>> this is a market that we still see as fairly constructive. we believe that the equity market rally can continue to move higher. >> these concentrated moves have masked everything. markets don't have to stay at the highest. >> markets are doing ok. >> it feels like everybody that comes on has this embarrassed tone. bear markets don't really start that way. >> there is an unprecedented and wide range of outcomes possible. no longer can we think about

investing around a central base case. >> this is "bloomberg brief -- "bloomberg surveillance." jonathan: good morning, good morning. equity futures are positive on the s&p, coming through wednesday on a six-day winning streak. closing yesterday with the certainties -- with a high of 2024. big tech, tesla, the premarket just a bit softer, but yesterday was the 10th straight day of gains and over that time, lisa, we were up 40% on the single name. lisa: tesla shares up 75% since hitting lowe's back in april. 4% almost, yesterday. why? that's really the key question. what's the key question that they reported on? maybe the report from july 2?

maybe the idea of what they could do with robotic taxis? unclear to me. jonathan: tesla acting like a meme stock, according to bill gross. lisa: he said that about nvidia as well. yesterday they were up 3%. the bigger take away is you have not gotten a day or all of the magnificent seven stocks acted in tandem. they acted like pillars going back and forth and people are ping-pong and thinking about which would be safer. there is of the heat -- a feeling that valuations are getting high. jonathan: we can try to get on top of fundamentals later in the morning. yesterday was day one of testimony for chairman powell. later this morning, he goes in front of the house. there was a standout quote about sending signals and i think for a lot of us we turned down the volume and we moved on, but he also said that elevated inflation is not a risk they

face. annmarie: he then continued to lean into the labor market, latest data showing that labor market conditions having cooled considerably from where they were two years ago and i would not have said that until the last couple of readings. he is starting to look at the timeline and try to communicate without saying -- yeah, we have seen the data, we have seen it cooling and are prepared to move. neal dunn immediately after he talked about labor not being a source of inflationary pressure sent this out, saying it's been true for months but it is nice to see powell coming around. lisa: i read the comments and my immediate thoughts was -- where that this was kind of dovish, leaning into the idea of preparing the market for a rate cut. the market was interesting, it seemed disappointed that there wasn't greater acceptance that he didn't come out to say that september is on. it was interesting to me that he didn't see a response in the

market about it being a dovish message. jonathan: cpi with outlined plans and jackson hole in august. this fed, led by the chairman, chairwoman, they want clear and clean sequencing. when he talks about more good data, what are we talking about? months? lisa: seems like he was setting up september. that in the meeting later this month they will be talking about how conditions are getting better for cutting rates. annmarie talked about the idea of elevated inflation and reducing policy. too late or too little could make economic activity weaker. these are dovish signals that employment might be front and center. jonathan: i thought that it was a no blank sherlock, something like that. we all had two screens up, didn't we. chairman powell on one,

secretary ellen on the other. asking questions not just about the deficit in the economy or even financial regulation, it would be about the health of the president and that is exactly what happened. lisa: there was a tense -- annmarie: there was a tense exchange between her and michael lawler. she said that the president is extremely effective and long meetings would not give a date about the last time she saw the president and then joyce beatty, democratic congresswoman, trying to get her name in there saying please, we stop, she's not a physician and why should she be commenting on this? his point was you are a member of the cabinet and has there been any discussion of the 25th amendment and then it was a unequivocal no. jonathan: this is going to go on and on for the next few months or years, seeing what happens. positive by 0.1 percent, yields

are lower by one or two basis points, short of 430. the euro, just like yesterday, not doing much. 108 16. coming up at this hour, brad levitt turning from optimistic to cautious. president biden looks to end a democratic revolt. kathy at nationwide, head of day to on capitol hill. that story, the s&p 500 pushing fresh record highs with brian levitt of invesco joining the chorus of warnings warning -- for the first time in a year we favor a more defensive posture in the near term. it doesn't mean that we eliminate equities, but rather we shift towards high-quality. brian joins us for more. good morning to you. this is a big change for you. typically you are on the program pushing aside the bears. what has changed for you? brian: i still say over the

intermediate i want to come back to inflationary. peak tightening is a favorable for equities. we are looking at a tactical indicator saying that the global economy is growing below trend and it looks like things are starting to get softer. when you are below trend and things are weakening, you want to be more defensive in the portfolio. some of that global weakness is being led by the united states. things are slowing. it's not a recession call, it's not something ominous, but tactically things are slowing down and we are waiting on the head to respond. i think that is the change that is the global distinction. global growth has been the discussion for a while. but the u.s. slowing down, at what point does someone like you become concerned about the slowdown? that you may have a recession? the good news is we don't have a

lot of excess in this economy. if you look at residential investment as a percentage of gdp, inventory to sales ratios, this is not an economy dealing with a lot of excess. we don't have banks sitting on piles of bad loans. you can see it in the corporate bond market. they are not worried about the economy yet at all. instead, you are seeing weakness, slow down -- that's what the fed wanted, it's here. the challenge is we've got a 5.5% fed funds target and the economy is slowing and inflation is in a comfort zone. so, you know, it's not a perfect backdrop for equities. you talk about going into quality, i wonder how quality has changed given the fact that some of the companies minting money have gained so much value over the past 12 months that they are the ones, like morgan stanley, they're the ones people

are getting nervous about. are you on board with this idea that high flyers like nvidia and microsoft have gotten over their skis? brian: perhaps a little, but investors are going to be looking for a spot where they find business is doing ok. part of the challenge was that our risk on call that started last july was a great one, but really, most of the broadening of the rally happened in a couple of months. small, mid, 20% within a few months on the expectation of rate cuts and then it was all concentrated. the risk on rally should have been broader. then when you get to a defensive spot, you tend to get higher quality. perhaps they are a bit elevated, but that is why -- where the investors camp out in a slowdown . that could persist but ultimately what ends up happening over the next couple of years is in the easing cycle

with a normalization of the yield curve, you should get water, but in the near term the investor hungers down. lisa: you are still a foam a guy when it comes to nvidia and microsoft? [laughter] brian: i'm a foam a guy for the next three to five years, -- fomo guy for the next three to five years, absolutely. [laughter] we tend to get more defensive, but over the next three years, five years, peak inflation favoring stocks. lisa: some of these words that people use like becoming cautious and having more risk on have different meanings depending on the person. caution in the past has been long bonds, more cash, going into say dividend plays within the equity market. what's the new conservative position? brian: the way that we think about it, take a 60/40 portfolio where we are risk on.

that will be far more credit. credit tends to to do well in more of a recovery risk environment with increased exposure to longer duration quality bonds. frankly, there are some nice yields there these days and i would be cautious about sitting out muddied -- money markets, those yields will ultimately be coming down. on the equity side, when you are more cautious you reduce your exposure to international and you move into factors like quality and low volatility and you reduce a bit of your small-cap exposure and go more large-cap. it's not so much wholesale changes, it's protecting the gains you have had in the portfolio with protection in the fixed income market portfolio. annmarie: yesterday we had the debate about as an investor can you look through the noise of politics. do you find advantages ahead of november or opportunities or are there setbacks? brian: i tune it out. if you look at volatility in

markets historically, it doesn't come because of elections. october and november of election years, the only years you see meaningful increases are 2008 and that was clearly for other reasons because of what was going on. if we had time for it i want to tell investors story points on politics. the first one is that since 1957 when the s&p went wide, every president has had a positive return over their administration except for w and nixon because they left office in bad recession. number two, over the trump term the s&p was up 60%. where's biden right now? 60%. it didn't matter at all. third point, if politics matter so much, how did obama and reagan have the same advances in the market during their term? they both had great starting points. i could become president in a recession if the fed is helping

out and -- lisa: are you running? brian: annmarie told me i have zero chance. [laughter] jonathan: there have been changes over the last decade. 2016, we were talking about investment in infrastructure. you saw what happened when we started to see signs of a blue sweep with the prospect of fiscal stimulus down the pike. changes, we started to wonder if there would be consequences for the bond market. two leaders that don't seem to be willing to do anything about the deficit anytime soon. brian: with regards to the changes, if we go back to that 2016 moment, it was the hope a lot of voters that trump could unlock growth and value and you had the same market leadership that you had under obama. we didn't change the economic environment as a result of simply electing a new president. a sickly they get to get a

couple of things done. they don't get to have the entire agenda play out. regarding rates, i heard this a week or two ago, you would know better than me, right, there was a quick move up a handful of days ago in the treasury and people asked me if these were the bond vigilantes finally here. there is nothing in the bond market that suggests they are here. this is a bond market that has been moving very much on nominal growth expectations for the fed. if the vigilantes were here, the dollar wouldn't be as strong as it is. no, it doesn't seem as if the bond market views it as a problem. i've been saying it for a long time that i don't think this will be a problem. my clients think it's the biggest problem we have, the debt level. jonathan: your job is to provide therapy. brian: i've been doing this for 27 years in the debt has increased three times and the dollar remains strong.

it's the what me worry at this point. we are a very wealthy country. $150 trillion of total household worth. jonathan: brian, good to see you. of invesco right now, heading to election in august. [laughter] here's your brief with dani burger. dani: china eking out another small gain in june with monthly cpi hovering near zero with deflationary pressures continuing. as of now they are worried about lowering rates because of a weaker yuan. consumer promotions for the 618 shopping festival hurt the prices of cars and entertainment last month. trump getting closer to announcing a vice presidential pick. he teased but did not officially announce marco rubio could be his choice for a running mate.

he stopped short of making official announcement, but said he was challenging president biden to another debate, this time without moderators. oracle shares dropped 3% yesterday after elon musk said his ai start up what rely less on cloud technology. he said that his firm would build a system to train ai internally. earlier information ported that they had ended talks on a $10 million cloud deal where ai would have pulled cloud servers from oracle. jonathan: more from dani in about 30 minutes. pressure is building in the democratic party. >> trump is on track to win the election, i think, and maybe by a landslide. jonathan: that conversation, just around the owner. ♪

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jonathan: live from a steaming new york, equity futures are down by 0.1 percent. yields are a little bit lower on the 10 year. under surveillance this morning, pressure is building in the democratic party. >> i think that donald trump is on track to win the election and maybe by a landslide, taking with him the senate and the house. the white house in the time since that disastrous debate has done nothing to really demonstrate that they have a plan to win the election. jonathan: divisions growing among democrats over the reelection bid of joe biden. michael bennet being the first senate democrat to cast doubt on it publicly. nine house democrats have called on the president to step down from the race. joining us to discuss, brett

from agf investments. what can the president do to stop the revolt? brett: he will have to have good press conferences starting tomorrow but i think more and more people i talked to say that he cannot serve for 4.5 more years. i don't know anybody who thinks he can serve for 4.5 more years if he wins reelection. the other point i would make is that -- can joe biden go from now until november 5 without another stumble? i doubt it. if he has another disastrous press conference or makes another mistake, he's out. either way, i'm not high on his prospects. it's unlikely he will be on the ticket. annmarie: yesterday we had mikey cheryl coming out and saying that biden should step aside. but who is it going to take to have to say that for the president to take it under

consideration? greg: people in his family, hunter, jill, someone close to him would have to do that or we will have to see polls showing a significant deterioration. or if he makes a mistake tomorrow at the press conference . so, there are a lot of factors, but again i'm not high on his chances. i think that between now and the election, he will have more problems. annmarie: so, what's the timeline of him stepping aside? >> i have new idea. it depends on events. he's obviously angry and feisty and bullfight this to see if he can hang on and i think he has had a good 48 hours. a lot of democrats are resigned to him winning. but the senator from colorado used thel word, landslide, and i

think people in the democratic party are worried they will lose the house, the senate, and the white house. lisa: when you say it's unlikely, what's the path to getting off the ticket and who comes on is incredibly important to understanding the chances and how the election results are skewed at the end of the day. at what point do you see a coalition of democrats getting together to take action sooner. or letting it play out in a series of gaffes that is a drip feed through november? greg: it's nothing the party is happy about. i think he can hang on for a few more weeks. he's fighting for his political life and has had a history of making comebacks, but this one for me is too tough to overcome.

lisa: meanwhile, you have the, the issue of what donald trump is talking about, basically going after kamala harris last night at the convention, at the speech he was giving. there's this question of a shadow race going on, whether kamala harris is the presumptive nominee for a lot of people and whether it is becoming increasingly explicit in what we are hearing from donald trump. greg: it's virtually certain she would have to be the nominee. i would be shocked if anyone else mounted a serious challenge. the party is thinking she's fairly talented as a politician and could be underrated. no, it's going to have to be her . i can't see another. we are down to only three people who can be president and one of them is her. jonathan: returning to the pressure point, on the donors the president of us the impression that he doesn't care

what they think. party officials, he's come out swinging for anyone testing him. when it comes to the polls, you saw it in the interview last friday, he thought it was a coin flip. he doesn't think it is as far apart as some of the polls suggest. i'm wondering where comes from. based on what we heard, he doesn't believe them. greg: that's a good point. the times pull shows trump ahead by quite a bit, but all of the other polls to my shock are close. after that disastrous debate, i would not have been shocked if biden was down by 8, 10, 12 points, but is not, it's only two or three or four points. showing that maybe most americans have already made up their minds. maybe most are not paying attention. they didn't pay attention to the guilty verdict in new york. maybe they didn't pay much attention to the debate. there still is a narrow path for

biden. the one thing i can get my arms around is the electoral college. i can't see joe biden coming to 270 with a big upsets and say like sconce and. jonathan: greg, great to hear from you on the prospects for biden. not just in november but getting to november and ultimately governing for another 2.5 years. annmarie: i actually view this differently. maybe it's the democratic elite that is missing it. biden's age has been showing up in polls for over a year in the issue is most americans care about the economy and immigration and when you ask them who they trust on the -- those issues, it continues to be donald trump. the electorate has been there. the debate has woken up everybody, you couldn't ignore it, it was right in your face. jonathan: what you said is quite important. when you listen to those democratic officials, they talk

about his age a lot, as if that's the only reason that he lags. they don't talk about the issues in the country addressed in the last 3.5 years. lisa: it's true is why come out to support biden. it was all baked, though. the wake-up call around his mental fitness, that is what a lot of people are focusing on. jonathan: and apparently a bigger wake-up call for the people in the party and not the general electorate. joe biden looks to return to form to reassure nato allies. it's a big week for the president, coming up. you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch

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jonathan: price action is firmer on the s&p. the nasdaq is up by a third. look out, tesla, a lot of people are playing catch-up. a 40% move over 10 trading days. phenomenal. lisa: i wonder why, though. on the mental beliefs that they are those are the coming up with robotaxi? i think that is why bill gross is talking about it has a meme stock. jonathan: it's hard to call it a

growth company when there hasn't been growth, right? it's the struggle we've all got with tesla. the carrot on the stock has been this robotaxi announcement that we have been circling since april. look out for that. the bond market, yield on the two-year 10-year, 4744 with debt coming into the market and yesterday we had -- what, three year note, lisa? 39 billion in 10-year note's coming through the treasury. lisa: yesterday went well in people saying that seasonably it is a good time to sell debt for the government that i love that we just heard from mr. levitt coming on saying -- i can't find the bond vigilantes. if they are there, i'm not finding them, they are not showing up meaningfully. hick can be attached to other narratives, particularly the economy. jonathan: they are not and france, either. yields are lower on the euro and

things are looking better. i know it's been difficult for a while but the bond yield is down to 300 17. that's the story in france. joe biden lost of the support of another democratic lawmaker in the house, mikey cheryl of new jersey coddling on biden to end his reelection bid. michael bennet of colorado telling cnn that trump is on track to win and sweep congress but didn't call on biden to bow out. the list is getting longer and longer. annmarie: terry haynes made the point that party leaders pressing biden to go could move the needle. backbenchers do not. party leaders or his family could be the lord almighty is looking for. everyone else at this point is just noise. at some point to those individuals get so big that it pushes the jeffries, the schumer's, the pelosis, maybe jill biden, telling him he has to step aside. jonathan: everyone has to manage

their own career risk and there is a reluctance to come out on the record and say what they are saying privately. what the number, nine or 10? it's not a long list in the grand scheme. it's getting longer but you know it is much longer when you hear about what's being said privately as opposed to publicly. lisa: and there's no groundswell on that scope. the post had a story about how in some ways democrats on the hill are divided and coalescing. this is one of the key questions, there hasn't been a real challenge to biden in part because of career risk because of the potential extrication from the party in some capacity and you wonder how much that is really holding people back materially. annmarie: when you explain in politics, you are losing. explaining that he can govern every day, that doesn't set you up well. the cook political report

yesterday made six changes and these are the three biggest. arizona, georgia, nevada, now leaning r, places where biden should be competitive and they say it's going red. jonathan: career risk goes both ways. if you lose in a landslide in november and you didn't say anything, you are equally in as much trouble if you did and he wins. it might even be worse. lisa: which is why we were both struggling as to the path for how he gets off the ballot. will it be pressure for the inside group? if thursday is rough, is there a coalition of democratic senators , not house representatives, coming out to say that we don't you have it anymore and we don't back you in the same way or is there an inner circle forcing him out? it hinges on what the threshold is. jonathan: that debate about all continues.

as jay powell said, day two of testimony, telling a senate panel that risks on the labor market are rising. powell testified before the house financial services committee at 10:00 a.m. anything missing yesterday for you that you think needs to be addressed? lisa: it was interesting that in his prepared remarks, he talked about fed independence in this aggressive way. a new type of reassertion of that, raising questions about the political threats he's under. he came out yesterday and said he wouldn't give any indication on forward guidance. i think it will be tricky for them to get anything out of them , but i would press him on the politics of the moment given the tariffs in the immigration

issues and understanding where they are now and the labor market and where it is cooling and driving. those things could make a big difference. annmarie: there's the upper chamber of the senate and the lower chamber of the house and sometimes people expect more substance. lower chamber, moore theatre on the politics. powell didn't bite, yesterday. i agree with you, these kinds of policy changes around immigration and tariffs, inflation because of fiscal spending, he won't want to make comments on it that it is important to understand what it will look like. jonathan: i was surprised about how much they talked about financial regulation. lisa: yeah, there's a real question about the relevance of his control over it. jonathan: look for a repeat of that later, maybe. joe biden and nato, pledging more air defense as biden looks to reassure allies that he is fit for the job.

the nato summit continues today with biden having his first bilateral meeting with keir starmer. let's talk about what's on the table today and what the reaction was to the address yesterday. >> indeed, what we heard yesterday was a pledge of five patriot missiles and other missiles, as well as short range missiles. we also heard that ukraine would be delivered f-16s finally, which -- a lot of the pledges from yesterday, although biden called them historic, they really warmed over things that was promised months ago. today obviously this was the moment where the summit kicks off and there will be a lot of bilateral meetings. the health of biden is front and center in the discussions.

people attending the summit, he is going to host a dinner today with heads of state from nato member state. it's a crucial time in which he should be resting. it will be a moment people will be focusing on. we also heard yesterday from presiden zelensky, who gave a feisty speech yesterday, not mentioning the election as such, but he said that the nato summit nato leaders in the u.s. and the rest of the world are waiting for november. instead of waiting for november, they should move on and try to help ukraine right now provide more, more help, also provide a path or commitment that ukraine will join nato at some point. he is not going to get an invitation here, it's not what we hear from the people around

him, and he's not very happy about that, of course. more of this will continue today. annmarie: behind the scenes i know that a trump to point out presidency is being -- 2.0 presidency is being discussed. what are people saying on the ground? his rhetoric on nato has been hot, but in his four years of governance javelins and more coverage to the eastern flank. the u.s. up coverage. is that correct? piotr: a lot of this rhetoric from eastern countries say that rhetoric is one thing and trump has said he has this plan to end the war. but we heard, for example, from the foreign minister yesterday who was in the studio and was asked about the potential president and she said she's not worried. she worked with trump when he

was in office and there was no sense of lack of commitment compared to the time that he was in office where nato was spending much more, the refrain we have been hearing all the time. some are trying to get even above from eastern europe, spending a poland for example. at least on the rhetoric of rhetoric and if they are concerned, their pointing out a huge gap in what jumping -- trump is saying been doing. lisa: it strikes me that has nato members are meeting and discussing the threat of russia and isolation of vladimir putin, vladimir putin just had a bear hug with narendra modi.

he visited with the president of china. this does not seem like an isolated leader. how much does that loom large over nato members? >> of course, it does. and putin was helped by one of the members of the nato alliance , who visited him one day before the summit and they talked and shook hands. putin has done quite a lot just to project the image of a leader who is not -- as you said, he met the indian prime minister. he also met others and he is clearly coming into the summit strengthened and sort of being helped by the members who are here who if he is raising

certain concerns yearly after the summit, after those concerns he met everyone yesterday. he is the one who was trying to push and we are not sure about the details of it. it is a lot of win for coming up into that summit. jonathan: friday, sitting down with the nato secretary-general, that's friday morning after the must watch news conference with biden on thursday. updating your stories elsewhere this morning with bloomberg reef, here's dani burger. dani: microsoft and apple have given up the chances to be of servers on the ai -- openai award after microsoft and google

set -- sent a letter to them. receiving an investment bank, looking at look like u.s. rivals, and it is a move that citibank made in recent years. a penthouse in new york city at has sold for 183 million dollars, the most expensive home sold in new york's is 2022. it was sold as an unfinished space and that is your bloomberg reef. jonathan: i love that you can drop $100 million plus on our property and it is, you've got

to finish it. lisa: well, it annmarie: is enormous. did you see the wraparound terrace at the top? jonathan: you know what's sad? the chance that no one lives there. lisa: i was wondering, just some ambassador? i wouldn't know. jonathan: neither would i. jay powell, keeping september on the table. >> the labor market appears to be back in balance. the latest data induced a clear signal that labor market conditions have cooled considerably to years ago. jonathan: that was day one, yesterday. they too, coming up. from new york, [speaking another language] -- from new york, this is bloomberg. ♪

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jonathan: 10 year supply comes later this afternoon. under surveillance, jay powell keeps september on the table. >> the labor market appears to be back in balance. the latest labor market data sends a clear signal that labor market conditions have cooled considerably compared to two years ago. this is no longer an overheated economy. as i mentioned in my opening remarks, the economy is back to where it was before pandemic and that was a strong labor market but not overheated. jonathan: jay powell heads back to capitol hill today, set to testify before the house after telling a senate panel that the dual mandate from nationwide brings us more. what did you not here on day one that you would like to hear on

day two? >> good morning, john. it would have been great to hear more definitive guidance from chairman powell, but i didn't really expect that. he is holding his cards close to his vest. there is cpi data on thursday, you can't really signal that rate cuts are coming, which is our baseline view. i thought he was pretty forthcoming on the labor market. there's a lot of recognition that things are fraying on the edges and have a more balanced outlook now. it's not just all about inflation right now. jonathan: is that how you would describe it, a fraying at the edges or are you seeing something worse? >> we see signs of fraying. we think slowing or >> might start to -- cracks might start

to emerge. we think recession is on the horizon with a soft landing possible. it's really contingent on the fed cutting rates next year. there are pressures throughout the economy, not just the labor market, but many households that rely on variable rates for borrowing, really feeling the weight of these high interest rates. lisa: i agree with you, i thought it was something that confirmed what participants have been saying for a while, elevated inflation is not the only risk that we have in strength could weaken unemployment. why is it that markets seem disappointed by what they heard did increase chances of a rate

cut? if anything, chances went down and they seemed disappointed that he come out to say september is on. >> i did notice that. i think that the markets being markets and hedging a bit, i was watching the sanded had gotten up over them cutting and it backed off a bit we are all waiting for cpi data on thursday. if it surprises to the upside, even the december call doesn't look good. no doubt, there is slowing in the labor market. looking at payrolls, people saying that employment is strong , but i was quite impressed by the senate questions, a few of the senators understood that three quarters of the gain in the payrolls on friday were in two categories in oath to be

related to government. the private sector is starting to slow down and i think it is on the radar screen. they need the inflation data to cooperate. lisa: thursday, when we get the cpi data, how much will we see a binary response in the markets? zero or 100%? if we get what is expected in terms of cpi coming down, stripping out energy and food, do you think that relates september regardless of the concerns about the base effect and things of that nature? >> yeah, you know the base effect is there, but they are squarely looking at three months annualized, month-to-month. he said that we needed a good monthly reading. they will be looking beyond the base effect in the markets, it

is, it really is the current run rate that matters most. annmarie: it did get a bit political yesterday. senator kramer said that rates should not move in either direction because of optics. how much do you think the fed is taking this all on board? >> i think very little. if it is there, they put it out of their mind. i really take chairman powell at his word that this is not entering the decision-making process here. they are looking at the macro fundamentals, doing their best. you can argue that if they don't cut rates before the november elections, they are then influenced by that. i think they will just keep their eye on the data here. annmarie: learning more about

policy from the fed, tara and immigration, at what point does the fed need to talk more openly about that, given some people talking about that meaning a hike in 2025? >> chairman powell won't do that. fed officials won't. we don't know, debate conjecture about campaign promises right now, you may have to see what lays out and what gets passed. then they will react. they have to be reactive. otherwise they risk sounding political. obviously, internally they have their own views. tariffs and tax policy changes could impact things. they will wait and see to deliberate they get on policy. jonathan: you have more space to develop that you publicly and perhaps we can do that right

now. if we come over it with the tariffs suggested, some think that the federal reserve will commence hiking in 2025. have you developed views around that topic? >> we are in a wait and see mode, to be honest with you. there are so many variables. what actually gets, what is rhetoric and that is reality? there are differences. clearly, you know, if you have large tariffs, that could be inflationary. it could impact of the consumer in a negative way. does the fed react with higher interest rates? perhaps. it's also a tax on the economy. it depends on the macro backdrop. things are slowing down prior to that, right, the fed could be cutting rates regardless. there is a lot of uncertainty

between now and then. jonathan: flying blind into 2025 is being. thank you. had this a few times, short-term inflation, long-term earnings growth. lisa: the rate of the price increase over time, a sudden change in policy of where goods are coming from, one argument is that it will be a one-time price hike, prices go up, people purchase fewer of them, depressing growth, inflation won't go with the same pace. that is one argument for why it might not be inflationary. i do want to hear what the people's understanding is of the effective labor on the market. i want some clarity on how they interpret some of the guidance we have been hearing. jonathan: adam pozen touched on

both and ultimately he landed on hikes in 2000 25. he was talking about stagflation that we might expect next year. lisa: given the fact that the workers for this economy have upheld it and allowed inflation to not go too far, there is a question around if it allows prices to remain stable. you have to wonder what it means for the effect on the wages of people who exist in the nation? it's a lot of uncertainty. i want to hear more about how the fed thinks about this and what they think future policies are. jonathan: i think they are really struggling to navigate policy right now in washington and don't want to step on landmines. you could sense that, yesterday. i know, you want to keep pushing. so do i. up next, dan skelley, congressman jackson, drew petty, and lisa coleman, all of that on

the second hour of "bloomberg surveillance." that's up next. ♪

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>> as we look ahead to the second half of the year, maybe we have less negative surprises, maybe positive as we go to rate cuts. >> the data is very clear and setting a green light to the fed they can adjust policies. >> they have to do what is right for the economy and if it requires a larger cut to start the process, they will do it. >> it allows the fed to be patient but it could turn on a dime. >> december will be the first

cut, but the door is definitely wide open. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of "bloomberg surveillance" starts right now live from new york city this morning. good morning. equity market at all-time highs going into wednesday. let's get to the day ahead. it looks a little something like this with chairman powell speaking at 10:00 a.m. eastern time. we also get some debt supply. the 10 year option is little later this afternoon. lisa: $39 billion. yesterday was a bit of a buzz kill. it came out very well. i like what we heard from david, this idea that he cannot find the bond vigilantes. if they are worried about the debt, where are they because this has been going on for quite some time and he does not see the pushback.

it cannot be connected to economic type of news. jonathan: just because there is no price movement does not mean there is no tension. it is like opposing forces. we started to consider weaker economic data, by bonds -- buy b onds. annmarie: there is a tension between -- lisa: there is a tension between the people in the market and the worry about the deficit will keep spending a little bit in check. if you don't worry about it, you get spending and a liz truss moment. that is the fear people have baked in at a time when there is not much else that is driving markets. yes, we got a 36th record high but it was limping and wheezing with a couple of mainstays. it really does not feel like some riproaring direction or feeling confident right now. jonathan: we squeezed out six days of gains on the s&p 500. cpi on thursday.

we will get bank earnings on friday. it is much more difficult to speculate on the future of politics, never mind discussing the outcome of november. we still don't know for sure who the two candidates will be facing off by the time we get there. annmarie: you kind of heard it yesterday. biden started talking about the biden-does truck -- trump started talking about the biden-harris ticket. it could be her at the top of the ticket and the trump campaign prefers it to be biden but will also prepare for, harris. i will be going down to d.c. for nato. a european diplomat said it is a pity we cannot talk about substance as much or a lot of the optics is not about substance and everyone is hanging on every word and move the president makes because they want to see what this means for november. lisa: i think a lot of people say it is a pity at a broader level and we wonder how much

markets are not to the drama and it becomes personal intrigue and people say, what will happen? it makes for good gossip but not necessarily anything that changes people's markets view until it doesn't. that is what we keep hearing from everybody. jonathan: that felt very real, very personal. we love to talk about substance in washington, d.c., but that will not happen anytime soon. you know what will happen at the news conference thursday. it should be about nato, the wars many countries are engaged in around the world, what is happening in gaza any crane. we will hear it again and again and again, reporters will just want to be talked about his health and the prospects he is not on the ticket come november. lisa: which he will have to be prepared for. how much oxygen does that suck out of the room? it does not seem to matter for policy. talking to greg tellier, he is

not going to be on the ticket. what is the path to get there? what is the option for democrats? you talk about career risk. it becomes noise in the background of frustration and a reason why a lot of people come on this show and say they are tuning it out. jonathan: it will be harder to tune it out. the s&p positive by 0.1%. in the bond market, yields lower, bonds rallying. the euro a little stronger. european assets doing ok today. yields lower in france. coming up this hour, we will catch up with daniel skelly. we will speak to congressman jonathan jackson amid more calls for joe biden to drop out. and we will talk to lisa coleman. the s&p 500 at all-time highs powered by big gains in big tech.

daniel skelly and the team at morgan stanley writing this. wall street has tilted towards the tech sector to a historic degree. values are stretched while earnings growth is poised to slow from here. it is good to see you. is this rally going to broaden out, and what gets is there? daniel: we think it does. we think the fed will cut later this year. we have stuck with the three cuts call, and we think it will happen amid a positive economy so that definitely helps boost sentiment for some of the more valued and cyclical sectors. second, and a lot of your guests have been speaking to this so it is not necessarily the biggest unknown, but the spread between the tech earnings and the magnificent seven earnings and the rest of the market starts to compress as the year goes on so you will see the earnings revision story improve for the everything else part of the market. jonathan: is it a financial, the banks, what is it?

dan: you are hearing positive regulatory rumors recently. there is a capital market cycle coming. we have been on a two-year down cycle in m&a so there is pent-up demand. financials are part of our preferred list. industrials. we are still seeing massive spending going on from that fiscal initiatives and this is an area that intersects a lot of technology and structural trends to powering ai and technology so that is another preferred sector. lisa: you can make a bullish argument for what you just said and you can make a bearish argument for what you just said. the gains would not have happened. talking about nvidia has accounted for 30% of the gain year on the s&p, so are you looking for index level s&p to actually fall as people shift away from big tech even as you see all of these opportunities and the broadening out under the hood? dan: it is such a great point

and an important idea to think about from a broader portfolio perspective. we see more broadening out. it is hard in our view to get a huge correction if the earnings are still positive for technology so we are talking about relative revision strength changing on the market. we are not talk about a collapse in earnings for technology. we still don't know what the effect of ai is. the market has been in this phase of suspending disbelief for some time in terms of roi and adoption productivity gains. that story will not play out for another year or two years so we see more intersect or intermarket rotation then a bigger selloff. lisa: this is what i find fascinating. i don't tesla is its own ball of wax but there is a question of how much you can actually see some of the negative feelings and the fear people have around some of the tech valuations translate into any kind of pullback. hasn't that been a challenge given the fact that valuations

-- given that valuations have been concerning but it has not material into losses? dan: no doubt. you have seen this optionality in ai, this massive fervor around what it does for the economy and all of these different structural productivity trends. but at the same time, let's not forget that while that has been the sword of the offense, big tech has the shield of strong balance sheets, so a world where narratives around interest rates have shifted dramatically this year, first very scared about inflation and now more tepid, the idea of having net cash balance sheets has been a strong defensive haven for this group as well. annmarie: when it comes to these changes in consumer trends want to get ahead of, what are the? what are the names that can outperform towards the end of the year? dan: you have seen a massive divergence in the consumer in recent months and this played out in first-quarter earnings. the restaurants and airlines have shown this divergence

between high income and low income. you are seeing more normalization of the stimulus checks have been exhausted. what we are trying to think of is there has been this extreme crowding in the high-end. we are thinking as rates come down later this year you will see some relief for those consumers. possibly getting more aggressive on lower end consumers is an idea to play later this year. annmarie: is the biggest risk that there is potentially a recession? dan: in our opinion it is hard to imagine a recession today. i have to give hats off to alan. what i would argue is you are seeing this to track economy. a lot of folks i try to put today's inputs and data into a very clean and smooth historical model and trying to bucket it as the hard landing or soft landing. what i argued is there is no known flightpath for the situation you are dealing with

today. post-covid, there is so much nuance in so many one offs that we have never seen before that it is resulting in this to track economy. for the asset owners they have so much concentrated wealth effect and frankly more power than they ever had in 20 years that their strength is still offsetting some of the degradation and the other track of the economy that is seeing real pain from high interest rates. on that, we think the outcome is it is hard for the slowdown in the second track mathematically to hurt the average to cause a recession with 70% of overall spending is coming from the first track. jonathan: do you think that spread can close? because that is a different conclusion. dan: we think it can but rates have become the dividing line. in terms of behavior and consumption. the other thing to think about is the labor market. a lot of people are starting to get concerned. powerball talked about this a

lot in his testimony yesterday, starting to reintroduce two-way risk. inflation is still a goal but he is starting to reintroduce the idea of the other part of the mandate in terms of employment. we would argue that a lot of the normalization post-covid has happened. the quit rate has certainly normalized to a more realistic level than we were seeing two or three years ago. jonathan: how many questions do you get from politics and the election from clients? dan: basically only our. among the wealth management channel in particular, it is a fever pitch and we do not expect the noise to tune down every time soon. jonathan: do you think it is just noise? dan: it is not noise in the sense that you have to have a view and some type of baseline of expectation. i would just say this. this is one of those very rare instances in american history and as a history geek 150 used

to be exact when you are seeing the incumbent faced off against the candidate he defeated in the last election. grover cleveland 1982 is the last time this happened. the nuances you have seen both of these gentlemen in office before. frankly the markets and the economy behaved fairly well under trump and did the same hunter biden. there is this massive pre-election and candidacy uncertainty and all of the different noise you are seeing at the moment, but the reality is it will not offset or take off track a lot of the positives out there either. i think the biggest surprise is the election ends up being a big nothing burger for the market. jonathan: daniel skelly with quite a headline. lisa is helping anyway. let's get you stories elsewhere this morning. dani: a court victory for elon musk. the billionaire defeated one of the lawsuits filed against him

after he bought twitter and fired dozens of employees. the sioux alleged to severance pay under the federal employee retirement income security act a district judge in san francisco ruled the employee claims were not covered because the company said anyone let go after musk's takeover would only get cash payouts. samsung's largest labor unit has declared an indefinite strike. thousands of workers rallied earlier this week outside of the chipmaking factory south of seoul. it was originally planned as a three day walk out demanding better pay. the exodus of families from large u.s. cities is deepening. in new york city that it number of children under five has fallen by 18% since the pandemic . in cook county in early, it fell by 14% for the under five. cities struggled to retain

families, one of their most important demographics, and that is your brief. jonathan: shocking. more from dani in 30 minutes. a democratic party divided. >> i believe democrats win up and down the ballot, joe biden is reelected, and we take the house. >> he has to step down because he cannot win. jonathan: very different views. we will give you a different view of next on the program. ♪ we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

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are managed in a tax-efficient manner. it's what you keep that really matters. why not give your wealth a second look? book your free meeting today at creativeplanning.com. creative planning -- a richer way to wealth. jonathan: six days of gains on the s&p 500, looking to make it seven which would equal the longest day winning streak of the year so far. we are up by 0.1%. lee says that we are not talk about major gains, we are talking to getting to more than

2% over those six days and yesterday we squeezed out a sixth day of gains because within this equity market, you think about what got us here, it is a handful of big tech names. maybe you consider tesla one of the big tech names. this morning, tesla is up in the premarket, this time by 0.6%. this one has made a big move. over the previous 10 days, one of the longest winning streaks of the year so far, we are up by more than 40% over 10 trading sessions. that number is like more than 50% over the last month. stellar. lisa: the longest streak going back to juneau 20 23 and it comes -- june of 2023. this is a name still far below its peak in 2021.i wonder what is driving it . you can say it is the technological advances. my question is, are people just

looking for what might not be as overvalued as something else but could be hinged to this ai trend as people rotate through the same names while the rest of the 493 stocks actually had losses yesterday? a majority of stocks lost value. it is a strange market. you wonder if it is people not fully relinquishing their fomo. jonathan: we hadjonathan: five -- jonathan: we have five different conversations with five different conclusions, buying nvidia. lisa: they are not saying to sell nvidia and that is fascinating to me. is it because you cannot get bearish on a stock that has performed in the earnings? these are questions people are asking. jonathan: citi say it is time to take profits in the biggest ai names. it is the most elevated and has

been since 2019. we advocate taking some gains in ai high flyers and redistribute them more broadly across the theme's value chain. drew joins us now for more. lots of people time but your note in the last 24 hours. we have to draw a distinction as you have done between the ai enablers and perhaps the ai adductors. can you help us work through your framework thinking but equities at the moment? drew: thanks for having me on this morning. when we think of ai, we think of it in three pieces, the enablers, semiconductors, the picks and the chapels. we get that. the creators, so the software side of things. after you have the hardware comey have to teach it to do something and package that in a product. i think the last category is the user. you call them the adopters, we call them users. those are the companies that will take those tools and either integrated into their products to make it better or in their background processes to make

their companies more efficient. i think the whole value chain eventually benefits but the market is just trading the enablers right now. lisa: it is very hard to see where the money is and we have not seen it in the earnings for some of the end-users so why is this the right time in your view to make that shift? drew: you have just had that almost parabolic move in some of these high flyers. you see that with nvidia. tsmc overnight is up another 2%. so a lot of these names a -- names without aggressive they moved, we are not saying to dump the names. if you are overweight, use that to fund the next leg. it will come. markets do not stay on the same theme forever. in some cases, the implied expectations with these enablers stock prices moving very far very fast get really hard to

meet and exceed going forward. lisa: it is fascinating to me because on the surface you call sounded quite bearish actually. time to liquidate some of the positions, time to take profits. screams as get out of nvidia and then you listen to what you are saying and it is incredibly bullish. we have not valued high enough some of the ai gains. you can get better gains in other names. how do you reconcile that at a time and i concerned about a weakening growth picture and there is that 10 of uncertainty of whether we are seeing the profitability of some of these companies? drew: so to me, again we are focusing on larger cap already profitable stocks. i don't care about traditional valuation metrics. don't talk to be about a 50 pe start in the early innings of a growth phase. we look at the market price today, make some assumptions about the discount rate and what the terminal value should be for the company, and we try to

figure out what kind of growth rate i need in the next five years to justify the stop some of these stocks have expectations like sell side consensus expectations that tell me they can beat what the market is pricing in so that is when we don't think ai is a bubble yet. yes, it is getting extended and price moves make you antsy, but really, there is a growth and fundamental story here. that is why it is not a bubble, at least not yet. lisa: at least not yet. what would take us there? drew: if you really do not see increase beats in raises from a lot of the ai pure plays. i think number one you have to recognize when stocks move this fast is more than just good earnings. you need to change future expectations as well. if prices keep moving this way without fundamentals falling, that is the concern. that is what really got us in the tech bubble. i think that is the big difference from then to today.

jonathan: i think we are all interested how clients received the call yesterday, just trying to gauge sentiment. did they push back or engage with it? what was it like yesterday? drew: i was a little surprised there was not more pushback. i think a lot of people were on the flipside like i am getting nervous, i am worried we are pricing into much. it was actually relatively well received. but on the flipside, i am not sure people are ready to hedge. that is not our base case but we have to recognize when we could be wrong because markets make a lot of smart people look silly overtime. people were not ready to consider the hedge or the complete other side of the trade. so there is still a lot of ai bulls out there they are cautious bulls. jonathan: appreciate the update. thank you for making time this morning. drew pettit of citi, the latest call on ai. lisa: a lot of people talk about

the three stage cycle you expect to see on ai. i spent some time trying to understand the way ai comes up and generates these ideas and the more i learn about it, the more i wonder how much we are overestimating how quickly it will be able to really take over complicated human types of tasks. maybe it will be a more efficient way of doing business, calculating data, having data sets, but replicating creative thought, i don't know if it is there yet. it is an interesting concept. jonathan: he said it. he talked about enablers, chip creators, software users, adopters. how close are we to the final phase and how can we identify what winners will be the ultimate winners off the back of that? lisa: the problem is we have not seen the numbers. there have been companies that came out like snowflake said they are not seeing the same level of gains people were talking about, and all of a sudden there stocks tanked. i don't know the people have a full understanding of how ai will be deployed to macon businesses that much more

efficient. care and banks, curious what the banks have to say about this on friday. beyond that, it just gets kind of a little bit less clear. jonathan: reluctant bulls. i like that. you can gauge how clients see something. the absence of euphoria and heads in the sand based on what he had to say. lisa: it has been like that for a while which is why people say you cannot bet against it because until there is euphoria, it is not there yet. jonathan: up next on this program, we will catch up with lisa coleman of j.p. morgan asset management. from new york, this is bloomberg. ♪

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♪ jonathan: equity futures look a little something like this on the s&p 500, positive again by zero 1%. six days of gains on the s&p, and over the six days, we are higher by 2.13% and we only just wheezed out a day of gains in yesterday's session. lisa: yesterday's was an incredible 0.07% on the 500. it was 0.15% on the nasdaq. the point is when you look at some of the gains it is just creeping across the line which

is not a rally with conviction, it is a value that is directionless with nothing to stop it and that is the key point with most of the names underperforming and losing value . jonathan: small caps down and down hard. switch at the board and get the bond market. we talk about some of that issuance. yields are lower on a 10 year by two basis points. 10:00 a.m. eastern time we will hear from chairman powell. three hours after that we get that 10 year debt. lisa: tomorrow we get 30 year notes, today we get 30 $9 billion 10 year treasury being sold. how much do people start to highlight the reluctance to really get into duration as a result of the deficit? a lot of people say nobody cares about the deficit, it has been there for a long time. on the margins some people say if you look at the valuation in the term premium it is higher than it otherwise would be. there's less conviction about going into longer-term bonds

because of where the deficit is vs. growth and where that sets us up. jonathan: just serve a side note on other bond markets, did you see the reporting on the soundings in the g7 about confiscating russian assets? did you read that yesterday? annmarie: they were concerned about what this were mean or basically they were saying we have some leverage because we own a lot of european debt. jonathan: and then on the record denied it but ultimately insinuated if the g7 went ahead with this they would start selling some of the debt they were holding. lisa:lisa: that has been one of the fears. if people basically weaponize the assets that they hold, that they come -- to a problem. we heard that with china moving away from treasuries and moving more toward gold and other types of currency. it becomes difficult to square that with the market moves and some of the ownership we've seen. jonathan: some of the geopolitics around the debt

market for you. french debt has not been sold. it has been bought. yields are lower by six basis points. the rally continues over in france on the equity side, bouncing back by another half of 1%. i think the fate of the euro on the dollar side is what we get on cpi next thursday. this coming thursday, thursday morning. lisa: i actually think it is going to be a really important print for the market reaction because any kind of upside surprise, massive reaction, downside surprise, also massive reaction. think about how people are looking at this cpi print. that is how it has been set up along the many guests who have come on the show. jonathan: i think a lot of people scrubbed out july, but why not? under surveillance this morning, donald trump teasing marco rubio as his running mate of stopping short of making an official reaction. this comes ahead of the republican national convention next week. is the classic donald trump,

wants to make this vp sweepstakes and we will find that will beget next week. annmarie: it's got to be, because it is the convention. you are going to have trump xxx ticket, who is it going to be? he is under pressure from his campaign that he needs to make this announcement. yesterday he really toyed with marco rubio, talking about this idea he has so they wouldn't get this their congress. rubio, will you be there to vote for it, or will you not? anyway, you will be part of it. but this is donald trump's show, and he is going to make an absolute show of the the p race. jonathan: at the moment it is someone else's show, too. you just get the feeling they have announced because they want to keep it abiding show for the next few days at least. lisa: there's that. it is the bachelor, vp style. at what point is that basically what we are looking at? jonathan: what is the bachelor?

you start talking about the roses. let's talk about microsoft instead. microsoft and apple giving up the chance to be observers on openai board. the decision coming in the growing scrutiny from antitrust regulators on big tech influence over ai. there are two interpretations around the story. one is a kind one, they don't need the oversight anymore. another one is sort of like, slightly more skeptical. they don't want to take any kind of view on what is happening within the company because they don't want the antitrust scrutiny that comes with it. lisa: they want to use the products and have a connection with them. they don't want regulators to hammer them for it considering the fact that potentially if openai is coming up with the programming that will actually take off, they could have a huge amount of control over how data is used and what types of ways it is funneled into end results. they want to step away from that but i doubt it is because they have so much confidence that

everything is going swimmingly. jonathan: we've all got so much faith in the future of these chatbots of openai. big banks kicking up earnings season. jp morgan asset management writing midsized and super regional banks are moving beyond concerns of a year ago around deposit outflows. we will be looking at q2 results to corroborate these views. i'm really pleased to say lisa joins us around the turn -- table. >> always makes me nervous to be quoted. jonathan: we can start there, good to see you. let's talk about what is happening in the financials. why are we so confident we've left behind the stress of last year? >> we look at what happened last year we saw such a dramatic drop for the banks and particularly for the regionals this is super important because unlike the large banks, the income is not a key part of their earnings. so we are looking closely. while we think we will still see nii down for this year, we are

going to see a slowing in the pace of decline. why do we think that is happening? we think deposits are finally stabilizing. remember the banks had to pay up for deposits. that was very costly for them and now that has stabilized. the other thing is when we think about where we could see losses on the balance sheet, so commercial real estate, obviously a hot topic, we think that the banks now are currently reserved to about 10% losses. we think the banks because of their earnings power have the ability to reserve more, should additional losses be needed. and we've actually stressed some of the regional banks. i'm not talking about the tiny ones, but the midsized regional banks and the large ones. and what we found is that even with 20% loss in the commercial real estate portfolio, specifically office, they have the ability to generate enough earnings to allow the ability to cover that additional reserving.

jonathan: one thing we struggled with this cycle is whether high rates or low rates help or hurt these banks anymore. to lower rates this year, if we get rate cuts, does it help this particular investment? >> i think we are talking about these markets and market security portfolios that for regional banks haven't had to run against capital. and i think what has happened is as time has passed, some of these portfolios have shortened. they rolled down. those losses are not as great as they were a year ago when we were looking at them. but i think when we look at the regional banks, they are also a little bit more asset-sensitive and so in a funny way, higher rates for longer may actually be more beneficial for them when you look at the asset side. loans repricing and the like. the thing that would make an even better for them would be if we got some growth and we haven't seen a lot of loan growth. lisa: i was reading some of your

research talking about how the contingent capital bonds are a key part of your portfolio. they were sort of maligned during the whole credit suisse episode. you're talking about european banks in general and bonds of those companies. a lot of people would say this is incredibly risk on, hinged to some sort of global economic recovery. is that accurate or is it simply a valuation issue and if you get paid 7%, 8%, 10%, it looks pretty good if you keep getting paid? >> i think you are right. things have shifted in terms of how we think about the european banks. they are very different today than they were even back in the time and we had negative rates in europe. because now banks have earnings power. so when you look at what happened as the ecb started to raise rates, we started to see these banks finally starting to generate some earnings. and what has been particularly interesting is in peripheral thanks, the deposit has remained relatively low at least compared to what we seen in core european

banks. while it is coming down a little bit now, it is still helping to generate a lot of earnings power. when you toss to the equity investors they are beside themselves because they are getting buybacks and dividends and the like. what has been remarkable is the losses have been relatively low for these banks. lisa: if you live in a hillier spain, do a better job demanding a better job demanding higher yield under deposit. when you broaden out in the united states, you pointed out this pretty amazing statistic that about 30% of nonfinancial companies that had some benefit from government stimulus programs or the buildout of ai. you are talking about europe. in the u.s., how much is that a tailwind that has been understated in terms of corporate quality and giving you

confidence to go into a number of companies? >> it has been completely understated to me and if i could just take a step, when we look at the macro statistic like top-down numbers that were coming out, they were giving the impression of things being week. and yet underneath the surface there was a strength. people underestimated the impact of this fiscal stimulus. it was announced sometime ago but it has taken a time for that money to actually make its way through the system. so the loans and the grants are now finally starting to be dispersed. but remember that even beyond the dispersal of these moneys you are going to have tax credit that can persist for many years. the obvious ones, people think about the chips and science act, but utilities are beneficiaries. energy companies are beneficiaries.

i really think it's going to have a lasting impact as a tailwind for these companies for the next couple of years. annmarie: how does november change that, though? is there a chance that trump, if you was elected, could unwind some of these? >> i think really the difference that mike pence some of these programs from getting unwound -- granted, evs are probably something that is going to go, but when you look at energy companies, if you are a large oil company you can get a tax credit for carbon capture. i'd be surprised if the trumpet ministration would take away something from an energy company or if we look at where some of the factories have been getting built, those are in red states. do you really want to take away jobs in red states? we think yes there will be some adjustments but i don't think it is going to be a widespread repeal of what we've seen already put in place. >> so they made --

annmarie: so they need to pick and choose their battles. how broadly are you thinking about the impact of the election? >> it's tough without bully know, the policies are. we hear and we think that some of the programs of the trump administration if it comes back into office could be more inflationary. we talked about tariffs and the like. it's hard for me to really gauge that. so really what i'm trying to focus on is what is going on with companies from a bottom-up basis, and when i look at what is going on with companies today, we are actually focusing our measure of earnings between now and the first quarter to be up about 6%. and that is pretty good, about a line with the 20 year average. i don't think a change in administration is going to have any impact on that. and we will get confirmation of that as we go through earnings. jonathan: it's even harder when you are not sure of the candidates are going to be, either. we believe that there.

thank you for being with us. let's get you an update on stories elsewhere this morning. >> tsmc overnight reported sales at the fastest pace since 2022. they are the sole supplier of nvidia and apple's most advanced chips. does ai chip orders help to make up for lackluster smartphone sales leading to revenue that 40% in june. the estimate, just over 35. houston is grappling with blackouts, blocked roads, internet disruption and spotty access to gas in the aftermath of hurricane beryl. more than one million homes and businesses are likely to be without power until at least tonight according to the main utility provider. beryl now downgraded to a post-tropical cyclone is carving a pass to the northeast with 30 mp wind. the national weather service warned of cash flooding for northern new york and in wheatland today. and spain is headed to the finals after a 2-1 victory over france.

the first of spain's goals shot by a 16-year-old, the youngest to ever score in a men's european championship. spain will now play the winner of today's nederland/england match where i will be glued to my tv at 3:00 p.m. eastern, and that is your brief. jonathan: at the same time, of course. what a player. 16 years old, turned 17 on saturday before the final. >> the maturity to be able to deal with that kind of pressure with that kind of gamesmanship is really just beyond imagination for a 16-year-old. jonathan: absolutely phenomenal. can't wait for the finally this weekend. a democratic party divided. >> i believe democrats will win up and down the ballot, joe biden will be reelected and we are going to take the house. >> he just has to step down because he can't win jonathan: that conversation up next.

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jonathan: equities positive by one quarter of 1% on the s&p 500. the lift continues in the equity market. yields are down by two basis points. the tenure, 4.27. a democratic party divided. >> we must support him. donald trump's election would be extremely destructive to democracy. >> house democrats are very confident in the agenda that we've been a part of the past few years. >> i believe democrats will win up and down the ballot, joe biden will be reelected and were going to take the house. >> he just has to step down because he can't win. jonathan: the latest of new jersey, the congresswoman becoming the now -- ninth house democrats: president biden the call out of the race. biden's campaign working to restore confidence in bolster support from progressive leaders around the country. joining us now is democrat

economy jonathan jackson of illinois. thank you for being with bloomberg surveillance this morning. i think he is up to the call of the presidential campaign season. it is a question a lot of people in this country have. it's not just another form of the head of us, it for years after that. what gives you the impression that he could handle not just the campaign for the next four months, but the four point five years of governing he would still need to do? >> i think he's got a great team around him. i think his agenda is clear. his focus has been very precise. when i think of the alternative that we are confronting at the moment, it's about direction, it's about character. president biden has been very robust on the campaign trail in the last week since that debate, if you will. i think he's got a very strong number two in vice president

harris and he's able to share with us as cbc members on a private zoom call when he was able to take our questions, so i'm very excited, very confident that he can go forward and will go forward in a very robust manner. lisa: if you think he has a strong number two and he's 81 years old in the polls continuously show not just post debate, but an issue with the electorate for over a year that they just think he is too old to continue, why not promote the number two? >> i think he has been promoting vice president harris. we don't know what the future holds, but i would tell you this, that they've been out on the campaign, this has been a scandal-free administration. he's been very focused. if you look at the alternative on the chaos, confusion, the calamity, i think the press has not put it in the proper light if you think that a person that has been convicted by a jury of their peers of sexual assault, you usually get a handle on your

name being called a sexual offender. but no, they'd given him a pass on that. so character is on the battle. i think the african-american community is very clear about what is at stake. we've gone the wrong direction with supreme court. 116 justices in american history, roughly 12,510 representatives in the house of representatives. we had 46 presidents, but this nonelected group of people that sits on the u.s. supreme court is able to dictate law. i think we need to look at some sooner traditional reform in the future that the power that they have and the corruption that they display is unprecedented, so the supreme court is on the ballot for this election season as well, and i would trust president joe biden and vice president harris to make that decision, recommendation before the american people. annmarie: i want to show you some new data we got this morning. they say that trump currently is 47-44% lead, the most dramatic shift the scene in this race and

david wasserman said "trump's current numbers among black and latino voters are incompatible with any plausible democratic victory scenario." what does joe biden need to do to really shore up the black and latino communities? >> well, i think he has to continue to stay in front of the community and also share with him all the things he has done and what is to be promised in the future. we know on the sunday before the tuesday election most democratic candidates find their way to african-american church. the african-american community, if you think about what president biden has done one thing that is huge, this is the first time an african-american woman was even considered to go onto the nation's highest court. the highest court in judge catania brown -- ketanji brown. what he's done on trying to put people on the judiciary has been

very outstanding. we are now seeing the erosion of african-american wealth. looking toward going to 2050 where they will be zero african-american wealth also being projected. but if we could talk about peace and security in the ukraine and israel and gaza and taiwan and talk about rebuilding lands, we can talk about rebuilding urban america, those persons to have a history of being the descendants of americans that have been enslaved, that if faced all the worst of america, they've not had an economic plan that has been sustained or implemented. our cities don't have to look this drab. we can also pick up people in america and once we do so we will expand the market. i believe there is a lot more potential when we saw the path of segregated athletic fields. once they were transformed into 11 -- level playing field, now we are proud of the mba, proud of major league baseball, all these other endeavors.

we can do the same without economy. when people have equal access to capital that has to be a major focus of the biden administration. the financial institutions created to have long-term, sustainable growth and inclusivity in the american economy. that's a promise, that is a commitment that should be made to the african-american community. it would be good for america and for the world. lisa: i want to go back to what you were talking about at the outset, that it is character on the ballot. we were going to alike as a person, a candidate, you're talking about donald trump. a number of polls have shown that harris and a number of other candidates would do better than joe biden across the ballot come across in donald trump. why are you still supporting joe biden if you think he has a lesser chance than other potential democratic contenders to win in an election that you are framing is quite important? >> i would say it this way. you're talking to someone who

has elected office and anyone in this position, you understand critics come after doers. we don't look at all the opinion polls. opinion polls will tell us we are wrong, that we can't win and that we've overcome many of those obstacles. we are in the position now of molding and shaping opinion. and that is why i stand on the side of. i appreciate those who have dissented. i disagree with them. i think it is healthy that we have debates, and i have liked to see a more rigorous primary debate schedule that gives other persons the opportunity to get on the stage, but here we are. we are about four weeks away from the democratic convention and i think these different opinions and party persons that may disagree with them, but i respect their opinion. i think in the end it all comes together. i don't want someone to be crowned the next president. if someone has a dissenting voice, i want them to be heard at the convention. let's keep the conversation open and robust and let's take our

case to the american people. this ultimately decided not by the donors, but by a radical proposition, and that is that every person has a vote and count on election day. one person, one vote. this is where the big -- beginner class and the working class all have one voice, one vote on election day. now it is time for us to shift opinion, not simply follow what the opinion polls are saying. jonathan: i wish we had more time because we've got plenty of follow-up to that particular last comment. congress been jonathan jackson of illinois joining us from washington, d.c. i know you wanted to jump in. >> he is a staunch supporter of biden but he says he wishes there was a more rigorous primary. with this in error? -- was this an error? annmarie: the question is, what if they can't? jonathan: the third hour up next. tracy mcmillan of wells fargo,

and veronica clark of citi. for new york, this is bloomberg.

♪ >> this is a market that we still see is fairly constructive. we believe the equity market

rally can continue to trudge higher. >> these handful of names heavily masked everything. markets don't have to stay at the highest. >> you look below the surface, markets are only doing ok. >> it just feels like there are very few bulls out there, everybody who comes on has kind of embarrassed tone to them and the markets don't really start that way. >> there is an unprecedentedly wide range of outcomes possible so no longer can we think about investing around a central base case. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: third hour of bloomberg surveillance starts right now. looking ahead today two, the chairman understands the trade-offs have shifted. that's important. now they need to tf. i don't think anyone has expected that a little bit later this morning. lisa: he's not going to come on

and say september is on. up is up. we did see a 36 for recordation on the s&p 500 regardless of what we hear from fed chair powell but what we are hearing under the surface that fed cut is crucial to cause later this year. jonathan: he said he wouldn't give us clues on the timing of a policy change in any kind of give us clues on the timing of a policy change by acknowledging the elevated ration is not the only risk area this is the shift from the chairman. this is the shifting balance of risk that people on wall street are thinking about. for the last two years almost exclusively, we've only talked about one side of the mandate because the other side was so strong he didn't have to look at it. labor market was good. let's focus on getting inflation down. now you start to see some frank of the ages which is what kathy said to us a but earlier this morning. unemployment is starting to inch up.

there is a reason to have a more balanced room, to acknowledge the two-way risk, not just look at price stability, but full employment. lisa: this is not an overheated economy and the specific language, elevated inflation is not the only risk we have, reducing policy restraint too late or too little could unduly weaken economic activity. of course, i want to hear what undue weakening means. they cut by more than 25 basis points? what is on the table? they won't tell us. >> as he said that, he said considering where we were two years ago, and they wouldn't have said that until the last couple of readings. and that is why everyone says now he is teeing up the cut. he is ready to go. talking out of fact that the data has been moving to his side to do this. i was struck not just by the private message, but what ubs

put out today from the economist. perhaps the federal reserve chair has opened in economics book. powell told the senate banking committee that cutting rates too bad -- too early to be bad, but more good data was required to induce a rate cut. the market is just ready. jonathan: they've been stunned before by a couple of head fakes. we have edition -- disinflationary process started, giving the impression they could back away from this restrictive policy, and then q1 happened. you start to get these upside surprises, they just need this of economic data to get more comfort. specifically the confidence that q1 was a head fake. i think that is directly what they were talking about. we can move on, we won't be in the history books are making the wrong decision out of the 1970's move and we can look at protecting and insulating this labor market.

the question that a lot of people have is that if you wait and you keep waiting, there is a risk here that you might be too late and if you think about the decision in front of them, and this is not a criticism, what is the biggest risk right now? holding too long or cutting too soon? you can just hear it in the commentary on the wall street side of things that they believe it is holding too long and not cutting too soon. lisa: especially because you have two prongs of the dual mandate. it is unemployment the labor market and disinflation. if you look at both of those metrics, they are both moving in a direction that would send a green light to them to cut rates. so a lot of people are saying why wait? this is the issue. if you are conditioned by recent events you think way second, we might not know what we know and that is why i want to understand how they are even looking at the current economy that a lot people are saying is very different than one we've ever seen before. jonathan: equities right now on the s&p 500 going into the

opening bell just positive by about a order of 1%. coming up, we'll catch up with trace mcmillan of wells fargo as stocks it for 36 record high of the year. tesla on track for its 11th straight day of gains and veronica clark looking for the fed to start cutting in september. we begin without top story, the s&p 500 hitting it already six record high of the year so far. investors should rebalance to avoid equity concentration risk. she recommends trimming tech and communication services and adding industrials, materials, energy and health care. tracy, let's talk about that. what is behind both? >> market brett has been extremely narrow with the top five names so far this year

contribute about 60% of the returns. and they a lot of that is coming from communication services and information technology. in fact, those are the only two sectors outperforming the broader s&p 500 index. so we think that it makes sense to take some gains out of those two sectors and look at those sectors that should benefit from a broadening out of the earnings recovery later this year, and we see sectors like health care, energy, industrials and materials benefiting later in the year from that broadening. jonathan: putting that together with your fed call, you only see two cuts in 2024, 1 in the 2025. if you are looking for that plus a broadening of the earnings it sounds like you're pretty constructive on this economy. >> we are expecting growth to

continue to slow. we do think we are going through a soft patch here but we think it will be a moderate soft patch. and as the fed starts to cut rates, we do think that that will help to stem some of the consumer weakness that we are starting to see. and we also think it will make credit more available. those two things we think will lead to a modest recovery as we move into 2025, and so our targets are higher for u.s. large caps in 2025 than they are today. we do see some choppiness here through the end of the year, but looking out a little further, we do see that prices could easily be higher by the end of 2025. lisa: this is fascinating to me because it has similar it is to dance healthy of morgan stanley who is talking about how he is expecting a broadening out.

he is seeing area that faced consumers that were dependent on consumers are more highly leveraged, that are in the weaker cohorts is doing better at the fed cuts rates. is this all contingent on the idea that the fed will cut rates in september or if the cycle started and then start to see the true broadening? >> our base case is that scenario exactly. however, if the fed does not cut rates it is probably because the economy is actually doing better than anticipated, in which case we would expect earnings to continue to improve and continue to support prices. lisa: this is sort of the push/ pull that people have right now. the actual participation of certain names will change because this is been a very bifurcated economy. is it too soon to sort of go full force, full throttle into some of the broadening out

traits, into some of the other names that haven't really kept pace with "the magnificent seven". if the fed hasn't cut rates yet and you are not certain, that kind of strength would just support what we've seen is already winning. >> really what has been winning is the ai-fueled trade. and this is a long-term trend that is playing out in phases. in phase one is that direct investment, direct investment in technology stocks that are going to benefit from the new technology. then phase two is really the data center buildout, the capacity buildout, the energy needed to support that. that should support materials, industrials and energy, and then phase three is those companies that are going to benefit from improved productivity. health care may be among those

sectors that would benefit most. so we do continue to support that broadening out into other sectors away from communication services and info technology, although we still have a neutral position, so we are not under waiting those sectors, but we are seeing gains and spreading it out a little bit. you annmarie: talk about momentum being the strongest factor driving the equity market. one of the biggest risk for vulnerability to that? >> the biggest risk is investor sentiment. liquidity has been driving a lot of this market. momentum has been driving it. should investor sentiment start to falter, then we think that some of the momentum that has been driving the market would certainly come out. now, what could cause investor sentiment to weaken? certainly if growth slows more than expected. if growth slows at the same time

that inflation does not cool as much as expected, if the labor market continues to soften more than expected, there are a number of factors that are dependent on upcoming data that will help to guide us in terms of just how all of this is going to play out. >> look for that broadening out of the earnings. i heard that a little bit earlier as well. lisa: how much does this really hinge on the fed rate cut? the idea that this will pave the way for a new kind of earnings boom. it's just really interesting to me to see all the things that have to fall into place for that to happen and then what happens with some of the ai stocks. basically it is all set in trillion dollars in money markets. jonathan: something like that, but there are two very different cuts. in the kind of rate cut that tracy is looking for is the more bullish, constructive rate cut, the midcycle adjustment, that

growth has decelerated but growth is still ok. the undue beginning of the labor market. if unemployment starts to climb higher, maybe too high. that they carry different kind of rate cut. >> the broadening out called zero -- resounding endorsement of the call and if rate cuts are part of that as a midcycle adjustment. jonathan: let's get you an update on stories elsewhere. >> donald trump is getting closer to announcing his vice presidential pick. during a campaign stop in miami teased but did not officially announced that florida senator marco rubio could be his choice for a running mate. he did stop short of making the official announcement but did say that he was officially challenging president biden to another debate, this time without moderators. saudi aramco has launched its first sale in three years. the world's biggest oil exporter is selling bonds at 10, 30, and 40 year maturities, hoping to raise at least $3 billion to fund several large-scale projects.

saudi arabia's government affiliated companies have our own vast amounts this year, propping china at the biggest issue of international debt among emerging markets. in the number one at wimbledon is out. janik center was eliminated yesterday after losing a four hour, five set match to medv dev. a new professional you a new professional your grand slam record. the quarterfinals continues today with novak djokovic continuing his quest for his eight wimbledon title. jonathan: thank you. novak will be in the final this weekend. a fiery novak. annmarie: that was pretty interesting. jonathan: going to the fans saying you can't touch me, i've been in much more hostile environments. lisa: he doesn't like the boos. jonathan: i think he is sensitive with the family and the crowd, with the kids in the crowd, i did notice that. but were they doing him? that is a very separate debate.

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(♪♪) sandals rhythm and blues caribbean sale is now on. visit sandals.com or call 1-800-sandals. jonathan: equities on the s&p 500 firm or by a quarter of 1%. this case of morning calls. first up, raising its price target to 600, from 530. the analysts saying the ai focus is driving revenue growth across the business. next up a second call, boosting its price target on apple to 260 from 220. setting the decision to buy back $110 million in shares when others are spending on general ai, that is an interesting one. and finally goldman raising its target on tesla to 248, maintaining a neutral rating than expected -- better than

expected. it is a positive sign for future pricing. tesla looking to make 11 straight days of gains. that is after posting 10 just yesterday. we are joined now for more. craig, it is 10 days of gains up by more than 40%. the founder of pimco coming out and saying it is trading like a meme stock. what i do reporting on, what is happening with this name in this market? >> it's hard to disagree. i think you look at what has happened to, goldman may sort of look at the inventory clearing in the second quarter as positive, maybe some stabilization in the margins for this company, but those margins have been moving dramatically lower over the last year, year and a half as the company has significantly cut prices, and we've not seen the result of

that being increases in deliveries. within the company over the last seven quarters seeing very, very flat deliveries. this is a growth company that is no longer growing. real questions about where that growth is going to come from going forward if the company is unwilling to add to the lineup, which elon musk has given every indication that he doesn't want to expand the lineup, that he wants to continue to really leverage the model 3 and the model y for the vast majority of company sales. jonathan: you know where the carrot is now. it is august and it is the robotaxi business. talking about pricing a company for growth that doesn't have any. can that story from the growth story around? >> there's real reason to be skeptical on the basis of we look back at the years of experience we've been through with mosque talking about this and putting this on the drawing board. you go back to 2016 when he was

really first talking about this idea of trying to make this a business, of putting self driving vehicles on the road, a shared fleet of them. tesla running that fleet, managing it as a sort of competitor, and this was all something that was on the drawing board way back in 2016. really executing that has proven extremely difficult. you look at this segment leader in waymo, they are marking really were -- remarkable progress of late in making their service available more to the public, but scaling that business has been a real slog and they've really focused on particular markets, whereas tesla has set a much higher bar for itself with one thing to do sort of general-purpose autonomy. so how exactly do the square that circle, that is really going to be something to watch on august 8 when musk has scheduled this unveiling. lisa: i think you are very

diplomatically doing the collective head scratch that we all are in terms of why now in terms of this rally that we are seeing in tesla stock. this actually adding to that collective head scratching given the fact that there is a report citing cox automotive research showing that tesla's share of electric vehicles in the u.s. has fallen below 50%. they lost ground to general motors, ford, hyundai and kia, all of them actually gaining on them in terms of the tv sales even as collectively this seems to be some steam lost. how much of a hurdle do they have at a time where a lot of companies might have deemphasized the ev, but are still gaining share and creating a firebase? -- buyer base? >> for tesla to go below 50% is a pretty significant milestone. it has sort of been assumed that this company was not only dominating the ev market, but

going to continue to dominate it sort of in perpetuity. and i do think that you do hear from some people that maybe this is part of the plan, the idea that the ev market is going to get more and more competitive, and musk doesn't necessarily want to play that game, that he wants to take this great big leap. i think that all may be well and good ending the sort of thing that you would expect of a disruptive company, but i think people under appreciate just how difficult it is going to be to get a car to where you don't need any human behind the wheel. i think we need to look no further than all of the money that google has pumped into this effort for years and really done this sort of in a step-by-step fashion. musk, as we know, is not one to really be patient, work well with regulators. this is an industry where one accident, one collision with a pedestrian or with a vehicle that results in fatalities can

lead to you no longer being able to operate on the roads that you've been on. we've seen that from uber. i don't think necessarily that there is a reason to think that musk is going to suddenly change his ways and work better with the authorities who will give him the green light, at least initially, on the basis of the promise that this technology offers. lisa: do we talk too much about tesla simply because elon musk is such a firebrand? tesla shares are up 5%. general motors shares of almost 30% year-to-date. how much has the drama around elon musk and tesla overshadowed some of the gains in some of the other auto manufacturers? >> it is a really interesting question and they do think that some of the gains that you are seeing among some of these other automotive names has actually been on the basis of you know what, these companies have been

spending sort of like drunken sailors to try to catch up to tesla and maybe it is not the best use of capital. maybe we would be better off actually getting some of that back in the form of a dividend and a buyback. though shareholder returns actually is a big factor behind gm, but i think the reason we do talk so much about this company, you want to talk about the 10 day run that this stock has been on, it has added 250 billion dollars of market cap over that stretch, and that is multiples of what some of these other companies are worth. do they get talk it an awful lot? absolutely. but for good reason in the sense that we just don't see these sorts of moves in terms of market cap gains among anyone else in the space. annmarie: i want to ask you about the tariff hurdle because rival signed this deal to start now producing ev's in turkey.

is this a way they can sidestep the tariffs that europe has put on, and is this something that potentially elon musk should start doing? >> they are not only setting up in turkey as you alluded to, but also in hungary. they've already started work on a plant in hungary. i do think it is really interesting in the sense that the chinese carmakers have had these big ambitions to crack the european market. they've done so in a way to try and avoid the scrutiny that they alternately weren't able to avoid in the sense that even making bits of progress in cracking this market was enough to set off alarm bells in brussels. so we seen these tariffs put into place. this would be a way around those, and i do think that this is an underappreciated risk to tesla in the sense that the shanghai plant as of a couple years ago became the export base from which tesla really tried to

leverage and to a great degree here in europe, where they have localized model y production in germany, but the vast majority of the model 3 they get for this region come from shanghai. those are at risk of real pain in the form of these tariffs that are coming into play in the coming months. jonathan: appreciate the update. thank you, sir. quite a run. the best performing stock on the s&p 500 over the last month. just a quick note, j.p. morgan hiking the price target on that name by more than 80%. the latest call from them overnight. more on data two for chairman powell on capitol hill.

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♪ >> we are on the longest winning streak of the year so far on the s&p 500. six consecutive days of gains. equity futures this morning signaling we might add to it. up another one quarter of 1%, adding some weight to the rally on the nasdaq 100, up another 4/10 of 1%. trying to participate up by 0.5% this morning. lisa: we've been talking about rate cuts and whether they will be good or bad rate cuts. one thing i find fascinating ahead of j.p. morgan earnings, financials have been outperforming. they outperformed yesterday and there the potential for them to

perform again today. we know that small caps include that kind of pocket. that i'm actually watching more closely today. jonathan: the pushback around the politics, morgan stanley, brian leva, invesco basically saying it doesn't matter whatever happens in november, markets are going to be ok. >> people are looking at the actual profitability of the companies. it is hard to see how one candidate or another is going to change that given that is already locked in. whether they will they have to some of the potential changes that would come down the pipe or not and it seems like everyone is saying that it's kind of the bigger question. >> 23% on bank of america year-to-date. goldman up by a similar amount. j.p. morgan is up by 22.

look down the list, these names of had a decent run. lisa: given the fact that they have been underwriting quite a debt, not just on the government side but on the corporate side, and then you talk about just the fact that they have been able to buy back their shares and pay out dividends and becoming more of a value stock for people who previously were disappointed that they want. yields pushed into just a bit lower. yesterday was about the front end of the curve. in little bit later this week, tomorrow, in fact, 20 $2 billion of 30 year debt.

lisa: even if these are all incredibly successful auctions i'm curious to see whether there is less appetite for longer duration bonds even some of the uncertainty around the deficit, around progrowth type of programs at a time when the economy is already going pretty well and we have a deficit the steepest we've ever seen it. these are some of the questions people have. ryan zinke hasn't seen the bond vigilantes, show them to be. fair, although we've seen people come out and just sort of expressed some concerns. jonathan: seated in the u.k., cenestin france. maybe a couple days a week or so. will he start to see it in treasuries later this year? we will see. we will see if that continues. if you want to see no price action at all, just to get a snapshot of g10 in foreign exchange, the whole of g10 is doing nothing with the exception of the new zealand dollar and norway's currency. the rest of the barely moving.

industry research firm saying apple saw a 21% gain in personal computer shipments for the second quarter that marked the second largest gain for any pc maker. if this going to be like this new phase of pc buying? annmarie: pc sounds cool again when they have some interesting ai advantage. they really are gearing up for the next few quarters, this ai adoption to start to ramp up and it is going to help the likes of not just apple, but down, lenovo, all of these companies. it is like vintage, it is cool again. lisa: i honestly wonder what kind of ai advancements we are talking about. is it just that you've got a cooley mode? -- cool emoji?

talk about ai as if it is creating this new factory. i think it is important to look a little bit more what it actually is achieving because it could be different. what it is going to do on your pc, i totally agree. i'm not saying that maybe what is advertised is worth buying, but clearly it is working because they are being able to sell a lot more, which notably, it was a bigger phone, ipad. now it is i want a pc because i can tap into this ai world. jonathan: if you're really bored of the weekend, turn on the g olf. ultimately, everyone is using those letters to try to sell products. lisa: that's my point. is the ai golf club going to magically understand? jonathan: six. no, eight. he corrected it.

annmarie: but a few years ago. jonathan: donald doesn't believe him. most people that listen to that don't believe him. we are talking about the debate again, art we? janet yellen facing questions from lawmakers over president biden's health. >> as a cabinet secretary have you noticed any mental or cognitive decline in any of these meetings? >> the president is extremely effective in the meetings that i've been in with him. that includes many international meetings, like his meetings with president xi. >> somewhat evasive about the last time she actually met the president. annmarie: she was talking about these big international meetings she sat with him across from other heads of state, but she wouldn't say when she was last in the room with him. she would not give that date,

and then has there been any discussion amongst the cabinet, and she said flat out, no. this is a preview of more to come. any cabinet official that testifies in congress or sits for an interview, the first few questions are going to the what is the mental acuity of the president today? jonathan: based on the last two weeks, they are questions that are warranted for cabinet officials. lisa: they are warranted, and this is a tricky aspect to me. career risk which way. what we purchased, credit congressman come on this show today and say essentially we are trying to change the message. we are for him. we are going to back him. whether we should have done it differently we are not going to talk about right now. i want to know at what point it is a career risk not to change course now if it is going to be increasingly difficult to change that message something with rhetoric. jonathan: wouldn't it be good if it was just for the good of the

country and not just for the good of their personal career? lisa: you're trolling the. jonathan: giving a september rate cut on the table while noting the risks arising for the employment half of the fed dual mandate. mike mckee is not bothering to focus on what is happening at the house because mike mckee is somewhere else this morning. why are you there and not down in washington, d.c.? >> well, because it is a lot nicer out here i think than in washington these days. washington is a tough place to be. jay powell has to be there. but his testimony is going to be the same this morning. nothing new in his prepared remarks. but when they get to q&a, perhaps a little more of a focus both on when they might cut rates, even while keeping wall street hopes alive, and other politics of it, as annmarie knows very well.

the house is much more political than it's questioning them the senate is. annmarie: it seems like we got the sense that he is recognizing the weakening and the labor market that a lot of people have been talking about. he's talking about this is not a frothy economy, you are seeing a balance and elevated lesion is not the only risk we face if they don't cut rates soon enough or deeply enough. that could be a problem longer-term for the labor market. i am paraphrasing that. how much are people saying that this is a shift in tone that is paving the way for a september rate cut unless something dramatic pops out to really change that view? >> i think we are not quite fair to say it is guaranteed, but it is a shift in tone that raises the possibility of september. put that in play. the fed is acknowledging through powell and we've heard from others as well that the labor market has definitely slowed. we are seeing a rise in unemployment. we are already where we thought they would be at the end of the year. the numbers have come way down

to about 1.5 percent for the quarter so far. consumer spending is falling off. they are seeing an economy that is slowing. now, that is what they wanted. and if they are getting what they want and inflation stays well, then you go back to the old question, is this the right interest rate for this economy? by september, they may be able to answer no. annmarie: to tape -- today potentially beget more of political questions. senator vance asked him about integration and set in the short run it may have helped beget the labor market got looser because there are more people. is this the line that powell is willing to walk? is talking about the fact that as jonathan calls it, the keyboard are actually aided what was going on in the labor market coming out of the pandemic.

>> he was very thankful to not go over the line into talk about the moral implications of this, whether people are legal or illegal, but we know how tight the labor market was. companies could not workers. so having more immigrants helped. going forward, the united states birth rate is falling, so immigration is important. that is all economics. so he feels comfortable saying that but he doesn't want to get involved in the question over who should be here or who should not be. jonathan: the politics, very different. the latest over in jackson. joining us now to continue this conversation, veronica, i want to start with you and a key feature of your call to the team. for quite a while now, the deceleration in the labor market. and we are starting to see it. do you feel vindicated? >> it was a very out of

consensus view a couple months ago when we were talking about even the possibility that the fed hike again, and it is easier now to convince people that things are slowing. i think it has gotten much more evident in the labor market data. we are still running consistently strong payroll job growth but i think people are aware that there's maybe some issues with that survey. maybe it is reflecting some immigration. we are still seeing those signs that we are headed to a slowdown. jonathan: let's be clear about that, you believe that ultimately this gets worse when they start cutting in september, they don't be stopped. that is where the daylight is now between you and the rest of the street. i still sense the consensus on the street is midcycle adjustment starts in september. are they already too late? >> i think the issue is that everything stabilizes here at

4.1%, that is still historically low. that is usually not how these cycles play out. they started very gradually, very slowly. not even just the last couple of months but nine months ago we were starting to see signs of weakening. it hasn't been enough to prevent that weakening. we're just expecting that this look like most historical cycles and unfortunately, gets worse. >> steve, what is your view on that, at everyone is pricing and at their base case that the fed has time to make midcycle adjustment soft landing on track? you agree that it is looking less likely the longer they wait? >> know, i kind of agree with the fed on this one because if you look back to the most recent cycles that we've had, in addition to whatever fed tightening there was that were acts of god, whether it is covid, the great financial crisis, even the collapse of the internet bubble in 2000, it has

been a long time since we had a slowdown by tightening. i think if the economy is slowing down, all the data shows a gradual slope and a broad set of indicators and there is nothing that suggests to me that we are going to go over a cliff. i think the fed realizes this. you do 25 a meeting too early or too late, a loss function is very flat. it's nothing really steep so if you miss it, you are done. lisa: veronica, what is jewelry but to that considering the fact that a lot of people say it is not usually linear? >> usually it isn't linear and beget that question a lot, does there need to be a trigger, some sort of external event that happens? i think this could be a

traditional cycle even if we haven't seen one in a while. we've seen for a while now that firms are really looking to cut labor costs by not hiring. what we haven't really seen yet are the layoffs. we see this increase in initial jobless claims for people are pulling back on spending now in the last couple months and they feel worse about limit prospects. if that means they are cutting back on spending and that is less business revenue, maybe that is what gets businesses to that last step of layoffs and those can believe build on each other. annmarie: steve, your reaction? >> i would say historically it is very hard to find. especially when the nonlinearity would be a great financial crisis or some big event. you look at the labor market, he sort of see that there are some firms that are going to be quick to lay off people, then you get to the middle part where the

process is done. so far, it looks like a very truncated curve. and yes, we expect to continue to lay off, but the question is are they going to do it so fast that the fed says we should have cut in may, we are way behind? i doubt that is going to be the situation that they face. i do think they have been overly hawkish maybe for a while, but i don't think it is going to bite them in the back, so to speak. annmarie: how does this look if there were to be layoffs, the speed of it? >> we are not talking about 2008 or covid or anything from the low already. maybe going 1% more, and about five. but i think that would be enough for the fed to say that is an unexpected weakening of the labor market. we are expecting 25 a meeting,

so he wouldn't be the most dramatic downturn. but it would be a recession, run-of-the-mill recession. jonathan: this is tremendous a difficult to do at the moment. you've put in your research half the time we are thinking about trump trades, the other half we are talking about this deceleration of the economy which might be dollar negative. do you focus on one half and the other or do you try to do both at the same time? >> you have to try to do both at the same time while being cognizant that every day is data matters. i think overall, the fed cycle, the weakening of the economy is going to end up being the dominant force. partly it depends, assuming that trump wins which is the assumption that most of the market is making right now, assuming that he wins, the question is what he chooses to emphasize.

you can go the cut taxes route and the high tariff route which i think much of the market with think is inflationary over the longer term. he can go on the drilling route, cheap oil, cheap gas route which would be disinflationary. i think until he get to that point where we actually understand, assuming he wins, what he's going to do, the market will probably emphasize the activity side rather than the political side unless he makes this absolute commitment that the first thing he does is put tariffs sunshine or something. jonathan: steve, thank you, sir. veronica, i just want to finish with you. i'm sure clients are asking you and your team about it. what are you saying about november? >> we are going only to get more questions of the month storm. we don't have a lot of concrete details of either a trump

victory or a biden victory. obviously it's going to depend on what happens in the house and senate also. both scenarios look pretty inflationary, like wider deficits for sure. jonathan: if you had to say in percentage terms, 50% on the fed and 50% on the election? >> they political side is just a lot of drama for now. jonathan: good to see you as always. feeling vindicated it the incoming information. not what anyone would wish for, but ultimately that the celebration coming through. >> houston is grappling with blackouts, blocked roads, internet disruptions and spotty access to gas in the aftermath of hurricane beryl. more than one million homes and businesses are likely to be without power according to the region's main electric utility. now downgraded to a post-tropical cyclone after stricking texas as a category one hurricane and carving it have to the northeast. the national weather service warned of flash flooding risks

for northern new york and new england today. microsoft and apple have given up the chance to be observers on openai's board. the move comes as global antitrust regulators pickup scrutiny. microsoft which has invested $13 billion to create chatgpt sent a letter to the start of announcing its withdrawal from the board. and bmw is pulling away from its ev competition while instrument rivals for the sales in the second quarter. deliveries of bmw battery-powered models surged 22% contrasting with 25% drop from mercedes and deliveries for audi. bmw has ruled out several remodels, moving ahead of some of its competitors. jonathan: thank you very much. up next, setting you up for the day ahead. we will be back in just a moment. you are watching "bloomberg serveillance."

♪ jonathan: looking to make it the seventh day of gains on the s&p 500. we are firmer here, higher, adding some weight to the s&p. up by one quarter of 1%, yields a little bit lower. 4.27.83. as we count you down to the opening bell, through today and the rest of this week, 10:00 a.m. eastern, jay powell wrapping up his two a congressional testimony and throughout the day, more fed speak. tomorrow morning is the big print, 8:30 eastern time, u.s. cpi. are we starting to see a sustainable, more durable rate with claims higher? i think that would be concerning

that, people. let's look at delta earnings which is worth watching as well. then we are looking ahead to this one right here which for some of you is the event of the week. president biden holding a solo news conference when the nato summit ends? look after that thursday afternoon. friday brings us ppi and then we kick off q2 earnings with numbers from jp morgan, wells fargo and citi. we talked about this a million times. what stands out for you now? lisa: it's got to be cpi and jobless claims. we really understood today why the rate that timing was so important. they are kind of using that at the benchmark for when to start broadening out the trade away from "the magnificent seven" into some of the other places. to me, that is why i find potentially will begin on thursday so interesting. annmarie: for me obviously it's going to be the press conference. but before that this evening

he's also going to be hosting a dinner for these allied nations and the alliance. if that is eclectic yeah and you can't joke about it anymore because the president told governors according to reporting that he was going to wind down activities and not be part of them after 8:00 p.m. and what european diplomats are saying to us is we wish we could focus more of the substantive issues at play in nato but we are also focusing on the health and mental acuity of the president of the united states. jonathan: this is part of the problem. the bar is so low for the president to clear. just get through a news conference without any tasks. -- gasps. the talk -- the fact that we are talking about a sitting president's bedtime and not two wars taking place at a nato summit is just bizarre. lisa: it's the reason people have a hard time taking it seriously in terms of market action simply because we are not talking about policy, we are talking about -- i don't even know what. who is going to be on the ballot at a time where there is a

coalescing of democrats but not necessarily confidence that comes with it. annmarie: the fact that he is going to stand behind biden, but at the end he did say well, i kind of wish there was more of a robust primary leading up to this point, but now that he is top of the ticket this is what some are feeling, we just have to go with it. but they are seeing the polling and they are seeing this potential from senator bennett yesterday, landslide trump victory and now they are starting to think career risk, we got to get ahead of this. jonathan: we will catch up with blackrock, sarah hunt, david kelly and stephen richiuto. a whole lot more for the president of the united states. from new york city, this was "bloomberg serveillance." ♪

>> will it be 37 today? less than 30 minutes until the start of trading. >> "bloomberg open interest" starts right now. >> another day, another record for wall street. the s&p 500 on its longest winning streak since january. >> and j powell for day two of his