>> it does feel like for the first time in a while the market has been attuned to downside risks and growth. >> the economy is showing signs of deceleration. >> i do not like the story of the fed and i do not like that the economic story -- >> we could see a continuation of downturn momentum. >> >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: it is nvidia's world, or is it? this is bloomberg surveillance. annmarie hordern, dani burger. jon ferro off until thursday. we begin with the question around nvidia. yesterday we saw a $430 billion

selloff in shares of nvidia. huge declines, or are they. how much is it nvidia's world? dani: this is probably one of the most constructive selloffs we could have imagined for nvidia. the most ever for any stock selling off but the s&p is only down less than 1% for those days. it feels more like a rebalancing , shifting into some of the losers. it is a technical thing, not a fundamental thing. lisa: i have a lot to say on that. i do not know if i am totally on board considering there's 140% gain in shares including the selloff in the $400 billion of market cap is greater than the market cap of johnson & johnson, home depot, bank of america, as well as netflix. there is this question. we will get to it. we will debate this the entire show. it raises the question of how much people were pushed into

nvidia because there was no visibility of anything else given political uncertainty. annmarie: when you have jp morgan talking about the shrinking's air -- the shrinking share of stocks and you start looking at is this the summer of malaise as greg peters calls it. if you are an investor and you think november -- politics of become a big issue this week because the debate kicks off the season -- if you think november 5 is a corn toss, why would you do anything other than hunker down right now and that is what people will start to do. lisa: it raises the question of what is hunkering down? there are other stocks that have offset the decline we saw in nvidia which raises the question is it any company that can deliver cash flows. dani: if it is month end rebalancing, that does not mean people like the small caps. it is a simple shifting because they have to. certain correlations got out of

whack. the question is if you are worried about election risk can you buy some of these smaller companies? can you buy duration if you are worried about the fiscal deficit? i think you have to sit on your hands to some degree. i'm not convinced what we are seeing is any clear trade. i feel like it is technical. lisa: that is a fair point and that is the reason people are doing technical analysis. the cio of new been will coming on the show later pointed out by the by the end of 2024 more than 4 billion people, close to half of the world's population willow participated in national elections during the year. the implications of this are dramatic and it is so hard to predict what that will be. annmarie: it is hard to predict but now people are starting to focus on policies, especially in the united states. axios is leading with a letter

from 16 nobel prize-winning economist, their headline is trump's policies will be an inflation bomb. you are going to see people looking at the noise and rhetoric from what policies could do and what that will mean for the real economy. lisa: that is the reason people are watching the treasury auctions later today. you can see crisis over, nvidia shares up 3.4%. everything is goldilocks once again. futures up. outperformance from tech names. even though they do not drive everything those shares are conducting a lot of the market activity under the hood. the euro is fading a touch, weakening versus the dollar. 10 year yields up just marginally but down yesterday. the stability in the treasury market is notable after so many sessions of incredible volatility. crude still hovering around $81. coming up, sarah hunt of alpine

saxon woods with stocks coming off three days of losses. peter to hear -- peter tchir, and bloomberg's mandeep singh on nvidia. let's begin with our top story. u.s. stocks suffering three days of losses following nvidia slump . sarah hunt writing "we see the u.s. spending boom on ai continuing, perhaps to the detriment of other technological spending. whether it can continue to drive equity markets would be the question in the blistering pace thus far this year seems difficult to sustain." sarah joins us. thank you for being with us and waking up at this hour. is it nvidia's world or is this evidence of the resilience of other names that can pick up when nvidia falls down? sarah: to the extent the market wants a theme and a story it is

nvidia's world and we are living in it. the extent their other parts of the economy starting to participate, it is a dual thing, not just one thing. given how fast nvidia moved it is not shocking it is having a pullback, but it is not retracing all of the insane gains this year. to us it seems normal you would have a pullback. it was a fast pullback and quicker than people expected, but that seems a little bit like you need to digest some of this. it is a word i had to use but it is true. lisa: that is part of the reason people are buying today. there is a larger question. what does it do when one company can rise or fall and create or erase the market capitalization of some of the biggest and most well-known u.s. companies out there? what does it mean in terms of how much of this market depends on nvidia to keep gaining, to keep going forward, and for the success of the u.s. economy?

sarah: it is the poster child for the ai story and the ai story has driven a lot of the performance to date. it is the big growth story, the big technological revolution. the question will be what are the use cases. people are scrambling to put an infrastructure that can handle large language models. the question then becomes i have the infrastructure, what joy do with it. there may be a pause. right now the driver is i've to put in new technology and that will be expensive and i have the money to do it because customers are sitting on cash. right now that is a major growth driver. dani: a lot of people question nvidia and say this has to go back down to reality. the thing people have a harder time grasping is what that thing is. at some point people build up the infrastructure and take a pause and say what we do with it. is that the catalyst to go back down to reality or is it something else? sarah: right now the pace is

blistering of what people are spending money because it is a land grab. everyone is jumping to say i've to get these servers together and handle not just one large language model but possibly more than one. right now the scramble on the spend is on getting that done. microsoft is making money on chatgpt, that is one of the reasons microsoft will be able to do so well. who else will jump in and how fast will that happens? i do not think we have the answer. the expectation is it is great and fast. dani: one way you can look at nvidia revenue is it is these other companies spend. they are putting huge amount of money into it. are we potentially overlooking other companies that are plowing money into nvidia? the viability of that paying off? michael: like -- sarah: like every other technology, what people expect the use case to be is probably not what the use

case will be. that something might come in and people realize i can use this to do that, that i might get a new set of enthusiasms, but right now the enthusiasm is for infrastructure. annmarie: if nvidia rises and falls, does that mean the adjacent companies are going with it? sarah: it depends why nvidia is rising and falling. if people back off on spending than they will fall with it. if it is backing off because people are looking outside to say what else can i put money into that will benefit from the spend, you have memory differences that have to be used. there other parts of the technology that will be changed because of this movement and having bigger servers with gpu's and liquid cooling. there is an enormous amount of stuff that goes along with this. it is more about looking at other parts of the ecosystem then walking away from nvidia. they have a position nobody yet can rival.

certainly that will start on the lower edges. it will happen. annmarie: do you think this is a point investors should buy even if they are not in nvidia? sarah: that depends on your timeframe. long timeframe come absolutely. short, you will want to see where it settles. it depends what you're looking for will stop on the short term i would see how it settles before i jump in. lisa: how frustrating is it to understand things like valuation in a market like this, especially where right now we see stability and benchmark treasury yields but there is a lot of uncertainty going forward given the fact we cannot project out how far this has to go or what form this will take? how difficult is it to have any historical reference you can bank on for a model going forward more than just a couple months at the time. sarah: it is not necessarily about modeling out the next six to 12 months. people will do that and that is

their job. i think you have to look at the bigger picture and where do i see the growth coming from and where do i see opportunities and what my paying for? six months ago, three months ago nvidia was not that crazy expensive. the move up has been people saying it was not that expensive. there is a lot of back-and-forth but timing is important. in this market it is difficult. dani: i want to ask you the question about where growth comes to rest of the market. if you're looking at these more cyclical stocks and small caps at a time we start to see the consumer paring back some of the growth metrics, getting weaker, where is the growth for the rest of the market? sarah: there is an infrastructure bill along with the technology bill and i will be positive for the industrial stocks. to the extent there has been a big move and utilities that is a

longer tail because it takes a long time interact capacity. will we need more energy? yes. i believe technology will bring energy usage down eventually. i think there are plenty of places where this can broaden out better about this infrastructure and there is also the consumer is at the moment more stressed than it was in the larger tech companies are not financially stressed. right now that is where a lot of the big spend is going. lisa: i am happy to say you are joining us for the rest of the hour. sarah hunt is stiffing with us. let's get you an update on stories elsewhere this morning. yahaira: apple has no plans to integrate meta's ai chatbot into its iphones according to people familiar. the wall street journal had reported the iphone maker was in talks with the social media company but bloomberg news has learned those talks did not get far. meta approached apple months ago but was turned down because the iphone maker does not think

meta's privacy practices are tight enough. shares of germany's mark are following in european trading. the company says it will discontinue develop in of a drug meant to treat head and neck cancer. analysts had estimated that drug could reach peak sales of $1.5 billion. this marks the second high-profile drug failure for merck since december. airbus is missing millions of critical parts needed to make its planes. the aircraft manufacturer warning late monday that it is experiencing a shortage of engines and cabin interiors. the delays are causing the plane maker to cut back on longer-term goals and everything from its operating profit and jet handovers to monthly production. that is your bloomberg brief. lisa? lisa: we do not want to hear about another airplane issue, this time with airbus. annmarie: or delays which get through all of the supply chain.

the issue is at the end of the day it will mean higher airfares. lisa: because there are less planes. it also raises the question of what hangovers from the pandemic. up next, flying blind into 2025. >> there is fog when you think about the outlook the election is creating in a sense people do not know what to do with either outcome. lisa: which is why people just by nvidia. that is coming up next. you are watching bloomberg. ♪

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studio one to studio three. when you start small, you need some big help. and chase ink was that for me. earn up to 5% cash back on business essentials with the chase ink business cash card from chase for business. make more of what's yours. lisa: nvidia trying to claw back some of the losses and as a result people are feeling good and the stock market except the russell 2000, lagging behind once again. under surveillance, flying blind

into 2025. >> is this going to be something that paralyzes the investment community? that is a thought that makes a lot of sense. i think there is a bit of fog you think about 2025 outlook the election is creating even though there is not a sense people know what to do right now with either outcome. lisa: u.s. election kicking into gear on thursday with the first presidential debate followed by the first round of french elections sunday and if that was not enough the u.k. election next week. peter tchir writing "while the wildcard risk is difficult to identify, there is a real sense of global unease. a lot of opportunities for troublemaking and fewer reasons for the bad actors not to behave badly. markets and our assessment are underpricing these risks." peter joins us now. we talked about the options, i have been hyper folk -- we talked about the auctions but

we've not seen the bond vigilantes come to the table and express their fear. how can you express concern in a market that cannot identify risk and loses if they bet on them? peter: i have been avoiding the treasury market as a way to express geopolitical concerns. normally we would get the flight to safety but anytime we get geopolitical elevation everyone gets concerned about safety. we have been playing it from the commodity markets. the commodity markets are underinvested. there is a potential for a shock. you have china built around all of autocratic resources. iran and russia and other countries. it will all feedthrough commodities. that is where i like to express my bets. annmarie: your latest note you say is this a one stock stock market? if you're so concerned about the

election risk in the geopolitical risk around the world, is the answer simply to buy nvidia? peter: i don't think so. it is one of these, we talked about this last week on your program. momentum has worked well. momentum feeds on itself. you have etf's were $.50 on the dollar goes to eight or nine stocks. i think that momentum build is starting to fall down and that is why people are looking at technical levels. the 50 day moving average in nvidia could be in play. i think there is more room to the downside on the momentum stocks. with the way the economies are shaping up i do not see certainty for other stocks. to the extent we get the ketchup trait it will be in the down market where those stocks perform bang less badly than a trend like we have last fall where the laggards really did well. dani: this what you are seeing over the past 30 days, are you

saying this is the start of a sentiment shift? there are plenty of arguments that it is just portfolio rebalancing. which is it? sarah: i think momentum -- peter: i think momentum has a way of feeding on itself. it forces more people in. people think they're missing the rally. now that that is unraveling a little bit you start seeing that decline. the fact that you have a two times leveraged etf on a single stock strikes me as bizarre. that shows me how much froth there is in that it has moved me to trading like a number, it is trading like a market cap. it is trading like a number and who gets in last or not. i think people try to buy the dips but we are not done seeing the lows on the stocks in the next month or so. sarah: i agree with you and i wonder how you are expressing

your conviction in commodities and in which direction? if the reps of the market will catch down and you are seeing wobbling into the china market, where is it you are looking at commodities favorably? peter: mostly right now at the energy stocks. i think the energy companies, there good driver stories. we need energy for the ai we will develop. energy has been my favorite place. industrials a little bit. i like the potential companies that could be part of rebuilding ukraine. and generally it has been focused around the energy space. lisa: how long term is your bet? that is one question as we look at week to week volatility based on headline noise. what is the appropriate amount of leeway to give yourself free trade at this point? peter: one reason i am gravitating towards energy, i like it for the next two or three years regardless.

i think there's a lot of opportunity. we look to continue building new sources of energy and continually have to reinvest in traditional energy sources. you see what is growing on -- you see what is going on in terms of growth in india. there's a lot of potential for that. to me i get the geopolitical risk not quite for free but i get that potential bump without having to detract from my overall thesis. lisa: overall you're saying the geopolitical uncertainty creates questions. the question is howdy want to play that since it is difficult in the treasury market. you are looking at commodities. you see nvidia seeing more downside losses. how you're arranging what your ballasts are? is it energy in cash, energy in short-term t-bills come energy stocks you think will be most relevant? can you give us a sense of what you are shifting overall? peter: we've been shifting it

out of duration. i love the 10 year at 4.50 and above, not 4.30 envelope. right now i would be in cash. the u.s. has probably been the best place to be. do not mind chinese equities. this friction will create more and more opportunities for chinese stocks. there is deglobalization. i would not want to invest in china long-term but for trade you can get back into those. a lot of our attention is focused on the philippines. it is off everyone's radar screen but there is more escalation. one of the real problems is we have a treaty to come to the philippines aid if they have a military service person die. what happens there we have something 100 miles off the philippine shore, china is becoming more aggressive, there have been injuries, those are the little things popping up and we are watching does vladimir putin try to do something ahead of the election? if any global leader would want

trump it would likely be vladimir putin. anything that hurts oil would hurt the biden administration so prudent might be emboldened to try something over the summer. annmarie: in the same breath you said you're going at a chinese equities but you are deeply concerned about the geopolitical risk around the philippines and china. what is your timeline for being a traveler in china? peter: for the next three months to six month for a year part of the pieces has been made by china. -- part of the thesis has been made by china. they will not have extended success in the u.s.. look at what they are doing with ev's, trying to sell those globally. china has these autocratic nations where china has trade deficits. we think they will be selling more of their brands into that and that will be good for the chinese companies as they become global brands. i do not like it, it is not necessarily where we should go

as a nation, but that is how i see that playing out. if we get any economic turnaround in china it will benefit chinese companies much more than global companies, unlike the past two decades. lisa: enjoyed london and have a great vacation. we will see you on the others. sarah hunt is still with us. how much do you agree with that, by chinese stocks because the idea of selling to the rest of the world will gain traction? sarah: they've there's a trade there. we tend to stay on the u.s. markets. to the point deglobalization is problematic compared to the kind of growth that would ramp up towards the rest of the world -- a big amount of chinese growth has usually been good for the rest of the world. if you are starting to see a bifurcation where you have countries working together to try to sell to those markets and not so much the cooperation we have seen, i think that could be -- that is part of the reason

there is an inflationary forces without some of the current things we've seen. lisa: in other words you are not convinced on chinese stocks? sarah: not right here. lisa: just trying to put it together. coming up, nvidia trying to bounce back after racing $430 billion in market value over three days. -- after erasing $430 billion in market value. we will talk to mandeep singh about whether this is a sign of resilience because it is bouncing back and other stocks picked up where it left off. ♪

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lisa: trying to claw back some of the $430 billion of market losses over three days for nvidia. welcome back. this is bloomberg surveillance. stocks edging higher led by the tech shares. nasdaq up .4%. perverse were the nasdaq lagged behind. russell 2000 struggling to get above read which is the reversal based on the outperformance. it raises the question, how much do we care about this? i say this not a somebody losing or getting a lot of money, but how much is this just technical rebalancing everyone is making a big deal about because there is no certainty to talk about anything anywhere else. dani: that seem to be the move because it was so sudden. peter tchir says this can continue.

if we are getting momentum that is flipping, if you have the strange etf's, if sentiment is turning it will turn hard and it will continue. lisa: in the meantime it seems like there is an uneasy calm under the surface. i am talking about the bond market. you can see the stability. if you look at a graph looking at the past five days it has barely moved. that is a shocker considering some of the volatility we have seen so far year to date. to year yields 4.73, 30 year 436. that could change with one option. that is why i'm watching the $69 billion in two years being auctioned off. how much of the auctions instructive at a time of relative stability where why bother betting big on treasuries if they will whipsaw around and end up in the same place? sarah: i think the auctions do not matter and they only matter

if something goes wrong or looks like there's not enough demand for u.s. treasuries. we are refunding so much and the deficit continues to go up, even in an economy that is not terrible. to the extent people only worry about it when it starts look like there's a problem it will change yields, that it becomes an issue. if they go well people do not notice as much. it is only when they go on my goodness there's a problem with demand on the treasury side. we have a lot of treasuries that need to be sold. lisa: people watch them and then they're not events and people say why did they watch them? we await what will happen in france. you can see a marginally weaker euro but some stability there as you have a number of people saying go to french bonds and french debt and this idea that maybe some of this is overblown. i'm thinking of bank of america which brings us to under surveillance. marine le pen's far right party

widening its leak -- widening its lead. rising to 35.4% in bloomberg's poll of polls ahead of the left and's alliance with the emmanuel macron's party in third. this is fascinating because even if marine le pen's party wins it is unclear what that happens for policy. annmarie: that's right because they will have a split government. you can see macron is clearly nervous. he came out and said whether it is the right or the left policies are revoking a civil war. all of the rhetoric has not fend off what we have seen, whether it is the right or the coalition of the left, continues to rise in the polls. you mentioned bank of america saying go in. elian's says these french officials need to ensure investors given the share foreign investors have in the french bond market there will not be a euro crisis. any with of what we saw in the past when it comes to the

sovereign debt crisis in europe will spark fear. dani: marine le pen's party is trying to do that. we had her right hand man say will be reasonable if you elect us, we will bring the deficit in line with what the eu wants. there's a feeling that liz truss changed everything. everyone looked at her and say she got kicked out by the bond market, -- before she was elected she had much more far right policies and she gets in and she moderates. lisa: the ghost of the liz truss moment hovers. shares of airbus tumbling, the plane market cutting its outlook amid a shortage of parts caused by supply chain constraints. boeing's bid for spirit aerosystems will value the supplier at $35 per share, a six percent premium to spirits stocks price. we knew boeing was going to buy spirit.

the most issue is this question around we have bashed boeing, we have talked about isis. airbus is the gold standard, and then this. dani: it shows that the pain will be here for some time. someone said it will be three or four years until the supply chain is back to normal. we cannot fly on boeing because we are all scared and cannot fly on an airbus because there are not enough of them. it is the summer of discontent. lisa: how much are we not seeing the extent to which industrial areas are disrupted by retirement, people leaving the workforce during the pandemic not to have returned at a time when we are depending on the physical world to support some of the technological advances? sarah: it is absolutely an issue. like anything else where there are long lags, people do not think about how long that can take to resolve itself.

if you had a period of time where the factories were not running properly, everything needs to go back to where you were. there is going to be slippage. you are seeing that with airbus. it is interesting you are seeing that now as opposed to six months ago. you think there would've been and i to the supply chain earlier. we got used to the kind of inventory where you take that and throw it out of whack, people do not realize the room vacations and not only will it be more expensive but the clans -- the plants will be obsolete for just haven't flown yesterday and the day before, we can look forward to that. lisa: this raises issues on the disruption in the red sea going forward. what other kinks you get to the system? i don't want to think about it. i do want to think about nvidia. shares rising after a three-day fall that lost about $430 billion.

that sought nvidia's market cap dip below $3 trillion. mandeep singh of bloomberg intelligence joining us. peter tchir saying it is just a number resonated with me. it is just monopoly money because it is hard to imagine the gain or loss of a johnson or johnson and bank of america in a couple trading days. as hard as it is to -- at what point can you put any credence on these moves other than just technical rebalancing? mandeep: nothing has changed fundamentally to validate these moves. at the end of the day this is a stock trading at 40 times price per sales. it was the largest market cap company or it was. you have to ask yourself how long can it sustain that path. everyone is excited about the prospect of ai. that is why they had 126% growth last year.

everyone realizes this is not sustainable. in the end it comes down to what are they really going to slow down and that is when you have to look at the different moving parts, cloud service providers, or the end market demands from the software guys and even apple jumping in. now that they have a large language model are they going to invested in ai and wrap up the capex spending? these are unknown questions that will drive the momentum that is what the market is grappling with. dani: something similar that sarah was talking about. is consensus that nvidia is overvalued but also consensus is this is a rockstar of a company that has huge transformational changes. what could bring it back downturn? is it earnings? competition? is there any clear threat? mandeep: for every dollar inch

of revenue you generate four dollars in software revenue and six dollars or seven dollars in services revenue. what the market is waiting for his we have spent almost $100 billion in data center gpu's last year. has that translated into software revenue of 200 to $300 billion, another 300 400 billion dollars in services revenue? if it has not will there be a pause or digestion to figure out when does it translate into software revenue? the companies always see that demand early. that has been the case always. what is different is nvidia having mid 70% growth margins. is it really different this time where will the valued creeds to the software guys and the services guys will have the services to show. that is what the market is waiting for. dani: when do we find out? mandeep: this quarter earnings will be a good reflection on where we are in terms of software monetization. everyone is talking about

copilot, the fact that get hub copilot is successful. there are some tangible use cases everyone recognizes come is just how is it translate into revenue. adobe gave us a data point where they did beat expectations. they talked about high single-digit growth. clearly there is a divergence in terms of how these companies are looking at ai contribution and in the end it comes down to hyper scalars. that is where all of the ai capacity is getting deployed. if the hyper scalars see acceleration in their cloud revenue, that is how you know near-term. lisa: mandeep singh of bloomberg, thank you for being with us and the insights. sarah, i am curious how much the idea of u.s. exceptionalism is tied up in the idea of ai adoption. is that what has been diverging -- is that what has been fueling the divergence between the u.s. and the world economy? sarah: i think it is the ai boom

but i also think it is technology in general. the u.s. has been much more of a juggernaut. the infrastructure in the u.s. and what has gone on in the technology sector, a lot of that innovation has come from here. we talk about exceptionalism, part of it is the things built on the technology side. annmarie: it is ai everything adjacent to it. if not in the united states, who else can benefit? mandeep: -- sarah: the area where you have companies in this infrastructure, but if you think about the googles that have been built and the meta-s and amazon, all that was in the u.s.. it is not just ai. you start out with amazon and say i'm am not sure where will end up. no one thought it would wind up the major web hosting company. there is the change and continuous innovation and that is something that continues to be centered more in the u.s..

dani: i am struck this is coinciding with the whole on short thing. you want to have the ai infrastructure and closer to home. could one make the argument europe will have to catch up? europe will need the infrastructure closer to home. apollo and intel partner to build something in ireland and that trend will continue. sarah: this is part of the issue with what is inflationary about regionalization and a lack of globalization. you have to add capacity to places where before you are like there's enough to do this. there is something where that supply chain that was global and now you're seeing the problems that has when you have a major disruption. that is not deflationary. it is adding to costs by doing that. that is part of the tension we are seeing. how you rain back inflationary pressures when it is not just about too much money chasing too

much money level goods. lisa: are younger people going to be able to do some of the skills that require actual physical work other than just looking at a phone? i know this is crazy but i wonder about what kind of training there is. does anyone talk about that ever? sarah: the person who talks about it the most is the ceo of snap-on because they have had to create a innovation center because they cannot get people have the trade skills to do the things they need to do to do actual physical work. there'll be a question about how that plays a role. right now we went so far to the other side you are storing to realize that is a problem. lisa: let's get an update on stories elsewhere. here is your bloomberg brief. yahaira: novo nordisk plans to invest 4.1 billion dollars into another u.s. factory as it plows more money into its biggest market.

saying the project will double its production footprint in the u.s. and add 1000 jobs. the new site is the latest multibillion dollar investment by the ozempic maker, with the company saying it plans to pour $6.8 billion into production investments this year come up from $3.9 billion in 2023. the nearly 15 year battle over the prosecution of julian assange may finally be coming to an end. the wikileaks cofounder is expected to plead guilty to leaking u.s. national security secrets. chilliness launch was accused of publishing sensitive military documents in 2021 and 2011 and one of the largest releases of state secrets in history. the florida panthers have won their first ever stanley cup, defeating the edmonton oilers. the panthers had taken a lead,

only for edmonton to win the next three, forcing a decisive game seven. a second period goal florida is enough for them to seal victory and the championship. despite being on the losing side connor mcdavid was named the series m.v.p.. that is your bloomberg brief. lisa: up next, waiting for the inflection point. >> so far the adjustments in the labor markets have been modest, not pushing up the unemployment rate. we are getting nearer to a point where the outcomes unemployment may be less benign. lisa: that is coming up next. mary daly with interesting comments. this is bloomberg. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. lisa: coming into a day trying to gain after three days of losses on nvidia.

this is "bloomberg surveillance." under surveillance, waiting for the inflection point. >> supply and demand factors have contributed to the reduction of inflation and we have done all of this with without a big disruption in the labor market. when i put all of this together i think monetary policy is working but there's still more to do. so far the adjustments in labor market have been modest, not really pushing up or down the on them -- not really pushing up the unemployment rate. we are getting near to a point where the outcomes unemployment may be less benign. lisa: investors looking ahead to another read on the economy with confidence data due at 10:00 eastern. more fed speak today from michelle bowman. "recent u.s. inflation news has been more encouraging, likely keeping the fed on track to start cutting rates in september.

u.s. dollar strength could persist through late 2024." nick joins us now. i want to start with mary daly's point. she is talking about how this point is where you might start to see a nonlinear increase in unemployment. is that on your radar in terms of a real risk or is this more interesting in terms of where the bias may be on the fit? nick: probably the latter, the bias on the federal reserve. when you look at leading indicators, job openings, we could see an accelerated increase in the on employment rate, but if you look at the consumer fundamentals we are not that worried about a recession and therefore we are not worried about the employment rate. dani: if we have mary daly changing her language, you think she is not alone? if the fed is starting to get concerned it is not just

vacancies but actual layoffs, cuts could be coming sooner. nick: i don't know about sooner but what i would say is if you look to the early part of the year there was frustration on the part of the federal reserve. now the labor market has improved, we are seeing softening in the labor market. i think more importantly inflation has started to cooperate. at that point we are still comfortable with the idea we are in september. we are holding steady in september. sarah: the cpi numbers were part of that ability to look at september again. if i think about the idea of cutting ahead of time because he did not want to be behind the curve, where does that sit right now? it does seem like that labor market is getting softer that goes from a short softening that can spiral quickly. how are you thinking about that

and what is 25 basis points to? nick: 25 basis points probably does not to a lot but you have to start somewhere. i believe the federal reserve policymakers were scarred by the experience of the pandemic and the way inflation got away on them, but they are looking at softness in jobless claims in the real fed funds rate is extremely high, 5.5 -- even though they are not quite at their inflation target they are probably worrying about that were extensive slow down and thinking we'd do start moving ahead of time. lisa: is the reason you see september as a feasible date to start cutting rates and yet you expect dollar strength. is this because of the expectation the fed will not cut as much as the ecb or is it independent of any central bank and the u.s. is not as functional -- nick: i think clinical

uncertainty in france is holding the euro back for the time being. our main story is more dollar strength until the end of 2024. we think the dollar weakness is likely to transpire when we see the federal reserve start to cut rates and when we see the u.s. economy slow down the most clearly. we are only seeing hints of the u.s. slow down at this point. while the u.s. rates remain high and while the u.s. is still moving forward, that is going to keep the dollar on the front foot. the longer term trend, 2020 five is probably a dollar weakness story. annmarie: when you look at france what you make of what is going on with the bond market? zurich insurance says we are not going back to the place we were. the spread between french bonds and german bunds -- you think this is an area to avoid or it

is time to get in? nick: from that perspective i would be in the camp that says it will not be as bad as feared. i think that spread is currently 75 basis points between french and german bonds. a lot of the bad news is priced in. france is not mexico or south africa but they had elections in recent years. there was concern after the election that policy would move in an unfavorable direction but some of the fears have c almed. with the french election if we do not see a national majority, i think most of the bad news is probably priced in. i would not be surprised if we saw the spread narrowed to 50 biz appoints but we can get to 50 basis points. lisa: thank you so much for being with us. sarah hunt, we have a couple minutes with you. thank you for spending the hour with us.

i want to start with the idea of are we really playing this game of who is the most dysfunctional political house in the world and going to the other side of the boat until the tensions come down. sarah: unfortunately i think we are playing a game of where is the least bad. it has been the story of markets almost since the financial crisis. where is it the least bad. you look at the political calendar globally. people have not been focusing on it. all of that is coalescing. there is one of the reasons we feel the summer will be a lot of push pool. that is why people are having trouble finding conviction in a trade at the moment because there is a much that is a no. you want to be in the least dirty part -- that is not a good thing. it is the way it is and that is

what we have to contend with. annmarie: if november 5 is a coin toss, how do you trade this summer? how do you prepare for that? sarah: even the discussions about what would be worse about a trump presidency versus a biden presidency on the tariff side, there is a lot of rhetoric and the question is what would get done. in the end there was a lot of discussion when biden one that he would change some of the policies but they did not change . there is discussion but then you get on the ground and realize there's only so much akin to doubt the potential of throwing things too far off. nobody wants to throw the u.s. into a recession. lisa: sarah hunt, thank you for spending this time with us. real insight into a world in terminal oil. i am struck by what we are hearing about -- implying paralysis. can you get ahead of some of these elections when it is staring into an abyss, which

raises the issue of technical discussions you are talking about. it is dancing on the head of a pin. dani: also an environment of where you go that is safe? what happens when you face an environment like this week where can you go? duration? maybe not. we are worried about the deficit and options. you are stuck in this no man's land that may be brings us back to cash? lisa: we will get insight on some of those questions. morgan stanley's mike wilson and -- today pushing up with s&p futures up .2%. yields free much stasis. down one basis point. ♪

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>> this is a fairly complex market. concentrated but high dispersion. >> everything looks calm on the surface. >> the market is becoming more discerning. >> we've been talking about make a cap growth. it sounds like the stocks are tired. >> the tech gains are fundamental. at some point that party will stop. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: welcome back. this is "bloomberg surveillance." it earned, dani burger, i am

lisa abramowicz. jonathan ferro will be back later this week. it has been nvidia's world we are living in it. it gained more than $2 trillion of market valuation and 12 months ended three days and lost $430 billion. the question is how much does that matter over long-term fragility and being leveraged to one stocks. it does show a vulnerability of this market but do not think it shows a narrative change. you can even see it in the discussion. what else can you buy right now? lisa: this is because we are looking at a political backdrop that is like staring into the sun. we are looking at elections around the world accounting for about 50% of global gdp in terms of political shifts. how do you get ahead of see changes in policy that have been the bedrock of a lot of that's in the market? dani: the last hour my big --

annmarie: the last hour my big takeaway is no one is going to fall you for owning nvidia. you have this period of paralysis and angst into the summer, may be want to stay on the sidelines and only just by nvidia. lisa: which is a difficult thing in a moment where people are saying it is time for active management. i want to get right to our guests. right now in markets we see a little bit of a lift but really calm. what i am struck by, as dani pointed out, this idea we've not seen a massive route in tandem with nvidia. other shares have been offset. s&p futures up .2%. it speaks to almost a resilience, civility under the hood. annmarie: it does. we have gone over a year with less than 2% decline. it does show that even if nvidia drops the most any stock has done in the past three days,

just rotation happened over the surface. it is not lasting today but there is some resilience in the market. lisa: almost like the cylinders are offsetting each other. dollar strength versus the euro but more in this range of 1.0 723. stasis in the yield space -- coming up, mike wilson of morgan stanley saying growth is more important than inflation. bloomberg's benedikt kammel on new worries for playmakers and greg peters of pgim saying it is still time to take on risk but with an eye towards the uncertainty in the political sphere. we begin with our top story, nvidia looking to bounce back from a $430 billion slump. mike wilson expecting era markets to continue, writing "we continue to recommend a barge fell of large-cap quality growth with defensive's while fading

lower quality cyclicals and avoiding the potential to play for true bartering out. " mike, wonderful to speak with you. you've been talking about this for a while, does not necessarily all boats will be lifted by the ai enthusiasm. what is your take await from volatility and that we have not seen a broad announced, is a contagion or real market weakness. mike: the market is smart as usual. we go back to our may narrative which is probably not consensus. the policy mix we have had is unusual. we had a strong fiscal policy which is keeping pressure on the fed. we know the rate is too high and that is crowding out a good part of the economy.

for most operators, i'm talking about consumers and corporate, that is reflected in the data. it is not just the magnificent seven. there is good high-quality growth stocks after -- outside of tech. i think you said earlier, the pistons moving around, the vix is low and volatility is low, but the volatility under the surface is enormous stop it is like the boat tilting back and forth. people are running to different sides of the boat and the boat can remain stable. that is what we have going on until some sort of shock. the elections do not have be worried about a bad outcome, is just higher probability. elections have consequences. why will our election be any different? consequences for the economy and policy but also consequences for volatility in the marketplace.

lisa: i want to talk about the idea of a shock and you laid out three potential shocks in your recent research, talking about the potential for upside acceleration. you say nobody is counting on that. then you talk about some sort of liquidity shock, the treasury auctions, and with market functioning, and then this idea of growth and that potentially you could see a real falloff in growth which is kind of what we heard from mary daly. when you throw in the tao if we do not see material weakening? mike: growth has disappointed this year. most of the economic surprises have been on the downside and that continues to be the case which is why the upside case is less likely. how has the market doubled down? it has gone to quality growth and defensiveness which is typical.

the problem is let's say it happens, there's not a lot of upside which means you have to pick stocks. that is what the market is doing. what is the key trigger going to be to say that growth is training -- is turning into a growth scare a recession fear? it is the labor market. the labor market breaks down, those with the fit is looking at , unemployment go to 3.3% or 4.4%, you believe the fed will cut rates unless they cut 100 25 basis points the market will probably correct 10%. dani: usually the argument of stocks can survive is if they cut they get support. it needs to be some cut in size. if we take a step back and say nvidia, clearly a lot of valuation here that should not

be baked in. mike: the market makes perfect sense. it is paying for quality and growth that is idiosyncratic and may be defensive properties. i think the market totally makes sense. the question is are those multiples too high? i think if you get a perfect soft landing it can be fine. if you get any aberration it will be a problem. the three doors to put it in monty hall terms, i think door three is the highest risk today. that could change. this is another lesson from the last year and a half. many times have we change the narrative? hard landing, soft landing, no landing. his musical chairs. right now it is soft landing.

we can stay in this environment we are in but we have to be -- we have to understand the risks. lisa: there is an irony. underneath the surface you're getting big moves in stocks. you talked about going from one side of the boat to the other. correlation has broken down between individual stocks. within sector stocks are no longer correlated. is that a troubling turn? do we need to completely rethink how we judge sectors and how stocks should be moving together? mike: it affects the later part of your account. the idea you will trade sectors is out. that is not working. that relative value trade is not working well. what is working is factor trading which is why we are going back to things like quality and defensiveness. that is working really well. operational efficiency.

the graph is the oldest we have seen since 1965. that is older than me. that is old. it does not mean the end of the world. we have many examples some sort of a regime shift. if we stay in the soft landing narrative nothing will change. if we move to higher inflation it will shift. that will be a rotation into defensiveness. we are open to anything. annmarie: if we do see a real acceleration of inflation, where would it be coming from? mike: commodities could pick up. there is talk china could stimulate again. i do not think it will come from housing where this owner equivalent rent, that is probably on the downside. maybe it is services inflation. we are not looking at a

groundswell of ablation, because i do not get the same -- we need an exogenous shock to get growth to drive broader inflation. that is why that is number three in our list of things that will upset the apple cart. lisa: i am thinking about liquidity. the idea of treasuries and options and what could happen if you get higher yields. this idea of the lifeboats and the lack of diversity, the lack of breath in the market going back to 1965. at what point does that make the market more fragile, not less, given the fact that if you have a true downturn, at some point you have to imagine if the lifeboats will feel it -- signaling warning signs about what is ahead. mike: all year we have seen some

of these lifeboats eight or at least take on water. that is normal. eventually everybody goes to the one boat and it gets too crowded and it sinks in the jump to the next one. everything makes perfect sense in a late cycle economy. we do not think it is been cycle, this is classic psycho behavior -- this is what tends to happen. i expect more of the same. it is critical to make the statement which it is not just tech stocks. it is almost like the nifty 50. there are nifty 50 stocks that people are gravitating to their more expensive than some of these tech names. lisa: are you going into those names too or are you steering clear because of concentration risk and the idea one of them could sink and that could be problematic? mike: we are with everybody else because it is a momentum market.

where we are different is we are saying this is not stable. it is fragile. you have to understand that -- you need to be leaning in that direction understanding you will move around in the short term. if there is a shock, and once again the third door is the biggest shock to the nifty 50 names. a growth scare/recession concern is the one that will take them all down together. that is not a risk today but the one we are up -- we are looking at -- dani: as you're talking about these different lifeboats, i am reminded of a conversation i had with kkr about public markets have been shrinking. since 1995, there are 40% less. is there some degree whether or less lifeboats because there are

less companies and some of the really good companies are public anymore? mike: because of the ai narrative, we have seen people perceive certain boats as lifeboats when in fact they have holes in them. that is a mistake. i think there's been a rising tide in many cases that is taking a lot of stocks up incorrectly. those are the names were talking to clients about now. there the ai winners in the ai pretenders. there are many companies that mention ai and the stock goes up to. those are the things you need to be worried about them buying that you ai winners and saying this has a business plan or the particular beneficiary. we are more interested in the doctors -- now it is about who will take advantage of this

technology to make a better mousetrap, better business while tuan -- to win competitive balance. lisa: you want to tell us any of those names? mike: we publish this every week. lisa: mike wilson of morgan stanley is sticking with us. let's get an update on stories elsewhere this morning with the bloomberg brief. yahaira: nike is betting on pricey air jordans to win over chinese shoppers. the athletics giant is launching a fresh push for the jordan brand where it has lost ground due to a struggling economy and rising nationalism. peggy is hoping to lay the foundation for a permanent come back in one of luxuries most key markets. three states are set to hold down ballot primaries for seats in congress. congresswoman lauren boebert is seeking reelection after changing to a new district.

new york representative jamaal bowman faces the challenge to -- and in utah several are vying for the nomination to replace retiring senator mitt romney. u.s. flyers continue to flight record numbers. the tsa broken new level, screening nearly 3 million travelers on sunday alone. tsa expects to break that record friday as people travel for the july 4 holiday. they expect three 2 million people will fly between this thursday and july break -- and july 8. lisa: if only they could find the planes. up next come investors prepare for the biden and trump rematch. >> is a close election. it can go anywhere. if you look at history to get a sense of how the market has behaved. lisa: that is next. this is bloomberg. ♪

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lisa: staring into the sun. that has been the political scene for quite a while. we will dissect all of that given the fact that you have elections across the world. 70% of the world's population will be going to the polls. investors prepping for the u.s. version, the biden and trump rematch. >> the point is it is a close election. it can go anywhere. you can look at history to get a sense of how the market has behaved. focus on policies and what the impact on the market is. lisa: here is the latest. president biden is preparing for thursday debate at camp david. the president will face off against donald trump, who is doing the campaign trail after holding a fundraiser in new orleans last night. mike wilson of morgan stanley still with us. we will not ask you about your impression of the debate.

instead of doing that to begin with, how do you understand what to listen for in terms of market impacting policies from something like the bait -- something like the debate we were expecting thursday? mike: this'll be a challenge for the moderators to draw answers. this is the way debates have gone for the past decade. it turns into personal attacks. let's see if we can focus on a couple of things. what i would love to hear about is what is your plan for fiscal sustainability? both banks are on a freight train i am not concerned about cutting expenses. the -- what are we doing about this fiscal sustainability issue will be the main one for me. number two will be tariffs and immigration. some might say those are social issues. they are not. immigration is an economic issue. that will be a hot topic from an

economic standpoint -- i think there will be some nuances. those are the three big ones economically speaking. annmarie: there is a difference in the sense trump is calling on a 10% tariff around the united states plus 60% on chinese imports. when you say there is not a big difference do you think this is just rhetoric and he might temper those numbers? mike: that is his strategy. he is a negotiator. he will set himself year and move to the middle -- he tends to be extreme and then look over this way. there's no doubt the trump administration would be more hawkish on tariffs overall than the biden administration. this has turned into a bipartisan support issue for tariffs in general, particularly against china. i do not think it is as big a

deal as it was. annmarie: axios has six nobel economists writing that trump would be inflationary. a destabilizing effect on the u.s. to messed up economy. you think trump is more inflationary? mike: that was our: 2016 that if trump wins it would be really positive for the economy because he is inflationary. at the time we had capacity for that. in the bond market -- we do not know yet. then the bond market may start a price and bigger term premia. it is truly 50-50 and you need some congressional support. it is not clear there will be a big coattails on this election, meaning whoever wins the presidency carries congress. if that is the case the reasons go up generally speaking, it

could be more inflationary. dani: there is potentially an impact on the bond market but will equity markets care? mike: they will if it is term premium. if rates are going up because of growth and inflation being higher the stock market does not care, at least at the index level. if rates are going up because term premium is widening, that is a bad thing for multiples. we saw that last year. in a situation where the bond market star story about fiscal sustainability a more acute manner, that would not be great for multiples. lisa: is this the reason you do not believe the fed put a saving everything? this is been one of the arguments of the stock bulls, that the fed could cut and that would offset weakness. is the idea of term premia the physical overhang why you do not

believe the same thing would be in effect. mike: the term has been under control for reasons that have nothing to do with rates, it has to do with the liquidity provisions put in place. now the fed is tapering qt, which is essentially have $1 trillion of potential bond buying across the curve. they have provisions in place to get us from here through the end of the year. at that -- if that stays the course, 2020 five is probably the bigger risk for the term premium no matter who wins. this fiscal sustainability is a bipartisan issue. we have bought ourselves time. the administrators have done a good job of finding ways to fund the government for now, but that risk increases as we go through the end of the year. lisa: steve eisman came on and said they're all of these deficit people that have been

worried about it for a long time. you replied and said it does matter this time around. does it matter if the u.s. is just as bad if not better then what is going on in europe or around the world? does it matter if u.s. is not disciplined about the slowest hiker for the bear to catch you. we still have the reserve currency. we are in a very privileged position. we have abused that a little bit. i'm not in the camp that we are going down the tubes come he cannot fund the government, but we can get temporary spikes like last fall where the multiple went from 21 times to 17 times on the equity market. that is all we are trying to do. we are not here to call the end of the world. we are just saying this is a risk not currently priced. term premium is zero today and i think that is probably appropriate given the path we are on, given both candidates.

lisa: mike wilson of morgan stanley, thank you for spending time. coming up, we'll be speaking about the industrial sector. bloomberg's benedikt kammel as airbus slumps with low guidance and missing parts. i have trouble thinking about that because i do not want to think about planes struggling with partners -- with parts. this goes to the supply chain disruption. in the markets a marginal lived ahead of the opening as people look at nvidia trying to crawl back some of those losses. this is bloomberg. ♪ o coming in.. big orders!s starting a business is never easy, but starting it eight months pregnant.. that's a different story. i couldn't slow down. we were starting a business from the ground up. people were showing up left and right. and so did our business needs.

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lisa: heading into tuesday with 13% declines on the shares. nasdaq 100 futures gaining the most, not surprisingly giving nvidia a rebound. s&p futures are up 2/10 of 1%. would i find interesting is this idea of lifeboats and the question of which are the lifeboats, saying that sometimes you get a lifeboat that sinks and you move on to the other but how much do the lifeboats keep the market afloat regardless of the cylinders raising issues underneath? dani: great boating metaphors. the other one i liked was this idea that we are running from side to side. one area takes on water, you go to the other side and then you

have this home on the surface and underneath there is this tension and when does the tension come to a four in a bigger selloff? does it take the entire market down with it? lisa: and that hasn't happened yet. and then the paddling duck metaphor. meanwhile, action that's interesting by itself after a lot of volatility with huge swings, 10 to 20 basis points per day. today, not that. less than one basis point of a move ahead of 69 billion dollars in two-year notes being auctioned off. 473 on the two-year. meanwhile, looking at the currency market, this is interesting to me, not seeing the same kind of fear baked into the market that you saw last week even though the french election is getting closer. a bit of euro weakness. anne-marie, we have been talking about this all morning, more people have been saying that

maybe this is overstated in terms of the risk around some of these elections. annmarie: they think it's other -- overblown and to dani's point earlier, with marine le pen's party coming out and saying we are going to be prudent, we are not the euro skeptics you thought we were, this is marine le pen who for decades has been trying to have influence taking the maloney route, being like i can't freak everyone out because i want to be able to govern and it's going to be cohabitation. we don't know exactly yet what it looks like or means. lisa: this idea that the markets will provide a check on fully populist governments, that's been a theory out there, whether it is donald trump or marine le pen, this idea that they cannot go to road because they will want to -- too rogue because they will want to cater to markets. how much coverage will the economy give them?

mary daly showing more concern for jobs, saying that so far the labor market has adjusted slowly but we are getting near to a point where the benign outcome could be less likely. i thought this was fascinating, the shift in tone. dani: huge shift. this feels much more dovish. the argument for a while was that the reason inflation had been stubborn was the strong labor market. what happens when it's not strong anymore? this is something -- something that neal dunn of would love to hear. he's making the argument that the labor market is starting to turn and disinflation is coming down in the fed is looking at past data instead of forward. the argument goes that they are more likely to make a policy mistake. mary daly is starting to reflect that language, if you keep pushing hard, labor could move nonlinear early. annmarie: the past few weeks we've been talking about jobless claims continuing to tick up higher and higher. potential trend? what i loved how she told the

room of founders and the san francisco leak, get your workers back to the office, it will help local economy. lisa: that's been atoned we have heard from the banks he knows but also i guess from the san francisco fed president as well. the biden administration talking about home president -- home prices and commercial real estate, taking on the flipside, janet yellen with new efforts to increase the supply of homes, including a measure to provide $100 million over three years to finance affordable housing. a lot to impact. it's interesting to me that this is coming at a political hot button issue time. how much is this politics and how much is this real question annmarie: this feels like a springboard -- real? annmarie: this feels like a springboard. morning consult recently did some of this, 4% of respondents

-- 74% think that it is in the u.s.. look at gallup. their survey over the course of years, we are looking at this past april, when you ask people if it is a good or bad time to buy a home, 21% say it's a good time. 76% say bad time. why? mortgage rates are so high and the supply is not there. we have been talking about this. dani: going a long way to explain why consumer sentiment surveys have been so bad on the economy despite the rest of the economy being mostly ok. to that point, is adding supply really going to change the game? the reason the affordability index is at its worse is because of mortgages. unless you master supply, it's not clear that housing affordability will get better. to make us more mad, we learned in the post financial crisis that low rates on their own do not solve the issue. lisa: this is something that you

said that really stands out to me, the reason why you see sentiment shifting to this degree among younger voters is because they cannot get access to owning their own home and are facing increasing prices across the board. if they don't have assets in the stock market they cannot offset the inflation the way that people who are older and more established can. it's a fundamental problem and it is not clear how anyone could shift in the face of this. annmarie: that's right. they cannot get on the housing ladder, as you say, and they are dogged by inflation and it's the biggest issue going into november. it continuously comes up in polls and will be an issue on thursday in the debate. over the weekend, trump pulled out a miniature tictac container and said that this is biden on x and when i come into the -- five economics and when i come into office, we're going to have

maga economics. it's hard to talk about inflation coming down when people are just concerned about price levels. lisa: and if it's something they do all the time, what about the deliveries of airplanes getting slowed from boeing and from airbus, potentially, slumping after eight new warning about missing parts in fewer deliveries, saying they are experiencing a shortage of millions of arts and will have to back expectations on new plane. benedict joins us from berlin. before we get into this specific issue, why is it that there are still supply chain delays and disruptions now, hung over from pandemic or not, given that people said they right sized, this is the normal economy, we are beyond pandemic disruptions. >> it's a good point.

the answer would be that the complexity of the product is such that you cannot compare it to other industrial products out there. they are lacking engine parts and aeronautic components, lacking the interior elements to the planes, seats and tables, things like that, lacking the skilled labor needed to do this. it's not just airbus and boeing proper, it's the supplier. the smaller companies struggling to get their products to airbus and boeing. this is a supply story, not a demand story. they find themselves in the weird situation where they are selling their planes well, almost too well, demand is hot and they cannot keep up with it. lisa: excellent point, they are having issues with the parts, with the expertise and talent to be able to manufacture that in its causing these problems. it's not about the pandemic.

given all the localization people are looking for, what does it say in terms of the workforce and the lack of training at a time when everyone is on their phones for everything? it's not like there's natural training for technical expertise going forward given the vast majority of younger populations. >> this is really a long-term effort to resize the industry and get people interested in the industry again. what kind of training do you have to introduce? what kind of incentives? what does a relatively cash rich company like airbus, what can they do to stabilize the supply chain? the ultimate fix would be to go into the small suppliers and prop them up. you are seeing it in cases like spirit, which is being bought by airbus and boeing, a case where one supplier is in trouble and it's being bought up. you might see more of that going forward, airbus and boeing

getting into these mission-critical supplies. all you really need is one missing part and you cannot old your plane. these are very complicated products with millions of parts and as i said, one or two pieces missing and your airplane is stuck on the factory floor. annmarie: airbus on top of boeing are cutting back on their targets. what are the domino effects for the airlines that want to purchase these planes? >> this is going to play out with the airlines, the people getting on the planes will want higher prices -- won't want higher prices so there will be fewer seats, driving up the costs. one big theme from the dubai -- where are the planes? we cannot get them fast enough. all of these orders are outstanding. we want or fuel-efficient plane and it's a huge costs element. they cannot produce them fast enough. you heard from airbus yesterday that cutting back on the rate of

production, it's not 26 like they planned, but 27, meaning that one year later they will reach that rate and it will have a ripple effect on the airlines and also on the humble customer. dani: it was also in berlin, the flurry of airbus, saying that it will be three or four years for the supply chain to sort itself out. take us to three to four years. the something need to fundamentally change if we are having these problems? or will it be how it was? >> this is an extremely long term type industry. these airplanes have been around for a long time and this industry thinks not in quarters, but in years, sometimes even decades. they are very mindful of this,

airbus doing its part, looking deep into the supply chain to see what suppliers are most at risk, where can we prop it up in which can be fixed? boeing have a raft of issues and they are probably in a less stable situation today, able to address that. that is something we will have to watch clearly and could explain why airbus is not taking pleasure in the boeing misfortunes because they know they need both companies. they need a healthy industry out there to help the supply chain as much as ourselves. airbus has an interest in boeing catching its breath and getting back on its feet. in a couple of years once you have a new ceo, once the company is stabilized again, they will sort out supply chain, but if anyone thought this was a quick fix to put the pandemic behind us, that's not the case. lisa: benedict, thank you for being with us. let's shift years to get you an

update on other stories this morning. yahaira: a reiteration on the need to keep rates higher for longer, with prepared marks in london she said that a tight labor market with geopolitical developments along with financial conditions prove risks to the financial help with a more immigration policy in the u.s. as a reason for differences between the u.s. and other major economies. apple has no plans to integrate ai chatbots into iphones according to those familiar. the journal had reported that the iphone maker was in talks with a social media company but we have learned that those talks didn't get very far. sources tell us that meta- approached apple months ago but was turned down because the iphone maker does not believe that the meta-privacy practices

are strict enough. italy is headed to the knockout stage of the euro 2024 tournament after a match against croatia, it was enough to secure a draw and avoid the exit. france is set to welcome back pelton killian for the match against poland. the striker is said to play with a facemask after a broken nose. lisa: up next, gaming out a patient fed. >> likely they will conclude that they have made enough progress, so even if the economy is resilient, september still on the table. lisa: that is coming up next. this is "bloomberg surveillance ." ♪

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lisa: coming into tuesday with gains, nvidia trying to claw back losses after three gains -- three days of declines. futures are up .1%. nasdaq 100, up .4%. the euro losing steam after gaining strength yesterday, weakening. yields heading a bit lower, for plea to 1% on the 10 year after a series of comments from mary daly, seeing more downside potential risk to growth. what we are hearing from michelle bowman this morning is that there be upside risk to inflation, saying it's not the time to cut. raising the question of gaming out an inpatient fed. >> if you continue to get mortgage progress on inflation, the fed by september is likely to conclude they've made enough progress.

even if the economy is resilient, i think september is still on the table. the case that we talked about earlier of a continued easing after september, that's where i think you need the sharper downturn. lisa: treasuries are holding steady as they look ahead to consumer confidence and remarks from the fed governor, lisa cook. greg peters writing that this remains a reasonably decent backdrop for risk, taking from the overall topline perspective, but the valuations are seemingly priced for positivity and then some. greg joins us now. this is fascinating to me. you talked about the risk going on but the upside from here seems limited. so, what do you do? greg: i think you have to trade carefully, honestly. stripping away valuations, which is impossible to do of course, we would be more bullish. the fed sector, you are at the

tight end of the historical range on the high-yield side. investors continue to overleveraged credit risk until we see more value in the unlevered or top of the capital structure. i think that what it means shortly is pulling back, make sure you are getting paid for the risk on the horizon. lisa: if i'm hearing you correctly, there could be a growth scare akin to what mike wilson was talking about with respect to the idea that the credit opponent could widen out, but not necessarily -- -- component could widen out how much we being a factor. greg: i think that's right. and i don't think it is a factor of a scare base pace in the

short term, but you never know. these unperceived circumstances arise and as an investor we are poised for perfection here. annmarie: you have seen that turn in the high-yield market where the worst among them is underperforming the spread moving out. but in the more leveraged part of the market the you are more worried about, how bad does it get in an environment where we get only one or two fed cuts this year? greg: that is an excellent point. what we are excited about in leveraged parts of the credit market is dispersion. the markets are differentiating. that's great news for active managers like us. in a kind of data standpoint, it's less, less exciting. but don't necessarily need to

have a recession or a real down to cds leveraged credits start to fight. reason is higher rates start to into the higher leveraged capital structures and it takes time. that is why you are seeing higher default in distressed activities. dani: is 50 basis points enough to solve that or is it a cut in real size to solve that distress? greg: i don't think it's enough, but it is important to look at why. there is a cut because growth is rolling over, it typically means the topline is rolling over and is that really enough? my guess is no. if they are cut because growth is strong and disinflation allows for a scope, that's a better narrative. the market continue to conflate those narratives. is it the labor market?

disinflation? both is somewhat heroic. lisa: in the meantime, we have a different narrative every two seconds. raises the issue we have been talking about a lot. we keep quoting lori, staring into the son of this election season given the fact that there is a whole deal of uncertainty. you talked about people on the sidelines when it is the bold that ahead of november. how do you know when you can have conviction given the policy uncertainty? or do we kind of already know the outcomes regardless of who gets into office? greg: i don't think that we know the exact outcomes. think about what is happening in france currently, and in mexico, it is very much a shot across the bow for a big election u.s.. it's been a big year so far and i don't see the appetite for a

lot of risk going into the u.s. election. once we are on the others, the policy differences are quite different and they matter a lot you know, i see as a bonded investor, i see more concerns around higher bond yield with inflationary policies and those are the areas i am most focused on. annmarie: greg, won't that be the case for either candidate if they become president? not exactly -- greg: not exactly. we are all of the mind that fiscal is an issue embrace on both sides of the aisle, but the contours of fiscal are very different. tax cuts have a different multiplier effect than say spending on infrastructure. look at the highly inflationary trade policies.

i think the details matter saying that physical will change regardless of who is in office misses the contours of how the fiscal is achieved. annmarie: we also need to know the makeup of congress. do you have a base case for what you're planning for after november 5? greg: at the end of the day, i'm a bonded investor and not a political analyst. we provide scenarios because we have to think about it, but i think that if you zoom out, everywhere i look i see more inflationary pressure, not less. think about it from a defense extending -- defense spending standpoint. think about it from, you know, spending on energy, both current needs and for the future, all inflationary. so, the one thing that seems

common wherever i look is more pressure for inflation rather than disinflation. lisa: quickly here, do you like french bonds? greg: too early, but it looks like a path for success. that's a great example, lisa. in the median distribution, it looks attractive. but the extremes are the things the markets are worried about. and then the setup of the french election makes it difficult with investors trying to gimp -- teen theory that out. lisa: thank you for giving annmarie a chance to say cohabitation again. annmarie: people are looking at cohabitation amongst these parties, meaning no one party getting their way. the euro people worried about skeptics coming in, they can pump the brakes of it. lisa: and i like the idea that

you bring up, the ghost of a liz truss moment. annmarie: exactly, they know that the market can bully them out of office. one reason it is so wonderful, it implies that they are there but not getting along, like we are cohabitating because we have to. that's evocative. lisa: it implies other things as well. coming up, sarah may lack nuveen and mark zandi of moody's as we look at the two-year action of fed speak and then onto friday, thursday and friday we have or pce and comes spending at a time when we see these lifeboats holding markets afloat at the 55 and above level on the s&p. dollar strength, yield strong, this is where we are at, stability. this is bloomberg. ♪

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>> it feels like for the first time in a while, the market has been attuned to downside risks and growth. >> they don't like the situation with the fed and i don't like the fact that the economic story seems like it is going a little bit. >> it's softer economic momentum. >> it's not guaranteed, but the

risks are higher than they were a few months ago. >> this is "bloomberg surveillance." >> heading into a day about nvidia questions, fragile? this is bloomberg surveillance. jonathan ferro will return on thursday. still a lot of discussion around the importance of nvidia right now and whether this is a stock that makes the market more secure in terms of ai dominance or more fragile given the huge fluctuations in market cap we have seen recently. dani: i'm just struck by the fact that nvidia can fall so much in a few days. it's kind of the most constructive selloff you could've had for nvidia and this point that we are not necessarily in a narrative shift? maybe just a order. lisa: that's something that mike

wilson was talking about, a shock narrative where the other stocks with similar attributes could be pegged to some of the growth. it would take something significant to really bring them down and it could be a growth shock. annmarie, we are hearing about this from the likes of mary daly . this isn't an economy that usually turns slowly and if you start to see the softening of the labor market it could be the beginning of something deeper. annmarie: different from what we normally hear from mary daly, it's not just all about inflation right now. we have to keep an eye on the labor market and we have talked about it a lot, jobless claims are rising potentially when you see more cracks in the labor market and consumer sentiment shifting towards a fed cut before the election. maybe september is coming more into play. lisa: which is the reason people are looking at consumer confidence in the university of michigan survey and even if it is now being conducted online.

there's a question going forward of just how much we can see the narrative shift more or if in some ways the fed has put a put on the market where growth risks will respond. dani: michelle bowman coming out -- she's always hawkish but saying that we have more work to do and when we get to that point where the >> -- cracks in the labor market are more apparent, will there be a big push back? is there enough disagreement at this point that even though we are hearing mary daly shifting sentiment, that's not enough to get us going. lisa: stability in the markets, firming up of equities, the s&p is up .2%. euro weakness kind of stabilizing in the area after going north -- excuse me, south of 107 last week with the 10-year yield marginally lower. crude going lower.

coming up, steve eisman of neuberger berman coining the deficit and talking about ai trade. sarah malic on election year volatility with mark zandi on why a fed policy error is the biggest threat for the u.s. economy. the biggest issue, tech route pushing markets to take a breather for a hot second. nvidia, shedding $30 billion in value. the biggest three-day loss for a company in history. even with the slump, the chip giant's up close to 140% this year, investors are still flocking to the company giving -- given the sky high demand for the chips. steve eisman remains bullish on the ai placing a corollary boost in the frenzy of infrastructure that powers the u.s. economy as we expect apple to benefit from ai and they have some reviews for the latest marvel movies. steve, i'm so pleased to say,

joins us now. i quote you on this every single day. i'm not sure how much pushback there is but it perfectly encapsulates what a lot of people have been thinking with the broader markets people have been looking at. is the huge swing in nvidia shares a sign of market fertility or strength, as danny pointed out, given the fact that we are not seeing broader retrenchment? >> looking at the chart, you can barely see the correction. percentage basis, down 10%, but you have to look really carefully at the chart to see the move. so, i don't get many -- means anything. -- don't think it means anything. lisa: how much do you understand the factor profits? i know being bullish on ai, but how do you understand? steve: i never do.

i just don't know. taking the converse, one of the things i learned running a hedge fund is that shorting a stock solely because evaluation is a death wish. i made that upt,oo -- made that up too, by the way. but you go short on a stock because you think evaluation is insane. it's expensive in the people who own the stock are in a story. as long as the story is intact, nvidia obviously intact, the story will continue. so, when you short something it's not just that it is expensive, it's that the story is going to break. as far as i can tell the story will last for years, so i don't think much about the value of nvidia. lisa: maybe you don't -- dani:

so, maybe you don't want to shorten it, the question for you, 12% dip on the chart, do you buy more? steve: well, we have a lot. [laughter] there are portfolio construction issues around how much you can have. one of the interesting thing this market that presents a problem to portfolio managers today that i don't this did before is that some of these stocks, nvidia, apple, microsoft, represent large percentages of the s&p. so, normally if you took a position in the stock, a 5% position would be big. those are the positions from the s&p. so, you are sort of -- the normal risk parameters that apply to the portfolio don't necessarily apply to use ox. dani: that's an interesting

point. you have to be overweight these stocks. steve: or at least equal weight. dani: which is again beyond normal risk parameters, to have so much concentration on these stocks. even though the story is there and powerful, does it do something to your volatility profile that you don't like when you can have swings like this over three days? steve: i don't focus that much on the volatility. i have a colleague who likes to say that one of the benefits of buying a holding is that you only have to make a decision. whereas if you are a traitor, you have to make multiple decisions and increases the probability of making a mistake. if you like the nvidia story, you own it and you keep owning it till something changes and i don't think it will change for a long time. lisa: do you also like micron? do all the semiconductor stocks benefit equally? steve: well, you can't own everything unless you just only

index. yeah, we like amd. we don't own other chip stocks. one thing that is very interesting is, you know, when you are talking about -- leave out microsoft -- software versus hardware. so, for years software outperformed hardware in one of the reasons was that the software industry moved to the sas model, everyone went crazy about it, etc. there is an argument to be made that hardware, which has recently outperformed software, will continue to outperform as an outgrowth of ai. this is not my theory. i'm not smart enough to create this one, but it is an interesting one that we should talk about for a bit. it's a long-term story and the thesis is that because it is ai, the caustic reading software will collapse. so, therefore some companies, unclear who, in the software

industry that people value highly because they have these large nodes, the nodes be so high anymore. now, if the thesis becomes true, hardware will continue to outperform software and software will get derated. that's a long-term story but i think it's interesting annmarie: annmarie:. the hardware is coming from taiwan. do you have concerns, geopolitically? steve: petrified. [laughter] annmarie: seriously? steve: god for bid china invades taiwan one morning, our economy is hit very, very badly. we're will beget our chips? annmarie: we are years -- steve: years from that, i agree. annmarie: is that your biggest risk? steve: that geopolitical risk is the biggest risk to the market, i think, and i have no way to predict it. lisa: to me this raises the

question -- will it be geopolitics or a growth scare? mike wilson said that a growth scare could torpedo some of these. some of the semiconductor providers. because there won't be as much investment. is that as much of a risk? steve: i don't see a growth scare at this point. you guys talking about the fed earlier? my view on the fed is that it's not relevant. it was relevant when it raised rig -- rights -- rates 500 points. that's relevant. the most vicious, what are they talking about? one or two rate cuts next year? seems like things that are dim and amiss. it will be important on fed day. i've said this before, fed day, they treat powell like moses coming down with the tablet.

like, check to make sure the 10 commandments have the same words as last time. but other than that, it's not that relevant. lisa: putting it all together before we shift politics and a bit, i'm curious about crowded risk. if there is a potentially increased tension around taiwan, how difficult could it be, given how crowded some of these names are? like i said, got for bid china invades taiwan, we will have more problems than my portfolio. we will all you -- lose money. [laughter] it will be the least of my issues. * with all of this -- dani: with all of this, why should you do

anything other than just hold a passive portfolio in the s&p 500? steve: that's fine for a lot of people. i have no. -- no arguments about that. i think that we are in an area -- era of stories more than we have been in a long time and you can construct a portfolio which emphasizes some of those stories more than the s&p does. you can outperform, that's how i look at it. i don't have an argument. if you want to invest in the index, god bless. lisa: if this was a movie, there would be a lot of stories, the plot is ai, it would be a good story. updating you on other stories this morning, here's yahaira. yahaira: the biden administration is looking to take on the verizon costs of housing. janet yellen is proposing new efforts to increase the rising -- to help with the rising costs

of homes, $100 million to finance affordable housing. the rising costs of homes and rent have put added pressure on americans. the average 30 year mortgage is 7.25%. the highest in decades. the nearly 15 year battle over the prosecution of julian assange may finally be coming to an end. the wikileaks cofounder is expected to plead guilty to leaking security secrets. he was accused of publishing sentence it -- sensitive military documents in 2011 and one of the largest breaches of state secrets in u.s. history. this plea deal would allow him to return to australia and avoid jail time in the u.s. developers in china will begin blocking access -- openai is blocking access to tools in china. the microsoft backed startup

already sent memos about the impending move to developers. it's not clear what caused the but it is from growing pressure from washington. that is your bloomberg brief. lisa: coming up, sarah malik and mark zandi, coming up next. this is bloomberg. ♪

lisa: time for morning calls. airbus, lowering to hold after they lowered their delivery targets, citing a damaging profit morning. next up, goldman sachs initiating coverage of paramount but they sell rating, with progression towards streaming

profitability but not enough to offset your cable had -- headwinds. when upgrading gap to abide, saying is in the upwind of a portfolio with underappreciated growth potential, talking about years of lost growth after people said you are not coming up with more staples for fast fashion? steve is here not to talk about fast fashion, but i did want to talk you about politics, as you have bold stances on it and i wonder if they are betting on the 200% confidence that you have that donald trump will be the next president. how do you translate conviction in politics into actual wagers in the market? steve: this is going to sound strange, i actually think it doesn't matter who's president for the market overall. i really don't. i think the themes of ai and infrastructure are so powerful that it doesn't matter. now, on the margins there will

be certain sectors -- like trump gets elected, i'm sure natural gas starts will do better. some solar stocks. some will do worse. there will be some sectors where things will be better or worse, but for the overall market i don't think it matters at all. annmarie: what do you make of the 16 nobel laureate economists saying that trump will be an inflation bomb? steve: i think it's ridiculous. based on what? because there will be more tariffs? annmarie: tariffs and tax cuts. steve: does that mean it will be slightly inflationary? maybe. one thing i have always learned about things as broad as this, things like inflation, things that cause inflation or cause inflation to get better, they are so broad, there are so many factors that, you know, the fact that trump will be president is

maybe marginal. annmarie: since the last time you. you shrugged off the deficit people, nonpartisan deficit office ramped up by 27%. there's growing concern about u.s. fiscal trajectory. does any of this concern you at all since the last time we spoke to you? steve: this is why it doesn't concern me long-term. at the end of the day the u.s. dollar is the reserve currency of the world. we have the most liquid at best government on the market in the world. if you are a major institution anywhere on planet earth and you need to park money, you buy u.s. treasuries. that's what you do. there's no alternative. you won't be purchasing italian bonds for chinese bonds or mallorca bonds.

you have to get something big, liquid, etc., and as long as that is the case, the u.s. dollar will remain the reserve currency of the world and until someone can show me why there is an alternative to the u.s. government bond market, we will remain the reserve currency and the deficit won't be that important. annmarie: there's this idea of policy inconsistency and remaining so how it -- and how it approaches the world and allies on these issues factoring into the u.s. in the most liquid market in the world. on the margins, some people say it won't happen all at once, but people are not worried about a wholesale blowout in yields but there is more volatility on certain proposals. you are basically saying that it doesn't matter long-term? steve: people need things to talk about. they need something to batch

- -- kvetch about. they will do that. at the end of the day, a dollar is a dollar and as long as that remains the case, we can have deficits. do i think at some point it will be important? maybe. people are pontificating. do you see rates going up? i don't see them going up, they are going down. so, until then, next story, basically. dani: ok, i'm going adjacent. i apologize. steve: don't apologize. dani: one of the concerns about it is central bank bonds. but the switch has happened. fortner individuals are the biggest holders of bonds. you are in an environment where because of more regulation, banks are holding less on the balance sheet and suddenly there is more potential for upset. not necessarily that the deficit

will cause it, but her hands are holding on to bonds now. -- weaker hands are holding onto bonds now. steve: i don't think they are so weak. the tenure has gone to 4.2. i don't lose sleep over this one. lisa: so, i guess the bigger picture -- steve: i sleep very well, by the way. lisa: i can tell. great life. you have been attached to the stocks that have one the biggest, but do you just -- won the biggest. but do you diversify? or do you look at ballast that could be cash? steve: first of all, it's nice to be able to purchase three month u.s. treasuries at over 5% . if you need to park cash, that's fine. corporate bonds are fine, too. generally we do equities. just u.s.

lisa: you also do movies. do you have any new recommendations? steve: i don't have a new movie recommendation. there was a new show called "the veil," with elisabeth moss, pretty good. dani: she's excellent. lisa: he's into bridgerton, equal opportunity reviewer. not into marble? steve: i very passionate about it, just upset about what's happened. [laughter] we'll get into that another time. lisa: always a pleasure, steve. insightful, touting the ai narrative. and i love that idea of the idea of stories, the same market driven by stories more than that any time in recent memory. dani: not only a story, but a story that our tiny human brains have a hard time comprehending. the power of ai, how it gets used at how quickly it advances.

i think that's why chatgpt caught us by surprise. it was like overnight there was this amazing thing that we could all use. i think that that is why so many are excited about the stock and are willing to buy it at current valuations. lisa: meanwhile, i wonder about that, people saying politics don't matter? that's a new one for a lot of people. annmarie: it's true, greg peters basically saying november should be a coin flip, hunker down to wait it out and then steve eisman saying that none of it matters, it doesn't matter who will be president of the united states. on the margins he thinks it might matter, even though we have record fossil fuel production, but he doesn't think that that is a driving force in the market right now. so, i guess that it is what everyone says, holding nvidia.

lisa: well, today will be -- we will be looking at fed speak and consumer confidence. i'm curious to see how people are feeling at a time when the market is trying to reverse some of those losses of the last few sessions. nvidia, gaining along with the rest of the equity space. yields, stable. commodities, lower as people take a look at supply. this is bloomberg. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari?

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her uncle's unhappy. relax i'm sensing ann state underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

lisa: about 60 minutes until the start of the trading day, a bit of positive momentum because it is all stories, stories are good right now. nasdaq futures are up .4%. no one ever quotes the nasdaq in terms of the level in the same ways as the s&p. i was just thinking about that. the russell 2000, unchanged. i was just thinking about running through these numbers and none of it matters to steve eisman. doesn't matter if people are concerned about the fragility of nvidia because the story is working, why fight against it? dani: all that matters is stories. people do quote nvidia. the new things we need to watch our s&p and nvidia, but it's all just numbers. lisa: in fairness, nvidia accounts for the entire market

cap of the russell 2000. so there you go. looking at the bond space, there might be calm before the storm or maybe it doesn't matter. we are looking at the potential for a two-year auction today to potentially be the first in a slew of treasury options to get a gauge on where investors are right now. you can see stability in the bond space, marginally lower. 422 is rounded up on the tenure. two-year yield's are really stable in this 470 to 475 level. in the currency space you see a bit of euro weakness simply banking on what we saw last week . still above the 107 level, really tracing back down, potentially crossing it right now after those french elections remained in the forefront. to me this is where politics matter. we saw a substantial response in

that region to the french election, the first run of which starts sunday. annmarie: and the rhetoric ramps up in the first round. macron talking about a civil war around the fact that you have the far right in the far left gaining ground. but we have seen marine le pen's party come out and say they are coming in mind, we are not the euro you thought we were. we will come in line, easing concerns on investors. lisa: how does the market provide a check on hyper populist policies? nvidia, slowing down for a hot second, a chip giant on the technical session yesterday with a $400 billion release from the market cap, the biggest three-day value loss for any company in history, but still up year to date. i feel like we need that asterisk whenever we talk about this name.

dani: the tiniest violin. bitcoin was also taking a lot, falling below 60,000. there was a flavor to it where these short-term momentum trades went into the market and things that have been hot were selling off. i've been saying this all day and it's true, the narrative hasn't shifted. the story is big, grand, wonderful, and i think it was consensus that it looked frothy. if anything, it didn't make that much of a difference. lisa: mike wilson talking about the potential for a growth shock had steve eisman shrugging that off. apple reportedly rejecting the idea of the iphone ai partnership with meta. we reported this after what happened in terms of the earlier reporting sources telling bloomberg that the tech giants are not in discussion to integrate the chatbot into the

iphone. the journal had reported a potential partnership. to me one potential aspect is that on one hand apple seems to be in the market should -- market for a partnership. regarding what is right and wrong, there is the overarching theme, but who wins out and when does it stop the overarching everyone wins trade? annmarie: when it comes to ai they haven't necessarily built it in-house like they normally do with a lot of their products, software, and hardware. what is interesting about the journal reporting is he said apple moved forward with meta discussions because he doesn't see it as a privacy practice that is stringent enough. maybe they are concerned about privacy concerns and the regulation battles they see coming down the pipeline when it comes to ai? leaving questions, to your point, who a pair within the future? dani: apple is a company that

will usually go to the consumer and tell them what they want. instead this is an apple looking at different partnerships and letting consumers do it they want. at the beginning when they work on -- contemplating about how to incorporate the internet they looked at having their own system in the apple world. it's come so far and shows you that ai is a complicated beast and apple might be behind. they are being forced to be a different company that takes on partners instead of a leading force. lisa: not a macintosh, [laughter] but a fuji. terrible. mary daly, saying that the labor market has adjusted slowly but we are getting closer to the benign adjusted outcome being less likely, adding that inflation is not the only risk that we face as they take a look at the data with consumer confidence and new-home sales.

we heard this morning from michelle bowman the opposite, inflation hasn't died and we have to be cognizant of that. canadian inflation showed the acceleration over the prior month's. a lot of crosscurrents. joining us to lay it out us is mark and sarah. i want to start with you, this idea of growth shock versus inflation. have we moved more to the growth shock risk than the inflation side? >> moves in nvidia and bitcoin told us that there is a cautious undertone to the market with employment markets and consumer retail sales getting weaker. less retail traffic. employment markets with payroll being strong, that is in unusual number cycling highs. both numbers telling us that the economy is slowing in the tough thing to forecast is how the economy going to get as they

approach the session in a slow manner. tbd, to be determined in terms of premiums. lisa: i know that you agree with the sentiment, market, the bigger risk being the drawdown. do you like this idea of a significant downturn? >> i don't think a recession is likely, but there is evidence at this point for the fed to start cutting interest rates. the economy is slowing. we track gdp growth at 1.5%, down from two point 5% last year. this as things notched higher. initial claim is heading up, market indicators showing softness. given that inflation is coming in within spitting distance of the fed target already excludes the problematic oer with the implicit costs of owning a home

being difficult to measure. everything suggests strongly that the fed should be lowering interest rates. now you know, if they wait another month, two or three, maybe even after the election, i think we will still avoid an economic downturn, but why take the chance or the risk? besides, in this kind of environment, the economy is beer he vulnerable to what could go wrong, including those upcoming elections. dani: you couldn't sound more different than michelle bowman. neil donna said the fed is looking at yesterday's data. are they behind and in potential danger of making a policy error? steve: there's a real -- >> there's a real chance they could make an error here. that's my humble opinion. i think that the economy is softening quickly. so far, so good. that's kind of what the fed

wanted. it's important to get inflation back in the bottle. but the other thing i would point out is that the financial system is under a lot of pressure. the yield curve is still inverted and that's not a good place for a lot of banks and financial institutions. loan growth is slowing because of last year's banking crisis. credit quality is moving in the wrong direction. still good, but moving in the wrong direction. the system is under a lot of pressure and when it is, as it has been and will continue to be with this higher for longer strategy, you know, something else could break and the next thing might not be conducive to being fixed like last year and the banking crisis. yeah, i think at this point the risks are asymmetrical in the fed should start cutting interest rates. dani: by the way, the yield curve is at its most in voted's -- inverted since september --

september. sarah, do you agree with that around the fragile economy? >> the fed needs to be careful about not risking inflate ability. the fed has said they need multiple months of data points before they start cutting rates and we are just starting to see inflation coming in and the fire months. we have many months to go before they cut. september could be the first but i still think it's only one or two this year. they have to be cautious around auto insurance. finances, health care, it all remains inflationary end of the consumer has been pretty strong, which has lisa: been lisa: an inflationary headwind. the fed could be to cautious and cause another inflation acceleration. i feel myself distracted by what we heard from steve eisman, talking about issues like the fed and political ramifications. he said the fed doesn't matter,

politics don't matter. mark, i would like your sense of the federal reserve and weather rate policy will matter. why it isn't necessarily just some sort of distraction every month or so when they come down to speak, given the fact that there is this technological shift underway that has taken mainstage? >> as your previous guests had to say, in my view, the things you mentioned, they matter and they matter a lot to people. if the fed doesn't cut interest rates, people with credit card debt and consumer finance loans, auto loans, home equity lines of credit, they struggle to make those debt payments. it matters. for businesses, small businesses that have loans tied to the prime rate, tied directly to what the federal reserve is doing, it matters.

and of course, in terms of the upcoming election? it really matters. obviously, a lot depends on what happens with congress as well, but these candidates have -- they have very different perspectives and revisions about what policy should be. depending on who wins, we will be going down different paths here. these things matter a lot in a broad, macro sense. more importantly, they matter a lot to the american people. lisa: when you think about -- annmarie: sarah, you are thinking about opportunities in places outside the united states . when people come around the table, they say that because everywhere deals with politics and uncertainty, you have to go with the u.s., so where are you looking to set up ahead of what many are calling coin toss?

>> three things that matter for the second half our earnings, the economy, and the election in the u.s., and the u.s. comes with a premium. everyone knows that story. many of the big elections are moving behind us. we had india, south africa, mexico, that we are still dealing with what's going on in france, a lot of the elections are ahead of where we are and many of these countries have been battling inflation for longer than we have. that makes it resting and valuations are interesting. even the emerging markets have the structural tailwinds of consumption based improvements. we like japan with the tailwind of better governance and growth picking up. benign inflation, that's a favorable country for us. the eu is still a challenge with the inflation problem but not the growth advantage. catalysts pus -- plus valuations

make us want to look for more attractive segments. annmarie: do french bonds attract you? or are they scary at this point? >> there is too much macro unknown in the region right now, we like where we have binary outcomes. it's challenging to invest even when those things are in your favor in that would not be our first choice. we like municipal bonds, not only are the yields attractive but the municipalities of such strong savings rates because of our economy, that is an area where you can take advantage of strong fundamentals. dani: bringing you into this conversation around political risk here and abroad, there's india, south africa, mexico, france. imf data shows 50% of french bonds are held by foreigners. markets were a lot of locals are participating. do you think that we haven't

been paying enough political risk abroad? mark: i think we have been paying attention. when i give a speech and ask what's top, the first thing that comes up is geopolitical risk. it's not hard to pinpoint exactly what risk is most threatening. there are plenty of things out there to worry about. mentioning france, europe, the various selections from across the globe, and of course the chinese u.s. relationship with taiwan, north korea, russia. there is all kind of geopolitical hotspots that can boil over. i don't think that people are discounting the risk. i think it's top of mind. i think the real difficulty is kind of aging how significant of a threat it really is and what are the links and channels back through which it will affect our economy?

that so much more difficult task to do and more difficult to gauge? annmarie: a number of nobel prize-winning economists came out today to talk of the difference between a biden reelection and trump winning. something else that steve eisman a sickly shrug off, saying that he doesn't think it matters. they talked about the fact that trump would be more inflationary. is that how you view trump 2.0? mark: yes, i do. if he gets what he wants, terrorists will be significant across the board. especially with chinese imports in the country, it is an immigration policy, particularly around deportation. if he did and could follow through on that, that would be disruptive to hospitality, retailing, the mining industry,

agriculture. food prices going back up. think about the tax cuts. they are deficit finance. there is no plan for paying for the tax cuts. and he's talking about more of them, lowering the corporate tax rate more, adding to deficits. that's, that's, that's fiscal stimulus, adding to the economic growth when it is already full employment. of course this is now more speculative, but there have incredible media reports about thoughts on impacting the relationship between the executive branch, the president, president trump, and fed independe of course, a bedrock of a well-functioning market economy is a well-functioning central bank. it will result in more inflation. that is a brew for higher rates

of inflation. >> there is good news and bad news about election years. markets tend to be more volatile, which is what we will likely see in the second half, but earnings are going to drive things higher in the next catalyst is the second or where things are expected to grow 10%, mostly led by technology, so we will see if that is the catalyst around this sector. it also depends on what happens within the u.s.. there are so many factors driving inflation, i don't think the president himself can be blamed for inflation or which candidate wins. trying to reopen any could be -- china reopening could be inflationary. all of those factors, there are so many, it is hard to pinpoint it onto a presidential candidate. lisa: it's why some people are

saying just look at the earnings, if they are ok, you can be all in. >> they should be ok, broader than we have seen in the past. non-tech earnings are expected to grow. if that happens, the market could broaden out and help them market stabilizing recovery. lisa: thank you so much, sarah, mark, for being with us, today -- with us today. here is your bloomberg reef. yahaira: the fed governor michelle bowman says she sees a number of upside risks to the inflation outlook and reiterated the need to keep rates higher for longer. in london she said a tight labor market, geopolitical developments, fiscal stimulus and a loosening of financial conditions are risks to the inflation outlook. she pointed to a more open immigration policy in the u.s. as a reason work differences between the u.s. and other major

economies in recent months. boeing has offered to purchase spirit aerosystems in a mostly stock deal that values the company at $35 per share. the latest proposal is a switch from their plan to fund an all-cash offer. the final details are being discussed and the terms could still involve a small amount of cash and it would require spirit to spin off some of its manufacturing plants to airbus. the transition would likely be announced within a number of days. u.s. travelers continue to fly at record numbers. the tsa broke a new level, screening 3 million travelers on sunday alone. the tsa expects to break the record again this friday as people travel for the elite holiday summer vacation. they expect yahaira -- lisa:

setting you up for the day head, this is bloomberg. ♪

lisa: does anything matter except for ai and the stories? counting down to the opening bell, here's the trading chart for the week ahead. consumer confidence data at 10 a.m. and more fed speak from lisa cook. wednesday, new home sales and the mystery of the housing market with another round of jobless claims and the first presidential debate. rounding out the week on friday with the pce deflator, the key inflation metric used by the fed . finally, university of michigan consumer sentiment. i want to go to the question of the difficulty in understanding where to look and what is important. steve eisman saying investors

can put aside the campaign trail. steve: this will sound strange, i don't think it is -- i don't like it matters who is president for the market overall, i really don't. i think the themes of ai infrastructure are so powerful that it doesn't matter. there will be some sectors where things will be better, things will be worse, but for the overall market i don't think that it matters at all. annmarie: doesn't think it matters at all? good luck to us, who have to cover it for the next few months. immediately afterwards we had mark zandi come on to say all of it matters and it matters a lot. you see the white house leaning into what these nobel laureates had to come out and say with a trump presidency being more inflationary and some people are saying potentially yes. talking about things like tariffs and tax cuts, there were a lot of unknowns, like the makeup of congress. for steve eisman, it doesn't matter as long as ai is still in

play. lisa: people might dismiss this as cavalier given that immigration is affected, the labor market, the upward pressure of wages, fiscal stimulus being a tremendous boost spending. he's not totally off though when it comes to the idea that nvidia has been a huge driver of the preeminence of the american economy, technological leadership, and the idea that we can shoot for the moon with these valuations. dani: but there was a point around nvidia where we were like -- it is just ai and any company that has incorporated ai. now there's this future potential with infrastructure needing to be billed out -- built out. for the moment it seems like the bet still needs to be nvidia. this thing benefits and it is the only real clear part of the narrative in the rest is theoretical. lisa: nothing matters isn't so

much the take away as it is the idea of lifeboats that people have been clinging to that are independent of the macro cycle and if one of them shows holes and starts to fill with water or flood, people jump to the next one and the only thing that could sink them all at the same time is a growth scare and this concern that things are not linear. it's the reason why jobless claims and consumer confidence are important. coming up tomorrow, strong feelings about this with something very similar as to what mary daly is seeing. we will have guests and i'm very curious about their take on small caps trying to get love and then falling back. this is bloomberg. ♪ so, what are you thinking?

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matt: from new york city, i matt miller. nvidia bounces back and so too the market rises. the countdown to the open starts right now. ♪ coming up, futures pointing higher as nvidia bounces back from his three-day selloff. michelle bowman that the fed sees upside risks to inflation. bloomberg invest kicks off in new york city. we will bring you conversations from the leaders and asset management banking and wealth. we start with the big issue, shares of nvidia helping push the market higher yet again. >> the market makes perfect sense. it is paying for quality and for growth. it is idiosyncratic from the economy.