in terms of fiscal outlook. lisa: you kind of get the sense that maybe the dollar should be stronger than where it is. given the uncertainty and what we are seeing, the idea that people are taking weight loss

drugs and spurring a new boom, you should see kind of a dollar preeminence. why do you think we are not seeing a stronger dollar? >> to some extent, you can see that bias in our forecast. i have not changed it. i still feel quite comfortable with that number. it is really very much a range trade. part of why is there are some questions. there are some people out there who are saying we are seeing some cracks beginning to emerge. i do think the euro-dollar would be hired. political risk on one side. the fact that we have already priced in a good u.s. economic

outlook and the rest on the economic side is to the downside. annmarie: investors are still split. why? >> is a good question because trump himself is so ambiguous. you can expect that she would make a lot of noise but i personally question to what extent he could force. the flipside, there is a lot of talk around america first and how much more aggressive tariffs could be. you can see how on both sides there is a push and a pool. where they are a little over worried is that the long-term

outlook, from the dollar perspective, it is much less of a currency story. lisa: does not seem like she is climbing into the deficit camp. >> it is a market that is wanting to test the ecb. they stepped in for italy's election and you get to this uncomfortable space that if they do that, are they interfering in politics? lisa: it is a christine lagarde moment. a day where we are leading into a league of's -- of fed speak.

it is full on fed speak week. this is bloomberg. this is bloomberg. ♪♪ sandals jamaica sale is now on! with rates from $199 per person per night. visit sandals.com or call 1-800-sandals

>> people are chasing the winners and continuing to feed into it. >> earnings are happening. >> this is a story and they are still not ridiculously priced. >> it does seem like there is a little bit of caution around how much markets could be priced to perfection.

lisa: caution but still upgrading the forecast. annmarie is still back in the hot seat. right now we are coming into a week after straight record highs led by a small cohort of stocks, coming into a number of upgrades from a lot of shops. >> exactly. it is interesting because they are essentially arguing that this is the first inning of nai boom, but it argues that he will have to see more cooperation. is that really the case? is the ai boom going to spread? lisa: what could shatter the confidence that they had as we

hear from dan ives. or is this something that will be fragile? how vulnerable do people feel when you are in southern italy, eating great food? annmarie: with people raising their targets, where else are they left to go? europe is kind of a mess right now. u.k. is on for an election. maybe marine le pen talking about cohabitation is starting to quell some of the french markets, but there is serious concern. lisa: we have been talking about it throughout the morning. keep going because this is what it is. it is a formal term in france

about the party of the president and the ruling underbelly not being of the same party. this does go to the question of american exceptionalism and how much is it that there is no better place? >> is europe exasperation lizzo him -- europe exasperation-ali sm. at what point are we saying it is residing within the u.s., it is just ai? lisa: is that enough? this morning, it is not quite enough. you do see the nasdaq with a little bit of a lift. when i say a little bit, i mean a little bit. you could see the euro gaining just a touch.

remember that we were well through 108. the 10 year yields taking back some of the gains and we saw a huge rally. crude is lower. this is what we have contact head of a slew of fed speak. coming up, citigroup's stuart keiser and whether the winning streak continues. enda curran and kelsey barrow as kashkari urges patients on rate cuts. futures on pause as traders kick off a holiday shortened week. raising equities from overweight to neutral. writing that at this point, it seems limited to a soft landing scenario.

they have less exposure to a recession. stewart joins us now. happy monday. how vulnerable is this market, given how narrow this leadership has gotten? >> a couple weeks ago, it felt really vulnerable. strong payroll report and friendly cpi. the narrow leadership is an issue because i think the market has tried to broaden out the theme couple times this year and it has failed to some degree. i think there is an underlying risk. folks have gotten so bullish that they have tried to apply it to other areas. with nvidia, a huge beast of consensus. that eventually has to run its

course as well. lisa: lori coming out and saying this record divergence, particularly the ai drivers but those staying underweight because there is this vulnerability. higher for longer and soft landing. what you have to see before you start believing again? stuart: it is underperformed by so much. you have to assign a reasonably high probability to really have that stock. it is probably too low of a chance. that outcome has been narrowing because we just saw a slew of data. chicago pmi.

a lot of shots on weakening growth. >> that is what they are talking about. that they can both be correct. tier point of the ai trade widening out, they basically say that for equities to avoid correction, you had to believe that tech will become a more meaningful driver. would you go as far as to say that? >> clearly the ai theme has been applied and it has almost been turned into a macros lori. you are going to get a gdp growth that is higher. there are some big assumptions

being made about not only how profitable the stock could be but what does this do to longer term trend outlook? >> do you buy that? >> we will have to see. the challenge for me on ai, there are always companies willing to generate revenue. it allows kind of a longer runway growth related to ai. companies have been using forms of ai for a while. that annoying chatbot is what people are calling ai. to some extent, that means that we will have to wait a bit. annmarie: for a while, people were talking about broadening

out into europe and now you are seeing a lot of risk premium being built in. >> it spiked massively last week. the u.s. europe trade is tricky from a lot of different directions. europe tends to be smaller cap. you have a lot of factor risks. if you are living here, that is sort of a surprising conclusion to draw. particularly in european banks, that position comes out pretty quick with what is going on in france as well. for europe to work, i think the u.s. has to broaden out. once you are doing that, you

make this valuation debate. it can lead you down that path, but i think it a gradual path. people will be cautious about following the breadcrumbs. it depends on what happens in france. there are reasonable concerns. if you are getting really concerned, some of these liquidity metrics kind of dislocate and you have this latent fiscal risk than if it becomes triggered it becomes a major issue again. for now, we will step back and look. in that sense, it seems like tactically we have probably priced in a little too much risk. lisa: does this basically send

more dollars back to the u.s.? >> i will not make the call, but you need a soft landing outcome to get there. it does reinforce the idea that the u.s. is kind of the safest place to invest. if you want a risk that looks like europe -- a lot of people are just saying that i'm going to express those risks a little more. >> what you think about the sign that liquidity is bad? >> does not seem that way. the last 10 days, we went from trading higher for longer to a soft landing. is it a lack of liquidity or

that the narrative is changing a lot and people are being very reactive about the uncertainty? i think the equity markets are still pretty healthy. it is summer and things have cut down quite a bit but i think that it is reflected in the instability of the market themselves. lisa: i thought there was a fascinating story over the weekend. how a lot of retailers are seeing an increase in the shopping for tight fitting clothing. they have change some of their looks. how much could that be a broadening out trend? at what point do you see that? >> the bigger discussion has been things of that nature, so it is possible that you might have to buy more clothing.

i'm not exactly what people -- lisa: looking forward to the next time. let's get to stories elsewhere. >> european markets continuing their streak amongst volatility in france. from overweight to neutral, citing the risk from a far right majority in friends. but french far right leader did sue the markets earlier telling a newspaper that she will work with current presidents if her party wednesday elections. the number of voters to say that they do not like either major party presidential candidate is at a historic high. the amount of double haters makeup for one quarter of the electorate. nearly twice as many from this

point in 2020. the biggest threat to biden and trump is that voters will stay home or vote for an independent candidate like robert f. kennedy, jr.. a dental movie will open in china and the u.s. simultaneously. disney announced that deadpool and wolverine will be released in mainland china with minimal cuts. previous deadpool films saw months long-delayed releases as they faced scrutiny and censorship. that is you are bloomberg brief. lisa: inflation in the crosshairs. >> over the last three years, there has been a significant increase.

it is something that the biden administration absolutely wants to address. lisa: this is bloomberg. ♪

lisa: coming into a week with incredible price action. lastly was anything but. what you saw was record highs on the s&p 500. down less than a percentage point. what you can see is the euro just a touch stronger. 10 year yields up marginally but not significantly. inflation in the crosshairs.

>> for roughly three years there has been a significant increase in the level. it is rising at a slow, close to normal rate. but yes, americans see that. it comes on top of concern about cost that we are making life very difficult. it is something that the biden administration absolutely wants to address. lisa: the administration ready to respond. in an interview, the top energy advisor saying that the administration will do everything that it can to bring down gas prices this summer as the election grows closer. joining us to discuss is wendy. do we have any sense for the administration to take action?

>> good morning. i do not know if there is a dollar amount threshold, but there is a point where people start hearing complaints where we get reports of people canceling summer road trips or something like that, and that is when the biden administration might respond but that also engenders a lot of republican pushback that will show up in ads that he is tapping a reserve that is supposed to be there for emerging that are not just political. annmarie: we do see in the polls that it is weighing on the american electorate. we heard from janet yellen over the weekend but i'm not sure that is doing the job. >> i do think there has been a subtle shift they are beginning to acknowledge out loud that prices are still too high for

consumers because we see on the terminal and people that follow the news closely will see that the rate of -- rate of inflation is coming down but most voters only know it from the gas pump and the grocery store. they are much higher than when donald trump was president. a lot of people see that as a equivalent to show that he is doing something more about it. did you hear janet yellen say that prices were still too high for consumers? biden's statement celebrating cpi was the first sentence was prices are still too high, so i think they are beginning to shift their messaging. annmarie: we have strong fundraising numbers from the president over the weekend. wendy, he is ringing in the

likes of george clooney, some of the older stars. he is struggling when it comes to the younger. >> de israel hamas war is really dragging down biden's popularity with young voters. they are very upset that the u.s. supports israel so fully. the execution of their campaign against hamas and gaza -- he can show that he is cogent and on top of things but he comes off as really old and he tells dad jokes and the younger voters do not feel like he is on top of what they see as the problems in the world. >> i love a dad jokes, but it is not for me to decide. it is also about the billionaire class.

they have publicly started to back trump where they have stayed out of it before. how big of a blow is that to biden and his campaign? quest donald trump is having trouble raising money because his base are not the richest people in the country. there is a limit to how much they can contribute. either paying for legal fees or campaign funding, that could give him a real boost while biden could get the establishment hollywood money. almost the quid pro quo that is being offered is he is being very straightforward about it. if you find be, i will work to lower taxes for corporations and the wealthiest americans.

that is 180 degrees the opposite of haydn's message. they look at the bottom line, trump may look like a better that to them. >> we have then talking about janet yellen and making up the difference. does the business community not care or are they hesitant on that idea of how this gets done? >> i think that the billionaire class feels like they may be able to get there within reason. he has talked about 60%, 40%, 100%, he is kind of all over the map on it now. there is a lot of work to be done to still get to those tariffs, but the effect will be higher prices for consumers. lisa: thank you so much for

being with us. i have to say this has been one of the most interesting as x. we do not really understand the full effects. the positive effects of fiscal policy domine the effects of reserve hikes. we saw that in terms of this incredible line going straight up when it comes to economic growth, despite the rate hikes that we saw. do you have any sense as to whether there is restraint and how much has to be unleashed? annmarie: it is an election year so no. it is just going to be different. i was struck by the numbers. trump was proposing exempting taxes -- tips from taxation.

on top of that fact that people are also talking about tariffs being inflationary. what does it mean for the fed? it is why it is so hard. it is very different. >> part of the issue is the trajectory that we are worried about. at the current level, perhaps it is not so can. maybe sometime in the future it will be a problem. maybe you need an economic event. you need canada to say this is really bad and step in or is it medicare? it is not action that would happen now. lisa: the issue is, if there is a downturn, is it enough if the

deficit -- these are some of the questions that people have that do not have answers. he pointed at this before. where are they going to go instead? france? >> maybe we want to cohabitate with france? lisa: disappointing data out of china. the market is not doing much. still you seeing that divergent eking out the winds. this is bloomberg. ♪ is often the road overlooked. (♪♪) at enterprise mobility, we guide companies to unique solutions,

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lisa: coming into a new trading week after a slew of record highs. hard to find real action this week as people look ahead. also some key data. the fact that we get retail sales tomorrow is key at a time when people are trying to understand whether the weakening speaks to something deeper or just simply a normalization. even as the s&p is pretty much unchanged, down almost .2%.

how much are we seeing this continue over the weekend? this is not going to change unless some dramatic shift in the economy happened. >> you can have a world where we are going to six k because of ai. both are true because under the hood, it is a record divergence. or something has changed by bad news is only bad news for the rest of the market. lisa: we saw a huge rally as people took a look at softening in inflation data. what you saw with auctions, people flooded into the bonds. still lower across the board from last week, up about the basis point come up about three

basis points. i wonder why this is not benefiting the huge rally in the bond market. why is that not benefiting some of the companies that are more levered to the potential of higher rate? >> they have a lot of floating-rate debt. you need to see the whites of their eyes before you can trade the small caps because we are concerned about financing. if it is just one cut maybe it is not enough. lisa: people are reassessing after last week. a stronger euro versus the dollar. under surveillance this morning, neel kashkari saying that the central bank is in a good

position to take it's time before cutting made. i wonder how much we are seeing that officials speaking out of all sides of their mouths. >> maybe this is why we need to trade data. it is kind of nice to hear. annmarie: i was struck by what he said in the interview about the dollar. he was asked about the g7 coming out and tapping assets. he said the responsibility lies with the u.s. and understanding people who view the dollar and how that is for them to decide. a lot of people say -- lisa: it seeks to a bigger plane

about why he does not see a liz truss moment. frankly, last week, we saw that with a lot of questions around what would happen in france and more broadly. wanted to shift gears a little bit. shares of tesla rising. granted approval to test the advanced system in shanghai. the next step in rolling out the feature. it is so interesting because it comes at a time when tesla is walking a tight rope. the u.s. is blocking out ev's from china and europe is raising tariffs and raises this question of how he plans to play this.

what is this giving you a sense of? annmarie: they want to get the robotaxi on the ground and running. remember that trip he made out of the blue that sunday he went immediately to china and all of a sudden resolve regulatory approval for this? now they are hitting the ground running. he is actually putting this to test. >> is this almost inveterate campaign to say, look how advanced we are on ev's? but look at this. we are letting elon musk test his robotaxis. i did watch european soccer over the weekend. literally everywhere you looked, whether you are watching germany or england, you saw them plastered over everything. china is really trying to use

rhetoric to win hearts and minds. lisa: doing a jon ferro is calling it football because he would never call it soccer. let's talk about china, given the fact that we got some data over the weekend. home prices and real estate investment declines gathering pace. in the current joins us now. there is a feeling that we got a turn. how negative was this considering that production really disappointed? we are not seeing a floor in home prices in china.

>> new investment since 2020. that is despite last month. money made available on top of measures. trying to get the housing market rebooted. it is only one month of course. but economists say it is not enough. the rest of the world has been looking at the sector. it has not yet turned a corner. we did mention more details. speaking to this idea of growth back to where it was and to illustrate how complex things are for china right now. cutting rates despite the growth story.

you cannot really move until the fed makes a first move. it is a pretty downbeat picture. it lends itself to more support, if needed. lisa: it used to be that china's problems where the world's problems. this meant a huge problem in growth. we have seen them more immunized from the chinese. europe, less so, but how much does it really matter? >> the growth baton has been handed to the u.s. the u.s. consumer has been powering global export over the years. china is playing a part.

it is still sector specific. spending in infrastructure is important. looking at the prices of iron ore and the consumer story on the ground, even though it is due to the potential, it is very important for those producing, selling and shipping to china. it has diminished in the overall growth story, but still important in the bigger picture, especially when it comes to trade. >> we had the pboc today and they did not trim their rate. there are concerns that we have not yet the bottom. >> the first point is to they need shorter-term interest

rates? that is a domestic china story. it is also the external story. it comes back to washington dc. it is a view that china does not want to cut rate. there is a view that they are waiting for the fed to move first. you know better than i that they may not move, but it is an example of how they are looking at the dollar and the fed story. once a hold off and see how they can bring down meets when they can. annmarie: pork imports going into china. he did he think this is a fresh iteration of a trade war between the european union and china? >> i think the economics and the politics of it -- yes, china is

europe's biggest export market for pork, but it is a fraction of overall trade. those volumes have been in decline. it will not do much for china's pork import market. the economics are less significant. it is significant. it is an example of china saying, we are not going to take these measures lying down. we can respond as we want to. it is in response to the eu probe. the trick for china is that they have been trying to court europe. they do not want to be seen as overly harsh on europe. they are trying to court both berlin and paris. they have been perceived as

going harsh on the u.s.. especially with the business community in europe. they want to be seem to respond but they do not want to be necessarily isolating them of from europe either. lisa: thank you so much for giving us some insight. here is your bloomberg green. >> the heat wave stretching from the atlantic ocean is sent to raise electricity demand and slow transportation networks. set to reach and get hotter throughout the week with humidity making it feel closer to 100 degrees. china has launched an antidumping. it is the latest in escalating

trade tensions. china is the biggest overseas market for pork although exports have fallen off during recent years due to low prices. the probe is seen as the counter to similar investigation being conducted by the eu, looking at a range of industries and imposing tariffs on cars starting in july -- starting in july. a second u.s. open trophy over the weekend. in a final wild hour of golf, mcelroy bogeyed three of his last four holes. an incredible bunker shot on the last hole, making the cut to take the title. that is your bring brief. lisa: investors bracing for a loud week of fed speak. >> i would like to see a few

more months of inflation report similar to what we guy last month. i would like to see that continue. lisa: that is coming up next. this is bloomberg. ♪

lisa: we have had a lot of action in the markets. the s&p was up one point ask percent. nasdaq composite was up double that, 3.2%. that really speaks to the divergence that we see in. investors bracing for a very loud week of fed speak. >> i would like to see more

inflation reports that are positive in the sense of what we had last month. i would like to see that continue. >> if you said there would be one cut, which is what the median indicated, that would likely be towards the end of the year. lisa: all set to speak today. tomorrow he will get details sales and tomorrow another round of jobless claims. fed speakers will deliver some utterances. the believer remains that inflation and they were market datable support rate cuts later this year enhancing income flows. kelce joins us now and this has been one of the ultimate tensions. at what point do we see the soft landing possibility that we hear is getting more narrow at a time when the data seems to be weakening?

>> it is really going the way that the fed would like it. inflation has been improving over the last two reports. they wanted to feel comfortable. q1 was the aberration and not the start of a trend. on the labor market society, it was part of the debate. but take from all these labor market mills? you have the magnificent strength of payrolls and the sneaky weakness. the reality is probably somewhere in between. we are circling back to this idea and does going to be enough for them to reduce policy restriction a little bit, but nothing is falling off of a cliff. lisa: the biggest debate was

labor market weakening and whether it was the start of something more protracted. we saw the difference between large caps and small caps. it was interesting, given the rally into duration, putting aside credit worthiness and some of the refinancing that we have already seen done. does it concern you that all the good is up when it comes to spreads and if you want it, it is a duration play at this point? >> spreads are tight. it will have to come from some of the lower quality, what is keeping some of the yields in the index right now. the thing i found notable is that the correlation between correlation and risk is turned the right way because inflation has been coming down, as

anticipated. how do we build portfolios? how is it different than three months ago? we up the corporate fundamentals were strong get think the difference now is trying to find those hedges in the portfolio. we have seen mixed data. how do we keep collecting? we do need to figure out how to build yield but also look at the hedges. the one that looks most attractive to us right now would be yield curve steepeners. at the labor market is weakening unexpectedly in that household survey, it is the start of something more material. on the other hand, the risk is

election. >> is this a steepener to your point about what the economy is doing? where is that happening? >> normalization needs to come from the front and. that is where you will get it. one of my long-standing beliefs has been that the yield curve will be inverted for longer than anyone expects. it has been about 21 months to two years for the curve has been inverted. to me, i think that yield curve inversion and probably persist until the fed is cutting in earnest. annmarie: when you say risk, what is the biggest risk? >> it is difficult to handicap right now. that is why we call it a risk.

there is the stimulus part of it , the concern that there will be less focus on managing the deficit, but i think that the tariffs side and how we approach foreign policy is also an important risk. i look back at when trump was president and what happened the last time we had this war? it really was not inflation that was damaged by the tariffs. it was global manufacturing sentiment and the growth impulse , so i think we need to be aware that it is not a one-sided story. i do not think it is all about the risk of higher inflation. there is also risk on the growth side. annmarie: is there any daylight between biden and trump? >> this is when it gets tricky.

when we were building our scenarios, you cannot just have trump and biden. you need the house and senate scenarios. that is really key right now. but then you're deficit forecast, consider the tariffs and the tax cuts. will they be sunsetted? will they be extended or will they down in the sense that it will actually be stimulatory? there is a hurdle for additional fiscal impulse beyond what was already venting. lisa: before november, we have to get through this week. friday we get the latest manufacturing data. what is going to be most important to understand so that we are still on track? >> i'm going to say something

that is none of the things that you listed. i remember the last time that we were on. they were talking about how the soft data is talking about the economy being terrible. it is ultimately what is most important for the fed. again, we saw that small tick up in claims. i do not think it means much anymore. we want to watch it every single week. it can reflect a turning point, maybe not this week, but that is what you want to watch. lisa: how many weeks before it is a trend? when do you see that it is something more concerning? >> i look at the nonseasonally adjusted data and i look at the path relative to the recent years because there is a trend.

what i need to see is that the claims numbers are running off course relative to the path, the seasonal path proclaims. more than one week, a number of weeks where it is clear that we are running out, running off the path of the seasonals. lisa: the playbook, when you see that moving out of risky credit? >> the fed has been clear that they will shift if the market weakens. he has been very clear that the framework is hold or cut. what brings forward cuts to be more urgent? diane side -- downside risk to the market. that is what will get the fed to move. lisa: always a pleasure having

you here. it raises the question. the fed plate. is that what people are betting on with a whiff of weaker employment data? >> do you need to get out of risky? the correct answer is, no, you do not. it means that the fed is more likely to take action and the fed put comes back and they can continue to grind higher. annmarie: it feels like with the jobs market, if they see one bad report, we could see a shift in the fed. lisa: especially since we were talking about how jay powell noted that the payrolls report overstated the labor market. coming up, talking with lindsay wagner. -- talking with lindsay. you are seeing markets treading

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♪ >> we've got a broad story where the economic fundamentals look good and inflation is coming down. >> i think what the fed signals

was a balanced message. >> we are seeing slowing growth but not such severe slowing but monetary policy makers seem like they need to act. >> there is not a lot of concerns about the u.s. economy going into recession. >> that's telling you they will cut rates even if the labor market stays tight. they will just cut a lot more. there is a support network happening there. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. ♪ lisa: a key week of economic data kicking up tomorrow with retail sales. today we are left trying to understand the narrowness of the rally we saw over the past few months and how it is getting narrower and narrower. good morning. anne-marie is back in her seat after her tour of southern italy. she was excited to be back. dani burger is here as well. jonathan ferro is not here. he is on his tour of duty

somewhere beautiful with great food. we are looking at a market right now that is basically trying to find direction after -- i can't emphasize how narrow the range is and how dominating this entire rally has been just from an incredible riproaring jump in ai. annmarie: it's interesting how shades of this ai have changed. dani: it's ai plus everything. ai would be and consumers duck-soo everything could rally off the board. it's a change back to maybe adjust is nvidia being the winner or maybe broadcom gets a slice of the pie but the flavor has changed. lisa: vulnerable to what's? is it politics or does it matter what fed policy is to nvidia? they don't need to borrow money. they've got a cash balance and t-bills that will only do better if the fed remains on hold.

let's remind everybody that you were in southern italy and enjoying yourself area you did break a lot of news and it was during a pivotal time of political developments and political risk coming to the fore. how much do you hear about this as something that people thought of as the beginning of a number of political surprises? annmarie: domestic politics loomed large over basically everyone there but giorgia meloni, the host and it was her show. but concerns about france are starting to quell the market because maria le pen is talking about she's not here to ruin institutions, we can cohabitate with emmanuel macron but you look at potentially that once the risk is over in europe we get more direction where they will be, then it becomes the united states. looking back of the data we got friday from the consumer sentiment and it feels like we are seeing that halloween out of the middle class. this economic story that biden

potentially needs to come out and try to sell the data to the american people. consumer prices, they are not feeling it. lisa: you pointed out the university of michigan sentiment survey. it's the fact that the middle income consumers are dealing the same as the lower income consumers and how unusual this is. usually, the middle feels the middle and you have the high end and low and how much does that speak to retail sales coming out tomorrow? dani: at some point, your feelings reflect on much you spent. jimbianco says the change we are seeing our middle-class democrats to believe trump will be the next president so their perception of the economy and how they -- their future standings will shake out, that's what we are seeing in the new survey. that doesn't point to great news for biden either. either people are unhappy or they say that trump will rent for -- will win. lisa: if you have chips, you are

happy and that's driving the market up. the s&p is doing nothing but attached lower while you have the nasdaq up. the euro getting a bit against the dollar after a difficult week last week. there is a shift to some far right types of candidates particularly in rants where they had a snap election. it's up about three basis points right now. grew oil is bouncing around. it was lower and now it's up 0.3%. watch this space ahead of that very hot snap in terms of electricity usage. coming up, goldman sachs on a path for a september fed rate cut, tech dominance in equities and stephen major of hsbc on the global macro outlook and why he

sees a riproaring rally ahead for u.s. treasuries. a busy week of fed speak as people look for beyond the dot plot. lindsay joins us now. i'm. is this independent from the fed? >> we learned a lot last week area heard for a couple of months now that the fed needs to feel confident and inflation is moving in the right direction and if they become not competent and labor market, they could go ahead and cut. what we learned last week is if you tear apart the headline

which is the median dot went from3 to 1 so where people are hanging out, that was -- that made the math shift down on average to 1. there are a lot of ways we could get to two cuts this year. that would probably be september and december. lisa: you talk about the importance of listening to fed speak and we have plenty this week. it's pretty much every day where you get 1-3 fed speakers. who do you think is most important applied from jet -- aside from jay powell himself? >> he's probably most important but it's not his soul decision. it will be important to hear the difference out there but more important is what continues to happen with the data. we had three really hot inflation points and then we had more and this past one was cool. it was really cold in many ways

despite the heat wave we are about to embark upon. we need to see the data continue to go in that direction in the bay thing that didn't move in the cpi that wasn't is oer. very stick d -- very sticky part of cpi can is usually a year or so of a lag. that could be happening anytime now. we've got three prints before september and there is a case that the fed goes in september. we are talking about maybe 25 or 50. risk assets are just cruising through this whole thing. they ignore the volatility. that seems to be a bit strange. when we look at where valuations are, we are findings reds like everybody else, valuations are on the tight end of the range. everything needs to go perfectly for that to continue to make sense area last week, we had a ton of news but we got the snap

election in france and we've seen a ton of volatility and kindness in rates. that needs to be a heads up to everybody in the u.s.. you are buying assets right now at the tightest spreads they been in a decade. there is likely to be volatility around our own election as well. it would be naïve to think we don't see some of that years of we are looking for pockets of value if they emerge through the volatility but we don't believe france is a contagion but the issue should be a contagion -- should be contagious. dani: remarkable to see the vix dip below 12 at the strengthen valuations have been those big ai plays. it's been nvidia and the rest of the market equal weight felt last week which was a record divergence. why would that be the case if we are going to get a cut in september? why is that the case of things

are slowing and not slow so shouldn't the market be playing along? >> the rest of the market is trying to figure out if this is robust growth that we keep coming up with explanations. is it ai everything? is it the labor market is more productive? we have this immigration number that is enhanced. cost ailey looking for ways to justify would's going on with stocks. there is a look through to everything. put bad news on the side and keep buying. we are saying take a moment and this thing happening in france is important for remembering and valuations are really important. your entry point counts and we feel like there could be some opportunity to have a better entry point in fixed income despite the fact that yields are high. the big takeaway last week as you don't want to be underweight bonds. on the back of volatility last week, look at what did well.

annmarie: you say look at the volatility it's part but is it overdone? you look at the polling it looks like we will get a hung parliament in u.k.? >> i don't think it's overdone. france was trading very tight if you look at comparison to germany and we are now at a level of spread between the two that makes more sense. it's very different economic outcomes forecast that we have. we've gotten to something that makes a little more sense. it's not an egregious move, it's not a massive move but back to the tight spreads in the price per -- or perfection across the globe. important to remember something like this that a ripple in the water could move things in there is an asymmetry when you are buying at the tightest levels. lisa: looking for better is code for we expect to selloff area this is another way of saying we are looking for declines in valuations because it looks too perfect for us.

what is so vulnerable right now? >> we didn't talking about the impact of higher for longer. when you have the higher cost of capital, you will see certain capital structures that don't work in atwood begin to see all the tell he ripple through the market, it is those capital structures that will be in the most pain. that will probably lead to some opportunity elsewhere. for us, it's not see something that's distressed, it's if things start to trade in sympathy and widen, that's where we want to step in for things we believe in him a fundamental perspective. lisa: you said you don't want to be underweight bonds and this is duration. you don't see that risk despite some of the politics of the moment in benchmark u.s. rates a time where political risk is just a european effect. >> we think bonds will do would bonds are supposed to do.

what is really the role of bonds in a portfolio and do you need them? if stocks take off, i'd rather just be in equities. people want to be nvidia but they don't want to talk about the two year. you want to have bonds in her portfolio because they protect you. when you look at what happened in france, look at how much germany rally. get a ballast in your portfolio of safe haven all the assets and they will benefit you and if you see some inefficiencies begin to arrive to in the spread markets, we want to step in their. lisa: thank you so much for being here and great to see you. let's get you an update on stories elsewhere. here is your bloomberg brief. >> european markets are edging higher despite continuing political volatility in france.

the citigroup strategist downgraded the region from overweight to neutral citing the risk for potential far right majority in france in the upcoming parliamentary elections. the french far right leader marine le pen told a french newspaper she will work with the current president if her party wins the election. she is not calling for institutional chaos. bill gates says he's looking to throw billions of dollars into a next generation clear power plant project in wyoming to meet growing electricity needs. he said his energy company relies on pooling rather than water which is believed to be both simplifying the process well also being safer. it can make nuclear energy a source of low-cost electricity. he said terra power plant is on track to produce power by 2030. pixar's inside out2 is

hollywood's best debut since barbie. movie growth $155 million of the box office in the u.s. and canada besting dune part two is a movie with the biggest opening weekend of the year. the film also notched a record inside out2 hall globally is the biggest opening weekend in history for an animated film. that's your bloomberg brief. lisa: thank you so much. we have to get annmarie to a movie theater. up next, the morning calls coming up, this is bloomberg. ♪

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is manufacturing and services act of any data. not a lot going on right now, the s&p 500 has crossed the 5500 mark. the nasdaq is again an outperformer even as small caps underperform. let's take a look at morning calls. goldman sachs upgraded toll brothers to neutral. there is a price target of 124 dollars and analyst expecting higher revenues and outperformance in new home sales. next up, bank of america raising its price target for micron. the firm expecting the chipmaker to benefit from increased requirements to support artificial intelligence and personal computers and smartphones. best buy was upgraded with the new price target. analyst expecting electronics cycle help by innovations in ai. sam stovall is also looking closer at the tech trade saying this --

sam joins us now and i have to say, this is the quote of the morning to me given the fact that this is the ultimate existential question. is this u.s. stock market incredibly vulnerably because of the dominance of the big tech names or is it incredibly resilient because of them. what do you think? >> good morning, i think it is resilient however, i believe we are headed for a second decline it this year. based on my historical work, everyone of those top 15 first quarters ended up with a gain for the entire year even though many of them went through declines of 5% or more and the average annual increases exceeded 20%.

when i look to the s&p 500, i see it trading at a 32% premium to its average 20 year pe. i look at tech at a 68% premium and i look at tech at a 21% premium on a relative pe basis. i wonder if we've gone too far too fast and need to reset the dials in order to maintain this longer-term upward trajectory. lisa: you think tech will pull back a bit as the rest of the index may be hovers where it is now and that will drive the index levels 5% lower? >> i'm saying it's going to decline by at least 5%. we will probably experience a mild correction. the 4800 level on the s&p is not out of the question. if we start to see people take profits in tech, it's not knowing to be just tech alone.

tech and consumer communication services are the only two sectors that are outperforming the s&p 500 since we had about 68% of the s&p 1500 industries trading above both their 50 and 200 day moving averages. today that number is down to 38%. while market has been higher and raised by tech but also communication services. dani: it's been a long time since we've seen a decline in the u.s. stock market. bank of america called at the pavlovian urge to buy. what needs to change? valuations of not spooked investors of what change allows that selloff to happen? >> we did experience a 5.5% decline from march 28 through march 9 teen and we lost everything by mid may which is

not surprising because of the 64 declines of 5-10% since world war ii. it took us only 1.5 months to get back to even so that's why i typically say you are better off not allowing your emotions to drive your poet folio decisions. -- your portfolio decisions. the 10 year yield crept higher causing investors to worry about where would end up area they also worried about the fed not likely to cut interest rates three times as the march dot plots of indicated. most recently, expectations were for 2 yet i found that investor a bewley and's was helped by -- ebullience was helped by the dots. how long will the fed maintain higher for longer and does it increase the risk of race asian -- of recession. dani: what are you expecting this week from all the fed

speak? will they be more dovish given the fact that the data potentially may mean they will cut before december? >> neel kashkari's comments are what he's been saying for a while which is more of a hawkish tone. other commentary could take the other side as well because the fed wants to remind us they are data-dependent. at the same time, they want to let us know they are independent of political pressures. every election year since 1992 except 2012 had the fed either raise or lower interest rates in that election year. many times it occurred in september. i don't think the fed would be averse to cutting rates if they felt the data supported it. dani: utility -- you still think annmarie: september remains in play? >> when i look to the cma forecast model, i see we are looking at 838 percent

indicating we will probably stay at that current level. obviously, 62 percent are implying that we will probably see a cut in september of either 25 or 50 basis points. that moves up to 80% for the july period and even higher for december. i would tend to say that the chances are increasing that we end up seeing a cut sometime this year with possibly two on the table. lisa: last week we saw a massive rally in u.s. government debt. it was a 20 one basis point decline in 10 year yields to end of the week it why is that not igniting a rally? i'm thinking of small caps in particular. >> the reason -- one reason why the yields have been coming down is because the prices have been

going up because interest rates look more attractive here in the u.s. than overseas. that's attracting foreign investors. we certainly are looking at small caps now trading at a 31% discount on a relative pe basis at 25% discount. i think it's because investors want to wait until the fed actually cuts rates because of the potential of a rising risk of recession since the smaller and mid-cap firms are the ones that will take it on the chin more so than large-cap should we end up having something deeper than simply a soft landing. i think investors are playing it close to the vest and focusing almost exclusively on the larger cap growth universe. lisa: sam stove all, thank you so much. it seems the uncertainty on the macro front has left people saying the only certainty i have is that people will keep buying nvidia. dani: i think it's a good question. we are open k to say the animal

spirits will be woken up to say? why can't we say there will be cuts and weakened by small caps? it seems odd to me that this is the one place we are saying we need to wait. lisa: especially in a time when people say if you get this adoption, it should and of it productivity across the board. maybe not yet. coming up next, busy we go fed speak and key economic data. we are looking ahead to it all with stephen major and ey. retail sales tomorrow we will talk about that coming up in terms of understanding how much ammunition some of these consumers still have. this is bloomberg. ♪

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lisa: heading into a week of economic data led tomorrow by retail sales. we are getting some coming out heading into the s&p futures around the 5500 level and not doing much. nasdaq futures have some modest gains, the russell underperforming yet again as is been the theme with a record divergence, down about 0.3%. we are seeing a u.s. economy that has been generally trending lower but not week. can we get that again with empire manufacturing?

in the bond market, you can see yields a little bit higher, grinding higher as the session rose. the two year yield is 4.73% and the 30 gilt yield is at 4.40. at what point will people still look at bonds is a haven trade? last week, it's very much the place where people go for safety. lindsey rosner set a moments ago that's the trade she likes. dani: it's good to like you as bonds again. the selloff last week means that the french pullback from the u.s. repo market. we saw a dearth of liquidity last week and that's way bonds moves -- moved as much as they did. it's just another roundabout way of saying french politics affected the u.s. bond market. lisa: we will look at that

affecting the currency as well. the euro is trying to retrench a little bit after last week real damage done to its valuation in terms of weakening versus the dollar. some firming up today but front and focus area goldman sachs and evercore boosting their year and forecast for bonds. julian emanuel at evercore saying 6000 from 47 point 50 and receives across the board were people say just because it's a thin rally dependent on a few names doesn't mean it will stop. annmarie: they think it will continue. the goldman sachs call stated some other projections. it looks like they have a number scenarios where for goldman sachs, the initial all is the base case. dani: i'm surprised we are not

hearing more of the david einhorn argument that something is broken and these companies keep getting bigger because there's too many insensitive buyers. they say is the retail buyers and hedge funds just biontech and that something is fundamentally different this time. fundamentally ok companies this time might not catch up because the buying base doesn't exist anymore. lisa: it also doesn't have the same base the actual businesses have in the same way google and microsoft are the main buyers of nvidia chips. technological shifts will be on the docket as the campaigning season heats up with a biden campaign raising re-million dollars after a star-studded fundraiser in los angeles over the weekend. he also kicked off a $50 million ad campaign ahead of the debate

with donald trump on june 27. trump is scheduled to meet with speaker johnson at mar-a-lago later today. annmarie, fresh off your tour of europe heading into this debate, what are you watching in terms of tactics and trying to get some of the double haters back? annmarie: one in four voters say they don't like either candidate and they are trying to win them over. this $50 million ad blitz from the biden campaign is called character matters. trump and biden on the debate stage both want to basically define the terms of this election and try to get one of those for to come over to their side. lisa: that's the big challenge right now and what's the potential political risk? it didn't matter and france. how much are people gaming this out and how much are they trading on it?

my sense is not that much yet. dani: the only place i've seen it is the vix. there is a slight kink around where the election is but perhaps the only reason that's the case is because we know who the candidates will be so we priced it in earlier. otherwise, we don't see it and it's not just france. we learned the lesson with mexico and india and again over -- and again, we are not prepared for elections. lisa: we get a lot of fed speak this week with comments coming from three today and six more tomorrow. we will also get retail sales data. michael mckee is with us now. it was the quiet time and now is the loud time for the federal reserve. what are you watching to indicate where the bulk of the fomc is at a time of incredible diversions? mike: i don't know that we get a complete view of that because they will be data-dependent until the next meeting which is not until july 31.

we got empire manufacturing today which is down to -6 but it was negative 15.60 that still positive. new orders were better. we get this mixed message from all of these data points. it's hard to know what the fed will do. we have a lot of economic indicators. it's retail sales the matter this week because it will give the fed an idea where consumers are and whether the economy is weakening. the atlanta fed gdp now doesn't show signs of weakening. we will go through this on a regular basis for the next month and a half while we wait for the next fed meeting. dani: is there any expectation that retail sales might filter through? mike: most economists don't think so. we had a decline in the core retail sales last month and now

the forecast is a goes up by 0.4% in the headline goes up as well. this is even with gasoline prices going down because retail sales are in dollars, that's a hill to climb that economists think they will do it. we've seen reports from the various credit card banks that consumer spending has been holding up. annmarie: even if we get a weak retail sales print, that will not be enough to move the fed, is it? mike: nop, the fed will look at them flight -- inflation indicators and look at the employment indicators. we've already got bond market and was complaining about the fact they have to work on july 5 because it will be the jobs report but that will be an important one because it will set the tone for what happens july 31 that sets us up for whether or not you get a september move. lisa: thank you so much.

stay close, i'm sure we will speak plenty this week amid the data and fed speak. we want to dive into what to expect for the remainder of the year and welder -- and whether the balance of risk as shifted as we see a disinflationary tilt to more data in the united states. stephen major joins us now as well as lydia basur. in terms of what do you make of the rally in bonds over the last couple of weeks in particular and what this signals about where the balance of risk is at a time when the fed kind of had a hawkish tilt last week? >> we've seen a softening and economic data. i think the narrative has been shifting toward the economy slowing more than what was anticipated earlier this year when inflation was on the uprise. in terms of the economy, we are seeing a gradual slowdown in economic activity, the fed last

week was somewhat more hawkish than expected. coming out of this meeting, there is a sense that they have lost some conviction that inflation is moving back sustainably toward the 2% target. when we look at the next couple of months and the coming data you were discussing, it will be about rebuilding that confidence and saying it's less than subquestion all -- less than sequential inflation. lisa: what did you make of less we consider when you saw a locust tilt to the fed and you reconfirmed in your outlook a belief in a riproaring rally in u.s. government bonds that could potentially take the 10 year yield to 3.5%? >> i'm glad we kept the bullish conviction. the news flow coming through on the back of these elections you were talking about in the prelude to this interview, i

think it overwhelms the impact of the cpi and payroll releases and the fed speak. i think it was yourself for what dani spoke about was chaos and you mentioned france and mexico. there is a lot of commonality here. these are spread markets that have a lot of nonresident buyers behind them and they don't respond well to volatility shocks. in this case, you had election results due to the fiscal challenges and focus. bonds are not like that. if you are going to flame to quality and globally, it's knocking on. i think you got this going on before these carry trade's. it's a bit of a bold shock.

dani: what happens when that meets u.s. political instability? will there be confusion about the results on the policy, where does that money go? >> at the start of the year, everyone was focused on how many elections there will be this year. it's taken to the halfway point the indian result was not a big shock in a way and it's a great domestic market. mexico and france are more international. i think everyone watching the show knows there is a lot there and they know what the policies are of the presumed candidates. it's not like there's a big unknown out there. it seems that part of the reason

the data is cooling is because the fiscal impulse is not beginning to fade. all of it should just recognize that whoever the president is next year will have the troubles of eight years ago. whoever's there will somehow be restricted in what can be done in terms of the future. i don't think the u.s. is in that bad shape fiscally. i'm talking about relative to other countries and considering the acid-base. the growth of gdp has really helped. of course, if the economy is cooling, then you have more challenges. i don't think the u.s. treasury markets to be so worried about the debt. dani: what about from economists point of view? it doesn't matter who's in and you know what that fiscal situation is. do we need to start worrying

about the deficit? >> we all can agree that the fiscal policy is on the table. we are looking at interest payments on the debt, 3% of gdp is double the pre-pandemic rate. i don't think this is threatening the outlook in the short run but it does pose an economic challenge in the long run and pushing interest rates higher and inflation can weigh on growth and it also means there is more for space in a downturn. annmarie: when you say the u.s. doesn't look so bad, is that because relative to what is going on in the rest of the world or is it because you actually think the u.s. is ok when it comes to its fiscal trajectory? >> it's a compile asian abode. i don't know about this saying but is the least dirty shirt.

i look through my wardrobe and trying to find the cleanest and brightest white shirt to wear. it's a bit like that. the u.s. debt stuck as a percentage of gdp in public and private sector since the 2008 financial crisis, it's gone up but it hasn't gone up as much as some other countries and it's also been helped in the u.s. by the fact that the household is involved. on a relative basis, it looks not so bad and on historical basis, it's oh k. also the fact that is the strength of the gdp and the tax take. looking forward, u.s. has incredible taxing ability. as we know, it's a question of who wins. annmarie: and it's a question of policy. there is a new report talking about it trump's proposal to tip

s from taxation, it could be $200 billion added to the national deficit? are you expecting there will be a lot more debt added to the u.s.? >> that's a big number you put out there. there will also be money coming in on the others. there is money from tariffs for example. we just don't know what the outcome will be and it depends whether we have a sweep or not. i think the fiscal outlook will depend on whether either candidate ends with a sweep. it's tricky. in terms of probabilities, at the moment, you wouldn't go down a baseline or base case of there being fiscal irresponsibility. i think that is a risk but it's not the baseline. at the moment, i look at u.s.

treasuries and i think they are priced appropriately given where the policy rate is. if the policy rate starts coming down, it will change fast. bond yields don't go up because of a lot of supply it seems some people want to inject additional term premiums because of the supply. i think it's already there. dani: do you agree? >> looking at the election and the implications of the connie, there is a lot of uncertainty surrounding the postelection landscape. when the economy came back, we were focused on fiscal policy and the jobs act in particular and the expiration of the tax cuts will be an important issue and will we fall off a mini cliff?

there's also it's happening on the trade front with the potential for escalation in terrace. we are already in an environment where inflation is still elevated so seeing more inflationary impulse and potentially some hindrance to growth wouldn't necessarily be desirable. that's especially of the fed embarks on easing cycle. lisa: both of you are talking about yields going lower in the face of disinflation as well as the u.s. being a haven for a lot of dollars. at what point do lower yields boost the economy, booze the economic activity in the united states and have a for self reinforcing cycle which indicates weakness that would be negative for the growth prospects? >> when we look at the economy today, we are looking at a slow down underway. we seen salaries balancing the

labor market and some softening in indicators. we're looking at consumers being more cautious with spending and investment softening and conveying more concerned with their spend during -- the spending and hiring. in this economic environment with signs of softening in the labor market, we expect to see the recalibration monetary policy happening toward september. rates will start to gradually move lower and away from that restricted policy. by seeing those rates moving lower, we should ensure that the economy doesn't slow down materially. we expect to see growth falling below trends in the coming quarters but not expecting to see a retrenchment in economic activity in the fact that the

fed will embark on a tightening cycle should allow for that cycle to continue into 2025. lisa: some people would say this economy has been less sensitive to rate hikes. why would they be so sensitive to rate cuts? >> that's a fair point. you have to be careful with this one. i think people are expecting very modest rate cuts. that's all conditioned by what the fed has just told us to and dot plot. i find a bit of an echo chamber around the mainstream forecast. they are always one standard deviation from the fed and it strikes me that it's probably true that the economy is not that sensitive to rate cuts. when the rate cuts,, i think they will be more than what the market is pricing in. cutting 25 basis points will do anything so when the economy is

really cooling and if unemployment is going up at a faster rate than the fed forecast, that could be a scenario to think about. then rates will be cut quite fast. it's not just about the u.s. cyclical economic data. it's about the structural factors, the huge stock of debt and about what's happening in china and europe and ultimately, u.s. rates will get knocked down but -- like everything else. lisa: both of you, thank you so much on a week where and we will talk a lot about the fed and rates. let's get you an update on other stories. >> president joe biden will host the nato secretary stoltenberg in the oval office after g7 leaders agreed to tap frozen russian assets to help aid ukraine. over the weekend, the ukrainian president failed to broaden

global support at a summit in switzerland with bricks countries. they all declined to sign a final document of support. the number of americans who say they don't like either major party presidential candidate is at an historic high. the amount of double haters as they are called makeup one quarter of the electorate. that's nearly twice as many as at this point back in 2020. double haters were a key factor in donald trump's upset win in 2016 when they broke for the republican candidate over democrat hillary clinton. the biggest threat to biden and trump is that voters will stay home or vote for an independent candidate like robert f. kennedy, jr.. for the first time ever, a deadpool movie will open in both china and the u.s. simultaneously. disney announced that deadpool and wolverine will be released

on july 26 and mainland china with minimal cuts. previous dead ball -- deadpool films on no release or month long delays as the r-rated movie faces scrutiny and censorship from china's film bureau. that's your bloomberg break. jonathan: up next, setting you up for the day ahead, you are watching bloomberg. ♪

lisa: taking a look at where markets are as we are about 35 minutes away from the open. it's not doing all that much. counting down to the opening bell, here is a trading diary for the week ahead. fed speak today and retail sales tomorrow and a host of fed speak

wednesday with u.k. cpi and another round of job claims thursday and friday, global pmi data. it had a significant impact on the market so people who say ism think again. for final thoughts, you were key on cohabitation but there are other things you are looking ahead to other than french politics. what are you focused on? annmarie: we are looking at politics stateside as well. the g7 was clouded by domestic politics and biden comes back and has of all on campaign and went to a campaign in l.a.. it's how they want to frame this election and who comes up better doing it. interested to see what retail says tomorrow. where is the consumer now? after the report ready when you see the middle class saying they feel more like the lower income class structure, that's a problem for this campaign. lisa: there is also the issue if

there is weakness, what can happen in response to it in terms of fiscal in paul's given the fact that there is quite a bit of debt. we've had a whole host of potential important aspects this week. dani: i think it's how the fed speakers react to the data we got. the reactions so far has not been that great. they don't sound like people who would have change their. lot. we will get the data and the loud period but to they change their town? stephen major said there is more than this market thanks. coming up next more guests and all talking about the key question -- if the fed cuts will

they cut a lot and how flat on their back are consumers? this was bloomberg surveillance. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

>> from new york city, for our viewers worldwide, i am matt miller. futures doing a lot of nothing. waiting for the data. the countdown to the open starts right now. ♪ matt: coming up, u.s. stock get more bullish after evercore and goldman sachs boost year-end targets for the s&p. traders staying cautious. in europe, they digest comments