>> parts of the market could be overvalued but this is backed up by a strong economy. >> quality factor and momentum factor have been dominant in the u.s. equity market. >> the earnings outlook is still supportive of the risk assets. >> business and the consumer are doing what they should be doing. >> people are doubling down on existing bids because they think the party will keep going. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: let's get you to the weekend.

that feels good. for some of you. live from new york city. i can see manus and danny are furious because they are doing the program on friday. i apologize. let's start the show again. from our audience worldwide come equities at all-time highs in the s&p 500 into wednesday. the day is short but the day is stacked. equities closing at 1:00 eastern. the bond market closing at 2:00. let's deal with the stacked part. adp jobless claims, ism services index, the fed speak at 2:00, john williams of the new york fed. that day is stacked. lisa: i am watching ism services first and foremost and after that the jobs claims given the fact we have seen the slow grind upward in terms of the numbers of people out of work looking to get some benefits.

to me the idea of ism services has the same kind of downside surprise manufacturing did, that will move the needle in a more significant way. jonathan: did you think chairman powell was dovish? show me signs of resuming the disinflationary trend. that is an additional quote. lisa: he said significant progress, real progress, and quite a bit of progress. he did say we want to be more confident inflation is moving down. he did not talk about a date when people pressed him on september but clearly you saw the market price and a greater chance of a september rate cut because of a substantial progress type of language from jay powell. jonathan: let's do the politics. the polls, the officials opening up, the leaks, there is a new excuse from mr. biden. "i was not very smart. i decided to travel around the world a couple of times and fell

asleep on stage." let's go to the timeline. back from italy on june 15. the debate was 12 days later. never mind the fact that you are at camp david for about a week to prepare for this and do nothing else. lisa: the excuses are landing flat to be generous. it does not get away from the basic fact that he is an older man who seems to be needing more rest and time to recuperate in a job that requires a very demanding schedule for even a young person. you look at presidents when they come in and come out and they are greyed. there is a chorus that is undeniable from the democratic party saying it is time to step aside. the polls are suggesting his chances of winning are plummeting. jonathan: yesterday it felt like the dam was beginning to break. to hear nancy pelosi saying on tv is a legitimate question to

say is this an episode or a condition. an episode or a condition? lisa: the fact that people are saying a quiet part out loud tells you where we are. if you look at the polls, the betting marketplace says joe biden has only a 40% chance of being the democratic nominee. this is a time when he is losing clout in terms of his ability to run. 60% of the yougov poll think trump won the debate. 61% of democrats want the democratic party to choose someone other than biden. the dam is breaking and the pressure is undeniable. will the biden camp respond? jonathan: cnn poll, three quarters of the democratic party say the party would have a better chance without biden. you see it repeatedly. lisa: the problem is when you take a look at some of what has been gamed out, this is all premature, who has a better chance of winning against donald trump?

that is one question at a time when, harris could have the financial war chest biden does and then there's a question with recent supreme court rulings and how much that amps up some of the pressure and raises the temperature of the democratic party given some of the doomed case scenarios. jonathan: much more on that story later. nothing doom and gloom about this market. all-time highs on the s&p. equity futures a little bit positive. in the bond market yields lower a single basis point. the 10 year 4.4217. coming up, we'll catch up on white is too early for the trump trade. isaac boltansky as biden blames travel and citigroup's andrew hollenhorst calling for a recession. investors positioning for a potential second trump term. "isn't it a bit key to be

positioning for the trump trade for the trump trade four months before the election, six month before the inauguration, and based on the 2017 timeline around eight months before the passing of legislation." you think maybe this move is little bit premature? james: either that or we are backward engineering a narrative to describe the move higher in treasury yields. the timing with respect to this move higher in the odds of trump being elected to stop time up perfectly. it looks like maybe there was a bit of inventory overhang from dealers into and out of month end and that have precipitated a move higher in treasury yields than by the long end and now we are starting to engineer that into being related to increased chance of trump's election. either way, now is not the time to push hard on trades and investment ideas which rely on trump passing legislation. there is a lot of wood to chop

before we get there. jonathan: you said it is too early to position for trump presidency, there is nothing clear in the macro front either. what should i focus on? james: that is the difficult thing. the trend has been a reversal of the trend which has proceeded it , which is to say we have had upside surprise and economic data in europe and the u.k. and downside surprises in the u.s. broadly speaking the u.s. feels like it is in a better place. if you look at economic cycle they do not turn on the consumer , they turn on business investment and that precipitates to higher unemployment and the consumer. in europe and the u.k. we are seeing that deterioration. investment dated we have seen that picking up. it looks to us we have seen you should be more comfortable taking positions from an economic perspective. i think the date it will give them cover to continue cutting. likewise the bank when we get to

august. the fed more uncertain but you're getting paid a little bit more to take on that duration risk in the u.s. and ultimately we see that as being attractive because the direction of travel is end of cycle. lisa: this is fascinating, this idea of a market move in search of a narrative. part of the reason we've been playing market ping-pong or table tennis with respect to different narratives. what narrative do you paint? end rate cycle, more heavily in europe but still in the u.s., going into dollar assets. is this the game plan you've been describing? james: ultimately it is. we are not trying to make some bold prognostication and then bet the farm. we try to think about the world probabilistically and we try to understand the various scenarios and themes that reflect in market pricing and deduce what

we think the market is assuming and position ourselves for the most asymmetry is. the fact we have credit spreads as tight as they are and equities at the all-time highs and equity multiples looking rich, meanwhile you have yields five to 10 year yields looking attractive relative to the dynamics which are being described broadly by the economic data. that as a starting proposition and asset allocator, that informs the idea that bonds and high-quality save defensive government bonds are the more attractive medium-term investment proposition. lisa: a lot of people are looking to the data we get today. on friday we get the nonfarm payrolls report. a key question has been how data dependent is the market, how data-dependent are people like yourself who do not know what macro compass to use? what is the more important dated to be looking at in the slew of information we get today on don

-- and the slew of information we get today and on friday? james: the data that matters the most is unemployment and the labor market in general. that is the spine of the economic cycle. that is how these positive and negative drivers feed through the economy in a cyclical fashion. the same dollar being spent multiple times. that cyclicality that is good in the upswing in negative in the downswing and those changes largely happen because of changes to employment or changes to unemployment. that is the most lagging of those major indicators. it is difficult to make forecast based on that. you have to use the forward-looking data to inform a view on where the labor market is heading and broadly speaking the data has been telling us and continues to tell us that things are softening and normalizing in the nature of the economy means the second derivative is incredibly important to try to understand where a more medium trend is.

unless we see the jobs market picking up, it looks to be in economy losing speed. jonathan: we started this conversation and you are playing down the importance of politics in the united states. i wonder how important the politics are in the u.k. and france over the next several days. given that the liz truss shock seems to become a self-imposed debt break, how relevant is the politics? james: that is a really important point. i would note the same. there's been a wake-up up moment for u.k. politicians it it is good politics for the labor party to shackle themselves to the fiscal responsibility the tories were campaigning on. from an electioneering perspective that muted the tories and their chance of winning became zero. ultimately the lessons will live long in the memory for the next year. in europe it is almost constitutional. you have fiscal rules still in the european union conveniently

ignored during the pandemic. deficit procedures will be part of the future. what that means for european politics is less easy to say because you have this rise of the extremes who are ultimately skeptical with respect to europe and the power of the european commission and that could set some of these countries on a collision course with brussels. near term there is a lot of event risk. actually in europe medium-term there are structural risks to the market pricing. lisa: in other words by the dip in longer-term treasuries and political risk may be less so in europe because of the structural issues. is that right? james: certainly germany is the safe haven, the core rates market, we do not favor owning a lot of the spread risks. we think there are a preponderance of downside risks in the market is not handicapping pricing those effectively. we would like to see more spread

before we be comfortable taking on his risks. jonathan: good to catch up. it is amazing from a market perspective how irrelevant the election and the u.k. appears to be in the next 24 hours. lisa: in part because we have a sense of how it will turn out and the liz truss moment hangs over more significantly in that nation. in terms of fiscal responsibility that test has already passed through. jonathan: nobody wants to be the bond crisis candidate in these populist parties, they want to prove they can govern and approve you can govern you do not want to miss your -- you do not want a messy bond market. it has become a self-imposed debt break across europe. that feels like where we are. lisa: people are still saying that spread between french bond yields and german bond yields persists. it is a self-imposed constraint to a point.

that is a hard thing a lot of people are trying to get their heads around. jonathan: yields lower in france. equities unchanged after closing at all-time highs in yesterday's session. let's get you update on stories elsewhere. here is dani burger. dani: donald trump sentencing in his new york hush money case has been delayed by two months. the delay is so judges can review the impact of the u.s. supreme court ruling on presidential immunity and it also means the sentencing would come less than seven weeks before voters had to the polls on november 5. trump faces up to four years in prison for the criminal case. eli lilly has won fda approval for its drug to slow alzheimer's. the drug will compete with another alzheimer's treatment available in the u.s. since 2023. eli lilly says the truck will cost $32,000 in the first years of treatment. the drug to remove certain toxins from the brain.

a check on paramount shares rising more than 9%. sky dance media is said to have reached another agreement over paramount. it rekindles deal talks that fell apart last month with the reportedly higher valuation. sky dance has a per luminary agreement -- sky dance has a preliminary agreement -- it could be announced within days the deal could still fall apart. jonathan: thank you. more from dani in about 30 minutes. up next, the white house trying to shift the narrative. >> extreme weather events drive home the point i've been making so long. ignoring climate change is deadly and irresponsible. unfortunately my predecessor and the maga a look in's and congress are trying to undo all of this progress. -- and the republicans in congress are trying to undo all this progress.

jonathan: this is bloomberg. ♪ are now being analyzed and restored using the power of dell ai. ♪ (♪♪) (♪♪) (♪♪) (♪♪) sandals rhythm and blues caribbean sale is now on. visit sandals.com or call 1-800-sandals.

jonathan: a record finish on the close yesterday on the s&p. on the nasdaq 100 futures unchanged. yields unchanged. later this morning, tons of economic data. tons of economic data throughout the morning. under surveillance this morning, the white house still attempting to shift to the narrative. president biden looking to ease concerns about his campaign, planning to meet with democratic governors and agreeing to a televised sit-down interview while also telling donors at a fundraising event that jet lag was to boehm -- was to blame. isaac boltansky writing "social media posts suggest social media -- suggests replacing biden is as easy as changing a football line but that process crashes

and burns against biden's pride and the nominating process." we saw the leaks yesterday. it felt like the dam was breaking. you think this gets worse not better for the president? isaac: it is surely going to get worse over the next couple of days. there is deep frustration in the democratic party over the white house strategy after the debate. it is clear their strategy of downplaying this comment afflicting and denying its reality has hurt them and it has caused some of those fissures within the democratic party. what i'm interested is twofold. how does he look in the upcoming events? i will be looking at his appearance in wisconsin on friday as well as that sit-down interview you mentioned in the opener. number two, what we see from the polls?

thus far they have been deeply concerning for the democratic party and have given the vice president a real inside lane among some democrats. those are the things to watch from here until sunday when that interview airs. jonathan: i wonder how fixable this is. the way the party and campaign talk about this as if it is just a bad debate like obama-romney a couple of years ago. this was not just a bad debate. this is about whether there is something structural. i cannot think of a better way of framing the question then nancy pelosi -- it is legitimate to say whether it is an episode or a condition. how do they stop making people believe this is a condition? isaac: i don't think they will. there is a part of the electorate for whom this is their permanent and lasting view of the president. it will be difficult to alter that. what the biden administration

will try to do is say he still has some gas left in the tank and he is a better alternative than the other guy. this is something that sticks in my mind more than anything else over the past few days. this raises different than once we've seen before because it is incredible to me how disciplined the trump campaign has been. if this was during the 2020 election you would have seen trump concerned the spotlight is not on him make it about him. instead he has been disciplined and let his opponent suffer with the headlines that he himself has created. that is another dynamic we had -- that is another dynamic we have to continue to watch. that is why joe biden in those closest to him believe he should remain the candidate because he is uniquely capable of defeating donald trump. lisa: he is a different man than he was in 2020 and a lot of people have been saying that and the debate was primetime viewing of that dynamic.

i wonder what kind of timeline the current president is on to try to prove himself in any way, given the fact that the momentum is building in his own party to tell him to step down and time is running out for nominating another candidate. isaac: i think from where we are in town, the conventional wisdom is let's see how the next few days give, how the next few polls. i am telling my clients i think friday of next week will be the deadline for seeing where the democratic party is. we have already seen the dam start to break in the comments from yesterday. let's see how the chief of staff , what he has to say with his staff call today at 12:30. that i think that will be a defiant tone. let's see how we do in wisconsin and let's see how the interview sunday goes. all of that will lead into the polling of next week.

i think by the end of next week will have a stronger feel as to whether this president will remain defiant and hope the story shifts, or if we will be talking about a replacement and we will be talking about some of the interparty dynamics that will be in play now 125 days before the election that should have been in place six months ago. lisa: it is hard for me to believe this will quiet down. it feels like it is only getting louder. yesterday was a cacophony of different democratic congress members with the first coming up from texas and saying please step aside. you can see the polls are coalescing around the idea, with some people saying the immunity ruling turbocharged this feeling of frustration in the democratic party. what are the alternatives given that kamala harris, gretchen whitmer, all of the potential replacements are not polling that much better in a head-to-head against donald trump? isaac: this is one of the

reasons we have the situation we have. if there was a clear alternative i think there would been more of a push within the democratic party six months ago to look at that alternative. we did not. the party coalesced around biden and that is one of the reasons we are in this situation. from my perspective i think if we go to the next alternative, and if the president steps aside , i think you have to look at the vice president as the clear front runner. two reasons. number one is i struggle to see the democratic party, a party that has embraced some tenants of identity politics, jumping over the first african-american woman in the vp role. that is not something i see the democratic party doing. if they do that you will see impact on voter enthusiasm. number two, let's not forget there are 200 million plus in funds within the biden-harris warchest. those funds need to be used by

biden or harris. there are some ways around that and that could take some time, but that is a complicating factor when we start thinking about what happens if biden steps aside. jonathan: go through the process. there is a bunch of money raised and only two individuals can use it. is it that straightforward? isaac: fec rules are incredibly clear on that. you could have a return of those funds in a new round of fundraising. what i found interesting is you are starting to hear some of the democrats who believe we are going to have an open race for replacing biden, saying vice president harris should not be allowed to use any of those funds until she is the presumptive nominee. you are already seeing some of that jockeying for replacing biden coming out in the fight over whether she could access the funds that have been raised for a biden-harris ticket. it is a lot of inside baseball

come and it does show you that this is getting real and we have gone from the odds of biden being the nominee being 90% to just a little better than a coin flip as we await what's next. jonathan: it feels very real. isaac boltansky. just to echo his words, it is not as easy as changing your fancy football lineup. it is far more complex. lisa: which is the reason why you see a lot of jockeying in the idea of waiting until next friday sounds like an eternity. it will not quiet down. jonathan: coming up, we'll catch up with socgen's kitchen nukes about political -- kit juckes about political differentials. from new york, this is bloomberg. ♪

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jonathan: equities on the s&p 500 just about positive. likewise on the nasdaq after closing yesterday at record highs. it is all about economic data today. switching the board. yields shaping up as follows. two year 4.7580. 10 year 4.5257. we did not see the deterioration some people were looking for. jonathan: inflection -- lisa: inflection upward based on the downward trend people were expecting to go back. there is a lot of questions

around the accuracy of this data. rbc put out a note saying job openings are being skewed by baby boomers retiring so there more job openings in their would be a normal society. -- more job openings then there would be in a normal society. jonathan: if jobless claims keep climbing and unemployment does the story will change. forget job openings. the story will change quickly. lisa is on top of this. dollar-yen came really close to 192 -- or rather 162. i got ahead of myself. give it five minutes. 161.95. lisa: there is an issue of what will stop this freight train of the yen weakening given the fact you've already seen intervention that failed completely. then this question of what of the bank of japan raises rates and it does not make a difference and that is getting a

lot of people nervous, including vanguard, who says of that happens you could see 170. people talk about the differential and say fair value is something more like 120. there are people saying we want to bet against the policy you have been executing for the past couple of decades that does not make sense. it is almost vindictive. you can imagine the traders sitting around and saying take this. jonathan: play out this exchange for a month or so and maybe will be close to 192. fed chair jay powell saying the latest data suggests the u.s. is back on a disinflationary path. economic data common throughout the morning, including adp, jobless claims, and durable goods. that sets us up for friday when we get the big payrolls report. guests are much more interested in the unemployment rate on friday than the payrolls figure, the headline number. lisa: given the fact we do not have a real sense of what the

normal level of the jobs created is to create a fully employed america, i am just curious. you asked me did i think jay powell sounded more dovish? i really think this is significant. the fact he came out and he said the economy had made "significant progress, real progress, quite a bit of progress". has a tone and he wants to believe in the disinflation he has seen and he wants to believe it is on the back of something that is a cooling of the labor market. either way this sounds like a fed chair prepared to cut rates soon. jonathan: he talked about the resumption of the disinflationary trend and said the strength of the labor market gives is the time to wait. i wonder if that line was the bridge between july and september. did you get that sense? lisa: waiting is two months. explaining why are you going now if you see the disinflation.

to austan goolsbee. if you have employment market -- if we get 150 does that mean they could cut this month budget mark jonathan: let's talk about travel. travel agencies warning of a surge in travel. tsa expecting more than 32 million people to fly over july 4 while the aaa is expecting more than 60 million people will drive. the numbers are staggering. we are talking about cracks in the labor market. if you're looking at travel alone there's nothing to see here. lisa: this is why it is so hard to get a handle around the macro economic narrative. is it simply because people are still doing revenge travel? are people prioritizing experiences? yesterday we saw oil reserves go down. this is interesting at a time of such big demand on the travel

level. it raises a question of are we going to see that path as a result of all of this travel and the commodity space we have not seen. jonathan: speaking of travel, back to politics, president biden speaking at an event in virginia saying jet lag was to blame for his poor debate performance. traders are betting on bond yields as they prepare for a second trump term. kit juckes writing -- "that only changes when the economy slows and rates are coming down." based on your note, it sounds like you think in the short term for a currency pair like euro-dollar, political differential is more important than rate differentials and what is happening with the economic data? kit: at the margin, euro-dollar yes, yen dollar no. the underlying story is this is the third big dollar carry rally

since i started work 40 years ago. the last two did not end until the fed started cutting rates and they both went faster than anyone thought they would at the time including me. i have excuse, i was in my first year of work. this feels the same. then the politics changes things. i would say one thing about the u.s. politics. i do not understand because i'm not good at politics. the big differentiator in the cycle is the u.s. has had more accommodative fiscal policy than longer and the post-covid area than the rest of the major economies. europe has been trying to get its fiscal policy underway. president trump does not sound like he will try to. the fiscal difference has been a big part of what we call u.s. exceptionalism. that has been a big part of why the fed is not cutting rates

because the economy is strong. we have no fiscal restraint coming out of the states. the politics drives a lot because the fundamental difference in the united states does the u.s. can run this fiscal policy and the rest of us have to see liz truss for five minutes. jonathan: the self-imposed liz truss debt break seems to be gripping europe. france is a big conversation. i want to talk about political risk in france. i want to do a little bit of a recent history lesson and go back 10 years. let's go back to 2011. if you have young people on your team at socgen, a trick question if they have not watched this conversation. tell them where spreads were in europe in 2011 -- italy, spain versus germany and ask them what they think the euro average that year. the euro average that year close to 140.

i wonder how relevant the political risk is starting to infect spreads is to the fx market and the single currency. it was very complex in 2011. it was not obvious. what is it now? kit: at the moment spreads have moved more than the euro has. the thing that is different now, mario draghi did his thing then and reassured everyone that we are not letting this break apart on the back of that. he stabilize the bond market. if i am being fair the stability in the bond market is little bit unsure of itself. we are back at 2017 levels. it is still holding in. there is long path between where we are now and life in 2010, certainly before 2015 and the

big changes we saw. we are ok provided this does not get significantly worse in terms of fracturing europe. we have to see how that plays out. what we have done so far as we have a wall in the bond market and not quite nonchalance than the foreign exchange market. the foreign exchange market is saying the euro is low but this is not a reason for us to panic. what i do think it does in the interim is this will cap where the currency can rally for the rest of this year. the upside on euro-dollar -- i cannot see how it gets good lift against this backdrop. lisa: what is the floor? how far could it go if you see political fractures escalating

and france were potentially in germany? kit: in the short-term term we got to 95. the biggest terms of trade shock negative to europe, positive to the united states. euro is very beaten up. i don't think we will get down to parity in the next 12 months. you'll need an escalation in terms of the european wide levels. you need to be talking about the future of europe with genuine concern for us to get there. we are not there yet by any stretch of the imagination. we are probably where we are now , anchored at the bottom end of the historic range, worried about the long-term lack of growth in europe, worried about european excess savings

departing for better returns in the united states every day of the week but not panicking. lisa: you point to this idea and finishing up where we began, the tension between the economics of the moment versus the politics of the moment. you say the catalyst could be downside for the dollar should the economic trajectory weaken. you said the market we need to see something closer to 150,000 in payrolls friday and ism services read we get later this morning, closer to 50 to get excited and start selling the dollar. what kind of downside risk you see for the dollar and upside risk for the euro if you get a scenario like that? kit: at the time quite a big one. the u.s. did not have recession until the clinton recession. it doubled in value against the german debt and then it halved on the back of fed rate cuts

without a recession. both moves were huge. there is part of me that says the carry trade, the way united states corners all the world's excess savings is because the u.s. is the best place for them to be. if that starts going back the other way the dollar can fall further than i imagine. the cabbie out on that is if you get a rate cycle in the u.s. that is one where does caray cuts and then they are done, maybe that does not play out because i only have two instances in history. it does strike me that if the u.s. looks like it is slowing in the market gets between the teeth on rate cuts and the fed delivers rate cuts, there is a bit of a snowball move. every dollar has been beaten up in the last two years. jonathan: great to catch up as always. kit juckes of socgen to break down the latest in europe. euro-dollar 1.0 760.

let's get you in update on stories elsewhere. dani: jamaica's prime minister has declared the entire island a disaster area and of hurricane beryl's landfall. the storm could cause over $1 billion in damages. the winds have weekend from a category five to a category four. it is expected to lose strength but there is also risk that a weaker barrel -- they weaker hurricane beryl could spiral into the gulf of mexico. anglo america is weighing options on the sale of its coal business after an explosion at an australian mine. the plan to exit was part of a dramatic restructuring announced earlier this year as anglo fended off a takeover pursuit. it is last day of campaigning for the u.k. elections. former prime minister boris johnson has made a last-minute campaign push to rally

conservative voters in support of prime minister rishi sunak. labor leader keir starmer dismissed the move as desperate. polls showed labor ahead by at least 20 points. jonathan: will touch base with dani in 30 minutes. up next, the fed seeing progress. >> the labor market is cooling off. we have the ability to take your time and get this right. jonathan: andrew hollenhorst is up next. from new york city, you are watching "bloomberg survlance." ♪ ssed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo

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jonathan: equities unchanged on the s&p 500. this morning futures going nowhere. yields not doing much either. 4.4277 on the 10 year.

the euro a little bit stronger against the u.s. dollar. under surveillance, chair powell seeing progress. jonathan: we want to be -- >> we want to be more confident inflation is moving down towards 2% before we start the process of loosening policy. you can see the labor market is cooling off appropriately. we are watching it very carefully. we have the ability to take our time and get this right. jonathan: investors looking ahead to economic data. adp at 8:15. jobless rates 15 minute later. andrew hollenhorst saying we see a downside risk to the 155,000 we are forecasting. risks to the 4% unemployed rate are more balanced but the fed response would be dovish to a higher reading."

andrew joins us around the table. 155,000 with the downside bias. unemployment at 4%. is unemployment the more important data point? andrew: i think so. we have a lot of questions about the payroll numbers that come in much stronger than forecast. you've heard fed officials starting to say these payroll numbers look a little bit out of step with what we are seeing in other places. including chair powell. but i think about the unemployment rate is it a ratio. you do not have to get the labor force right, you do not have to get the population right. jonathan: implicit in that analysis are you suggesting that one survey is better than the other? andrew: i think there are pros and cons to both surveys. what you would have said until six months ago is it is the establishment survey payrolls number that is the better number on the monthly basis. it has less volatility

month-to-month. because we are in a laborforce environment where we have had immigration in big shifts in the labor force over covid, we may be getting some things wrong in the establishment survey, firms being born and firms going out of business. the household survey, you call people and ask them already working or not working. we know the percentage of people who say they are not working. lisa: you think there'll be a recession starting in the second half and that is underpinning calls for more aggressive fed rate cutting. yesterday we saw job openings come out more than expected. we have seen record travel amounts. we were just talking about that with what airports are expecting. we see people continue to spend dramatically. how do you explain that noisy nest? andrew: it is a mixed data environment. you will get some stronger numbers and softer numbers. the interesting thing in the

jolts numbers is jobs openings have come down. the interesting point is we are back in terms of the ratio of job openings to unemployed individuals. that ratio, about 1.2 openings for every unemployed individual back to where we were pre-pandemic. what we tend to see is this pandemic where once you start pushing job openings below that level, the unemployment rate starts rising more rapidly. we heard chair powell talking about a yesterday. we may be at an inflection point in the labor market where you see more week this on the unemployment rate, in job growth as we continue to push this. lisa: people have been talking about this inflection point in jay powell -- the potential is we have strong. with a 155 single -- with the 155 signal to them time is up? andrew: it does raise concerns

and that is what we heard from chair powell. we have been in an environment were risks were unbalanced and it was about upside risk to inflation. it is about upside risks you need to raise rates. now there is a balancing act that has played out were fed officials are thinking about upside risk to inflation but downside risk to the labor market. austin goolsby more dovish. we heard him say i've seen warning signs. he will see that 155,000 and say we should have cut in june. i do not think powell will be there but 155,000 is the kind of number where things are slowing down and we are getting the balance between employment mandate in inflation mandate. as early as the fomc meeting we should be seeing that read towards the rate cut. jonathan: a lot of people are using the word normalization. let's go to where we are today. let's get to jobless claims.

can you walk me through what is normal post-pandemic and the danger zone? andrew: we have been these levels of initial jobless claims , we are at about 230 right now. if the number moves up to 260, that is when you start to get concerned. we have momentum upwards on initial jobless claims. you cannot compare the level to prior cycles because states are always changing the rules about who is eligible. it is the movement you see, we are up 30,000. if you are up 50,000 that is when we start to worry. jonathan: if you wait for that are you late? andrew: usually. initial jobless claims can be a leading indicator but they are often a contemporaneous indicator. in fairness to austin goolsby, that is where you look at the numbers and say two weeks from now we could be another 20,000 higher and we will wish we had been more dovish. lisa: i want to overlay the

politics. there is an existential fear underpinning the fed trying to get this right that if they do not get this right and there is a serious recession the response function from the fiscal side is not going to be there in the same way. is that your assumption that if we go into a recession that is deeper it will be that much harder for the united states to get itself out without causing interest rates to go up much more considerably? andrew: we have a relatively low unemployment rate and we have a quite high deficit as a percent of gdp. usually what you see and that economic policy is that deficit comes down when the on employment rate is low. that does create a concern that if the unemployment rate starts rising, that is when deficits go up. you want to spend to support the economy. it is not clear there is as much ability to do that in the current environment. if we get a deep downturn i am sure there will be political consensus.

the danger zone may be is it more mild downturn? is that this conversation we are having were some people are saying we are seeing warning signs, other people are saying things are strong. if you're in that environment there will not be a political consensus on more fiscal policy, especially where we are already running a high deficit. jonathan: that is where people say -- lisa: that is where people say the fed put comes into play. i keep asking people this and i do not have a real answer. how much and how effective can the fed be with the rate cuts given the fact people do not think the rate hikes had that big of a slowing effect on the economy? andrew: is a great point. when you reduce interest rates that will stimulate the economy and bring down interest rates for some borrowers. to your point, it is a 30 year fixed-rate mortgage economy. that means when interest rates rose for a lot of households that own a house, they do not

experience the effect of the higher interest rates. when interest rates come down you do not experience that. the other thing is 10 year are below two year treasury yields. that is already reflecting an expectation the fed will cut interest rates. it is not clear 10 year yields fall that much and we are having a discussion about deficits, about continued inflation. those things continue yields higher. most economic activity will be more responsive to a five year yield, a 10 year yield. it is not about the overnight policy rate. there are questions about how much can you transmit that effective lower policy rates. jonathan: good to see you. have a happy july 4. andrew hollenhorst of citi. the fact that that is an open question if we go to the next economic downturn and the deficit gaps wider and we do not know treasury yields rise or fall, that has been a given for a long time.

people gravitate towards fixed income. sovereign fixed income. the fact that we think that is an open question is a big change. lisa: also a change that we had a massive countercyclical fiscal stimulus that reduce the deficit at a time the economy was going quite strong is unprecedented. when you take a look at the debt levels relative to gdp that is unprecedented. a lot of aspects to fight historical precedents. jonathan: up next we will catch up with jordan jackson of jp morgan and speak with charles myers of signum global advisors sticking with joe biden. tom tzitzouris, and bloomberg's annmarie hordern live from ukraine. from new york city, this is bloomberg. ♪

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>> there are parts of the market that could be overvalued but this is backed up by a strong economy, good consumption. >> quality and momentum dominate the u.s. equity market. >> the earnings outlook is still supportive of those risk assets. >> business and the consumer are doing what they should be doing, shoving up. >> people are doubling down on

existing bets. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning. on the s&p 500 and the nasdaq 100, we have quite a morning for you. let's talk about the day ahead. the day ahead looks like this, adp, jobless claims, ism services and you will hear from john williams. we are packing that into a shortened trading day. lisa: where is the signal and where is the noise? people are looking for a two prong show starting with the initial jobless claims and going to services. those metrics setting the stage for friday when you start to look at the potential for

services also showing the weakness we saw in manufacturing. jonathan: what is the difference between a welcome calling and unwelcome deterioration? andrew was here just moments ago pointing to jobless claims. we asked for a number and he gave us one. he said the danger zone would be 216. he said to him, if you wait, you are late. lisa: when you start triggering these rules, some of these points, you have already blown it. that is what is on the minds when they start having a devastating. we see other aspects like the fact that travel is at record highs, it challenges the idea of weakness. if you see a broad-based cooling across the board, even if you don't hit those trigger points, is that enough for a serious change of tone? jonathan: we will talk about the politics as well. think about what we have heard

in the last 24 hours. the polls, the leaks, the excuse, the jet lag. think about what the rest of the world is thinking what is developing in the united states, with foreign leaders are thinking. if you are wondering where she has been, annmarie hordern has been sitting down in ukraine with zelensky. this was part of the conversation. lisa: there is a real question about american leadership when there are questions about the sitting president and his ability to give running and who might be in his stead if he decides to step down. we is -- this is clearly the concern. what is the american role if you don't have strong leadership at the top? the white house has said there is strong leadership. we have heard this from netanyahu and the unnamed european leaders on the overseas trips. jonathan: we will play some of

that interview for you only catch annmarie hordern on the ground. equity futures on the s&p just about positive. in the bond market yields just a little lower by not even a basis point. euro-dollar at 1.0 760. at 1.6193. lisa: the real test will be if the bank of the jan -- bank of japan makes a move and that does not extend the weakness we have seen in japanese yen. versus the yen, they are not getting a break from the u.s. political scene. that is the ultimate question for them. how much do they need a friend in jay powell and the u.s. electoral cycle that has not given them anything close to that? jonathan: they have not got many friends right now. japanese yen is the weakest going back to 1986. here is your lineup. jordan jackson of jp morgan

investments as the s&p 500 at another all-time high. charles meyers and thomas tzitzouris under a second trump presidency. the s&p 500 closing above 5500 for the first time after -- first time ever. jp morgan's jordan jackson wright says, the strongest are getting stronger but they are fueled on veggies and compact scarves. investors can diversify into sectors like materials, financials and healthcare which are expected. good morning. it is good to see you. you seem pretty constructive in this equity market. jordan: as i mentioned, the strongest are getting stronger. when you think about the magnificent seven, 39% of r&d

spending, 23% of free/flow -- free cash flow. a lot of these companies are also ai hyper scalars. they will spend close to $200 billion in investment. first-quarter earnings of 50%. these are strong businesses. they generate income on their balance sheets they are making so much money that they are buying back shares and issuing dividends. we have never seen this before. i get excited by that side. valuations already headwind that for the rest of the market when you look at the earnings coming from materials, healthcare, financials by the fourth quarter, this provides some durability in this equity market rally. jonathan: the one-year move for the mag-7 has been amazing. are you sharing -- saying we should worry about diversification or we should not worry about it? jordan: we should be mindful of it, careful about valuations.

you think about a risk budget within an equity portfolio, you need that exposure for some of these companies but i also think you want that value defensive areas that looked to be seeing promising expectations. lisa: if we see the economy weaken, andrew hallman horst was expecting that to happen, is the healthy diet of complex carbs and protein suddenly looking like twinkies? jordan: when you look at growth holistically, yields are higher but gross is higher as well. -- growth is higher as well. perhaps they are feeling more defensive than they have historically. we are in the camp that growth is cooling and not freezing over. that is an important dynamic as well. i don't think all bets are off. if the economy slows, this could

be a soft enough recession where it is almost difficult to call it a recession. lisa: there is an interesting idea underpinning what you said which is what we have heard. how much are treasures going to behave at a time where people have been hiding out at nvidia. people have been hiding out in growth stocks. that has been the a cyclical bed on something different -- a cyclical bet. it is not going to stop the freight train of nvidia. and microsoft you can see the same rally because of the deficit in some of these political issues. jordan: i think this is a put on long-term interest rates. we think yields will be in a pretty tight corner for the direction of the year -- for the duration of the year. when you think about that floor, you have rising estimates. there is increased pricing as of late of perhaps a trump victory. he has talked about tariffs.

certainly he is going to push through all of the expiring provisions on the 2017 tax cuts and jobs act. that will be net inflationary. the bond market is starting to feel that. if you get a more material slowing, you will see treasuries rallying here. . in the next recession, if it is a deeper midsection -- resection, maybe balance rate policy will be deeper to back the federal reserve impacting the loan rates. jonathan: you have this range of four to 4.50. i think the call is only one cut for 2024. do you think that the trump presidency has the potential to change that given what we have seen over the last couple of days driven by the backend? jordan: you have already seen a little bit of that steeping play out since that to conversion sensual i of last year.

the steepening is happening and moving higher relative to the middle of last year. i think the next steepening will be bold. i think it will be the market. when the fed cuts rates, the market jumps the gun. they may start to price in more aggressive rate cuts. that will bring the front end of the curve down. i don't think it will be positively sloped perhaps into the second quarter of next year. maybe not until the second half of next year. this will be an environment where you'll coats -- yield curves will stay inverted. perhaps you need to barbell, 65%, 35%. it is a hedge against the risk of something more sinister plays out in the economy. jonathan: i like how you looked at lisa when you made that point. you know this program well. jordan jackson, good to see you. thank you. if something sinister happens. lisa: i know i come up with

catastrophic scenarios. i sit at home wearing about catastrophic situations. i do. what happens if the yield does not go down in the face of weakness? jonathan: when i lived in london and marie used to bring back twinkies for me -- annmarie used to bring back twinkies for me. i'm still trying to digest those. lisa: i just wonder, getting bigger and the diet of complex carbs and protein, there is truth to that. what happens to change that? jonathan: are you being serious again? let's get an update on the stories elsewhere. here's your bloomberg brief with dani burger. dani: apple is getting the observer role on the board. the former marketing chief has been chosen for the position. they say it will take effect

later this year and puts apple on par with mark us off which has a nonvoting observer role. apple announced it will offer chatgpt in the iphone as part of ai features. donald trump's sentencing in his hush money case has been delayed by two months to september 18. the delay lets judges review the impact of the court ruling on presidential immunity. it means the sentencing would come less than seven weeks before voters go to the polls on the number for us. he faces up to four years in prison further, no case. annmarie hordern sat down with president zelensky and asked him what it would take to win the war with russia. mr. zelensky: i would like china to play a serious role. it is a big country. the second largest economy. russia really depends on.

they have another place to export many of their goods because of the sanctions. dani: we will bring you more that interview in about 15 minutes. jonathan: thank you. looking forward to catching up with her at about 7:30. up next, the dam begins to break. >> it is a legitimate question to say is this an episode or is this a condition. jonathan: is it an episode or a condition? we will give an opinion on that next. good morning.

jonathan: equities right now on the s&p unchanged. record highs at the close yesterday. so far for q3, gains on monday,

tuesday, unchanged on wednesday. yields unchanged at 4.42. the bond market has not been looking at the data over the fed speak. this bond market was staring at one thing, the latest on the election in america. the dam beginning to break. >> he has a bad night. i think it is a legitimate question to say is this an episode or a condition. when people ask the question, it is legitimate of both candidates. both candidates, whatever test you want to put them to in terms of their mental and their health. jonathan: here is the latest. pressure mounting on president enter proofs last week's debate was just on that night. elite poll showed biden's favorability ratings plummeting through -- the most in

nearly three years. "i am all in on biden. his performance in the debate was weak but his performance as president has been very strong." charles myers, great to catch up with you. after thursday night, it is about the next 4.5 years. let's run with the nancy pelosi question. how do we know that is just a bad episode and not a condition? charles: i think the president and his team have a lot of work to do to show the american people that he is fit, alert and he can run the rest of this campaign but govern the country for another four years. they do have work to do. what nancy said is accurate. things are moving faster than expected. i thought they would have -- we were telling our clients two or three weeks of polling before they would have to make a decision. this is a personal opinion.

they have another five to six days. things are moving much faster against the president. they are getting him out this weekend into the swing states and we will see how he does on the interview. jonathan: what do you think he needs to accomplish in those five days? charles: i think he needs to be unscripted and show people that he is fully there and can make decisions, interact with people. i was with him on friday night in new york at a big event. i had about a three minute narrow action with him. he was very alert. he needs to show that to the american people instead of this perception that has been lingering of him post debate of someone who is out of it. lisa: isn't the damage done given the fact that people are really questioning whether they are being told the truth especially from his advisors? you have a number of democratic congressman including one from texas now verbally saying that

they hope he steps down. does that mean there has already been too much to shake his reelection chances? charles: i would say a couple of things. the campaign expected polling to take ahead. the puck that was leaked was pretty damaging. you need to see more than just one poll. you need to see a set of polls over a week to see if they can turn it around. a lot of damage was done. i understand it. only one sitting member of congress has called for him to step down. that could be the next shoe to fall, there was reporting this morning that there are potentially 40 additional democrats who will call for him to step down. that is probably the most serious issue in addition to further deterioration in polling. when you have elected vendors of your own party asking you to step aside, it is hard to recover from that. lisa: there is a question of who

could take his place. this has been one of the arguments from people who are saying that he is the best shot, to your point because the other potential candidates whether it is kamala harris, whitmore, gavin newsom, they kind of polls similarly in a matchup with donald trump. do you think there is sufficient polling to make that decision given the fact that some of it is not that extensive? charles: to make a decision on who should replace him or if anyone should replace him? lisa: both. charles: plan b is the vice president. she may not be the favorite of every donor. a lot of donors come from financial services. we tend to be a center-right industry. any notion that the white house, the dnc or the democratic congressional leadership is just going to overlook the vice president and go to some other candidate or have an open contested convention is a mr.

reed of the situation. the point of the vice president is to step in in the case of death, incapacitation, resignation or the president stepping aside. they will do everything they can to avoid a contested convention given what happened in 1968. lbj's vp did win the nomination. he was so weaken that they lost the white house to richard nixon. they will try to engineer it so that the vice president ultimately locks out the nomination. jonathan: it is worth pointing out to the audience that you are wearing two hats in this conversation as both a donor and an individual running a global advisory firm. forgive me for saying this, when you said you had a five minute exchange, when it is behind closed doors and you tell people that he is sharp, cogent, and we see something else, i wonder how much tension there is between

you as a donor and your opinion on a program like this and the advice that you give to clients right now. charles: i'm giving this same advice. we have a base case that biden will win. we have not changed that yet. he is still in the race and thursday was less than a week ago. we want to look at data and make a good assessment. the reason we believe he would win his he had already beaten him once in 2020. as a firm we will see higher than average turnout by both women and the democratic base, because of abortion rights and because trump is on the ballot. the race has changed fundamentally since thursday night absolutely. we want to see if he will stay in the race before we make additional calls from here. i am sitting here both as a donor watching this very closely but also as the head of a firm that advises clients on what to do. it is hard to make a decision until we have more clarity on what the president intends to

do. we were telling clients yesterday that without there were three weeks for the white house or for the biden-harris campaign. they have five days to make a decision. jonathan: your position as an advisor, i want to lean on that and understand your perspective. traditionally the incumbent would have advantages. i wonder if it is a disadvantage for biden. 2020 he got to make this a referendum on the former president. this feels like a referendum on him and not what he has delivered but whether he can last four years, whether he can actually keep this job for that long. how do they change that? charles: that will be the hardest part of the narrative to change. up until thursday this had been still partly a referendum on the former president, on trump, as opposed to the sitting president. now it is a referendum on canada sitting president -- on can sitting president served for

four more years and what people think of the vice president. in politics everything is fair. the race changed fundamentally on thursday night. as i said i think we will find out in the next four to five days whether the president is still in this race. i don't think he has three weeks. lisa: the dam is breaking when it comes to different democratic congress members, advisors, when it comes to people starting to leak their feelings. is the dam breaking within the inner circle of joe biden that we keep hearing that keeps saying keep running? charles: i am not part of the inner circle but from everything i am picking up, no, the inner circle wishes his family, advisors and the campaign team who have been with him a long time still absolutely believe he should keep fighting. this is a man who has dedicated his life to public service and reached the pinnacle of world

power to drop out after a really bad debate or a terrible stumble on the campaign trail would be highly unlikely. i would not advise any politician to drop out after that. there is always a chance to turn things around in a campaign. they are trying very hard. the pressure is building faster on him to drop out of the race. that is probably a bit of a surprise to the campaign. i think we will see more coming out saying he needs to. the biggest risk is his liability down ballot with elected democrats in vulnerable seats in the house and senate. that is what we are hearing the most pressure and much more panic than amongst the donors. jonathan: 30 seconds left. just to fit this in, are people underestimating kamala harris? it has almost become a joke. can she win? charles: absolutely. she has three advantages. she would be totally underestimated. it is one of the greatest

advantages you could have. she gets all of the biden-harris money which is not able to be transferred to any other candidate. she gets the warchest. she will be very well-funded. but her approval waiting -- approval rating with democrats. she is positively young voters, black voters and she will help drive the turnout by women. people totally underestimate the vice president. i put my money on her. jonathan: let's do this again soon. charles myers. lisa: she has a 32% chance of winning the presidency versus 68% chance for donald trump. jonathan: the change in the markets has been amazing. lisa: she has a better chance than joe biden. jonathan: from new york city, this is bloomberg.

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jonathan: 40 minute -- 45 minutes from now, we will have data for you. the adp report and then jobless claims to 60 minutes from now we will get claims data for you. absolutely nothing on the s&p 500. likewise on the nasdaq. talked about the shortened trading days of the stock market closing at 1:00 p.m. today. the bond market closing at 2:00. let's switch up the board and get to treasuries. we start with the 10 year. yields doing nothing there. at the two-year level, we are

up. we had this conversation earlier talking about the asymmetric bias of fed officials to incoming economic data. if you get soccer labor market data, it is more likely you will get a cut quicker from the federal reserve. lisa: the question is, what is the bar for truly soft data? the limit rate creeping up from the 4% rate. others saying you would have to have a 150,000, 155,000 print on jobs created and that would be enough. friday while, it was -- for a while, it was not interesting but now there is a feeling of wanting to buy into the progress of disinflation we have seen so far. jonathan: the other challenge of fixed income, is not just for bonds but for stocks and the whole market. you are looking ahead to 2025 and you are flying absolutely blind. upgraded a price target to 24, basically saying there is too much fog going into 2025 to

offer price guidance. that is where we are at right now. take about how things changed from thursday night. all of a sudden, we are having a very realistic conversation about kamala harris being the nominee for the democratic party. all of a sudden you have to think about different policies, different cabinet, the incumbent versus the known entity in donald trump. a completely different conversation almost overnight. lisa: last night i was thinking about this and saying if you would have had this on your bingo card, people would have said you are one of the people that says they will call of jamie dimon and see if he can come down and serve as president. here we are. we just heard from charles myers, the democratic donor as well as strategist saying biden has five to six days and then he has to basically make a decision. that is essentially where we are. talk about flying blind to the market. even if you know who the candidates are, how do you assess what their policies will

be and the ramifications for the economy? jonathan: with great difficulty. we know what the consensus is on the u.s. dollar. donald trump wins, got this idea it will be protectionist, more tariffs, inflationary. that will keep the fed from cutting interest rates perhaps in the short term at least. that will feed the stronger dollar story. the other side of the trade, we have an election right now, second round of the vote will be over the weekend in france. lisa: that comes after the u.k. election is coming tomorrow with a question of how far can populist governments push things in europe? if marine le pen gets some sort of majority which it looks like she may not because of a host of technical aspects, how far could she push it before the market pushes back? we keep talking about that. i wonder if we could take a step back and say it is all about the economics. people say the politics of the moment and it is not the economics. and what point is madness can --

is matt wright when he says the trends are disinflationary. there will be slower growth and that is the dynamic you will have to factor? jonathan: it will be a long four months. lisa: i know. jonathan: let's put it that way. under surveillance this morning, the latest on trump's fundraising. the former president raising $330 million in the second quarter. biden's campaign faces criticism after his debate performance. charles thought we would have three weeks but we have said it repeatedly the dam has been breaking in the last 24 hours. lisa: to that point, he thought he had three weeks and was telling that to some of his clients. one day before changing his tune to saying maybe they only have five to six days. the other thing that he said that was interesting is he is expecting 40 democratic congress members to come out and reiterate what we heard from the texas progressive basically

saying maybe joe biden should step aside for someone to take his place. the question would be for the democratic party if he chooses to do so whether there is this groundswell of support around one candidate and whether that one candidate will be kamala harris. then we can start to extrapolate questions, but talk about the next four months and how quickly some of the narratives can shift when you potentially have a different cast of characters at the head. jonathan: this late in the game, it is all about the money. there is only one individual that can have access to that money. everyone else, how quickly can you put a camping together, go through all the mechanics involved. this is what was said about one hour ago. this is not straightforward. not like you sit here and say, gavin newsom, go. lisa: i wonder how much it is a money thing because they could give the money back to the donors who could then give it to another candidate and i wonder, how much is this political? ultimately of the optics of,

they have is not getting the nomination when she is technically a number two, a black female, and it would be particularly difficult for the democratic party to push her aside and still maintain a lot of support from a groundswell of people. jonathan: we talked a lot about the politics and individuals. we need to talk about some of the policies that would address things like this. owning a house in the u.s. is less affordable now than at any time in the last 17 years. mortgage rates about 7%, outpaced incomes. the median home price at a record high $360,000 according to a new report. the pursuit of the american dream is something we have been talking about repeatedly going into november in an election year. this needs to be part of the conversation again. lisa: i actually think this is absolutely part of the political scene, especially for younger people who do not have access to homebuying in any kind of way. you see rent prices going up in

a significant way. how do you address this when you have mortgage rates where they are and prices that have not gone down? we have seen this from joe biden. it is going to be a key question of how it changes the electorate in terms of what people are looking for and what galvanizes them. jonathan: a final story for you from secretary lloyd austin saying the u.s. will provide $2.3 billion in new military aid to ukraine. he met at the pentagon yesterday. of course as i repeated a little earlier this morning, annmarie sat down the volodymyr zelenskyy earlier and will be joining us later. one headline from that particular story. challenging zelenskyy to review his plans to end this war and end it quickly. if trump knows how to finish this work, you should tell us today. he told annmarie if we lose statehood, we want to be ready for this. we want to know. lisa: that will be a real

question considering donald trump said he could end this in one phone call. really key to this is some of the discussion we see between russia and china, which is currently ongoing because chinese leaders and russian leaders are set to meet each other out east. jonathan: working on getting that conversation going with annmarie. she will be joining us. former president donald trump came out ahead of president biden in last week's debate. there is a narrative around that the pop higher in yield is because of trump's raising odds of taking the white house. a combination of long-term structural forces and short-term the gritty drivers are all pushing up yields. tom joins us now for more. can we go through the list of things taken away thursday night. what else is on that list? >> in the immediate term, the things pushing treasury yields up is there has been a drop in liquidity in the system as households and corporations have

paid taxes heading into the second quarter. we estimate there is a $400 billion drop in liquidity, much of it coming out of bank reserves. when you see $400 billion come out of bank reserves, you are likely to see short-term return. we are past that now but the market has to focus on the fact that the deficit continues to be gargantuan. the deficit missed the estimate. we are still printing to trillion dollars plus deficits. in 2025, that is likely to come down but not enough that the market can breathe a sigh of relief here. we are going to have to see coupon options rise as the deficit continues to print to the upside. that will be a long-term problem for the bond market. the bond vigilantes are sniffing that out today, not waiting until they find out who is in the white house. jonathan: let's talk about who might be in the white house. how relevant is that conversation? you say it is a convenient demand right now. have you been telling clients about the last few days? tom: i am not sure whoever is in

the white house will have much of an impact on the deficit in calendar year 2025. it is really 2026 and beyond. that will also come down to who controls the senate. if you have full republican control, yes, it is likely you will have more pressure on the deficit -- upside on the deficit because of the pressure to cut taxes. if you have a divided government, what we find historically over the last 50 years, divided government is a little more fiscally conservative. senate control matters just as much as the white house but my base case would be that we will see some extension of the trump tax cuts no matter who is in the white house, and we will see this deficit continue to print at least above $1 trillion for the calendar 2025 and 2026, the big picture is i think that we will see upward pressure on yields because of the deficit for years to come. irrespective of who is in the white house. lisa: given that, do you still see 10 year yields ending north of 10% by year end? tom: we do and the reason for

that is in the intermediate term , six to nine months, we are in a disinflationary environment in the fed funds rate is still 5.5% so we are still tech policy, particularly for most of the u.s. most u.s. households, policy is tight. in a market where labor market is slowing. the friday's jobs report is always the gold standard in economic data. that should show further slowdown in the economy, and that should further add to the annuity of that inflation will continue to slow as the summer progresses and into the fall, so that is how we justify 10 year yields dropping to 4%, but the question will be how much lower than 4% can they go without a recession and if there is a recession how much lower do they go? without a recession, i don't see yields dropping more than down to 4%. lisa: in 2025, how much of his

ability do you have two make a forecast at all, let alone have any conviction? tom: not a lot a visibility to be perfectly honest with you. the big drivers that we see that we are absently confident in his that coupon supply in the treasury space will rise and the deficit will be at least $1 trillion plus next year. that is what we have most confidence in. confidence is we will continue to see some sort of disinflationary progress into early next year and the fed is likely to cut into that. that is pretty much where our clarity ends because tariff policy, tax policy, everything you can think of, regulatory policy is all up in the air at this point in time so it is a complete question mark. jonathan: great to get your thoughts on the latest in washington and what it means for this bond market. let's get you stories elsewhere. dani: a check on paramount shares this morning, up nearly 12% in the premarket trade.

sky intermediate is said to have reached yet another agreement over paramount forget talks, part of the month with a reportedly higher valuation. sky dance has a per luminary agreement to buy the national amusements and merge with paramount global. sources say it could be announced within days but the deal could still fall apart. oil is trading near a two-month high this morning on signs of a significant down drop in u.s. crude stockpiles. crude inventory shrank over 9 million barrels last week. if confirmed, that would be the largest drop since january. crude has remain solidly higher this year with a whole lot of risks including hurricane season and hurricane beryl approaching jamaica, elections, and geopolitical risks in the middle east. the tsa expects more than 32 million people to fly over the july for holiday. aaa is expecting more than 60

million people driving. that is your bloomberg brief. jonathan: thank you. up next on this program, do not miss this. annmarie joining us after she sat down with u.k.'s president zelenskyy from ukraine, up next -- ukraine's president zelenskyy from ukraine, up next.

jonathan: equity futures right now on the s&p 500 totally unchanged. let's catch up with our colleague, good friend, cohost annmarie, who sat down with the ukrainian president volodymyr zelenskyy and little earlier in kyiv. fantastic work. good morning to you. annmarie: good morning. my big three takeaways from this interview is one that president volodymyr zelenskyy having watched the debate, heard what former president donald trump said. he said it would be tragic for ukraine if they don't know what comes if former president trump

was to win in november. we also talked about the state of the war. he does not like the word stalemate or deadlock. he says the problem is russia contract if they were to have a counter intensive because the weapons have been so delayed coming from the united states even though he was very grateful to the u.s. congress for recently signing off on the $60 million. finally, one thing that i really took away from this conversation , if the war were to end, i asked him about a third-party mediator. who can mediate the end of this war? you would think it would be something that has credibility in both russia and ukraine's eyes. he actually said it needs to be the united states and china. let's take a listen to the state of war at play right now from the president of ukraine, volodymyr zelenskyy. pres. zelenskyy: russia has been always killing our people so

only if it is an international forum in the presence of countries, leaders who are trusted. they might have different ideas, different views on the stages of how this war will be over, but we all have to be on the same side. we have to trust each other. trust is very important. this has shown that we can follow this plan. over 100 countries. today, we are talking about nuclear security and energy security and they will be a clear plan so the cease-fire is also a clear plan. we must understand russia would not be using cease-fire to simply accumulate equipment on the territory, our territory they have occupied, because we will not be striking them. they can use that to create

strengths and accuse us of breaking the cease-fire and start another invasion so it is really complicated for us. it would take a significant loss for us if they invade again and they have almost reached the capital city and accumulated a lot of equipment in the territory of belarus. belarus kept saying it is just an exercise. no occupation in mind. it is just military games.it is very important. i really don't want to have trouble for my country because we are at war already. giving the advantage to russia now is just impossible. we need to be smart. and it is important also who will be responsible for this besides the ukrainians playing with our lives.

which country will be responsible? it is easy to talk about a cease-fire but it is difficult to enforce it, to keep it. it is very difficult to find those who will respond. annmarie: we will see more calls for a cease-fire, especially as the world politically is moving to the right and potentially moving to the right in the united states beginning you have said this war is dependent on u.s. aid. did you watch the presidential debate between joe biden and former president donald trump? pres. zelenskyy: so first and foremost, the cease-fire is an important element in any plan to finish the war. so a cease-fire is not finishing the war. within that, it would just be a frozen conflict and it will be frozen on our territory and our people would be under the

occupation. this gives a clear advantage to one side. it is easy to offer different proposals of cease-fires, but what is important? it is important to find an answer of what would come after. it is the matter of not just the victory. there are many people talking about cease-fire. it is time. people are talking about that. what is the question? for example, what is the next step? what is the third step? what will be the step if putin breaks the cease-fire? after the cease-fire, will he pull the troops out of ukraine? who guarantees he will pull the troops out of the occupied territories? and there is silence. nobody has an answer. i am not accusing.

i just want to understand that we are at war and we understand this. so the debate -- annmarie: because the answer of how this might all unravel will depend on who is at the table from the united states. pres. zelenskyy: it might depend on who is the president of the u.s., yes. that is a fact because the united states of america today are probably the most powerful player so the matter whether the united states would be the international player or if they want to focus more on the internal politics. i cannot say. it does not depend on me. annmarie: did you watch the debate? pres. zelenskyy: yes, i watched the debate. first and foremost i want to say, maybe to be out of tune to what we see in the u.s. media,

but i watched. we are not electing the president. i did not look at the incumbent president and the former president. i look at them in terms of ukraine. annmarie: president trump said he will end the war before he is elected. what do you make of that? pres. zelenskyy: i heard that. let me be frank. for example, the decision is on the u.s. public, but let me just tell some reasoning. yes, so let us imagine that the winner might be trump in november and he knows how to end the war. he has a plan. me as the president of a country at war, not theoretical, but a

real-life person, i have to be prepared. we are 40 million. a big country. we really depend on the aid from the world. we depend on the aid and the position and the stance of the u.s., so i would like to understand what would it mean to finish the war fast? do we want the war to be over tomorrow? it is putin who started it. if trump knows how to end this war, he should tell us today because if there are risks to ukraine's independence and there are risks that we will lose the statehood, we want to be prepared for this. we want to understand in november if we will have the powerful support of the u.s. or we will be all alone.

annmarie: looks like president zelenskyy is ready to sit down with former president trump. when it came to president biden, he was very careful with his words about thierry gary -- about deteriorating health. he laughed and said a lot of individual things matter about that, who is on your team, what is your health, and he wanted to make sure that everyone is aware ukraine is a country at war. jonathan: brilliant exchange. congratulations from all of us at for your work into the team on the ground in kyiv. lisa, just a decent idea at the end of how the rest of the world is responding to what this country saw take place thursday night. lisa: we heard about it in terms of private conversations with different leaders. this raises a question of the real on the ground consequences of thursday night's debate if it is not rectified in terms of

perception for the sitting president for the next four months let alone for a half years -- four and a half years. jonathan: let's get you set up for the next hour, the next 60 minutes or so. we will catch up with amh before we close out the program. jobless claims, adp, a lot to talk about later today. lisa: especially when you heard from guest after guest about a potential tipping point in the labor market. when do we see that? we did not see it yesterday. do we see it today or friday? jonathan: from new york city this morning, good morning. ♪

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>> the fed is certainly cognizant of the fact that it is nearing the end of this rate

hike cycle. >> reintroducing balance to the labor market. my concern is whether or not the pendulum swings too far. >> the labor market has normalized rather than weakened sharply. >> is still around 200,000, fine. when it gets to 300,000, that is when the fed will have to pivot hard and start to cut. >> the labor market has weakened. the window is closing to get ahead of that risk. >> this is "bloomberg surveillance "wit jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: some good news for you sick and tired of the political conversations. the next 45 minutes are largely political free because the focus will be on the economic data. in 15 minutes time, the adp employment report drops. the estimates are 165,000. the previous number, 152,000.

jobless claims. lisa: you pointing out earlier that andrew of citigroup saying the pain threshold is around 260,000. if we get that number of initial jobless claims, that is sounding warning signals creeping higher. how do you interpret that? that is what i am curious in terms of the market reaction. is there a bigger response to a small upside surprise to initial jobless claims given the asymmetry of the response? jonathan: first, listen to this because the u.s. economy is strong and the labor market is strong, we have the ability to take our time and get this right. the federal reserve chairman yesterday. also yesterday, claudia. a good labor market is not a reason to wait. remember when she said this? the reason to cut his inflation is down considerably. your best friend neil set this the fed speak is starting to feel off-site rather to the

economic data coming in the labor market. lisa: here is the issue and this is something claudia did a great job highlighting yesterday. she highlighted the rule which is a certain amount of increase in the unappointed rate over a certain period of time. it always indicates recession. if the fed waits until that gets triggered, it is too late. you are already in a recession and have to get ahead of it. which brings us to the inflation point. neil and claudia pointing to the fact, and austin also, the more inflation comes down, the more restrictive the fed gets and that is the question i have about services and the reason why i am focusing on ism services. does it show strength or does it sound more of the all clear that jay powell is trying to coalesce around a little more? jonathan: that comes at 10:00 a.m. eastern time. the s&p 500 largely unchanged for most of this morning. just about unchanged again on

the s&p. it will be a shortened trading day. it is worth doing again in case you missed it. 1:00 p.m. the stock market closes. 2:00 p.m. the bond market closes. lisa will tell you this because the bond market works harder. a lot of you may disagree with that. lisa: looking for attention from the federal reserve. they are driven by ego and the day-to-day. i get a lot response from that and people say yeah. jonathan: i am sure you did. this coming up that the jp morgan strategist is set to depart the firm just moments ago on the bloomberg terminal. the jp morgan price target in the investment bank on the s&p 500, the last time i looked, 4200. a difficult time calling this equity market over the last couple years. lisa: both on the way up and on

the way down at a time when there is a real question of whether there could be some sort of recession. they say yes. the readthrough is to a financial market that has been upheld by artificial intelligence as we heard earlier from a jp morgan global strategist how the pillars of this market are really being held up by complex carbohydrates and protein considering and not twinkies considering the likes of nvidia. jonathan: coming up this hour, sonal desai will be joining us and says the fed needs more confidence to cut. we will speak with geetha ranganathan about paramount and sky dance reaching a deal. mark mccormick reacting to today's job data. we begin with a big issue. carol and the path to 2%. sonal desai sang economic data is starting to show a cooling that is likely welcome news for the fed. it is growing space to cut rates

before the end of the year. the market is now pressing in a cut in november. i expect the next rate cutting cycle to be short and shallow absent some shock. sonal joins us now for more. great to catch up with you. start with the short and shallow piece of the call. how short and how shallow? sonal: i think the endpoint is not in the threes. i think it is more like 4, 4.25 that has. that has been my call for a while. i don't think the neutral rate is going back to 2% less than the pre-gfc level. with inflation at 2%, fed funds neutral should be for the quarter and that is short and shallow. going from where we are right now to that point. absent shock means absent

something that causes a recession is what i would say. jonathan: you knew it was going to go there and go there early. sonal: you know, here is the thing. i think there is so much focus on the trump candidacy versus the biden administration, lots of focus on blowing up the fiscal deficit. holy cow, we are looking at 7% this year. looking at the last three years of fiscal deficits which are enormous. they are enormous by any stretch of the imagination. these are massive fiscal deficits. and that happened in the environment of a split house senate administration. i don't think we should underestimate the u.s. government's ability to run deficits. pretty much all scenarios. i would say, is the trump administration going to be

notably worse than a biden administration? we don't know enough about the policies to be honest, and i will say this, every time we talk about expansion of tax cuts, it is important to recognize there has been a text promised on the part of the democrats, and that is not to increase taxes for those making less than $400,000. most estimates show that is a substantial part of the trump tax cuts. they will disproportionately target towards high income earners. but a large amount of the cost of those tax cuts comes from people who will hopefully continue to be protected into the next administration regardless of who comes in. lisa: let's put the two ideas together, this idea of the neutral rating for percent to 4.25% -- 4% to 4.25%. does that mean the neutral rate you are gaming out has a political implication based on the deficit?

that is the premium from where the deficit is, or is that without that added on? could you be gaming out 5% to euros or north of that based on the deficits alone on top of the neutral rate? sonal: absolutely, 10-year gilts but i am not talking about that in the near term because we have to think about medium to long-term and the near-term. mechanically, the fed cuts. long and yields react. i don't see massive reduction in lung in heels. i have been calling for this particular range we are in since the start of the year, and i think that is how we end this year. i don't anticipate during a fed cutting cycle to see a massive ratcheting up of long and heels but if we are looking at post cutting cycle, the fed is running at around 4%, 4.25%. absolutely long and heels would be north of 5%, 5.5%

depending on how the deficit plays out. i want to distinguish between what i think about in the next year or so of cutting cycle and then post cutting cycle. a year, a year and a half once we get to the cutting cycle. lisa: that makes sense. basically, there are two time frames here. there is the question of cuts but not that far and what you could potentially see down the line and the lack of visibility, the fog of 2025. a question on what this means for credit given that before the pandemic people said never would we see benchmark rate get above zero and if we did to this level, you would see a rash of defaults. that starts to get tested as survived to 25 gives outdated. it is something that companies have to exist in this timeframe. how much does this benchmark neutral rate challenge the concept of these bullish calls on credit given how tight spreads have gotten? sonal: corporate have been -- if

i talk about the broad swath of corporate, they have been surprisingly prudent, dare i say. it used to be this year was going to be the majority. that keeps getting pushed out because corporate have in an important way refinanced and they have managed. i think we need to look at the underlying economic fundamentals , which i don't have a baseline deteriorating massively. if that does not happen, i think actively choosing corporate risk still looks like a pretty viable way to go, but you have to be active. clearly the cushion in terms of spread has contracted massively at this point. jonathan: we have to leave it there. sonal desai on the bond market. we just got a hold of this note. trump's tariff proposals could raise the average rate by 16

percentage points. implication for monetary policy. hawkish to the tune of 130 basis points because the large hawkish inflation outweighs the smaller dovish growth effect. it is quite a call. about five hikes. lisa: which raises the issue of how you can get ahead of 2025. i am internalizing this idea about what that benchmark neutral rate really takes into account. would it have to be that much higher? does that limit the rate hike the fed can engage with? jonathan: we will see more notes like this over the next couple days. with your uber brief, here is dani burger. dani: president biden's favorability numbers saw the largest drop in three years according to a leaked memo from a pollster. biden's debate performance last week cemented concerns about his age. number of alternative democrats paul better than he does

including people to judge, gretchen whitmer, gavin newsom, and vice president kamala harris. owning a house is now less affordable for average earners in the u.s. than any time in the last teen years. in the second quarter, a typical home cost rose to 35% of the average u.s. wage, the highest since 2007 and up 32% from last year. pricing markets in the west and north east had the biggest declines in affordability including orange and alameda county and brooklyn in new york. kovel agencies are warning of a travel surge this weekend. the tsa expects more than 32 million people to fly over the july for holiday. aaa is expecting more than 60 million people will drive. that is your uber brief. thank -- that is your bloomberg green. jonathan: thank you. geetha ranganathan as sky dance

and paramount reach a pluming every -- a preliminary deal. lisa: some people want that to happen. jonathan: some people called lisa. from new york city, conversation up next. this is bloomberg. ♪

jonathan: it has just gone 8:15 eastern time in new york city and that means we have an adp report for you. >> good morning. i am not sure how you take this number. 150 thousand jobs in june according to adp which measures only private sector employment. that 150,000 is close to what we are expecting from the payrolls number private sector employment on friday. according to adp, and you will

pay is up 4.9%. it is a little more than the fed wants to see. in terms of job creation, 136,000 there. in terms of manufacturing, a loss of 5000 jobs. 27,000 construction jobs were added. this is large establishments. 58,000. medium establishments, 88,000. small businesses only added 5000. we have seen in the small business report that companies still reporting it is hard to find workers for small businesses so that may be part of it. all in all, this is a kind of middle-of-the-road i guess you would call it adp report. they of course say they are not a forecaster. it is not a forecast of a just a separate number from payrolls tomorrow but everybody will work that into their books. jonathan: let's look ahead to the data through the rest of this week and this morning. jobless claims in 13 minutes. we will get the ism employment component at 10:00 a.m. eastern

time. what would you look for from claims and perhaps more specifically continuing claims? what is to learn from that over the last few weeks? michael: what we have seen over the last few weeks as it is hard to get a new job if you lost yours. continuing claims have continued to increase. we have seen some volatility in initial claims but they are higher than they were three weeks ago, so there's that continue -- so does that continue? it suggests the labor market is definitely slowing down. 10:00 in the services employment aspect of it, this adp report showed a lot of service sector job hiring compared with other sectors. does that show through in the ism numbers? we can reconcile those two things. and of course at 10:00 we will be looking at the headline for ism services. we will see if there is still that kind of strength in the service industries. lisa: just sort of to lean forward to friday, all of this

is the drumbeat to the friday report and we have been playing around with the idea of what it would take to change the tone on the federal reserve to bring forward the july rate cut, to lock in a september rate cut. what are you hearing in terms of expectations? right now we are looking for the creation of something like 190,000 in terms of jobs created in the month of june. what would that threshold have to be to really change the narrative on the fed? michael: i don't think it will change the narrative on the fed. it may change the narrative on the fed in the markets because we still have some inflation data to come with cpi and also the pce numbers before the fed's next decision, but the markets are probably looking for something south of 150 to more or less bring september into play all them other data could move that sooner. anything north of the 190 will push september maybe off the map. remember, the 190 we are

anticipating this week was pretty similar to what we were anticipating for the may payrolls report that came in at 272. there cannot be a lot of confidence in what the consensus is at the moment. jonathan: mike, great to get your thoughts. he will be back with us in 10 minutes when we break down jobless claims. adp coming in at 150,000. the estimate, 165,000. let's get you some morning calls. first up, price target raised on test lead $300. the demand story has taken a turn for the positive. highlighting the new case of $400. up another 2% on tesla. deutsche bank lowering the price target on nine keaton $92. more investor patience is needed. finally, maintaining market perform rate and paramount.

if we have learned anything from the paramount process, it is not over until it is over. geetha ranganathan joins us now. how close are we to this one being over? geetha: no idea. say we have seen this movie before multiple times is an understatement. this has had more twists and turns than a racecourse really, so we will see what happens, but again, i have to see it to believe it. just three weeks ago, this deal was completely struck down when sherry redstone walked away. it looks like they have some new merger terms, but again, if there is one thing we know about sherry redstone, is that she is completely unpredictable. jonathan: you say just three weeks ago. yesterday, barry was going in as well. what is going on? geetha: a whole lot of players on the scene here. we know as of yesterday that sky dance is back in the mix. of course, this was the one

party negotiating very aggressively with the redstone family. again, that deal completely fell apart three weeks ago but in the meantime, there have been so many others that have expressed interest for natural amusements, the controlling shareholder in paramount. you mentioned barry dillard. he expressed interest. he is a huge digital media conglomerate. there are reports of others being interested in a hollywood financier. we do not know what is going on. there are all kinds of different dollar values here. in terms of sky dance, they have come back with $1.75 billion. that seems like it is slightly lower than where initial news reports picked them up, which is 2 billion, but when the deals were falling apart, it was probably closer to $1.7 billion so maybe this is slightly better than what they initially offered, but i think the main thing we are seeing here is there is stronger indemnification language and this is something redstone has

been concerned about. just because the skydance deal will paper her over the class a and class b shareholders, and she knows that will attract a homeowner lawsuits. there is strong indemnification language. one thing skydance has been against is that shari redstone had been pressing for this majority of the minority kind of approval which is of the class a shareholders getting a say in whether the dealer should be approved or not. it looks like that has finally gone away so that is no longer a sticking point. lisa: jon keeps making fun of me because i am are particularly interested in the ins and outs of this roller coaster we have been seeing or this pin turning kind of road. i just want to understand, is this billionaire poker or is there a deeper take away from this? geetha: the winds have been shifting in the media landscape here. it is obviously clear that the

more and the more this process drags on, we have been seeing this thing play out for 6, 7 months. the more it drags on, the last assets will be worth a and i think shari redstone realizes that. she knows something has to get done. we know this is one of the last big iconic assets. you have a huge film studio, some great broadcast network assets as well as stations in cbs. as a streaming business. the jury is out whether that is a good or bad business. there is the linear network business weighing the whole model down. but it would be an understatement to say assets like these are not going to come around often so everybody wants to throw their ring in the hat. jonathan: you make it interesting. geetha ranganathan, thank you. the latest on paramount. the saga continues. it is not over until it is over but a few of us are hoping it might be over quite soon. coming up shortly, we will get some jobless claims data for you and the views of thomas simons and mark mccormick.

let's get some reaction to that. you have been looking forward to the ism services. particularly the employment component of that. lisa: this has been the pillar of support for the u.s. economy. we have seen u.s. manufacturing got lower. the revival has not taken off. if you see services weaken, that will be a red flag. a similar situation with services and inflation. in the u.s., that is what people are focused on. jonathan: if we get a big week the next couple weeks, it opens up to the july cut or will the data tee this o they can go in september after the big jackson hole speech? this takes us to a midcycle adjustment. lisa: i don't know. i don't know how high the bar is to talk about july again but we are reaching a tipping point. we definitely heard a slightly different tone from jay powell

yesterday so i honestly don't know the answer at a time when people are still expecting pretty strong readings, particularly in the services and when it comes to travel. jonathan: powell testimony next week, one to watch. you will hear from chairman powell after the payrolls report. you will hear from him for hours in washington. lisa: i wonder if they ask any real questions about what terrorists due to their outlook. we don't get involved and we do with what we have to do with goldman sachs coming up with that call. jonathan: that is quite a call. lisa: five rate hikes is what it is equivalent to. jonathan: amazing. people make youtube clips for their own campaigns in november after the hearings. lisa: what do you think of twinkies? jonathan: something like that. from new york, this is bloomberg. ♪

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jonathan: jobless claims about 20 seconds away. equity futures look at little something like this on the s&p 500, negative by 0.1%. on the nasdaq, a similar move. the adp report came in at 150. the estimate was 165. another taste of the labor market coming up. after this, we will get the ism a little later. with the jobless claims number, let's get back over to michael mckee. good morning. michael: good morning. very little change in jobless claims. 238,000 last week.

1,858,000 in terms of continuing claims, so that is a little bit higher than it was, but we will see when we get the revisions numbers out in just a second. waiting on those. but it does not look like there is a whole lot of change at this point in the status of the labor market. at least not in terms of claims. 238,000 last week revised up to 234,000 so it is a gain of 4000. continuing claims were revised to 1,832,000 so we are up by 25,000 on continuing claims. it looks like a little bit of deterioration continues in the jobless claims area but still very, very low. jonathan: we did not see that deterioration in jobs yesterday at all. you see a little bit of it there, and the crack -- you see a little bit of it there, a

crack. lisa: over the past four weeks, that is the kind of action people will hone in on saying possibly you are seeing some sort of people point -- some sort of pivot point, inflection point. jonathan: what do you make of what that chart looks like? michael: it is maybe a pivot point but something we will not know for some time because we will have to see with jobless claims coming out every week if this continues or if it is a short-term thing. we are getting into july. that is usually when the automakers shut down their plans for retooling and we lose some workers to jobless claims on a regular basis, so that will be a seasonal adjustment question coming up. it will be hard to tell from claims if we reached that inflection point or not. that is why the fed will be more interested in what is happening with the unemployment numbers than the claims numbers. claims give you a hint, but it does not give you a definitive answer to where we are. lisa: it does give you a hint

that things are changing, and they are changing in a linear way at least when you look at continuing claims at least over the past couple months. you do wonder if the fed will try to get ahead of this. claudia yesterday talked about how once they wait until they see the whites of the eyes or a cracked labor market, it is too late. do you get a sense of that from the fed officials as we heard a number of them speak over the past few days? michael: i do think we have seen that yet. we are seeing people make the argument that, yes, we have to be aware of this because they have been pushing on the idea that they are looking more at the employment part of their mandate than they were doing the last year when they focused on inflation. but nobody has suggested yet they are close to the edge. the general feeling is we are still seeing a strong enough economy that we can wait. what does weight mean -- wait mean? that is perhaps something to

wait for next tuesday from jay powell. are they on other for any kind of change that comes very quickly? we might mention what is coming up on friday. if we should see that trigger, the markets will react and argue the fed needs to hurry up or they will be behind. jonathan: i am sure some super diode in lawmaker and washington, d.c., will ask that question next week. thank you. have you got doubts? lisa: really? jonathan: is that what you think about lawmakers in america? lisa: you put this on me. he basically projects cap lisa is undermining the american legal system -- he basically projects that on me, lisa is undermining the american legal system. jonathan: don't worry about that. what do you think is normal? what is worthy of worry as we start to creep in another higher?

thomas: so normal is hard to define and on a daily basis there is a new market where normal is. 203,000 is normal. that is probably a decent enough benchmark for the next few weeks but as we get to the end of the year, hopefully it will continue to creep a little higher, right? if you go to 260 over the course of six month, that is exactly what the fed wants. the whole thing with the rule and these inflection points is this concept that economic data goes down in an elevator and up on an escalator. there is momentum that becomes self reinforcing. if we in fact get this gradual decline in labor market pressure, i think that is actually quite a good outcome. jonathan: ok, let's build on that a little bit more. they just don't think you stabilize if we do not plateau here. once the journey starts, it

continues. thomas: you look at 85 plus years of labor market data and it supports that fact. when things start to go wrong, they get longer and longer but the issue is we have a different set of demographics that is not consistent with any other real labor market episode we have had in the economy before. we have a shrinking prime age labor force as a percentage of the overall population we arson plus years into baby boomers retiring at a rate of 10,000 people per day. we have about six more years of that to go. the labor market shortage scarcity became extremely acute after the pandemic was over, but it is not a temporary factor. that is a secular trend that will continue for years. jonathan: mark, is it different this time? mark: what is important is considering the supply side of the economy as well along with the growth side. everyone is very focused on growth for the fed but we have dropped the ball that inflation

is the key metric. we run strategies. we are try to figure out what is driving the markets. everyone is talking about this but this factor is what is making money and nobody is talking about that anymore because it is not as interesting. if you look at currencies, they are trading more on inflation then growth. those things are not working, so while it is interesting to work through the data and say this is important and what is driving the fed. at the end of the day will drive the fed in the next three months to september is inflation. if inflation is hot next week or next month or one hot inflation report could kill the entire narrative that they will cut this year so that is one of the most important things to think about. what we tend to do from a market strategy point is aggregate the data, scale it, compare it to different countries, and which looks better? it is clear the u.s. is slowing but slowing from a very hot level but it is still good and better than most of the rest of the world so i think that is a key consideration that while we could move into this inflection

point where we go from linear to nonlinear, if it is a linear slowdown and we are just moving in a direction that markets are already prepared for an price for this year. lisa: you don't think there is a point at which the labor market becomes a check on the ultimate read that you say is inflation? mark: if it is nonlinear, yes, but the thing on the inflation side is the drivers are coming from the supply side. demographics, geopolitics, the changing nature of technology, the pricing around those technologies, i think when you think about war and some of the things we have had on the energy side, all of the things happening on the supply side have been at the rating pandemic but these are things that started in 2010. if we look at what is happening with globalization and how that impacts national sovereignty and politics, those things are all moving in a direction. think about immigration trends. all of these are potential drags on the supply side that make inflation stickier over time, which has nothing to do with the man or growth.

those are things happening in the background that the fed has no control of that we have to be cognizant of. also pushing inflation higher from moving things around. those are considerations. i know the market is focused on the growth story but we are focused on the inflation side for the dollar, for the market, for the fed. lisa: do you agree? thomas: more or less. our views on the supply side are similar. i have kind of been kind of assessing a new normal, looking at what consumption patterns are looking like an understanding this dichotomy of haves versus have-nots. there is a dynamic where we focus on all of this consumption pattern recognition on people traveling, entertainment, all of these things that are services enjoyed by higher income households. we have seen growth slowdown. we could just have all that activity concentrate in the second half and then we will see the logjam of supply not being

able to meet demand in certain sectors. i think that in the service sector that will be something we see consistently over time for many years. certainly you see it in the housing sector. that is probably the best example. i think a lot of folks have been more sanguine on inflation are expecting we will get delivered disinflation from rent and whatnot. we may get there for a short time but at the end of the day but we are still very undersupplied with shelter and i don't think we are -- you can consistently expect it will be something that will be relatively soft overtime. jonathan: let's complicate things and really complicate things. goldman had this to say. i imagine this will get picked up everywhere. wall street, political circles, maybe much more so. this is what he had to say. the truck proposals coming from the donald trump campaign could raise the average u.s. tariff rate by 16 percentage points to nearly 20%, which would be the highest in the postwar period.

that is what the base case says, and this is what we think the infant -- the implications are. the large hawkish inflation effect and growth effect at goldman, modeling out the potential for something like five hikes from the fed based on policy. what is your reaction to that? thomas: so my view is that if the fed were to hike again, they would have to hike five or six times. one more hike would not do too much. if we are pricing in one hike, we should price in substantially more. i don't share the view that tariffs should generate that sort of reaction. i remember in 2016, 2017 when trump was initially putting on his big tariffs against china, the reaction was tariffs increased price level once but do not create an upward slope of prices. they needed to may be offset one vector of inflation but i would

be very surprised if trump put in policy of a tariff that was that high, and i would be equally surprised if chair powell would react that way. jonathan: a letter taking place right now. let's say that is the assumption and those policies delivered. do you think that would be the reaction? mark: it is a very spicy proposal. i think part of it is it is two-sided. you have lots of inflation and the other thing is you are taking away growth, so we are in goldilocks right now. our macro models are at the lowest levels we have seen through the cycle. trades incrementally blowing up here or there but it starts to change with volatility. a big piece of that is if you have growth being taken away from china and europe and even parts of the u.s. and higher inflation and the fed responding to that, the initial move is a much stronger dollar. it is a complete decimation of

goldilocks moving to a higher volatility environments with the markets are not prepared for this at all. again, you come back to what happened in the debate and we had the french elections over the weekend which were important but as soon as we got the supreme court ruling, so we are right back into the silly season where every headline related to a poll or who is leading, all of these things will drive markets now for if not the summer, september on. just the thought or the uncertainty of the fed having to reverse course and actually start hiking again will be very by for risk -- very bad for risk markets. lisa: this is something we keep talking about what this is -- talking about. what does this mean about how far the fed could cut? sonal was talking about 4%, 4.25%. there is a floor to how far they

can go. do you agree with that? thomas: i do actually. that is where the rate will end up probably sometime around 2026. it is something the fed needs to be careful about. we see more research coming out from john williams at the new york fed who put out another paper this morning saying he still does not think it has moved very much. he probably spend more time than i have been alive studying this so i cannot really say i know more than him. jonathan: you just aged him a lot. [laughter] thomas: well, aged myself. focus on me a little bit. [laughter] thomas: i don't think it is that easy to dismiss that we are in the old normal. 2.5%, it was not that long ago that the fed thought it was quite a bit higher. i think if we get another wave of tariffs, it lowers potential growth and then

perhaps we are moving to a lower rate environment overall, because that is like a tax. as much as tariffs are on the exporting countries at the end of the day it is paid by the consumer. it is just a deadweight loss for them so they will have to take that consumption out of something else. that lowers the dynamism of the economy and probably lowers potential interest rates. lisa: given all of this, why would anyone short the dollar? one would anyone not be as long as they could possibly be on the dollar right now? mark: that is my view. the dollar is ranked number one in our trading baskets on growth, risk correlations, inflation, and carry. in this environment, if you look at correlations of the dollar to risk models, pre-covid it wobbled. sometimes it was cyclical. sometimes it was a safe haven. it moved around. since the pandemic, that has not gone down to zero.

the dollar is the only safe haven. the yen and the swiss franc are no longer safe havens. in this environment, specially if we are focused on inflation or growth, the other interesting thing is the only other places that offer the yield are places where everyone has been positioned in fx for two years, so you bought the commodity in terms of the trade story, the emerging markets that were the sellers of those and the ones that offered the carry. latin america is no longer immune from all of this, so i would say yeah. the other thing is the dollar represents at least 62% more you'll pick up than all of the currencies we track so to me i would not say this is a no-brainer because that is the last half of the year. i feel like this is broad dollar, not rv markets anymore. jonathan: mark mccormick, good to see you alongside thomas simons. if you are joining us for the

last 30 minute or so, we had some economic data. 150,000 on the adp report. the estimate was one of the 65,000. -- was 165,000. payrolls of course on friday. let's get you an update on stories elsewhere this morning with your brief and dani burger. dani: you stole my line. i will do it again in case you missed jon do it. initial jobless claims coming in at 238,000. continuing claims rose for the ninth straight week. an indication that a growing number of people are having difficulty finding a new job. the adp private payrolls increased 150,000 last month. jp morgan's chief market strategist is leaving the firm

to explore other opportunities according to an internal memo obtained by bloomberg. the 19 year veteran at the bank had a rough few years trying to call this market. he was bullish for much of 2022's slump and turned bearish as the market bottom. he had the lowest s&p 500 price target among analysts as the s&p hit 32 record highs this year. donald trump's sentencing in his new york hush money case has been delayed until september 18 so judges can review the impact of the landmark u.s. supreme court ruling about presidential immunity. the sentencing would come less than seven months before the likely republican nominee's rematch against president biden on november 5. trump faces up to four years in prison. jonathan: a lot better when you did it. sorry about that. next on the program, setting you up for the day ahead. you are watching "bloomberg

surveillance ." ♪

jonathan: what do you do on mornings like this? how does it work? lisa: you obviously wait for the ism. you need to. on friday. jonathan: coming down to the opening bell. here is the trading diary for the rest of the week. the fbi will be jammed coming out of new york and getting over to long island. it will be busy. lisa: that is true. jonathan: equity market closes at 1:00 p.m. and the bond market closes one hour later. lisa: you cannot keep a straight

face with that one. jonathan: payroll is on friday. look out for the team in london tomorrow carrying out coverage of the u.k. election. on friday, a programming note. lisa and i will not be here. we would love to be here but we will not be here. lisa: we begged to be here and they said no. jonathan: i actually asked and they said no. lisa: please. jonathan: stay away. annmarie sat down earlier for an exclusive conversation with ukrainian president volodymyr zelenskyy. she joins us now with more from kyiv. good morning. annmarie: russia's invasion of ukraine is in his 30 year. they are entering a third summer and top of mind for volodymyr zelenskyy seems to be what we all watched, the central debate and where u.s. politics are going. i got the sense that what ms. zelenskyy does not want to take any changes with the outcome in november and he wants to get in a room with former president trump. take a listen. pres. zelenskyy: i am ready to

meet with president trump of course for me it is very important. for me, it is very important not to have any surprises which can be very tragic to ukraine. i don't want to have any surprise. i want to understand what he means. they can't plan our live and the life of our people. i am not pushing. my messages if they have the plan, it can be maybe not public because of the elections, but i think we have to know it before to prepare. annmarie: so zelenskyy's challenging trump to come forward with his plan. i got the sense from him he does not want to do back channels or anything that is illegal or illegitimate because the former

president is just taking it right now and not running policy , but clearly he wants to make sure that ukraine is set up to potentially work with the trump administration, because we heard donald trump at the debate that zelenskyy watched when he talked about he is going to have the conflict solved before he gets into office, and zelenskyy wants to hear that plan. there is lots of rumors about what it is, about potentially that kyiv does not want to negotiate and former president trump would withdraw the aid. zelenskyy, sounds like he is signaling he wants the conversation. jonathan: before you go, you have been in the country for a number of days and in the capital for a number of days. describe it that has been like this week. annmarie: right now, ukraine has changed some of the mobilization so you are seeing an uptick of the draft of young men. it is affecting their economy already.

the issue they have on the battle lines is not so much the weapons right now when you talk to military analysts. it is the manpower. you can see that still in the city. also, they have been living this for more than two and a half years but i have been quite new to it. every single evening almost you are broken up and have to get out of bed and get into a bomb shelter. this happens at night. this happens at your desk while working. this is a society working with this paranoia and anxiety on a constant basis. jonathan: heartbreaking. thank you for showing this and once again fantastic work. annmarie, a conversation with ukrainian leader. lisa, incredibly savvy political operator to turn to the camera and speak in english when he thought he needed to. lisa: basically saying i don't want to have to rely on someone else to determine my future. i want to be able to prepare in advance. an incredibly timely interview by annmarie given the fact that it is not just how the debate

reads across america. it is how this debate and how the broader election race in the united states affects the entire world. we have heard the ramifications from leader after leader very much front and focus volodymyr zelenskyy who has frankly been on the receiving end of both the delays as well as potentially the agent to continue this war. jonathan: a lot changed for a lot of people. after the debate on thursday night. peter oppenheimer of goldman sachs, sarah of wells fargo, blackrock, a stack payrolls friday lineup for you. dani and manus will go through that for you. for lisa and myself, that does it for us. have a wonderful long weekend for those of you that celibate. for the rest of you, stay safe and have a blessed fourth of july. from new york, this was "bloomberg surveillance." ♪

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matt: we are seeing futures lower after a slew of economic data. the countdown to the open starts right now. ♪ coming up, futures lower as even more signs of a labor market slowdown. chief global market strategist at jp morgan is stepping down after a difficult two years.