>> donald trump doubling down on his brand which is president biden's best chance at retaining the white house. >> this is a market pulling forward a trump win. >> the tariff story will be the big what we have to wrestle with. >> tariffs raise a lot of inflation uncertainty and it will complicate the fed message. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern.

jonathan: good morning. bloomberg surveillance begins right now. coming into wednesday with all-time highs in the s&p 500. the stat of the morning comes from rita nazareth at bloomberg news. over the past four sessions the russell 2000 has beaten the nasdaq by almost 11%. we've not seen moves like this since 2011. lisa: -- dani: over the past days it has outperformed the s&p the most on record. you hear that and the nasdaq and s&p are surely getting pummeled. there is a sense the strong hands have not folded. i would've the politics changes that? jonathan: five days of gains on the russell 2000. obsolete phenomenal. when it does talk about politics. -- absolutely phenomenal. we need to talk about the politics. there is yen strength.

there is one quote that jumps up the page in the donald trump interview with bloomberg businessweek. "we have a big currency problem." dani: is a trump that is not pro-dollar but trump policies are pro-dollar. the confusing thing to get around. i had a conversation with mark mccormick basically saying japan will try to get out in front of this. part of the reason they will hike is because they do not want a weak currency level. maybe that is what ultimately weakens the dollar. it is all very confusing. jonathan: if you ask someone around the table what will tariffs due to the u.s. dollar, if president trump gets a second term, what happens to the dollar? most people around the table said the dollar get stronger. he also says this, i've been talking to many factors and nobody to buy our product, it is

too expensive. that is a quote from former president donald trump. the dollar is too strong and they will put up tariffs and that will make a stronger dollar. dani: one way to offset is to have a fed chair that is not want to hike. it is also donald who in speaking to bloomberg said he would allow jay powell to carry out his term. he does not have the political power to not allow him to carry out his term but you have to wonder how you get a weaker dollar unless you have a federal reserve willing to let inflation run. jonathan: some of the takeaways would allow him to complete the term but does not want them cutting before november. i wonder how the move might change if they did cut before november. dani: one of the big takeaways from this piece with businessweek's he views relationships very personally. that is a concern with jay powell. go back to the idea of him talking to manufacturer saying it is more expensive.

there are other reasons besides a strong dollar. europe does not want to buy our giant gas guzzling cars. it is more than just a dollar. jonathan: a lot of talk about this morning. there is a chip story in the mix we will be billed on. let's get to the story -- we will build on. yields all over the place this week. up again by a single basis point. 4.1692 on the u.s. 10 year. there is the weaker dollar across the board and the stronger euro. we are firmer .4%. coming up this hour we catch up with brian nick of new edge. sarah wolf of morgan stanley and hermann chen of bloomberg intelligence. we begin with our top story, the big rotation, small caps on a major five-day winning streak. brian nick writing "we closed

our underweight u.s. small caps versus large in light of the softer and patient data, in light of a further unwind and negative positioning, and more optimism that we will comfortably avoid recession." brian, good morning, congratulations on the new seat. brian: we are not in the business of standing in front of moving trains. jonathan: like in this continue? brian: we are not sure it will continue long. we can see ourselves moving back to underweight if it seems it will not get the rate cuts the market has priced in. this has what has propelled the small-cap optimism. we will see the earnings fill in behind the optimism. we need to see homebuilders turn around and see more construction in the economy. we see the cyclical upturn in the second half of the year which is the only way we can hit small-cap earnings targets. jonathan: are you more convinced about the earnings that may come from big cap tech and are you unwilling to sell the players in small caps?

brian: we have been selling high earning, high-growth companies. we are not buying into a junkie rally for small-cap, we are still emphasizing quality across the portfolio. being neutral we see ourselves underperforming the small-cap index in this environment where things are indiscriminately moving upward. we are concerned about the fundamental story in 2025 in the ambitious earnings targets that if they are not met it will not matter how many times the fed is cutting rates. dani: large caps and big tech have fallen but not by a large degree. there is the narrative that once the rotation happens it will be violent, yet we have an s&p that is up 1.5%. that is not exactly violent. brian: we could see more days like this one -- in 2024 we had days where 80% of the index was down and the index was up. we could see more days like this one where we could have more

violent rotation, especially with the headlines around ships. we do not think the -- with the headlines around chips. we want to trim a little bit and some of the names have gotten too expensive. that was part of the rationale of a valuation clay -- as a valuation play. you need the economy to perform well and we see the economy slowing down it will be the bigger growth names with better secular growth stories that will lead and that could be we are back in the situation. dani: for now we are treating this goldilocks thing where it is slowing down. we have been concentrating on small caps. it was not homebuilders up 6%. unprofitable tech up over 3%. is there some degree of irrationality in the moves? brian: i do not think in the homebuilders there is. we've been saying the fed has been raising interest rates.

there is not that much evidence that cutting interest rates will help the consumer. we know the parts of the markets alter responsive to rate hikes in 2022 and 2023 will be housing related. we have been pessimistic. as soon as there is an indication inflation will be lower and the fed will acquiesce and start cutting rates sooner and maybe more cumulatively over the next 18 months, that will be good for homebuilders. we did not see it in the confidence numbers. maybe it will take another month for the nhb to start moving up again. jonathan: let's talk about the bond market. monday morning we had a bear steepener and this time yesterday morning we had a bull flatten her and we are trying to work out what is more important. the economics, the macro backdrop, the federal reserve, or the politics. brian: i think everything is pushing short-term interest rates down. if you had a trump win he would prefer short-term interest rates.

there are some who are advocating for not cutting rates who might be in the discussion for the big job who might decide they want to cut rates after the election. we will see. the steepener trade -- when people ask what is the political trait, is clearly a steepener whether is bull or bear. if you will cut taxes for corporations further, if you will make those individual tax cuts permanent that will raise the longer end of the curve. at the same time if you have some power over the fed to try to get them to cut rates where they're inclined to do that because inflation is down, that is how we play. we are advocating people move out of ultra short duration cash and extending duration portfolios. the longer end of the curve will stay higher for longer. jonathan: we shared the quote from the interview with donald trump at bloomberg businessweek. "we have a currency problem." if the president of the united states comes into power it is

talking about a currency problem, can he back that up with policy? brian: the words might have to be enough because what would you do to weaken the dollar other than to liberally trying to weaken the economy or create a sense of non-credibility when it comes to the central bank? at this point we are past the point on the curve were doing more fiscal stimulus could weaken the dollar if it looks like the debt situation is becoming worse. we have not seen that in other places where they are much larger debt to gdp ratios. it is a tough thing to accomplish if you are trying to erect tariffs and enact some kind of trade rescissions -- trade restrictions. the economy in the u.s. is stronger than the other countries we are talking about to try to weaken the dollar. it is a hard policy to accomplish. dani: you can look at today and see had -- and say he has done it with the yen. the yen is stronger versus the

dollar. this translates to more volatility. if there is some element of jawboning that cannot last. much conviction can you have in something like a strong dollar trade? brian: if we are doing big fiscal expansion which is the low hanging fruit for what the new congress and new president can do in a scenario where trump wins, i do not think you see the dollar weaken. you will have relatively high interest rates. it might stop the fed from cutting as much as currently priced in or what the fed would say they would do. that keeps the dollar strong against the euro and the yen and the british pound. that does not mean it is incompatible with rising equity market. some of the companies benefiting from the pocket of moves continue to do well in that scenario and we have an overheated economy. i do not see the dollar weakening in that scenario. jonathan: good to get your opinion and congratulate shouldn't on the new seat -- and congratulations on the new seat.

equity markets negative. there is a big reason. with an update on stories elsewhere here is your bloomberg brief. yahaira: a changing of the guard at hsbc. the bank has named georgia penry as its next ceo. they will take over as ceo in september. he replaces noel quinn who in april announced his surprise decision to retire from hsbc after three decades. the biden administration is considering ramping up its chip crackdown on china. bloomberg learning the u.s. has floated using the most severe trade restrictions available if companies such as asml continued giving china access to advanced semiconductor technology. the potential risk hitting shares even as it posted second-quarter earnings and sales that beat forecast. prior to the assassination attempt and shortly before his debate with president joe biden,

donald trump spoke to bloomberg businessweek about his economic plans for a second term in office. in the 90 minute interview he said he does not want to remove fed chair jay powell from his position. he wants to bring the corporate tax rate to as low as 15% and he would even consider jamie dimon to head the treasury. the full interview is available now on the terminal or for subscribers on bloomberg.com. jonathan: much more from that interview later this morning. up next, from fierce critic to staunch ally. >> chaos follows him. we cannot be a country in disarray in a world on fire and go through four more years of chaos. >> for the sake of our nation, we have to go with donald trump. jonathan: what a difference a few months makes. that conversation is up next. annmarie hordern in milwaukee, wisconsin. good morning.

♪

jonathan: a sneak peek at the price action. down .7% on the s&p 500. chip players struggling. difficult to know how much this is president biden making it more difficult to sell these chips to china and how much is the move over the last few days. dani: the move has been mostly nasdaq and s&p study. this is the extra push to get a selloff in some of the names. jonathan: yields up by a single basis point. under surveillance, from fierce critic to staunch ally. >> chaos follows him. we cannot be a country in disarray in a world on fire and go through four more years of chaos. we will not survive.

for the sake of our nation, we have to go with donald trump. donald trump has my strong endorsement. jonathan: republican speakers uniting behind donald trump in milwaukee. attention now turning to a speech from trump's vice president pick j.d. vance. i want to go to that quote and bring in annmarie hordern. four more years of chaos, we will not survive. not the words of a democrat, the words of nikki haley a few months ago. annmarie: absolutely. this is what many are calling is about unity but critics are saying this is sheer politics. this is donald trump's party now and you saw that this week with who we decided to pick as his vp candidate who we will formally see except that today in a speech. you are seeing the foes come on board to the trump camp. she called him unhinged. she said chaos follows him. this was the quote last night.

"my message is simple. you do not need to agree with trump 100% of the time to vote for him." she wanted to make it clear as she came out on the stage to boos, he said donald trump has her full endorsement period. jonathan: boos for nikki haley, mitch mcconnell boot. we have seen the footage of matt gaetz arguing with kevin mccarthy. how united is this party? annmarie: they are trying to say they are united, especially with the events over the weekend with the assassination of former president trump. he is talking about the fact that he wants a call for unity. under the surface it is a very divided party. not just divided on the politics. that video circulating a former

speaker kevin mccarthy talking to a reporter and then matt gaetz bashing him. that individual who led to his ouster being speaker of the house. there is a lot of personal politics under the surface and a lot of policy divergence. you see that as well in this interview former president donald trump gave to businessweek on a number of issues, whether it is the economy, foreign policy. it is two gop's in one but right now they are focused on trying to win and take back the white house in november. dani: nikki haley in her speech said she wanted a president that would fight enemies but stand with our allies. from that interview with trump in businessweek you did not get that flavor from him. annmarie: now. -- no. i would point to one of the most important quotes on foreign that everyone in the national security world will be discussing and this comes with taiwan.

donald trump was questioning why the united states should protect taiwan. he said "i should think taiwan would pay for defense. we are no difference that an insurance company. taiwan does not give us anything. it is 68 miles away from china. a slight advantage. china is a massive piece of land." he also talked about taiwan is where all of the chips are in they take business away from the united states. i wonder if this is similar trump playbook he used to his first term in office when he talked about how when it came to nato and these european countries need to pay 2%, if he is going to try to use this as a negotiation to get something out of taiwan. he was questioning the u.s. defense or who should be paying for that defense. dani: you have spent a lot of time with leaders abroad, most recently at the g7. there is a lot of talk about your preparing for trump 2.0 but

we did not know what that would look like. is this a europe that is prepared for that, given some of the language we heard from him in his interview? annmarie: i would say it was certainly clear at the g7, definitely at the nato meeting in washington, d.c. that european leaders and u.s. allies are preparing for trump to point out. one thing is -- for trump 2.0. they understand the playbook and understand the individuals around him so potentially they can start making those inroads now and trying to have influence. we saw this with former u.k. foreign secretary david cameron going to mar-a-lago. viktor orban just went to mar-a-lago as well. they are seeking out these meetings. one thing from the businessweek interview is clear. a lot of notes coming in and i looked at what goldman sachs is saying about a potential trump 2.0 and what that would mean for tariffs on europe. he looks like he is going to want to put up this 10% tariff

wall around the united states and we are talking about what this would mean for china. a 10% tariff wall around the united states would mean potentially no growth in europe. jonathan: a fantastic interview with bloomberg businessweek. a sit down with donald trump from about a month ago. president donald trump also telling bloomberg businessweek we have a big currency problem. that is a theme we will revisit throughout this morning. i want to talk about some comments from joe biden. in an interview with nbc he is made this point that he wishes the media would be more focused on donald trump. he is lucky the media is because if they were not and they were not there were more focused on him like they have been over last two weeks we would be talking about and address yesterday that was not great at all. i imagine if we do not have the tragic event of saturday evening we would be talking about more house democrats asking him to step aside. annmarie: it is a great point. if we did not have the rnc this

week every single movement we have seen current president joe biden make would be under that magnifying glass and it would be scrutinized, including his speeches yesterday and also the lester holt interview that got a lot of pickup and individuals were talking about, but not as much given the attempted assassination on former president donald trump and the fact the rnc is taking place this week. it is also taken up -- it has almost taken up all of the oxygen. that has given breathing room as we heard from henrietta treyz yesterday for president joe biden because his performance has been lackluster. the interview with lester holt, if you are a democrat and you are sitting in congress, it did not do enough to assuage concerns this individual is going to be able to not just win but govern the next four years. jonathan: we sat here monday morning and we talked about how one-dimensional the biting campaign has been coming exclusively around one idea.

that idea is ultimately the existential risk donald trump poses to democracy. we have heard that on repeat and we questioned whether they could continue sending that message. after the last 24 hours it feels like just a few days after the assassination attempt on the former president, we are back to where we were. his campaign as normal. annmarie: it is campaign as normal. joe biden did say this to lester holt. he says he does want to tone down the rhetoric but he tried to explain why he thinks trump is an existential threat to democracy but he tried to pivot and talk about some of what trump's policies are. what we keep hearing from this campaign is they've not been able to expand upon that one-dimensional. they want to make it about a referendum on former president donald trump's prior four years, even though joe biden currently is the incumbent in the white house. jonathan: great to catch up. we'll catch up with you in about

60 minutes. sitting down with virginia governor glenn youngkin. do not miss that conversation. i know a lot of you are just tuning in. the take away from her sit down conversation with donald trump. he would keep chairman powell in the position. he does not want them cutting before november. that will not come as a surprise. he would consider jamie dimon as treasury secretary. we have gone over this repeatedly. he has some strong thoughts on the strength of the u.s. dollar. dani: i've seen a lot of commentary coming out of this interview saying it is pretty benign. he does not want to replace powell, he is talking about jamie dimon. when you factor in some of his policies on tariffs you have to question whether he will live up to that. he wants tariffs, which means more tax cuts for the public, and then a higher inflationary environment which means you have a fed that cannot cut as much or needs to hike which means a stronger dollar.

the rub in that is the fed. the fed is standing in his way. he can say all he wants, but if the fed is standing in his way for a weaker dollar will he hold to that promise? jonathan: what are trumponomics? he said it will be low taxes. adam posen it brought this up. if the former president goes through with these tariffs plans you're talking about an inflationary burst but one the fed might have to respond to and then we will be talking about rate hikes in 2025 and then we revisit that question on chairman powell. coming up, sarah wolfe of morgan stanley on the upside surprise on u.s. retail sales. from new york, this is bloomberg. ♪

(♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

the moment i met him i knew he was my soulmate. investment objectives, risks, charges, expenses "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: on the s&p 500, three-day winning streak into wednesday. the nasdaq down more than .7%. outperformance again from the russell 2000. unchanged on the session. anything but unchanged over the last five sessions. double-digit gains on the russell 2000 in just five days. it has been confusing. monday morning yields up a lot, tuesday morning yields down a lot.

4.1730. what is the more important force to this bond market? dani: i have to say it is politics. we have already priced in fed cuts. how much juice is there to any sort of bond market rally when we are two more than what the fed has priced in. we are ahead of them. what is left to be priced in? it is politics. jonathan: foreign-exchange. we can argue once again it might be politics. dollar-yen with the big move. dollar-yen 1.5643, down 1.2%. this is been a funky currency pair. the comments from donald trump in bloomberg businessweek, we have a currency problem, i think will reverberate around foreign-exchange until november. dani: i cannot get over the irony of japanese officials trying their hardest to jawbone

and intervene in what strengthens the yen? it is donald trump topping about it. this works separate well for them. jonathan: i want to have a quick look at what is happening with sterling. sterling's little bit stronger as well. we are back through 1.30. we thought we would open the door to a cut in august and the bank of england. much of a nightmare is that data this morning from the officials? dani: you have to hope they look through it. if you look at the data, services were hot. you dig further in, it is hotel prices. it is almost a cliche, you have taylor swift there. you have everyone traveling. how many american friends to we have the travel to london to see taylor swift? it had an impact and that is not sustainable. jonathan: we are blaming mohamed el-erian going to paris? he can answer that himself.

dani: once we get the french numbers we can blame that on him. jonathan: will not do that. top stories. the secret service boosting security around donald trump after picking up intelligence in recent weeks of an iranian plot to assassinate the former president. iran has denied the report and there is no indication of any link between the intel and the sunday shooting at a rally in pennsylvania. -- the saturday shooting. an unbelievable report yesterday from cnn. dani: it underscores what a colossal failure the secret service had. if they have this information before the rally and still allowed open era rally, the only thing i can think of is they must have assumed this threat was not fully realized. there are some reporting that is what they believed. this would be a serious escalation. for iran to go after a presidential candidate when there is a hot war in the middle east that involves iranian

proxies, i have to imagine that is why you do not have trump moved indoors. it points to this fact if they do this, why did they allow him to have a rally in an open field? jonathan: absolutely shocking. still no answers. part of the move we are seeing on the equity benchmark come the s&p and the nasdaq 100 as well is because of this story. the u.s. chip war with china showing no signs of easing. we are reporting the biden administration is considering the most severe trade restrictions available if the likes of tokyo electron and asml considered -- continue giving china access to advanced semiconductor technology. where does this leave technologies -- it is four months until november we find out it might not be president biden anymore. dani: it is also a new dutch government. we have a very right-wing government, the most in history.

i was thinking if you wanted to build a contrarian portfolio where you say i think biden will be elected. right now we've been trading trump. if you want to contrarian portfolio you're getting the flavor it might be short big tech. jonathan: big tech is down today. the nasdaq is off 1%. let's turn to this story. new york fed president john williams telling the wall street journal the central bank is getting closer to cutting rates but will not be ready to pull the trigger at this month's meeting. more fed speak coming later. sarah wolfe of morgan stanley expecting three rate cuts this year starting in september, writing "the deceleration in consumer spending is concentrated in goods while services consumption is slowing but remains the top priority among households." sarah joins us for more. let's build on the number yesterday. retail sales better than expected. there was a shaky period we started to worry about the

consumer losing the tailwinds of the last several years and then retail sales happened and jobless claims happen and there is more confidence. you think we could park that concern around the consumer? sarah: i think there is a genuine slowing in consumer spending but now we can say the forced quarter were real pc step down to 1.5% was slightly overstated by higher prices and seasonal factor distortions. the second quarter we are getting much cleaner read on consumer spending which is chugging along around 2%. that is still a slow down from last year and it is coming at a pullback in goods consumption. i do not think we need to worry consumer spending is falling off a cliff. i would be more worried if the 1.5% we got last quarter had to be extrapolated forward throughout this year. jonathan: should the fed be cutting if we have interest rates at 5.5% and we have cpi running close to 3% and tracking at 2%, is that a decent world to be in? sarah: the top priority is inflation.

inflation is coming out better than the fomc expected. we have it coming into .6%. their projection showed 2.8%. inflation is what will get the fed to start cutting but the slow down in economic activity is what keeps the fed cutting and we get three cuts this year. one of the things to note is even though gdp is running at 2% we have done a lot of work on the fact that stronger immigration is driving higher population growth. near-term gdp is above 2%. we are seeing depressed economic activity. it is hard to pin it relative to pre-covid where we had a smaller economy. dani: you are getting into one of the complicated things of 2025. what happens if there is a serious clampdown on immigration? sarah: it is a huge risk to our 2025 outlook. if we were to see a negative supply shop come either way

clampdown on the border or there are deportations, that would be a negative shock to labor. we see that as negative for growth and later positive for inflation. in that outcome we see the fed might have to be easier on policy to react to the negative growth effect would be the first order effect we see. dani: there has been an interesting thing in the labor market under the surface. that is the kind of jobs happening. we have talked about the job losses. the balance of jobs has shifted to high production type growth, high productivity, high pay. things like the sciences industry where the losses have come from the lower productivity work worse, things like hospitality. what shift is that? is that structural and what does that mean for america growth in productivity? sarah: reality is we saw the trends in these lowering sectors

over the last years because we were backfilling. now we see a shift to industries that are higher productivity. i think there'll be a huge question on how ai influences the productivity of these industries. what we have highlighted is it is likely ai will slowly find its way to a broad set of industries and help augment the workforce and bring productivity back to lower productivity sectors like the hospitality industry. we are very optimistic. we think there is going to be more of a productivity boom. it will roll out in the economy and it will help augment the workforce instead of the rollout of ai. we do not think that will be the base case. jonathan: these are long-term themes. can we talk about the end of this month. do you think the july fed meeting could be a live meeting? do you think there'll be officials pushing for that cut as early as july? sarah: i think the bar is high for july to be alive meeting. not much data between now and

the july meeting. there is no real data besides jobless claims which we saw a retrace. if we saw a large exhilaration in the next couple of weeks it could make it live. more likely we will see notable changes in the july fomc statement that push the fed more clearly to set up for a september can't. what joy mean by that? -- what do i mean by that? right now the statement is intensive to inflation risk. jay powell said inflation is not the only risk they are watching. we expect to the fomc statement will have a lot more on that maximum employment side of the mandate because of the sopping we are seeing in the labor market and that will tell markets it is not just inflation driving cuts, it is the broader economy that the fed is watching. at this point chair powell does not want to cause undue weakening in the labor market. jonathan: sarah wolfe of morgan stanley looking for the first

rate cut in september. remember we have jackson hole in between. let's turn to london. the first king's speech under the uk's new labor government is underway. joining us is bloomberg's tom mackenzie. we have seen a few of these over the years. it is his words but ultimately someone else wrote it. tom: they did indeed. the person behind the speech is the new prime minister and his team. this is the opening of this new parliament with a labor government without significant majority. what we are expecting is a flurry of bills. there will be critics who say this is a government that has not been as courageous as it could be. in terms of the number of bills presented in this speech over the next 15 to 20 minutes you will be at levels last seen when tony blair was the prime minister. 35 to 40 bills on renewable energy to a national wealth fund to improvements around labor and workers rights. all of those will be in the mix

as well as planning for housing and the building out of key infrastructure like data centers. the opposition conservative party will be going through all of this along with the liberal democrats as it is debated after the speech. the focus on what is coming through from the pain as he sits in the house of lords. jonathan: summit governments have promised the same thing. let's go through the headlines. the promise is reform and housebuilding. how may governments have promised that and failed to follow through? tom: a multitude of governments have promised that and failed to meet those targets. this labor government is promising 1.5 million homes in the parliamentary period. your skepticism is well-founded. here is what the labor government would say is they have that majority in the houses of parliament to be able to push through the concerns within those constituencies around adjustments to planning reform.

they will not face the resistance the conservative party felt in those greener areas of the u.k. where you have the critique that holds back much of this planning. they have the majority to look past those concerns and complaints and readjust the planning procedures to push through with housing targets and more importantly or as importantly, it is not just about the building of houses come is about the building of infrastructure, things like data centers that have been held back as a result of the rigidity in the planning system. dani: the other thing the labor government campaigned on his growth but they are hemmed in by the lack of fiscal headroom and they are pledging to extend some of the tax cuts or not increase taxes. what will be there platform for that growth when they cannot spend their way to get there? tom: i talked about the parliamentary majority this government has, but the flipside in terms of the political strength they have is the

constraints on the fiscal side as you correctly point out. growth has been upgraded. we saw that for the u.k.. well below the target the prime minister has set himself around 2.5% medium to longer term for the u.k.. this is a more interventionist government. this is an industrial policy that will be outlined in terms of what we are seeing with this state owned energy company. capitalized with about 8 billion pounds with additional private accounts. state owned wealth fund will also be part of the mix. the fact this is an interventionist government with these industrial policies and a government that has the ability to push through these policies given its mandate, unlike in the u.s., france, or germany is what the government is saying gives them the ability to push for that ambitious growth. the b and other -- the obr and

others have suggested that will be a challenge. jonathan: tom mackenzie in london as we get the king speech under the new labour government. let's get you updated on stories elsewhere with your bloomberg brief. yahaira: major changes could be ahead for the supreme court. president joe biden is planning to unveil proposals that could dramatically reshape the high court including term limits on justices. the president has also discussed and enforceable ethics code for judges and a constitutional amendment that would overturn the court's recent ruling offering broad immunity to presidents. johnson & johnson earnings coming in. the pharma giant putting its full-year profit forecast setting heavy costs tied to a series of recent acquisitions. the company reporting second-quarter earnings that beat wall street estimates on overall sales in medicine revenue. the company also saying it is cautiously optimistic about a settlement. elon musk saying he will

relocate headquarters for x and space x from california to texas. elon musk making the announcement on x after expressing frustration on california's new lot related to transgender children in public schools. he endorsed donald trump for president and pledged tens of billions of dollars to his campaign every month. jonathan: up next, regional bank stocks absolutely surging. >> you have the cost of funds is beginning to crest. the expense leveraged in this business is good. we have seen banks much more efficient than 15 years ago and that is a terminus difference. jonathan: wykle talk about that tremendous difference next. live from new york city, good morning. ♪ finance and h.r. on one platform.

tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah.

jonathan: equity futures look something like that. on the s&p 500, -.7%. over the last days firmer. the big rally from small caps. the outperformance on the russell versus everything else. the outperformance of regional bank stocks. regional bank stocks absolutely surging. >> no and the smaller players, you have the cost of funds beginning to crest. the expense leverage is very good. we have seen banks much more efficient than they were 15 years ago and that is a tremendous difference. this tilt to spend money and they are much more efficient in doing so. when we get to a period that the cost of funds comes down or flattens out, that will leave better spreading. jonathan: regional and midsized banks surging amid growing optimism for fed rate cuts, rallying 12%.

that is longest stretch since the pandemic. joining us is hermann chen of bloomberg intelligence. what a move. what you make of this? herman: the multiples have been pretty extraordinary. there are expectations that if trump does become president there is the potential for less regulation for regional banks which would also work well. jonathan: let's start with interest rates. it is interesting we are talking about 25 basis points in september. we are not talking about a major rate cutting cycle that will stimulate all of this business for regional bank lenders. what are we talking about? herman: the rate cuts will not have much of an impact for banks for 2024 results. that is for sure. there is lift in 2025, including the potential for less credit quality issues that have been looming over banks ever since we

have been sustaining higher interest rates. there is also the potential for higher loan growth as well. loan growth has been tepid over the last several quarters and there is a potential for that to come back. dani: have we seen any of that in the earnings we have got? have earnings showed up? herman: i would say the earnings cycle has been fairly steep. nothing to surprise on the downside. talking about not only regionals like pnc but also the largest like jp morgan and bank of america have talked about strong earnings trajectory especially the net interest income. dani: i want to talk about the political peace. having a vp pick who has championed local banks but said he would not recommend some of the big banks buying some of the smaller ones, there is nuance to it. out of does the political picture play out? herman: one of the factors that

has been hurting regional banks, especially smaller ones, is there is not been a lot of m&a activity. one of the reasons for that is the biden administration has been pretty reticent to approve deals, not only in banks but also other industries. that is something that in a trump administration, maybe that goes away and we see more merger activity which is good for increasing scale and increasing efficiencies for the regional banks. jonathan: this is where things get tricky. find out how they will govern and the j.d. vance pick comes into the conversation. the senator from ohio will address the convention this evening in milwaukee. we know the senator from ohio has agreed on a lot of issues with senator warren, including this one on mergers and acquisitions. how business friendly you think this administration will be? herman: you can look back at the previous trump administration and you can see with the fed there was a different regulator in terms of the banks.

randy quarles, more open to having a tiered system of regulation from the smaller bank. maybe you can infer that if trump does come into the office again that sort of behavior would change versus what is going on with the biden administration. there is some potential blueprint for changing regulation for banks. dani: in all of these come in the fed rate cuts and the politics it is you need to infer, maybe there is potential. it is not there yet. is there since we have gone too far? herman: a lot of it is just fine . we are seeing the melt up, not really any changes in the earnings power of the banks. the banks have suffered since what happened with svb in march of last year and we have seen

suppressed valuations and suppressed multiples and now we are starting to feel like the multiples have come back fair value. more in play now for the regional banks versus what we have seen over the last year and a half jonathan:. dan greaves sat with us and made the point what do we buy when we buy russell? what we own there? not to throw mud on some of the very good businesses, but i'm talking about investors pivoting from one thing to another. much knowledge do they have about what they are buying? dani: even the makeup of the russell is so heavily skewed towards regional banks which is why we've gotten a follow-on thing. so much money has been poured into these etf's which are a retail product. with they become people know when they are buying regional banks. with a be comfortable knowing also in there is unprofitable tech? if you dig through the components it would not like what you are buying. jonathan: for much of this year we've been talking about regional banks and commercial real estate.

to the issues go away with a couple of cuts? herman: issues do not go away. if there are lower borrowing costs maybe the borrower could support these properties a bit more than they would with rates elevated. jonathan: hermann chen of bloomberg intelligence. it has been absolutely stunning. coming up the next hour, the lineup looks like this. we will catch up with michael o'rourke. we will catch up with virginia governor glenn youngkin, and we will speak to mike schumacher. glenn youngkin was in the running to become the vp pick under president trump. he is sitting down with anne-marie. this is a guy that will have very different views on some of these policies coming out of this administration. dani: i'll be interested in what he has to say because he has been talking about we want more business in virginia. what does he think about trump's

policies on tariffs? i would be interested to know because he is someone you would associate with more classic conservative policies, not the protectionist ones we hear from trump. in this idea of unification, does the policy move towards unification? you can talk about one republican party but what does it mean when it could hurt your constituents? jonathan: the thoughts on tariffs and foreign-exchange dominating the interview with donald trump in bloomberg businessweek this week. a fantastic read. we have a currency problem in the forms of the former president. japan is having a currency problem. things getting a little better. a stronger japanese yen. trading at 156.70. coming up, much more on the stunning small-cap rally outperforming once again with the s&p 500 -.8%. from new york, this is bloomberg. ♪

do you want to close out? should i? normally i'd hold. but... taking the gains is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management.

>> there is a whole large portion of the market that is both unloved and overlooked. i think there is ample opportunity. >> i think the market will now start to demand rate cuts. >> now would be o optimal to reach out. now that the labor market is rebalanced. >> we do think the fed should be easing. we think they start in september but cut three times. >> think how better the environment would be if we had lower short-term interest rates.

you would have more confidence in the country and future. >> this is bloom brg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning. good morning. good morning for our audience worldwide. the second hour of bloomberg surveillance begins right now. we need to talk about this conversation right here with donald trump, the former president sitting down with bloomberg business week. the top takeaways, he would keep chairman powellment allowing him to keep the term e doesn't want them cutting interest rates before november. would consider dimo nd for treasury second. the headline we are running with is this right here. quote, we have a big currency problem. question, danny, what can they do about it? >> the things you could do are not great. you get a fed chair in place who lets inflation run hot. the other thing which directly contradicts his comments on europe you do a reagan style

plaza accord. you need europe on your side. how do you do that when you talk about pulling out of nato because people aren't paying enough money when you are angry at angela merkel because germany hasn't bought enough u.s. currency. is europe going to come to the table? jonathan: japan may come to the side. the dollar is weaker against everything at the moment. that's foreign exchange. talk about equities. you might have noticed the s&p 500 pulling back by three quairts of one%. the united states is floating even tougher trade curbs to try to track down on exports of chips to china. >> this goes back to what herman was saying it's trading on vibes. we don't know what the government is going to look like in a couple months' time. we don't know if really the u.s. trading partners will go along with the chip crackdown if they think the government might change. what we have had is this big rotation that some looks to be

like a pain trade. some looks like a huge amount on the shorts of the russell 2,000 getting rushed out. you add the politics and you kick start things. it went from s&p tech hanging in there to now starting to break down. jonathan: we were talking about the prospect yesterday of a small cap presidency we'll spend the morning talking about that too later this morning. annmarie from milwaukee, wisconsin at the r.n.c., look out for a conversation later. indications on the s an p3500 pulling look three quarters after point. bond market yields higher by a basis point or two. there is another example of that dollar weakness we are talking about this morning. 10931 on eurodollar. a third of one percent. this hour we'll catch up with michael o'rourke. he thinkings the big rotation continues. governor glenn younkin on day three of the republican national convention sitting down with bloomberg's annmarie. and markets are too quick to

price in a rate cut. the russell 2000 delivering performance, small caps rallying 11% in five seconds. the s&p might get left behind. it is likely the s&p 500 and nasdaq 100 are in the process of registering their peaks for 2024. michael joins us for more. let's get into that before small caps. why do you think maybe the peak is forming not just for the next few months or so but maybe the rest of this year? michael: as you know, the market has been crowding into these megacaps for the past 18 months. that leadership got significantly narrower over the -- throughout june into the first week of july. of course when we got that c.p.i. report last week it was the second very cool inflation report in a row. and i think it is the type of number the federal reserve's looking for that will lead to that september rate cut.

when you think of what's gone on here for the past year and a half throughout this high interest rate cycle, we got to this 5.375 level in the feds funds rate last july. the market's crowded into these megacap names. a lot has been size and safety. the a.i. trades there. there has been a lot of positives that you had this one way crowding. these smaller cap means the banks you guys were talking about, these other groups value, they have really massively underperformed. the s&p 500 massively underperformed. these are the other groups that are going to benefit from interest rates starting to lower again. and investors will see there will be an opportunity there. i see people trading out of these what are now very expensive megacaps and looking for value throughout the rest of the market. these other groups are trading to attract evaluations. jonathan: there is a reason they have traded at these valuation,

they haven't put up the numbers. they struggled with higher interest rates. we are trying to work out what difference 25, 50 basis points of cuts in 2024 makes the underlying business. we can see the position squeeze. the trade of the last week. hard to ignore it. we are trying to work out the fundamentals that need to back it up at some point. how curable are those tailwinds through the rest of this year? michael: i think they are very durable. it's about the cycle. we'll start an easing cycle and hopefully this era of high inflation the past several years is behind us. if you look at the situation and say, ok, whoever's -- it's been a rough two years for a lot of these companies. going forward the outlook should be better. the banks are the best example because we talk about the half a trillion dollars in unrealized maturity losses on the balance sheets that they weather through the high interest rate cycle. those are the factors that led to the failure last year and

things like that. these banks have survived that very tough environment and now rates are going in the direction. they'll see less deposit pressure. just as you guys were talking about it a little while ago, those multiples are going to start expanding again. that depression of multiples will end. the outlook going forward for these groups is better. and hopefully you see smaller companies begin to grow again. of course that's great for the country. >> to your point what started this rally, gave it juice was the c.p.i. report. then over the weekend the events really the bottom line come interesting it was that trump became a more likely candidate. then you have the pick of his vice president of j.d. vance which championed smaller companies. that's when you really get a leg in a rally that takes it to a record outperformance versus the s&p 500. how much is down to politics? michael: i think politics is a key part of it because, again,

we -- this is a country where we don't want to see monopolistic companies. that's what's happened over the past two decades. you want to see small businesses. you want to see smaller companies grow. you want that american dream out there for everybody. that's important. you also have to remember the russell 2,000 it peaked in november of 2021 through monday's close it had underperformed the s&p 500 by 32%. since that peak. we are just catching up for some lost ground here. and the group -- that index is significantly -- think about it. apple, microsoft, nvidia have larger caps than the russell 2,000. you have to remember at one point in time those are all small companies themselves. so you want to see that there is an -- era of growth coming. >> if you want to talk about making up lost ground, the regional banks, have done that. they are back at the levels they were before the s.v.p. crisis

for the first time it happened. is that fair? it's not like the office commercial real estate issue has gone away. michael: it hasn't gone away but it's been well advertised. it's been one of the issues you have been dealing with for a couple years. if you can survive in this environment, high interest rate environment for a couple years, as interest rates art to come down and start a new easing cycle, you should do even better. i think that's the key. that's why as you mentioned, that c.p.i. report is so important. throughout -- since the beginning of the year we started the year with the market expecting six rate cuts which is ridiculous. we had 4% of g.d.p. last year. we are seeing inflation come down in conjunction with the economy. simultaneously the economy hasn't collapsed. it makes these great expectations we are seeing now much more plausible. and that, again, that whole new easing cycle creates a better

environment for the banks and smaller companies out there. jonathan: late on this morning we'll catch up with mica shoemaker of wells fargo, a window of maybe a month to two months for this to work. then the political consideration that is dan any is talking about take over. i want to understand how you would respond to this language from donald trump if he's president again. we have a big currency problem. what do you think that means to financial markets? michael: you know what, i don't see where we have a currency problem. 75% of our pay loals rolls in this country are service jobs. our manufacturing base left a long time ago. when china entered the w.t.o. in 2001 it got decimated. obviously we are decoupling from china. heading in a different direction. we'll get some of that back. what happened from that point on we went from a 3%, 4% g.d.p. country with strong jobs and stronger inflation to 2% g.d.p. with less jobs but lower

inflation. you are talking about shifting the makeup of the economy. it would be nice to have more manufacturing jobs. it's also going to lead to more inflation. it's a massive shift when we talk about 75% of the jobs in this country -- on payrolls are service jobs. i don't see it quite the same way. it should be interesting to see what he plans to do about it. jonathan: that would be my question as well. it doesn't matter how you and i see t what matters is how he sees it and what he's willing to do about it. do you think there would be a preference for big caps over small if there is something they could do about it? michael: i think there could be a preference for manufacturing to come back. of course he started that a little bit as far as trying to rebuild semiconductors in this country. but it is such -- it's a structural shift in u.s. economy. we are so far from that taking hold. it's hard to see. i do think if you have a weaker dollar, u.s. stocks do rally. they'll perform -- but there is a give and take on the global

scene. what we have seen happen in japan i would argue -- yes, their stocks are at new highs. they have decimated their currency to do that. i wouldn't argue that's good policy. again, a lot remains to be seen. a weak dollar would be good for stocks. jonathan: weaker dollar this morning down a half of 1%. all these points of attention we'd need to figure out and maybe beyond. exyet features down .9%. bloomberg brief. disa harrah. zeier harrah: the u.k. labor government most ambitious planning reforms in decades, unveiling a wide ranging legislative program at the king's speech at westminster. the speech announced 39 bills in areas including renewable energy, house building, enartificial intelligence, and contrasted 21 bills unveiled by sunak's government at the last king's speech in 2023. king charles saying, quote, it is my government's objective to

see rising living standards in all nations and regions in the united kingdom. new jersey senator bob menendez was found guilty of bribery, extortion, and acts ago-o as a foreign agent of egypt. pouterful democrat had accepted goal, cash, and mercedes-benz, and other gifts worth hundreds of thousands of dollars in exchange for numerous political favors. senator menendez remaining defiant after the verdict despite calls from majority leader chuck schumer and new jersey governor bill murphy to resign. the 70-year-old faces the possibility of years behind bars. and shares of roash are hire after the company said it's weight loss bill showed promise in a study. the swiss farma company said obesity patients to took the pill lost an average of 7% of their starting weight. compared with a little over 1% of patients who took a placebo.

shares gaining the most as they move into the next phase of development. jonathan: thank you. much more from yahaira in 30 minutes. next on the problem, biden not backing down. >> jobs are up. wages are up. tourism is back. the economy is growing. inflation is down. we have to do more. that's what i'm determined to finish this job. jonathan: that conversation next. live from new york city, good morning. ♪

jonathan: s&p 500 down about .9%. pulling back. couple things going on. here's one. we'll talk about it in just a moment. the united states floating tougher trade curbs and chip crack down. we'll get into that. yields up by a single basis point, 41730 on a 10 year. biden not backing down.

president biden: jobs are up. wages are up. tourism is back. the economy is growing. the inflation is down and. the economists tell us this plan would cost working families a new tax of $2,500 a year. can't let that happen. we have to do more. that's what i'm determined to finish this job. jonathan: the latest. a growing faction of democratic lawmakers pushing back against d.n.c. plans to fast track his nomination. several house democrats signing a letter arguing there is no legal justification for letting roll call vote two weeks before the convention begins. joining us is bloomberg's annmarie. let's get into this. the pressure on president biden seems to have fallen away a little bit. can he get this done? annmarie: here's the issue. had he breathing room following what happened over the weekend as attempted assassination on former president president trump. his party did give him time to

come out, talk about that. but now that anger, this unnerviness, basically what they are so stressed out about is can biden get them over the finish line november 5, that pause is starting to stop. we are seeing in reports as well that a letter is going around, potentially more democrats want to put their name to it. they are upset by the fact that the d.n.c. want to push up this roll call vote. basically lock in biden as soon as possible. this is why he continues to hit the campaign trail. these questions about his age and can he do the job, they are continuing to linger. now that he's had this treeting space in a few days an interview, on the campaign trail. in nevada. that hasn't quelled their concern. that means this effort may just start to ramp up more. dani: you have seen policies start to come out of the biden white house. you have this one on chips. more severe curbs. "the washington post" has a story this morning that biden is considering supreme court reforms that is term limits and ethics codes put in place.

is any of that policy or desired policy breaking through the noise? annmarie: first, there's been a lot of individuals in the progressive wing of the party who have been calling for this and biden did not want to go through with it. it feels like a hail mary effort. he cannot do this before november 5. so this is just straight politics. playing to his base. trying to assure members of his own party, within the democratic party, in july, ahead of their convention in august, ahead of an election in november. all of this is really him trying to really talk to the individuals in his own party to not just talk about the policies that he would enact the next four years, but give them confidence that he should still be the top of the ticket. jonathan: looking forward to the conversation with the virginia governor glenn younkin in 10 minutes' time. don't miss t joining us to continue the conversation is terry haynes of pangaea policy.

i would like to talk about policy with you. this quote from donald trump, the former president to our team at bloomberg business week, we have a big currency problem. the question a lot of people around this table already have had in the last 90 minutes or so, what can they do about it even if they get back into power? >> what they'll do is try to put a policy mix into place that strengthens american defense. including the ability to supply our allies. terry: and provide a lot of manufacturing reshoring. continue to support semiconductors. do a bunch of those things. i look at this as much more rhetorical than real. it's not as if they are going to have a strong dollar task force. there is too much -- too many variables involved. jonathan: off the campaign agenda, what do you think is more real? what should we take more seriously? terry: taking seriously the --

put it this way a lot of the business about protectionism versus conservatism, that's real. but to some extent that's noise within the party. the bigger reality, i think, that's been going on for the last eight years, i would point to obama's decision not even to try to get the transpacific partnership ratified in 2016, is a greater turn towards shoring up manufacturing and defense and the like. that's what's turbo charging policy underneath all of this. that's happening with biden right nowment as you reference add couple times this morning, also looking at bigger chip manufacturing restrictions, export restrictions. you get a situation where the trump versus biden focus is a matter of degree more than anything. trump expressing what he wants to do. more vigorously with more energy. but broadly the similar policy.

dani: what about things like foreign policy. when he says things to bloomberg business week on europe, they treat us violently. taiwan took our chip business from us. why would we necessarily support them if china invades? how seriously should american allies take these? terry: i think it's wise to take the adage of take trump seriously but not literally in hand. if trump was a painter he would be jackson pollock. he wouldn't be a literalist. but in splashing the paint cans around all over the place. in point of fact, what the allies know is that the nato criticism was always based in the lack of -- monetary support for the alliance. that's being remedied now. number one. number two, trump can't leave nato unilaterally both because of the 1949 treaty and because now there is a law in 2023 banning the president from doing

it. in reality you are going to get a lot of discome fort -- discomforture on the side. and they take the position in the brussels cocktail parties and the like they find trump distasteful. what you are going to see in the end is very strong support for allies, very strong support for the alliance. dani: a throft will change demending who he puts in his candidate. we know one person for vice president, j.d. vance. looking at that and who he might choose, does it give you comfort he might be backed off of the most extreme of some of his views? terry: i always thought that trump in practice ends up being a whole lot more sort of centrist and business friendly than trump rhetoric, which is meant for campaigning and for pressure. and for leverage. to me the most significant part of your excellent interview was

the exactly that. that he uses tariffs as a negotiating tactic. which is obvious if you look closely. at the same time tarrifs scare the willies out of people. and it's a point of contention between the two. even if it's mostly by degree considering where biden is on this. i find it much more centrist in practice. you wouldn't have gotten the endorsements you would have from the ken griffins of the world. jonathan: talk about something much scarier than tariffs. the reporting yesterday from here and elsewhere where there was an iranian plot to cincinnati the former president -- to cincinnati -- assassinate the former president. if that story is true, what does iran say you are afraid of? terry: what they are afraid of is a foreign policy that is more laser focused on taking them out. as a major player in the middle

east. we all understand what's going on in the middle east which is that the hamas attacking israel and the rest. the broader struggle here is whether or not we are going to have an asendiancy of iran and the proxies versus israel, saudi, jordan, and a number of more conventional folks who want peace in the middle east. trump will be much more focused on that. the concern is from the -- many in the united states, clearly what iran sees, it can use the disarray in the biden administration and the lack of resolve of the biden administration to its advantage. jonathan: shocking story yesterday. terry haynes, sir, thank -- terry haines, sir, thank you. of the policy effort for both president biden and donald trump. equities right now in the session lows down about one full percentage point. next on the program, do not miss the sit down conversation,

annmarie with virginia governor glenn younkin at the r.n.c. what we heard from donald trump he would consider the likes of jamie dimond for treasury secretary. could we see glenn younkin? dani: he was floated as a vice-presidential click. if he's trying to assemble a cabinet of businessmen a. glenn younkin, previously of carlyle. why not. jonathan: from milwaukee, wisconsin, next on the program. futures down one full percentage point on the s&p 500. we have seen this story again and again on repeat. small companies outperform. on a relative basis. 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: we have got a lot to navigate. the s&p 500 down by one full percentage point. the underperformance from the nasdaq 100. small caps down by .75%. let's talk about the nasdaq move. nvidia down by more than four percentage points in the premarket. off the back of the story this morning, the biden administration has told allies it is considering using the most trade restrictions available to crack on these companies.

annmarie: it has been more about the attractiveness of the small caps. the story had not and about the big cap tech before. there is no fundamental change to the story. there were still strong hands on it. this could be a fundamental change to the story so you are seeing cracks. jonathan: yields are up by four basis points, the two-europe to 4.4611 and you might think we might get a stronger dollar, but we get to foreign-exchange, weaker dollar. let's talk about foreign-exchange. under surveillance, the dollar facing pressure among g10 currencies. japanese yen falling to the lowest level since june 13. and donald trump's telling bloomberg businessweek we have a big currency problem, raising bets that a new administration would weaken the u.s. dollar, how? dani: how would they do that?

through a fed chair who allows inflation to run hot? or is it through the threat of tariffs? maybe there is the idea that if trump looks at japan and says your currency is two-week, we will slam you with tariffs, it might speed up the hiking cycle and that is hard to get it priced in. jonathan: one country on board with having a stronger currency, the dollar-yen is down. president joe biden is said to call for a major shift to the u.s. supreme court. biden will propose adding term limits for justices. the call also includes an enforceable ethics code as he looks forward up hero -- more appeal to his campaign. i would like to turn to the story of donald trump telling bloomberg businessweek he is open to letting gerald powell finish his current -- jerome powell finish his current term and floats jamie diamond as a fast jamie dimon as a possible pick to lead -- jamie dimon as

possible pick to lead u.s. currency. annmarie: good morning. donald trump called him prime time, the governor from virginia, glenn youngkin. thank you for joining me. gov. youngkin: the rnc has been a statement of coming together in excitement, and president trump came into the arena monday night, the first time that everybody had really seen him since the assassination, the police erupt did, and it was emotional. it does represent not only confidence in the america that he built last time, but the one he can build again. annmarie: would you work for him? he says would love to have you on the team. gov. youngkin: it is a humbling sentiment. right now, the job is to win, and virginia is in play, which is amazing to say. joe biden won virginia by 10 points last time and then we

came back and won by two the next year. all. virginia locked up tight, so i will go to to be, one, a great governor of virginia, and to do everything we can to make donald trump with. annmarie: if you flip and go read, if you are asked to serve your country under president trump, would you join? gov. youngkin: there are so many if's. i'm a basic businessman who has become a governor who set objectives to meet them. we set them in virginia to turn around virginia's job economy and we have used all of the tools we know that work. we have had $5 billion of tax relief, we streamline relations in a big way, we have invested in infrastructure, and we were ranked the top place for business that is because we are the top place. my job is straightforward. set objectives, let's meet them. one is to make sure congressional candidates win in virginia and we extend our

majority in washington and to help donald trump and virginia. annmarie: you are part of the business world, head of carlisle, what i heard about a lot of individuals on wall street, they called the former president to pick somebody like you. instead, he went with someone who unnerves wall street, j.d. vance, calling for tariffs, one of your biggest importers coming from china, how do you think virginia would handle 60% tariffs on china and a 10% around the united states? gov. youngkin: let's back up. one of the things president trump has been clear about, and we know in the business community that free-trade really does not exist because we have given unfettered access to the u.s. market in so many other countries actually do not provide reciprocal access to their markets. let's be clear, u.s. companies do not have access on an unfettered basis to the chinese market. yet, they expect to have unfettered access to the u.s.

market. we have to stand up strong for the u.s. on top of that, china is not just arrival. they are trying to dominate the world and at the expense of the u.s., the use economic imperialism to do it, they ciber radel, and on top of that, the use every ounce to infiltrate every bit of the u.s. economy to understand how they can influence it. with that has translated two is a real recognition that we need to not only protect ourselves against china but we need to fight back, so the tariffs that president trump imposed on china when he struck the first chinese deal were critical in order to rebalance the situation with china, and companies that are doing business in china, take ford, who has a big market share in china, and they would like to build an electric vehicle battery plan in the u.s., and i can guarantee that the chinese government put immense pressure on them to use cattle technology in the u.s., now we are seeing

that it is being banned by the u.s. military because they're worried about the influence from the chinese communist party. this is the way china does business, and we have to make sure that we fight back. annmarie: most economists say tariffs are inflationary, so is that the right solution to the problem, where you don't think there is free trade on the marketplace? gov. youngkin: i have lots of economist friends and worked with them a long time -- they are right and wrong. annmarie: $100 per every household, they ran the numbers. gov. youngkin: people around lots of numbers at the beginning of the year and said they would be five rate cuts in the u.s., let's be real. at the end of the day, i believe president trump will use tariffs in order to make sure trade is reciprocal and fair, fair for the u.s., fair for u.s. businesses and workers, and that is important. annmarie: he also things the dollar is too strong for do you think we have a currency problem? gov. youngkin: the first issue

with currency we have reflects the weakness that the biden-harris administration projected economically around the world, and a weak america invites a strong china, and china has moved in right around the world economically. all of a sudden, you hear all of these threats that the dollar will not play a role that it has internationally going forward and it has historically. that is a real challenge to the u.s. and our economic future, so i think part of the reason why they are excited about president trump coming back into the country's strength, order strength, economic strength, they are tired of the weak america and would like a strong one. annmarie: how do you think he fixes the dollar problem? gov. youngkin: first about, having an economy that works. annmarie: that might mean a stronger u.s. dollar. people are looking at potential policies, especially trade policies, and they say that

looks like it will be a strong dollar. does the treasury may be need to buy other currencies? gov. youngkin: let's go back to core basics. a strong u.s. economy that does not have runaway inflation, which is what the biden-harris administration unleashed against america, and we have been seeing it for decades, that drives a dollar up because interest rates have to follow. jay powell has done a really good job combating inflation. let's be real. at the beginning of the year, there was huge pressure for five rate cuts. of course, inflation was nowhere near contained, and he's done a really good job maintaining discipline. we have got to get inflation down and make sure that it is and then rates will come down and drive the currency. that is a strong fiber of low inflation economy that is not allowing inflation to drive to stronger dollar. annmarie: you said the market expected five, now the expect one or two, likely one before

the u.s. election. do you think jay powell, if he cuts rates before the u.s. election, is being political? gov. youngkin: no, i think he's doing his job. as we have seen, the biden economy really faltered. jay is going to react and do what he needs to do it he's not political at all and is doing a great job. annmarie: j.d. vance is the vp pick. i would like to give you a quote of what he put on his campaign website before he ran for the senate. we will raise taxes on companies that ship overseas jobs, and this corporate america have a place in this republican party? gov. youngkin: first of all, let me begin with jd's nomination. i think you will be a great running mate for the president and will do a great job as vice president. let's be clear, it is donald trump's agenda, and he's going to set the agenda on the future of our economy and how we are going to build a riproaring economy again, like when we had

in his previous administration. yes, the business community is clearly excited. the stock market ran away over the last few days as it has become more clear that trump is leading and has a better than likely chance of being elected as president. i also think it reflects the catastrophe that joe biden has been over the last couple of weeks coming out of the debate for the democratic party. there is chaos on their side, and wall street and the markets and business seem to really support this. it is the market running away. that is exciting for the opportunity to build a strong economy, strong america, and to put us back where we belong, which is leading, as opposed to defending we solve a time. annmarie: no fortune 100 ceo has come out and link themselves to back former president and donations. do you think that is a problem? annmarie: let's start with -- gov. youngkin: let's start with elon musk and you cannot dismiss

him. he made an anonymous statement. annmarie: there are 99 others. gov. youngkin: $180 million in order to support grassroots ground game efforts to elect donald trump and seven battleground states, this is a giant statement, and i think we will see over the course of the next 3.5 months, as it becomes very clear that the momentum we are seeing today can be maintained, that the business community does want a strong economy, a strong leader in washington, america to be strong overseas, they would like a secure border. we need to combat china, not locate them, and this is what donald trump will represent, and this is why i think american business will be pleased to have him back as president. annmarie: he spoke to trump before your speech at rnc. what did he say to you? gov. youngkin: after the assassination attempt -- let's be clear, he was millimeters away from a very different someday than what we had, and i

do think god for his present -- thank god for his presence there because people was unleashed in pennsylvania. he said he was encouraging everyone to really reflect on unity, unity in the republican party and across america. this is opportunity we have, and people together around a common vision that unleashes the land of opportunity once again as opposed to one where most americans have been so concerned economically, can they write the tuition check? can they retire as runaway inflation has eroded so much of their hard work? annmarie: inflation has come down but it is top of mind for a lot of voters. gov. youngkin: we have to be real, inflation has come down from highs that were unprecedented, and it is the curative effect of inflation that has made prices so high, gas up 40%, and the average american family, this is tough. prices are not going down, they

are just going up less quickly. annmarie: that is correct, thank you, glenn youngkin in, the governor of virginia, who donald trump says is primetime and would love him and his administration. jonathan: is that his new name, primetime? looking forward to more later this morning. that was primetime. this talk about that conversation and a big scene, china. if you cannot get access there, why would they have access here? a strong argument, dominating policy the last several years, a lack of trust, national security, there are industries that we would like here that we do not want there, regardless of how accessible it might be for american companies. dani: you can feel that when you talk about dvds and the exorbitant --ev's and the exorbitant tariffs. when japan turned out key cars, america said, fine, but you come and build them here. that isn't it happening this time, largely because of the security piece, so the way we

approach overproduction has changed in the past. jonathan: i would like to touch base on equities, down across the board, small caps, as well, down about one full percentage point on the s&p 500. we're down in small caps by a similar amount. let's get you an update on stories elsewhere. >> sticking to china, the biden administration is considering wrapping up the chip crackdown on china. learning that the u.s. floated using the most severe trade restrictions available companies such as asml continue to give china access to advanced technology. the potential risk hitting shares of asml, even as they posted sales that estimates. shares jumping to a 2022 high for the sportswear maker raising annual profi markets, -- profit

, adidas soaring away with the new announcement of their products plus a shrinking stockpile of issues, which they stopped making after cutting ties with kanye west. cathie wood is making a bold call on tesla, saying that the companies move into the autonomous taxi business will be a catalyst for a tenfold increase in the share price. what had been bullish on tesla for a long time, making it among holding in her etf, tesla shares are up percent while the innovation fund has lost 9% this year. jonathan: thank you. next, the market says september. >> there is a lot of uncertainty, but for now there is a good case that the fed should be easing policy. the idea that policy should be less restrictive when the labor market is slowing and patient is coming out to target makes a lot of sense. jonathan: it is a question asked at the start of this week, why wait?

we will ask the question next. you are watching bloomberg surveillance.

jonathan: a bit of a sound off, down on the s&p 500, close to one full percentage point, following a three-day winning streak. we are done even more this morning on the nasdaq 1.5%. the difference, small caps joining it after a five-day run with double-digit percentage point gaps. under surveillance this morning, the market says september. > there is a lot of uncertainty, but we are expecting that there is a good case that the fed should be easing policy. the idea that policy should be less restrictive on the labor market is slowing in the labor market comes down to target makes a lot of sense. we think the fed should be easing. we think they do cut three times this year.

jonathan: here's the latest, the fed president williams telling wall street journal that currency policy is appropriate until he sees more data. more fed speak ahead of the beige book at 2:00 p.m. michael schumacher saying that the fed is likely to move in september but the market is pricing -- and he joins us now. when is the interest-rate policy of the federal reserve, not the currency policy, and the other is the political considerations taking place later this year, when do you consider one over the other? michael: it has been interesting. we had a ton of questions the last couple weeks. i think the fed dominates over the next few months. we have seen missed the last years, architect fixated on monetary policy. i think it turns to sequencing, the fed is probably the dominant

force until early november when politics would kick in, so the big move we've had with the trump trade, it is about done for now. it will reassert itself but when it's course for the time being. jonathan: it sounds like you would like to be super tactical, is that right? mike: it is, and that reflects not just our view but when you think of the comments out of the federal reserve, i would characterize them as tactical. they don't have a lot of confidence in their long-range modeling ability and that is why they would like to wait. people are saying that inflation data is cooperating, why not go now? the reason is because the models have been so far off so many times that they would like to more evidence is seen. so wait for the opportunity and they go. dani: a winning trade would to be feeding any map extremes from fixed cuts priced in to know cuts priced in, but we find ourselves with three. you got at this a little bit what extreme exists that i should fade at this moment? mike: a couple things could happen read the big risk for

markets is inflation finds a home but it is too high, whether that is in the u.s., the euro zone u.k., you name it. yes, inflation has come down but not to level policy makers like maybe it gets stuck or maybe there is a u-turn. that is a nightmare scenario for markets out there. with respect to politics, there is always a risk that things get overcooked rather. maybe there is total chaos at the democratic convention next month in the u.s. or maybe donald trump says something really while thursday night. these things can spur a bit of a reaction, too. i would watch for the inflation idea first as more inflation get stuck, and political set second. dani: the political set that you describe with more chaos, what do you do when yields do that/ maybe i go out -- that? maybe i go out and buy treasuries but how does that kind of thing play out? mike: we think yields go down

over the course of the year. take the 10-year treasury, at 4.15, ballpark, i think at the end of the year you are looking at high threes. a decent move but not a ton. the question for us is how much of the big fed move -- so our thesis for a while has been when the fed cuts, the market will price more easing and that will drive what people call a typical fed cycle trade with yields down, curve steeper, and that could offset somewhat if there is a sweeping november. our take on it is if you would like to be long-duration, to some degree, not a huge one, over the next few months, i looked to go to the other direction around the first. dani: if yields really get going after the first cut, isn't that something i would like to fade considering the economy is holding up and it does not look like a cut cycle like ones in the past? it is that tweak that many have called it, is that enough to power that move?

mike: a couple of things. first of all, i don't necessarily buy the midcycle investment. secondly, what counts is not what the fed idc b does but with the market thinks the central bank will do -- fed and ecb does but with the market thinks the central bank will do. for the fed, the average move in the first 12 months is 160 points of easing, huge. in the market today if you look at september this year and next year, it prices at 130. our advice to clients as the market is unlikely to price 260 basis points of easing. but after the first cut, people say it is game on, we should not be pricing 130, maybe we price on 75 or maybe we really get going and pricing -- 175 or maybe we really get going and pricing 200 basis points. so the fed doesn't have to deliver those cuts. it just has to get the market thinking the fed is moving in that direction, and the market will think they are being too

conservative and we should price more. that is the thought process we talk about clients. jonathan: tends plus, i would like to understand if we start to see high heels off of a second term for president donald trump, whether those high yields are a function of inflation expectations, growth expectations, pricing at a fed that is hyper longer, i'm trying to work this out from the equity perspective, from the equity perspective, what do i do with that? is that because there are higher rates? what is it? mike: the main reason we think yields will rise, and fundamentally, the figure deal we have is the curve will steepen, is the fiscal deficit becomes worse, so let's say there is a republican sweep, probably the republicans extend trump tax cuts, maybe increase them, who knows. that will increase the toll on treasury funding, steeper back into the treasury curve, probably push rates up, so i

think it is called the fiscal spend instead of fiscal polls, so it is not a weak economy or inflationary per se, simply a lot of initially bond supply of the market. jonathan: does that generate the weaker dollar he is looking for? gov. youngkin: weaker dollar -- mike: weaker dollar? i agree with governor youngkin,. the rate differential comes down, that should drive the dollar weaker. jonathan: got it, mike schumacher of wells fargo on the rates market. if it is all about supply for the longer and, typically it is a stronger dollar. but when you worry about the deficit and people financing it, does that generate the weaker dollar? dani: i also think what it does to equities is interesting, history has shown us that they don't care about higher yields. jonathan: say they do care. coming up, philip camporeale, brian weinstein, the

third hour of "surveillance". ♪

>> donald trump doubling down on his friend, which is, quite

frankly -- brand, which is, quite frankly, president biden's best chance at reaching the white house. >> a lot of the trump effect is starting to be priced in the markets already. >> good tariff story is probably going to be the big one to wrestle with. >> tariffs raise a lot of inflation uncertainty. it will complicate the fed story and message. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: this schedule is a little bit light today, 8:30 easton, 30 minutes from now, housing stocks data. you will hear from the fed speak, and we get the beige book. suggesting we are getting closer, may be taking the july story of the table, and then later at the rnc, senator j.d. vance, the vice presidential pick for trump, will be speaking later today.

equity futures falling back on the s&p 500. 90 minutes away from the opening bell. small caps, the wrestle has done tremendously well over the last week or so -- russell has done tremendously well over the last week or so. small caps pulling off, so a selloff across the board. dani: i would be interested if this picks up because it has been resilient market and maybe complacent. the s&p 500 has not sold off more than 2% in a day, the longest stretch since the financial crisis, so there is a sense that while the rotation has gone on, it is strong hands underpinning it. it is not the weekends that sell off big tech. if it picks up some steam, i will be interested to know whether a lot of the concentration in the big names we have been worried about play out. jonathan: that the colors we have navigated, one is rate policy, the federal reserve, two, economic data, and the inflation mix right now, and the third is political considerations. politics of the last two or

three weeks going back to the debate a few thursdays ago with biden and trump. since then, we have talked about the trump trade in a bigger way. dani: just to play devil's advocate, i'm wondering if all this is is just more certainty on who the president is into it will be. if you were to do a contrarian portfolio today and say that i didn't will be the present -- biden will be the president, how different would it be? is it we have more certainty that we will get someone, on what has been a close race is starting to lean one way, maybe if you are in business, you can start to spend and do. maybe underneath the surface, things look different but maybe all you needed was certainties to really get a rally going. jonathan: have we got that certainty now? we are down by about 14 percentage point on the s&p 500, a little outperformance on the russell again this morning with the big outperformance over the last week is what dominated the conversation on wall street. we will talk more about that in a moment. bond market yields are higher by two basis points. in the dollar is a lot weaker.

euro-dollar, 1.0934. a sit down conversation with donald trump and bloomberg businessweek, and the takeaway -- "we have got a big currency problem," the quote you will hear a lot over the next few weeks. dani: the currency problem without a solution, at least without a solution considering the policies he would like to put on place. he would like to extend the tax cuts. ok, higher deficit. ok, you would like to add tariffs. all of those, even if he is not pro-dollar, those are pro-dollar policies. what can you actually do to weaken the dollar? jonathan: pretty much everybody has said the same thing on the program, the tariffs will lead to a stronger dollar. what tools do you have to counter it? coming up to discuss the themes, we catch up with phil camporeale of jp morgan, michael halen, and brian weinstein of morgan

stanley on why he sees it to three rate cuts this year. we begin with the great rotation gaining momentum. the russell 2000 close to 12% over the last five sessions, a move not seen since the early days of the pandemic. phil camporeale says, the momentum and equities can continue. he joins us now for more. filled: good morning -- phil: good morning. jonathan: why do you think the better balance can continue? phil: we just got the cpi number that i think really puts into focus the rate. jonathan: this seems like a lifetime ago. phil: i've been saying that the economy and stocks do not need rate hikes to continue to move higher. here's what has changed about balance. it is full employment and price stability, so we have now gotten three straight cpi numbers that have shown normalization or a

cooling of inflation, and the difference here is the labor market, 4.1% unemployment rates. last year, we had 3% on cpi, again in the june reading for cpi. what makes it different is the unemployment rate back then was 3.5%. people were let, no, that means acceleration of an nation. that is what has changed. if you have inflation that is cooling, but you have unemployment rate creeping higher, than that, i think, allows not just the one cut like a calibration cut, but i think it also puts into focus next year and that is what small caps are really qanon, the fact -- zoning and on, the fact that we are those companies that could not finance themselves, whether it be lower quality or small-cap

, those things kind of look the same, now have a lifeline. that is the new chapter we are in. jonathan: are rate cuts efficient or do you need the economy to hold up, as well? phil: i don't think you need above trend because i think you can get every acceleration of inflation at 4% or 5%. last year we had 3% inflation number, and gdp was 5% or 6%. all of this, all of our view, we are 69% in equity, a progress position. 20% of our portfolio is in high yield, all predicated on that, a, u.s. economy avoids recession, we have a 15% chance the next several months, as low as it gets, and the second thing, the fed will be moving in to a world where they can start moving policy rates lower. i have not been able to see that with certainty until now -- say that with certainty until now.

dani: i'm taking away the idea that the certainty is there, and you write that so much money has been in cash waiting for certain, so how much of the small caps -- it puts the money to work in tech is already overpriced. phil: you asked the right question and i will date myself with the reference but that $6 trillion in cash and my clients saying i could get 5% risk-free is like meals on a chalkboard -- i'm not sure if they exist anymore -- but that hurts my ears when i hear that. that cash of 5.5%, sure, it is risk-free, but it comes at the opportunity cost, and the one that i mentioning, ok, if you could be in a diversified portfolio, you lacked the cash return this year, and last year you tripled the return, so i think you are correct, the cash on the sideline that gets put to work can continue in a world where all of the uncertainties of rates, inflation and recession start to shrink. if you can shrink those

probabilities, that brings into focus the diversification. there's no such thing as easy money but diversification is as easy as you can get. dani: are they now more receptive to that message? phil: i think they are because it was that unbelievable kind of emotion, especially from last year when folks said the u.s. economy was going into recession. this year there was little fomo. the first step is usually fixed income, so i did not want to alarm people by saying there is reinvestment risk with cash, but now you can start to see it. i don't think you are going out and saying the risk-free rate is not going to be 5.5 and i have not been able to see that until now. jonathan: do politics change that? phil: where? jonathan: in the u.s., if we get a republican sweep, does it change the called and could you argue that interest rates have to go back up?

phil: i think the cycle has said never a zero probability since march of 2020, but, listen, there is a curve steepening story that we are not going to ignore in the world of continued fiscal largess. i think the first at-bat of cash can be into the middle of the curve, not quite a long and given the fiscal situation you're in right now. dani: i mentioned this before, but as a hot experiment, if repriced in diana -- biden -- if we priced in biden as the next president, how different with the market look? phil: good question. i like to keep politics out of the fact, that inflation has gone from 9% two years ago to 3% today, and that president biden is still the president. i like to take that up. i'm not sure it would look that different. i think the fed will still be cutting in september.

and i think both candidates like to save, so the fiscal largess story is still there, so i like to take the politics, and what is the trajectory of growth and inflation with what we know now? i would say six months ago we only had a 50% chance of probability of recession and what has changed is not not just the uncertainty of one rate cut, but may be this year and four next year and that is the rotation. jonathan: you sound more confident, good to see you. equity futures this session those .9% on the s&p 500. here is your bloomberg brief. yahaira: u.s. mortgage rates fell last week to the lowest level since early march. the rate on a 30-year fixed mortgage dropped to 6.87%, according to data compiled by the bankers association. the shift down is a reprieve for

potential homebuyers and an industry looking for much-needed demand tailwinds. the overall index suggested of applications includes those for a home purchase and refinancing increasing to 3.9%. shares of roche trading higher after their weight loss pills showed promise. a new study showed obesity patients who took the pill lost an average of more than 7% of their starting weight, compared to just a little over 1% and the weight loss of patients who took a placebo. shares getting the most in over four years as they see the drug will move into the next phase of development. and the mayor of paris stuck to her word, taking a dip in the river to prove it is safer summers at a deal of vix. france earmarked 1.5 billion dollars to clean up the river amid concerns that overflows from the city sewage system make the river on swimmable. -- river on-swimmable.

the french president has also committed to a swim in the river at some point. that is your bloomberg brief. jonathan: thank you. no. just know. would you? dani: i had a friend who did the new york city triathlon adulatory fine coming out of the hudson. no. jonathan: good for them. next, as a weakening consumer begins to weigh out dining, that conversation as we count you down to the opening bell. futures lower, negative .550 on the s&p 500 -- .50% on the s&p 500. this is bloomberg. ♪

say aloha to olukai golf. waterproof leather. breathable fabrics. spikeless traction. the most comfortable golf shoe in the game. grab your pair today at olukai.com.

jonathan: counting you down to the opening bell, one hour and 15 minutes away, down by 0.9%,

yields higher by two basis point set 4.18. the dollar weakness, euro-dollar at around 1.0935. just a fantastic sit-down conversation with former president donald trump, and sitting down with bloomberg businessweek, and his quote reverberating worldwide. we have a currency problem. we will talk about it for the rest of the week. time for the morning calls. first, truest financial downgraded to neutral after the recent rally and regional banks with limited upside. next, the price target raised on united airlines to 65 and keeping the buy rating. they expect strong reports. we are down by 1.1% in early trading. the third and final call is from morgan stanley, remaining cava

act overweight, saying that they can post strong numbers, down about .80%. michael halen joins us on the state of the u.s. consumer. let's get into the state of the u.s. consumer, when you break it down, where do you start to see a little weakness? michael: we have seen pretty broad weakness this year and restaurants. we are seeing that with earning provisions. we expected that coming into the year, expecting estimates to be too hard, as we had really hard comparisons in january and february. i think most of the companies that sales would get better in the second half, but we have not seen it. casual dining chains sales were negative in the second quarter according to black box

intelligence. a modest one-ish percent gain in the quarter was hurt by weakness in california, so we have not seen this bounce back in the second quarter that i think most expected. jonathan: what you think is behind it? do you think we reached the limit with the consumer and they will not tolerate price increases anymore? gov. youngkin: -- michael: price increases are a part of it, and we see most of the is from customers making $75,000 and less, particularly with customers earning $50,000 or less. a lot of them have been using credit cards to pay higher prices. inflation is cumulative. we have had almost four years of steep inflation at restaurants and everywhere else, so low income consumers continue to struggle. on the higher end, it is different. fine dining might have a tailwind here, they are having

easing comparisons from last year, stock markets are at all-time highs, bitcoin is near an all-time high, home prices have held despite higher interest rates, so we are seeing a bigger divergence in western winners and losers due to the k shape recovery we are seeing. dani: you can see that if you go out on a weekend in new york city and you see people lining up out the door for restaurants. there is the argument that there was ptsd after covid and that people's behaviors have changed. does any of that exist or is the price sensitivity enough that we are back at normal now? michael: i don't think that issue is the weekends. i think the issue is more so during the week. lunch business is not as strong as it once was because of work from home. i don't think people are cutting back much on the weekends. i think on a tuesday night or a

wednesday night, things are much higher than it would be. you also have to remember that new york is different than other places in the country. people tend to do well in manhattan and they have the money to eat out and they are not as pinched as low income consumers, but i think things are getting to a more and more lice state for the restaurant injury -- restaurant industry. there have been a lot of different headwinds, but inflation is definitely causing more pause with consumers, and some of the survey data we have seen is consumers seem to be more concerned about their jobs, and that could cause some of their apprehension about spending at restaurants. and in the last call, they mentioned consumers seem to be visiting less.

on the bright side, they are not cutting back their checks as they have in recent quarters. dani: this is part of the concern that relates to jobs. you can have people cutting rts restaurant margins, so maybe they don't have people work as many hours, but at one point do you have restaurants and food related businesses that need to start and let people cut back on the workforce? michael: that is not something we necessarily see yet. a lot of the casual dining companies we cover our perpetually understaffed. right now, they're pretty much at pre-covid levels. which is understaffed, so probably 95% stop at this point. we have not seen any of the companies we cover -- we have not seen too many instances of those companies cutting back on workforce yet. that would be a much bigger concern about traffic moving forward.

jonathan: michael, thank you. michael halen of bloomberg intelligence with what is happening across the country right now. the labor market, a really important conversation across wall street the last years, if we have an economic downturn, would we see lots of layoffs? given the difficulty out of the pandemic to hire people, what you heard from michael, many companies are not able to hire enough people still were not able to get fully staffed, so what layoffs are going to expect if we do get the downturn? dani: it feels like some of the conversation, the restaurants for america lobby group surveyed all the restaurants and for a long time post-covid it had been our number one concern is staff. hence, you get is labor reporting environment? the past few months, they say the biggest concern is sales, so at some point, if sales we can enough, to save the margins, they would have to let people

go. we are not there yet, but we do get the concern is it a nonlinear move? jonathan: there is this essence that we still get a soft landing, and there may be a stabilized around the levels. we heard it from j.p. morgan 10 minutes ago. let's go through some of that again, investors are optimistic on soft landing, 68% versus no mandate at 8%, hard landing 11%. 68% expect no recession the next 12 months. that is so confident a lot of people are. dani: and you see it through the market, a fascinating thing when you say it is going to be so perfect that not only are we going to get a lot of rate cuts, enough to sustain small caps, but the economy will be fine tuned. usually you think when we are in a cycle with a decent amount of rate cuts it is because there is something that looks like a recession. we are pricing in something so

perfect for you have enough cuts to support small caps and an economy strong enough to support them, too. jonathan: j.p. morgan was quite bearish on the equity market for a while with questions about whether some of the research would shift or change. fantastic research over in london, j.p. morgan saying the slowing growth is likely to impact earnings delivery the second half. expectations are punchy at 13% to 50% year-over-year growth rate, and could be challenged by slowing top line on top of weakening activity, in particular for the consumer. that is the view from europe the last couple of days. dani: i have heard this argument a lot, the idea that expectations for earnings are too high and that people have not cut them enough. usually the reason they cut earnings expectations is because companies guide them down. they talk of analysts and say this is where we think you should be. they do not want to have this thing earnings do not come in strong enough because expectations were so high.

if companies are not guiding down, it probably means they are pretty confident they can be the targets set. sometimes i take issue with the argument that we are over-80 learning should be. -- over-a egging where earnings should be. jonathan: pepsico was telling them that maybe the consumer is close to be tapped out. dani: it is the consumer stocks that are worrying and this goes to the conversation with dan greenhouse, do you know what is in the russell 2000? there are a lot of consumer names, do you know what you are buying? this is an unrelenting rally. except for today, it is over performing. jonathan: the next time you sit down with strategist who tells you they are long small caps and you should be, too, just see how many companies they can name. coming up, brian weinstein with

morgan stanley, and treasuries all over the place. we will talk about the shape of the curve, the steepness of it. i'm interested in the detail. what is behind it? is it led by the front-end? is it the politics or the economics? dani: how much of this is using politics as an excuse for a trade you have called for for the entirety of the year? so many people have called for curve steepeners. the politics gets little bit tricky. jonathan: the whole curve shifting a little bit higher. the 10-year by 2%. 4.1750 on the u.s. 10 year. 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. hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release,

my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

jonathan: lots to work through. s&p 500 pulling back by .90%, underperformance again. the nasdaq 100 down by .40%, outperformance on the russell 2000, negative, down about .60%. we will come back to that story later. let's get to the bond market, two-year, 10 year, 30 year. the tug-of-war we have described. a tug-of-war between the fundamentals and economics and policy from the fed and the

political considerations, the policy initiatives that might lead to different fundamentals. yields up, the 10 year up by two basis points, 4.1750 and the two-year at 4.4632. a weaker u.s. dollar against everything in g10 including the japanese yen. dollar-yen, 156.64. and following comments from donald trump in a wide-ranging bloomberg businessweek interview . under surveillance, let's start there, donald trump sitting down with businessweek saying that he will let jerome powell serve his full-term and considering jamie dimon as secretary of trash treasuries -- secretary of treasury. dani: i think we need to start on the dollar because it's moving the markets but there are so many things to hear. one thing he talked about, he sees the deficit, the current

account deficit as the big problem, and he sees that basically the u.s. is importing so much and not exporting so much. it is so much more than the dollar standing in the way. we don't have the supply chains that allow for cheap goods to be made here. even if we did, does europe want our giant trucks on the road? that is one element. the other thing, how does he make a dollar cheaper? jonathan: i think the answer for a lot of people is no. we will talk about jamie dimon, and i know he has a statements like your over his head, and that is why people lincoln with government, surely a man with all that talent will go down to washington, d.c. and why not come the treasury secretary? we give this on repeat again and again, encouraged by the words of donald trump. if we can park the name, let's talk about the caliber. i would like to understand if trump with a second term can

attract the same talent he managed to attract at the beginning of his first term. we know that there were others, like gary cohen, lighthizer, o'brien, can we attract those same names if he gets back into power? dani: garrett cohen is the one i thought about when you said that terry the ultimately butt heads -- he said that. the ultimately butt heads over tariffs. what happens when he talks to them about the policies he would like to put in place? someone like lighthizer agrees and could do that but i wonder about other talent like jamie dimon, who might come into the administration and say this doesn't make sense? jonathan: glenn youngkin was quite supportive of those initiatives. if you are wondering why chip stocks are getting hammered this morning, there are a number of reasons, including the biden

administration is considering using extreme trade restrictions on china. officials are looking at using the fdp are or foreign direct product role -- fdpr, the foreign direct product rule. nvidia down by 4% as of earlier this morning. dani: this makes me think the market was looking for a reason to sell some names that they had been holding up in the rotation and finally they don't because when you look at the story, there is the underlying element of the allies of the u.s., netherlands, tokyo, are they going to go along with this when they look at the current state of u.s. politics and say you may not be the guy elected in four months, why would we put these changes in place that will hurt our chip industry when we don't know if you will be the guy running with it? jonathan: i think we are all asking the same question, how much will exchange on the trade front? people think not much.

dani: one of the interesting things to come out of the businessweek argument is he does not want to ban tiktok. it is long hour already, so he will have go to congress and get them to do it. the reason is because of his dislike for facebook area we know he doesn't like mark zuckerberg, but it is this big tech thing. he doesn't like tech. it is often for different reasons. maybe he thinks they don't allow conservative voices enough. j.d. vance also doesn't like big tech, so that could be a change. jonathan: j.d. vance will make his address to the rnc later this afternoon. john williams told the wall street journal the central bank is getting closer to a rate cut but will not be ready to do so at the next meeting. adriana kugler said it would be appropriate to cut later this year if data cooperates. joining us now is terry rodriguez alongside brian weinstein.

-- tony rodriguez alongside brian weinstein. tony: data is moving in the right direction. i don't think it is there yet for a july cut for september, it is sitting up well. july, you still have unemployment that is comfortable for the fed, and inflation data is still above target, moving in the right direction but a little bit too early to say in july we need to move, but it is setting up nicely so far assuming we do not get a brand-new set of data and right now, we are sitting up for a september cut and then a gradual kind of quarterly pace over the course of the next three to four quarters. jonathan: think about where we will be in september. we are talking about september rate cuts and how the inflation growth exit a little bit better and they can reduce interest rates, but when we get to

september, we talk about the election more than right now? we had mike schumacher earlier talking about a window for the trade to work, maybe a month or two, and then all you talk about is the political consideration of looser fiscal policy and maybe an inflationary trade policy and higher interest rates at the long end of the curve. brian: i like that story. we are priced for rate cuts. i don't think the fed is going to ease more than the market prices. we have a fed funds rate that was there for 9% inflation and it is below 3%. they are going to ease, and people are going to extend and that trade will not work. i think it has already happened and we know we do not have -- we don't need in a percent or 9%, but i don't think we will have -- 8% or 9%, but i don't think

we will have that. i think people will rush into duration. if i can be underrate 3.90, i would be happy. dani: the push and pull has been about steepeners, and that is down to politics. steepeners work until they don't, and people who just entered the trade have got smashed across the face the last couple of days. we would like to be gung ho about it and perhaps that has been the story. can you really put it on? brian: the only thing i really like is not only the long bonds. you can go back when we were inverted. it is not where we are. to me, that does not hurt and you don't need to extend to the thirty-year part of the yield curve. if we are going to have higher deficits, to me, it is the long end of the yield curve. so, yeah, i think steepeners will be problematic until we get

nasty growth and inflation numbers, that is not where we are. i think -- dani: on the long end, there has been the argument made that it is a trump trade, it is the extension of tax cuts, how much difference does it make who is in the white house next year? tony: we think the fiscal situation will be similar, no matter who was in the white house. there is no party that is really fiscally responsible anymore. in that case, i think you've seen the majority of the moving along and. we don't think we will see a huge backup because we think the economy is slow and inflation will continue to come down, so the curve steepening is priced in for the first move and i have to wait for the fed to actually get into the game, which we don't think will start until

september and will be a slow process, so the long and will be held up around these levels for quite some time, and one of the big reasons is the fiscal deficits and the fact that nobody will address it. jonathan: ultimately, you are not looking for a big rally, and i think there might be some difference on the front end. i hear from a lot of people who come on the show who go on business tv and say don't do the front end, rate cuts are coming, luckily yields, make it work right now -- lock in yields, make it work right now. why can -- how do you take some comfort by same, you know what? i don't need to give these guys fees. i can just keep taking 5.50. brian: eventually, there are things you would like to own. cash is one instrument. what they are getting wrong as we are not going back to 1% growth end inflation.

daschle percent growth and inflation. -- 1% growth and inflation. the next move could be up again. i think if you look, if the curve is usually 100 basis -- if the two note ends up close to four, close to 5.5, i think that is what they are getting wrong. we are not going back to the oldies of 1% to 2% . dani: part of the story was that it would be a huge power that could mean the risk could keep going. are you saying that is not the case? brian: no, the cash on the sideline is a bit of a myth. if everybody sells treasury bills, somebody has to buy them, so there is give and take. as you leave cash, you are not buying five-year treasuries, you are buying credit and high-yield. people are buying safe, high yields.

i think that can expand and people can find other things to buy that have been returned, especially after tax, so, yes, people will buy other things and cash should fall but do not blindly move the yield curve and think that is where your cash should go. dani: people have been putting their money into fixed income funds. they way they have done it is the active funds. that has attracted good money. should i interpret that think that there is a risk if you just by credit funds? tony: look at performance managers, fixed income, active fixed income management, we think there is a lot of money on the table, everything opportunities are very heavily weighted toward the treasury mark. we think treasuries are overvalued relative to non-treasury spread assets out there. we talk about the cash story,

you can build portfolios with a two-year to five year duration that will earn 6%. and they will earn. for the next 2, 3, 4 years, whereas casual will earn you above 5% today. fast forward six months or year, year four has to be a three handle ykk six -- three handle by 2026. jonathan: quickly on credit, what are credit spreads? tony: we think they widen a bit, with volatility from the election and the economy slowing down. we have been in a golden age of credit, so credit is weakening, but we do not see any recession like invite for credit -- recession likened for credit. that means you should see some credit spreads because we may be a little overpriced, but not to the sense that they will really destroy a portfolio. dani: credit default swaps, we

think they are at their narrowest since 2021. a lot of people look at that and say, i'm not getting compensated for the risks that should be priced into this. brian: i'm out of consensus. i think the credit story will be interesting. in the absence -- the fiscal story, with treasury markets, not a great quality credit, i think people will search for credit that they think is better than the u.s. dollar. i think can we make the argument that apple should trade to the government? people well, so i think the high quality credit spreads will continue to see new things unless we have a hard landing. i think that is why the credit market is where it is, and i don't think we have seen jonathan: the high yet. jonathan:what is driving that bit -- jonathan: what is driving that? brian: it is not my personal

favorite argument. i think what is driving it is you can make what is -- the u.s. government is not going to default but we can get downgraded again. if you look at the credit markets, there are not that many single names names. so you get into trouble names, and a lot of them have rates cash flow. we are being fiscally responsible and they will not continually and restore deficit have little issues. all the issues we are about to go through will not those things. i think you will see some of these high-quality names trade up. because people do not want to buy -- jonathan: tony, what do you think of that? tony: when we talk about negative rates, it could happen but i don't think it is likely. theoretically possible, i don't think it is unlike anything --

jonathan: tony, good to see you. tony rodriguez alongside brian weinstein. fascinating thoughts on fixed income. let's get you an updateon stories elsewhere with your bloomberg brief . yahaira: amazon coming under fire from senate done that's as its annual two a sales event takes place. a new report led by senator bernie sanders says prime days lead to a surge in workplace injuries. nearly 45 injuries per 100 workers were reported in amazon warehouse is during prime day 2019. amazon responded, saying the report is wrong in its facts. elon musk is moving the headquarters of his businesses from texas -- to texas from california. the announcement on x after expressing frustration over california's new law related to transgender students in public schools. earlier this week, elon musk

endorsed donald trump and pledged tens of millions of dollars to his campaign every month. and staying on elon musk, a bold call being made on tesla. wood said their move into the thomas taxi business will be a catalyst for a roughly 10 fold and race -- autonomous taxi business will be a catalyst for a roughly 10 fold. tesla shares are up 3% this year. wood's fund has last nearly 9% this year. jonathan: appreciate it. next on the program, we set you up for the day ahead and go through some of the data points to look for, some of the fed speak, and address the rnc. we will catch up with an recorder and on the other side -- annmarie hordern on the others. this is bloomberg. ♪

jonathan: a decent around the small caps. better than good. s&p 500, three days of gains pulling back a little bit into the opening bell, 40 minutes away, negative by one percentage point on the s&p. in the bond market, treasuries selling off just a touch. yields higher by three basis points on the 10 year, approaching 4.20. the dollar story we have been talking about repeatedly true the morning, the dollar weaker against everything in g10. as we count you down to the opening bell, here is the trading diary. the fed beige book at 2:00 p.m. eastern, j.d. vance taking center stage in milwaukee at the rnc later this evening. tomorrow, another round of jobless claims and netflix

reports after the closing though, and donald trump will redeliver his speech, rewritten after saturday's assassination attempt. joining us from the rnc, anne-marie is back with us. j.d. vance is the vp pick for donald trump. what can we expect later this afternoon? annmarie: he has been making the rounds at the rnc, showing his face on the floor, sitting next to the former president, but now we are going to hear from him for the first time on stage as a trump's vp pick. he's likely going to lean heavily into his background. he wrote a memoir about this. he will talk about rowing up and i palacio -- growing up in appellatio -- appelachia, and why jesus donald trump's policies working for the middle class and the lower income. there will be a terminus amount of scripting on this individual.

2016, when donald trump first won and took over the white house, j.d. vance was a political contributor on cnn, bashing him. you can read everything he said about the former president, 2024, he is his vp pick. he will try to support him in three key states, the rust belt, and this is where donald trump things i pick like j.d. vance can help them win. michigan, wisconsin and pennsylvania. jonathan: the important one is the story of his that you described. if you think about the post-pandemic, cost-of-living crisis, dominating not just as well, the incumbent in elections across europe, in the u.k., the united states, has been punished in the polls at the ballot box for those who have had elections. i wonder if that is what this is about. this is an individual who can go to the states and communicate with these people and relate to them in ways that politicians who have been in d.c. for

decades cannot. annmarie: absolutely. and donald trump himself is an incumbent. j.d. vance has only been a senator for one year. he's relatively new to washington, d.c. he is certainly not from the establishment, so he has a fresh vibe in that sense, even though he is from the far right of the party, which solely represents donald trump. this was not a pick that potentially could help him expand into the center. and the sheer fact that he is 39 years old. he turns 40 next week. when you have an election, someone in his late 70's running, early 80's running, this individual screams youth. dani: he is not necessarily somebody who helps expand into the center but nikki haley perhaps can, and she spoke yesterday. what inroads did she make to help widen trump space? -- trump's base?

annmarie: she closed the fraction between trump and herself. she potentially would not have been here if there was not that attempted assassination -- assassination attempt. that is on the phone call was made. there is one thing that was interesting, and i'm not a liberator, so i cannot tell what donald trump said to j.d. vance, but when she said donald trump called me to get me here, to talk about unity at our party, he looked over to j.d. vance and said something to him and kind of laughed. i cannot quite understand what it was, but, clearly, there was a phone call made, that she made it clear last night, she does not agree with donald trump 100% of the time, and she said, if you're going to vote for him, you might not, but she is urging supporters to vote for him and one of the first thing she said when she came out on stage, even though she was being booed, she wanted to make it clear she endorses a 100%, period, her words.

jonathan: really enjoyed the conversation with glenn youngkin earlier this morning on whether the administration would truly be pro-business in the traditional sense. what was your take away from that exchange? annmarie: my one takeaway is yes because what governor youngkin was saying when i was trying to get his -- what he thought, his first impressions of young senator j.d. vance and some of the protectionist populist rhetoric we have heard from him and the fact that he does unnerve the business community, i was told that a lot of wall street individuals try to make last-ditch efforts to pick governor youngkin himself or a type like him and his mold, and he said let's make one thing clear, this is donald trump's policy and j.d. vance is stepping in to see his policy move forward, so even if there is a little division, but to where they align when it comes to j.d. vance and trump and potentially there populace in

different ways, i got the sense from governor youngkin that this is trump's policy and j.d. vance will help push them forward. annmarie: thank you. wonderful work-- jonathan: thank you, wonderful work. looking forward to seeing you back in studio next weekend. tomorrow, from donald trump himself. here's the lineup, thomas kennedy of jp morgan, geoff yu. i wonder if we wake up still talking about the fx market going into tomorrow. dani: it is hard to have conviction because you can get slapped by politics or economics. it is a lot of back-and-forth. for now, it is the only thing that is certain is some form of a rotation is happening. jonathan: the rotation the last week.we are down 1% on the s&p 500. from new york city this morning, good morning.thank you for tuning in. this was "bloomberg surveillance." ♪

(jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try?

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.

matt: the big chipmakers fall. i matt miller. katie: "bloomberg open interest" starts right now. ♪ sonali: tough trade talk weighs on sentiment. the vita administration considers using the most of your treating curves yet on china. matt: johnson & johnson cut its full-year forecast to account for recent acquisitions.