♪ >> now that we've praised him his greater odds of the recession, i would say the market is probably going to be more sensitive to any sort of positive rises. >> that may be part of the problem in that we are being whipped around on every single cyclical data point. >> financial markets aren't as important as they think they are. >> and my outlook for equities it is not figure onto what the fed does one way or the other. >> they ought to be and i think they will err on the side of caution if we do get additional negative data. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: did i miss anything?

welcome back. supposed to be sleepy, jon and i are playing vacation tag. thrilled to say dani will be joining myself and anne-marie for the rest of the week so evidently i missed a doozy of the week last week. trifecta of exploded carry trade's, new growth fears. the question into this week, if the roller coaster over? >> i fear not. ppi, cpi, retail sales. it feels like it is going to be a mini referendum on the micro chaos last week as markets are right where they started. it's almost as if he didn't miss anything. but the volatility itself is important. lisa: i missed some auctions that were actually important for once. there is so i question what actually happened last week and some people are wondering is this just the idea of leverage getting pushed out of the system, is this something really fundamental about the weakening of the consumer? >> one thing we continue to here is that this was really a perfect storm of a number of issues at play.

this week of course the consumer will be front and center. we get is retail sales but also the likes of walmart. the last round they said they saw consumers starting to trade down. that bifurcation of the consumer, maybe some of those on the operetta starting to also look for deals. lisa: there's been a reversal of the trump trade almost entirely at this question about whether the harris wave has really begun and what that looks like. how much credence to people who you speak to give to that? >> she put this in her know when all this was really blowing up and the markets were experiencing all this volatility. people are trying to decipher what exactly is driving this and she said one dynamic committee elections. they are shifting in a way that is challenging the stock market. the s&p has positively correlated with trump adding market odds which have been deteriorating and now lag harris. but terry haynes says beware the harris trade. >> terror so many different swirling winds and a lot of it comes down to leverage in system which goldman sachs says has

surged to some of the highest levels going back 10 years in data that they compile. questions around the japanese yen, how much that is over and unwound. we have a sense of how much some of the discrepancies in the market sort of positioning has really right sized? >> every estimate is different and i think this speaks to the point that it is kind of unclear. jp morgan's is 75% unwound. morgan stanley's is 60%. bank of america's of the bulk of it is over. the concern is you have this big move on monday and the japanese stocks rallied. they didn't even end down double digits for the week so how much of that encouraged people to low backup? sure, he sold off on monday, but what he saw as good news? maybe we got complacent again. >> have we really killed off the optimism? we've got a great sleep for you to really dissect all of what we've seen in markets. basically trying to reclaim some of the losses that really didn't

stick last week. this week we are seeing basically rage found s&p futures. this may be one of the most interesting areas to watch. how much the euro gains, not because of the euro strength, but dollar weakness because of some of the fatcats. 10-year gilts still some 4%. crude after a monster week last week, gaining yet again, up more than 1%. $77.75. here's what we've got coming up this week. a really big one in terms of the consumer and in terms of inflation. ppi coming out on tuesday. wednesday, cpi data. does the fed see inflation coming down, decelerating enough to justify the september rate cut which even the title he was baked into the market, a 50 basis point rate cut at some point this year? retail sales and jobless claims

as well as walmart earnings. all of this pointing to the key question, is the u.s. consumer getting too tired to uphold the rally that we've seen? stocks coming off four weeks of losses. terry haynes the pangaea policy as harris pushes ahead of donald trump in three swing states ahead of a q. week of economic data. we begin with our top story, starts edging higher ahead of the q. week and economic data. michael schill reading this. the market reaction function seems to have flipped with bad economic news driving risk assets lower, which typically occurs at the transition point the economic cycle. michael joins us now. his very first interview in his new fund at the new post. great to see you, congratulations. i want to start there. are we seeing a tipping point in the economy that justifies the volatility of last week? >> is a change in the reaction function.

this all started with the cpi. it didn't start last week, it culminated last week. it started on july 16 with the dollar suddenly weakening, the yen suddenly strengthening held by the bank of japan jumping in. and since that point in time, whenever we've had weaker economic data, risk assets have gone down. and where we have decent economic data, it has gone up. we had a tiny beat on the initial claims number on thursday, and we had a stronger than expected ism services index for the market still down that day, but it rallied at the point the number came out. this is something different. since we started worrying about inflation in 2021, stronger economic data typically sent the market down and sent yields up. it is not necessarily that the economy is in a different point but the balance of investor concerns have changed. investors are more concerned

about a recession and a weakening economy than the risk of upside inflation. >> last week, bonds actually acted as a hedge, and you saw them become the haven trade that they have been traditionally do you see that sticking according to what you're explaining, seeming like they they're prone for more volatility >> right now, yes. if you get weaker economic data, bonds will go down. bond yields will go down, bond prices will go up. equities will go down. the reverse is true if we get stronger than expected economic data, so that is a little bit different. that again poses problems for people who have set up portfolios anticipating a different kind of correlation. one of the things i think that has fed into the chaos is that portfolios are not reacting in the way people would have expected to a certain input. >> that's a really interesting

point. i want to dig into that more. are you basically saying that a lot of the universe right now is set up in bonds and stocks don't have their normal negative correlation, that people currently are not paired for this new environment that we are about to go into? >> some of the chaos we see, people are smart. if i've noticed it, someone else has noticed it. you are probably starting to see people sit down and look at their portfolios and say look, if i know that cpi this week is going to be 0.1 vs. 0.3, this is what i expect my portfolio to be doing. >> part of the switches that inflation isn't a concern. when inflation was a concern is when correlation got out of whack. what does it mean to have fed officials to still be say we are not competent inflation is low enough that we can cut? what is the push and pull between markets and fed officials? >> i think fed officials and

markets are often in a point of conflict. i personally think the economy is falling apart but i respect the fact that the market is more worried about that than it used to be. but as i said, to the extent you see fed officials push against rate cuts over the short term, the market is going to be nervous. >> but as the fed almost creating this environment because they become so data-dependent? >> yes, and guidance depended as well. the fed did not used to guide in the way that it currently does. i think setting fed policy is always difficult and it always go through different fashions. if you went back 18, 19 years ago, the 90 fed, it was 25 basis point, meeting of the joke you don't need a calendar, you just need to tell me what interest rate it is. we have this current paradigm with the dot plots and excessive guidance and data dependence.

you are probably nearing the sell by date. we are probably heading toward a much more opaque that and if you end up with a trump presidency and you listen to what he is saying, the fed with a lot more political, even if it is only verbal interference, a lot more political interference. >> when you say trump may potentially come back, we see the race is very tight and people are questioning if some of the unwinding with the trump trade unwinding do you believe any of that? >> i do. i do believe that it wasn't the biggest driver in portfolios but at the margins you did have people, it did look after the debate as if you had a fairly straightforward election. there were certain things which were favored, and certainly it is no longer as certain as it was. if anything, the certainty is moving in the other direction. at the margins that will have been a factor. >> you are starting a new fund,

how are youpositioning it? >> not entirely sure. still have a couple of weeks to make up my mind. this is a harder environment than markets were three months ago. i think the global economy is still ok. i think the chinese are edging toward doing something about having their own battle with bond yields being too low, ironically. i'm reasonably positive about the global economy. i look back to summers of 1987 in 1998 it started off with similar chaos. and you got this sort of secondary wave of volatility in september, october. i wonder whether that is something we have to look

forward to. >> is this a financial problem for an economic problem? >> i think it is a markets problem more than anything. a very limited number of trades to a three months ago. what happens is people over a certain set of assumptions, sometimes they realize they should have been doing something slightly different. the first half of this year, people were quite invested. by july, everybody was fully invested. u.s. tech was number one. two or three other things. and i think what we had more than anything was a massive overcommitment of capital to a limited number of themes, and

that unwinding is a messy process. we have to get back to more normal portfolios and i don't think we're there yet. you don't normally go from 100% commitment down to zero. you normally end up at -50. the pendulum over slaves. >> good luck, and don't be a stranger. right now let's get you an update on stories elsewhere this morning. here is your bloomberg green. yahaira: investors pulled a recommended money from china last quarter. outflows reached $15 million during that time, marking just the second time the country has recorded negative numbers according to data from china's data administration of foreign-exchange. should the decline continued for the rest of the year it would be the first annual net outflow since at least 1990 with comparable data. a bloomberg survey of economists now showing the ecb is likely to cut rates once a quarter for the end of next year, a timetable

that would see the easing cycle ending sooner than previously thought. the economists expect the benchmark rate in europe to reach 2.25% by the end of 2025. they had previously expected to hit that mark in 2026. growth slowed in july while economists lowered their forecast for growth in germany. and karis handed over the olympic baton to los angeles in true hollywood style. having after tom cruise pal from the roof of the stock -- into the closing ceremony. l.a. will host the games in 2028 and already planning is well underway with the city mayor addressing the big issue, saying they will encourage remote work and nonstandard working hours to prevent traffic chaos during what she calls a new-car olympics. >> i've got to say, this is a very exciting olympics. it felt more unifying. >> you got to witness some of the. >> i went to paris for a day,

but the enthusiasm is really inspirational. >> you saw the torch and that the like that is everything. it is in the center, this glowing orb. what else do you need to see? >> that is what i told manus. but more of this up next. a harris trade rolls on. >> deal like hard work. hard work is good work. and with your help this november, we will win. >> that is coming up next. this is bloomberg. it's time to grow your business. create a website. how? godaddy. coding... nah. but all that writing...

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♪ >> mohamed, we saw you there. we saw you in the stands watching the men's basketball game in the olympics.

you were at every single cultural icon event and we want your life. we're trying to claw back some of the losses that mostly were brought back from last week. up now about 1/10 of 1%, you wonder how many of you people are in their seats were how many people take a page from jonathan ferro off on vacation. they harris train rolling on. >> we know this will be a tight race until the very end. so let's not pay too much attention to the polls, because we have some hard work ahead of us. but we like hard work. hard work is good work. and with your help this november, we will win.

>> they harris campaign raising over $12 million at an event in san francisco. harris winning in the polls also. the latest in the new york times joined the vice president is leading donald trump in the key swing states that she did, wisconsin and pennsylvania. to retain the pangaea policy writing this. from now until the first debate, the raisman and to very likely continues pro-harris. post labor day harris is likely to be the clear frontrunner, but there are many potential harris speed bumps. terry, i'm going to ask a question that annemarie and i were talking about earlier this morning which is how much of we exceeded our the unwinding of the trump trade and a that we have seen? >> i think quite alive. there's a situation where everybody gets way over their skis for one event and a dissipate it and when that starts to unwind, they jump on the other horse markets do this all the time, you don't need me to tell you that this morning. but the proof in the pudding is going to be whether or not those

trades and that bandwagon is valid. what markets forget in the presidential election year but remembers every other year is that congress has as much or more to do with this that the president is. right now the base case is that congress is going to be politically split. whatever happens in either of those trades is going to end up being less traumatic than markets anticipate. >> how do we know what a harris trade is when we really don't know where policies are? >> that is a very good question. not speaking for markets, but i think the answer to that is people consider a continuum of the status quo, that by and large, the buying policies will become the harris policies, number one, and number two, what you do get is a democratic platform that has already been approved by folks and will be rolled out at the convention. so you have some idea of what there is.

what i hope markets see beyond all of this is an increase in defense spending and building up the defense industrial base regardless of the president is, because that is the most bipartisan policy there is. >> imagine congress. i want to give you a little bit of a president biden had to say over the weekend. one of the reasons he dropped out was a number of his democratic colleagues thought he was going to hurt them in the races. have you seen the cure the polls that intentionally there are more seats the democrats could pick up, whether it comes to the house of the senate? >> i think so a little bit. i take issue with the president. even before he dropped out, the vast majority of people running ahead of him, particularly in the senate. incumbent democratic senators up for reelection were already doing better than buying was, so there was a lot of talk that those senators actually like full biden up rather than the effect that biden talks about.

but yeah, i think what happens is that the democratic idea of taking the house back by targeting a relative few seats in blue states probably is more likely to happen than less likely to happen, simply because the enthusiasm for harris and the enthusiasm for the ticket is way up compared to where biden was. >> one piece of policy we have been able to get out of both campaigns is how they view the federal reserve. j.d. vance doubled down on what the former president said in terms of the president should have more say in directing monetary policy. do you think this could hurt the republican ticket? >> i think it does on balance. what trump and vance are trying to appeal to is this kind of "end the fed" crowd. at this point of a campaign you're throwing out little bits of meat for everybody in the hopes that they bite and stick with you. but i think on balance, it is silliness or worse.

the idea that it is a very short step from talking about how to corral the fed, which is constitutionally impossible for the executive branch, by the way. these are powers derived from congress, it is not anybody's opinion, it is not a fourth branch of government. the fed exercises congressional powers, end of story. congress is not going to give that up. but when people see that the net effect of what trump and vanc e are talking about is going to negative the effect they're saving in their pension in the marketplace, that is a losing argument for that ticket. >> another visa policy to we can probably argue by both candidates is this idea of no taxes on tips. both of them have coalesced around it. here is talking about it over the weekend. where does that land us on tax policy for the two of them? what did you make of it? >> well, i will go back to where you started. it is a great bit of meat.

it lends itself to the immediate post, why don't we talk about income from whatever source derived a start to make exceptions? in the very unlikely event today that you get into an extension of the 2017 tax law, i say that because a slew congress, no matter who the president is, a slick congress that either has democratic is not going to entertain an extension of the 2017 tax law, i think that unless you get some sort of republican clean sweep, this doesn't have it because what ends up happening is they want to capture as much revenue as they possibly can. it's a little bit of enticement for people but in the end, it won't happen, i don't think. >> the trump conversation tonight, it is probably going to be more of a liability or a boon for his campaign? >> i think on balance it will be

a little bit of a boon and it is worth watching for this reason. one, it is about cross marketing. musk wants to highlight a free-speech platform, a freer speech platform from the background that a lot of the social media were polluting with the government on things in 2020 and thereafter. it is also about rebranding the trump campaign as the resistance. and that sounds like a leap, but you can see it in his tweets where he tweeted just yesterday or the day before that you see in movies and you identify with the resistance in all movies. star wars, divergent, this and the other, but you don't see it in real life. so i think when you're going to see is a rebranding exercise where what musk wants to do is attack what he characterizes as the anti-free-speech posture of

the harris-walz ticket and what trump tries to do is tries to start the conversation around exposing harris as more than a shape shifter, but as just another politician who is taking whatever stand suits are at the moment. so we will see where it goes, but i think that will be reflected in the data from tonight. >> thank you as always for your insights. if you want to find that crowd, twitter or x is probably the place to do that. bobby ghosh and markets, trying to claw back some of the losses that last week were still a little bit after over. this is bloomberg. -- a little bit left over.

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♪ >> it sounds like it was really volatile. we saw the biggest spike going back to the early days of the pandemic. the yield curve on inverted for the first time in two years. the s&p lost 0.04% during the week. clawing back, maybe again to reverse some of that volatility. the nasdaq clawing back some of the losses after they were thrown out with the bathwater. up about 3/10 of 1%. the russell interestingly is

lower. how much is this a growth scare versus actually some sort of financial scare? you see the russell down for tenths of 1% even with some of the rates. >> it's fair to say this is not a recession. it is a process, you get there eventually. when people buy up the russell to an extreme pace, do the economics back this up? you get all of these companies and let's be honest, not profitable junk. perhaps the past week was just a reminder that the economic environment is not great for that. lisa: whether the rate cuts that are positive for equities, if you look at what we are seeing in the yield space, we are seeing a reversal of a lot of the declining yield we saw last week, back again north of 4%

after plunging. u.s. 10 year yields, 395. this came after a pretty poor 10 year and 30 year option. there is this question about whether the fed is poised to cut by 50 basis points. you have michelle bowman saying pump the brakes, i don't see what you are seeing with growth being the preeminent concern. dani: it's concentrating on the fed's other side of the mandate. we are still in an inflationary environment. how will you cut 100 basis points for the rest of the year if fed officials aren't saying they are ready to cut 25 basis points? lisa: that is the question. another basis point cut of the year. if you take a look at the

dollar, to me, this might be the linchpin of everything happening last week, it is not the dollar as much as the yen. the hike from the bank of japan and subsequent currency pair after being as high as 160, 170. the question for the euro is if it could continue to climb like it did over the past week. not euro strength but dollar weakness. he economic data, pti tomorrow followed by cpi on wednesday. another round of jobless claims on thursday. we will be hearing from key consumer giants, home depot and walmart. what are you looking for? the most important indicators as it has to do with where the levers really are? dani: given the fact that the

market is swinging like it did last week when we got the jobs number. the data will be really important when you hear the likes of nikki bowman talking about inflation is key. i'm interested in what the come -- consumer is spending on. these are big ticket items. how do they fare versus walmart when it is starting to see higher end consumers trade down into their marketplace? these big companies and what they see on the ground. dani: you have to assume that is what the market is concentrated on. what if cpi comes in a tad higher? do we see this huge pushback if they are already starting to see and not just continue into jackson hole, how does the market continue as this week plays out? lisa: might be a bigger week to watch the fed speak as well, not just the economic data.

foreign investors pulled money out of china, more pessimism around the second largest economy. investors have pulled $15 billion in the second quarter. second time a country has recorded this outflow going back to 1990 according to state data from china. you raise this issue of how fragile china is and how that factors not just in the economic picture but the geopolitical picture as you wonder how desperate they are. ann marie: one is the economy slowing, another his geopolitical concerns. there is a serious demand concern. the likes of goldman sachs, the chinese government is waiting on the sidelines about fiscal spending.

lisa: this goes to the heart of what we heard. this is one of the wildcards, will they pop a fiscal stimulus into the economy to create that kind of balance that is missing? are the investors even counting on that at all? dani: it is a fiscal barrier. it will be difficult again for him to backtrack on what he sees as a principal for this chinese economy. not to mention local competition, porsche really struggling in earnings because china foots ev demand and local cheap ev demand. lisa: israel right now is strengthening its infrastructure defense as it faces heightened risk of attacks from iran or its proxies in the middle east. this comes as they reiterate

their plan to seek revenge for the killing of a top hamas official. joining us is bobby ghosh. the latest from the wall street journal saying the u.s. is planning to send a carrier to the middle east, could you give us framework for what we are expecting in terms of what the retaliation might look like? bobby: i ran keep saying it will retaliate. there was a statement overnight from the iranian foreign minister. it knows it can't make the statements without actually doing something, that undermines its credibility at home. i ran set the bar last april when the israelis took out a senior israeli -- iranian commander. they retaliated from iranian soil. they fought off 300 missiles and drones. they gave israel plenty of time

to prepare. plenty of advance warnings. it was symbolic. now the challenge for iran is calibration. it has to raise the bar. at the same time it has to calibrate in a way that it thousand set off a war. none of these players want an actual all-out war. the damage is far too great. how do you raise the bar without actually getting into a war? the most likely scenario is sort of looking out for this. i ran follows off more -- iran fires off more. the proxies, lebanon, the who sees -- houthi's firing off missile drones and rockets.

it is a much larger number coming from multiple sides. the challenge then for israel is does the iron dome, is it of taking this from all over the place? the second challenge is for israel's allies, could we then restrain israel from going up one more notch? the risk is not that any of the parties want a war, we have reached a stage where any of the parties all too easily could do this. that is the real risk that something will happen that pushes everyone over the edge. annmarie: on thursday we are

supposed to have these talks, this has become a sideshow. bobby: the new leader is the guy who planned the october 7 attack, he is not a guy who is remotely interested in any kind of peace and releasing the hostages. he's happy to keep fighting. it's clear that benjamin netanyahu is not interested in a deal at the moment. he's had plenty of opportunities and a lot of pressure to make a deal. he does not want to. these talks, i'm not holding my breath. annmarie: do you see these as domestic politics or is it a hail mary event to restrain iran , if there was a cease-fire deal, that would mean they could hold off on retaliation. bobby: i think the iranians like me and anybody else who has been watching this closely, all of us agreed these talks will not make

a material difference. for iran, it is a calculation of how much to do without getting into a war. from israel's point, it is international. this is benjamin netanyahu saying if you want me to keep talking, look, i am talking. he keeps bombing schools in gaza. everyone continues to do what they are planning to do. they have this little thing on the side. annmarie: it wasn't that long ago, it was sending carriers and submarines over to israel. what do we make of what the u.s. has to make any sort of response or de-escalation from israel?

bobby: again, i just sigh report coming on air, we have made it clear to the israelis that if they don't take these new talk seriously we will start naming and shaming them. i don't think they will. the biden administration is briefing journalists off the record. netanyahu is a master at playing the buff -- bluff game on the international stage. he's not really paying attention to the rhetoric coming out of the white house. he is paying attention to the actions. the aircraft carrier group, nuclear missile group. that is all he cares for. he knows for a fact that no matter what the occupants of the white house says, he did this during the obama administration.

there is a bipartisan agreement or consensus in the united states in the senate, in congress or in the political landscape of this country that the u.s. will back israel no matter what. lisa: thank you for your insight, always wonderful to get them. let's get you an update on stories elsewhere, here is your bloomberg brief. >> bank of america ceo telling cbs the bank no longer sees a recession on the horizon, going on to say consumer spending is slowing but it is heading to normal. the fed is in a position where they have to be careful they don't slow down too much. the bank expects the fed to cut in november and september. former president donald trump plans to sit for an interview

tonight with elon musk. promising an unscripted discussion with no limits on subject matter. he endorsed the former president after the attempt on his life last month. elon musk's interview with former president trump is set for 8:00 p.m. president joe biden is getting his -- giving his fullest exclamation yet for why he decided to end his reelection campaign. he described the pressure within his own party to step aside. president biden: poll showed it was a net and net grace -- net and neck race. they thought i was going to hurt them in the races. i was concerned this would be the topic. why did so-and-so say?

i thought it would be a real distraction. yahaira: biden is expected to join kamala harris on the campaign trail as early as this week. lisa: it is all about the data. >> people really questioning how weak the economy is. i think the growth scare has been people's concern for a while. lisa: that is up next, this is "bloomberg surveillance." ♪ waterproof leather. breathable fabrics. spikeless traction. the most comfortable golf shoe in the game. grab your pair today at olukai.com.

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on the sleep number limited edition smart bed and free delivery when you add any base. lisa:lisa: everything's over, people are on vacation. i'm back. we have pretty much clawed back, up 2/10 of 1%. really this question of how many of the leveraged trades have

been around? how many of the concerns are rooted in reality. it is all about the data. seema: we wonder with people questioning how weak the economy is. i think the growth scare has been building up in people's concerns. the fed themselves will have to respond in kind. lisa: a q. week of data set to provide further insight on the u.s. economy and the ability to really cut rates. u.s. ppi and cpi coming wednesday. another round of key jobless claims on wednesday. with all eyes on september's fed meeting, cpi will be the most important indicator of the week or maybe even the year. i'm thrilled to have you here in the studio at a time where there

are so many questions about what is going on in the labor market. you point to a slew of statistics showing we are above pre-pandemic levels of hiring. does that mean we are out of the woods? we don't know where the endpoint really is? nela: i don't think we could become inclusive -- be conclusive with this data. the labor market is cooling. everybody is talking about it. we are never seeing where we are cooling from or where we are cooling to. when you look at small firms, new business formations. we are going back to something that resembles 2019, will we stay there? i cannot give you a definitive answer. now normal looks a lot like 2019 with some interesting changes

like new business formation. we are seeing record numbers when you look at over the past 10 years, even still one third of those are high propensity businesses which means they have the potential to add payroll and headcount. those are the new employers, job creators. that is a little bit different than what we saw in 2019. lisa: how much does this undermine the conclusion people had from the july jobs report that came out really disappointing and raised a lot of concerns about a recession and the fed cutting rates by 100 basis points this year? nela: we are seeing a market of investors and speculators that are overreacting to the mainstream economy. they are not seeing the mom-and-pop hiring that we see in the adp data.

looking at financial businesses, to look at the economy in totality you will see some. -- some weakness, you will also see some areas of strength. not only will you see financial market indicators but then you get retail sales. you will get a sense of how mainstreet is doing next to this price data. dani: we are struggling what the indicator is. statistical regularities that this time is different, what should be the indicator? how will we know if we are heading towards that? by the time we are there we know it is too late? nela: you always look at the consumer. is the consumer still spending? that is the data point that is important. is the consumer spending ahead

of inflation? that is exactly what we will see this week. if you look at last month's data , consumers were holding the line, they were doing ok. this is an ok economy. it is not superstrong or weak. it is holding the line. that is pretty good when you consider the inflation headwind we have all experienced. dani: cpi is the most important statistical point this week despite a market that seems to have moved on. why is inflation so important? nela: it is important to the fed. it is not the preferred indicator but it is an indication. those producer prices are gaining momentum in terms of interest. people will be looking at ppi to see the pipeline, that very important pce report that the

fed cares about. they lead into consumer prices, super important that it's just going to be one more piece of evidence that the fed needs that they are comfortable with cutting rates. annmarie: you are seeing a pickup of hiring, less than 50 people, what are you seeing? what businesses are these? , what are they looking fornela: a lot of them are mom-and-pop businesses. bakeries, dry cleaners, those parts of the economy that keeps churning regardless of whether or not there are recession fears , those employers were really blocked out last year as larger employers work hiring in force. it took a while for them to get a window into this labor market. you saw this pickup last year. they are still adding headcount.

i will argue that the demographics are changing the labor market. some of them are actually opening new businesses and becoming nontraditional workers. that will be a change that we see going into the future because they are not just becoming traditional workers. annmarie: that was a shock for lisa, not john. she was off last week. it's not just the boomers potentially leaving the workforce, it is new flows of supply coming in, how do you view that immigration supply right now? some are saying that is the reason why we have to discount things.

some economists are using immigration too much and there actually isn't as much as we are expecting. nela: no one makes a better case than claudia some herself. if you are seeing a pickup in immigration, and we have, it is to be expected that the unemployment rate because it has been so affected by the wild swings in labor over the last three years, that would see an uptick. not to totally discount it but to give room and breath for immigration is probably the best story. lisa: thank you so much. always wonderful to have you. you all saw the piece last week,

i was out somewhere. the title was my recession rule is meant to be broken. i love her humility. it joins a list of economic tools skewed by unusual disruptions of the past 4.5 years. that is underscoring some of it. annmarie: saying it was design for decline in labor demand, still trying to work through what exactly this means. she went on to say that said it is still relevant. annmarie: if most economists had something like this they would be beating the drum. lisa: she says rules are meant to be broken and then i don't know, i can't decide. that is the truth. up next, tony dispirited out of blackrock, eric resnick, deborah

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>> the market tends to lead the fed, and i think you are seeing validation of that now. >> -- a significant furor of unemployment. >> you can count on the inflation rate going down, and i think that is the trade they will make approaching the end of the year. >> my guess is they will stop prior to where they stopped last time.

>> this is "bloomberg surveillance." lisa: maybe last week was a good week to take off after all. welcome back here good morning. this is "bloomberg surveillance." jon ferro is off. and reeve return, dani burger, and myself holding off the fort -- and marine her darrow -- last week, what happens? was this a matter of an issue of no liquidity? the worst liquid iggy -- liquidity going back to the peak of the pandemic. annmarie: a trader last week said it looks like an emerging market, that the bid was so massive. people say, can you trust that the vix actually went to 65? how do you calculate a measure

like this? it could be all of those things. it could have been bad liquidity and a paradigm shift in this market, and we will swing up and down to find a new trend. lisa: we will have to rehash the toxic brew of the digital items. dani: the good news is bonds are doing what they're supposed to do during it and that you can have these big swings. the question is, are we prepared for that or did we all change our portfolios assuming bond stock correlation had reversed forever? lisa: president biden decided not to run. then we had the biggest vol spike going back to the height of the pandemic and had a couple options. on the political front, how much are we looking at a really fundamentally changed landscape were trump is on the back foot and eris is writing high?

>> it is a brand-new election. there has been a paradigm shift. you think about the fact that after the attempted assassination on trump's life, the rnc, it was almost a foregone conclusion that he would win. markets are starting to price that in. now it is a very different set up and actually a serious race with kamala harris and now in some swing states beating the former president donald trump. lisa: i do not know why the fed has taken on such preeminence in this particular presidential election. we have heard from not only donald trump also j.d. vance about how he thinks there should be more political interference in the federal reserve. who is this catering to? >> last week, trump said he feels like he has a better gut instinct were interest rates going he should have a say.

it goes back to the april report from the wall street journal that said the trump campaign was looking for more ways he could have more say. it harkens back to the nixon administration. the markets view it as rhetoric. if they did believe it, they would really start to react to it. >> it is interesting and i cannot help but wonder, if the republican party wants to be seen as the party of resistance. that is challenging a lot of institutions. what bigger institutions is there? maybe it is this narrative that the institutions are doing your wrong and trouble come in and change things and fight for the everyday man? in practice, it does not look like that. it could be worse for the everyday man. these two we have a massive week coming up. ppi, cpi, home depot, walmart earnings, retail sales more broadly. a real question here of how much

volatility could hinge with these metrics? annmarie: i think saying the fed response might be equally as interesting as the data. the fed has been saying it is still inflation, saying we are not there yet and we want inflation to cool more. it is a market that already cares more about the other side of the dual mandate. what happens if cpi comes in even just a tad higher? do markets need to recalibrate? lisa: we are seeing a bit of clawing back after last week's drama that ended pretty much with a flat market on the week for both the s&p and nasdaq. up about .2% on s&p futures. the dollar front and focus after the unwind of a lot of carry trade's tied to the yen. dollar weakness expected on the heels of some of those fed rate cuts. euro trending because of the dollar, one point098 -- 1.0929.

yields down about 20 basis points last week. 3.90 5% currently. crude, after a rally last week, up about 1%. coming up this hour, we have tony despirito with blackrock as investors prepare for a busy week of data, scott bessent of key square group on the outlook of a possible second trump administration, and eric resnick of ksl capital partners on the state of the consumer and the travel sector. he oversees resorts and has investments in hotels. we will be having a week looking into what some of the travel factor see about the health of the consumer as people wrap up their summer vacations. top story, u.s. stocks looking to build momentum heading into a busy week of data for investors and the fed. tony despirito road, market focus move from rate coming exuberance -- rate cutting

exuberance to recessionary fares. tony joins us now. great to have you. thank you for being in studio. i believe it is the first time we have been in this studio. you expect volatility to rise and the market to broaden out. how much of those two ideas compatible? tony: i think it is what we have seen happen since the beginning of july, a broadening of the market, s&p has outperformed, values have outperformed, etc., and that is the broadening, and we have had the resin volatility. that is something we have been calling for for a while. we see concentrated performance combined with very low volatility, which is absolutely abnormal. lisa: it is compelling because you wrote this, our approach more technical than fundamental. how much is what we are seeing purely technical overcrowded trades, unwinding, versus

fundamental weakness? tony: i think it is very much technical. june 30, if you looked at it measure of momentum, it was at the 56th percentile. that is extreme positioning. so we went into this with extreme positioning. a few thanks move the market dramatically. part of it was a lack of liquidity. you have the unwind of the carry trade. the market has moved from this is great, cpi is slowing, fed will cut, purchase small-cap value stocks, to no, the fed is behind the curve. when you look at the underlying fundamentals, yes, the economy is slowing in a good way, through labor participation growing as opposed to layoffs. the atlanta fed measure looks pretty healthy. early's desk earnings season is pretty good. i think the underlying fundamentals is still pretty strong. lisa: where does it leave us now if we had this technical froth come off the top?

japanese stocks slowing up the most since 1987. a rally in the back half of the week. where do we stand in terms of stretched and frothy technicals? tony: i would not be surprised volatility continues for a while. as we get into the october earnings season, you will see everything is still ok and that is when things will settle down. annmarie: i know you say don't time the market, but do i need to lick my lip and say time to buy up every time this happens? tony: it is not uncommon. once every other your you get that event. so i do get excited. lisa: you say you want a more discerning view of the market. this can be a stock pickers dream what we see right now. what industries are you looking at? tony: i think about skill and volatility.

the more volatility, the more you can apply your skill and make money. if you look historically a fed rate cuts, one think that has always worked has been quality and low beta. right now i see a lot of low beta stocks attractively priced, health care, staples, even utilities. lisa: we have the fed rate cut, then u.s. election. do you position differently for politics? tony: i do not think you can. yes, certain textures -- certain sectors may be at risk if one person wins over another one. but you want to avoid that risk and go straight up the middle. lisa: how concerned are you that we have overpriced some of the potential rate cuts, certainly this year and even next year? tony: one of the nice things the fed has set up is by raising rates to over 5%, you create a lot of room. the fed has a lot of cushion.

they could get a number of cuts over time, that is expected. lisa: how much does it hinge on cpi?? it is one of the most important moments going forward, you have growth concerns on one hand and on the other hand you have the inflation mandate. if inflation does not cooperate, it ties their hands with how much they can use that lever of cutting rates. if we have a hotter than expected inflation rate for the next couple of months, how much does that shift your view? tony: i think that would definitely give the fed pause. they will look at the economic data and inflation data. if we go back to 2007 and 2008, inflation was still really high. oil peaked at $140 in june of 2008 and the fed was cutting despite that because they were worried about the economy. so if they are worried about the economy, they would cut. i do not think we are there.

lisa: tony despirito, thank you so much for being with us. of blackrock, joining us here. an update on stories elsewhere. here is your bloomberg brief with yahaira jacquez yahaira: ceo's of britain's biggest companies had a slower pace of growth. medium pay for ftse 100 ceo's edged up, but well short of the 21% increases of the year earlier. medium pay for s&p 500 companies were up 12.5%. oil prices are extending their first weekly gain since july, climbing back above $80 a barrel. opec still remains above industry consensus, this is traders continue to monitor iran's expected response to last week's assassination to a hamas leader in tehran. opec is expected to raise crude

production in the fourth quarter by roughly 45,000 gallons a day. disney announcing a new villain 's theme land is coming to the magic kingdom park in orlando. the opening date and details remain in the disney fault with the company only releasing this concept art. this is part of the $60 billion investment into the parks. it was previously announced last week, the cfo said weaker demand for the parks is expected over the next few quarters due to economic restraints on the consumer. that is your bloomberg brief. lisa: have you read about people visiting the parks a little more frequently, partly because of consumers going overseas. > the disney cfo said they expect the parks to do better next year because the high end consumer is jetting off to europe and they want that to come back. lisa: come back to mickey mouse. next, politics facing the fed. that is coming up next.

this is "bloomberg surveillance." ♪

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lisa: into another week of likely volatility, that is what we're hearing from everybody who has come on the show. right now, mild gains on the s&p. but almost .20 5%. 10-year yields marginally higher. crude still with the lift on geopolitical concerns. politics facing the fed. vice presidential nominee j.d. vance backing donald trump's call to let presidents influence monetary policy. trump is pushing the idea after a news conference at mar-a-lago last week. vice president kamala harris has maintained that fed policy should be independent of politics. joining us as someone with inside knowledge and is a wonderful macro investor who has a ton of respect. key square group founder and ceo

scott bessent. i want to start with the idea of the federal reserve and its independence but do you make of this being such a hot topic on the presidential campaign trail? scott: the financial press has blown up. all presidents want a say, and i think they have a right. donald trump is going to make his opinions no. i think senator warren, before the fed decision, recently, the day before, said they should cut. the day after, she said they made a big mistake not cutting. i think that is within her right. i am not sure what all this is or what this allegedly means, the people are saying donald trump thinks he should be in the room. if he wins, he will get to choose a new fed chair. the treasury secretary meets on behalf of the administration with the fed chair every week,

so the administration's opinion is known. i have written and talk quite a lot about politics in the fed because i think janet yellen has taken over the fed. dani: when it comes to what trump is saying, and j.d. vance doubled down on this, he thinks it should be a fundamental political decision agree or disagree. haven't we seen that in the past under nixon, and it did not exactly work? scott: i think it is all up to the fed chair. again, the president, he or she always has input. we saw from joe biden, state of the union, i expect a fed cut. the inflation numbers got high, expecting a fed cut just a little later. presidents make their wishes known. i want to comment, i think this

wall street journal piece that reference the 10-page document, i would challenge them to produce that document. i do not believe it exists. lisa: you think janet yellen has already taken over the fed. i wonder how much this is in reference to the fact the treasury department has been selling at disproportionate amount of t-bills, some say it is offsetting tightening as well as with respect to rate hikes over the past few years. how much do you believe that the fed is way more political than people expect and that that is something that you can trade around? scott: we will go back -- your question on yellen treasury, highly political. unfortunately, secretary yellen has thrusters of into the middle of the campaign in a very an appropriate way. she gave a highly politicized speech in arizona couple months ago. she was standing on stage with the governor of pennsylvania

campaigning for kamala harris who is not even her president two weeks ago. so it is politicized. the quarterly refunding schedule was changed for the first time ever. they gave forward guidance. how do you know what the conditions are going to be? why do you have a borrowing committee if you are going to give forward guidance? back to the fed, i think they try to keep politics out of it. we all have biases. 83% of people at the federal registered democrats. but i think, in general, that they are doing what they can with what they have got. your question in terms of how do i trade around that, i have had very good luck this year trading against the fed.

that any time publish their so-called dot plot, the summary of economic projections, they have been wrong. all year, they had three rate cuts. i did not think there would be three rate cuts. at the june meeting, they published their would only be one rate cut. and we traded against that, and that is probably going to be wrong because now the market is pricing in three, maybe three rate cuts. annmarie: if we can look a policy that has to do with the fed and treasury, it is well-known that you are an individual the text to the former president, could potentially be part of his future team if there is trump 2.0. he talks about potentially the dollar. scott: i think it is a preference, not a go, that i think he believes.

i think about it in terms of, are other currencies undervalued? is there some kind of a manipulation, i.e. the bank of japan running ultra-loose monetary policy for 12 years and doing a gigantic appreciation of the yen were ghost with 50-your undervaluation? is there something that it chinese are doing with their trade policy that is causing an artificially weak rmb versus a strong dollar? i think remedying these undervaluation's as opposed to remedying a strong dollar is a better way to think about it. dani: probably no one would like that more than japan. they do not like the weakness in their currency. do you say something like a plaza cord? is that something we should be looking at should there be a

trump administration? scott: was your question, there should -- should there be a mar-a-lago accord? dani: certainly could be called that. scott: i think that is what it would be called. i could see something, or policy specifically targeted at the different countries that are in violation, maybe rather than a global plaza accord. i have studied this a lot, and what is different this time is if you go back and look at the history of the plaza cord and another one, soviet union was never mentioned because their economy was so small. so you had security threat and then an economic threat. now with china, i think we should view china's as both a security threat and an economic threat, and it is going to

require a lot more finesse with them just because they're such a big part of the global economy. so you do not want to upset the apple cart, but you want to be present in terms of supply chains and national security. dani: how do you then view a weak dollar if trump talks about the tariffs, 60% of imports coming from china, as well as what he says mass deportations? scott: think we discussed this before, president trump speaks in a different way than many politicians. he speaks like in or you're just like a new york city real estate developer -- he speaks like a new york city real estate developer. he is a maximalist in negotiating position. i think a lot of the analysis in terms of inflation has been sloppy. at our firm, we try to have better models.

our models show that, a, those are maximalist positions and, b, everything i have seen in sell side research and other firms assumes there is a jump on day one, which will not happen. i have spoken to the president and to his team, and i think everyone is on board with the kind of forward guidance or a phased-in tariff. here is president xi, here is 60%, might be 2.5% a month for 24 months, tell us when you have enough. end of the day, i think donald trump views tariffs as a way -- as an end to free-trade. if you bring down your tariffs, we will bring down hours. at the g7 meeting when he was president, he left ottawa to go

to north korea, and on the way out the door he said to the leaders, i will get rid of my tariffs if you get rid of yours. i think he views the tariffs as a negotiating tool, almost like a shane -- like a sanctions policy. lisa: scott bessent, will you be living in connecticut or in washington, d.c., next year? we will find out. next, eric resnick of ksl capital partners, talking all about what trends are existing in the consumer after years of record travel? this is "bloomberg surveillance." ♪

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lisa: welcome back to "bloomberg surveillance." after a week of tumult and unwind, we are seeing some stability. looking similar to where the markets were before i left for my week long vacation that i will never stop being teased about. we will be talking about vacation in where people are going and what it means for the consumer in a moment. under surveillance, republican vice presidential candidate j.d. vance floating a $5,000 tax credit -- child tax credit. vice president kamala harris

joining president trump's calls on ending texas on tipton come -- on ending taxes on tipped income. dani: terry haynes says none of this matters until we know the makeup of congress because we need congress to enact some of these policies we're talking about. i thought it was interesting that both trump in june and kamala harris over the weekend, they are in nevada talking to an industry where there are lots of workers that make money on tips, talking about this idea. we have some analysis on this that says tipped workers represents less than 4% of employment in the united states, and they already pay no income tax because they make less than federal minimums. but some lawyers, hedge fund managers, make fees taxes.

lisa: meanwhile, the bank of america ceo telling cbs at the bank no longer sees a recession on the horizon for the u.s. economy. brian moynihan saying consumer spending is slowing but it is heading to normal, adding that the team expects the fed to cut in september and december. to me, this is the divergence that we are hearing and seeing from every guest to his come on this show. they look at markets, they are freaked out, overleveraged, overconfident, and basically overleveraged this idea of a soft landing. in the real economy, slowing but not slow, everything is chugging along. that is what you are hearing from economists and investors. dani: it is the pendulum. jobless claims and they surprised by 7000 people, therefore we will not have recession.

moynahan says we have to be careful that we don't try to get is a perfect that actually put stuff in recession. the idea that the fed can be preemptive. they had the luxury of being predictive -- preemptive so they should cut. recessions are not an event, it is a process. he does not think we are in a recession but it does not mean we cannot get there. maybe the fed should be moving. lisa: i love that, embrace the mess. busy we give data, ppi and cpi on deck and results from home depot and walmart. also talking about some of the retailers catering to vacations. we saw that last week with earnings a bit softer. certain numbers coming down, discretionary spending coming off the boil. eric resnick, cofounder of ksl capital partners, is focusing on the consumer and alec for travel and joins us now -- on the outlook for travel and joins us now. thank you for being here.

your firm oversees tons of some of the most popular names that people go visit, whether it is the icon passes of ski or the marriotts and ritz-carltons. do you think there is too much pessimism right now about the pace of spending, particularly discretionary? erik: i think there is too much reaction, reactionary thoughts happening, based upon short-term data. when you look long-term -- and i really do thank you for being a customer of the icon pass. this is my morning to thank you. lisa: you can call him up if you have an icon pass. erik: the long-term transfer travel are positive. people do not realize how much resilient travel is even in the face of economic volatility.

we have to embrace the mess, as you were saying. what do you want to do? you want to escape. you want special memories and experiences with your friends and family. we see the long-term trends being favorable. we see the same type of softening of trance still good but not as robust growth. lisa: there is a bigger question that we were talking about with nila richardson of adp this morning, talking about how the pace of job creation. -- the pace of job creation being above 2019. is this the new normal and we can expect more spending at an accelerated pace or are we going back to the old normal people actually had to work? erik: well, they have to work, but it is interesting. i think the trend of people having leisure trips, combining

purposes of trips, it is all positive for travel. you want to combine something that is vacation or recreation oriented with what you are doing at work. skiiers are growing rapidly midweek more than weekends. that is better for everybody. we are pro-that. i think the new normal is we are all on all the time and want to combine purposes. in the end, that is probably good, creates more balance for people, perhaps more opportunity for them to read create an vacation -- two recreated vacation. dani: by envisioning someone with a laptop on the ski lift. you are talking about the trend and spend and how that is

normalizing. what about what people expect? when they go to a luxury hotel, has something fundamentally changed after the covid era of not being able to get out and now they want something different with their hotel experience? erik: i think that is fair. they want more of the basic hotel experience. during covid, we saw that it was ok to reduce services at hotels. we eliminated some things for less physical contact. it has come back, but the guest wants more than that. they want to be able to go on a trip and it have more meaning. some of that is wellness oriented, could be a spa treatment or something more holistic in terms of mental health or something physical. i think the consumer just wants more out of everything that they do. that is value. dani: what about the airbnb's of the world? they are not providing that kind

of service. erik: with airbnb and that experience, they are trying to wrap around experiences. experience is a watchword, whether you hear it on experience -- on consumer calls. airbnb has a challenge, which it is great if you are in the city and you do not need a restaurant necessarily if you're in a hotel. the city is my canvas. but in a resort destination -- airbnb offers wonderful value because you get your own space and couldn't cook your meals and congregate easily, but it does not have the amenities. i think they're trying to address that it will have some success doing that. dani: where are travelers going right now? erik: europe is hot, japan is hot. currency is part of that. part of that is you took the international away. what happens when you take something away, people want

more. covid took international travel especially way from us. u.s. dollar being strong and currencies being weaker internationally, you see a lot of the luxury consumer wanting to go to europe and japan. it is creating not yet a normalization of travel patterns, but the consumers, the more budget conscious consumer is coming back a bit more on that, luxury consumer is going more abroad. lisa last week. lisa: there is a real bifurcation. erik: select service spending for hotels, those trends are a bit softer than the higher end. in the last year, we saw luxury travel positive still, while

select service is down. it is not dramatic. these are evolutionary, not revolutionary, shifts. normal volatility, not abnormal. lisa: you have a good lens on the balance sheet equation right now. especially talking about increasing oil prices, increasing commodity prices, talking about workers in the consumer experience much more important. how much our margins getting squeezed? eric: over the last five years, since pre-covid, our margins are up. able to move price more than costs, even though costs are up a lot. up a lot, but prices are up. the equation still works. if you have less distinctive properties or less distinctive

experiences, you do not have the same pricing power and margins are being hit more. urban hotels, their margins are still under pressure. business travel has been coming back, but it is something to watch out for. lisa: are you seeing hotels are trying to spend to be able to deliver that? to get the larger margins, you need the all-around experience, but you have to build a lot of capabilities. eric: it is a paradox in life. you have to be able to do two things at once at hotels that can spend on the consumer experience and create more differentiation and justify a higher price, they are doing that. you see that. other hotels that do not have that ability, you see more challenges. we have some wonderful resorts in italy and saint barts that they put tremendous emphasis on the consumer and guest experience, investing in spa, programming, wellness, off-site

activities, picking up from the airport with a great car, those types of things, luxury, but they are seeing prices that are exceptionally higher. on the other end, if you are at a more nondescript hotel, the consumer is being more discerning how they are spending money. lisa: talking about leisure, which is a difficult word for me to get my head around. increasingly, businesses are mixing business with leisure. do you basically just go around and experience the different experiences at your properties? you go there for a spa treatment to understand the value? eric: that massage was not quite as good as it should have been, i need another one. it is a lot of that. it is not as interesting as you would like to believe. business trips are probably in some more leisure oriented destinations than most.

i spend a lot of time talking to the leaders of our businesses, about 25 business leaders across our portfolio. i spend a lot of time meeting with investors and other owners or constituents in the travel leisure business. it is a large and growing sector. 10% of global gdp, 10% of global employment. you have to stay connected to the ground on what is happening. not quite the massage and spa, but i try to get a sense of what the consumer is looking for. so i spent a lot of time on the road and trying to understand consumer trends and the mindset of our management teams and the challenges they deal with. laura: and on the ski slope on friday to see how many people are working from the slopes. eric resnick of ksl capital partners, a pleasure. let's get an update on stories elsewhere. here is yahaira jacquez. yahaira: investors with a record

amount of money pulled out of china the last court as they continue to sour on the world's second-largest economy. outflows reached $15 billion in the last quarter, the second time the country has reported negative numbers according to china state data. should the decline continue for the rest of the year, it would be the first annual net outflow since at least 1990 when comparable data began. a bank has agreed to purchase a minority stake of keycorp for about $2.8 billion as part of an effort by the bank to increase its footprint across north america. scotia bank will acquire under 15% of the bank with shares purchased at an 11% premium to the value weighted average price. keycorp has about 1000 u.s. branches and oversees about 100 $87 billion in assets and was among the hardest hit regional banks and last year's crisis after the fed hiked interest rates. a mix of economic uncertainty and a weak period for earnings

forecast is likely to cap stock market gains, according to morgan stanley's mike wilson. he expects the s&p 500 to rage 5000to 5400 as he sees no clear signals for the short term. wilson says we're likely to see analysts put downgrades that outnumber upgrades with seasonal weakness. counterparts at j.p. morgan also said they expect a mix outlook do this summer months. that is your bloomberg brief. lisa: we're going to take a poll about whether people should be leisure or leisness in terms of blending them. up next, testing the soft landing pieces. >> up to five cuts before the end of the year with only three meetings seems massively obsessive, completely priced the fed wrong. lisa: that is next. this is "bloomberg surveillance." ♪

where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management ♪♪ relax into a caribbean state of mind. visit sandals.com or call 1-800-sandals.

lisa: let's check in on the bond market. it was volatile last week. a bit of retracement back to lower levels this week. what will we call it? dani: vol-mageddon 2.0. lisa: if you have ideas, right in. 4.05%, people expecting a likelihood of 100 basis points a federal reserve rate cuts this year. up ahead, testing the soft landing business. >> up to five cuts by the end of the year with only three meetings to go seems massively excessive, acidly overreacting, pricing the fed wrong --

massively overreacting. we are looking for cpi data this week, jackson hole next week, and we may need to see more data , especially the next labor market. lisa: this week's major data points, ppi, cpi, and retail sales, said to test the idea of a soft landing for the u.s. economy. u.s. growth fears unwinding but traders still considering the potential for economic slowdown. expecting soft inflation prints, but for retail sales to show consumers pulling back. deborah cunningham of federated investment joins us now. i want to know how much of what we are seeing in the bond market is a reaction entry fundamental economic concerns versus a similar kind of overweighting of the soft landing thesis and sort of an unwind of credit positions. deborah: much more of the latter, definitely an overreaction. we saw something similar at the beginning of the year, 2024,

when we came into the year and for most of the fourth quarter we were pricing in almost seven cuts at one point. a similar reaction, i believe, has occurred over the last several weeks. thankfully, by the mid-part of last week, some sensibility was regained in some fed speak it come into the picture, sort of talking back the market from that overreaction. and we saw some retracement occur. not enough from my perspective, but better than it was at the beginning of the weekend the end of the week before that. lisa: what you are saying is really important, especially with michelle bowman pushing back against the market, saying inflation is still very much a concern and do not get ahead of yourselves. how much do you think the market is still, and it is what you are

implying, maybe sell on the margins some treasuries that have gotten bid up most because there is more to retrace in terms of yields going higher? deborah: absolutely, that is our mantra. if we can take some gains, if gains are available, which they should be, it is probably a good time to do that. although maintaining duration and weighted average maturities is also a goal. we have been looking at it in the context of a barbell some of the longer data paper provides more gains whereas some of the shorter data paper maintained some of the current fed stance, which we think is appropriate. so may be maintained somewhat shorter paper with this red-hot moment in time but with an overpriced market, we do not think it is the right strategy to buy longer. dani: you're getting big swings on pieces of data, like jobless

claims, things he would not associate such big swings with. what does that tell you about what this week is about to look like? tier one data in the form of ppi, cpi, and retail sales. deborah: we are very much ready for volatility. volatility seems to be the name of the game, seems to be what the market wants to do right now, wants to react every small piece of data, overreact on what i would call the upside from a standpoint of -- let's call it the downside, from a standpoint of potential growth slowed down, hard landing versus soft landing potential. less reaction on the normalcy that i think the fed is trying to gain. nonetheless, i think that means volatility. so there's opportunity in volatility, and that is essentially what we're looking

to find with every day's trade. dani: part of that normalcy is talking about concentration. if we do get a hotter cpi this week, does the market have an ability to concentrate on it again or care about it again or is it too far gone and we will try to bully the fed and trying to care about the labor markets? deborah: bullying the fed never works, so hopefully that is not the tactic of the market. i think it needs to be constant reinforcement with not just cpi that maybe some additional, less important but nonetheless additional data that is confirmation of what we are seeing from an inflationary perspective. i do believe the market is capable of it, but not in a single print of a single number. dani: where do you see yields? that could send yields much higher. if inflation still needs to be a worry.

deborah: that is where we need to see the market go. i think what has happened from a bond market perspective is overdone, and we saw some of that retracement last week, but i think there is more to come. lisa: we were talking about how a lot of people were relieved to see bonds acting as a haven once again during volatility. are you saying not so fast? deborah: we are saying not so fast. absolutely, the fed's next move will be to decrease rates. maybe instead of that being one or two and not starting until maybe november or december, maybe it is more like september. but it is not intermediate moves , certainly not 50 basis point moves. as such, i think that is why there is some retracement that continues to need to be done. nonetheless, i still think yields over 4%, a maintenance of those for a period of time is a

good value. lisa: how many rate cuts do you expect for the remainder of this year, given the fact that you think 100 basis points is probably overdone and sounds like you do not think it is likely that the federal go fees -- go 50 basis points in one meeting? deborah: i don't. we're looking at 50 basis points for the rest of the year, outside chance of 75 but unlikely that will occur. i think the fed does not want to signal that they were wrong and that there is a bit of a panic and that they need to move faster than anticipated, and less they truly believe inflation is slowly, the economy is slowing in a way that i think is not expected. lisa: deborah cunningham, thank you for being with us. interesting the idea that across the board, whether stocks or bonds, people say it is more technical than fundamental. dani: and what if you have a

long-term vision of where these markets should go? you have to put that to the side because you could be punished. she said yields could be higher, we could be over 4%. it is a bad time for that because the whole market just moved long treasuries. it is this pendulum swing that keeps going back and forth, and to the wilson analogy, feels like we are running on both sides of the boat and getting crashed every time we move. lisa: and trading volumes, there are incredible amounts, record paces for treasuries and for a host of other instruments. yet, the actual moves suggest a very different type of backdrop. coming up next hour, venu krishna of barclays, daniela bretthauer of hsbc, jane foley of rabobank, an interesting change regarding euro strength on the heels of some of the cuts. this is bloomberg. ♪

>> now that we have priced in the greater odds of recession, i would say the market will be

more sensitive to positive surprises. >> it might be a part of the problem in that we are being whipped around on every date of release. >> financial markets are not as they think they are. >> in my outlook for equities, it doesn't figure prominently. >> they ought to be and i think they will be on the side of caution if we get additional negative data. >> this is "bloomberg surveillance." lisa: good morning. welcome back. heading into a big week made bigger after last week's turmoil, this is going to be a fantastic week of cpi ppi data as well as earnings. we have dani burger, annmarie hordern, i'm playing vacation tag with jonathan ferro, i'm lisa abramowicz. he's off for the week but will be coming back after that and to me this is such an interesting moment where people are wondering how much of some of the turmoil of last week was driven by fundamental weakness.

dani: you get the feeling that this will be of micro-check on that. was the crisis justified? markets at the end of the week as we have been seeing are basically unchanged, but the volatility is important because it tends to cluster. are we at a moment when each piece of data that we get this week and there's a lot will swing up and down. dani: this -- lisa: this has been a massive week politically. 2.5 months, less, until the u.s. presidential election and some people say that is what was behind the turmoil. this idea that we had gone from trump as the given expected next president to a completely different race. annmarie: like michael set at the start of the show, it was something on the margin that he saw, the unwinding of the trump train. it was a perfect storm in terms of so many different issues hitting the market at once. the biggest for sure being the

growth scare and the data points. it's why this week is so interesting. the cpi report, everyone is waiting for the fed to weigh in on the deterioration in the labor market. and then over the weekend michelle bowman came out and said that inflation is still a top concern and we are not at the target. lisa: deborah cunningham saying that this is just about getting on top of the expectations that were ahead of their skis. walmart, thursday, a time when people are looking at the consumer and saying that people are still spending, they might be paring back but it is a normalization, not something fundamentally weak. why are people hooked into cpi as more important than some of the consumer data that we get? dani: it so interesting. if cpi is a tad hotter, expect more people to sound like michelle bowman.

she's the most hawkish fed member, so you can brush that off, but if it does, you get maybe the more dovish side talking about it. concentration swaying from the labor market and home depot, saying sorry, folks, we don't have the luxury of cutting with inflation being a problem. lisa: especially if they are trying to get ahead of the weakness that people are seeing more broadly and markets. we saw a wild roller coaster last week that seems to have right sided itself with mild gains this morning up .25% on the s&p. a lot of it driven by what we saw in the currency markets, given the unwind of the japanese carry trade. dollar weakness, widely expected we will be speaking about this with jane foley and why that's likely to continue. the 10-year yield, this is fascinating to me, how much is deborah cunningham sounding the alarm saying that people have not fully unwound some of their hope around the fed rate cuts

and the ability of the fed to keep cutting, continuing higher after last week's rally after a host of escalations in the middle east among others. coming up in this hour, a big week of u.s. data and why some are expecting slow down but not recession. jane foley of rabobank on her outlook for the dollar if the fed cuts next month. this is really what a lot of people are honing in on. we begin with the big issue, stocks looking for direction after a volatile week with traders pausing ahead of the data, the s&p 500 finishing the week flat, rallying back after the plunge, wall street betting that the wednesday cpi report will add fuel to the september rate cut fire if the fomc moves forward with a cut. they are seeing clear bias for defensive outperformance based on historical trends.

vino, thank you for being with us. before we get into how you expect the market to respond, how do you understand what we experienced in the market last week? >> a huge element of it has been technical and we feel that that has room to run. in general, the velocity of the moves that we are seeing, the magnitude of moves you are seeing, the underlying shock factor behind the moves suggests it was more technical in nature. that said, on the fundamental side, a few data points have changed. we had a week claims number recently. and then you had a week pmi number. i think there are some mixed signals coming out that have clearly brought to the center the fact that perhaps the downside to u.s. economic growth is higher than what we thought. in our own move we had assigned a risk for recession to 10% to

15% and now it's 25%. still, our view at the end of the day is that the odds of a soft landing are much higher and the chances are it will become more balanced. dani: a lot of people saying it's more technical than fundamental but we have seen how that can happen. i'm curious what the vulnerability is baked into the markets if a lot of the leveraged trades have not been fully unwound yet. venu: i think that risk stays in the market. depending on part of the unwind, where it left, looking at systematic strategies, our house view is that that is pretty much unwound, quite sharply, where there had been 110% allocation. but we are in an environment now

where seasonally it jumps and typically the second half crowds history and you were talking about cpi. one week ago if you have been looking at the importance of that feeling, there had been the market telling you that the fed was directing cpi and it was under control in the labor market, but come this week it has changed quite sharply and now the bond market is telling you that we care a lot about cpi. this back-and-forth is quite dramatic. looking forward by one month, for example, what did the market indicate? cpi, ism, and mfp. it's clearly more growth oriented in the market is on the edge about whether u.s. economic growth is sustainable and if we end up with a soft landing or not. dani: i'm very curious about this idea of a feedback loop.

like lisa asked about, does bad equity performance fee the economy? specifically, if you are cisco over the weekend, or intel laying off thousands, is the fact that investors are more willing to punish underperforming equities, does that directly feed into the economy with these companies looking for more leverage and potentially laying people off? we get a feedback of weak equity performance, does that mean weakness in the economy? venu: i partly agree but they have been going easier on hiring for a while no. it's very targeted. mainly on machine learning and ai areas. the question is, the equity market has been posting excellent returns, right? you are at the point where you need to take a breather. for example, looking at the angst in the market, big tech in

july and june was driven by evaluation of multiples, 29 times the 34 times. that was a red flag, right? it's not as if the earnings were acting up, if anything they are decelerating even though they are healthy. i think that this is a market where the balance of fundamentals is decent, including in big tech. but clearly you want to be careful about what you pay for big tech, which has been dragging the market up consistently. we would be comfortable in the the 25 to 28 range, anything more than that is risky and correlations increase. annmarie: but when you see a correction like we saw last monday, is that a time to get into big tech and a time to hold down, if you do think that these other growth prospects of the future? venu: our view is yes. it all depends on the entry.

34, uncomfortable. once it comes to the 20's, we are comfortable. big tech had been growing at 50%, 56%, now the expectation was 32% delivering close to 40%. the realized earnings are tremendous. at the same time, like i said, they are decelerating. the expectations have settled in the 70% to 20% range. that is deceleration but still extremely robust. the question is what happens in the future in terms of the tech area with a focus shifting towards monetizing ai and do these companies deliver? if they miss on those numbers, i think that they would part with the limit because the rest of the s&p was doing ok. the creep is marginal and the problem over there will spread. lisa: we were speaking with tony

at blackrock over the broadening out and equal weight s&p catch up to the market cap s&p 500 that has been dominated by the big tech names. sounds like you disagree? lisa: -- venu: no, we agree, but it will be incremental. the hope had been there for nine months. in the other camp we set learn to live with narrowness and that's what happened. now what has changed is the big tech outlook is moderating because of the monetization angle and rightfully so. with the huge amount of capex they are spending. some are waking up saying you are spending 200 billion dollars, what's to be done? what we see today is hardly anything. for the last two quarters we have seen positive upgrading levels in the s&p, meaning earnings growth is escalating faster than sales growth, partly aided by the marginal.

i think that incrementally if you look at what the numbers are telling you, big tech is decelerating, but the rest of the s&p is accelerating. market consensus tells you that this will be around 15% but it will probably be less than that because half of this is still an eastern facing pressure as they exercise the benefit over p profitability without rolling over as demand moderates. lisa: venu, thank you for being with us. i love this sanitized way of saying consumers won't take it anymore. absolutely not, hiking prices, we won't buy. that's what we've been saying, no? annmarie: bifurcation, it depends on who you are. lisa: leisure or, what was the other one? annmarie: lismus? [laughter] yeah ira: a heightened risk of attacks from iran towards israel

through proxies in the middle east as iran is looking to increase their pledge for the killing of a top hamas official in iran. leaders are looking for an implementation plan around cease fire based on earlier talks rather than beginning a new round of negotiations. the u.s., egypt, and qatar have scheduled new talks this week that israel said they would send a delegation to. the germany economic outlook is facing the brief -- bleak outlook of hardly any yield this year, down from a prior prediction according to the median forecast in a monthly bloomberg survey with data showing that the industrial woes of the country are holding back growth, causing the biggest economy in europe to unexpectedly shrink through june. former president donald trump plans to sit for an interview tonight on x with elon musk, promising an unscripted discussion on subject matter.

muska often butted heads with trump when he was in the white house, but endorsed the former president the attempt on his life last month. the interview with the former president is set for 8 p.m. tonight lisa: evidently, the house of lords messaged into weigh in on leisure? dani: correct, they've said it is leisure [british pronunciation] [laughter] lisa: coming up next, morning calls and hsbc coming up ahead of a big week of retail results. that's next, this is "bloomberg surveillance ♪ ♪." where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

lisa: is it over yet? the key question this week after last week's tumult. a roller coaster of volatility spikes in yields with respect to credit, a spikes down in yields with respect to treasuries, and today you are seeing the markets,. evidently for now it might be subsiding. s&p futures are up .2 5%. the euro really gaining pretty much over across the board last week. 100 923. a real question, how much currency volatility was underpinning the drama. dani: maybe that is why today is calm her. something interesting to contemplate, even if it's a position for big cap tech and japanese yen for the lift, a lot of people said they are funding the tech trade with currency. does it mean we will get into a position where volatile earnings

mean reaction in the yen? is there a link between them because of monday's event with a strained relationship between them? dani: there are also other trades getting a fundamental rethinking. we are not just seeing increased tensions in the middle east, which seems like an ever present drum beat in the background, but a lot of oil producers are cutting back production saying that they are worried about a glut of oil. how much are we seeing a changed landscape? annmarie: they tried to maintain that floor for opec-plus at $75. something that they would probably like to see higher but even that is hard to maintain. most notably, the u.s., even more of a record producer now. at the same time, what did we discuss this morning? a record amount of outflow from china with growth weakness that notably would be the place where

you would see a driver for more consumption. lisa: time for the morning calls, macro beyond micro, upgrading robin hood to overweight. analysts cited the recent pullback as an attractive entry point into a "innovative fast-growing brokerage platform." next up, qualcomm was downgraded with headwinds as apple swaps supply chains for the apple 15 processing modem for processing share to go up on all but u.s. phones with evercore initiating tactical outperform trading calls ahead of the thursday earnings report, praising the big-box retailer as a steady ship providing a port in the storm of consumer volatility. sticking with retail, daniela at hsbc maintain her home depot rating, lowering the price target, setting the pressure of higher interest rates and lingering pandemic affects with

do-it-yourself customers on the sidelines. daniela joins us, thank you for being with us. on an overview level, where are we post-pandemic, where did everyone go to shore up their homes where they would be stuck for the foreseeable future? good morning, thanks for having me on the show. let me begin by sharing with you our base case scenario for the u.s. economy, which stands that the fed should start easing in september with the u.s. economy avoiding recession. that's the hsbc best case and eric base case scenario. according to the regression models, currently the market is pricing out a 30% chance of recession, up from 10% of the risk of a recession last week. so, with this easing, the u.s. economy would avoid a recession.

we recently increased the number of rate cuts this year to 3, 20 five basis points, to a cumulative cut of 75. with regards to home depot, the current price is broadly in line with the stock valuing of the last six months. it has been a favorite name for income investors, investors that look for dividend yield of 2.5% for home depot. home depot has missed the wall street revenue estimates three times over the last two years. consumer spending and higher interest rates, the economic downturn recently, could all hinder that recovery for home improvement projects and negatively impacted growth. we have been talking -- dani: we

have been talking a lot about the bifurcated consumer with weakness on the low end. any sign that it's starting to migrate upwards? daniella: yeah, great question, over the past few months we saw more evidence of a tired consumer. large cap names like walmart that operate in a more defensive sector of consumer staples, outperforming risk off scenarios. walmart, which reports on thursday, it is usually perceived as a good prophecy to the state of the u.s. consumer. annmarie: it is not just a good proxy for the u.s. consumer on the low end, according to their last report they had wealthier consumers trading in and down. does this just say something about the consumer as a whole, or is it about walmart taking market share from other players?

daniella: the takeaways from the walmart quarterly results are one, consumer wallets remain stretched, but responded well to their strong value proposition. second, food inflation continues to moderate down from where it was at the end of last quarter. it should stay at low single-digit rates for the rest of 2024. third, the u.s. consumer, even the wealthiest ones, are now shopping at walmart. so, that do have market share gains among higher income consumers. lisa: is there anything in the earnings or the commentary that you have been focused on suggesting that we are heading into a bout of real consumer spending weakness beyond what is expected? daniella: no, i think that it has, as you put it, it has been bifurcated since the beginning

of this year. so, consumers are spending more on travel and other discretionary purchases rather than complex housing projects or remodeling of their homes. so, i think that this scenario, until we again get a clear picture from the fed, even if we do get the cuts this year, it is something that only 2020 five, given the new government results in the election, that is where we will get more defined scenarios for the u.s. consumer. lisa: daniella, thank you for being with us, appreciate your insights. really interesting to see the push pull and dichotomy around the home depot haas of the world struggling around those changes with walmart cashing in on every trend. annmarie: and with home depot it is those big ticket items where

the consumers don't come back like they did flush with cash drink pandemic and had nowhere to spend it. walmart, i still cannot get over what the ceo said, more wealthy consumers coming to walmart and trading in. looking for deals as well. this is interesting, the idea that you can have an investment play. is it walmart or a disney park? people going abroad and going to a park? depends -- lisa: depends on if they want food or mickey mouse. [laughter] coming up next, we parse through the debris of last week's volatility and look at whether it will continue. this is bloomberg. ♪

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lisa: things seem to be calmer for now, let's move through the markets and understand where they are after a week of up and down. basically, it had been ok to take a week off. the russell 2000 gaining, even after all of the hopes and gains broadening out, the russell 2000 not seeing those kinds of assets. dani: and from how many people

did we hear that it was finally time to purchase the russell 2000? sure, trump trade cannibalizing it, but if the fed cuts it means you can purchase the russell 2000? the fear is that the fed is cutting because the data is deteriorating and if that's the case, can you afford small caps? lisa: does widening out mean small caps are more susceptible to weakness or just the rest of the s&p 493 catching up? if you take a look at bonds, that's the underpinning of a lot of what we have seen. it's a huge expectation for fed rate cuts after the weaker than expected jobs report with traits being unwound and two-year yield's tracing down, 4.04%. down on a day after earlier having been up range bound. system, dramatic. 10-year yield, 30 year yield,

393 and 422. i her that last week auctions were interesting. dani, did this trigger that got check around how far the rally could go? dani: if yields are below 4%, are we really going to add duration and if they are, do we start caring about the deficit? this trajectory, where the market saw that you were off and said now is the time to freak out. [laughter] lisa: you know, i was looking at on my phone for leisure. in the currency markets you are experiencing dollar weakness broadly and that's a key question here, the euro, gaining. coming up we will speak with laura, who has changed her call on euro strength and dollar weakness, given the expected fed rate cuts and fed reaction function to a lot of the economic data that we have coming down the pike.

under surveillance, kamala harris reason to it -- raising $12 million settlement event attended by top donors and politicians in the latest siena college bowl, harris gaining 50% support compared to donald trump and his 46% in wisconsin, pennsylvania, and michigan. over the weekend, a lot of data on the funding point and on just voter appetites, giving them a real boost. annmarie: i would go back to what libby told us, don't look into the polls until labor day but if we are playing this game, i love what they put out at the financial times. on the top it looked like harris caught up to trump on the issue of the economy. more voters say that they trust her on the economy. trump has always been the standout. under the hood it's interesting numbers, 42% said they were for surface -- prefer someone like trump with another four years in the white house and most being

better under the harris presidency saying that she needs to distance herself from joe biden. i want to know if the connection to biden helps or hurts her. dani: this distinction, saying that trump will help personally, people vote in their own self-interest, so the idea that the harris campaign can take a victory lap isn't quite so. it goes back to what they said about the momentum now with stumbling blocks ahead where they need to position themselves for a coherent message around the economy in order to keep the momentum going. dani: next week at the dnc, you will be there, we'll be taking a look at how much the message has changed. we have elon musk interviewing donald trump on x, formerly known as twitter. we will get a better idea of how much the u.s. consumer is faring through home depot same-store

sales that are expected to slump again where the ability of walmart to appeal to all income levels to protect it from consumer weakness. this is the interesting out aspect of these companies. on the one hand home depot has struggled with secular and housing related issues. walmart is just basically cashing in on all sides. dani: every time that we look at earnings, we say -- is it idiosyncratic? is it a delta problem? a cvs problem? but maybe that is the point, when individual companies make missteps, the market is less willing to forgive, because without the economic growth you cannot paper over the issues. is walmart doing better because they positioned themselves well for the moment or should we have a bigger read where it suggests it's not just the lower end consumer and it is moving upwards. lisa: and is walmart a consumer staples company or an advertising company, a media

company, or what else is it doing given that it has cashed in on some of its platform and technological edge. traders bracing for a big week of data. ppi and cpi coming tuesday and wednesday followed by retail sales with another round of jobless claims. inflation data is the next crucial print ahead of a widely anticipated september rate cut and joining us ahead of that, laura, great to see you. thank you for being with us. i want to start with what you are expecting to see with respect to economic deterioration to confirm or question what we saw in the non-foreign payrolls report for july. >> the way that i am describing the evolution of the economy right now is incremental slowdown. it's hard to remember that the beginning of july feels like a lifetime ago, but everything was

maximum optimism, volume 11. no slowdown from a very strong pace of growth for as far as the eye can see. now we are facing deterioration to something worse -- more sustainable. i want to be clear i don't see this as actual weakness. but for markets who have only been given upside surprises for six quarters, it's an uncomfortable surprise and we are seeing the downside of the hyper concentration that you spoke of off the top. lisa: i liked your reference to "spinal tap," everything going to 11. there is what the fed has to respond to. do you believe they have the luxury of being able to cut rates because inflation has been coming down? you have been among the people of the past few months saying that the upside surprises to inflation might be more considerable than people expect. how do you pair those ideas?

daniella: -- >> this is a tough pedal to thread but the question is are they badly behind the curve and i would say no, for three reasons. one, the economy is less interest rate sensitive than it has been in the past. so we will get a fed rate cut, the question is how much juice is that going to give us in the near term? the second reason for me is that while clearly he are facing a nice soft patch of inflation today, i think that when you look a little further, several quarters ahead, some of the problems of rent, of services, are not going to go away. the fed doesn't have the latitude to just slash rates down 200 basis points like markets one, unless the economy really changes trajectory. the third thing is they know they have a little bit of time. we have seen real rates correct

down. if they feel that they are seriously behind the curve, they are going to take that chance to cut. one payroll report, that's too volatile and not enough to move the needle. dani: when they talk about having more time, they talk about it in the context of this labor market where hirings have slowed down but layoffs haven't started. to that, neil donna says they are plant -- playing with fire, that using layoffs as a crutch is not wise. what do you make of that? >> i think he's really -- this is important -- unemployment moves asymmetrically. it goes down slowly and it shoots up. we have a really scary history of this asymmetric response in the unemployment rate. but if we are going to be all in on a soft landing -- and we don't have to be, landings are bumpy.

but we need to watch the unemployment rate like a hawk and really need to -- you know, if it gets to 4.5 and starts to move in .25% increments every month, that's a situation where the fed cuts significantly. this is an important tipping point and looking back to the one case where we didn't have a recession where the fed cut rates, the mid-1990's, you saw the unemployment rate moving up a bit and then stopping. but it is a tricky time, i agree. annmarie: where we are right now is roughly where the fed wanted to see us at the end of the year . so, where do you think the unemployment rate will be at the end of 2024? >> i think we will be about here, 4.25. again, this is the dance of a lot of companies actually announcing capital expenditures in their earnings calls. we are going to need a lot of investment to put things like ai

into practice. this is i think where markets got ahead of themselves. it's not just a profit story, it's a spending story. that's great for the economy, it's great for growth, it's not so great for free cash flow yields. i think that is why we have gotten this real snapback. you had the problem of corporations -- when we talk about the need for investors to widen, i would agree that it's even beyond traditional markets. what we are seeing today is, i think, good for the economy and productivity growth, but for publicly traded markets it's a challenge. lisa: finishing up and looking ahead, what do you think will be the most compelling data point or earnings release that could shape your view going forward? >> cpi will be important, retail sales will be important. cpi markets are looking to checkbox on the fed, putting a

rate cut into place, i expected to be another friendly report. we are going to see a lot of volatility, brace for that in the next quarter. fed policy expectations will swing around. i'm still looking for a one quarter point cut. but in the elections we know that the volatility picks up. lisa: laura, thank you for being with us. joining us now, someone with a call on what's going to happen with the euro. jane foley. you recently changed your view on the euro, to actually increase it, seeing a likelihood of 110 rather than 110 rather than 105, previously, versus the dollar, not because of euro strength but because of dollar weakness. compared to what we heard, how much of this is hinging on u.s. weakness as opposed to simply rate cuts that might be beyond what people expected? >> well obviously there are a

lot of different stories inter-lapping, but going back to the start of the year there was always the view that the dollar would get weaker at the end of the year because that is when we anticipated they would start to cut interest rates. coming up on the end of the year right now, it is our view that we are likely to see a fed interest rate cut in september. i must really caveat that, because when you go back a week with the market anticipating really aggressive interest rate cuts, we were never of the view that that would happen. one week ago we saw the combination of a lot of different factors coming together on the part of that was positioning. you know, the market was -- you know, the market was too positioned in tech stocks and u.s. equities. i think that perhaps retracement happened all at once, creating the chaos that we saw. our view all along was yeah, we

have moderate fed interest rate cuts towards the end of the year and we are still of that view. dani: how much of those carry trade's have been unwound? how much are left? jane: that again needs to be put into perspective. if you were in the carry trade at the start of last year, you would probably still be in the money. if you look at currencies against the yen with trades like that, i think we have unwound, more or less, everything we will unwind right now and the reason for that, particularly talking about dollar-yen, i think the market has to still settle down in terms of their views on the fed. they were far too excited a week ago and priced into many interest rate cuts. this week the data around the u.s. economy will be imperative around giving the market a lot more balance and what's relisted for the fed and at the same time

yes, maybe that bank of japan can hike interest rates again but maybe that won't be until the start of next year. to that point of view the extreme positions of a lot of them have been washed out and i think that maybe dollar-yen can settle that. maybe relatively volatile but nothing like what we have seen. they will have a bed until we get more data to clarify what the fundamentals are suggesting. dani: is there a degree to which the carry trade isn't attractive now? it is linked to low volatility and if we have a summer that has already been volatile, as you mentioned, uncertainty around the fed, with trades unwinding won't be put back on? jane: yeah, you are right there, one of the reasons the carry trade has been so popular this year is because volatility has been very low. if you venture into an environment with high volatility , the fed, u.s. elections being

big events for the foreign exchange, there is the likelihood that those kinds of trades will become less fashionable and i would not, i expect, go back to the situation we were in a month ago, with everybody and their dog, short of the yen. i don't think anyone is anticipating that happening. at the same time, it is the nature of foreign-exchange that there will be some degree of carry trade in there, just not as popular as we were a few months ago. annmarie: last time you were on you talked about from policies meaning stronger dollars, but on the record talking about a weaker dollar. any idea how the dollar would trade with the harris administration? jane: we have seen some of this coming through. the trump trade, we all started talking about a hugely after the

break between biden and trump. now that harris is there in doing better in the polls and biden was doing, the market is scratching its head in thinking maybe we were too hasty in pricing in this trade. if we assume that trump would bring a more aggressive tariff, assumed there was more of a chance of tax cuts under trump, you know, those are inflationary and therefore suggest less fed cuts in it more dollar positive, we can perhaps assume that harris will be more friendly terms of her allies when it came to ask. the direction of protectionism will be there, but less so under harris then under trump. but if we assume that there is less reason to some the panic so much about tariffs, we've got to assume that maybe the fed is going to be able to cut interest rates a bit more and that is dollar negative. but putting a spanner in the

works is the fact that trump vance dialogue about with the president should be able to control, interest rate policy, i don't believe that would happen, but if it were we are looking at a completely different outlook. lisa: jane foley, not a boring august for you. thank you for your insights, will talk with you again soon. getting you an update on your other stories this morning, yahaira? yahaira: scotia bank has purchased a minority stake in key core as a part of a focus on increasing the footprint of the bank across north america, acquiring just under 15% of the england based bank with shares purchased at an 11% premium compared to that volume-weighted price with 1000 u.s. branches, overseeing 180 $7 billion in assets. they were one of the hardest hit regional banks last year after the fed hiked interest rates. opec meanwhile trimming their

forecast for global oil demand this year and next as the cartel decides on supply increases. in the monthly report they said that they could pause or increase depending on prevailing market conditions. oil prices have fluctuated as concerns over escalating tensions in the middle east were offset by signs of weakening economic growth in china and the u.s. here is handed over the olympic baton to los angeles in true hollywood style, having tom cruise repel from the roof into the closing ceremony. l.a. will have the next edition of the summer games and planning is already underway, the mayor addressing the big issue, saying they will encourage remote work and nonstandard working hours to prevent traffic chaos during what she is calling a no car olympics. lisa: thank you so much. that was really exciting to see

tom cruise go in and sweep down. annmarie: unbelievable. he is in his 60's. can you imagine? he so that this is own stunts. dani: it reminded me of the queen. i mean, it was fake, swooping down? annmarie: just playing into the royal lord? [laughter] lisa: the week ahead, you are watching come up next, "bloomberg surveillance."

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lisa: less than 40 minutes until the opening bell here in new york. here is your trading diary for the day in the week ahead. today at 8 p.m. eastern, donald sits down with elon musk for a live interview on x, formerly

twitter, and then tuesday we get uscp i with home depot earnings. wednesday, cpi, don't miss that. thursday, another round of jobless claims as they take on increasing importance with more fed speak from harper and giving us earnings from walmart. rounding out the week on friday with a sentiment survey and more fed speak. joining us now is michael mckee. mike, it seems like fed speak matters more this week than in previous months. mike: except -- [laughter] lisa: come on. mike: we heard a lot from rafael bostic so i don't think we will be getting a lot more. st. louis hasn't spoken much at all since he took office at the beginning of the summer, so it will be interesting to hear what he has to say about it. probably the most interesting aspect of fed speak recently was over the weekend with the fed governor, mickey bowman, saying that even if we get the numbers we are expecting, we might not

need to cut rates yet. as one analyst put it this morning. there are two things here. one, there is what the numbers say and two, with the fed reaction to the numbers are. we will get the market reaction to the numbers but we really need to hear from someone like jay powell or john williams for four people have a good idea of what we will see in september. dani: do we need to coalesce around cpi? given what bowman said? mike: unless there is a big surprise, i would point to retail sales. the reason being we all know that we are making progress on inflation that is incremental and slow and we are expecting ppi and cpi to show slight declines, but retail sales fate -- feeds into the narrative on real slowing following on the jobs report. we will want to see if there is an additional warning sign, a

flashing red light about the economy. for that reason, the university of michigan survey not directly related to spending will tell us about how people are feeling. annmarie: 85 days until the election, candidates are talking about the fed on an almost weekly basis, like it should fundamentally be a communal decision on interest rates. our fed members going to have to respond to this? mike: probably once someone is elected. for years fed officials have said they thought fed independence is important but they will not tie it to a campaign. now, if trump were elected, and especially of both houses went republican, the fed would have a problem and they would start marshaling lobbying efforts like they did when dodd-frank was written. but if just one part of the house goes democratic, it probably won't be enough for a

rewrite of the federal reserve act. lisa: michael mckee, don't be a stranger. you're not. not this week. [laughter] you will be joining us on a daily basis, a good and beautiful thing. coming up tomorrow, mark mccormick, matt brill, keith lerner, and matt was at eight. what do you think the conversations are like in the fed committee when they get some of that criticism from politicians? annmarie: austan goolsbee was asked about this and he said that before the politics, it makes him uncomfortable and they go out of their way to not look political, which in essence feels political. lisa: which is kind of the discussion some people are having. we will continue to have a conversation tonight with the fed over on the conversation on x formerly known as twitter. this is "bloomberg surveillance ." ♪

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>> futures higher after a commotion was weak. 30 minutes until the start of trading. i am matt miller. sonali: i am sonali basak. katie greifeld is off today as we start "bloomberg open interest." matt: looks like stocks kick off this week calmer as investors await key data which will shed light on the health of the u.s. economy and inflation and help us design and outlook. meanwhile, inflation still bases up