>> this summer is going to be a lot of push pull on the markets before having trouble finding a conviction on trade. >> we are into stories more so than in a long time. >> momentum feeds on itself and there's more move to the downside on momentum. >> over the longer term it will be earnings that drive the markets higher. >> people are running on different sides of the boat in the boat can remain fairly stable. >> this is "bloomberg surveillance."

lisa: the runway to a soft landing, getting narrower. welcome back. annmarie hordern, dani burger, lisa abramowicz. jon should be back tomorrow. right now the market is buffeted by one name. yesterday the name was up, market gains, talking about video after 200 begin in losses. to me under the surface there is a question of what the message is for the rest of the market. dani: there certainly is. when you are led by one market, you have to take it away and see what the rest of the market is doing. there are growth concerns. what happens when you get growth concern? maybe when you see -- regime shift in remove from defenses and not just nvidia. lisa: yesterday the s&p equal weight was down, even though the market cap weight was up zero

point or percent. in the second quarter the s&p 500 is up more than 4% and at the equal weight is down almost 3%. this is a market of many different stories, to steve eisman, --'s point annmarie: -- steve eisman's a point. there is weaker growth with disinflation but then there are the concerns from the fed. in the concerns about the labor market, people are talking about those cracks in the labor market. jobless claims are up and mickey bowman came out at the same time saying that the bar will be very high still. lisa: glad you brought that up. the australian having to deal with that resurgence in unexpected acceleration, there's this feeling of a runway to a soft landing. they are both rearing their

heads and making it difficult to know where to go and where to look for the market. how much are they going with soft landing? dani: and by soft landing to you mean nvidia? it's this world where we don't know what's happening and the only sure thing is the narrative of ai because under the surface it is confused. look at the corporate earnings. fedex does well, carnival does well, but then people aren't buying pools anymore. there was a consumer conference where walmart and target talking about the weakness of the consumer. it's gone away from the ping-pong narrative. it's all occurring right now. lisa: and even fedex, was that the right kind of upside surprise? on the market cap level when you take a look, when we see moderate gains of .1% after a few gains yesterday on the heels

of nvidia on the s&p, the euro fell below 107 and once again we are tracing the lows that we saw last week in the wake of the snap election that was called in france. we get the first round on sunday. emmanuel macron losing a lot of cloud, potentially dragging down the euro. annmarie: he is losing cloud. we have a story about individuals trying to distance themselves from him because his brand of politics at this moment has become very toxic and france. lisa: meanwhile, inflationary field -- fears going upward around the globe with oil prices. sitting here for a hot second, there's an increase in crude levels at a time when we are hearing more and more about hezbollah and israel. lloyd austin came out and said that this could be another front . to me this is percolating under the surface but getting louder and louder. annmarie: absolutely, it's the

geopolitical risk premium we've seen coming in and out of the oil market and now it is creeping back in. at any moment, people are concerned about these skirmishes that could actually expand and could maybe mean, according to at the pentagon has talked about, iran coming in even more. also interesting, peter tear yesterday said be careful leading up to the u.s. election. could any autocratic regime or bad actor make a move to impact oil prices? it's so important. they were talking about how important gasoline prices are to the election. lisa: which is why we are focusing on that with the growth concerns today. katrina dudley is coming up from franklin templeton on why she still believes in that soft landing. one day out from the first presidential debate, with neal dunn a on why the fed should be

cutting rates right now. top story, u.s. stocks snapping three days of losses ahead of the presidential debate with key inflation data on friday. katrina dudley wrote -- we continue to believe in the soft landing. today's economy is better than it was at the beginning of the year, the main risk on the horizon being the impact of the presidential election. before we get to that, we have to go to the fact that we begin the show saying that the runway twist off landing is getting narrower and narrower in here they come out saying it's the opposite with people getting more confident and have complete conviction. can you just sort of bring that together? >> when you think about the soft landing and the narrow runway, that's the impact of data coming into the market and informing the investment opinion. looking at the beginning of the year and where we are, at the beginning of the year the market was predicting six rate cuts and

we were lower in terms of the february cuts. we were slightly more optimistic. the market has come towards us. it's interesting, now soft landing is considered bullish and i think it really -- it doesn't understand the resilience of the u.s. economy and also doesn't look at the fact that there are opportunities outside of the u.s. market as well. looking at valuations and everything, when we look at the soft landing scenario, we are very positive going into the second half of the year. i think we have got good earnings support with a labor market that is not inflationary and we think that if i look at the impact of ai and all of those things, we think it is positive for a lot of sectors. lisa: do you think that mary daly is wrong at the fed and that it is nonlinear when you see a weakening in the labor market? katrina: calling it at the fact

that you have got a fed that we really do congratulate for the fact that they have been telegraphing so clearly what they are paying attention to. they are paying attention to inflation. we have spent a lot of time talking about that because it came from such high levels and they are watching the unemployment number. but when it comes from historically low levels of unemployment, we can normalize unemployment and we can still have a supportive market. dani: i want to ask about what supports that market. the environment is positive but we are talking about soft landings. or we are talking about a huge growth engine? how do the cyclical stocks catch up if it is not a huge bout and it's an anemic soft landing? katrina: anemic growth is actually good for companies. aggressive growth, that's difficult to plan for when you are in the ceo seat. when you have tepid but predictable growth, it is much

easier to plan and forward forecast. if i told you that we know that things are only going up 2% to 3% you could get some productivity gains to manage that. so, you can manage costs in order to meet the revenue. when things are going gangbusters intermarket is growing 10, your revenues are going 10 to 15%, you are just adding bodies, adding costs. i do think that productivity is where we are going to see upward surprises in terms of driving earnings going forward. dani: does this market make sense to you right now? stripping out nvidia, a market where in the past quarter it's been utilities and staples doing well with the others lagging, you look at that and say -- given that we are trying to approach a landing, does that make sense? katrina: concerns about the consumer are not new over the last couple of weeks. mcdonald's for example, three to

six months ago they were talking about the fact that they were seeing a shift in the consumer to being more cost-conscious. what does that mean? they see a shift, they use data, the use a lot of technology enable -- to be able to forward project and they are bringing out more cost-conscious offerings to meet the consumer where they are at and that is a key aspect of what a company needs to do. understanding what is going on. we already knew that the consumer was more cost-conscious. going to the oil prices and looking at what is happening at the pump, that is also starting to pressure the consumer. interestingly enough, a lot of people are using the strong u.s. dollar to travel internationally and oil prices are not such of a component of the costs of travel in this summer vacation series as it has been in the past. i think that there are just a lot of dynamics going on in the market but we look at the fact that have a high end consumers

supported by a strong stock market and its very much a driver in the middle income consumer has a lot of good things going for them and the low-end consumer we are paying attention to and it has strengthened the job market, which is positive for them. annmarie: glad that you brought up travel. even though we have seen subdued sentiment, most respondents say that they are planning to take at least half of a vacation in the second half of the year. does that maintain the idea that we have seen disinflation with service being the most difficult? katrina: service in terms of the number, the biggest driver is the housing market and the rent. that is a significant lagging indicator and the implication is that the number will come down so we need to pay attention to the second derivative impact. there's less inflation there. in terms of traveling abroad, it

is the strength of the dollar that is driving that. i am heading over to london and portugal. look at the prices we are going to be paying for accommodation for trips and travel, it is significantly lower and that is a big driver for a lot of travel. lisa: before you go, you said the biggest risk is the election later this year. is there a scenario in your mind about which presidential candidate could be more disruptive to the market? katrina: the reason we talk about the presidential election being disruptive is the fact that there is no clear contender for the white house that you can bank on and you had data earlier on that. so, if i take a look at what we think is going to happen, each of them has a unique platform with sectors of the market that will work if they are elected and not work if they are not. that's the answer we are talking about in terms of the difference in policy and the fact do not have a clear person going into the white house.

as a result, what will happen is that all of the stocks will thrice in the fact that they will lose, pricing in the downside on the downside, those gains could come back into the market and we do see the risk. lisa: katrina dudley, thank you for being with us on your way to portugal and london, have a great trip. here is your bloomberg brief. yahaira: again, hovering around 160 against the dollar. the same level that triggered a sharp reversal in april because of suspected intervention. the latest move raising speculation that japanese authorities may intervene to support the currency again. the japanese finance minister said they are closely monitoring developments in the marketing and will take all possible measures as needed. with just days to go before france votes in the first round of a legislative election, leaders in the biggest political groups clashed in their first

televised debate and it became heated when they discussed the retirement age in the country, which emmanuel macron raids -- raised from 62 to 64. it's become a turning point for the country with polls suggesting that the micron party is set to lose majority. shares of fedex surging in the premarket, announcing fourth-quarter earnings that beat wall street estimates and that they would buy back 2.5 billion dollars in stock over the next year and the better-than-expected results have been assigned to cost-cutting plans that are taking hold in fedex is hinting at a possible investor of the freight is this, saying that they are assessing the unit place in the portfolio. lisa: thank you so much. up next, net and heading towards november. -- neck and neck heading towards november. >> for the overall market, i

don't get matters. lisa: nothing matters except for stories and that story is nvidia. this is bloomberg. ♪

lisa: coming into wednesday ahead of the debate on thursday and on friday of ores the core pce deflator data that the fed looks at to determine the inflation metric that they view most important. right now a bit of gains that are marginal across the board. under surveillance this morning, net and neck headed towards november. >> actually think it doesn't matter who is president for the market overall, i really don't. >> there will be some sectors where things are better or worse, but things that cause inflation to get better, it's so broad, there are so many

factors, the fact that trump might be president, that would be marginal. lisa: one day out from the first presidential debate, the latest polling showing that president biden and donald trump tied at 44% each. wendi schiller writing -- why are so few voters undecided at the early stage? could be that it the candidates are overly familiar or a sign of further entrenching of already polarization. wendi, wonderful to see you. maybe it is as we heard from steve eisman, nothing matters and it will become a tired position of political punditry at the top of the country that you have to look elsewhere for other policy shifts and for what will move the market. wendy: well, lisa, i disagree, i think it will matter for businesses and labor and that is where we have to look. labor has made some gains. the sector of private unionization is pretty small,

but in the last year and a half we have seen them secure wage increases in particular with conditions on revenue-sharing at all the things that affect business. those have been the particular sectors but the auto sector is a pretty big sector. thinking about the trump administration and the regulation, then the biden administration, they are very different future pictures. i do think it could put pressure , either downward pressure on wages or upward pressure on wages. i disagree with that statement, but when you have a former president, recent former president and current president, there isn't much new to learn. the weaknesses in the candidates are what we are going to learn. is trump going to be more restrained and disciplined in his rhetoric? is it by going to bring the energy and coherence he had at the state of the union but has been inconsistent about in the

last couple of months? annmarie: there's an editorial this morning from "the wall street journal," showing that trump is as personally unpopular as biden but that voters recall fondly the results of his pre-covid policies and that if the campaign is about ruling records, trump can win and if the record is about trump, he will defeat himself again. is this a strategy for the trump campaign trying to set -- separate the rhetoric on voters with policies that some of them looked kindly on? wendy: trumka try to separate himself from his rhetoric, but that's impossible. having him focus on himself and how great a president he was in his mind and in the minds of millions of voters, particularly strong loyalty from the republican party just focusing on that message, you can get your candidate to do that.

i don't think that you can separate or distinguish. i think you just have to keep him on message, the economy was great when i was president and i support independent businesses, etc., i won't make you feel out paperwork or impose new regulations. i will let you be free. these are the kinds of things he did well on the first time and this is what voters will respond to in 2000 24. you cannot separate the man from his words. in fact he is his words. you can keep them on message when it is about his success. annmarie: nbc is announcing he could announce a vp pic as soon as this week. is there an opportune time when you think campaigns should announce running mates? wendy: he doesn't care who his running mate is. he thinks he loses or wins the election on his own. voters that haven't been

traditional republican voters, you may want to announce it now so that you can get a foothold in your ground game for the next couple of months. the same might be true for tim scott and african-american voters. that is the advantage of announcing now, these are constituencies that don't usually vote republican and might be more responsive if he picks a latino or african-american for vp choice. your average north dakota governor who is an older white male i don't think it's them any traction. annmarie: last night we had the first member of the squad, jamaal bowman, getting kicked out. tough primary, one of the most expensive house races we have seen. is this assigned to the progressive base that they need to come more in mind to the moderate center ahead of november 5? wendy: the democrats are counting on winning back the seats they lost in 2022 in that's an issue where progressives have been very left

and aren't playing well with constituents. those competitive districts are eight total in all and if the democrats swept the table with those seats it is likely they can take the house back. i'm not sure it is the progressives that want to learn the lesson as it is the leadership that leans progressive needs to themselves how do we position ourselves to win those seats and a left message doesn't appear to be winning them anymore voters. and they really need to moderate on things like the economy and as i said, wage increases, climate change legislation, infrastructure, all the things that biden has actually done that most voters would respond fairly to. dani: a lot has been said about the market reacting in a big way to who the members of congress are. to that point, does the fate of trump and biden matter? how tight are they to down ballot candidates?

or are they separated in the viewpoint of voters? lisa: that's a great question -- wendy: that's a great question. it's highly contingent on the performance of the presidential candidates at the top. more so for biden then for the republicans. the senate races are dispersed across the country in terms of their importance in this and competitiveness of this. right now we have democratic incumbents leading in swing states when biden is losing in swing states. it's a dynamic suggesting that voters are willing to split their ticket in november. so, you could see the democrats maintaining the senate or losing by winning the house. that's something we don't usually see. in political science over the years we have seen that markets don't like uncertainty and when there is a presidential election , things get shaky and when it has been resolved, the markets need to regain their footing. it is the uncertainty more than

the individual winner or loser for the markets. lisa: wendi schiller, thank you so much. we do see this in options markets, a possible blip in volatility as a result of not being clear on who the president is just yet. annmarie: it might take days or weeks for the ballots in the states. some can only start counting on the day of the election. it might not be as clear. 2020, everyone thought a red wave and then more democrats voted by mail and it was like actually, this is a lot closer than people were thinking and markets were all over the place on that. lisa: and that was a great question about down ballot versus top of mine given the results that we saw yesterday. they were talking about jamaal bowman losing to george latimer in this moderate democrat district and you wonder if this is a larger message that is something very specific tied to

a specific region. dani: there are certainly specific things happening in new york but latta mayor -- latimer more like biden and question -- makes you wonder how tight they are. split tickets and the idea that you could have trump with democrats retaining certain parts of congress? we have mostly been talking about it split the other way, so it is interesting to hear these outcomes. lisa: and there's a split market where people think that it matters and others think just focus on nvidia. a little bit of a lift is the emphasis. this is something there watching after they get a more than expected rate out of australia. this is bloomberg. ♪

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

lisa: three hours until the start of the open as we look until whether we will get an ongoing divergence between nvidia and everyone else. we are taking a look at mild gains getting claw the back as the session grows older in flat on the s&p, 55 38, the nasdaq outperforming once again. you can see the bifurcation continuing. the russell 2000 up one quarter of 1%. we have been talking about this throughout the morning and i think it will be a theme for a while, how long can this divergence go on?

are these engine pistons firing in different ways and keeping everything afloat or does it represent real weakness and fear under the surface? dani: whatever it is, this is maddening, a market that feels like a zero-sum game. it doesn't necessarily make sense. maybe it's the momentum being such a strong worst that on any given data momentum is doing well or poorly. we are not necessarily trading on sectors. mike wilson talk about the idea that it's dead and we have to trade on idiosyncratic stories like he and other guests talked about yesterday meaning that the market as a whole isn't rising or falling together, it's the pistons. lisa: lifeboats, going from one to another as they get scared about one loss in the cloud. the one thing that he said would really change the scenario would be true growth fears, which is why looking at what's happening in the bond market is interesting.

yields higher or lower based on the growth scare, now a strange place of two-year yield's marginally higher on the week down on the day. 10 year yields, higher after we got the inflation spike in australia, 4.28% rounded up. to me this really exemplified the concern of the chinese 10 year yields falling to the lowest since 2002 on growth concerns. currency, weakening dramatically. this highlights, is it good or bad for the economy or the stock market? that is one of the key questions we keep hearing from our guests. dani: it's true and part of that tension is playing out in a static bond market, market that refuses to move out of a range. maybe that's because we already priced in 50 basis points of cuts? michelle bowman made it clear that we might not even get that.

how can you even trade anything anymore at this point? not to mention it's the summer time where everyone wants to be on the beach and while that's happening we are getting all of this political news, it is a tricky market to be active in. lisa: which beach? europe? the euro is weakening versus the dollar and continuing eight dissent and weakening trend. -- dissent and weakening trend. -- a descent and weakening trend. putting aside the french election, looking at travel and carnival, carnival had record booking. they were talking about record spend. they were upgrading a forecast at the time when they were supposedly worried about weakness. how do you put that together? annmarie: that's why consumer sentiment was fascinating. people are still concerned a bit about the cooling, the >> we've seen in the labor market, yet many respondents said they still

planned to travel in the second half of the year, they want to get on the beach and not just international travel. international travel, that's good for the americans right now, but consumer sentiment risk is also about domestic travel. it's that bifurcation on what people are willing to spend on. lisa: lisa cook, fed governor, saying that rate cuts will be appropriate at some point and she expected inflation to moderate slowly this year before more rapid progress 2025 with the preferred method of inflation, pce, is due out on friday. is any of this fed speak still useful? dani: i think it is. we are kind of hearing this thing that you heard with lisa cook and mary daly, no one says we are there yet, but the doves are getting louder and more bold, talking about labor market

concerns, talking about inflation raining itself in. this isn't across-the-board, michelle bowman saying that a cup being necessary, but it is more bold of and i think that means something. lisa: it does, i would agree. shares flying in the premarket, beating estimates with a sweeping plan to restructure and cut costs taking effects. buying back 2.5 billion dollars in stock over the last year. is this the wrong kind of upside surprise? annmarie: so much of this is about cost-cutting. there's the potential that they might look at unwinding their business and people are saying that what they are doing in terms of cost-cutting is working and that is why they had a good earnings report and why the stock is moving higher. at the same time it seems that the logistics business is healthy at the moment. a lot of concerns about that business after the covid-19 pandemic. but to your point, it is -- it's

good but maybe not for the best reasons. lisa: cost-cutting representing a weakening around the edges. an ev maker getting a boost from a $5 million volkswagen deal to develop battery-powered software. they have both struggled this year amidst a slowdown in demand . how much is this a boost on this prospect? how much is this just retrenching from the 50% decline in shares this year? dani: rivian is one of those tesla wannabes, wanting to build up a big presence in the u.s. there is a graveyard of these right now with a lot of vc backing and have run out of money. there is one, for skirt, which filed for bankruptcy last week, ran out of cash and couldn't keep going. here is rivian trying to extend

the runway. i think it makes sense from their point of view. vw, they already invested in another trucking ev, so i don't get it, it seems like they are cannibalizing their own business. i'm not certain. lisa: maybe that is why. katie koch expecting rising defaults without a bubble in private credit. i spoke to the co-ceo of oaktree at the bloomberg invest conference yesterday. >> where are we in the credit cycle? lee, i would say we think the credit cycle is mature and we expect there to be some challenges ahead in public and private markets and we can come back to that. we don't think that necessarily the equilibrium rate is 5.5%, but it is also not zero, by definition things will get more restrictive ahead of us and then you just have to think about the

vulnerability of companies. clearly, the ones in the ig space are more secure. they will have to refinance with higher rates and the most exposed would be those companies in the floating rate structures that we can talk more about. the second point that i would make that i alluded to that i want to emphasize is we think markets are too complacent now. we don't think that the records we have on credit spreads are reflective of the real challenges that we have any economic backdrop. obviously, people are still bidding for credit largely over the last 12 months with yield buyers about the spread is what gets you protection and there isn't a lot of it now, so we think there is more opportunity to stay wide and narrow. the third point is that there is going to be a lot of this version for the reasons mentioned and we think that is true in the public and private markets and it should be an extraordinary opportunity for

active managers to be able to lean into the right places, be liquidity providers with incredible returns for clients. >> well said and consistent with our point of view. if you look at what happened with the financial crisis through 2000 22, there has been unprecedented buildup in the amount of that of all forms, but particularly the forms that we specialize in. it has grown at a rate well in excess of the underlying economy and when you see that kind of dynamic where debt grows in excess of economic activity, it typically leads to a blowoff or some sort of dislocation over time. we would have expected something like that to have already happened. normally you need a kind of catalyst. we have had some in the pandemic and of the rate move of now facing a pretty significant maturity. so, but the wall is only

increasing. to the point you made, katie, about dispersion, there will be companies that handle it fine and some that will fall out and overtime we think that will be an increasing phenomenon. lisa: this seems to suggest we are late cycle in the credit space, that markets are overly complacent. one thing that has been hard to get your hands around is -- what does some sort of blowoff look like? a lot of people think about it looking like a financial crisis like 2008. otherwise there isn't a near-term corollary in the minds of people. is it just an increase in defaults back to historic norms? how do you view what's ahead? >> the first thing i would say is that we lack the proverbial crystal ball, so we can't tell you exactly when there will be a recession. we know that that is how the world moves and we know we will get that, i'm interested if you agree, but i'm wondering if he could get dispersion in the absence of recession due to

restricted rates. >> good point. you have floating-rate debt, companies that were predominantly floating-rate experiencing stress through the liquidity buffers they had. i guess the different feature of this particular cycle is -- we are both well versed this, the documents are so much worse than they have been, historically. it places an advantage on the sponsor who is able to delay the day of reckoning and what would have been a default five or 10 years ago is now a liability management exercise turning into an extended sort of decline for these companies. we think it all ends in the same place, there are defaults but it may be more protracted. lisa: there is a lot to unpack their around private markets that have grown up since the post-financial crisis era and become something much more mainstream as an asset allocation that people commit

funding to. there is this question of -- has it gotten frothy? we are talking about spread tightening. in the private markets you are seeing documents maybe get more forgiving and allowing people to go on for longer before default thing. is that an area where you see a significant amount of distress to, or is it just general? >> i think if we expect spread widening regardless of if we get a recession. that's the expectation on liquid markets. a big opportunity for alpha people leaning in. we manage liquid assets at tcw. we have a core plus mandate, that is the part of the firmware we express a macro view. based on what we discussed in the portfolio we are liquid, conservatively positioned, overweight, carryover the index, waiting for one of the events we just described with a credit

event where we can just happen and be a liquidity provider. we just on think you are getting compensated for credit risk, if that answers your question about positioning. that is what we have done historically at tcw, leaning in, that being an example with pandemic, $20 billion of credit being put to work in two weeks. so, we cannot tell you which time will be different. we know that in terms of what the market will do, but the spread will eventually widen and you want to be liquid and take advantage of that. lisa: that was my panel at the bergen vest conference that continues today. there is a great one with anne-marie and kenny gensler. dani burger is going to be there. i want to note, southwest air came out with the revenue available per seat mile declining at 4.5% in the second order with available seats up.

shares are tanking right now on the report that we just got, down 11% at one point. we will follow that story in the hour to come. right now let's get you an update on stories elsewhere this morning with you hire a. -- yahaira. yahaira: paramount talking to international providers, chris mccarthy telling staff that the deal could transform the online service and make it profitable. earlier this month their controlling shareholder turned down a merger offer from sky dance media. they also announced they hired investment bankers to sell certain assets and that the proceeds will be used to reduce debt. this was announced yesterday at a town hall with employees. julian assange has arrived back in australia as a free man. he pled guilty to leaking national security secrets in a legal drama that once left him in prison and self-imposed

exile. the wikileaks founder entered the plea in a u.s. court room in the northern mariana islands, as a resolving international fight of prosecuting him over the leak of military documents and diplomatic cables. england, advancing to the knockout stages of europe 2024, but fans are not happy with how they did it. the nail all drawl was enough for them to top the group, but fans jeered and through their caps at the team for only scoring two goals. the polish drawl over the netherlands means england has a favorable draw for the knockout rounds, on the opposite side of the draw from the tournament favorites span -- spain, france, germany. lisa: thank you so much. up next, the fed. >> with the labor market cooling

gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy. lisa: that is up next. this is "bloomberg surveillance ." car, take me home. (♪♪) car, can you turn the music down a little? of course, james. thank you. ♪ (suspenseful music plays) ♪ um... car, this isn't the way home. that's right james, it isn't. car, where are we going? we're here. surprise!!!

the future isn't scary. not investing in it is. car, were you in on this? nothing gets by you james. nasdaq-100 innovators. one etf. before investing, consider the fund's investment objectives, risks, charges and expenses. visit invesco.com for a prospectus with this information. read it carefully before investing.

lisa: growth concerns very much in the forefront. you wouldn't know it based on yesterday and today if you take a look at the nasdaq 100 or the s&p, basically climbing your record highs, of less than .1%. looking under the hood, outperformance is very much from big tech and not the other more cyclically sensitive areas. the 10-year yield is higher with inflation concerns at the front, improving on geopolitical risks. under surveillance this morning, the fed being patient.

>> with the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restrictions to maintain a healthy balance in the economy. the timing of any such adjustment will depend on how economic data evolves and what the data implies for the economic outlook and balance of risks. lisa: here's the latest, new home sales at 10 a.m. eastern as investors look ahead. neil donna writing that the fed needs to get on with it and that the rationale for cutting policy rates is strong and in short, on inflation is up, core inflation is down, this is why the fund rate based on simple monetary rules changes around unemployment with policy rates suggests cuts now. i love this idea that you are on the same page with mike wilson after having quite a bit of divergence for a number of years. why are you saying just get on

with it and why are you beating the drum saying as loud as you and the or making a mistake? neil: i would say a couple of things. just look at the realized data. the unemployment rate is up. it's up 60 points below. so far it has been rising 30 points every five months, which all else equal would imply that it would be 1.4% by the end of the year, higher than where the fed currently thinks it's going to be. looking at core inflation, after the wobbling from earlier this year around which i think the fed is too concerned, generally speaking the trend in inflation is lower. pce inflation is likely to be around 2.5% in may. to me, it's thinking about which direction both of the indicators are going over the next six months. what is the risk for

unemployment? higher or lower from here? with initial jobless claims rising in the hiring rate low, unemployment may rise a little bit from here. with respect to core inflation, there is still a significant amount of this inflation in the pipeline with powell going around worried about import prices in the dollar running at your to date highs. we know that things like used car prices have more room to deflate over the summer. new car prices are already declining year-over-year and auto adjacent services like maintenance repair, motor vehicle insurance, those will continue to come down. i want to break-in. i understand -- lisa: i want to break-in. i understand these points and they are all valid in light of the fact that inflation was hotter than expected in canada and australia and some are arguing that them of these

indicators will reverse into next year. especially if rates come down, thinking about housing in particular. how do you assuage those concerns given the readings in canada? neil: you are jury picking. -- cherry picking. it's better than expected from a few months ago and look, these numbers, you have to have a fundamental framework for why the data will move the way it will. you can't just be a slave to high-frequency numbers as they come in. that's a recipe for making a mistake. you have to have a fundamental framework for how these things will operate. where is the upward inflation surprise coming from? it's interesting, financial conditions, people are making that argument, but look at mortgage purchase applications. the fact that rates have been coming down, looking at 10-year yield's they have generally been falling, what has it done for

purchase applications? not much of anything. lisa: when you talk about cherry picking data, you can cherry pick it any which way and tell a different story. it's not like there's one overarching narrative that dominates. seems like you have coalesced around one set of data that's more important to you then all of the perspectives then we get -- that we get from, say, carnival, with travel picking up and certain retail sales picking up. neil: the only data that matters is unemployment, which is, you know, in a wide body of federal research the single best labor market statistic we have, a comment from janet yellen back in 2013. unemployment. and core inflation. those are the indicators that are in the fed scp. you want to talk about carnival? ok, for every carnival there is a pool, fewer home renovations.

let's focus on the summary of economic projections. all they that is how you backout the fed reaction and in those projections is unemployment, core inflation. you want to talk about economic growth? there is real gdp as well. the right tail for economic growth has been clipped. i don't see much upside right now. growth running at 2.5%, i wouldn't let my hair on fire but there is not much upside risk. lisa: i -- dani: i think that this discussion by itself hones in on the point that people can come away with different ideas and there's a different discussion on what the fed is doing. i'm sure that you would agree with mary daly about the inflection point of the labor market but for every daily, there's a bowman saying that inflation could go higher and they could be hiking. in your view, if the fed is for

some of them a problem on rhetoric, if we get cuts, how violent does it look? neil: right now if all we are doing is waiting on a few months of inflation data, it won't look violent at all. we could probably talk into it in september with someone like bowman, if the inflation data was like they did in may through the summer. i think it will be difficult for even the hawks on the committee to not at least make a nod to cutting over the summer. folks like governor waller, all they are really doing is following the last few months of data. it setting the tone. in other words if the rhetoric is conditional, if the data changes and it quickly changes, then i think that things will be ok. if that doesn't happen it could be a problem. i will say that i do think that we will get another soft june inflation report.

that will be coming out i think in a couple of weeks time. as that happens, you know, i think the doves on the committee will be fighting tooth and nail to make a more meaningful signal at the july meeting. that's what i'm looking for. lisa: we are out of time, this is been fun but we should come back and have a longer debate session. this is the debate on wall street right now, how do you have conviction at a time when everyone cherry picks their data . neal dunn a disagrees, thing there's only one game in town. i could talk to you about it all day. coming up next, josh whaley, josh wingrove, the new york fed president bill dudley, and cherry picking. i like cherry picking. that is what we do. there's nothing else given that you can have the different stories on the same day as carnival with everyone cruising around the world and enjoying their croissants. what we are looking at in the

markets is a tepid kind of action in equities where you see euro is weaker in the crude space. keep an eye on this, of almost .8% as geopolitical risk rises.

life's daily battles are not meant to be fought alone. - we're not powerless. so long as we don't lose sight of what's important. don't be afraid to seize that moment to talk to your friends. - cloud, you okay? because checking in on a friend can create a safe space. - the first step on our new journey. you coming? reach out to a friend about their mental health. seize the awkward. it's totally worth it.

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

>> right now it is a soft landing. great. as long as it remains stable, it's the environment we are in. >> i still only see one to two cuts this year and the fed needs to be cautious. >> they are probably at the back of their minds like yes, we need to start moving. >> cutting because is strong and

that is nation in system allows for a scope that is a better narrative. >> this is "bloomberg surveillance." lisa: the big question of the last few weeks -- is big tech dominance a feature or a bug? annmarie hordern, dani burger, looking at the market trying to find its footing after yesterday where india regained all their losses from yesterday. the day before yesterday, we saw underperformance under the hood, raising this question -- is big tech a feature or a bug of the market stability? dani: it has left stability extremely full. all of these statistics show we are overweight tech. that doesn't mean that it comes crashing down, but it is a vulnerability. household equities are at a record. if you own the stock market, the thing that lets it go down is

people picking profit on carnival cruise. lisa: that's what i was highlighting as a note of positivity. neil noted that i was happy that i imparted something positive. dani: sounded bullish on earnings of carnival. lisa: cruise liner of all things, making him happy. but what he was talking about was really interesting. saying that when you look around, what you see is a labor market that is late to the game when they cut away and he calls it obvious. anyone pushing back against it being cherry picking data, but my personal view is you can paint a different narrative with lots of different data. this makes the market with a growing number of people saying it is actually a weakening in growth that should be the dominant story. annmarie: at this moment it felt like he was on the side of mary daly, saying it's not an inflection point and you can't yeah slave to high-frequency data. you have to focus on the only

two that matter, unemployment, to his point, being higher than the fed by the end of the year, 4.4%, with the disinflationary trend. he said you have to stick to those two items and that's it, ignore everything else, and in that case he thinks the hawks and the fed could be talked into september being on the timeline. lisa: maybe we are not talking about a wholesale celebration of a neutral rate, but that said there is a real issue ahead of some of the housing data we get later today of what does a 25 or 50 basis point rate cut due to ignite inflation in areas like the housing market? dani: that's a point we discussed with richard miller last week when he talked about bringing demand back. prices go up and you are left with the awkward position of cherry picking canada where they have lowered rates only to see inflation surprising on the

upside. that's what policymakers want to avoid. they did a verbal equivalent later in the year. lisa: and we could cherry pick australia as well. the situation on hand is leaning towards the side of doing nothing on the s&p, clawing back the gains. basically flat, its euro weakness. it's interesting to see that we broke through the 107 level pretty consistently, tracing the low to the weakest levels we have seen in a week amid concerns over the snap election. 10-year yield's higher because of the cherry picking of candidates, australia, global yields and inflationary pressures. 428 rounded up on the 10-year with crude. i keep watching this. how much do we worry about geopolitical risk given what's going on with hezbollah, lloyd austin, given what we are seeing around the world? coming up this hour, blackrock

saying that concentration in tech is a feature and not a flaw, the risks for bill dudley on the budget deficit. there's a bullish long-term outlook for small caps. beginning with our top story, mega cap tech oz and back after the chipmaker suffered a plunge. blackrock writing -- the concentration in tech stocks is a feature and not a flaw. we are overweight u.s. stocks on a six month to 12 month tactical horizon and we prefer the theme of liking industrials in health care. broadening out, that joins us now with that idea of broadening out. we saw that for a hot second. every time big tech fades, we see broadening with more steam. what do you make of that, within the market operating counter to one another?

>> the way that we see broadening out doesn't necessarily come at the expense of the leaders. we continue to have the overweight in the tech sector in the likes of nvidia and the magnificent seven continuing to deliver strong earnings on par with price appreciation. so, we still like that, but we are starting to see signs of momentum broadening out. not necessarily at the expense of leaders giving into a reversal of momentum, right? the reason we have the broadening out of the theme is if we think about the capex spend that is expected to happen, to build the infrastructure, the piping around ai, we are talking about price incentives in the arms race to build ai data centers by the companies flush in cash. some of the bottlenecks as we think about those data centers building out could create opportunities for excessive

returns and that's where we look at the likes of energy and industrials, the likes of materials that are well positioned in this kind of environment of steel supply constraints. lisa: so, -- annmarie: so, this sounds pretty specific. it's not krispy kreme. >> small-cap. [laughter] lisa: a lot of names don't fall within this. walmart dealers, i don't remember which, disclaimer aside, but my point being that this is an tied to the consumer. it's not speaking to the macroeconomic place. it's more speaking to the trend, the megatrend you are talking about. is that a correct way of framing your view? >> that's very fair. looking at the earnings season that recently wrapped up, the margins gave us confidence and that the theme is broadening out. it's not just public market,

either. it's private market. the road the -- the role that the infrastructure will have to play to support the build of ai data center needed, that's a private market play that allows us to have exposure to early winners of these mega forces. we are talking about a continuing combination of public and private markets to position for the mega forests playing out that still has a long runway. dani: so even if those are not specifically exposed, looking at the customers around nvidia, the hyperscalers like google and apple, these companies are exposed to the cycle. if you think about advertising revenue and the ability of apple to start a new cycle with iphones, roundabout could that come back to effect ai? if these companies come back and say we don't want to commit as much -- and there is a lot that they are committing -- to

building out ai infrastructure? wei: that's absolutely right. there are caveats to the conviction. like if it doesn't play out for whatever reason, like demand is not there or the supply is just not right there, it could be a regulatory reason. talking about hyperscalers, they committed to net zero targets which, in the target of energy constraint, something may have to give. bringing it all together, it is possible that the incredible capex forecast companies are talking about may not come to fruition, which is one way that the ai theme may not go all the way. but you just described the customers being quite concentrated, this is precisely the reason why we think that the concentrated nature of markets at this point is a feature in a bug of the theme.

it has been very different compared to the bubble in terms of the diversity of the customer base and also in terms of the extent to which earnings have come through. so, we are comfortable with the fact that so far the rally in the equity market is concentrated around the names we have like for a while. dani: what will need to change for me to buy small caps? wei: this is a broader question. they are more vulnerable for longer in terms of the funding and rating environment. we are still of the view that the fed will be able to cut this year. two likely. as you talked about, canada and australia, inflation has not gone away, right? it is still an environment of labor shortage, net zero transition, creating supply constraints within the environment of central

constraints and as they cut they won't be able to go all the way the way they were able to in the past. another example, emerging markets and central banks have been further ahead in the rate cutting cycle and now they are further ahead as they kind of come to the end of that rate cutting cycle. what we see is that they are stopping at a higher level compared to people and then it, but also at a higher level compared to expectations starting the rate cutting cycle, which is i think a relief from the book of developed markets considering their rate cutting cycle. annmarie: do you buy into the narrative that a lot of this is also fueled as a eight because of some of the political uncertainty around the world, especially places like europe? wei: i think so. statistically speaking european equities gained back relative

outperformance, making the u.s. exceptionalism even more pronounced, right? it has indeed been partially a result of the political uncertainty across european equities that make your -- u.s. equities look better but there are foundational drivers of this concentrated rally as we talk about transformations, the likes of which, the speed of which, we haven't seen in a long time since ever. when we talk about that being driven by a selective kind of concentrated number of names, it's no wonder in our view that they are driving the stock market. the concentrated nature in a way is supported by the drivers of the transformational environment , the way in, with the rest of the world coming under pressure because of the exacerbated uncertainty. lisa: to that point, with everyone else not really doing that great, right now the

japanese yen just got to its lowest from 1986 versus the dollar. ongoing trend and not necessarily because of ongoing weakness. a lot of people have been bullish on japan for a long time, including yourself. does this make you less bullish to go in on a non-currency hedge basis? wei: japanese equity is negatively correlated with the weaker currency that can create momentum for exporters within the japanese equity market. but we still think that over a longer term, at this level we would still rather own it on the hatch basis, that's our view at this juncture. obviously, very volatile is what we have seen so far. yes, some banking intervention coming from the central authorities, that will basically be costly and so far it hasn't really worked. volatility is what we should

expect. japan is one of the few markets where macro is a friend. here in the u.s. we are talking about a tougher trade-off given inflationary pressure with central markets choosing. in japan it comes through in a gradual way with a long deflationary mindset, earnings getting upgraded and customers beating earnings with reforms just getting started. for fundamental reasons we are overweight and currency has been somewhat inconvenient given the possibility it has created. lisa: inconvenient being the currency going back in 1986. wei, thank you for being with us. here is your bloomberg brief. yahaira: the ecb indicated that investors are reasonable to expect to more rate cuts this year. the governing council member,

also a member of the bank of finland, said officials must ensure inflation returns to 2%, but they should not overly dampen economic activity. >> big picture, our projection is the european economies are heading for a gradual recovery this year. yahaira: shares of southwest are falling in the premarket after the airline cut revenue forecast s for the second quarter. they are expecting a decline of 4.5% in revenue per seat mile down from previous estimates and said that the adjustment was driven by complexities in adapting revenue management for current booking patterns. listen up, disney fans, the fast pass might be about to get faster at disney world. the florida theme parks will let visitors reserve a space in line for rides up to one week in advance. right park goers can only book one day ahead.

the new system will be called the lightning lane multipass. disney hotel guests will be able to make seven-day reservations for up to three rides but there is a costs. it allows for three reservations and starts at $15. lisa: my shocked face, this is that, there's an extra costs. annmarie: you can make a reservation for arrived like at a restaurant? that would have been useful last time, they closed space mountain lisa:. lisa:how old were you? annmarie: no comment. [laughter] lisa: up next, counting down to the first presidential debate. >> the weaknesses are what we will learn. is trump going to be more restrained and disciplined in his rhetoric? is biden going to bring the energy and coherence that he brought at the state of the union? lisa: that is up next. this is bloomberg. ♪

starti is never easy, but starting it eight months pregnant, that's a different story. with the chase ink card, we got up and running in no time. earn unlimited 1.5% cash back on every purchase with the chase ink business unlimited card from chase for business.

lisa: a quiet day as we look ahead to housing data ramping up tomorrow with the presidential debate after the bell, as well of course on friday the key inflation data is under surveillance this morning counting down to that key inflation debate. >> the weaknesses of the candidates are what we are going to learn. is trump going to be restrained and disciplined? is biden going to bring the energy in the coherence that he did at the state of the union? as we have seen, he's been inconsistent in that domain. lisa: just one day until the first presidential debate. president biden aiding -- aiming to dispel concerns over his age. trump is expected to press biden on inflation at the border and immigration. the latest whole shows the

candidates in a dead heat. 44% each. josh wingrove joins us now. personally, i'm looking for actual policy. for is the daylight between policies? particularly around immigration. what are we expecting on that front given the rhetoric we have heard from trump and the actions taken by biden? >> we will see him go after trump for intervening on the border bill. there was a bipartisan deal in the senate, it collapsed, biden has taken executive actions that will be flat traps for legal challenges and he will blame trump saying that he is the one who wants to actually do something on the border. you will hear him talk about abortion, campaigning on getting roe v. wade restored. he will need to run the table to do that, so we will hear about

that. the next year is a tax policy election year. i think biden will be going after trump on the reported commitment or interest that he has on lowering the corporate tax rate as he campaigns against the previous trump tax package. that one will heyman -- hang in the air. there will be stuff in there, but the feeder side of it is impossible to avoid. we can sense the excitement in the voice of everyone for the big debate. for biden, course, the downside is if he stumbles or has a freeze, it will fuel concerns that he has been circulating for trump. something that he's been saying about the small, red meat type base, both campaigns think that the expectations game might work in their favor. annmarie: part of that reason is we have been here before.

the electorate really knows who the individuals are. you recently wrote a story about what the biden debate prep actually looks like. take us behind the scenes at camp david where he has been hunkering down for the last few days. josh: yeah, since last week. they are saying he has less time to prepare than last time, he's the president now, where the burden fell to trump in 2020. right now he is up there with one dozen aids or so. his lawyer claimed trump in 2020 and is doing it again this time around. working informally and going to the formal podium prep. the microphones are muted last time trump has talked over

moderators and debates -- and opponents and debates. trump is already working the refs saying that cnn will be biased and that this is a three on one debate. they spent the last few years russian in the mental acuity of joe biden and now saying what a great debater that he is. a lot of to and fro on this one. trump trying to raise expectations for biden and if he has a good performance, questioning whether there should be drug testing of a candidate. the sniffing on this -- has been remarkable. annmarie: i think it what you see from both individuals is they are trying to lower the bar for themselves to make sure they clear it at the end of the night. there are concerns in the polling about the age of biden. how will they combat that specifically tomorrow evening? josh: it's a fair bet that they might borrow from their first

ad, hey look, i'm not a young guy. wrapping her arms around it might help. biden said it's not the age of the person, it's hitting trump for the 80's economic policy. give a good speech, pretend is up for it. it's in the clear, the good debate, with more to lose in the debate over trump when he has a moment that feeds anxieties. in the polls in particular with the swing states it has been minor with a tiny bit of momentum on his side after trump was seen with a clearer lead. this type, it's a handful of states deciding it. that is why these things will be

so closely watched. dani: is what the stumble one issue? is it enough to label the double haters, the district or should it amount of voters that don't like the candidate? josh: i think so. in part because it is only the two of them on stage. polls have shown people flirting with the idea of supporting robert f. kennedy, jr. and other candidates. this is a win for biden in some ways, and trump, to have the two of them up there. they have been saying things like any vote not for joe biden is effectively supporting donald trump. that is an angle here that polls show in particular younger voters leaning into the interest of supporting third already candidates. a or b, pick your slot, there will be excitement about that.

lisa: josh, thank you. i want to see the numbers around the viewers of this debate. i know that this has been something people have been talking about. everyone saying that they are sick of this, double haters, but i think they will still be watching. annmarie: if not live, but also what each campaign is going to quickly clip and get out onto social media. interesting with mute microphones, how much back-and-forth can they have? lisa: i love that [laughter] . [laughter] any of them going to scream over it? dani: maybe they can reach the other candidate's microphone if they scream enough. [laughter] lisa: coming up, william dudley on the deficit. this is bloomberg. ♪

want to save on some of the biggest names in streaming on the network made for streaming? x marks the spot. now you can add the new xfinity streamsaver™ that includes netflix, peacock, and apple tv+. that's xfinity streamsaver™ for just $15 a month. all your favorites. all in one place. only from xfinity. for more watching and less spending... x marks the spot. do it all on the network made for streaming, and bring on the good stuff.

lisa: the moderate gains have turned to losses as we look at two hours to go before the opening bell. s&p futures falling into the red after being in the green for most of early trading. 553 four. nothing significant except for the mix under the hood. the nasdaq 100 up .1%. the russell 2000 is down almost .5% which raises the question of, how concerning is this about the growth prospects for an economy? it doesn't even matter at this point given the fact that we just heard if you are bullish on

stocks, bullish on the ai trend independent of any macro trend. dani: i love she was like, this will broaden out. utilities will do well because they need to build up ai infrastructure. infrastructure does well. it is interesting to hear people talk about an broadening out. not a small caps. no, no, not cyclicals, though. lisa: a very specific broadening out. yields marginally higher in the united states, especially after we saw in canada and australia. on the 10-year yields up three basis points. 10 year yields, 4.28. 30 year yields coming up about three basis points. the two-sided risk potentially picking up as well as potential growth concerns. the currency space, it is fascinating to see the dollar preeminence regardless of concerns about the fiscal deficit, regardless about concerns about political dysfunction, weakening growth, fed rate cuts, etc. etc., dollar

strength across the board. the euro falling below the 1.07 market. the japanese yen falling to its weakest level going back to 1986, crossing through the 160 threshold raising the question of if this speaks to intervention from the officials in japan or if that is throwing good money after bad? dani: if they intervene people shorting this thing will say, lovely, another great level to short the thing that is even better than where i was before. there is discourse that the boj likely won't intervene because we have pce on friday. i kind of don't buy that necessarily, because we know what pce is going to be. they could intervene. i think that your question is the right one. does it work, doesn't even matter if they do? lisa: how many times have we been here? the lines in the sand continue to move for the japanese yen. until they do something with rates, does any intervention matter?

unless they do with the chinese government did in 2015 it is not going to be enough. now, they have to basically continue to manage the decline of the yen. lisa: which is maybe what they will do or raise rates. fedex is surging after cost cuts drove better than expected profits in the fourth quarter. the shipping company pledging to buy back 2.5 billion dollars in stocks and hinting at a possible sale of its freight business. what do they have to say about the macroenvironment? dani: the first thing i did was go to the earnings call, look at the transcript, what did they say west and multiple analysts ask them, this seems not like a macro driven plan. it seems about cost cuts. they avoided the question at every turn. the one thing the kind of said is that we can adapt. if the demand environment adapts, we will too, but they frustratingly didn't say what the demand environment was. in a roundabout way it comes back to this is cost cuts. it is a catalyst for the rest of

the cyclical market to do well. it is fedex and a specific plan to cut costs. lisa: an idiosyncratic story of success amid an uncertain environment without anything definitive to say. the irs saying, i'm sorry. settling a lawsuit and apologizing to citadel founder ken griffin who sued after his information was included in a data breach which leaked private data and some of the country's oil theist taxpayers. you can kinda say that this is an interesting story. this raises the issue of data security with the irs. what concerns there are going forward about future data breaches and what kind of security protocols they have. annmarie: that is why they wrote this sincerely apologetic note. this was an issue about a data breach, which has a number of individuals who are part of the data breach upset as well. the issue is that the irs has now punished that individual -- this has gone through the legal process. they come out and say, i'm

sorry. he wasn't looking for any kind of financial gains on this, but the fact of the matter is, you're supposed to give confidential information to the irs that will remain confidential. lisa: i'm sorry goes along way. don't we all want that validation on some level? the first of three treasury options going out without an issue, yesterday, $69 billion of two-your notes well received ahead of auctions for five-year and seven-year notes today and tomorrow. investors are tracking demand for u.s. debt, investors being mean, after the office boost to the outlook for the deficit by 27%. bill dudley writing this. the u.s. is taking a risk by running large fiscal deficits. it is impossible to know when investors will decide that such risks are too much to bear as the bond vigilantes famously did in the 1990's. it tends to be sudden and brutal. bill, i love that you wrote

about this. i care very much about the auctions. i also care about the deficit even if people say it doesn't matter. there is an issue of is this something that people can put in the backs of their minds and say that it hasn't mattered for 30 years, it probably won't matter going forward without a blip here and there? why should someone be paying such close attention to this even if the auctions are going off without a hitch? bill: number one, unsustainable trends always have to come to an end. we know that this cannot go on indefinitely. number two, the situation is bad and will probably get worse. the congressional budget office'sassumptions are actually optimistic here they don't have a recession in the forecast over the next 10 years. they assume the tax cuts enacted in 2017 expire, so things will probably be even worse. the other thing that's important to recognize is that when things go bad, they go bad quickly because people start to balk and they don't want to buy. interest rates go up.

higher debt service cost leads to higher deficit. the feedback loop is really it can be quite vicious. the hard thing to know is the timing. it is not clear why the bond vigilantes did that in the 1990's and it's not clear this time. the other thing that i think is important to realize is that we don't have quite the same demand for treasuries internationally that we did before. because of sanctions. countries that are not friends of the u.s. are trying to diversify their holdings out of treasury because they are worried that sanctions could be invoked sometime in the future. the good news is the dollar still the reserve currency. the dollar will probably be the reserve currency for several decades. but that exorbitant privilege doesn't necessarily have to last forever. lisa: you raise a lot of fascinating points, but one, to

unpack the idea that if you see any kind of fumbling the demand for treasuries and yields go higher, it becomes almost a spiraling effect that will create bigger overall debt servicing costs for the government which will deepen the deficit which will make people even more nervous about buying treasuries. do we have a sense of what the debt servicing costs look like if rates stay where they are now? if they don't go down? if you get volatility and rate structure and inflation but the fed is not able to cut rates significantly to levels that we previously saw without igniting true inflation which cal

and the total amount of debt. i can't help but wonder if when and if it happens. if it is more brutal than the 90s. and the reason i ask that is we learn the lesson with the uk. that part of the turmoil sparked from non-banking entities. it was ldi, it was pension funds. debt has shifted away into other hands beyond the banks. so if we do get some sort of rapid sell off in a post regulatory gfc environment, are banks prepared to help act as a ballast as potentially they -- which culls their hand? -- bill: i'm not sure that anyone wants to come into the market if things are bad. the capacity of the primary dealers to provide support to the treasury market in size is obviously much diminished. the idea that somehow bank

dealers can come in and support the market, i think you have to do that is limited. the primary dealer has to show up at the auctions. the fed is pretty focused on making sure that none of the auctions fail. non-failure is not necessarily the markets subdued. you can see longer tails, higher yields on auctions relative to existing securities. things could get out of hand very quickly. annmarie: you said this is not possible to -- dani: you said this is not possible to time, but does this translate to any duration appetite because this threat exists? bill: the outcome of the election might be relevant. now we don't know who the president is going to be. it is clear from published reports that the trump administration is pretty hostile to the federal reserve. you can imagine a situation where if you had a trump

presidency and it was trying to limit the independence of the fed, people could be worried about the inflation outlook that the fed would be pressured into certain monetizing of debt. when debt levels are really high and rising quickly, there is lots of sensation to allow higher inflation, because higher inflation devalues the debt. we saw that during the pandemic. the surge in inflation during the pandemic caused the debt to gdp ratio in the united states to decline despite large budget deficits. monetizing the debt is always one way out. it is a horrible way out. you are basically confiscating the value of the debt that people hold through inflation, but that's always a 10 tatian. if people worry about that, the worries would be higher under the trump administration because of the trump hostility to the fed. that could be an exacerbating factor. annmarie: a lot of people talk

about what an independent fed would look like under a trump presidency. when it comes to the responsibility of the federal reserve delegated by congress, what could he legally do that would hurt the independence of the fed? bill: as you are implying, it is a lot harder to change the independence of the fed than just saying you want to do it. governor's terms are staggered. one term every two years. the federal reserve presidents are appointed by the board of directors and the federal reserve board, not the president, not confirmed by the senate. taking control of the fed is quite difficult. that said, just the mere attempt to take control of the fed, to diminish the fed's independence could be the spark that rattles markets. annmarie: when it comes to the deficit, do you have thoughts about who would be worse for the fiscal trajectory of the u.s.? bill: i don't think either side has distinguished themselves, the trump or the biden

administration. the difference between the two, if you have a second biden administration you know what you are getting in terms of policy. the risk in terms of policy uncertainty is less then under a trump administration. trump has proposed some -- already the proposals out of the trunk side are pretty extreme. dramatically raising tariffs, cutting income taxes and corporate income taxes. that would be very inflationary in itself. so, if we had a trump administration and he did what he says he's going to do, and there is always a question about that, the economic environment i think would be a lot more volatile and more uncertain. lisa: since you were on the fed and you did have a prominent role, can you give us a sense of what the conversations are probably like about not 2024 and the path of rates, but the lack of visibility into 20 25 given the uncertainty you just highlighted? bill: i think the fed takes the

world as it is. in my experience, they don't worry about election outcomes that will happen down the road. they react when the outcome occurs, and that leads to a set of policies that are relevant to monetary policy. the fed is not going to do something preemptively or not do something preemptively because of concerns about what the election outcome would be. they will set policy based on what is happening to growth, what is happening to inflation, and right now markets are trying to figure out what the fed will do next. it's difficult because it is very data-dependent. a weaker economy, better inflation. the fed cuts, the fed stays on hold. the reality is that the data has been pretty mixed. lisa: cherry picking. it goes back to the conversation from earlier. bill dudley, wonderful to speak with you. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. yahaira: a chinese spacecraft

carrying samples collected from the far side of the moon has returned to earth. it landed in inner mongolia carrying materials from one of the oldest impact craters in the solar system. this was one of the first sample return missions to go to the moon's far side where communications are more difficult because it never faces earth. the gag order against donald trump in his new york hush money case has been lifted for the most part. a judge ruling trump canal talk about witnesses and jurors, though he is barred from revealing jurors' identity giving him a way to criticize the proceedings as he campaigns for the white house. the former president had said that the gag order prevented him from responding to attacks. trump and president biden are due to debate tomorrow night in atlanta. new hampshire is suing tiktok for allegedly misleading users about the safety of its design features and protections for children. the complaint accuses the social media platform of exploiting

young users for profit by creating an addictive product that is harmful to their mental health. a spokesperson for tiktok says that the app has industry leading safeguards to support teenagers as well as parental controls. tiktok is facing a possible ban in the united states if its parent company bytedance does not sell to an american owner. lisa: thank you so much. next, taking risk outside of big tech. >> i think you need to get the cut figured out, because essentially small caps tend to outperform after the cuts happen. any disappointment on the cut narrative will push stocks back down. lisa: that is next. this is bloomberg "surveillance." ♪

lisa: we keep talking about the shift under the hood of the

index level how outperformance has come from big tech when you look at the equal weight index. you can see those declines. we want to dig into that. under surveillance this morning, taking a risk outside of big tech. >> i really think you need to get a cut figured out, because essentially small caps tend to outperform after the cuts happen, so any disappointment on the cut narrative will push the stocks back down. the other thing that you really need for small caps to work is an above-average economy. i don't like the situation with the fed and i don't like that the economic story seems it is slowing right now. lisa: investors looking for opportunities in small caps. jill from bank of america securities writing, we have been tactically cautious and selective in the russell 2000 index since april, but sustained outperformance may depend on further disinflation. makeup america -- bank of america still expects a december fed cut. i want to talk abou small capst. some say it is less relevant

given how big it is to the big five mega caps stocks. is this still a referendum on the more cyclical aspects of the economy and a sense forward of what we can expect from economic performance? >> there is obviously regency bias when the asset classes underperformed for so long. usually these things run in cycles of 7-10 years and small caps have underperformed for the past 10 years. i think based on where evaluations are which tend to matter more for long-term investing, this would argue we could see a better decade for small caps. i think they are still a good diversifier when you look at their diversification properties relative to other indices out there. i do think, even though they could struggle near term, i think that they are an economically sensitive area where if you want to get gdp sensitivity, capex sensitivity, if we want to see something that

could benefit from reassuring, i think a lot of domestics still have opportunities if we think about the next several years. lisa: what about the anxieties underpinning under performance? if rates stay high because of economic strength that they will struggle based on their debt structures. if they go lower because of economic weakness, they will struggle because of the weakness they are leveraged too. how do you get around that? jill: like you said, it may struggle near term because of refinancing risks. if we were in this uncertain environment about rates remaining higher for longer, and granted the latest inflation print was a step in the right direction, but i think that the fed and investors want to see more progress on that to feel comfortable we will see a cutting cycle, because half of the debt in the russell 2000 is either short-term or floating rates. over the next several years you see those maturities come due. a lot of investors are focused on the cycle because usually

small caps outperform when it picks up and that is what consensus is expecting this year, but revisions have still been negative and the prophets recovery has gotten pushed out. so it is very backend loaded. if we see confirmation that that is looking like a reality in those expectations are not too optimistic, combined with more easing of inflation it could be potentially a better year end for the index. for now, i think, you want to be selective and focus on pockets of small caps that are less exposed to those risks. dani: what are those pockets? where can you find the value that can gain and everything else seems like gravity is weighing on it? jill: since the macro story has not changed, we are seeing gdp growth generally better than expected, when we think about the beginning of the year and even last year when everyone was expecting a recession, you are seeing manufacturing recovery, i think that you want to focus on the areas that are more exposed to economic cycle recovery,

capex spending, areas that have less refinancing risks. being active and selective focusing on, does the company on looking at have a lot of debt or short-term floating-rate debt, screening those out, and focusing on the quality cyclicals, stocks that will be sensitive to interest rates. from ace sector perspective some of the energy industrial sectors seem to be less refinancing risk relative to sectors like real estate and tech within small caps that are more risk there, and focusing on cyclicals quality value i think are all themes that could work near term. dani: value is one of the themes that has been crushed this year. if you were to trade on the theme that because it is a low valuation will pick up at some point, it has been really difficult. this is the argument that some people have talked about, that

something is different about this market, something is fundamentally broken. a valuable companies from a fundamental basis are not getting rewarded anymore. do you share any of that concern? jill: again, a lot of these things happen in cycles. we were in an environment for many years where there was slow prophets growth, low economic growth, so growth as a style was rewarded. now we have seen, as economic growth and profits growth picks up, that is an environment that tends to be one where you don't need to pay up for expensive growth if growth is becoming more abundant. you don't want to buy risky value. you still want to stay away from the nonprofitable companies within small caps. fortunately, the value benchmark has fewer of those than the growth benchmark right now. i think focusing on quality value rather than risky value and having those screens for leverage or rate sensitivity makes sense. so i think it will be a stock pickers market. at b of a, our analysts cover

about 1000 small to mid-cap stocks so there are still opportunities even though the asset class has gotten smaller. annmarie: a lot of analysts talk about that maybe now is the summer of malaise. hunker down because of the u.s. election. small caps, which are the most sensitive to november? jill: overall, we have seen the vic's which has been very low pick up and consistently rise from july to november election years. i think that is another reason that, in addition to near-term uncertainty around inflation and the fed and the profits cycle, that small caps, in terms of the russell 2000 index, could be challenged near term because typically when the vix, rises that is when the russell too underperforms the large-cap index. lisa: thank you for being with us. we have been talking about the spread whitening in the credit sphere. that seems -- widening in the

credit sphere. it has been a push-pull sphere for a while that people are in truth it is truly weakening. dani: you look at that and you are logically like, there's not enough spread to account for the risk. something is amiss. but there is so much demand and so much issuance continuing at pace. as she said, there is the idea that at some point it has to break. lisa: we were thinking there is so much debt issued at such low rates that when you had to refinance at higher rates it would be so rough, yet you have investors tied to make sure that these companies could going to not take losses come etc. come etc. the next hour, less of that, more of this. the bull on apple talking about the path ahead. t. rowe price, why she things people are overly sanguine about when the fed could potentially cuts. in the market yield on the long

and marginally higher after what we saw in australia. 10 year yields are up four basis points. 4.29. ♪ ok coming in.. big orders! 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. the chase ink card made it easy. when you go for something big like this, your kids see that. and they believe they can do the same. earn unlimited 1.5% cash back on every purchase with the chase ink business unlimited card from chase for business. make more of what's yours. wealth-changing question -- are you keeping as much of your investment gains as possible? high taxes can erode returns quickly, so you need a tax-optimized portfolio. at creative planning, our money managers and specialists work together to make sure your portfolio and wealth

are managed in a tax-efficient manner. it's what you keep that really matters. why not give your wealth a second look? book your free meeting today at creativeplanning.com. creative planning -- a richer way to wealth. want to save on some of the biggest names in streaming on book the network made forday streaming? x marks the spot. now you can add the new xfinity streamsaver™ that includes netflix, peacock, and apple tv+. that's xfinity streamsaver™ for just $15 a month. all your favorites. all in one place. only from xfinity. for more watching and less spending... x marks the spot. do it all on the network made for streaming, people couldn't and see my potential. stuff.

so i had to show them. i've run this place for 20 years, but i still need to prove that i'm more than what you see on paper. today i'm the ceo of my own company. it's the way my mind works. i have a very mechanical brain. why are we not rethinking this? i am more... i'm more than who i am on paper.

>> there will be a lot of push

and in the my kids. >> momentum has worked very well. i think there is more room to the downside on momentum stocks. >> over the long-term it will be earnings that drive it higher. >> it can remain fairly stable. lisa: a lack of conviction but a lot of stories. every quarter and, -- a lot of's toys that people are talking about. not only marvel comics but with nvidia. this is the issue right now. even those who were bullish have to revise upward their projections for the s&p target or else they are suddenly bearish because the index has gotten ahead of them.

you can be bearish and upgrade your target at the same time because you have this behemoth of a trade. dan curtis pointed out only 113 s&p 500 members rose yesterday. the second weakest behind a rally of the century. we heard from mike wilson going back to 1965. it raises the question of which story should we cherry pick? we are all cherry picking things because the data is contradicting itself. we cherry pick carnival and say people are cruising around? disney and the people -- fact that people are willing to make reservations at rides? for every carnival, there is a pool. everything is about stories, but

have a thesis and ignore everything else. the point in terms of an inflection point is that the only things that matter for the fed is the unemployment rate and what is going on with inflation. >> it is not even agreement on the fed. you cannot trust corporate or the data and look, that -- and look, the f moc is saying something different. lisa: flirting with gains and losses through the morning. the euro is a story and the story is weaker. nonetheless, south of 107 in the face of that french election, the first round of which starts on sunday. the story getting my attention with inflation coming in hotter

than expected, raising questions about how much onward inflation momentum there is. here is another story. crude inventories going down and the idea of geopolitical risk with crude prices higher. $81 $.30. coming up this hour, chris harvey as stocks recover. dan ives lifting his price target on the back of its $5 billion pack. and why the buyer for a september rate cut is still high. we begin with our top story. nvidia recovery after a $430 billion route after we have retraced all of it. it has helped to snap a three day losing streak. chris harvey saying, we are

approaching our price target but no change. remaining in the right price camp. momentum will not break in the near term. ultimately, we think it still needs to get worse before it gets better. chris joins us now. what does that mean? >> i think you had on a small cap strategist. when do things brought in out? it has to get worse before it gets better. you need the economy to slow down and you need people to see the economy slowdown. you have to pool fed expectations forward. you need them to cut soon and aggressively. until then, there is no rotation. lisa: so they go and then pull back and everything else lags behind?

>> i cannot speak to nvidia but i can speak to momentum. the momentum trade is not breaking. people bend but you will not break because at the end of the day, there are a few things that are working. and that is pretty much it. economy svc is not great. it is not a straight line up, but until we get them pulling expectations forward, you are not going to see that rotation. >> it got a lot of attention because of av balancing. record flows into tech. i saw that etf launches are 52% above the record pace. when you look at av balancing,

you look at all the etf's. are there distortions we are not fully appreciating right now? >> there are a bunch of things that we can talk about and one is that back in 2021 -- we were high in the street. we talked about things like staples center becoming crypto.com and so forth. it is kind of an anecdotal signal. flip-flopping with apple, is that something we need to pay attention to? i'm not sure. i'm not an expert on this but there are some tax issues that you see with etf's. some of the smaller structured etf's, people one very specific. they want to return to distribution way style to that

effect. you are seeing things pop up to meet that need. i heard that the boomers want it for retirement, so when you talk about momentum, what comes to my mind our trend followers. is that a concern at all? >> this is what we are concerned with right now. credits are spread out. everyone is now bullish. there is no volatility or uncertainty in the market. the most important thing we are worried about is we have not been penalized for being wrong. people thought we would cut six to seven times this year. maybe we will see a cut later this year. what was a penalty? double-digit equity gains. yet overconfidence and they start to do things that are

uneconomic. this is a period where we think systemic risk rises and put more risk into the portfolio because they have to. in the near term, we are not close. a viewer just wrote in and read my mind. if it gets worse before it gets better, why are you still calling for a index levels? >> it is a perfect environment. what do you want for momentum to work? you want the status quo to stay. it is going to continue to work. it is still ok for the broader market. if you are small-cap or mid-cap, that is not a great place to be. they will have a difficult time

if we are seeing the economy slowdown. short-term, you still have this momentum type market, and as we have seen, you just need a couple stocks to work. you could -- lisa: so it could further propel stocks higher after. >> he would see growth outperform value. annmarie: i want to move to the politics of this. you are tracking trump to the s&p 500 and right into the 10 year yield. what are they telling you? >> i do not like to talk about politics too much. >> you have two really good charts.

backing up a little bit, what we like to talk about with politics is that if the gop takes the senate, and it does come in our estimation it looks like a more out -- likely outcome than not. we think it is because the gmp is a little bit more business and economy focused. m&a has been held up by regulation. as far as the presidential election, we think it is a kueng toss. if you look globally, if you are an incumbent, and has not been a great situation. it has been very difficult. we stumbled on this chart with the probability of trump winning. this is an interesting chart not causality. but as we talk to people, they do think that trump is more

market friendly than biden. that is what the market is maybe picking up on. annmarie: you say the senate is going to go republican and they are more loose with regulation. can you really say that when you have a senator like j.d. vance who -- isn't this the difficulty of the republican party right now? >> it is the difficulty with politics in general. we think about this in aggregate and their philosophy, their base is to be lighter or easier on regulation. the situation has been very difficult. a lot of it is around regulation. if you do see the senate go, we think to some degree, that eases up.

lisa: i love how everybody tries to explain why they are forced to talk about politics but actually have no enthusiasm whatsoever about talking about politics. dani: clients want to know about it, but it is true. am i wrong? >> it is fraught with a lot of risk, but you put those charts out and it was an interesting chart. you deal with the incumbents globally thinking, that is not a great situation, but when the gop controls the senate, they are better. lisa: you put the tracks out and then tiptoe away. you are a good sport. thank you for being with us. let's get an update on stories elsewhere. >> we are staying on politics. in new york, defeating incumbent

congressman in the most expensive congressional primary in u.s. history. bowman by a double-digit margin. bowman is the first member of a progressive group of representatives known as the squad to lose reelection. he had garnered controversy for his response to the october attack against israel and the time he pulled a fire alarm during a session. announcing earnings that beat estimates. better-than-expected results are assigned cost -- fedex hinted at a possible divestiture of its business saying it is assessing its place in the portfolio.

paramount is talking to potential international partners for its streaming tv business. a deal could transform the online service and make it profitable. the controlling shareholder turned down a merger offer from sky dance media and the company announced it has hired investment bankers and that the proceeds will be used. lisa: vivian's growth story as it enters into a packed. this is bloomberg. ♪

l time for the morning calls.

j.p. morgan grading fedex with a price target of $359. highlighting the decision to explore possible divestment of its freight unit. next up, raising the price target on carnival cruise lines. noting the enduring price power amid the cruise line industry's coast covid -- post-covid phase. and raising the price target on review in. he cites the newcomers 5 billion pack as a game changer. i'm not sure we can call ready in a newcomer. i want to get started with why you think this is a beneficial deal for volkswagen. why does this make sense all around? >> it is an established ev player that has had capital and

supply issues. huge confidence to get this vw capital in. i think it is just the start. it could be more of a partnership that changes the game. dani: what about the awkward fact that they have an electric car that they have invested in. are they not going to start cannibalizing themselves? >> for them, it is ripping the band-aid off. they needed something. even as amazon took a step back and freed vw, they could still have some success on some of their own ventures. it is a broader partnership.

we will see new models that they can come out with. it is a huge win for both and for investors, a major sigh of relief. lisa: i'm wondering if this is the beginning of some kind of tied up cycle. at a time where there is fierce competition and questions about short-term demand, it will be a question of size and market share more than slow innovation that can move the needle over the long term but not the short. >> almost like an eighth-grade problem. on the one side you have these players that need capital and on the others, you have those who have been later to the game but have the capital. competition is building. there are others in china and it

just takes one. i think this will be the tip of the iceberg for where this is ongoing. annmarie: delaying a new battery-powered model in factories. gm said it would take decades to develop. you see mainstream buyers reluctant to go and buy dvds. -- dvds -- ev's. >> is making a bet, hedging their bets in terms of where this hybrid world is going. it has been an uphill battle. many have gone by over the cliff , but the stronger you get -- when you look at where they are, look what happened to detroit. they are betting on hybrids now.

it is my gm stock is doing what it is doing. it will be this combo. the dream scenario is off the table, but you will see more ev's on the road. lisa: i love your phrasing. it is wonderful. thinking of the awkward prom date taking place between the companies. i wonder how much the onus will be on german manufacturers, in particular. not like in the u.s., where they are putting up the wall and saying, do not even try. >> going back to some potentially awkward prom pictures that we will be seeing there. in germany and what we are seeing in europe, they are late to the game on ev's, but more and more, it will be

partnerships that we are seeing. it is a mini game of thrones playing out. names like tesla -- they are going to get more and more aggressive. dani: now i'm thinking about who will be in the bedwetting scene and what gets slashed. european autos, if they want ev's, they cannot stand alone? is that what you are saying, that they cannot fight the competition from china alone? european auto manufacturers need to find a buddy and date to the prom? >> in terms of that, i think vw, what they are doing is a shot across the bow. they stand and a stronger position than others, but it

will cause others to sort of go down that path because if you are late to the game there, then you get closed out. i think that is where this is going. it was the perfect situation. i think that was -- there will be others. others are going to fall off the cliff and from an ev perspective, they cannot raise capital. it is almost, the strong will get stronger but others will definitely fall away. lisa: we are putting up a chart of year-to-date losses on some of these names. lucid group in particular. at what point can you really leave some of these for dead. midian has gotten a shot in the arm, but some of these have to

fail. who could fail or -- >> there are a lot of other players. when we talk about the strong getting stronger, this is an air pocket period, a massive growth renaissance on the horizon. for vivian, they will be a longer-term player. you will see more in detroit but others, if they are not successful in the next six to 12 months, it will be messy. from an investor perspective, you bet on ai revolution, tech continues to be the play. they are like, what about us? lisa: thank you for being with

us. always fun and always a pleasure. we parse out the growth versus slowdown story. eighth-grade prom, awkward prom pictures, the question of, is this really what we are talking about? annmarie: kris bryant says it is more than eighth-grade prom. dani: i think we need to put in exxon metaphors for a while. lisa: look at that s&p 500 that is completely flat. right now you are seeing yields marginally higher. this is bloomberg. ♪

do you want to close out? should i? normally i'd hold. but... taking the gains is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management. ♪ ♪ relax into a caribbean state of mind. visit sandals.com or call 1-800 sandals. you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai. people couldn't see my potential.

so i had to show them. i've run this place for 20 years, but i still need to prove that i'm more than what you see on paper. today i'm the ceo of my own company. it's the way my mind works. i have a very mechanical brain. why are we not rethinking this? i am more... i'm more than who i am on paper.

lisa: we do get some data at this time. in markets, it is pretty quiet today as -- the debate between biden and trump. that core pce data, personal spending and income. s&p future losses are deepening. nasdaq teachers basically flat.

it is really interesting. just to stick with the teenage theme, there is angst under the surface and this is what we have been talking about. we have had people on like chris harvey who does not seem very positive. >> something you said worried me. steve was talking about this yesterday. he was essentially like, we owned so much we are already risking parameters. when they start throwing out the window tried-and-true methods, it is not usually end well. lisa: you can see in the bond space that yields are marginally higher on the longer end. 10 year yields.

this comes on the heels of higher than expected inflation in australia and canada. in the currency space, this is currently the most interesting move to me. going back to 1986, coming at a time when people are worried about intervention or the idea of intervention at 140, 150. annmarie: when is the next psychological level? it is more about japan, unless they come out with tons of money to flood the market, it is more about managing the weakness of the yen until they decide to make a central-bank move. lisa: that is why people are speculating that if you get some kind of move, it could stave off some of the losses.

fedex beating earnings expectations thanks to a sweeping cost-cutting plan. the company hinting at a possible sale of its freight business. to me, this is perhaps -- he would think on the surface it is the wrong kind of upside surprise. what is the macro call? >> almost like they were trying to avoid it. they should have asked, what is the environment you are dealing with? they said, we can adapt to anything. one thing i see in the call is they are benefiting from near shoring. they talked about manufacturing moving to mexico and that they can take part in -- take care of it. they have prepared themselves for that and that was interesting.

lisa: volkswagen is revving up its rabbit -- it's plans. the deal would be a financial lifeline. it would give vw a way to expand manufacturing footprint. we were talking to dan ives about this but i wonder how much this is triggered by the idea that german auto manufacturers need to find some exit strategies with the onslaught of chinese ev's. annmarie: there were some interesting points about china and the european union trying to manage this. what surprises me so much is that yes, it is a on lifeline for vivian, but they are going the opposite.

the demand is not there right now, but maybe vw has to make a move now. lisa: saying it would be appropriate to cut rates at some point, adding that she expects inflation to gradually improve this year before more rapid progress. investors looking ahead to the preferred gauge. it comes out on friday. joining us, jason. i want to start with you. you had a call saying everyone is more sanguine about cutting rates. >> i do not see a lot of reason for concern and sharp deceleration. on the acceleration side, we have had some progress, but the

fed chair has made it very clear that they have a different reaction. for powell, the first cut is consequential. they will deliver a series rather than one and done. in the context, i do not see the rush. i see them as playing with this approach, getting more confidence on inflation and a clear signal that the economy is decelerating, which i do not see in the data. lisa: jason, do you agree? jason: we were pricing cuts into march. now, two cuts for the year. largely because of growth expectations improving. if the fed is waiting, it is not a bad thing for the markets. the path is uncertain, but timing is less so.

dani: what about the magnitude? we have been having a discussion about the broadening out. what you need for the cyclical parts of the market to become attractive again? >> lower conviction that it will consist of solid growth and the fed can do cuts. when inflation came lower, you had fed officials talking about proactively cutting. cyclical's value for a few months. maybe the fed will come to the party a little too late. this whole thing rotating away and broadening out. it probably will not happen for a few months. dani: is the fed going to be

late to the party? there is a bellman that talks about the fact that inflation could view its head, which would mean another hike. you can still hear that type of language as there are other metrics that start to soften. >> i think this is quite helpful. it does prepare investors to better understand the fed reaction function. i think hiking interest rates again is pretty high. it comes with accelerating inflation but it would only happen if the economy itself is resilient and growth is accelerating. demand is resilient. i do not think we are seeing the kind of wage inflation spiral. this is important to understand.

i hear a lot of talk about the unemployment rate and recent increase. i would say the unemployment rate is an important statistic. but this debate ignores the fact that there is some uncertainty about how sort of under the couple of names or one name. it is not a convicted under the hood value. >> it is interesting because the tech sector is up.

think of it as the small-cap index. they are actually flatlining. the market is actually skeptical. there is an issue where, do you actually want to chase performance? we have seen the reliable our hd market data surprise to the downside. we do not know if it is a soft landing or falling off a cliff. annmarie: no one has been penalized. earlier they were talking about six cuts, but you see the market making all-time highs. is there something to be said for that? nobody got hurt and continue to do well? >> we have an environment where

growth should be fine. they are biased towards cutting rates. it is generally supportive. it leaves out the whole ai story . if you have those conditions that you think are supportive, it is hard to get to barash in the markets. the fact that markets are up, i think they are at risk relative. it is just hard to underperform when the markets are going higher or when the markets are going lower. i think it is forcing people. you have to be invested. if you are not, you are going to be lacking performance. dani: blurring into that point, you mentioned the craziness of the labor market data. you can look at the household survey, and fps that show some strength -- is confusing. i wonder what you make of corporate. i hearing clarity when you hear

that people are still going on cruises? or a target yesterday saying they are going to cut even more prices on their goods. are you getting any clear picture from their exposure to the consumer? wes what i am watching very closely is the playoffs and how confident they are in discussing the tightness in the labor market. it is certainly a loosening in the late -- in the labor market. companies are not hiring at the fast pace that they did in 2022 and 2023. at the same time, i am not seeing widespread layoffs in the data from the companies. also the challenging report and so on. this suggests to me that we are not at the point where the labor market is about to sour. if that happens, we should start thinking about how sustainable is this recovery?

on the consumer spending story, it will be complicated and complex during the recovery. we are due for a correction and that is finally materializing. mind you, it is happening year or year and a half later than consensus first expected it, but there is still some pent-up demand and resilience in services and that is where carnival, cruise ships and overall consumer discretionary spending comes in. it is not going to be a very clear picture, but understanding that this recovery is playing out in phases, i think that surge of services come back is not over yet. lisa: it is an interesting point. so much has derived from home moving and everything in the housing industry that has

essentially been frozen into place for a while. we have been talking about it for the last few weeks that it is clear what will happen when the fed starts cutting rates. does it lead to more potential supply and prices going down or is there pent-up demand released ? where do you stand on this? >> it has not really slowed the economy. if it has not slowed the economy, maybe cutting rates would not be that emulated. the housing market we have seen, when mortgage rates came down last fall, sales picked up and there is this pent-up demand. a lot of small business is, it relies on bank lending and they are borrowing at higher be. if those rates come down, a lot of them have been holding off on making investment. even in the back of their mind -- if we cut rates, is it something where economic

committee can accelerate? we just do not know. the argument that it may not be that stimulative, there is a risk that it could ramp up activity. dani: does that mean even if the fed is cutting, the impetus for bond yields to move down is not as straightforward? >> i think the risk -- you see the 10 go lower. the risk is that they go lower almost reactively. and then we had 12 months down the line and you realize we are going 2.5%. that is definitely a risk of that happening. annmarie: you have the inventory for the housing market. what you think will be the endgame if they cut?

is that really enough for people to get in? >> first of all, i agree that there is pent-up demand for housing. we started this hiking cycle with tight inventory. that has only gotten worse because builders are not starting new homes. we have the mortgage locks as a people are not bringing their existing homes into the market. i think the question is that what we know from the fed, they want to cut and start a series of cuts. the 10 year will respond. this is the risk. the fed will eventually be able to deliver. this loosening in financial

condition could give the housing market a lag up and release pent-up demand. it will not be about one cut or two but what the 10 year price is. that is the real risk. if that happens, we are expecting a deceleration in shelter. that is fundamental. the next leg is the progress that we expect is undermined. lisa: basically saying stop it with all of this. if he stopped cherry picking, you will actually see that it is important to do an adjustment because growth is slowing. they will risk having some sort of fed error. do you agree with that? >> i think it is more nuanced

than that. i think it is chain thinking season at bloomberg surveillance this morning. it is important to understand that in this complex environment , the approach that the fed is delivering is the right one. we do have a lot of firepower, should be economy decelerate. i am of the opinion that the first cut and decision to ease is consequential because of how the market will price it. we were pricing six to seven cuts. i am not pessimistic on the economy. if you think that the fed will deliver two or three cuts, that means other people's baseline view is not a sharp recession. having more confidence on the progress of inflation is right. waiting before you deliver on that easing and monetary policy.

lisa: is it cherry picking on surveillance? jason quinn you look at the data and interpret it the way that you would. if you are more pessimistic -- i have had smart people on both sides saying that the fed will be too late and other people say it is crazy to even think about cutting because the economy is not slowing down. we are dealing with data that is noisy from the pandemic. i am focused on friday. we see goods going lower. at the end of may, that is strong versus goods. the picture is fuzzy. it is challenging for the and for us. it is still generally risk on. lisa: both of you, thank you so

much for being with us. here is your bloomberg brief. >> we start with disney as the fast pass may be getting faster at disney world. starting next month, they will let visitors reserve a space in line provides up to a week in advance. currently, partygoers can only book a day ahead. the multilane pass will be able to make seven-day reservations for up to three rides, but it will cost you. it allows three reservations and starts at $15. micron is sent to -- investors are looking to see if the chipmaker's ai fueled valley has jumped too far too fast. investors are setting lofty expectations with revenue estimate coming nearly 80% higher than the same period a

year earlier. micron shares are up 60% with much of the end coming since the last earnings report. airbus has a new warning. deliveries are due. some deals are at risk. the company cutting its outlook and delaying plans to increase the output. that is your bloomberg brief. lisa: up next, setting you up for the day ahead. this is bloomberg. ♪

at morgan stanley, old school hard work meets bold new thinking. to help you see untapped possibilities and relentlessly work with you to make them real. (♪♪) the road to opportunity. is often the road overlooked. (♪♪) at enterprise mobility, we guide companies to unique solutions, from our team of mobility experts. because we believe the more ways we all have to move forward.

the further we'll all go.

lisa:lisa: counting down. here is the trading day -- trading diary for the next few days. at 1:00 p.m., the u.s. is selling five-year notes. plus another round of jobless claims. the first presidential debate that comes out. we will close out the week friday with personal income spending. one theme this morning, are cherry picking the data? question had to have a framework for why it will move the way it does. the only data that matters is unemployment and core inflation. those are the indicators that are in the fed's sep. lisa: it is cherry picking season on bloomberg surveillance. how do you look at all the best folks worries?

you can be accused rightly of such. how much is this a more shack test? i'm not sure of the answer because he hears smart arguments on both sides. dani: it is hard to have conviction about anything. these risks exist. you can see why the fed would want to be patient because potentially, they could be wrong. nothing challenges that but silly data. annmarie: i loved chris harvey's point that nobody has been penalized and investors think that they can walk on water, but how can you not invest or

continue to go all in on nvidia. lisa: you bail out to the next and you can tell stories. coming up tomorrow, joseph will be joining us. ed has been talking about the roaring 20's. more people are talking about the idea rather than some sort of 1970's model. do we see a roaring 20's off the ai stories that underwhelm the cycle taking place? we are seeing that with a flat on the basic index.

s&p futures down as younger -- longer-term yields rise. ♪ 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.

matt: futures turned down after the second worst in a rally this century. the countdown to the open starts right now. coming up, futures running out of steam as fed officials cool rate expectations and the japanese yen