♪ >> i don't think you want to be taking a whole lot of risk out of this election. >> fiscal policies of this country are making monetary policy for our monetary policy makers much more challenging. >> biden has played his cards in a sense and i think trump is talking a whole other level of protectionism. >> biden's policies on the fiscal side are much more in line with kind of controlling the deficit. >> we have policies that have been in place for four years, that continues. i think the markets can get some comfort out of that. and a big shift, look out. >> this is "bloomberg

surveillance" with jonathan ferro, lisa abramowicz, annmarie hordern. jonathan: "bloomberg surveillance" begins from new york city. this is bloomberg and we begin with our top story. a disastrous performance from the president in atlanta, georgia. >> we are the greatest economy in the history of our country. we have never done so well. pres. biden: the economy collapsed. there were no jobs. unemployment rose to 15%. it was terrible. >> they spent money like a bunch of people that didn't know what they were doing and they don't know what they are doing. pres. biden: that simple not true. there's no data to support what he center he's exaggerating. he's lying. >> the only jobs he created are for illegal immigrants and bounce back jobs, bounce back from covid. pres. biden: we get the total ban, total initiative relative to what we are going to do with more border patrol and more asylum officers. pres. trump: i don't really know

what he said at the end. i don't think he knows what he said either. pres. biden: how much do you owe in several pennies for -- penalties for blessing a lady in public, for doing all sorts of things, for having sex with a porn star on the night your wife was pregnant. >> i would like to ask him why he allowed millions to come and here from presence, jails, and mental institutions to come into our country and destroy our country. pres. biden: the only person on the stage that's a convicted felon is the man i am looking at right now. pres. trump: when he talks about a convicted from, his son is a convicted felon. killing roe v. wade and moving it back to the states, this is something that everybody wanted. pres. biden: dealing with everything we have to deal with. look, if, we finally beat medicare. john: this was supposed to address concerns. instead of putting to bed questions about the president's age, if anything, he made the former president look 78 years young.

there's some big questions this morning across this country. lisa: if you go to the election betting site, they're pricing in a 62% chance that joe biden will be the democratic nominee, down from 86% the day before. real question setting in about whether he will infect be at the top of the ticket. it was the one bar he had to clear. he had to put to bed these questions, this nervousness within the american electorate that he was up 81 years old, that he was up for another four years, up to the job. and he did not do that. former president obama's campaign manager msnbc last night calling it defcon 1. biden's former communications director saying her former bos'' performance was disappointing, saying his biggest issue was that he had the energy, the stamina. he was not able to prove that. jonathan: a cnn flashpoint, trump learning by 67% to 37% --

33%. that margin is huge. go to the timeline. around 12 minutes and, the president was asked about abortion, then pivoted to immigration. abortion was met to be the strength, he bit to the weakness -- meant to be the straight, he pivoted to the weakness. the former president says the following, i really don't know what he said at the end of that sentence and i don't think he knows what he said either. if you look at the reaction of the president, totally disengaged as that moment is developing. lisa: there is real conversations that are evolving. greg was talking about dementia, mental illness issues. either way, i think annmarie hordern really did nail it. the fact we are talking about it so openly and so many democratic commentators are commenting on this, the cat is out of the bag in terms of a lot of confidence out of him. punch bowl put it best, 2024 reality sets in. a lot of people are really awakening to two choices that

many do not want. >> if you are trying to ignore this election cycle, you can no longer ignore it, especially if you're invested in this market place. if you are not watching, it's a good point you made. there were moments where president biden seem to disconnected. he was looking down. he looked off-camera a lot of times. but even if you are not watching the screen, his voice was soft, has voice was hoarse. why did the campaign -- why didn't the campaign or white house not tell us before the debate that he was suffering from a cold? why did that come 10 minutes into his performance? a lot of questions brewing. jonathan: let's go down to atlanta georgia to catch up with david gura. there was a big question going into it and it was a pretty low bar for the sitting president. could you deliver, get there 90 minutes and put to bed concerns about his age? i think most people concluding he did not do it. david: we had a spirited conversation yesterday, the four of us, about help of this debate could be and i think it's

extremely pivotal. you bring up the comments we have heard from very establishment members of the democratic party expressing trepidation about this candidate in light of what we saw last night. that does change the tenor of the conversation surrounding him as the presumptive mccracken nominee in this election. it was astonishing to watch. i was -- presumptive democratic nominee in this election. it was astonishing to watch. at the end of the debate, a lot of quite, and all of a sudden, from each entrance we had surrogates for donald trump coming onto the floor, obviously very happy. it took 10 or 15 minutes before any democrat made his way to the floor. gavin newsom finally came out, raphael warnock was on the far as well. it was clear that in the aftermath of the debate, yes, there was soul-searching, but also probably a very difficult conversation about what was the way in which they could possibly spin this as somewhat positive for the sitting president.

i hear you mentioning that cold. i don't know how much that's going to cut it. these questions swerving dust swirling around him i think -- these questions swirling around him i think have really ratcheted up. >> you were in the room. the videos i saw were reporters swarming the likes of gavin newsom. what were these individuals' responses, these people being floated as potential contenders that could step in if biden stepped aside? david: are talked to the governor last night before the debate. we joked that nobody was enjoying the spin room more than governor gavin newsom. he was swarmed by a throng of reporters very eager to talk about the president' policiess, very eager to say he was fighting for the president's policies, talking about his travel schedule. you look at him and see him as a much market be member of this democratic party and somebody that has presidential ambitions. you contrast that with the president. it's extremely stark.

even looking at those goggles that took place after the debate, you had gavin newsom, raphael warnock, a throng of reporters around them. but it was so large, reporters cannot really have a give-and-take with those candidates. they kind of centerpiece and moved on. it was clear from that dynamic, the imbalance of the surrogates we saw her president biden versus those for trump, there was this recognition that this is a night that did not go by any means in favor of the sitting president. >> since there have been so many opportunities and discussions around exactly this point over the past few months, why is joe biden staying in the race? what is the conviction that is backing that in terms of not just the fact that he is the sitting president, but the fact that the polls are going south and the fact that he is not reviving them? david: i think that this is going to be a fascinating conversation and there is going to be a lot of soul-searching as a result. you mention kate bedingfield, his former communications director, and what she said on

cnn, reckoning with what happened and critical of the way he had been prepared for and could could this debate. joe biden has been in politics for a long time, has a very loyal group surrounding him. the message we have gone for months up until this debate is he can do it. it kind of mirrored what we heard going into the state of the. you are worried about -- state of the union. you are worried about him? he's got this. that's the message we heard from advisors, it's been around him for many years. i think there's going to be a moment whether democratic party is sank, what's been going on? there's a level of political er sponsor billy surrounding the way his ash political irresponsibility surrounding the way his -- there's a level of political irresponsibility the way this campaign has was operated. this was supposed to be something that was to shake it back to life, be this pivotal moment. seems like it's moved in the

opposite direction, certainly did not a vance -- advanced what they thought would be happening here. jonathan: david gura down in atlanta, georgia. it's the debate the president wanted to have. lisa: this is something he called early to try to be a pivot point in his campaign. it was anything other than that. people are actually talking about fundraising even. who is going to throw their money behind him. some real soul-searching within the democratic party. jonathan: joe policy has a very different view. 2020 for election view is unchanged post debate but the call is made with less confidence because neither candidate change the game. in november, biden likely wins by a nose. terry joins us for more. there are questions about whether his candidacy survives until november. why do you take a little bit of a different view this morning? >> i think you have to look at the debate in context. firstly, i wrote and i would associate myself with everything

that was set so far. i don't want to reiterate it. at the same time, what you see in pockets of the media are people that were way over their skis in trying to validate what now is apparently covering for biden and now they are going in the opposite direction and bedwetting on this to cover their own difficulties, so there's that. secondly, i think you cannot look, as bad as biden's performance was, i think you cannot look at it in a vacuum. trump had a relatively good night. but at the, same time he is dealing with a split republican party, luminaries, too, but voters and lack of a field of independents. he did not make progress. and the other republican in that debate against biden, there would be voters flocking to the republican candidate. that's not the case with trump and it's probably not going to

be the case. thoroughly, i would say in short attention span theater land, now we are going to get onto the trump immunity case, his sentencing, the political conventions. this becomes part of a continuum that, you know, we don't know how the polls are going to shake out. the polls have been way ahead of official washington on a lot of this. finally, you got a situation where markets are understandably concerned about the direction and how they bet on this election. might point to you is that, you know, 70% likely right now what 2025 washington is going to look like and it's regardless of who the president is, you are going to have a split congress. you're going to have a basically a lot of steps. dani: greg v. writes our tentative bottom line is that biden will drop out within days. whether you like biden or not, it was a sad sight last night,

as this once dynamic figure stared off into the distance with the look of a very tired and lost old men. terry, is this possible? is there a chance biden looks at last night, his team looks at last night and says we need to get ahead of this before august, before the convention and step aside? >> i share the sadness. i don't share the view that biden will drop out within days. biden has worked his whole life to get here. he is not going to lose his grip on the office lightly or quickly. people should understand that. and people should also understand the vast majority of the democratic party is not interested in embarrassing itself and a quick flip on this stuff based on one debate performance would be exactly that. it would be a panic move that would frankly i think outstrip what went on last night in the debate and not look good for democrats or whoever the candidate is. at think that's very unlikely and i do not think that's what

democrats will do. i think democrats will wind up closing rates trying to figure out new ways to highlight biden's sent against and energy -- sentience and energy, doubling down on the line that it's a cold, it's this and that, and moving forward. the strategy had two components, an early debate would be good. if it wasn't they have a lot of time to correct it and here we are. dani: you said flip on a switch -- lisa:lisa: you said flip on a switch. this is not a new discussion per david put it really well when he said there's a question around political malpractice that has not been addressed more concretely earlier that is being left up to this moment that was set up by him as a pivotal moment. how do you address that kind of concept that it has been sort of miss advisement that should be course corrected versus just allowed to keep going? how would you respond to that? >> how i respond is i think i was one of the first to raise

this is a real issue, even last year, got a lot of buckshot for it, frankly. we have all discussed this on this program and others for months. so you know, you all have been i think well ahead of the curve. i've been raising this as a real issue. voters think it is a real issue. the places where it has not been a real issue is kind of inside the beltway, official democratic washington, and in supporters in pockets of the media that have been enablers for that view. you know, i think they are now scaring to catch up more than an thing else. i think people should understand that that panic is in part self-inflicted for that very reason. jonathan: reality check for them this morning. terry, appreciate the perspective. democrats waking up to a nightmare. let's get two stories elsewhere with your bloomberg brief, it is dani burger. dani: israel and hezbollah are heading closer to a full-blown war in lebanon.

a steady tit-for-tat between the two that started october 7 has been shifting into something more alarming. record numbers of hezbollah projectiles have hit israel this month while israel carries out deeper and more destructive attacks in lebanon. tens of thousands of residents have been driven from homes in both regions. thousands of hsbc u.k. customers have been unable to access their online and mobile banking services. the bank saw major outages beginning in the early morning. in a post on x, hsbc acknowledge the widespread issue, saying i.t. teams are working to restore service. online card purchases and still be verified via text message. nike shares tumbling 14.7% in the premarket. full-year outlook fell short of expectations and the company said revenue would decline in the mid-single digits this year. nike has been struggling to turn out new lifestyle where. rivals have been picking up the slack like adidas, whose retro

samba sneaker are fueling a new era of growth. that's your bloomberg brief. jonathan: nike just not in the game. up next on the program, wrapping up q2. >> we are in an era of stories more so then we been in a very long time. as far as i can tell, the nvidia story is going to last for years. jonathan: that conversation just around the corner and why the s&p could hit 6k before the end of the year. that conversation up next. ♪

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♪ jonathan: live from new york city this morning, no drum and this market, plenty of drum elsewhere. equity futures positive on the s&p. on "surveillance this morning, wrapping up q2. >> we are in an era of stories

more so than we have been in a very long time. as far as i can tell, the nvidia story is going to last for years. some of these stocks, nvidia, apple, microsoft represent very large percentages of the snp so the normal risk parameters that apply to constructing portfolios do not necessarily apply. jonathan: the s&p 500 heading towards a third straight quarter of gains. julian emanuel of evercore raising his year-end snp price target to 6k, writing 7000 as possible by year-end 25. ai has permeated the consciousness of corporate america. this is a huge inflection in what we continue to view as game changing technology. julian joins us for more. good money to you. we might navigate our way through politics in washington but i've got to start with this price target of 6k on the s&p 500. when you put this up, how do clients respond? julian: clients who know that, for the most part, we have been

concerned about valuation on the one hand, yet have been, i would say, one of the largest proponents of the game changing nature of ai for well over a year now. really, we are receptive to the fact that it was an introspective moment on our part. we did their work and basically when you go back and look at similar high-priced valuation regimes, valuation alone is not a reason to sell stocks. when you've got a fed that is really looking forward to cutting rates when it can and you look at this morning. let's step back and we will start the political conversation may be a little bit earlier. you've got the uncertainty of what we saw last night, you've got a disruptive event in france coming this weekend, and you've got the world's most iconic footwear maker down 14% and the market is rocksolid this morning. something else is going on.

lisa: you talk about the length of an expensive market, how it can be a prolonged time, almost two years and the current expensive market is only six-month-old. wasn't micron a reality check? that if there is any kind of lack of increased target expectations, the world falls apart, you see everything fall out of bed? julian: it wasn't. if you look at the narrative, it was basically, oh, that is traditional ships, that is not ai enhanced, supercharged, you know, 2024, 2025 semi conductors. and essentially, the market again took it in stride against this backdrop of just incredibly ample liquidity. and from our perspective, part of what we do is sort of look to see if there is a bubble psychology forming. when you think about sentiment levels, you think about ipo

activity, m&a activity, we are not concerned about the bubble aspect get either by any stretch of the imagination. >> let's get to the politics sooner than maybe we normally would. we have steve eisman saying it is not really matter who is president, you can ignore this, buy nvidia. can you ignore moments like yesterday evening? julian: the market is telling youjulian: that at the moment you can. i think there's a rational response here. if you look at the state of the equity market, and again, the subdued bullishness, but bullishness nonetheless, what this is is really a recognition that after two years of essentially no earnings growth, we are back to an earnings growth pattern, both from a revenue perspective and from this ongoing ability of corporate america to control its costs. and frankly, ai over the

long-term is going to give even more power to corporate america to increase revenue and control costs. jonathan: you wrote the s&p 500, the persistence of exuberance, the persistence of exuberance. what did you mean by that when you put that in? julian: well, again, this is part of getting our arms around this high valuation regime. if you look at these past regimes, they lasted 1.5 to 2 years, and you saw gains. once stocks became expensive, which stocks passed in january, with gains of 40% to 60%. could there be payback? absolutely. that payback is a function of a bubble forming or a recession directly on the horizon and we do not see either of those at this point. >> how different our u.s. markets then say france and the exuberance you talk about in the u.s. versus the outflows we see

from french assets ahead of the election that begins on sunday? is there a sense in your mind that because of the ai developments, the u.s. is immune to political risk in a new way that people are not accounting for? julian: this is the kind of thing and i go back to this valuation paradigm, it does not last forever. we have to be conscious of that. the apple card, there are no sort of overt signs of disruption. but look, america has benefited by being on the vanguard of technological development. this is a growth-centri marketc. europe tends to be a value centric market in the main and this is the place where capital flows to, particularly in times of uncertainty. when we think about the global political point of view, there's lots of uncertainty. jonathan: it's a unique privilege and i am so pleased you brought up this story because i can only imagine what

the fallout in france looks like if those two governors were french. we are talking about governance issues, fiscal sustainability. the treasury markets totally unmoved by. >> we would see treasury yields surging because that's what happened in france, we saw the biggest outflows in many months from french markets as a result of what we have seen over there. how different is the united states politically? how different is it not because of the fiscal policy but because of the privilege on the global stage? jonathan: based on price action, it's very different. julian emanuel of evercore is going to stay with us. nike getting absolutely hammered in the premarket, down by almost 15%. that conversation, up next. ♪

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read it carefully before investing. her uncle's unhappy. for a prospectus wit i'm sensing anion. 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.

jonathan: three days of gains on the s&p 500, looking to make it four, the longest streak to the middle of this month. the nasdaq up by .40%, heading towards a fourth week of gains and another quote begins on the benchmarking america. the two year, 10 year and thirty-year looks like this, the two year is up on the quarter and down on the month, more constructive than the course because the last month has been on the back of economic data rethinking with the reserve will

do. lisa: it is backing away from this idea of higher for longer and the whole idea that the reserve would be determined to hold rates high. the idea that equal risk and it would accelerate, growth has taken the main stage. jonathan: do politics matter to financial markets? if you are french, absolutely. look at the spread between the german and french 10 years, it is at 80 basis points. lisa: you are looking at the biggest spread between these two yields going back to 2012. when you look at outflows, western europe recorded its first week of outflows since november 2020 three, highlighting how political risk letters but not in the u.s. jonathan: coming up later this weekend, we will have more on that story later on. front and center in america, undercuts and damage control mode. president biden's performance in his first debate against trump

raising doubts about his candidacy and raising questions of the first debate is the last. annmarie: this was supposed to be a recalibration and biden was supposed to put to bed if he is ready for four more years it has aggravated the concerns. what you hear from the white house and campaign officials is it is a double standard. trump is almost as old as biden, but what they have done, what many call, is political malpractice. looking off to the distance was one issue, a raspy voice, losing train of thoughts, and at moments, clearly, sickly, almost freezing on camera. lisa: well, we've got five months until the election. jonathan: see have five months? lisa: great question, it is looking like less and less. the pricing of the expectation of his running is 62%, harris is at 13%, gavin newsom it 61% --

is that 61%. i keep thinking about this from punch bowl, 2024 reality sets in, we are looking at an election where an increasing number of people are extremely unhappy that these other choices. annmarie: i like to look at two friends of the show, this morning, greg bailey a, our tentative bottom line is that biden will drop out and days. and terry says, that is unlikely and that looks worse than what they need to do. but what do they do? they need to make a massive move because there is not another debate until september, and all of these moments of biden looking confused and losing his train of thought, that is going to persist on social media and on television until that next debate. jonathan: let's drop a major distinction between what is happening the political world and there might be panic in the democratic party but not in the financial markets this morning. i would expect that maybe the

dollar would start running a little bit more on the prospect of trump getting a big win in november, and doing something big with trade policy, which deutsche bank already said that they would make big things with the u.s. dollar. i'm not seeing that this morning either, so i'm trying to make sense of that. lisa: think about the people who've come on the show, whether it is jay pulaski saying the currency will tank or steve eisman same it will be incredible if trump wins. you are looking at a complete difference in the opinion about the outcome, depending on the presidential winner, as well as potentially the make of congress. annmarie: or is the market thinking this is 1968? this is lyndon-johnson and biden will step aside? because the conversations are not just happening behind closed doors but out in the open following the debate. did you flip through cnn, msnbc, individuals openly talking about

how uncomfortable that was to watch. jonathan: left-leaning networks, the kind of void what everybody can see for themselves the past six months. that is the issue terry haynes has gotten a. -- gotten at. who surprised by this? this has been shown in the polls for the best part of 12 months. there have been certain segments of the media that have been spinning a different story and they could not spin it anymore after the performance yesterday. lisa: this is what happens when you get tribal politics. when you have certain things you cannot say if you are part of a political party and certain things you can say, and you have that on both sides of the aisle where people are not willing to challenge the status quo. you have seen that get more and more entrenched. a lot of people have talked about that dynamic and how that could change. jonathan: there is a little economic data coming up later, for those of you interested. 8:30, we get the preferred inflation gauge, and income spending data and followed by

consumer data at 10:00 a.m. shares of nike are getting hammered in the premarket. therefore your outlook reinforce kinds -- the full year outlook reinforced increased competition. we are down by 15%. what is the market issue and what is a nike issue because this feels like a nike issue? >> an absolutely is a nike issue. the problem is innovation. they put their foot off the pedal a couple of years ago since the pandemic and they have not brought out enough innovation to compete with competition and customer demand. they are working at it, but it is going to take time and it will be a painful year to watch them try to come out of this and bring forward more innovation and their competition. lisa: when you talk about innovation, i think of running. i'm a runner, i know many

runners, and they don't think nike is in the circuit. instead, you see hoka and other brands that have gotten the front stage. how do they get that back and where did they go wrong? poonam: nike is still the leading brand and running. so you probably are seeing more hoka on people's feet, but it is still a dominance you for running. that said, you are right, they need to bring back innovation, they need to become more hip, they need to have performance, improve styles, and in this phase where things are looking ugly because they are just starting to really push forward on innovation, and to see that come through will take at least six months. jonathan: we appreciate you. the stock is down today, down by double digits in the premarket, following a big move yesterday on another name, walgreens. we were all over the story when it dropped. -22% yesterday on that retailer.

lisa: dragging down other potential drugstore providers with the closure of a significant portion of their 8600 stores around the country, raising questions about is it a walgreens problem, consumer problem? a lot of people say not so much. or is it a model problem? the theft, the way they have dealt with it? and the fact that amazon is eating their lunch. jonathan: julian, when you see moves like 22% on walgreens, double digits on nike, county keep saying idiosyncratic or do we have another issue at play? julian: no, we can say it is idiosyncratic. one of the things that have concerned us until recently is this incredible dynamic where the cartilage among stocks, not just the s&p 500 but the entire universe, has dropped to all-time lows. normally if you look back the last five or six years, that had been the precursor to a

correction, but the degree to which that has happened in recent months is so different that it actually calls to mind the potential, and this is part of what our upside -- if a bubble starts warming, we could get 6500 dynamic would look like, you have more correlated moves where all stocks start rising like the end of 1999, but the fact that you could have this report down 14%, one of the largest pharmacies in taking to the degree says that investors are absolutely not patient for stories that are not working, but that the picking of stories that are not working are very, very voluminous. lisa: it also shows there is not a presiding narrative, and it is not recessionary moment, and that is what we have felt come

back into the zeitgeist over the past couple of. suddenly, it seems like it is more on the forefront than the chance of searches in inflation, so what happens if the weakness becomes more pronounced? julian: when you think about all of the noise we have been talking about and all the political volatility globally, you can get a sense for why the market is much more comfortable with not really caring whether there are 6.5 rate cuts or 1.5 or two, but more of the fact that the fed is looking awfully smart and stressing the concept of data dependence right now, but the market believes that however the data unfolds, that the fed will either exercise constraint appropriately and wait for the right time to cut, or, to your point, if the slowdown looks like it is exhilarating, they will be there front and center. jonathan: i'm trying to tap into a simple underlying message that

i think you've tried to explain, you say buy the index and sleep well at night for the s&p 500? given the price target and everything you've said with these moves and the index levels the rocksolid, are you saying to just do that? julian: no. there is low correlation environment and that is really fracturing management. a lot of people, yes, it is appropriate to own index exposure, but from our point of view, the market is bifurcating in a way where we have to come to grips with the fact that there are only two sectors are only two sectors outperforming the s&p 500 this year, communication services, we know who was there, and infotech, which recently upgraded. our view is you need to be there, but you also need to be in the defense of sectors, health care, and staples because if we get the slowdown, those companies will be more immune to

the slowing economy. jonathan: fantastic to see you, julian emanuel. price target of 6000 on the s&p 500 year-round. later, we talk concentration risk. to go through the stats, only 17% of the s&p outperform the index the last year, and of the nasdaq, it is 11%. lisa: just going through the overall full year so far year to date averages, the s&p is up 15%, nasdaq 19%, russell 2000 up 0.2%. you see such incredible dispersion with apple of 100%, nvidia hundred 50%. why not just buy the index if you have pistons counter firing each other? you can count on them rather than doing the work yourself. jonathan: look out for that conversation later this morning. not the message julian is sending, just for the record.

let's get your bloomberg brief with dani burger. dani: volodymyr zelenskyy signed a long-term security commitments with the european union. the deal formalizes eu initiatives to support the nation, including arms deliveries and training for ukrainian troops. they formally opened negotiations over ukraine's membership. l'oreal is expecting slower growth this year. weakness in china is weighing on their sales, telling investors they see the global duty market growing between 4.5% and 5%, that had been their base case previously. the ceo says it is thanks to a flat chinese market which had been a growth engine for them. shares are down nearly 10% this year. microsoft told customers that their emails may have been accessed by russian hackers. in january, they disclosed that senior leader emails were stolen but the company acknowledged that the hack was more widespread than first thought.

microsoft has dealt with strong condemnation by the u.s. government for security breaches with a company undergoing one of the biggest security overhauls and decades. that is your bloomberg brief. jonathan: more from dani and 30 minutes. next, playing the inflation blame game. >> we are working to bring down the price around the kitchen table. >> he inherited almost no inflation and it stayed that way for 14 months and then it blew up under his leadership. jonathan: that conversation around the corner. live from beautiful new york city, this is bloomberg. ♪

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it is, right. he gets it. yeah. jonathan: equities doing ok, positive by 0.36%, up about .30%. yields in the bond market higher by .20%, 4.3078. under surveillance, playing the inflation blame game.

>> he brought down the price of prescription drugs. we are working to bring down the price around the kitchen table. >> he has done a poor job and inflation is killing our country. he inherited almost no inflation and it stayed that way for 14 months, and then it blew up under his leadership. jonathan: over 90 minutes away from the pc deflator, calling for another month over month decline. the and cpa pointing to slower consumer growth, writing that with the calling of activity be accompanied by ongoing inflation relief? if so, the fed can continue to focus on eventual easing. if not, and ongoing loss of momentum, coupled with still elevated price pressures may result in the feared scenario of stagflation. lindsay, what are you looking for 8:30? aced on those two options, what's the best case? lindsay: we're looking for a better improvement, getting us

closer to that 2.6 level headline and the core, but even with further progress, it isn't enough to justify a topline move in terms of monetary policy. fed officials set the bar relatively high, suggesting they need many months of improving data to instill the level of competence needed to adjust policy from the sideline position, and i don't think there will be enough in the morning report by the end of the year to get that first-round rate cut. jonathan: you offered up two scenarios, the ongoing loss of momentum coupled with price pressures, if we got that result in that was the outcome, give a decent understanding of how the fed would respond to that. lindsay: it depends how deep the loss of momentum would be, we are talking about the u.s. economy slowing from a 5% pace to over 3% by year end, now down to less than two. volatility aside, we expect to

remain in this 1.5 to 2% range of the year, but the question comes down to what happens when we turn calendar page 22025. if we continue to lose momentum to a nonaccelerating pace or fall below the bare minimum we should expect for a developed economy, but the fed is continuing to tolerate above target price pressures. at that point, we see a scenario of the fed persistently on the sideline, but if we see an outright decline in activity, so now we are talking negative growth, price pressure is still elevated. at that point, the fed may be willing to move the goalpost for inflation, saying right now it is more important to provide additional policy using or even support while someone is not necessarily ignoring but putting the idea of price stability behind the need to supplement growth. lisa: we have been talking about the politics of the moment given that we are getting into

the heat of the presidential election season. can you give us a sense of how much fiscal policy led to the pop in inflation and how much that keeps prices afloat to this day? can you give us a sense of the? -- of that? lindsay: it should come as no surprise when you talk about pumping trillions upon trillions upon trillions of dollars into the marketplace, resulting in excess of 2.5 trillion in terms of savings, not to mention growing the money supply by nearly 40% that there will be inflationary consequences. while the rest of the world was reeling from the supply side of the inflation equation, in the u.s., we ignited the demand side, as well, tilting and the highest levels of inflation in the u.s. than anywhere else in the developed world, so it is very much a fiscal policy scenario, but it was exacerbated by the fed's inability to recognize the lack of transitory

nature of inflation. we had crisis level accommodation still in place in march of 2022. the economy was still faltering, we were not talking a robust economy, but it was clear at that point that we were beginning to talk about recovery process and it was no longer appropriate to have that crisis level accommodation in place, but the fed was fearful about undermining the economy and buying into that notion of transitory well beyond what was appropriate. lisa: some people argue because of the fiscal stimulus, it is why the u.s. consumer has remained as robust as it has. how quickly is the fiscal and policy fading and how quickly will it continue to as a potential driver of inflation? are we going to start to see personal income outpace personal spending with some of the pandemic era stimulus being used up? lindsay: most of the fiscal stimulus has largely concluded,

there are still some out there, but most has been spent, as quickly as that arrived in american mailboxes, we were willing to go into the marketplace and buy goods and services, by the new car --bb uy the new car. there were additional pandemic savings, but have seen consumers turn to other inorganic edgers, and intergenerational wealth transfer or consumers turn into 401(k)s with hardship withdrawals at double digits since the start of the year and turning to credit cards with outstanding balances of $1.1 trillion, but that said, we have seen organic support to the consumer, which is more of a welcomed potentially medium for longer-term support to the consumer scenario with disinflation setting in painfully slow but setting in. we have seen real wages turn positive, so there is ongoing support to the consumer that can

continue to perpetuate this resilient thesis, even now in the absence of fiscal stimulus. annmarie: yesterday we did hear the candidates talk about tax cuts, entitlement spending, tariffs. do you have a base case of what we can see fiscally in 2025? lindsay: regardless of the candidate who comes into power, we will face challenges, turning the page 225, we will face sizable labor shortages, a massive divide between asset holders and non-asset holders. we continue to face elevated prices, massive budget deficits and international geopolitical risks, so in many ways, the u.s. economy is poised to face sizable challenges, regardless of whether this is a second round biden or trump administration. jonathan: wonderful to have you on the program, on fiscal policy in 2025, lindsay piegza.

french bonds selloff into the weekend continues, and other cap is at 85, 86 basis points between france and germany. lisa: this is as it is up 3.3%, coming out of the political uncertainty in the region that is dragging down all of western europe assets, the question of is this existential for the euro region and how much does this highlight the populous trend and how different is that in the u.s.? jonathan: there is so much political issues in france and the u.k. the past years, unlike the united states, but the distinction is it is a different format in places like france. lisa: it is a much bigger market in the u.s., and julian emanuel mailed it, the united states growth market has been the homeplace for a lot of the behemoths driving innovation and cannot continue to be the

leader? you wonder how much new ambassadors are the leaders of nvidia, amazon and apple.why ? those are the companies driving u.s. exceptionalism and not the political sphere. jonathan: let's talk about companies that are not, nike, down 15% in the premarket. price target, cuts and 90 from 100, neutral at truest, a cut at ubs, 78, just dropping headline after headline the last 24 hours. lisa: think about how much jordan's cost and how popular they were three years ago with many people's offspring, including mine, keen to spend astronomical amounts and then walking like they were on the moon to keep them from getting a crease to resell them. that era has shifted and you now see other shoes in the forefront. nike has not been able to regain that in the sports world, in particular with running. jonathan: let's park the air jordan stuff, this is about the

root of the foundations of the company, running. there has been a boom and running and have not been a part of it at all. lisa: there was an anecdote i was reading from a runners club, and they said that hoka and on had their representatives at their meetings and they gave them free food after the runs, free drinks, and they said, try these out. hoka and on are the new running shoes. jonathan: look at the share price, on holding, at 44%. given the indication of the premarket and early premarket performance, coming up in the second hour of "surveillance," we will speak to bob dole, the former fed president, david malpass, and morgan stanley's michael kushma. all of the still to come. from new york this morning, good morning. ♪

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>> generally speaking, the trend in inflation is lower. >> i don't think inflation will pick back up. i think it is slowing and will keep slowing. >> markets are trying to figure out what the fed is going to do. it is pretty much data dependent. >> there's a lot of data between on september. if we see the labor market continued to cool, they will go-- >> think inflation is coming

down and that allows the fed to cut. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning morning, the second hour of "surveillance" continues. there is one word you have heard repeatedly associated with democrats, panic. lisa: panic after a sad debate, and a lot of people say that there are questions in the democratic party about whether joe biden has the resilience to run to become and have a second term and little erin serve -- let alone serve another four years of elected. annmarie: these comments were whispered behind closed doors and other democratic party is having the conversation with themselves in the open, just like many are saying this is malpractice that they got to this point. the debate was supposed to be recalibration for the president. all it has done is aggravate the concerns about his age at 81 years old.

can he do another four years? jonathan: it is early to have the discussions, but we are having them because you wanted to have the debate in late june and as early as we had it. lisa: he wanted to turn the sentiment. the question now is how do they turn the sentiment in his own camp and have feasible it is, and if the popularity with the snap poll saying that donald trump won that debate, is that enough to be a gut check for the people around joe biden to say, wait a second, we need something else to figure out how to proceed? jonathan: we have drawn a difference between what is happening politically in america and what is not happening in financial markets. we are seeing a little political drama, it is a completely different story, when you have political risk come to the surface in places like france, they see it in french bonds this morning.

lisa: you see it the highest relative to german bonds, and here's the question, how difference is france from the u.s., how vulnerable are they to some sort of increased spending and increase deficit in a way that the u.s. is not? how much does this have legs? have talked to a lot of people who say they are investing in france. at what point do they step in because we are seeing outflows in the yields continuing. jonathan: will u.s. retain the unique privilege of being able to behave recklessly for another 1, 2, 5 years, even decades? lisa: julian emanuel nailed it, saying that so far, it has been big growth tech giants in the u.s. economy that has allowed the u.s. to remain immune to a lot of political risks. and does that change, especially at a time when there are real policy shifts on tariffs and taxes, and these are some issues that we did not hear about last night, even though a lot of us wanted to. annmarie: we did hear about it

on the margins, but really yesterday was about style. of course, the other issue, and this is a feature of the u.s., not a flaw, we have the makeup of congress to know how much we can see whether or not it is trump or biden. what can they enact? what fiscal spending can they do? it depends on congress for a lot of questions i may be that is reading into. jonathan: the biggest debate yesterday, for those of you who missed it, that was the biggest debate, and the got over handicaps. annmarie: they actually looked at each other and engaged when they talked about the golf game, not taxes, inflation, the border, their golf game. they looked at each other and said, i will meet you on -- would you call it, the pitch? jonathan: no, we believe that there. the course. we will leave those analogies behind. ok, i will move on.

the s&p 500 looking a little something like this, equities positive by .40%. if biden can come back from that, you can, too. we will catch up with libby capital of pimco -- libby of pimco, and then the former world bank president on the economic consequences of the election. we begin with our top story, president joe biden and former trump clashing in atlanta. the democratic parties looking for a pickup plan. >> we have the greatest economy in the history of the country. >> unemployment rate rose to 50%. it was terrible -- 15%. it was terrible relative to what we are going to do with more border patrol and more asylum officers. >> i don't think he knows what he said either. >> how many billions of dollars you own for molesting a woman in public, for doing a whole range of things, having six of the

point star on the night while your wife was pregnant? jonathan: -- >> i did not have six of the point star -- sex with a porn star. >> you are the sucker, you are the loser. dealing with everything we have to -- we finally beat medicare. jonathan: libby cantrill, how does the president of the president of the united states come back from that? libby: that is the question for a lot of democratic strategists and the white house. interestingly, even though i think we all saw the same debate and arguably the president really did not meet the very low expectations that were established for him and he is acknowledging he had a slow start but he finished strong,

this is one debate and there will be another opportunity for another debate in september. i doubt that one happens at this point, honestly. it is important to keep in mind here that there is no party elder in the back room smoking a cigar, deciding who the next democratic nominee is going to be. this is joe biden, he will be the nominee unless he steps down and unless he decides early in the next two weeks or so that he is no longer going to run. that has to be his decision and nobody else's, that is not the donor decision, that has to be joe biden's decision, and even then, there is no consensus candidate. the thing they risk is if joe biden decides not to run, there could be chaos and that then

undermines the whole pitch to the american people that they are the party of stability, but it was objectively and an incredibly bad night for the president. jonathan: you indicated that a lot of questions you are asked is who will ultimately be the candidate for the democrats? the words you hear from clients is not joe biden, you hear michelle obama, jamie dimon. what do they sound like now, particularly yesterday evening? libby: i would say that traders had lots of use last night and they were sharing them with me in a generously. i think that narrative is going to reach a fevered pitch if it has not already. people have to understand that there is a process that the democratic party has established and they have put their thumb on the scale. joe biden is going to be their

nominee again unless the president of the united staes -- and this could only be his decision. i cannot reinforce this enough. i think the narratives around shall obama and jamie dimon are going to accelerate for sure, but i don't think that changes the reality that this is likely what this is, and if it is not going to be, the decision has to be made within the next week or so. annmarie: you brought out the fact that the biden camp said he finished strong and he didn't. they did not bring up abortion, which is where they are going to try to get out the vote, but i'm sure your phone was blowing up with mine -- like mine, with democrats saying this is a disaster. do you see a schism between democrats, the white house and the campaign? libby: i do think the down ballot democrats, and we have talked about this before, democrats are much more vulnerable in the u.s. senate, only controlling it by one vote now, 21 of the 34 seats are

controlled by democrats, eight are vulnerable, and so for those folks who are in vulnerable basis in the senate and in the house, i think democrats are hoping that they can flip the house. there is a lot of concern that even though polling shows that they are outperforming biden by a significant margin, that biden's performance last night will continue to weigh not only on him with their candidacy -- but their candidacy. the reality is this is difficult to change at this late in the game and this was not some sort of -- just going to the consumers -- conspiracy theories, this was not a plan by the democrats to show joe biden's weakness and that they are trying to change the ticket. this was a mistake, this was a political miscalculation. they really were trying to reset the race. they wanted this, they set the terms for the debate, and they hoped this could calibrate.

i think from a markets perspective, let's see what happens. it was discussion about tariffs yesterday and there was a brief discussion about deficits. i did not hear anything that either candidate -- that there will be fiscal consolidation. they did not talk deficit reduction. the only thing we talked about was reinforcing the importance of medicare and social security and not touching those. entitlement programs, that's a big source of the deficit. maybe the market starts pricing in the tariff risk that they had been ignoring at this point. i may be the yield curve normalizes a little bit with the expectation. lisa: yields are up 4.28% yesterday, today, 4.3%. big fear, especially compared to what is going on in french bond markets. we did not talk about trump and the fact that it was the focus on biden, but i'm wondering what

this does to embolden him with respect to his choices for vice president, whether he leans more to a populace rather than centrist, and he feels like he has more about mandate to cater more to the trenches and the way because there is a vacuum on the other side of the ticket. libby: great point. if joe biden did not meet the expectations established for him, arguably, president trump did outperform expectations. he was more disciplined than he was in those first debates in 2020. he was more moderated. i think the format helped him , the fact that themics were muted, but the point about the vice president, it puts it in sharper focus now. folks are now, because of concerns about biden's age, this will make this much more of a referendum then even it was before, and as a result, who trumps vice president is going

to be, and that is important, as well. that debate is likely to happen by the end of july or august and i do think this was a win for president trump, as we all know, debates are more informative, more about performance than they are about style, and i think on style, you know, he definitely won. lisa: you said the fiscal is coming into focus, and given what we did not hear yesterday, how long can the united states remain, as jo mentionedn, and this place of being able to have the privilege of acting recklessly? how long before the u.s. feels the same pressure that france does? libby: that is the big question for sure. we have talked about this many times, that you cannot replace something with nothing, and the fact that the u.s. is the

reserve currency and the fact that the treasury is the reserve asset of the world and that central banks still hold treasuries, and the fact that they have this flight to quality and characteristics, all of this is based on the fact that the privilege still extends to the u.s. what we do expect and what we are telling clients as well we are not expecting the bond vigilantes necessarily to come back and sort of enforce spending restraints on washington anytime soon, we would expect there would be some increase of the long end of the curve. right now, it has been inverted the last two years, and you have not as an investor been getting the premium to hold longer data paper with deficits. this did not come up last that, but the cbo last week upgraded their deficit and projections for the u.s., and they are 6%, 7%, 8%. you add that to the cost of trump task cuts, should -- tax

cuts, should they get extended, and then you're are talking 8% deficits with the market haven't really moved. we are expecting the markets to internalize this at some point and in terms of the reserve currency status, the reserve asset status, that doesn't seem like it is going away. as we have mentioned, look at the alternatives. as we talked about it a lot, bill gross' assertion about the cleanest derby shirts, the u.s. is the cleanest derby shirt. it is not clean but it is less dirty than the other alternatives. jonathan: the best thing about treasuries this morning, they are not french bonds. that is kind of it. what libby said is vital, deutsche bank talked about the extent to which america is going to go on to pursue a very aggressive protectionist trade policy. something you have to take much more seriously this morning. based after what we saw last night. lisa: even an independent government agency is ringing the

alarm bells and saying that we are going to see deficits unlike what we have ever seen in our history that is again tomorrow of an emerging -- akin tomorrow and emerging-market, and nobody has noticed it. wonder they start to notice? jonathan: thank you, libby cant rill of pimco. here is your bloomberg brief with dani burger. dani: down 14.5% on nike, therefore your outlook falling short of expectations, and they said that they would decline in the mid-single digits this year. they had been struggling to turn out lifestyle were to replace their previous top sellers like air force ones. instead, rivals picked up the slack, like adidas, whose sneaker are fueling a new era of growth. the judge who scrapped elon musk's $56 billion tesla pay package before the hearing on whether a recent shareholder vote to revive the deal should affect the decision. the delaware courts may take judicial notice but they

are not obligated to recognize the results. tesla argued that the vote addresses many concerns the judge raised in her decision. boeing is getting another round of criticism, this time from the ntsb. they said that boeing provided "misleading and inaccurate information to the public" in a media briefing this week, surrounding their 737 max incident in january. in a letter sent to the ceo dave calhoun, regulators said that boeing blatantly violated the agency rules about active investigations. the ntsb said they would revoke their access to investigative information as the probe continues. that is your bloomberg brief. jonathan: more in about 30 minutes. next on the program, heading for three straight quarters of gains. >> for the most part, we have been concerned about valuation. yes, i would say we have been among the largest proponents of the game changing nature of ai for well over a year.

jonathan: that conversation around the corner. live from new york city this morning, good morning. ♪ o coming in.. big orders!s starting a business is never easy, but starting it eight months pregnant.. that's a different story. i couldn't slow down. we were starting a business from the ground up. people were showing up left and right. and so did our business needs. 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.

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jonathan: stocks positive by .30% on the s&p 500. yields are higher by a single basis point. the 10 year, 4.3020. under surveillance, heading for three straight quarters of gains. >> the most part, we have been concerned about valuation on the one hand, yet, had been, i would say, among the largest proponents of the game changing nature of ai for well over a year. when you go back and you look at similar high-priced valuation regimes, valuation alone is not a reason to sell stocks. jonathan: here's the latest,

communication services leading stocks higher, the s&p on track to wrap up the first half of the year with four straight weeks of gains. equity leadership remains uncomfortably narrow and focused on secular growth plays, the key equity theme of late is that she's perceived secular growth plays regardless of valuations, rather than position for a rotation into better valued laggards, bob doll right spirit he joins us for more. you heard the words of julian emanuel, talking about six k on the s&p year-round this year, what is your response to a call like that? bob: it would not surprise me if the mid-fives surprise me, as well. valuation -- as julian said, it is not a timing tool. there we have to focus on the slowing economy and with the fed might do as a result of that. so you are seeing like economic

concerns, retail sales disappointed, they see the u.s. surprise index coming the wrong direction, signs that the economy is slowing, and that would surprise a lot of people who are expecting double digits this year and next year. jonathan: we saw that with continuing claims yesterday when it dropped to 8:30 eastern. i would ask this of you, the economy is slowing and losing momentum, inflation has come down a little bit, as well, unemployment is starting to climb, and i would like to focus on the labor market, for people hoping that we stabilize and plateau at these levels, what would you say back to them? bob: that would be the first time in history, they are not stabilizing summer, they are moving one direction or the other. underneath the surface, whether it is the workweek, whether it is jobs available, etc., all of those are weakening, as well, we

just have not seen the headline payroll numbers yet. lisa: when you talk about the potential for some sort of downdraft at a time where momentum can keep climbing, how do you hedge? how do you hedge downturn at a time when we talked about deficits in the u.s. and the potential for the fed to really confront an increase in deficit and also retract entrenched inflation? do you barbell it, or is the barbell gold in nvidia? bob: you have to play the game. the momentum market is like standing in front of a freight train, you do not know when it will end. there are no good predictors, so be careful on what you own. you own companies that have confidence in their company's earnings pretty debility, consistence, good cash flow stories, there are plenty. though stocks have done fine on the upside, but should we get a setback, i think though stocks go down less than that is how

you play the game. your annmarie: conclusion is that risk on will persist annmarie:. given the performance by the sitting president, do you ignore what is happening in washington? bob: you would have to take market cues, markets tend not to pay attention to elections until after labor day, you get conventions, running mates, and then after labor day, let's focus on the election two months from now. this is unusual with the debate so much up front. i had to market it with the futures shrugging. it does not make a whole lot of difference yet. look, both guys are not spring chickens. i wish i heard less about -- it was all about you are a sucker, let's focus on the future, not the past. jonathan: let's have that serious conversation, six, i mean, it was a stretch, it is a

stretch. bob: i have seen you swaying, you are not a six. jonathan: let's leave that there. let's talk about the market, where do you think and financial markets you would look to begin to focus on the prospect of a second term for donald trump? a much more aggressive trade policy? what that would mean for foreign exchange, the u.s. dollar, the prospect of extending the tax cut from 2017 and what that would mean for fixed income, when you focus on that more? bob: we have to do our homework now in the market will focus on it after labor day. i'm glad you folks talked about this in the earlier segment, but it is clear that if it is trump, we will have a hawkish foreign policy, a more protectionist -- if it is a republican suite, which it very well could be, the extension of the trump tax cuts. all of that is interest rate upward mobility, and i think we

will see some of that. on the other hand, if we get economic slowdown, that at least for a brief time can work in the other direction. jonathan: you know handicap when you see one, don't you? good to catch up. these are things we have to take seriously. you can make the point that it is important, the makeup of congress, what that means fiscal policy. when it comes to trade, that is something we can talk about now. lisa: especially given the fact that there are similarities between both candidates. i think about how the risks are so bifurcated, it is one asset class can either do really well or poorly depending on who wins in with the policies are. jonathan: coming up, we continued the cover station with david malpass on a potential second term for donald trump. that is next. ♪

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.

jonathan: positive but they're in present on the s&p. nasdaq positive 5.4%. even the russell is having a look. in the bond market, two-year, 10-year. the two-year at 4.71. i have to say, lisa, the fed talk has gone a little quiet. lisa: we have a number of people speaking today. that said, the message, it hasn't been market moving.

it is fascinating how stable yields have been over the past couple weeks. we were talking about 20 basis points wings and we are not doing that anymore. jonathan: let's talk about stability. dollar-yen. the high of the session, 161.27. concerns about 140. 155. 161. when is it going to stop? lisa: full disclosure, one of my progeny went to japan for a trip, had to transfer some currency. i was waiting as long as i could. it is moving quickly and you wonder what will stop it given the fact that you have inflation but you also have growth slowing in the region. at what point do you bite the bullet and raise rates next month? this will be in increasing drumbeat heading into the bank of japan. jonathan: the rhetoric is still

the same for the ministry, rapid moves. when we are waiting to hear from the central bank is let's have a serious conversation about rate hikes. that is getting into what is happening in the fx market right now. the same language, verbal intervention at the moment. the game changer will be when the boj has a serious conversation about hiking interest rates. lisa: a number of people have come on the show to say when you look at the different economies, 160 seems particularly week for the young versus the dollar. they are betting that they will not do that which is the reason why traders are shorting yen. at what point can they fly in the face of that in the bank of japan comes out and say we are going. jonathan: inquiring minds will inquire. did you buy the yen? that is taking place. so you did this at 160. congrats.

under surveillance this morning, the u.s. military is moving assets is closer to israel and lebanon as the risk for a full-blown war with hezbollah gross. nbc news reports that some are preparing for the possible evacuation of u.s. citizens from lebanon. this is the fear we have had, the prospect of this work. spread across the region including more bad actors like hezbollah. this was a conversation that we had yesterday. annmarie: you can see with the u.s. is doing in making these moves, tractors at a different level of deterrence. they are planning, which is positive, but how dire a situation that they may need to evacuate american citizens. that would not look good on this administration considering they've had to evacuate u.s. citizens from other instances as well. for me, the marker was earlier this week. lloyd austin said such a conflict could easily become a regional war with terrible consequences for the middle

east. lisa: it just feels like there's a lot going on that we don't have visibility into. trying to quiet some of the tensions. if this became a conflagration that engulfed a broader slot of the region, you would expect a bigger reaction from the market. jonathan: mohamed el-erian talked about this. the situation over there was like boiling the frog. people are ignoring it, you don't see much price action in the commodity market. you get that spread of the tension beyond the gaza strip involving things like hezbollah, the risks that iran gets involved directly, you can see how this can spiral in the wrong direction pretty quickly. lisa: people talked about a significant risk premium that is not being baked in. it only takes one errant bomb to create a real problem. right now there is careful

calibration of not going ahead of their skis with every single lobbed missile. in the u.s. is having a presence there to make sure it doesn't escalate. jonathan: this is the latest in france. the national rally continues to gain ground ahead of the election on sunday. bloomberg sees a poll that has them at 36%. president macron's centrist group is trailing at 20. we are in the 80's now. lisa: why does the spread going back to 2012. 3.3%. going back to a time when france has already been downgraded by the credit rating agencies and is still expected to have more spending. it just goes to the question of the populist wave, with the ramifications will be for the markets given the fact that everywhere but the u.s. has seen

that. jonathan: president joe biden and former president donald trump attacking each other on a range of issues including in nation and the economy. david malpass writing this. mr. biden has blamed everything except the actual cause, expensive regulation and massive government spending. donald trump's approach to inflation should be, let markets produce more so that growth goes up and the prices goes down. david, wonderful to get your perspective on the program. i'm sure you have read the letter that came from the 16 nobel laureates warning about the risks associated with a trump presidency, how it would reignite inflation. what would you say to that this morning? david: trump was pretty clear about how you can get more growth and that will have a big impact on whether you have inflation. i don't want to say phd economists are off-base but that

group really has a model that has not been working. think about all the huge mistakes that have been made on inflation forecasts in the past. what we know is that trump articulated this plan where you have more energy. that holds down prices. that allows interest rate cuts. and you have more growth within the economy. he was really clear on how you get jobs for minorities. you cut off illegal immigration and have more growth in the economy. i was surprised by the contrast with the heightened who was talking, it seemed almost as a senator, talking about pell grants, first-time homebuyer credits. small things that are not getting to the core of the affordability crisis that we are in right now. jonathan: let's go through some of the policies. extending the 2017 tax cuts, potentially implementing a flat tariff. you have heard of economist talk about how that would lead to

higher inflation. on those two issues, why wouldn't they contribute to higher prices? david: if you raise taxes, you'll get less production and that will be inflationary. biden is proposing big tax increases, and that is factored into the growth forecast that cbo put out. the deficit forecast that they are predicting hunter biden are dependent -- under biden are dependent that the economy will stay slow-growing into the future. trump is going the opposite way and saying, no, that is not the economy we want. we want a better economy that would generate more tax revenues and more prosperity for people. lisa: this is something we have discussed before, the idea that you can grow your way into the deficit by cutting taxes versus raising revenues. i don't want to have that debate right now. i want to talk about the idea of tariffs, something that donald trump could unilaterally do. do you believe that if the

former president becomes elected, and engages with pretty significant tariffs across the board unilaterally, if the market sells off, that he would reverse course? david: we have seen biden continue the tariffs on china. the market is able to digest a whole lot of things as it is doing this morning. the market adjusts to the policies. the overall question is is the u.s. going to be a strong player on the international scene? trump talked very effectively, i thought, last night about afghanistan and the disaster that created. you can create a better world by having an actual plan based on production. you are saying what about tariffs? there is a whole plan -- excuse me. there are lots of things that can be done in the u.s. to really allow this strong economy to move forward. lisa: to pick up on the tariff

point, there is a belief in markets that potentially the former president would reverse course on tariffs that were highly negative for the market. a lot of people have said that the tariffs proposed would increase inflation in this country and would actually create a real negative situation for a number of companies. do you believe, if the market sells off, that would provide a check to the former president and he would reverse course? david: that is a real hypothetical. what we have to do is, over the next five months, survive and see how do you resolve some of the wars, meaning resolve them quickly, although energy production to start. as you look at tariffs, there needs to be a real re-think of how do we interact with china who has been this -- very

successful industrial producer that takes away jobs from the rest of the world? there needs to be a world discussion of that. you are seeing the politics of that in europe. people in europe realizing that this cost on climate is really hurting their competitiveness. germany's economy is in deep trouble in part because energy costs are so high. that drives people to other answers to try and deal with and interact with china into the future. i think that will be an important part of a new administration. annmarie: let's go where you almost went. what is the plan on tariffs? are these just talking points now, or is this a plan, if trump was going to be president again, 10% on all goods, 50% plus on chinese imported goods? david: you have to have a room with people in it, lawyers, what is the legislative process.

i think there will be a very detailed discussion of how do we protect -- excuse me, how do we have sectors in the u.s. that are able to stand up to subsidize production from abroad? that is a valid discussion to have, should have been happening already, needs to be done more deeply. annmarie: we had maya mcguiness on earlier today, i'm sure you know her well, and they put out some numbers this week about how president trump approved eight point $4 trillion of new borrowing in his term. the height and approved $4.3 trillion of new 10-year borrowing. do you think that either of these individuals will not add a substantial amount of money to the deficit? david: to the deficit? let's talk about debt and deficit. if you have a faster growing economy, you will not have as big of a deficit that biden is predicted to have. cbo is operating from the

economic plan in place right now. you heard it last night in great detail. the government is going to be the solution for each thing an interest rates will stay high for a long time because of the inflation. if you project that out, you'll get huge deficits into the future, which is what shows up in the cbo forecast. if you redo the forecast based on a growth program, you don't get those deficits. i think there also has to be very strong restraint on spending. washington is spending like crazy. it is out into the future, every month, trillions of dollars going out the door. president trump talked about the paris agreement costing $1 trillion. i think he is understating it. it is worse than that. on the energy front alone, the subsidies and credits that are being put out on that side are super expensive. some of that can be saved still.

the market will react positively if you say anything that causes them to think that you'll have some restraint. right now they are operating under the idea of noah street and that keeps interest rates on. jonathan: you are close to the campaign, quiet on the vp front. who should we be focused on? david: it is up to president trump. what you saw last night is somebody who will make a lot of decisions on things. he landed a lot of blows. one of them was that biden has not fired anyone. this is a really important part of management and governing, choosing people. trump will have the chance to have really strong people across the board. i think that can really help. they're just hasn't been enough strength within the u.s. administration that is operating now. you see it in every policy meeting that i was in, you see

it in the results that came out of those programs, it is not working, so we need change. jonathan: great to catch up. we will continue the conversation over the next four months or so. david malpass, the former world bank president. maybe a future something. lisa: potential something in the next administration. this is a key debate, something david talked about, growing your way into growth. trickle down, mood economics of the reagan times versus something else. where where the cuts come from? these are real questions that we can keep having. jonathan: much more important questions particularly after what took place yesterday evening. let's get you an update on stories with dani burger. dani: richmond fed president thomas barkin said the inflation battle still hasn't been won and that the u.s. economy will remain resilient as long as

unemployment remains low and assets high. the lack of effects from hikes are still playing out in that they will eventually slow the economy. investors have a key read on the u.s. economy at 8:30 a.m. when pce deflator it's the tape. apple is reportedly exploring new option that would allow iphone battery that would be more easily replaced by customers. the update follows a law passed by the eu that aims to protect consumers. at least one model of the iphone 16 and potentially all iphone 17's may get the new option. a spokesperson declined to comment on the story. the nfl is facing a massive antitrust lawsuit after a jury sided with fans over broadcast subscription costs. the league was hit with a $4.7 billion damage, which were tripled to $14 billion under federal law. fans have claimed that they conspired with directv to raise prices on out of market games.

the league spokesperson called the verdict disappointing and said the nfl plans to appeal. that is your bloomberg brief. jonathan: next on the program, the data dependent fed. >> generally speaking, the trend in inflation is lower. core pce is likely to be around 2.5% in may. they could probably be talked into a cut in september. jonathan: is there an actual argument between you and me? lisa: he called me out for cherry picking. i said everyone is cherry picking. i said you look at two data points. annmarie: and god intends when he looked down the barrel of the zoom camera and said, lisa, there are only two data points that matter. jonathan: you should have seen lisa's face off-camera. we have said we need a bramo cam

for a long time. from a beautiful new york, this is bloomberg. so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track.

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and it orchestration by cdw. people who get it. jonathan: equities positive, treasuries lower, yields a single basis point higher. on the 10-year, 4.3039. under surveillance this morning, the data dependent fed. >> generally speaking the trend in inflation is lower. core pce inflation is likely to be around 2.5% in may. let's focus on what is in the summary of economic projections. that is ultimately how you back out the fed's reaction function. those projections are unemployment, core inflation. they could probably be talked into a cut in september. jonathan: future is gaining as focus turned from the debate to the data.

the may pce deflator do out in just minutes time, investors hoping it will solidify the case for a rate cut this year. michael cushman writing, the big question is have high interest rates done all they can do without creating too much pain? michael joins us now for more. we heard from mr. barkan of the richmond fed and said -- neil. i wrote this morning and said the economy, consumer, retail sales, food services are flat for five months. new home sales are the lowest since november. core capital goods orders and shipments are flat or six months. he says the language is totally detached from reality. can we get your assessment on how detached from reality those comments are? michael: if you look at goods price inflation, close to zero, so that has worked. interest rate sensitive sectors are struggling. generally speaking, housing,

construction. interest rates have done their job, brought demand and output down from the peaks we saw the last couple of years. the areas where inflation has remained high, core services, is somewhat immune to interest rates, except for lower incomes and people spending less money. i'm sure you have traveled recently. every plane is full. business-class, economy. cannot change seats, planes. a lot of core services are still strong, and that is a function of wealth rather than worries of income, which is strong for a lot of people. the question for the fed is will keeping higher rates high do the job of bringing inflation down sooner without causing too much damage to interest rate sensitive sectors? wealth creation is rolling along. household wealth is at record highs so why is that going to slow down spending? lisa: we have been talking all

morning about politics, long-term trends, deficits, potentially tariffs. we are 40 minutes away from what we've been building up to all long, core pce deflator, personal income, personal spending. which of these data points will be really important for you when you think about where rates should be, the fed response mechanism, and where we should be focusing? michael: core pce is the fed's preferred target. there is a big gap between cpi and core pce. the question is is that gap going to close by core pce coming down? core pce is too low relative to cpi. higher relative to core cpi, so we see fewer improvement in core pce. tends to be stickier. the numbers are coming down. you are on your numbers have

proven -- have been improving. the last little will be difficult to improve upon considering how low inflation was the last third of last year. core pce is likely to keep coming down but the gains are likely to get fewer and fewer over time. then the question the fed has to say is core cpi continuing to fall, putting more pressure on core pce over the next months? i don't think core pce is a restraint on the fed for cutting rates, it is more about the strength of the economy. the on appointment rate is still pretty low. lisa: which goes to the personal income level. we had been seeing huge swings in bond yields over the past few weeks, pretty wild in the day-to-day moves. it's been pretty stable over the past couple weeks. do you expect that to continue regardless of any surprise? core pce, people can calculate that by backing out certain data points. do you expect this kind of stability to continue? michael: it will be a little bit

challenging. the market thinks there are two fed rate cuts this year, the fed says one. both are reasonable. it could be zero. not likely to be very. the question for bond yields, 10-year treasury around 4.3%, that is pretty low. huge inversion of the yield curve. it is difficult to get 10 year bond yields lower unless the path on rate cuts is accelerated. that is still a challenge. i don't think there is a reason to sell off. i think we are stuck at these levels, waiting for a surprise, gets a prize bad surprise on the inflation number. good surprise could accelerate the rate of path cuts, bringing yields down closer to 4%. if inflation goes up relative to recent numbers, 10 year bond yields may go back to 4.5%. the point is volatility is likely to stay muted in this range. jonathan: thank you.

you mentioned the inverted yield curve. the yield curve, two-year versus the 10-year, been inverted so long that many people have stopped talking about it. what is the significance when you think about that inversion? lisa: the longest period ever in history. typically in the past, inversion indicates recession at some point. people are saying maybe we had one and it was too light, covered up by nvidia and didn't make a dent. i don't know what to make of that but the point is really interesting. we are stuck at these levels waiting for a surprise, because unless you get material rate cuts, it is hard to see the 10-year moving lower and inverting the curve more. jonathan: the third hour of bloomberg surveillance is around the corner. here is the lineup for you. mohamed el-erian of queens college cambridge. from new york city, futures are positive by one third of 1%. that is the good news.

all the bad news for a certain president is down in washington, d.c. this is bloomberg. ♪ okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them? that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it! i downloaded eight hours of true crime stories just during our last video call i'm learning a lot

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>> generally speaking, the trend

in inflation is lower. >> i don't think that inflation will pick back up. i think it is slowing and will keep slowing. >> it's difficult, markets are very data-dependent. >> if we see inflation coming out, if we see the labor market cooling, they will go in september. >> we think that inflation is coming down as well. we think they will cut. >> this is "bloomberg surveillance." jonathan: let's get you to the weekend. one hour left on this program and we are doing something different no focus on politics, just economic data. just got this from andrew, "loaded -- slow sets in." "recounting the data out yesterday, further establishing a broad-based economic slowdown ." this hour is all about the

data. lisa: he's not alone. people have been surprised about the data on the downside more and more frequently. everyone is talking about core pce and i want to know if income is going to outstrip spending or if we see those personal deficits of individuals getting deeper. annmarie i know you don't want to talk about the politics, but the policy is still important. biden went after them and said it will be inflationary. that is what these economists said. if you get pce to the slowest level we have seen in months, slowest level this year, that would be a huge win for the economy. the concern is what's on the horizon. jonathan: the focus on inflation is feeling stale. ultimately for me that is where things could stand at the moment . if you look at jobless claims yesterday, the initial claims dropped six k, making it the highest claims print for a

non-fund payroll survey week since june of 2023. are we going to plateau at these elevated levels? will we break down again? or are we going to incrementally be breaking out? that is a concern from a lot of people. lisa: a lot of people have said never in history has it been linear where unemployment picks up in a gradual way, raising the question -- how different is this moment at the time when people are saying it is distorted from post-pandemic realities that are different from what we have had before. it's the reason why today's print might not move the needle when it comes to the narrative but is another data point on the march. jonathan: it will be a big divergence between the last art and establishments. equities right now into the s&p 500, positive on the s&p with a

big conversation coming about nike later. that stock, lower by 13% to 15%, stock netting absolutely hammer this morning. lisa: when you are wondering about how to remain relevant and the running cohort, it really raises this issue. even people who say that it is china sales, no, they outperform. it's converse sales. even the benchmark air jordans are not delivering and it raises the question of relevancy at a time when this is a fast-moving retail consumer market. jonathan: we will catch up with liz and bernstein's and -- and he should sherman and we will speak to the holiday layer -- mohamed el-erian reacting to pce data dropping in about 26 minutes. wrapping up q2, liz ann sonders says we have seen risk of consolidation at the index level

if performance divergence persists. they don't seem immanently fatal to the bull market, but we think that more members will need to start joining the party for the music to stay on. i was going through some of the stats in your work. 17% of the s&p has outperformed in the last year but the nasdaq number is much worse, 11%. can you build that out for all of us? what do you think that indicates? >> that we have two markets under the surface and you can see it under the index, s&p or nasdaq outperforming and the table that you pointed out, one month, two-month, three-month, you don't get much more than 25% no matter the timeframe. another way to think about it is the average member maximum drawdown. we know that the s&p and the nasdaq are at an all-time high

with a no more than 5% drawdown in the s&p and nasdaq that is at the index level. the average member maximum drawdown year to date is 39%. there's a lot of turmoil under the surface that i think reflects these uncertainties that we talk about on a day to day basis. you don't see it at the index level because of the mega cap bias. jonathan: is this typical of abu market or is there something unique and unusual about this -- bull market or is this something unique and unusual? liz ann: what's unique is having these names drive performance through size. when the rest of the market significantly underperforms, that is where you get into historically rare sets of circumstances and it suggests that consolidation is probably likely. i think that that shift could

happen with convergence. i think that might be a somewhat healthy thing. if we saw further pullbacks in the mega cap names, but at the same time more of a clawing higher on -- from the rest of the market -- interestingly, that is what was happening in october of 2000 22. indexes were taking out prior lows, but under the surface you were seeing improvement with more soldiers heading towards the front line. even at the index level, while it didn't look great, it was a sign of some grinding higher on the part of the names that were not in focus in a cap driven market. annmarie: this -- lisa: this is fascinating to me. earlier julian said that the lack is a feature and not a bug and the fact you are seeing equities up on an index level without the participation of so many highlights the resilience of the market and the fact that it has been powered by these

names with others converging on the upside. what is your argument against that? liz ann: no, i don't disagree with that. going back to that negative maximum drawdown at the member level for the nasdaq, that weakness under the surface reads opportunity. so, when you have that, at some point you start to see krugman and i think that that is where there are opportunities presenting themselves. the other interesting thing about the focus on the magnificent seven or six, the fab five, whatever component you want to talk about for these mega cap names is that from a contribution to index return perspective, they're all in the -- call it top 10 -- but they are not the best performers. from a price-performance perspective, only one of the magnificent seven is in the top 10 best in the s&p 500. look at the 10 best in the nasdaq. year-to-date, none of them are household names, none of them

are in the magnificent seven. so, i think it shows that there is a lot of churning under the surface but it has bread opportunity and that there are ways to find performance and in this environment, we continue to say that you want to stay up on quality. that might be the ultimate duh but there are times when you want to go down the quality perspective with companies that have lost their earnings or have a leveraged pickup in the cycle. i don't think we are at that point. staying up in quality, if you look at the performance spread between profitable around the russell 2000 and the nonprofitable, it's 14% with strong double-digit gains for profitable and negative on the part of nonprofitable. it's -- there are opportunities that get borne out of a tough environment like this. i think it gets lost in a lot of the analysis.

lisa: i love this, it's like you scrambled the narrative enough to force people to pay attention. for so many years the macro narrative blinded everyone. what happens when the macro is not scrambled? what happens when we have a direction? how much does the market become vulnerable in a new way because of how high the elevation has been for the valuations at the top? lisa: recession would be a macro narrative not priced into the market, broadly. there are certainly metrics pointing in that direction, but a lot of economists thought that last year and it wasn't the case . that is just the unique nature of this cycle. more significant deterioration, particularly in the labor market, even if it provided the fed a green light to start easing policy, any backdrop that requires the fed to have to be somewhat quick and aggressive on

the downside with rates, i always say to people who want the fed to move at -- asap and go quickly, be careful what you wish for. one of the clear distinctions of the past regarding fed policy and impact on equity market to the point where they start easing policy is slow versus fast. a slow-moving fed is beneficial for the equity market for somewhat obvious reasons in that they are probably not combating recession, financial crisis, or a combination thereof. a fed that needs to move aggressively on the downside so soon after a move on the upside, that would be destabilizing for the market. jonathan: not all rate cuts are created equal. dead on. liz ann summers, great to catch up with you. thank you. turning to the market boards briefly at starting but equity futures, i have got a question for lisa at the end. not for me. futures are positive by one heard of 1%. outperformance on the russell is

up by eight tencent 1%. how many people this morning are looking at the charts from yesterday into the morning, looking at but charts have done and attributed it to the debate last night? lisa: nobody. i find that interesting. no notes saying that the market is rallying because trump has a likelihood of becoming president. most people saying the markets are not responding because it is too soon to understand the composition and they don't pay attention until after labor day. it shows how arbitrary it can be when you assign a narrative to a market move. sometimes it is obvious and sometimes it's not. annmarie: people are calling this debate a disaster for the sitting president of the united states, potentially because democrats are out in the open discussing for months what i heard we had the scenes about not having biden be the candidate. the dnc is in august. maybe that is why markets are

not selling off, they think it could be a lyndon johnson moment where he makes a speech and steps aside. jonathan: joe biden, good man, good president, he must bow out, can't go on like this. after the debate, i don't think you should be running. you see these kinds of headlines repeatedly this morning. lisa: at the same time it seems it isn't resonating inside of the bite camp. a lot of people saying it would have to happen in the next two weeks. that is what they said it pimco, that's the dropdead deadline before we can get potentially new candidates at the top of the party. lisa: it will certainly be a long weekend for that campaign. jonathan: here's dani burger with your bloomberg grief -- brief. dani: israel and hezbollah are heading closer to a full born -- full-blown war. it's been a steady tit for tat

and has been shifting into something more alarming. record numbers of projectiles have hit israel and israel is carrying out deeper and more disruptive attacks. tens of thousands of residents have been driven from homes in both regions. checking on apple shares this region, up ever so slightly. iphone shipments in china rose after heavy discounts from their june shopping festival. 50% in april as they bounce back from weaker chinese markets. smartphone shipments climbing, foreign brands growing four times faster according to our bloomberg calculations of official data. microsoft has told more customers that their emails may have been accessed by hackers. january, microsoft disclosed the emails were stolen but now they are acknowledging that the hack was more widespread and they have been dealing with strong condemnation and they are now

undergoing one of the biggest security overhauls in decades. jonathan: dani: more fro it about 30 minutes -- jonathan: more from dani it about 30 minutes. we will catch up withaneesha as nike stumbles on a week earnings report. from new york, this is bloomberg. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa?

safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: opening bell, a little more than one hour away. yields are shifting a little bit on the 10 year. time for morning calls, just one stock is in focus. analysts are seeing limited upside because of limited guidance.

a volatile year ahead with strategic changes and note after note. bernstein, cutting device target 112, investors should wait for more signs of innovation success before putting full confidence behind the stock again. anisha, been looking forward to this conversation for a while. you have made the point peter lee. why are market leaders losing market share? what is nike getting wrong? aneesha: nike has done a poor job innovating. the market was doing great. 2022, people were out there revenge spending and nike was leaning on the older line, the more recent from several years ago. the market, pulling back, people looking for value, it's becoming obvious that there is no new information out there and they

need to do a hard reset to push innovation out before they can gain share again. jonathan: do they need to do a hard reset on certain business lines? is it the edge ordinance or is it the nuts and bolts of what the company is built on, running shoes. both or one or the other? aneesha: it's both but the timing is different. they just launched a new product with pegasus and they are no longer selling or producing the older lines anymore and they had a lot of new launching coming. that reset is done and we saw that this quarter and in the prior to read the sales were hampered. they need to reset the other big franchises. this is a big part of the portfolio. it will take a big toll on sales , the back half of this calendar year. lisa: during pandemic a lot of people said that platforms were

losing cloud and that the likes of nike could go on brand appeal to such a great degree that they could get people coming to their websites and shopping off of there. but that didn't seem to be the case in these particular earnings does that make you think that the trend has peaked or is there a blip because nike isn't cool anymore in the same way? aneesha: the dtc trend, brands got carried away. it worked well into thousand 21 when everyone was shopping online and there was no friction or transaction costs. you can open any browser that wanted. what they missed is they looked at e-commerce penetration from 2021 and extrapolated. that was a mistake, we all went back to stores when we could. retail is now much more important have to take a step

back to regain it. lisa: nike is at a $142 billion market cap, a significant size and a daily move for nvidia. larger questions ahead of personal income spending, which we get in 10 minutes, is there a sense that the nike pitfalls extend from a weakening consumer or is this just a nike problem? aneesha: i dig is a bit of both. it's a nike problem in the sense that there innovation has not been able to draw in as much innovation as they should have and now they have to correct that by cutting the older franchises and reinvesting in you innovation, but it is also in the context of macro. the same issue did not cause them problems in 22 or 23 when the same problems were growing. that was in the context of macro consumers, middle to higher income consumers in the u.s. in

a wave of revenge's bending -- spending, going on trips and getting out there. now they are running out, repaying student loans, wage growth not catching up with inflation with no revenge spending catalyst. in the macro context of a pullback, you need something new and different. annmarie: is this a win for adidas and lululemon? i mention them because you talk about them in your note. aneesha: i think they are in different places. lululemon is facing some of the same macro pressures on its consumer, spending in 2022, pulling back, they need to rethink innovation to attract younger consumers and men. outside of their core middle-aged woman consumer. i dos is on the upswing. there trend is working globally and they are at the peak level of it and the question is -- can they sustain it? do more to keep

it going? or will it fade out next year? they are in a good place, but can they keep it? annmarie: we are talking about innovation, but are you basically saying that they need to be cool again? our trend analysis says that was nothing new to the brand. aneesha: coolness, newness in the design, getting a silhouette that is exciting. it's not necessarily about technical innovation. most people who run are not concern with the carbon plate composition. they are not trying to shave 30 seconds off of their marathon time. they want something comfortable and looks good. it's about design innovation and comfort as opposed to technical prowess. jonathan: why haven't we seen more acquisitions? propulsion lab makes a nice shoe . i've always wonder why they

haven't come into purchase brands like that, why isn't it happening? aneesha: it's not in chris -- inquisitive sector and some of those of not gone well when you look at reebok. some of them have not been particularly successful. most believe they have the in-house talent to create the design and the retail relationship and a distribution print for consumer awareness. as long as they can do that in-house, that is a better way to do it. it is contingent on them innovating in house. jonathan: that has certainly been the struggle. aneesha, good to hear from you. why are you both laughing at me? lisa: i googled athletic propulsion labs. immediately. i look, which particular ones have you had? annmarie: 300 20 version? $420 version? you have spent a lot of money on shoes. jonathan: it's a pastime of mine. i don't drink, i go to the gym.

lisa: do you do it for the technology and speed? jonathan: no, i love the look. they used to be distributed in lululemon stores but now you have to go through direct channels. lisa: that's her point, people are going to buy it off of the way they look and if they are comical. i will say that some of the best running shoes comfortable personally are not particularly attractive. annmarie: which? lisa: i'm not going to get into the debate, the ones i have are functionally good but not the most beautiful. jonathan: you care about the carbon fiber plate, is that what you are saying? lisa: it's on brand, don't worry. jonathan: sound very on brand. are you done taking shots? annmarie: well, ucl of these opinion pieces about have athleisure where has moved into workwear and they could have had a moment coming out of pandemic with more people buying these goods and using it going back to the office two or three days a week and they missed that boat. jonathan: that is something that

i have strong feelings about, athleisure becoming workwear, but this is meant to be serious -- annmarie: there should be worker's policy. jonathan: i agree. breaking pce data, next. honda larry and joining us in a moment. all of that -- mohamed el-erian joining us in just a moment. equity futures positive by 0.4%. where has jun gone, where has the first half of 2024 gone? data is still ahead of us with equity futures positive. this is bloomberg. ♪

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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.

jonathan: seconds away from economic data in the united states. i can tell you that mohamed el-erian will be joining us in about two minutes time. i'm not sure this will be hot or cool data. we did this around the labor market? jonathan: -- lisa: when was the last time that he worry tie? is this deliberate? maybe it's a sign? jonathan: no idea. futures up by .5%. the bond market looks a little

bit something like this. treasuries, the two-year, 10 year, 30 year, basis point of 470. mike mckee is with us. morning. mike: i have a tie on, but it does mean -- i don't know what it means, but consumer income comes up higher compared to the .3% rise. personal spending, .2%, lower than in the forecast but the same as last month. the pce price index is flat on the montes forecast, meaning that the price index goes to 2.6% from 2.7%. the core is up a 10th as forecast and the core pce, two point 6% on a year-over-year basis. this tells you that economists are getting good at forecasting pce and the fed can continue to look forward to lowering rates without giving us a timeframe to do so. jonathan: this rally this

morning isn't disruptive, it continues. the small caps, the russell, up by nine tents of 1% now. the bond market, yields were higher but now lower on the front-end. breaking 470 to the downside. in the fx market, japan is i guess grateful. on that currency pair we are negative by .1%? lisa: the one thing that might be somewhat unexpected is that personal income exceeded personal spending by a big degree. does this mean that the consumer is being a bit more disciplined and being a bit more with personal finances getting better than not -- and not worse? jonathan: we have got jobless

claims behind us going into payrolls next friday. have we got a decent picture of what happened in the survey and how it might come out the other side for payrolls? mike: yes, but you can't use jobless claims the same way that you can use cpi. the jobless claims side suggests there hasn't been a lot of change in the overall labor market. if you think that we are adding workers at a reasonably strong pace, you can extrapolate that out. one of the things we end up doing is taking the ism hiring numbers, hiring plans numbers to a certain extent, adp -- we won't get into that, lisa [laughter] but you take these other indicators and try to plug them in and come up with something. right now it is early but basically economists that we will be seeing something in the 180's range, which they forecast last time with an upside surprise lisa: we have been in a

model for a while where people pick their own narrative and you can get mad at people saying that inflation is coming down, inflation going up, how long has it been now? jonathan: two years? coming out of the pandemic, the richmond fed president had a speech this morning asking about why everything went wrong, why did all the models go wrong? there are a lot of reasons that they can look back on, but they got it wrong, everybody got it wrong. lisa: i guess i'm looking at this and if you could draw a production on something not predictable, you look at the outspending and outstripping of personal income that shifts after people used up pandemic savings according to the san francisco fed. is that significant? personal finances getting better? mike: yes and i will give you a

reason why. this is a surprising number, wages and salaries were up .7% in the month of may after .2% in april. we know from economic history to the extent that it is still valid after pandemic, people tend to spend what they make. even though savings have gone away, people are feeling like they can spend money and that is what they appear to be doing. we don't know if this is a rise in general or if it is some kind of outlier because of the wages trending down, but in this case it's a strong number that would suggest people can keep spending. jonathan: mike mckee, stay close, stick with us. i'm pleased to say that mohamed el-erian is joining us. i'm going to sound like a fed official talking about the totality of the data. when you look at it, are you

seeing concrete signs of economic slowdown, loss of momentum, and you think that a conversation about reducing interest rates as soon as next month is warranted? mohamed: yes and yes. the economy is slowing faster than most economists expected and faster than what the fed expected. yes, on the whole the economy is slowing. remember, this economy has very few buffers. most of the buffers that we have had in terms of personal savings and debt capacity have been run down. leading you to the second russian, a forward-looking fed would certainly have the possibility of a july cut on the table. jonathan: how much daylight is there between what they should do and will do? mohamed: too much. [laughter] i would look at july being alive meeting. i don't think that's the case. there's even a question in the

market. certainly if you look at the narrative of the last few days from fed officials as to whether even september will be live, right now the market gives a less than 50% probability of a rate cut in september. the narrative has been pushing back the rate increase towards the end of the year and one or two fed officials would like to keep the possibility of a hike open and i think that's a long way from where they should be based on what's happening with the economy. unfortunately, they have been burned a couple of times already. let's not forget that they are still excessively data-dependent and it takes quite a bit of historic data to get them to change. lisa: let's not talk about the totality of the data or fed officials, let's cherry pick and talk about specific numbers. personal income, 0.5% versus the expectation of .4%, up from .3% in the prior month. looking at personal income in

the fact that it is increasing as personal spending declines, does that give you a sense, if we wanted to cherry pick the number and understanding that the totality is different, people might be in a better place and have greater ammunition ahead of financial tools to keep spending at this robust pace? mohamed: i would love to be where you are, but there's a problem. even if we cherry pick and say one month of data has a ton of information content, that's two big assumptions and i wouldn't know if the increased savings that comes from income more than spending -- is it voluntary or forced? are people voluntarily saving more work do people feel forced to save more? much as i would like to go to where you are in terms of that number, i hesitate because we have to assume away some important things and secondly, we don't know if it is voluntary or forced. lisa: that's a fascinating

point. i'm thinking about that in a time when people are saying they might not be spending because they are not buying homes and don't have the capacity to do so. one argument that some have made is that if the fed were to cut rates by 25 basis points next month, it would reignite a surge of interest in the housing market if you could see prices climbing more substantially as a result. do you believe that to be the case? if not, why? mohamed: i don't think that 25 basis points will make a big difference to the housing market. that's the first issue. you need more than that. don't forget how much we have moved the other way. that's the first point. second, housing gets even more complicated. supply has been impacted in a way that most didn't expect. most people thought that housing demand would come down as the rates went up but they didn't realize that the supply would

also come down as people hesitated in going from low rate mortgages to current mortgages. so again, the market has been distorted by what happened during this long time of rock-bottom rates. we must not forget that a lot of distortions occurred. in the slower moving asset classes like housing, it takes time to get the distortions out of the system. lisa: i'm wondering if 25 basis points would even reignite the housing market. is there still a reverse argument that if they don't cut by that next month, they could accelerate a tipping point that the labor market is already reaching? mike: -- mohamed: that is where i am. looking at the type one, type two errors, right now the one that scares me more is they are too slow, too high for too long, and that economy slows to such

an extent that two things happen. first, they can't moderate the slowing. second, they wind up having to cut rates more than they would have other ways, like they ended up hiking rates more than they would have otherwise because they were so late. when i look at the tales of distribution -- remember, i put on the table the notion that a soft landing is 50%. 35% is ending up in recession because the fed doesn't react quickly enough. 30% is the bigger but not hotter with a supply-side positive shock. when i look at that distribution, i worry that the more likely error right now is that the fed will not start cutting early enough and then will be forced into cutting aggressively. but it won't have the impact in terms of slowing or moderating the slowdown and then it will overshoot on the way down again jonathan: a new wrinkle, how independent is all of this from

policy out of the white house in 2025? mohamed: i've been fascinated on this discussion you have had about why markets are so calm about u.s. politics, the yen is at 160, france and germany, the spread is at 84 basis points. the list goes on and on. why are they so calm on the middle east conflict intensifying? i think the reason is because we, here in the u.s., have three things going for us. one, a belief in economic exceptionalism. that we can soft land the economy or even not land at all. that is still the central scenario for a lot of people, number one. two, we ultimately believe the fed will cut. three, we believe that nvidia and the ai revolution is such a positive supply shock that it will keep on giving and giving and giving.

on three, i worry most about the economic assumption. if that economic assumption is tested in the months ahead, then the politics -- what is happening around the world, suddenly all of these things will capture much more attention in the marketplace than they have so far. annmarie: we are waking up after a moment where the sitting president was said to have had a disastrous debate. alarm bells are ringing. what would be enough between now and november, potentially what political movement, could move the markets between now and november? mohamed: so, this is your world much more than mine. i think the market truly believes, despite what they hear from economists, that when push comes to shove, whether it is president trump reelected -- president biden reelected or

trumped coming back to the white house, the degree of freedom will be less. we have seen both of them be very similar in what they wind up doing. so, i think the market senses that despite what the economists are telling them about fiscal policy, tariffs, everything else, when push comes to shove, these individuals, when in power, will be relatively similar in economic policies. why? we have had four years of each. the market has been able to observe they have done. bring in the possibility of someone new. it changes the fundamental construct. if you bring someone new to the equation, what degree of confidence with the markets have? they saw both individuals in the white house? -- house. jonathan: i want to elaborate on

a finer detail. the guild market has been a restraining regulatory force on the prices and you can see that in the nervousness they have talking about deficit. similar things are taking place in france right now. do you think the treasury market could become a regulating force in this country or will we retain the unique privilege to do other things? mike: -- mohamed: we will retain it because the rest of the world is so messy. i think about it simply. france, the u.k., it was an absolute space. if there was fiscal responsibility, they will feel it regardless of what's happening elsewhere. the u.s. bond market is in a relative space. so, as long as other countries are more irresponsible than us, we can continue being

irresponsible. jonathan: you are one of the best, we want some final thoughts before going into next week. let's get you updated on stories elsewhere with your bloomberg reef from dani burger. dani: the fed, its preferred inflation gauge came in in line with the forecast. 1.1% month over month, the smallest advance in six months. personal income rose .5%, higher than estimates with personal spending a touch softer. the data will boot -- boost the case for later this year. a check on mike -- nike shares tumbling, the full year outlook falling short of expectations. the revenue could decline this year. they are turning out lifestyle where with little offering to replace other top sellers with arrivals picking up the slack. sneakers, fueling a new era of

growth. the nfl is facing a massive antitrust lawsuit. especially over broadcast subscription costs, they were hit with $4.7 billion in damages, which could be tripled under federal law. they conspired with directv to raise the prices to watch out of market games. they made the unusual decision to take the suit trial. roger goodell appeared as a witness in it. saying that the nfl plans to appeal. jonathan: have a nice weekend, dani, thank you for this morning. you are watching "bloomberg surveillance." ♪ u see untapped possibilities and relentlessly work with you to make them real.

jonathan: mohamed said it is dressed down friday, so i guess it is dressed friday area s&p

500, counting you down to the opening bell. here's your trading diary, 10:00 a.m. we have the image sentiment survey from sunday. it's the first round of french elections, numbers are a plus. jay powell speaking in portugal and wednesday there's another round of jobless claims. the u.k. is holding its first national election in five years. getting through all of that, you got the payroll report on friday. for a final word, fantastic to have you all with us. mohamed has laid out a different story from the one you have been pushing over the last couple of weeks. let me give you a bit of what he had to say. >> as we talk about every day, a lot of things are going on in terms of interpreting data points. important data shows the economy

doing well. now the consensus expects 185 for next friday and that's not bad. the atlanta fed gdp is expecting growth in the second quarter of 2.7. that's not bad. jobless claims are moving in line with the patterns we normally see. in terms of same-store sales it's going nicely. we are up and down, doing nicely. it's a bit difficult at this point to see. we are not seeing the economy fall apart. it still continues to point to an economy that has tailwinds from eastern conditions and we still have support from the chips act and the infrastructure act. as well as financial conditions. overall, we are seeing steady growth for the next several quarters.

lisa: i can't handle all of these casual people letting their hair down on this friday. the balance of risks right now is more seriously tilted. it's because of the weakness you are seeing in the labor market and the concerns you are seeing among the average household. torsten: those who owe money, have a lot of leverage in the housel sector, lots of debt, have been hit harder. those are low income households. high income has been benefiting from stock prices going up. the cash flow from fixed income hasn't been better in decades. you begin to see cash balances going up over the last several quarters. how income households are still providing a nice tailwind overall for consumer spending but you are right, there are distribution aspects were overall we look at the outlook

for consumer spending, including this morning's data being very strong and on top of that flow unemployment. it's difficult to see that slowdown that the fed is anticipating. lisa: what would you tell someone who thinks that right now the fed is not owing to cut rates in the fed has enough momentum to keep going? mohamed: the fed is not going to cut until it's too late, to be clear. i think they should be cutting rates earlier but i don't think they will. there are fundamental differences in the following areas. one, distributional weakness the economy or general weakening. issue number two is are the forward-looking indicators telling you the same thing as the backward looking indicators? the answer is no. forward-looking indicators are weakening in the backward looking indicators are relatively strong. not as strong as they were, but relatively strong.

third, something you have heard me say over and over again, i wish macroeconomists would do this more often, listen to the company earnings calls. listen to them. i could go through the whole list. they are all seeing weakness, they are all responding to the weakness that they see in the pipeline. so, i understand that the data is a big u.s., but i think the data goes away if you distinguish between forward-looking and backward looking and you inform yourself by what the bottom up is telling you as well as the top down. jonathan: the excuse on walgreens is that it is idiosyncratic, dealing with problems with theft, the store experience not being what it used to be. what would you say to people using that word repeatedly, idiosyncratically? mohamed: i would say that you are using it too much. they use it so often -- i remember from 2021, when the

companies were telling us that there were price pressures and that they felt confident passing them on to consumers, raising prices. you would hear -- it's isolated. ok? people didn't listen. by the time that played out in the macro numbers, it caught most people off guard. i'm just saying, these are tales. it's important to remember that you're talking about the tales of distribution and how the balance is in the tales. jonathan: torsten, how would you does -- explain the difference between survey data, soft data, and of the data right now? torsten: on the earnings side it has been the case that some companies have been more on the downside and there are several companies, airlines and restaurants, sporting events, concerts where you are seeing relatively strong as this, broadway shows showing significant strength. what is really important is the

fifth. in my view that moves a bit away from being data dependent more being star dependent where there is a credible desire to lower interest rates. the sooner the better, the incoming data is still quite strong. how can you start talking about lowering interest rates where it's only at 4%? it all suggests -- is there really a reason to start talking about cutting rates soon and the data dependency is less relevant when it still comes in quite good? jonathan: at least we can all around one thing, it is no tie friday. mohamed: jon, put your tie back on, please. jonathan: i will hold it up for you later when i leave the office. coming up on monday, david kelley, cameron torsten, steve reshoot out, and you all have a wonderful weekend. lisa: you look so relaxed, who is this person? jonathan: i'm the most guy in

new york. annmarie: exuding chill, my goodness. jonathan: not tense at all. [laughter] jonathan: what are you laughing for? annmarie: i like no tie, john. jonathan: there you go. ♪ i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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and bring on the good stuff.

katie: from new york city, i'm critic i fell. -- i'm katie greifeld. focus on the data rather than that we -- rather than the debate. the countdown to "the open" starts now. coming up, president biden's debate performance creating more questions than answers about the future of the election. futures on the rise as the latest pce data shows slowing inflation supporting the case for a rate cut, and