>> the conventional wisdom right now is going to be this is trump's election to lose. >> joe biden and his campaign, even with all of the dysfunction, should not be counted out just quite yet. >> there isn't a trump or biden trade, you have to put congress in the mix -- >> i think geopolitical risk continues to ramp up this summer. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning. for our audience worldwide, "bloomberg surveillance" starts

now. equity futures just about positive on the s&p 500. coming off the back of a big rally for the small caps. the banks, the regional have been flying. speaking of the banks, 6:45 eastern time, numbers from bank of america. later this morning, we hear from morgan stanley, retail sales at 8:30 care than at the rnc, a week ago, we were not looking for this. we are now. nikki haley speaking at the republican convention. plenty of headlines. annmarie: and the biggest one is trump's vp pick. this is a vp pick for the base. he is not from a swing state, and he does not broaden the appeal. he is pretty much in the maga camp, but he is able to speak to the rust belt. this campaign will make sure this young man, j.d. vance, 39 years old -- only sworn into

public office in 2023 -- will campaign in -- jonathan: the pickets about campaigning, not governance. if we talk about governing, that is where things start to get a little more confusing. what does this pick mean? annmarie: for the policy platform, this will be an individual who wants to be very tough on china, has questions to all the money going to ukraine. when it comes to economics, he wants to put those barriers up. he wants to put barriers up coming from china. he is anti-technology, antibusiness. one of the key voices that was interesting was the teamsters' head railing against big business and also saying we come as a union, are not beholden to anyone or to any party. j.d. vance speaks to that. in his book -- and he talked about this in interviews -- his grandparents who raised him are blue dog, union dairy -- union

carrying democrats. very different when he will square off with joe biden, who says he wants to be the most prolabor union resident. jonathan: just how pro-business is trump volume two going to be? checking out the price action in the s&p. firmer by 0.1%. unwinding some of the move from yesterday. yields were up -- now they are lower. 4.1789. chair powell has confidence about the trajectory for inflation. let's see how confident he feels about the consumer, retail sales at 8:30 the one to watch and there. coming up, we will catch up with jennifer flitton as trump tops j.d. vance assays running mate, andrew sheets as chair powell signals greater confidence, and christopher marinac reacts to bank of america earnings. we begin with trump's grand entrance, the former president with a bandage over his right ear arriving to a standing ovation at the rnc.

trump standing next to senator j.d. vance, the man he tapped to be his 2024 running mate. joining us from the rnc in milwaukee, kailey leinz. walk us through the next 24 hours where you are. kailey: well, it will be marked by more speeches. really the big event of the rnc was the vice presidential selection for that is what we had all been waiting for. trump did that by design. he wanted to improve that ratings of the rnc by announcing the pic while we were in milwaukee. now that is over, it will come to accepting those nominations. j.d. vance, as the vice presidential nominee, will speak wednesday. trump will give his speech, which he has rewritten in the aftermath of the assets nation attempt, to something with more of a message with unity. in the interim, we will hear from others in the party, including nikki haley, who will speak today. the question is that unity donald trump is now speaking about, the idea that he did

extend that invitation, which was not initially given to her after she competed against him in the republican party, trying to signify the party is coming back together, coalescing around former president donald trump. certainly he received almost overwhelming reception when he walked in, made his first public appearance since that shooting on saturday. you can see the way the party is galvanizing around him. of course, j.d. vance, in many ways, an extension of donald trump, just, perhaps, a younger version at 39, but espousing those populist ideals. annmarie: when it comes to the former president saying he is throwing out his former speech and rewriting it, is that the sense you are getting on the ground from individuals, that they are actually trying to lower the temperature? kailey: every single elected official i've spoken with since arriving here sunday has expressed a desire to lower the temperature, to tone down the rhetoric. even when i was questioning a

congressman from ohio, who is, in many ways, aligned with senator j.d. vance, i mentioned to him that it was j.d. vance who pointed a finger at president biden and his campaign and the left in the immediate aftermath of the shooting, saying that they were to blame for the assassination attempt. i asked him, should senator vance, as the vice presidential nominee, be changing his rhetoric? his answer was, effectively, we all need to do that. it does seem to be a total shift here at the convention. but in the conversations i was having with strategists in the days between saturday and yesterday, when the selection was announced, there was a thought former president trump a not select someone like j.d. vance, because he has been such an attack dog, because he is known for aggressively defending donald trump, including with inflammatory rhetoric, in many senses. some thought donald trump may not lean that way with his pick as he speaks this message of unity. but the thinking now is perhaps j.d. vance is going to be able to play that pit bull role while

donald trump, to the public, as he tries to get independent voters or nikki haley voters, for example, more in his corner can be more on that message of unity while he leaves the fighting to j.d. vance. jonathan: fantastic coverage of the last 24 hours. looking forward to the coverage through the rest of this week. kailey leinz at the rnc in milwaukee. is that how you see it, good cop, bad cop? annmarie: that is how terry haynes sees it. he picked someone who can be the pit bull, shore up the base, but trump can come out and say i am a unifier, i will try to unite the country. how long does it last? jonathan: we have heard that word on repeat since the weekend, unite, again and again. joining us now is jennifer flitton of invesco. wonderful to catch up with you again. walk me through your reaction to the pictures yesterday and what you're telling clients about it -- to the pick yesterday and what you're telling clients about it. jennifer: donald trump is doubling down on his brand, and

j.d. vance is an extension of who donald trump is, ideologically. but also, he is able to go out there and be that firebrand. he is able to deliver a message, rather eloquent, he is thoughtful, he is media trained from his time touting his book, and certainly the philosophy behind that book, "hillbilly elegy." we will see a lot of vance, especially in that blue wall in the midwestern states. annmarie: when it comes to campaigning, he is not from a swing state, so what do you think he really offers when it comes to trying to get trump over the finish line when it comes to the electoral college? jennifer: that is right, ohio is nailed down. it is now a red state. trump won it last time by two points -- by eight points. but he does reflect that rust belt mentality, that blue-collar, working-class mentality, and it is the expedition he will go into a lot

of those rural areas, those ex-urban areas that really brought trump onto the scene and into the white house in 2016. it is very likely he will be deployed to that blue wall, which is, quite frankly, president biden's best chance at retaining the white house. annmarie: when it comes to some of his former rhetoric, when it comes to j.d. vance, an individual where he actually said donald trump was hitler-like in a text that was made public, an individual who said he would not vote for donald trump in 2016, can he overcome this when he tries to sell the trump agenda? jennifer: well, he has a little practice in rewriting some of that history. when he ran for senate in 2022, he had to explain that away. he might have to go a little deeper. i have a hard time thinking that any interview with senator vance is not going to start with that question from reporters.

they will probably want to dig a little deeper. he has said he -- really came on board with a trump way of thinking and realized his alignment. i think you will have to go deeper. this question is going to remain. jonathan: this is where the buzz is. let's talk about where there is quiet. house democrats. house democrats are making so much noise, coming out, calling on the sitting president to step sip of the house gonvarri quiet fair there was an interview yesterday evening -- only a week ago, we would have called that interview high-stakes. right up until the tragic event of saturday evening. how high-stakes was that interview yesterday evening, and do you think we are done with a conversation we have had over the last two weeks? jennifer: i think, for the general public, it was overshadowed, obviously with last night and the republican convention and trump's entry into that. that is sort of the news of the day.

i can tell you democrats were watching that. there are still a lot of private conversations happening now behind the scenes with the campaign and with president biden himself. what will come out of that, perhaps, may be the first sign this friday meeting of high-level democrats, determining whether or not they will have that august seventh virtual convention that could really seal the deal for the president's nomination prior to the convention in august. we will have to see what comes from that. annmarie: if he were to step aside, what is the absolute final date for him to do so? jennifer: for the purposes of the convention, you would want to allow for some sort of open convention, or there is the possibility that, in the very final moments, they sort of surprise folks and then really allow for the pathway for kamala

harris as being the only option at that point. a lot of the money is tied to the biden-harris moniker. the question really is if he will pivot at all in the next month, because after the convention, it is very difficult. that it is just in the hands of the dnc. jonathan: yesterday, a big conversation around this table was how this campaign was going to pivot ultimately, given that president biden, for a long time, has been talking about trump as an existential threat to democracy. it felt like, following the conversation yesterday evening, they were not going to prevent that much. is that the way you read things? jennifer: he had an interesting answer to that question with lester holt did i do not know if that was supposed to be his official answer. i do not know if he will see some sort of further explanation of that going forward. i think it is going to be really hard, not just for the president and his team but for the surrogates to really flip on the democracy issue.

you are going to see a doubling down on the abortion issue, for sure, but they really had a two-pillared message going into this campaign. i want to think we will have a unifying force, not just for the republican convention but the way in which we talk about politics, but there is something cynical in me that says i think we just might go back to the way we have been doing things. jonathan: i think a lot of people share that sentiment, unfortunately. thank you. jennifer flitton there. with your bloomberg brief is yahaira jacquez. yahaira: gm is backing down from its goal to produce one million electric vehicles, the ceo saying the company will not have production tsipras of the in place to build one million ev's at the end of next year. gm is the latest legacy automaker to scale back its goals as momentum slows.

customer demand will dictate how fast the company can get to that one million mark. meanwhile, hugo boss shares plunges after the company slashed profit outlooks for the year. the company saying profits plunged over 40% in the second quarter, and it expects an operating profit of around 350 million euros in 2024, significant downshift from 430 million euros it was expecting. and president biden will unveil a new proposal today to cap rental costs across the country. his plan would give landlords a choice -- agreed to cap rent at no more than 5% a year or give up coveted tax bricks. the measure would need to be approved by congress. that is your bloomberg brief. jonathan: thank you.

one extra headline -- a little self-indulgence. guerra south gate to leave his role as the manager of england's male football team after active back euro finals, losing both -- after back to back euro finals, losing both. >> we did not think it would be appropriate to loosen policy until we had raider confidence inflation was moving sustainably down. the three regions in the second quarter, including one from last week, do add to confidence. jonathan: live from new york city this morning, good morning. ♪ at morgan stanley, old school hard work meets bold new thinking. to help you see untapped possibilities and relentlessly work with you

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you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai. jonathan: the fund managers survey from bank of america just dropping. here's the latest from politics. investors say trade policy to be most impacted by the u.s. in --

election. saying the same party in the white house and congress, 77% say higher bond yields. 52% say a stronger u.s. dollar. 48% say higher u.s. stocks. more on that in a moment hey let's turn to the price action. equities in the s&p 500, by 0.1%. yields back in, high yesterday, lower this morning. we are down five basis points. your 10 year, 4.1789. under surveillance this morning, confidence building. >> we did not think it would be appropriate to begin to loosen policy until we had greater confidence inflation was moving sustainably down to 2%. the three readings in the second quarter, including the one from last week, do add somewhat to confidence. now that inflation has come down and the neighbor market has indeed cooled off, we will be looking at both mandates. they are in much better balance. if we were to see unexpected

beginning in the labor market, that might also be a reason for reaction bios. jonathan: investors looking at the retail sales data at 8:30 eastern time amid a slew of fed speak this week. andrew sheets of morgan stanley expecting a september rate cut, writing the second half should see the passive disinflation, growth, and policy become clearer, setting up a constructive outlook or nearly all markets. however, what happens beyond that horizon is clouded by a wide array of uncertainties. we will talk uncertainties in a moment, particularly 2025 -- i think i know where that conversation is going kate i want to talk about july. goldman came out yesterday and said, why wait? going into the july meeting, why wait until september? andrew: thanks, good morning. great to be with you. there is a good case the fed should be easing policy. as you just heard from chair

powell, you have some weakness in the labor market, the unemployment rate is ticking up, inflation is coming down. we had two consecutive very good, i.e. low, cpi readings, and the fed is well above neutral, per its own long-term thoughts. the idea policy should be less restrictive as -- we still think the fed wants to see just a little bit more data to confirm inflation is coming down, and that is why they wait until september, but our economists have been at the more aggressive end of fed netting. they think the fed goes in september, -- september, november, and december, and that is also a reason why we think the curve steepen's. we think the fed should be easing, we think they start in september, but we think they cut three times this year. jonathan: let's go to the curve steepen her. it was driven by the long end,

not the front end. the call was you would get that steeper curve but driven by rate cuts pay what we saw was the so-called best steepener. there were political considerations in the mix as well. when i reflect on that of yours, and you start thinking about the uncertainties beyond the back half of this year, are you thinking about those political considerations a little bit more? andrew: absolutely. i do think that is how the market is thinking about it, importantly, and what the market cares about does matter. if i think about how we are thinking about the yield curve and how are rate strategists are thinking about the yield curve at the front end, you do have this story of inflation moderation, some very good inflation readings, the fed appearing to be much more balanced as they are thinking about the risks, and a morgan stanley rate cut call that has been calling for more rate cuts in the market's pricing in the near term. i think the long end is more driven by, potentially, concerns

around the fiscal path, and i think the market has looked at recent political events and thought that raises the chance you get looser fiscal policy, a wider deficit going forward, and that can drive steepening pressure on the curve. that is still how we are thinking about it. obviously, there is a lot of uncertainty, but right now, we expect the curve to steepen. annmarie: and we could get looser fiscal policy regardless of who was in the white house, but we see people trying to talk about the trump trade. if that were to be the case next year, we get tax cuts and tariffs, we have adam posen saying that would mean a hike on the table. what is your expectation for the fed in 2025? andrew: a lot is unknown. if we try to break down this problem, it is true fiscal policy, that the deficit, is still there under both candidates, but i think under our modeling of the candidates' proposals, the deficit is wider under a second trump

administration, especially if it would have a sweep of congress, and it is also more likely a trump residency would coincide with a congressional sweep than a second biden term. it is also the case where those tariffs raise a lot of inflation uncertainty, and again, it will complicate the fed's story, the fed's message. for the moment, we think that is more likely to show up in currency markets, more likely to show up through a stronger dollar, but it is likely to create a lot of potential noise, and it could also increase inflation risk premiums going forward, which could be another factor that we could steepen the curve somewhat. jonathan: when we start to think about who is vulnerable, obviously, we sector think about china, ubs saying u.s. tariffs at 6% would half the growth or in china. the next logical step is to think about europe. what would happen to the outlook for european inflation when all of these politicians and officials have been complaining about chinese overcapacity?

doesn't europe have to eat it if the walls go up in america? andrew: it does raise some serious questions. again, we do think that a deflationary or disinflationary pressures, i should say, our building, and that is the story in the u.s., but that is also the story in europe, and we are pretty confident inflation will come down, come down enough in europe by september, where the ecb is cutting, that the bank of england here in the u.k. will cut rates in august, so this disinflation story is still there. i am glad you mention china, because that is another driver of this disinflationary story. you still have negative ppi coming out of chinese industry. i think you do have some real uncertainties of how an economy would respond to potential tariffs. again, going back to what we were just talking about, there is an enormous amount of uncertainty here. but a weaker currency could be

one way that you respond, and that could be, also, further is inflationary in terms of usher into europe, so a lot of questions. i do not think we have enough information to know exactly how europe will respond, but the way we are currently thinking about it is there is already some of that pressure. jonathan: what would that mean for european corporate credit? andrew: i actually think credit is in a relatively good place. if we are looking at somewhat modest growth, lower inflation, the ecb cutting, and the type of risk we would see from that sort of tariff or import pressure from china would not necessarily be a credit issue. it is likely to cause dispersion, when we think about the risk of either tariffs or foreign competition, it is very idiosyncratic, the exposure differs a lot across our european universe, so it does not necessarily create credit negative story overall. we will expect spreads to be modestly tighter here over the next 12 months, but it could

evidently drive single name risks. jonathan: thank you. appreciate the update. we will continue the conversation for the rest of the year. andrew sheets of morgan stanley. i mentioned the fund manager survey cave number one risk -- geopolitics. china, china, china once again. annmarie: a lot of this is why they are saying trade is the number one risk -- not risk, the most impacted when it comes to the election. taxation and energy at the bottom of the list, although the trump era tax cuts expire next year. jonathan: coming up next, president biden campaigning -- defending his campaign rhetoric and looking to ease voter concerns in another state down interview. from new york, this is bloomberg. ♪

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jonathan: take a look at this. the price action. just a snapshot. what do you see? the dominant story, small caps once again. the russell up by one full percentage point, the s&p up i want. small caps were up 6% last week, something like up 2% last week to the nasdaq actually lower over the past four days, the russell up by eight percentage points. the regional banks, that kp w injury -- kbw regional banks index up 5%. massive outperformance for small

caps and regional banks. we have been talking a lot about steeper yield curves, yields up on the long end. down by 45 basis points on tens and 30's. the next stop for this conversation, retail sales later this morning. 8:30 eastern time, look out for that. another read on the u.s. consumer, just how many cracks are out there, particularly in the labor market. yields lower on the session. the euro -- if you get trump volume two, and you get another big round of tariffs in america, who eats chinese overcapacity? has got to be the europeans care that will be a conversation for us for the next few weeks. the euro dollar .091 -- 1.0901. trump taking j.d. vance of ohio to be his vice presidential pick. vance is known for his criticism of u.s. involvement in the war

in ukraine and has said china is the biggest threat to america. annmarie: he constantly talks about how america should be squarely focused in the pacific, instead of these wars like ukraine. he talked about at the munich security conference, he gave an opinion piece to the new york times. foreign policy will come into focus when it comes to this individual. also trade policy when it comes to china. he believes, as a former president out, that the walls and the barriers need to go up. he things this means that will mean more capacity in the united states to build goods and buy goods in the united states. jonathan: around the table, you usually think republicans mean business, then you look at j.d. vance paid his position on tech and mergers seems to have more in common with senator warren than the conventional, stereo budget will -- stereotypical public in position. annmarie: when it comes to senator warren, she says she would actually like working with him.

they want to call back some of the executive pay. to be fair to mr. vance, he said we should not treat all these banks the same. there are regional banks that we need to treat different than these big behemoths. he has always had those regional things close to the american heartland in his mind when he comes -- goes after some of these big corporations. another individual heat says he things is doing a good job in the biden administration, when it comes to where his mind is on mna, is lena con -- is on m&a, is leena khan. jonathan: and there will be questions. we have to ask the question this morning -- do you think there is a risk of too much of j.d. vance's views and how they shape donald trump? annmarie: those who know trump well say he wanted someone oil and who could carry out his

agenda, so i imagine it was a conversation you will help me with my agenda and not path your own course. but as everyone has been talking about, this is an individual who firmly lined up, even though he was a critic in the beginning, in a short political history, has firmly lined up with the former president and a lot of these policies. jonathan: every campaign needs money, so let's talk the money coming in. elon musk pledging to port $45 million a month into a pro-trump super pac, the news coming out there must endorsed the former president. it was not just elon musk that came out. you wonder if others will follow. annmarie: the big question we will watch is ken griffin and paul singer, because we were reported they had taken a meeting with the president. potentially, they will swing their support to the former president. we do not know if that happened yet, but there are talks involved. but elon musk dropping a ton of

money into this race, firmly behind the former president. i guess it makes sense with the j.d. vance pick. jonathan: think how quickly the conversation changed literally in this country, how the nation has shifted from one subject to another, and how quickly we have done it gave only a few days ago, we were talking about a high-stakes it down interview with nbc for president biden. it took place. take a listen to what the president had to say. >> should they have anticipated what happened, should they have done what they needed to do to vent this from happening? that is an open question for that was little focus on the trump agenda. jonathan: the term was bullseye -- >> the term was bull's-eye. >> i meant to say crosshairs, i met focus on it. i understand why people say he is 81 years old, what will he do when he is 83, 84? it is a legitimate question. i watched part of the debate.

why not talk about the 18, 20 lies he told? >> is there a sense of wanting to get back on the horse? >> i'm on the horse. where have you been? i done 22 major events with thousands of people, overwhelming crowds. jonathan: the president back in campaign mode. annmarie: the president saying have you not see me out and about campaigning? the reality of what the president sees himself campaigning out there is a very different from the perception of american voters, who are still questioning whether or not he can be the top of the ticket, including in his own party, so a lot of this has gone a little bit quiet since the assassination attempt on the former president, but it does not mean it has come to a complete halt, and that interview there, when he was concerned about whether or not he said himself bull's-eye or crosshairs, i do not think that is going to stop the concerns about whether or not he is too old to be the democratic

nominee. jonathan: joining us to continue the conversation, antjuan seawright, the ceo of blueprint strategy, a democratic strategist. wonderful to have upi want to go to the conversation that dominated political conversations around the world for the last two weeks before the weekend, and that was president biden and whether he would be at the top of the ticket come november. do you think we are ready to unite behind one candidate in the democratic party? antjuan: i certainly think it is a must, not a plus. we have seen what has happened in our party when we are not united on all fronts. the residue and the aroma of the 2016 election still lingers, especially when you consider the actions of this right-wing activist core that the president was able to appoint three appointees to, not to mention the downstream effect of judicial judges at the federal level.

so we still feel the residue of that. i think it is so important we learn from our mistakes in the past. quite frankly, joe biden and kamala harris have been two of the most consequential leaders this country has ever seen. there has not been a constituency in this country, whether you voted for them or not, have not benefited from the biden harris administration. our country's economic bill of health effects that. i think the social bill of health of the country refax that. certainly, when you look at the legislative agenda, there is no comparison in modern-day history. annmarie: then why not pass the torch to vp kamala harris? antjuan: well, he does not need to. or 2 million people in the democratic primary in 2024 voted for the two of them to represent us. they have been dynamic as a do ok there is no need to change what has been good for america

soul and will has been good for our party. they have been able to accomplish the things they compassed with some of this must majorities. that means even though republicans may have voted against the legislation, when they went back home to their districts, they took credit for the bill that is a refection of who joe biden and kamala harris are as leaders for that is what they were present now, and certainly, their vision for the first 100 days is very reflective not where america was, not where she is, but where she needs to be. annmarie: following the assassination attempt on trump, we saw that campaign swiftly take down tv ads pa they talk about wanting to lower the rhetoric. you think the principle of this campaign, which is donald is an excess sentential -- existential threat to democracy, can they still campaign on that and use that rhetoric? antjuan: i think so. when you fig about basic fundamental freedoms as we know

them, the former president still presents a threat to those things. for me, as an african-american, for voting rights, for women, one being trusted to make their own health care decisions, and those decisions remain between her and her doctor, for children trying to access s.n.a.p. benefits, for the younger generation, who believes the climate crisis is a real thing in this country and we must deal with it in an aggressive way, there are a number of things we can point to that donald trump presents a threat to. when you add the fact he is a bullhorn for trump's project 2025, and we know the threats that come without policy agenda, certainly, we have to remind the american people about what donald trump presents, but also what he was after spending four years in the white house. annmarie: let's talk about the math. the current president needs to

hold michigan, wisconsin, and pennsylvania. how difficult is that going to be, now that former president donald trump tapped j.d.vance, an individual very good at speaking to the concerns of the rust belt? antjuan: elections are about people's rhetoric did we cannot fall into the trap of having a personality conversation. certainly, we must have a policy conversation. when you thing about who j.d. vance is, as a senator and a person, he is another page in the catalog of right-wing, election denying extremists. he is an evangelist for trump's project 2025. he does not believe women should be trusted to make their own health care care decisions, i.e. including a 10-year-old rape victim and his own state of ohio. he was ensure mental in killing the bipartisan border legislation in the united states senate. and certainly, he has been vocal

about ending medicare and medicaid as we know it. as we lay out the case and put out muscle mass and muscle memory to the trump-vance ticket and make the case on the biden-harris record and the vision for the future, i am confident that voters will make the right decision, just as they have in every single election since the biden and kamala harris have taken office. jonathan: antjuan seawright of the print strategy. we want to get an update on stories elsewhere. with your bloomberg brief, here is yahaira jacquez. yahaira: israel is engaging in talks about withdrawing from the egypt-gaza border. the issue is seen as a gateway to a long-term cease-fire. israeli officials are reportedly open to the news. meanwhile, china is preparing to

host leaders from two pro-palestinian arms, including hamas. shares of trump media sinking after their date with cell 38 million shares. -- this coming after trump media shares rallied as much as 31% yesterday, the biggest upside move since march, but stock has been volatile, moving with polls on the election. england football manager gareth southgate stepping down after eight years in the role, the announcement coming days after england's loss to spain in the final. southgate helped restore english football baxalta high levels of competition, reaching two straight euro finals and the quarterfinals of the world cup. jonathan: thank you. numbers from bank of america

just around the corner, with equity futures on the s&p 500 down 0.1%. up next, wrapping up earnings. >> interesting comparisons for all the banks on a year-to-year basis as a negative, with the exception of j.p. morgan p that will be one of the biggest trends most investors will focus on. jonathan: a sneak peek. the estimate at 1.45. more details on that, up next. ♪

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jonathan: 6:45 eastern time, equity futures on the s&p 500 murmur by 0.1%. under surveillance this morning, bank earnings wrapping up on wall street. >> the comparisons for all beings on a year-to-year basis has been negative, with the exception of j.p. morgan.

i think that will be one of the biggest trends most investors will focus on in looking for the inflection point on a year-to-year basis. we expect it to happen in the second and third quarter of this year. jonathan: getting numbers from bank of america to wrap up some of those numbers. b of a just dropping, morgan stanley later. here's sonali basak. sonali: bank of america baeting -- you have bank of america given guidance on what they expect to bring in on that interest income later this year. they expect that number to jump from the $13.9 billion you see in the second quarter two about $14.5 billion, so and increases the end of the year in interest income. that guidance is critical. where to the extent this to come from, that is the most interesting part. you are member those held to maturity -- they believe they could reinvest

these securities, and what we understand is about $10 billion rolloff per quarter, so about $40 billion per year, now into higher-yielding treasuries. this is also a reinvestment of assets like mortgage loans and auto loans, that had been extended at lower interest rates, now moving into higher interest rate product, so higher for longer helping bank of america out, little bit of a lift in the premarket. a strong read across the board. a real quick note on credit letty, provisions for loan losses meeting expectations, charge-offs coming in just a little higher than expected, charge-offs of 1.5 billion dollars, relatively flat from the first quarter, and up from 860 million dollars in the second of last year. jonathan: trading revenue, decent beat here. zero days of trading losses in the second quarter of 2024. looking ahead to morgan stanley

now at 7:30 eastern time, how high is the bar for morgan stanley? sonali: very high. we talked about it yesterday. goldman ended yesterday at an all-time high, and when you saw there equities trading number, it came in above j.p. morgan's and above where morgan stanley is expected. this has been a traditional, very historical rivalry, and all of these banks are leaning hard into their hedge fund clients, really leaning on that prime brokerage at a time when markets are still volatile, and clearly these trading ducts are benefiting from them. jonathan: bank of america up date time so far this year, year to date at 24%, goldman up about 28% gain morgan stanley has really lagged. still a decent year, but it has lagged the pack. joining us now to talk about bank earnings is christopher marinac of janney montgomery scott. great to talk to you. i want to start with the

earnings from the big players on wall street. we had a few more than, citi, bank of america -- we had j.p. morgan, citi, bank of america pay what stands out for you? christopher: margins are not increasing yet. the cost of funds at bna was only up marginally, so they are still the leader in terms of low-cost deposits. i think yields will get better as ends roll over on the upside, but the cost of funds has to come down here that is where the fed policy will shift an interest rates third quarter, fourth quarter could be useful. i was very thing for the criticized loans were flat in the quarter from q1. charge-offs off only by one basis points. overall, that was a win. but you are not really seeing the big revenue growth on the spread side. investment banking, as you mentioned, was definitely higher. no issues there. no major surprise on the expense front. jonathan: i went through the

year to date gains for some of these major players. over that last 12 months, you can double it they have been tremendous. there was something about this environment has been particularly good for the bigger players in the financial world. is something changing where you think things get better for the smaller, midsized banks, the more regional players? christopher: sure. on the regional players, the cost of funds is beginning to crest. that was the major challenge before you had the silicon valley failures last year. generally speaking, the expense leveraged in the business is very good. we have seen banks much more efficient today than they were 15 years ago, and that is a tremendous difference. the cost of technology is helping banks do more with less. they are getting much more efficient with their staffing. they still have to spend money, but i think they are much more efficient at doing so, so as we get to a period where the cost of funds comes down or at least flattens out, that will lead to better spread in income. overall, the expense leverage is still there. jonathan: the moving regional

banks has been phenomenal, i think we are up something 11% in five days for there was a note from citi. overweight u.s. banks are our preferred trump trade. easier valuation set up, stable fundamentals, laissez tariff -- less a tariff risk. give this sector a good risk reward set up. it is the conversation of the moment. how would trump's second term influence and shape the performance of these stocks? christopher: for sure the revelatory garment will shift. regulation can be much have peaked in terms of the -- i think it would take about 18 months to affect. the rank-and-file do not change that quickly just because the head of the white house shifts, but it will be a perception shift, which is already anticipated by these stocks. banks were trading at 40%

relative multiples, today they are 53%, 54%. we used to be at 66 percent to 70% median range for the last 10 years, so there is a lot more value. the regulatory perception changes a massive one. we have to see the follow-through. but that is certainly a good start. annmarie: we heard j.d. vance, the former president's vp pick in the past talk about big things but also regional smaller banks. he thinks community lenders operate at a financial disadvantage to the biggest banks. without be another reason to put on trades for the smaller regional players? christopher: i think you need to have a regulatory framework that make it easier and less onerous on regional banks. having the trickle down to the -- line on whether it is a one billion are tubulin dollars is very difficult to execute. it gets -- and like $1 billion

to $2 billion is very difficult to execute. that is a possibility. i think it takes time. that absolutely happens. these small banks are the major vendors in the country. small businesses generate the new jobs, the new activity in the country. jonathan: wonderful to hear from you. appreciate the set up there. christopher marinac of janney montgomery scott. the opera performance in small caps and of regional players. the regional bank index, five days we are talking double-digit gains. annmarie: i am looking at political rhetoric some of this. what did he hear from senator vance? he says the executives responsible for running their banks on the ground -- into the ground are sitting on millions. meanwhile, the american people are bearing the burden for their excessive risk-taking and gross mismanagement.

but he likes to prop up this idea of community lenders, regional banks, close to people at home he is serving in ohio. jonathan: how different would it be if it was not the likes of president trump and j.d. vance, and we got president biden and kamala harris volume two? how different would it be for the banking sector? annmarie: if the idea here, at least in the legislation i was looking at overnight, trying to remember where j.d. vance lined up with elizabeth warren, that is where it is. there's a lot of elizabeth warren acolytes in this biden administration, and some of them lined up when it comes to big tech, antitrust. they line up squarely next to j.d. vance. jonathan: the party of rankin is a long time ago, even of paul ryan is a long time ago. the makeup of congress now, what is the republican party, and how pro-business is in a stereotypical sense? annmarie: it is divided, i think is a fair way of putting it.

this was on display last night, when you had the teamsters' head, and rally against big business at the same rally you will have may be a representative from the chamber of commerce. these are the two different paths for the republican party, j.d. vance greatly sits in one, as opposed to maybe someone else the former president could have chosen, like haley or glenn youngkin. he is sitting firmly, his ticket in the base of the republican party now, which is not always friendly to big business. jonathan: we have a lot to talk about. here's the lineup for you. up next, henrietta treyz of veda partners, dan greenhaus of solus, robert koenigsberger of gramercy funds. we will also speak to david malpass, the former world bank president. this is bloomberg. ♪

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>> the policy changes that could come in in the first six months alone of next year are probably the greatest i've ever seen. >> if we get increased geopolitical risk, it will come with a slowing economy. >> markets cannot risk the idea there will be some sort of seismic swing, and over the past two cycles, it has not happened. >> the reality lies in the results, and we will see the

results in the coming weeks. >> it is an interesting inflection point. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning. for our audience worldwide, the second hour of "bloomberg surveillance" begins now. equity futures positive 0.1% on the s&p. we had numbers from bank of america. later this hour, we will hear from morgan stanley. later this morning, 8:30 eastern time, do not miss retail sales. then, at the rnc -- this would not have been on the schedule until saturday evening, when a phone call was made between the president, donald trump, and nikki haley. annmarie: also the fact donald trump is talking about not just uniting his a party, showing support, reaching out to nikki haley, asking her to give this address to do that, but he himself says he is throwing out his old script, the speech he

will deliver thursday evening, and he wants to talk about unifying, which is what terry haines said he picked j.d. vance, who can be the attack dog. jonathan: investors unifying around one thing right now -- small caps. check out the futures aboard. we have seen this repeatedly. the s&p up by.1. the russell up by more than one full percentage point. we are lucky dani burger is back in the studio with us. this thing continues. dani: it has everything going for it, up more than 1% over the past few days you think about the bond market and how it can get more juice from trading the fed. it can't, really. what has been so unloved with rate cut expectations in small caps, so put that in the positive camp. then you get the debate and you get the regulation, potentially, what that means for regional banks, then you add in j.d. vance and his dislike for big tech. jonathan: can we get to the senator vance point.

if we get a second term, are we saying it all about the small caps? dani: at least the vice president is. the question remains how much can he influence donald trump? i think that has been some confusion to say i do not understand, why is silicon valley behind this guy? we need term number silicon valley right now is small tech, and that is his background. he is a guy who saw svb happen, and everyone came and lobbied to him and elizabeth warren. his background is not for the big tech of the world, and that is a potential risk to what has been the highflying a sector of visible market rally. annmarie: key point which is whether or not he can influence the former president. it is the opposite way around. he will be signing up to former president donald j. trump's agenda, and he will see that through. so if he gets a phone call to back off of those issues, j.d. vance will get in line, and he was chosen partly for his loyalty. jonathan: is it the economics, the federal reserve, the politics?

at the moment, it is all working for the small caps. the s&p positive by 0.1%. yields lower by five basis points, 4.1789. there is a big data point later that may shake this up, retail sales at 8:30. coming up, we check -- catch up with henrietta treyz of veda partners as donald trump picks j.d. vance as his vp, dan greenhaus, and robert koenigsberger. we begin with our top story. donald trump announcing j.d. vance as his running mate, the two appearing side-by-side at the republican national convention, the former president sporting a white bandage over his ear in his first public opinion since the attempt at assassination. bloomberg's kailey leinz joins us now with more. nikki haley. we need to start there. nikki haley would not be appearing if it were not for the tragic event saturday evening. what are the contents of this

address going to sound like later? kailey: we have heard nikki haley's tone around donald trump itself changed since she dropped out of the republican primary all those months ago. she was not initially invited to this convention of fact that donald trump made invitation over the weekend shows maybe there is some serious message -- seriousness behind the message of unity he will espouse. when in nikki haley speaks later on this afternoon, she is likely to say emily ideas around the idea the republican party, especially those voters, who cast their vote for her, would need to unify around this ticket, which is trump-vance 2024. she previously said, when exiting the race, it sent those voters who cast a vote for hurting the primary process, donald trump needed to earn those words. i am curious to see if nikki haley suggests he has now done the -- done so.

to say that everybody needs to circle the wagons and cast a vote for him. it is part of the total shift we are seeing at this convention in milwaukee and will see in the days to come. everything seems are changed very much since saturday, although props not this election in the he still went with an attack dog in j.d. vance. annmarie: an attack ducky will put squarely in the rust belt -- an attack dog he will put squarely in the rust belt. the president is down and all of them. what is the message you think j.d. vance will bring to pennsylvania, wisconsin, and she can -- michigan? kailey: those key states already has the most obvious appeal. he is from ohio, he -- due to the manufacturing decline in that area. some sense, those are the kind of voters he can reach.

even georgia, when i spoke to governor kemp yesterday, he said the messaging power of j.d. vance has the ability to deal with all swing state voters. -- i would also note, while we talk about the appeal j.d. vance may have with working-class people with those kinds of ideas of populism, he also has a lot of influence with powerful people with money. before his political career began, not that long ago, considering he has only held his senate seat since january of last year, he was a venture capitalist. he is a peter thiel acolyte. peter thiel is one of his biggest backers. of course, there are other billionaires who have come out in support of this ticket as well. elon musk expressed his happiness with the selection of

j.d. vance yesterday. and you reporting from the wall street journal suggests elon musk is preparing to contribute $45 million per month to a new pac supporting donald trump that will focus on turnout. we know turnout will be key in deciding the outcome of this election. jonathan: big, big money. kailey leinz, thank you k let's take some time to try and answer some of the questions you have got. joining us now is henrietta treyz of veda partners. one of these questions sounds like a list -- donald trump is a dow jones kind of guy. he is big business. typically, the stereotype of the republican party as they are the party of big business, they are pro-business. is he going to become a russell 2000 small caps kind of guy? is this going to be the outlook of the second term of donald trump? henrietta: i've been spending a lot of time in the tech space and the recent formation of a super pac and decisions by elon musk to donate considerable sums

of money in the next few months. what i have to recall every time is the way the trade war was orchestrated, where then secretary -- treasury secretary nguyen and others that you like then secretary treasurer -- that lead to lower tariffs under trump than biden. they have an in to j.d. vance, they have been part of his campaign since he ran for senate the first time. what the business community as well as the international community, including the european union, have seen in the last eight years is they can have a more direct line of communication that leads to exclusions, grandfather clauses, and licenses under trump than biden. annmarie: that line, does that mean that business goes to the top of the ticket, trump, and it is maybe the smaller tech companies that go to the bottom

of the ticket, j.d. vance? henrietta: that make perfect sense, and it makes a lot of sense to see how they fill out any potential cabinet positions. one of the things i focused on a lot this year is the fact in number of these potential candidates for a second trump term will not be eligible for the 60 votes to be confirmed, so there may be a lot of acting cabinet secretary officials. those could be more extreme people. if the administration is not bothered by having and acting secretary for a while, that is someone who could have the ear of business, russell or large-cap names, that can get directly in. there are a whole host of names. it makes sense they get involved now. the teamsters union has decided they are not going to necessarily endorse biden this year. after supporting democrats for the last two decades, going back to obama in 2008, and well before that.

that is a major indicator of how deeply insidious the republican ticket has been on the democratic blue wall in rust belt states, in j.d. vance's healing from ohio and the events in pennsylvania really served the republican party. annmarie: the teamsters president last night, he had the longest time allocated to him in this speech. he said we are not beholden to anyone. is there a potential we are seeing a shift of prolabor union individuals supporting republicans? this was supposed to be a main pillar of president biden. henrietta: this has been going on for a long time. if you have spoken to anybody in the binding campaign, the administration, the last four years, you know they have bent over backwards to provide for the labor unions. scranton joe talks about it all the -- all the time. even to the detrimental for the environmental lobbies. 1.3 million people strong

teamsters union, which is integral to nevada, michigan, ohio, pennsylvania, they are saying we will not necessarily endorse biden this year. they are not even scheduled to speak at the dnc. dani: somewhere else trump and j.d. vance are aligned's foreign policy van saying china is the u.s.'s number one enemy. he gave an interview saying he was devaluing the dollar. the market for the most part has written this off as campaign rhetoric. does j.d. vance as vice president mean you can no longer do that? henrietta: i do not think you should have written this up as rhetoric regardless. the former president illustrated he is as short clear about his approach to tariffs on china. they are the number one offset in the tax bill plan, that tax bill will cost $.6 trillion. even if you do not believe the rhetoric -- that tax bill will cost $4.6

trillion. $4.6 trillion just to keep tax rates flat is no laughing matter. depending on the size of any majorities in the house or senate, you may not get the salt tax cap that would be a major dent in the deficit hike that would be opposed by the 2025 tax bill. the former president's plan would offset the costs of that. jonathan: last time we spoke, you said there was a really strong chance that joe biden would not be top of the ticket come november, he would have to step aside. events happened. it feels like we have been overtaken by events, particularly what happened saturday evening. have you changed your mind on that call? henrietta: i think the events of saturday helped former president trump secure a lot of groundswell of support and galvanize asian from his base. i think it created some breathing room for joe biden, that has obviously changed the

circumstances. one other thing i would point to is the dnc is trying to move up their vote count to start july between ninth and end august 5. there are a lot of things working in joe biden's favor. jonathan: henrietta treyz of veda partners, breaking down the situation in the republican, and the extra time sitting president biden has been granted. annmarie: he has been given a lot of time, because the interview yesterday started with the attempted assassination attempt on the republican candidate, but also the vp pick a it has taken the oxygen out of the room, giving biden this breathing room to not face the calls every day of potentially this is a make or break interview, potentially a make or break campaign stop. he was defiant yet again in the interview last night, even though there were times he struggled to form his sentences, remove or exactly what he said. he was still defiant, which is why the whispers are quiet right now, but i do not think they have gone away. jonathan: if we do not have the

events over the weekend, -- let's make that assumption -- let's say we had that interview yesterday evening, and the president delivered his responses and the way he did, we would have more democrats asking him to step aside, without a doubt. annmarie: absolutely. they would have felt emboldened once again this performance was not good enough. jonathan: that is the lives in washington. here's the latest elsewhere. here is yahaira jacquez. yahaira: we start with bank of america. those shares are up in the premarket. the company reported trading revenue that beat analyst estimates. bank of america reported investment banking revenue that came in above estimates. there were also some insight into the health of the consumer. b of a said net charge-offs increased more than 76% to higher credit card losses. seganti capital management has returned more than 90% of client

-- the multi-strategy hedge fund had about 4.7 billion dollars under management at the end of may, this coming as its founder an an -- and an ex-trader will go to trial over accusations of insider trading. and match group, owner of dating up tender, is facing its third activist investor this year. star board has a stake of more than 6.6% of the company. the investor plans to push for a sale of match if the company fails to turn around its operations for this coming as online dating companies have been struggling with slowing growth and challenges in retaining paying users. jonathan: up next, the big rotation. >> the big question is, as we get this rotation, can it occur without selling of tech by small-cap? does ai continue to roll over?

jonathan: we will continue that conversation. ♪

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better outcomes. jonathan: equity futures on the s&p 500 firm or by 0.1%. the outperformance once again this morning on the russell, the small caps rallying a big time surveillance, the big rotation. >> as we come into earnings, the big question is, as we get this rotation, can it occur without selling of big tech to by small-cap -- buy small-cap? even if small caps outperform, it will be in a down market rather than an up or get. jonathan: the rally and small-cap stocks showing no sign of slowing. the russell 2000 coming off its best four day run. dan greenhaus of solus suggesting this is not to say

the mecca tech -- megacap tech names cannot define. dan joining us now. dan: thank you for having me. jonathan: let's start again. a lot of people drawing the line to what is happening politically in washington, particularly at the rnc, overnight. you think we are reading too much into it? dan: i do not think the small-cap move has much to do with rnc. a lot of people were talking about the non-megacap story was a lot of that's something a lot of us were telling. coming into the year, would i rather be long on the s&p 94 -- small caps would fit into that discussion as well. the problem is you have the inflation interruption in the

first quarter, when he had a couple of 4/10 readings, and that put off rate cut discussions. now that that rate cut discussion is in full swing, you are seeing the type of action that people such as myself thought might happen to start the year. jonathan: so you do not think this is just a position and squeeze, there something fundamental, some tailwinds -- dan: there's always a position as squeeze. you do not get the type of parabolic action you are seeing now without some positioning, some positions being squeezed. if you are asking underneath it, is the reduction in rate expectations, the un-inversion o f the curve, does it all play into the idea small caps might do ok relative that large cops in the immediate future? i think the answer is yes. admittedly, i do not love the small-cap index, and i never have. i do not think viewers can name 10 of the top 100 companies.

sure, eber crummy's in there, sprout's farmers market if you are an cannick guy like me, but a lot of people do not know those companies. i do not think they are emblematic of any larger play. but these -- a reduction in rate cut expectations will surely benefit them. dani: you do not strike me as someone who spent a lot of time in april, and fitch -- you're talking about the positioning squeeze being part of it. but what we are seeing the squeeze is on the most short sto cks. what we have not seen the squeezes the over positioning of the mag 7. those are made mostly flat. can that remain? dan: first of all, you look at apple and tesla in particular, they are overbought, and certainly -- like small caps,

probably in need of a breather. there is an argument from a money flow standpoint. money can come out of the megacap and into the rest of the market without there being a huge dislocation in the indices. at the same time, if you will have some sort of decline in nvidia, apple, etc., for the most part, no matter how well the rest of the market does, at best, you trade flat. at worst, you trade down a bit, even if things look better than the headline suggests, akin to the weight it is now. dani: bank of america points out mag 7 earnings will slow down for the first time in a while, and the 493 will catch up from a low base. will that help this rotation? dan: it will. we have had for five quarters where ex-tech, ex-mag 7,

ex-financials, you had flat to down earnings for a year, a year and change, and you are just now starting to come out of the earnings recession. for solus, we are nowhere near the megacap names. we are scouring the market every day for credit and equity for names that are unloved, overlooked, and there is a large portion of the market that is unloved and overlooked. there is ample opportunity here. annmarie: so you do not think the rnc or trump's pick of j.d.vance is fueling small caps, but can we talk about what this ticket could mean if we get trump volume two? what kind of policies would we get and what sort of investments would you put on? dan: you might say energy will do great, because trump will drill, baby, drill. but during the first trump

presidency, energy stocks were among the worst performing sectors. and under the biden administration, which is considered more onerous lay regulatory, energy stocks have been among the best performing sectors. it is not just as simple as x will happen, therefore y. but forgetting j.d. vance for a moment -- because trump is ideologically set, and i do not know vance moves the needle policy wise -- of the tariff story is the big one we have to wrestle with. i think we can assume, if trump wins, probably the senate and the house goes with him, and if you have unified government, you get the extension of the tax cuts. that is $3 trillion to $4 trillion or so, so deficit and debt issuance will be a story. but the tariff one is one we will have to wrestle with. i imagine the discussion ongoing is a starting negotiation. at the same time, the idea tariffs will be put in place is something that will happen. what does that mean?

it is certainly inflationary, all else equal, but is it necessarily bad, what sectors, what industries, that will be the largest conversation. jonathan: the bank of america fund managers survey. 77% say higher bond yields, 52% say a stronger dollar. dan: i was talking to somebody just before on air -- jonathan: i was speaking to dani. dani: i sound the same. dan: we have a similar name. you guys go, i am monopolizing my time. dani: i think dan stole the thunder. jonathan: maybe he will be back, maybe he won't. coming up, robert koenigsberger of gramercy funds. you are watching "bloomberg surveillance." ♪

jonathan: waiting for numbers from morgan stanley. let's check out the price action. futures on the s&p 500 up .1. outperformance on the small caps. dani: a lot of things going for the index at the moment. a lot of the strength came post cpi, may be rate cuts have not been priced into this. when you look at smaller oil and energy companies doing better, financial companies doing better, jeffrey's out with a note that is looking for financials looking forward to a more deregulated environment.

jonathan: speaking of the banks, numbers from morgan stanley. let's get to sonali basak. >> when you look at the core numbers, wall street numbers, trading desk, equity sales and trading coming in above estimates at $3.02 billion. the estimate was for $2.7 billion. meaningful beat at the sales and equities trading desk. wealth management revenues also not as bright, missing estimates to the tune of $6.8 billion. estimate was also 6.86. let's see if the market gives them a hard time. the beat, that interest income, more meaningful for morgan stanley, trying to lean into that lending revenue. you also see fixed sales and trading revenue beating estimates, $2 billion, a

business that has been growing meaningfully. interestingly, the rat race is over, while the numbers from the biggest banks. beat at equities trading. goldman took the crown when it comes to equities trading. again, morgan stanley rising on those premarket beats, about 2% higher. jonathan: we have had all the big banks report. who won q2? >> it is hard to say it is not jp morgan because of their return on equity, 28%, when people are worried about expenses. bank of america, citigroup brought in $13 billion. they are guiding higher for the year. the story is interesting when you think about rate cuts and how this may impact the banks

moving forward. jonathan: thank you. under surveillance this morning, that wraps up bank earnings. bank of america delivering better-than-expected net interest income and trading revenue. morgan stanley reporting a beat on trading revenue but a miss on wealth management net revenue. former u.n. ambassador nikki haley is expected to speak at the republican national convention today. donald trump reportedly called her after he was shown on saturday to invite her to the convention. last week, haley said that she was releasing her delegates, encouraging them to support trump. new tariffs on chinese exports would help china's growth rate. this after reporting says that donald trump is considering a 60% tariff on chinese goods. do discuss, robert cohen's burger from gramercy funds joins us. big terrace we could potentially

face. we understand what it means for the world. if we think about the arc of that tariff effort. initially a focus on nafta, mexico, china later on. how are you thinking about things in em? robert: it is helpful to look at what happened in 2016 with a couple lessons. perhaps more impact on mexico and elsewhere but if you look from november 16 to february 17, 30 days after he had been in, all of that trade had been covered, all positive territory. 16 was more able surprise, the donald trump victory, then perhaps it might be in 24, so a lot of that is being priced into the markets. use of the steepening of the curve yesterday. as we go forward, i would not be surprised to see volatility but you'll see some differentiation

between asia, china, and latin america. jonathan: are you seeing that, hearing that yet? robert: starting to. the china trade, the headwinds of tariffs, it has been more properly priced this time around. annmarie: who would benefit outside the united states if you would see manufacturing come back to the u.s., who would benefit in em from this likely trade war? robert: you will continue to see a trend that is underway. mexico is a big winner. we have seen a lot of opportunities that have come on to the onshore income in mexico. india is also a beneficiary. when i look at latam, you can say it will be a winner, but you can also differentiate the different regimes. those that looked more to the left, more to the right. it will be beneficial for argentina, el salvador, may be

more challenging for brazil, colombia. annmarie: when it comes to mexico, isn't it important to make sure there is no backdoor for the chinese just under a different flag? robert: a friend of mine who has been doing manufacturing in china for textiles just made a trip to vietnam. it is all the same people, he said, they are just moving to vietnam. you are seeing that in mexico as well. dani: excellent point, it is not just mexico, it is elsewhere in asia, which leads to the confusion for 2025. what does that mean for investment, business is willing to do these sorts of partnerships? do your point, we don't know what it will look like. robert: i think it's about to try to tease out when you have the best conviction. it is about trying to figure out how to be beta agnostic, figure

out the transactions, so you can be more agnostic to those risks. one can expect a lot of unknown knowns. it is all about the details, how you negotiate a contract, implement a contract. whether it is on financial investment or direct investment. dani: this push and pull him do i care about the economy or do i care about politics? where do you stand on the spectrum right now? robert: ultimately the economy matters. when i look at different regimes in latin america for example, you have all sorts of volatility around the politics, but if the economies are anchored, you can have change in politicians, changing regime. if you have regime change, you should expect policy change, but often times it is not the regime change it, just the name of the leader. jonathan: let's take a look at the typical market

characteristics of things like treasuries. dm versus em. the distinction between the two is what happens when things go bad? em you sell it, dm you buy it. if things change here in america, when things start to go bad, whether it is the economy or politics, governance issues, do treasuries rally anymore? do they behave like em, are we turning the world upside down? robert: if you look in the post-covid era, em led the way in terms of good policy. raising rates faster. didn't have the flexibility that some of the markets had. when you look at the u.s., what is the alternative? that is the problem. there are fundamentals and then there are technicals. where are you going to go? jonathan: anywhere in the e.m.

that you suggest we could go? robert: for us it is less about where in e.m. and more about how you approach it. the notion ofbeta agnostic before, within emerging markets, you can get the high expected return without making a call on beta. doing it with this asset allocation, really anchoring a high conviction yield, not owning an index because jp morgan told you to only certain credit. then waiting for opportunistic credit when it is really opportunistic, special situations. we have seen a lot of mistakes that folks have made it emerging-market for 25 years. it is usually about buying the wrong thing at the wrong time, sticking with it too long, capitulating, and then wondering why it didn't work. less about making a call on an asset class. when you talk to your guests

about developed markets, it's about how to play it at any given time. e.m. tends to be this afterthought, should we be in beta or not? we think that is one of the biggest mistakes people have made. annmarie: when you say special situation, described that to me. historically, what has been special? robert: they can be anything like the sovereign debt structuring, some of the special situation we are involved in today, may be around late stage litigation finance in and out of emerging markets. what makes them special is you can structure the transactions in a really high coupon and return. we have been able to wrap it with insurance to get principal protection. you create this asymmetric return profile to look more like call options than bonds. annmarie: when you look at the u.s. and you say there is nothing else that is on the same caliber, do you think we are at

peak u.s. exceptionalism? robert: that is hard to call. there are cycles, waves, what have you. for this cycle, the exceptionalism have been pretty strong. not sure where it will come from in the short term. dani: i want to ask about china specifically. we have been getting a lot of data and it does paint a dour picture. soft gdp numbers. despite continued exports of things like ev's and semiconductors, that has been the model, continuing to pump out goods. is there a limit to how much that can help china in their recovery? robert: the ultimate thing with china is the property sector. you have to go back to the evergrande crisis. the goal was to isolate the rest of the sector but real estate is 30% of gdp. there has been little drips of aid but to ignore 25 to 30% of

the economy, that doesn't make sense. dani: that turn of phrase, we been using it for so long. isn't it that the drips will add up to something? why is this struggling sector, when there has been support -- and you can argue that things have been adding up. robert: you look at the data this morning in the housing sector, year on year still looks anemic. it is all about confidence. certainly there is an inventory overhang. you mentioned this export economy, not creating a lot of confidence for the consumer. it is complicated. jonathan: can i finish with your conviction trade? that way you described e.m. is interesting. on or off, long or short, in or out. very binary. what is the thing that you are super confident about telling

the world about right now? robert: i think the special sauce in emerging markets today is the ability to do private credit, asset-backed lending, late developing markets, where you can get high expected returns, you can mitigate your risk through structuring collateral. take a quasi-sovereign oil and gas in latin america. trading at 5%. collective action clauses, all sorts of challenges. you can lend to the suppliers of that same company, get the company guaranteed, and then get 1000 basis points. i would rather do that all day long and not have to figure out -- the hardest thing to figure out, which is beta. jonathan: robert koenig's burger of gramercy funds. let's get an update with yahaira jacquez. yahaira: morgan stanley

earnings, shares are lower in the premarket, miss on wealth management net revenue overshadowing a beat on equity trading revenue. the bank ceos saying it remains well positioned to deliver growth and long-term value. earlier, bank of america reported better-than-expected net interest income and trading revenue. verizon is exploring the sale of thousands of mobile phone towers across the u.s., according to people familiar with the matter. the biggest wireless carrier in the country has hired advisors to gauge interest from potential buyers. a sale could bring in more than $3 billion for the company which declined to comment on the report. in 2015, verizon sold the rights to operate and lease about 11,000 towers for $5 billion. in a home run derby first, a los angeles dodgers has taken home the trophy. terry oscar hernandez won the

showcase last night in texas. the new york mets all-star and derby champion pete alonso was eliminated in the first round. the festivities culminate tonight with the mlb all-star game. jonathan: the only thing i heard about this was the national anthem. dani: that it was one of the worst efforts. jonathan: i have not seen it. dani: i feel bad for her. it was not good. jonathan: i still want to listen to it. coming up, donald trump picks j.d. vance. >> president trump was right about every disaster that joe biden was wrong about. nafta destroyed the manufacturing economy in pennsylvania, michigan. a real estate developer from new york was right about that issue. jonathan: from new york, this is bloomberg. ♪

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jonathan: for the record, you might have guessed, i cannot sing. annmarie: neither can i. jonathan: it is pretty bad. annmarie: i feel bad saying it, but it was pretty bad. dani: maybe she couldn't hear herself. it is pretty painful. annmarie: because jon mentioned it, i had to listen to it. i will not get that minute back in my life. jonathan: none of us can saying, she can't either. that was a bit harsh. s&p futures for mumbai .1%. under surveillance this morning, donald trump picking j.d. vance. >> president trump was right about every single disaster joe biden was wrong about. nafta destroyed the manufacturing economy in pennsylvania, michigan. a real estate developer from new

york, donald trump, was right about that issue. letting china into the wto. i real estate developer from queens opposed it. jonathan: donald trump picking j.d. vance of ohio as his running mate. once a critic, now a fierce defender. vance is known for his populist policies, calling for increased tariffs, antitrust enforcement, and very critical of aid to ukraine. when you see the s&p up .1%, russell small caps surging by .9%, how much of this picture is about the prospect of another round of trump policy? let's get into it with chris verrone of strategas. so i'm trying to work out is this about rates, the economy, is it also about politics? christopher: when you look at what is driving financials, it's a combination of three things.

certainly the move in rates i would put at the top of the list. this is a very big breakdown of 2-year yield's. u.k. yields below 4% for the first time in two years. there is the political side to this as well. as we know, this is a market pulling forward, the leadership profile looks similar to what we saw in the weeks following the 2016 print. you have that. then you have the macro, which i would describe as, certain sectors justifying the soft landing,. financials, when you look at the landing in 1995, they were the big winner. their leadership speaks to this revolt story. you have political, soft landing, and rates down. jonathan: of those three, do you think some are more sustainable than others? christopher: the rates story is the most important of this, the most durable.

we put a major top in bond yields. we are going to 3.50 on 2-year yield's. jonathan: you say that with conviction like you know. where does that come from? christopher: the trends have changed. for seven months, these trends have been transitioning lower. when you look at the global picture, yields are breaking down everywhere. german 10's have failed, u.s. 5's, 30's. something has changed in the bond market. dani: even so, if we are talking 50 basis points, how much will that help small caps? all of this floating-rate debt, is 50 enough to revive the trade? christopher: i think we are in a reverse situation from late 2021, when the market began to demand rate hikes. the market will now start to demand rate cuts. the 2-year yield right now it is trading 100 basis points below fed funds. even after the ecb cut, german

2's are trading 100 points below the policy rate. the market will demand that the fed do more. dani: in terms of the sectors themselves, if you look at small caps, heading toward a soft landing, they are ok. what makes sense to you? it has been the policy leading it, financials. christopher: it is the largest weight within russell 2's. financials participating certainly helps, but think about the inverse of this. when you have the nondiscretionary rate cuts in the summer of 1995, what worked? financials roared, tech struggled. i think some of the best clues that markets give can often be very subtle. the last three or four weeks, even before last thursday, banks were breaking out. nvidia, qualcomm, micron, they all peaked back in the middle

part of june. watch of the stocks here. we know how robust the enthusiasm has been. we know how massive the flows have been. they are starting to crack a little bit. all of these ai related power stocks have begun to crack the last few weeks. lower rates would not be the boon that many expect. financials are telling you that is where the momentum is. annmarie: let's talk politics. when trump won in 2016, he talked about infrastructure, and that it became a joke, everything was infrastructure week. it took joe biden to get an infrastructure deal done. what if you are wrong, this does not pan out? christopher: the risks from the bond market are telling you that the feet are coming off the accelerator next year. what has underpinned a lot of the economic momentum has been stimulus over the last year plus. first year presidential cycle next year, if there is a change

in the administration, does the put come off the accelerator on the fiscal side? is that with the bond market is starting to reflect? the yield curve has steepened. we know the historical message of that is. when you have the curve coming out of inversion, it typically means you are not too far off from some recessionary environment. that has to be a risk for 2025. in the interim, we have 5, 6 months where this market is still digesting that. jonathan: does it matter how the curve steepen's? the kind of curve that you are talking about is the rate cutting cycle. that was not yesterday. christopher: 10-year yield's are now below where they were on yesterday's low. 2's have gone from five and change to 4.40. that is what i'm looking for. jonathan: donald trump does not change that? christopher: i think it accelerates it. jonathan: accelerates the bull

steepener. get into that. people might think the opposite. christopher: if you remember november of 2016, you have a bear steepener as the market prices in the deregulation, all of that. there is a lot of equating of what we have seen from the steepener the last few weeks, postdebate. the subtle differences, this has been able steepener. why? the market is beginning to pick up the idea that you will lose some of the fiscal support in 25. at the end of the day, it means nominal bond yield growth particularly on the short end. you could convince me that tens and 30's hang out here but i think we have lost 2's. jonathan: you just said the trump presidency might accelerate it. i want to understand why. christopher: the likelihood that we have the same fiscal impulse in 25 that we did in 24.

therefore, the message on the bond market is one of slower growth, not more robust growth. i think the short and reflects that. jonathan: great to see you. chris verrone of strategic us. looking for them bull steepener to continue. dani: that feels quite contrarian at the moment, considering it is a market that has not been trading that way. but to chris' point, you need to rethink this equity market, the health of big tech in that environment, if low yields also means they are not doing well. jonathan: a lot to talk about this morning and maybe the rest of the year. republican congressman michael lawler of new york, andrew husby from bnp paribas. the third hour of "bloomberg surveillance" is up next. ♪

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>> the conventional wisdom right now is going to be that this is

trump's election to lose. >> joe biden as his campaign even without the dysfunction cannot be counted out. >> there isn't a trump trade or a biden tree you have to put congress in the mix. >> i think geopolitical risk continues to ramp up this summer. >> this is bloomberg surveillance. jonathan: live from new york city, good morning. the third hour of bloomberg surveillance continues. equities up .1% after a major rally over the last week. in 30 minutes time, retail sales in america, the data point to watch. chairman powell said he is more confident about the trajectory for inflation. we want another read on the u.s. consumer. and then later an address by nikki haley at the rnc in milwaukee, wisconsin. more on that later.

the challenge in financial markets, our performance in small caps. how much of this is about the macro background and the politics. the difference between how donald trump will campaign and how he might govern. annmarie: also now his vp pick and someone who likes small cap and doesn't like big business and big tech. it is a hit it and that is why this evening will be interesting because there is a big gap between the nikki haleys and j.d. vance's. dani: he spoke to fox yesterday say china is u.s. number one threat. over the spring saying he is with dollar depreciation.

i think the rhetoric will calm down. jonathan: this gets tough. let's go to the survey for bank of america. what happens if you get a sweep, red or blue, 77% say hi bond yields and 52% say higher u.s. dollar. it is the dollar piece i think is interesting. if you say that this senator vance doesn't want it but most come on if you deliver tariffs that is what you will get, what will they do? dani: they only have so much power to devalue the currency when they want to do tariffs and when they are all for building up the economy and that is a huge part of their platform when you talk about small businesses. devaluing the dollar only goes so far at this point. and it j.d. vance will have to go out to the senate and whipped everybody up in congress and say, believe in our policies. a lot in the senate don't like

him both from the gop and democrats. jonathan: what happened to king dollar over at larry kudlow? we have to figure out what this is going to look like going forward and it is tremendously different to work out how different campaigning might be on how they might govern. annmarie: it depends on if they will bring the likes of individuals like larry kudlow back into this. i was shot in the senate yesterday, well maybe not that shocked, but when you're senate minority leader mitch mcconnell was on the floor, he was booted. foreign policy -- booed. foreign policy will be up. j.d. vance does not want to give more money to foreign policy. jonathan: equity furniture's firm or by 0.2 percent. that is the equity story.

we talked about the bond market selloff. it yields lower by five basis points. coming up in the hour, we will catch up with the republican congressman michael lawler on the candidates and greg daco. and david rubenstein on the growing 2%. >> ultimately, this will fall on the secret service. why were the manpower requests granted. what was the timeline for the agents arriving from out of town and being briefed. in 22 years and never worked a site where i felt like we had enough people. there are always holes to plug. jonathan: big hole saturday evening. officials trying to piece together the security failer.

the secret service director said it will be immediate changes including expanding tactical support for trump. near congressman mike lawler and another introducing legislation to increase security for candidates. joining us is republican congressman mike. thank you for sharing your time, particularly how busy things have been for you since saturday evening's events. walk us to the content of the bill and the kind of changes you would like to see. annmarie: we are working --rep. lawler: we are working through the logistics and we plan to announce this week but the intention is to ensure that president trump, president biden and rfk junior whose family has twice been a victim of a political assassination have enhanced security. obviously as more information is

uncovered about the events on saturday, it raises serious questions about what level of security the former president had. the fact that an armed shooter was able to get on a roof with a clear line of sight at the former president and get eight shots off that went through donald trump's ear and but not for the grace of god we would be having a very different conversation right now. the fact that this was able to happen, they have been lots of questions about the lack of resources and the lack of air support if you will, as well as drone technology. lots of questions being raised that require immediate and serious answers and this cannot to be a cover situation. this has to be a full and

transparent investigation into what happened, why it happened and how to ensure this never happens again. our elections must be determined by both at a palafox, not by violence at a rally in the secret service has a responsibility to ensure the safety and well-being and this cannot be a question of the expense or resources. the federal government has a responsibility to ensure the safety and well-being of these candidates and to ensure every resource necessary is available to them. annmarie: i think many on the other side of the aisle agree with you. how quickly can this bill get past and we actually see the resources hit the ground? rep. lawler: obviously this is a question for leadership. i am getting this to the floor as quickly as possible but i am

heartened to see the biden administration didn't move yesterday to give rfk a secret service protection after many months of him requesting it and obviously the head of the secret service saying there are going to be immediate changes with respect to president trump's detail. we need to make sure as a congress that we are insuring the resources are their both financially and in that there is more stringent requirement on providing the security. it should not have taken a shooting on saturday for them to realize that president trump needed enhanced security and that rfk junior should have security. that should have been a no-brainer in this heightened political environment in which, we are a deeply divided country and we have seen incidents in recent years, attacks on members of congress, threats against a

sitting governors, violence against the former speaker's husband. this is critical in this moment that we recognize the seriousness of this, the threat and that congress acts to ensure the support for the secret service and congressional investigations that are going to get underway it next week when we get back to washington. annmarie: given we are a deeply divided country, following the assassination attempt, the now vp pick of president trump said this had ties back to biden. do you think that kind of rhetoric is appropriate coming from the vp candidate? rep. lawler: first of all, the investigation obviously is underway. we don't yet know the motivation of the shooter and that will come out in due time and we should allow that process to

play itself out. i think what the vice presidential nominee was alluding to in his comments is the continued assertion that donald trump is a fascist or that if he somehow wins in november that therefore american democracy is going to end is destructive. it is destructive to our country and it undermines our democracy and our electoral process and it should stop. and i think all of us cannot recognize the need to bring down the temperature several notches and to look at the rhetoric that is being used both republicans and democrats have a responsibility. in this moment of heightened political disagreement that we recognize the importance of the moment. as i said, our election should always be determined by votes at a ballot box and not by violence at the rally and all of us have

a responsibility to understand that words that are, our rhetoric can at times because harm and we need to be clear that we are not going to tolerate it and i think what the vice president tilt nominee it was alluding to be and that is that the continued effort to somehow say that donald trump getting elected is going to destroy our democracy needs to stop. dani: these were shocking events and deeply disturbing but not the only case of political violence. you only need to look back over the past few years whether it be the insurrection on january 6, whether it be nancy pelosi's husband being attacked. so you temperature reading you are we starting to dial it down the temperature. how concerned are you still of

this deeply divided rhetoric that we continue to hear? rep. lawler: if this doesn't shock our nation's conscience to the core, i don't know what would. i have been very clear over the years. i was the first republican member of the state legislature in new york to denounce the events of january 6 on january 6. i smoke out -- spoke out when nancy pelosi's husband was attacked in the same way i am speaking out about the assassination attempt against president trump. we should all be clear on this that political violence has no place in our democracy. there should be no tolerance for it wherever it occurs, whether it is those that seized control of the federal courthouse in portland, burned it down a police station in minneapolis or storm the capital on january 6 -- capitol on january 6.

jonathan: thank you for joining us. with an update on stories, let's get to the bloomberg brief. >> shares of morgan stanley lower, a miss on wealth management net revenue overshadowing trading revenue. the bank saying it is well positioned to deliver growth and long-term value. earlier bank of america missed estimates for net interest income but said the key metric would climb by the end of the year. though shares are higher. gm backing away from the goal to produce one million all electric vehicles. it was set at an event that they won't have the production capacity to build one million by next year. that was the previous target. customer demand will dictate how

fast the company can get to the one million mark but for now they are seeing a slowdown in new deliveries. president biden will unveil a new proposal to cap rental costs across the country. his plan would give landlords a choice, agree to cap rent hikes at no more than 5% a year or give up federal tax breaks. the measure would be need to approved by congress where it faces steep odds. it would have to pass a gop controlled house and win a single majority in the senate. jonathan: up next, donald trump picks senator j.d. vance. >> president trump was right about every disaster joe biden wrong about. nafta destroyed the manufacturing economy in pennsylvania and michigan. a real estate developer from new york, donald trump, was right about that issue. jonathan: coming, david malpass. good morning.

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jonathan: one hour in 30 minutes to the opening bell. equity futures firm or on the s&p by .1%. bond yields down five or six basis points on a 10 year at 4.1731. former president donald trump picks j.d. vance. >> president trump was right about every disaster biden was wrong about. nafta destroyed the manufacturing economy in pennsylvania and michigan. donald trump was right about that issue. letting china into the world trade organization, joe biden reported it. a real estate developer named donald opposed it. jonathan: come from picking j.d. vance as his running mate, the 39 euros supporting increased tariffs, stricter banking regulation and antitrust

enforcement. david malpass the former world bank president joins us from the rnc in milwaukee. always wonderful to catch up with you. thank you for making time for us. this is a man you know well. walk us through what we need to know and how you think this administration might be different to what we saw the first time around with donald trump. david: good to see you. one thing is high energy. that will help u.s. leadership within the world. another theme from last night that was clear is the working person in america. i am a nerd so we talk about median income, raising the median income. that is what i have worked for for 40 years and that means, what is the mage of the people in the middle of the economy and how do you get it up. there was talk about manufacturing. j.d. vance is a great choice as you think about, how do you think to get people in jobs in

rural areas and suburban areas and making things again. that speaks directly to michigan, ohio, wisconsin, minnesota and so on around. i am from michigan and manufacturing is a key part of the state. jonathan: a conversation on wall street, conversations about foreign exchange. you know larry kudlow better than i do and he would often talk about the strong dollar policy. you don't hear that so much from senator vance and some say you have the opposite. what will change on that front? david: we saw in the platform that the u.s. is going to protect the reserve currency status of the dollar, that means defendant the dollar. i use the phrase a strong and stable. 50 years from now you will know that the u.s. dollar is the stable value for the world. that is the best thing for manufacturing because you make

the new investments. the key is to create an environment where people want to invest in the u.s.. the teamsters union last night gave a strong endorsement to president trump talking about breaking the political caste system and creating an environment where corporations wanted to be in america because they could produce here. that will be especially advantaging. you can create energy and mining, huge value in the u.s. and that enables all of the manufacturing and technology sectors in the country. annmarie: what do you think about he questioned jay powell about the fact that they reserve currency is status of the u.s. dollar worries him and the lack of control we have over our own conservancy -- currency. does that bode with former administration officials like larry kudlow? david: the fed made big

mistakes. i have been writing about that in the wall street journal for well over a decade. the idea of having 0% interest rates didn't defend the dollar and it didn't work for getting investment into the u.s.. you can have a much stronger policy from the federal reserve. that is some of what people are getting at, the fed it needs to be talking about production in the u.s. as a way to bring down inflation and that will bring down interest rates. i think there is a huge complaint right now that interest rates are the only tool being used to try to bring down inflation. that is not the right way to go at it and it means the small businesses across the country are feeling the pain. the interest rates are too high for small businesses and it is feeding into the concentration of wealth at the top. jonathan: how are you thinking about the federal reserve? are you saying they need newer tools or more tools or should the emphasis be elsewhere in

congress? david: they have lots of tools. they have a regulatory tools that really affect how lending is done within the country. they are not doing it in order to help small businesses. they need to be thinking about that and also the trade-off between the balance sheet and interest rates i think can be done in a more effective way. they do not need to be owning the bonds of the u.s. government . how is it that we are in this environment where central banks by the bonds of their governments and that enables big government spending. you can spend -- change that in a way that is pro-growth and that also plays into making the dollar the reserve currency of the world. china is looking at it saying it looks to us like the united states has lost its way, chasing its tail. that can be fixed pretty quickly

by communicating clearly that you want a strong independent fed that is talking about the actual needs of the country as a way to bring down inflation and bring down interest rates. jonathan: it sounded like you were thinking they should accelerate the rolloff and i'm trying to match that on extending the tax cuts of 2017. how do you do that at the same time? david: they all go together and they work toward both. if they would shrink the balance sheet, remember the balance sheet has two sides, assets and liabilities. the liabilities the fed is using to hold bonds is short-term liabilities. they have this giant leverage to trade on the huge amount of money of losses from that trade. they can let it run off in a way that puts money through the private sector so it actually

gets to small businesses. the how better -- and think how it better the environment would be if we had short-term rates. that can be achieved by talking about growth and defending the dollar and having more investment in the u.s.. you would have more confidence in the country and in the future and that was the theme at the convention yesterday. jonathan: you have a very clear policy preference and do you have a preference on who you would like to run the federal reserve? david: that is not so much of the issue as the policies. we need good people in strong positions in order to turn the country around. i have written a lot about the need for a full upheaval of policy thinking, especially the models at the fed. they are still basically operating under the phillips curve model that in some way you have to have unemployment to bring inflation down and that

can be switched around to say it, if we have more people working you will get lower prices and lower interest rates. jonathan: one of the bad things about tv is you run out of time and this is one of these conversations that i needed 30 minutes to get more clarity. let's do that soon. thank you for joining us. dani: i am interesting -- interested about the balance sheet comment. jonathan: the extra tools they could use an extra things they could be doing and how that is compatible with the stronger dollar at the time. dani: and how it helps small businesses. the wheels are turning. jonathan: coming up next, retail sales in america. from new york, this is bloomberg. ♪

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

jonathan: counting down to retail sales in america. equity futures on the s&p, from a 5.1%. at the nasdaq up by a quarter. small caps up by almost 1%. two, 10, 30, 10 the ear down by six basis points -- 10 year, down by six basis points. let's get to michael mckee. mike: better performance for the

american consumer than anticipated though not great retail sales coming in flat for the month of june after being up .1%. the forecast was for a 3/10 dropped so good news there. autos is a .4% gain. the retail control group was up 0.9%. i want to check when i get a chance to see what happened with autos because there was the computer outage for a lot of the auto dealers. auto sales suffered and that might be one reason we were only flat. import prices come in flat. petroleum up .2 on a year-over-year basis. input prices up one point 6%, going in the opposite direction of what we anticipated but overall it looks like a relatively good retail sales report. i will check the details now. jonathan: the control group of 0.9 was a big upside. the estimate was 0.2 and you put

that together with jobless claims from last week better than expected and you get the impression that maybe just the shaky period was a head fake but we will see. it supports the idea that this economy and consumer are holding up. looking at equity futures on the s&p 500, firm or by .2%. more weight to small caps, up by one point 1%. the two-year, 10, 30, down five basis points. the 10 year is down to 4.19. foreign-exchange, the euro against the dollar, euro dollar it looks like this, completely unchanged at 1.0893. let's get to the data. j think the shaky period for the consumer was ahead fake or is the jury still out? -- do you think the headshake.

for the consumer was a fake or is the jury still out. mike: i think the jury is out. it feels when you look under the hood we had a -2.3% drop in autos and other motor vehicle parts but they fell 2.7% the prior month -- or a year ago. it was partly is seasonal but everything else for the most part it is up except for gasoline and you would expect that gasoline prices going down, you take that out sporting goods and hobby stores, everything else was up including non-store retailers up 1.9% where they had fallen in the previous month and people were questioning why that is. what should be interesting this month as we are right in the middle of prime days and that tends to drive retail sales

higher. dani: on the topic of goods and sales, we had been expecting disinflation or deceleration coming in. is there any sign of that in these numbers? mike: these are not adjusted for inflation. so you can take away the inflation numbers from it in the numbers come in still very good because inflation was low and these numbers were high, especially when you look at the 9/10 game in the core group. you have to seasonably adjust inventory by category and i can't do it of the top of my head but there is still strength even without inflation. jonathan: thank you, this is a strong data point in america for retail sales, an upside surprise . to break it down is greg daco

and andrew husby. greg: this report was strong and that is an indication that consumers are not pulling back but being more judicious with how they spend and how much they spend and where they spend it. that is still a reality today despite this favorable report. we still have a jobs market that is having a decent number of jobs added and wage growth is still around 4%. combined the two and you have the income support. it is not sign of retrenchment but more prudent on the part of consumers. jonathan: the federal reserve has put in the consumers -- pointed to the consumers and say let's wait just to see how the inflation trajectory changes and evolves. do you think they have that time ? can they skip july and wait

until september? greg: we are not talking about necessarily bringing it rates down to zero or cutting in an emergency bashing but the calibrating pallet -- emergency but the calibrating is not as restrictive as monetary policy now that the labor market has rebalanced and inflation is continuing to move to the downside. what you want to do is sustain expansion and a low inflation environment and that calls for a recalibration of monetary policy. i have been discussing this for a few months and now would be optimal to recalibrate monetary policy in june would have been good as well. annmarie: andrew, do you agree that now is the time to act? andrew i agree with greg here. this consumer is taking a break. what we are seeing on the

consumer sentiment data is fatigue about high interest rates and higher prices but not a consumer that is ruling over and the labor market is a key part of that. wages are growing and the economy is not set to take a dive. jonathan: the balance has shifted and you can see it with the communication with chairman powell. and can you say it is equally on cpi and employment? andrew basically that is where we are, a fed that will be very attuned to weakness in the labor market, the economy probably slowing in the back half of the year and our estimates and they can think about recalibrating policy lower. dani: with all the things lining up, one agrees with you and put a note out saint white wait, if everything is lining up, why wait seven weeks pay would you agree that july makes sense? andrew june might have made

sense. you are talking about recalibrating monetary policy gradually. you want to avoid a situation where you are reacting to a slowdown in economic activity and that is the risk. you have an equally balanced environment when it comes to the downside risk on the labor market front and easing of inflation and now is the time to gradually recalibrate monetary policy and do so with regards to how the policy is evolving and gradually move to a state where interest rates are in lines for growth of the economy and an environment where inflation is moving towards 2%. i agree in terms of easing monetary policy and not waiting until september. jonathan: and her how her said rate cuts go from if to when to help many. not a matter of if, we are meeting -- waiting for the move and we can talk about whether it

is july or september. when you talk about just, are they talking about a midcycle adjustment? what are you looking for an how can we make the call for 2025 given the political conversations we are having in this country? . greg: there is nothing that says there needs to be a certain amount of rate cuts. we anticipate a couple in september and december given what we have heard from policy makers and anticipating 100 basis points of easing in 2025. there is a lot of uncertainty, whether political, geopolitical that comes on top of the macro uncertainty. the direction of the economy is one in which you are seeing gradual slowdown and it warrants a recalibration of monetary policy. we are in the early stages and i think the fed would be well

placed to gradually recalibrate and allow its of time to observe how the economy is evolving while recalibrating the pace of mountain in a -- monetary policy tightening. annmarie: how are you thinking about 2025, because the fed could be looking at a set of policies that will be very different. andrew is a key catalyst, we are talking about tariffs and potentially labor supply. for us we think on the inflation front that the fed might have to think about in short order is tariffs. we did put out an extensive note last on them and there is a lot of detail left unsaid about what that might look like but you are looking at inflation that could be a couple percentage points higher than the base case. with the fed having gotten inflation roughly in the neighborhood where it wants to, it is not bubbly home yet so that will potentially be something. annmarie: does that mean a hike

potentially in 2025. andrew with christ in you could look at a hope for a longer. but with a mix of policies you could be looking at hikes potentially after cuts. jonathan: both trying to figure out the future, tremendously difficult to do. we could see some big changes to trade and to the federal reserve. i want to reflect on the conversation we had with david malpass who is talking about shifting away from reporting the treasury and onto small business. these are big ideas. dani: were the things i struggle it is more than supporting the fed and that is to avoid financial shocks. if you think we need to run this down, what happens when we enter a covid period when there is liquidity in the system and the fed doesn't have the base.

if you take that out, you could maybe make the argument flipped it is an elephant in the room. jonathan: what happens if you talk about the administration talking about tax cuts as they are already and that collides with the fed? this is a complex stuff in difficult to work out what is going to happen and what fed looks like, i have no idea. dani: will it even beat powell? he wants to stay until 2026. and you get them talking about how he doesn't want to dinner anymore. he told david rubenstein he doesn't go out to dinner because people listen to his conversations. jonathan: why is he wearing about his conversations be heard? does he talk about policy at dinner?

let's get an update on stories elsewhere. >> retail sales for june delivering an upside surprise, coming in unchanged after economists had expected 0.3%. the retail sales control group which excludes fern -- food services auto's building and gas stations rose 0.9%, well above the projection of 0.2 percent. investors now looking to a slew of fed speak for clues on the central bank's path forward. elon musk during his weight behind donald trump, pledging to $445 million a month into a pro-trump super pac after muska's endorsement of trump over the weekend. the cash infusion likely to build the fundraising over president joe biden who is suffering from a donor revoked over calls for -- revolt with calls for him to end his candidacy.

donald trump, the presumptive gop nominee announcing j.d.vance as his running mate on the first day of the republican national convention. it signals what is likely to be a proterra ticket. trump reportedly said he was considering a flat 60% tariff on china's imports and advance of calling for china at the biggest threat to america. jonathan: up next, we set you up for the day ahead and we will catch up with david rubenstein. all of that just around the corner. from new york, this is bloomberg. ♪ investment opportunities are everywhere you turn. but at t. rowe, we're letting curiosity light the way. asking smart questions about opportunities like advances in healthcare.

and how these innovations will create a healthier world tomorrow. better questions. better outcomes. a healthier world tomorrow. better questions, better outcomes. another

jonathan: counting down to the opening bell, features a positive by .25%.

just a moment ago, a nice retail sales print. upside surprise in america. the trading diary for the next few days, nikki haley will speak at the are and see it later on. wednesday, the fed playbook and j.d. vance will take the stage. thursday, jobless claims and netflix -- netflix earnings. a programming note, joining us is a david rubenstein of the carlyle group and host of "bloomberg wealth." 's latest interview you can watch at 9:00 p.m. eastern. we have lots to talk about. we need to talk about your conversation with berman -- chairman powell and the bp pic. what can we look forward to later in your interview? david: he is an immigrant from

france that came here at the age of 16 and worked for julian robinson after he got his degree from m.i.t. and built for the largest headphones in the technology space, a $50 billion hedge fund and has had successes through up and down times and is considered one of the best technology investors in the country and has built a wonderful reputation investing in technology companies in the united states and around the world. dani: we have to talk about your conversation with powell. you tried to get something out of him in terms of what you wanted. what was your take away from that interaction? david: he is very experienced at not saying anything that will get him into trouble. he will not make any comments unless they are official and wouldn't make those until after there was an fomc meeting. he is very polite and smart and

has worked with me over the years but he doesn't tell me anything he shouldn't tell someone like me. i couldn't get him to say anything other than you will have an fomc meeting and do it they suggests. i am glad he did the interview and gave insights into what it was like to be the fed chairman and everybody is paying attention to every word you say. you caught up with him with the inflation rate challenge and how difficult it was. it feels like it is slipping into the background and it is shifting more to the labor market. can you give me information on how the ark of your conversations have changed? david: when inflation came it was not recognized as being an enduring as it turned out to be. the secretary of treasury and others said it was transitory

and said it was more enduring than that for the fed did a good job of increasing interest rates without putting us into a recession. people were predicting the high interest rates would produce a so-called hard landing last year and a hard landing this year and it hasn't happened. we are at the point where interest rates are likely to be lower and we haven't had the hard landing people have predicted. defendant deserves credit for managing this high inflationary period of time. annmarie: we found out last night the bp pic will be jd vance and who do you think represents the pro business interest in america now. david: i was surprised by the selection because he is young, and we've had them before but i thought he added less to the ticket than some of the others

but obviously donald trump knows what he is doing in terms of politics and seems to be successful in that area. i knew j.d. vance before he got involved in politics. he was working for steve case at a start up venture fund investing companies throughout the united states but not just in silicon valley and new york or boston. it was a fund that j.d. vance was working on and i invested in the fund but before it was completed he left ended something else so i met him in that context before he was in politics. annmarie: did you invest in the fund because you are also interested in the individual? david: it was steve case that had the track record and the concept of investing in technology companies not just in silicon valley, austin or boston so throughout the rust belt and other places because there were good technology companies there and that was the idea and

because j.d. vance had been from the midwest he was thought to be a good guy to invest in that kind of company. he did that for a while and left after a year or so to do something else in silicon valley. jonathan: what can we expect now given the potential of a second term with donald trump and thoughts we have heard already from senator j.d. vance on things like antitrust, regulation, mergers and acquisitions? what do you think is in store and is at the republican party of old or how much has it changed? is it still the pro-business movement? david: the republican party of the 1950's, 60's and 70's is not the republican party of today. it is different. trying to predict what the party will do and what donald trump will do if elected is very difficult because he has not picked all of his advisers but it is clear that donald trump controls the republican party and it is clear he has a good,

healthy position going forward. i was sad to see the shot at him over the weekend. we are very fortunate that he was not were severely injured because as we all know, a half inch either way it would have been very tragic for the company -- country and his family and fortunately that did not happen. annmarie: you did not answer my question originally. which party is not the pro-business party? david: both parties have a certain pro-business elements and business people will complain about both parties in a certain areas. it is not fair to say either party is pro-business but there are so many different types of business but clearly the republican party is different of 20 or 30 years ago and when i worked in the white house for years ago and the world has changed. i think both parties offer some things for the business community and some things the business community does not like

but it is too early to say what trump would do if elected or what president biden would do whether he was reelected. we are too far from dealing with the economic situations we will see in the next year. jonathan: fantastic to catch up with you. you can watch his interview a little later at 9:00 p.m. eastern on bloomberg. this is been a thing for this thing over the last three hours, the difference of campaigning and what you can expect when they expect governing. it is difficult to work out what will happen when they start governing. annmarie: we are seeing rhetoric and what i will see that the pic of j.d. vance for those within the republican party that thought potentially they were going to go back to traditional conservatism and pro-business, that is not the pic. this is a pivot to the populist right which is why it will be so interesting when we hear from

ambassador nikki haley, especially with foreign policy. she wants more funding and support for ukraine. a lot of circulation happening of what jd vance has said in the past and it will point he said i don't care what happens to it either way. very different tenors of the republican party. dani: where there is something united it is on china and for j.d. vance and trump, it is the dollar. on some of these things j.d. vance pic was about campaigning but for some things it is about governing. they are so closely aligned. i don't know how much trump will sign on to the antitrust but they are in it together. annmarie: this pic him as the populist and they have taken control of the gop and this solidifies it. but j.d. vance will help them in the states that biden needs the most. one issue that will come up, is the individuals in energy

districts in pennsylvania, will they vote for jd vance. it is the women, who do they go to? jonathan: counting down to the opening bell 35 minutes away. equity futures on the s&p up .2%. small caps is where the outperformance is. yields down by five basis points on the long end. we got news 25 minutes ago and down to basis points on a 10 year. the dollar comes back stronger it with that move. euro-dollar 1.08 78. tomorrow, we will catch up with a man in the running, the junior governor glenn youngkin sitting down with annmarie at the rnc. we will catch up with mike shoemaker. from wells fargo. good morning. this was bloomberg surveillance. ♪

matt: markets continue to climb higher. katie: bloomberg open interest starts right now. ♪ sonali: kicking you off of u.s. retail sales excluding autos, frozen june by the most in three months. matt: earnings season ramps up with financials firmly in focus. bank of