> we've got a good situation here. >> you are still seeing u.s. exceptionalism. >> earnings data looks to be positive. it is moving ahead in the second part of the year. we are not as optimistic. >> inflation has simmered down a little bit. >> you have disconnects markets have to reconcile themselves with. >> this is bloomberg surveillance. jonathan: let's get your week

started. this is bloomberg surveillance. i am jonathan ferro. coming off the biggest gain so far on the s&p 500, leaving behind the growth scare of two weeks ago. the week ahead, let's get to the week ahead in a moment. let's start with increased futures on the s&p 500 coming off the back of a seven day win streak. we are down a 10th of 1% and small caps going nowhere. the week ahead absolutely stacked, but the main event is friday. chairman powell addressing the nation and the world. lisa: can he be dovish enough given the market is set up for basically the soft landing we saw early this year? essentially, the economy is doing fine and the fed will cut rates by year end. can jay powell confirm that and

give justification without weakening the economy? jonathan: hard landing to soft landing. you wonder if we can slip back again. september 11 is cpi. lisa: it could change in the next two days. this is the story we have been living, narrative table tennis or ping-pong over the past couple weeks. anything could change. goldman sachs just a couple weeks ago said we are increasing our recession forecast to 25% because we are concerned about what we saw in the payrolls print. now they downgraded their recession forecast, basically saying, just kidding. jonathan: back and forth over the last 18 months or so. anne-marie is with us with a report on air traffic control in

the new york area. >> all flights are grounded until this morning and it is difficult to get on a flight that is going to leave the new york area today. jonathan: have we got the policy yet? do we know what the policy is? annmarie: there has been huge pushback from economists over the weekend, saying they were mixed ideas and they should abort this. we heard from kamala harris that she wants to basically encourage congress to expand the ftc ban on price gouging when it comes to grocers. they are talking about making this federal. this has tremendous pushback because many people said this sounds like price controls. the washington post says this sounds like a gimmick. you have heard people pushback and say the -- she is for free

markets. the issue is politics. lisa: i am going to be a broken record, but it is frustrating because you do not know what to take seriously and want to take as a bit to get voters. this is the same thing we see what donald trump and kamala harris. at what point do you take them seriously but not literally? is this a signal to certain groups rather than coming through with policy? we do not know. jonathan: you will love this headline from the atlantic, economically dumb, politically smart. if you look at grocery retail margins, they range from 1% to 3%. if you look at food inflation, what were pre-running at? 1% year-over-year? is this a problem that needs addressing?

is this the war of two years ago? lisa: especially when you have kroger's set to slash costs. this raises a question of whether this is economically sound or matters and whether it is all going to be messaging in a way that does not give people a sense of what the actual platform is. that is one of the questions for people who care about policy. >> a few months ago, this white house was welcoming those cuts we talked about, saying finally corporations are listening to us. this goes back to a report the ftc put out. they said some companies were using the pandemic era to inflate prices higher than they thought was acceptable, so they are leaning into that frustration because kamala harris is the incumbent on this ticket. if the number one issue is the economy and inflation, she needs

someone else to blame. jonathan: if we had a more focused trump campaign, what we would have repeatedly, if these are things you could have done, why did you not do them? on this program, we have described the democratic ticket over the last month or so. if it were a stock, it would be facing the relief rally. new ceo comes in. we have this honeymoon period. they come out and say, what is this about? they back away from it again and we do not have a policy platform. the beauty and the beast of the harris taken is it could be anything you want it to be. it is going to become more of a problem over the next couple months. lisa: when is it going to be a problem? is it going to be the debates with donald trump?

is it going to be pushback within the party when it comes to protests? is it going to be what people ask and have kamala harris sit down with a television newscaster? right now donald trump's camp is not doing it. he is facing pushback from the maca camp -- maga camp seeing you are not far enough to the right. jonathan: we will keep attempting to navigate the massive front of us. your scores look like this, equity futures on the s&p just about positive on the back of a seven day winning streak. your yield on the 10 year maturity, 38711. we got earnings wednesday as well. lisa: target earnings coming out

wednesday. we also have biden speaking at the dnc today, supposed to be the first of his goodbye speeches. kamala harris speak thursday and powell speaks friday. the theme is reassessing the effectiveness of monetary policy. i want to hear what they have to say about how effective it has been at bringing down inflation. one event seems like a side note but i think is important. that is one to be what we see with payrolls wednesday when they downgrade how many jobs were added to the economy. does this raise questions about resilience of the u.s. economy? jonathan: might look a little different. it is kind of odd. that is the lineup for the week ahead. we will catch up with stocks close to all-time highs and the

dollar on a four week losing streak. we begin with the s&p 500 coming off its best week of the year as we await jay powell's remarks this week. we are on guard for choppy conditions. if economic data releases continue to disappoint, our price target still stands. good morning. proceed cautiously is the advice you are giving people. >> i would say we put equal emphasis on the proceed and caution. we have had the worst behind us. we think we saw the lows on august 5. i was looking at retail sales data. we are coming off a good one. i am cognizant of someone who has been on the sell side for more than two decades.

we are going to come back after labor day and hear all kinds of stuff from companies. i think is going to give investors another chance to dig into what happened the summer. even if we put the consumer aside, one thing we keep reading from companies is all the uncertainty from whether it is interest rates, geopolitics has been weighing on decisions. we heard this from one of the industrial companies so i think we are going into this pretty fully valued. some models say we could go 5800. so we have pretty fair valuations and we could go into a period where we are hanging on to every economic data point. >> the difficulty we are having is contradictions between what we hear from companies and see in economic data. i am sure the team are talking

about this in regards to retail sales. you have to make a decision on how much weight you put on one versus the other. >> on data, i put more weight on hard data as opposed to survey data. some survey based data does a better job on the manufacturing side. i read through a lot of company transcripts and we pay attention to what they are saying about consumers and i think what we have seen this reporting season is there has been a step up in concern about the consumer. consumers are reacting in a more profound way to the impact of inflation. prices are still high and interest rate uncertainty. we saw one company last week say we are not seeing further fraying, so it is balance where

i think companies are saying we are seeing impact but we are not alarmed. lisa: that company was walmart and reported incredible earnings and talked about potential for margins to increase, which is something we have seen. margins are increasing. does that speak of layoffs in the future? lori: we have looked at what companies are saying. we are not finding much on the layoff conversation. it has been coming down markedly. we are seeing companies focused on things like automation, kind of this technological revolution , all these tools that have come out since 2016. they allow companies to attack things other than labor first and they seem to be hitting water out of this rock.

i have been thinking for three years we are suddenly going to have a reporting season where this does not work. smaller firms, not as much. that has been one of the problems with the russell 2000 because they do not have the same scale and tools. lisa: i love the idea of water from a rock and it indicates this biblical back people are talking about. how much does the rally hinge on what happens with jay powell friday? whether he gives a not expectations for rate cutting that can mark -- match with the market is expecting. lori: i cannot speak for the fixed hedge fund side of the world, but if i think back a couple months ago, some investors were saying we do not need cuts this year because the economy is strong and i have been hearing a lot about 50 basis points.

i think people want the fed to cut. i do not know that 50 is demanded. but there are some corners of the market that want that. could there be disappointment if you do not come away with messaging supporting that? of course. i would view that as short-term distilled -- dislocation. jonathan: do the financials demand a 50 basis point cut? lori: financials would like enough cuts to keep economic expansion going. financials would probably not handle it well if we have so many cuts we start to spook people. the financials trade closely with consumer confidence and have become kind of a boring sector, but it is the plumbing of the economy. so i think they will react to that as much as cuts. i think financials would do well with cuts before the end of the year.

i do not know that you need the panicked cuts. jonathan: i do not know if you saw the interview in the financial times. there was a key phrase, the economy is not in an urgent place, much calmer after the data of last week. lisa: she was arguing about gradualism being prudent when the economy is not falling off a cliff. as i was reading the interview, does this actually support what the market is hoping for? it seems like we are back to where we were in january where the economy is not falling off a cliff but because inflation is coming down and because of these other factors the fed can still cut aggressively. if they do not come through with this, is it failing on both sides?

how much are they going to affect anything other than a massive rally in risk assets as they decide to move policy? >> are these the right kind of rate cuts? >> inflation has come down, not to the 2% target. a lot people do not think that is realistic anymore, so i think you have seen the fed talk about both sides of the mandate. we know if we look back at history it is tough to get inflation back in the bottle and the fed pays heed so that, but we are hearing a lot about the employment side of things. i take them at their word when they say they are data-dependent. that may be something that is not realistic in this scenario. we may have to let them be data-dependent. jonathan: equities right now

just about unchanged. let's take an opportunity to get you updated on news elsewhere. >> the circle k operator is looking to take over 7-eleven holdings and would create the world's top operator of about 100,000 convenience stores. the bid is preliminary and terms have not been disclosed. donald trump is battling for momentum this week, planning an aggressive schedule as the dnc kicks off. he will hold rallies in for swing states -- four swing states ahead of harris's acceptance speech at the dnc. his aides say it is an effort to try to go to harris into an unscripted interview herself. trump lags harris by four points. israel and hamas leaders are blaming each other for a stalled cease-fire and hostage deal.

benjamin netanyahu accused hamas of completely obstinate welcome moss said netanyahu is responsible -- while hamas said netanyahu is responsible. that is your bloomberg brief. jonathan: the president's national security advisor coming up later on the program. do not miss that conversation. , the harris economic pitch. >> when i was attorney general, i went after price-fixing schemes. when i'm president i will continue that work to bring down prices. >> 80 days from now, we are going to defeat a communist known as kamala harris. jonathan: that conversation up next.

good morning. ♪

jonathan: your scores look like this on the s&p 500, just about positive this morning. under surveillance this morning, the harris economic pitch. >> when i was attorney general, i went after price-fixing schemes. when i am president, i will continue that work to bring down prices. i will take on big corporations that engage in illegal price gouging. >> 80 days from now, we are going to defeat a communist known as kamala harris. the most radical left person ever to run for office. this is not what this country needs. jonathan: kamala harris riding a

wave of momentum, holding an advantage over donald trump in the latest polling. annmarie: president biden is going to come in. there will be a lot of love for him in the room for the fact that he, as the democrats view it, stated country from donald trump and was able to pass the torch to the next generation. it was sunday four weeks ago when he dropped out. when you look at the polls, this is a change in the election. she is leading when you look at head-to-head matchups. jonathan: is there anything to analyze here? lori: we commented on there being headline risk for things like health care and consumer staples. there is not a lot i can analyze

at this point. we have at least something, and that is positive. i have spent the last year talking with non-us investors about the election and having nothing to analyze from the biden administration, so at least i have something to talk about at this point. so that is huge as a forecaster. i have something to look at, but it is not a lot. annmarie: what is your instinct on price gouging? ? pure rhetoric? lori: we have read a lot of consumer staples transcripts. i am thinking about the last reporting season. it did seem some consumer staple companies were tone deaf in terms of talking about passing price increases through at a time when they were acknowledging consumers pushing back. i understand it from the perspective of the messaging i have seen on earnings calls, but i do not think this is going to play well in economic circles. annmarie: you are one of the few

who said part of this is the trump trade unwinding. do you see the trump trade coming back in and what is the kamala harris trade? lori: i do not know if we know what the kamala harris trade is. people were talking about financials and energy and the 2016 playbook. if we look at how markets are trading, it was really just the s&p had a positive correlation. u.s. relative to europe was also correlated with trump. we have had the market rebound. you had the betting market starting to shift. we did notice you had seen an uptick in the market. but we looked at that and we were prepared to write maybe this is starting to break down. maybe this is sticking around.

jonathan: one campaign getting tough on the nation's debt. lori: i am in armchair political scientist mode. when i get asked about this and client meetings, i say if you look at both sides there does not seem to be appetite for fiscal restraint. i go back to my politics 101 class. all politics are local. when we talk about bringing home the bacon and that kind of thing , congress is trying to get money to their districts and we saw some news headlines about the ira money and tax credits and republican congressman say and do not take these away. i think that illustrates the point. what is the incentive of the individual lawmakers? i do not think you get there until there is some sort of crisis. lisa: there is an option coming

wednesday. i am thinking is it going to matter? i want to keep putting that out there because this is going to be the main question for people in terms of volatility. jonathan: is it fair to say both candidates are looking to make auctions great again? lisa: i have studies we can go through later. jonathan: thank you very much. coming up next, we will catch up with nela richardson. this is bloomberg. ♪

jonathan: seven-day winning streak on the s&p 500. equity futures totally unchanged. over the last seven days, rally of close to 7%, up 6.8% over that period, the best run back to 2022. quite a run in a very different story from how we started this month. lisa: when i went on vacation the market went to hell in a hand basket. when you went on vacation it rally the most of this year. there is no correlation necessarily. jonathan: should i go on

vacation more? lisa: i am pointing out this is what happens. people call me gloom and doom but last week i returned from vacation and it was the biggest rally of the year. jonathan: is that because you are happy when things are lower in the market? annmarie: she is upset she missed that rough bit. jonathan: you wanted to be here when markets are cratering. amh is nodding her head to that assessment. on the two year -- when i left the two year was just about 4.05% and that is exactly where it is right now. there is all this fear we were going to this hard landing ignited by what we saw in the labor data to start august. things have calmed down since then. jobless claims have pulled back.

i think that is restoring some confidence going into jackson hole. lisa: this is back to the beginning of the year. you could have a good economy and aggressive rate cuts because you could have the immaculate disinflation. we are bringing that back again in a massive form and we are expecting jay powell to lead into that on friday, saying to normalize policy you have to bring rates down consistently and we heard that from austan goolsbee and neel kashkari. to me that is what is interesting about the fact the bond market -- stocks have been whoop whoop because it is responding to the soft landing hard landing whipsaw. jonathan: what have stocks been doing? lisa: whoop whoop. jonathan: i missed you. i want to talk about dollar-yen. a lot of japanese yen strength.

if this was two weeks ago and we had a move like this on dollar-yen i think we would have a very different picture in the stock market. lisa: people are looking for some sort of explanation from japanese authorities on why they hiked and what you have going forward. much to the show how much we have unwound the carry trade? hedge funds are going long so this is not disruptive the way it was in the past. it raises the question of how much was last week the healthy washout that allows the market to rally further. are the excesses baked in? jonathan: breaking the connection between what is happening in the japanese yen and what is not happening in the equity market. under surveillance, the race for the white house hitting fever pitch. kamala harris said to speak at the dnc thursday. we will hear from president biden tonight in tim walz wednesday. donald trump countering the event with rallies and four swing states, trip to the u.s.

mexico border and a series of interviews. annmarie: he will try to paint the split screen as we see this momentum building around kamala harris. the issue trump is having, this was all across the sunday shows from a number of individuals, whether nikki haley last week for senator graham yesterday, governor sununu saying any other republican candidate would be winning the race by 10 points if you talk about these economic issues. what republicans are trying to do is get trump to stay on message. can he do that this week? lisa: you started talking about how kamala harris is rotting this incredible wave of goodwill and a feeling of at least you are not the other guy. is she going to be challenged is the bigger question. who is going to do it? is it going to be donald trump? is it going to be her own party? is that pressure on when we are not talking about real policies?

all of the policies are being taken as noise to cater to constituencies than actual policies. annmarie: the rhetoric of the policy is to create a picture of happy momentum. this will be a joyous convention. as the democrats try to paint this picture of unity there will be potentially mass protests at the dnc for the biden harris administration handling of the gaza war. the president wants to try to get a cease fire negotiation. antony blinken will be meeting today. they want to shore this up. jonathan: steve eisman kim of this program and said the former will win this election race and that is why -- when people start to see that, the images from the dnc, the tide would turn the other way. annmarie: they would be reminiscent of 1968 when you had protests at the dnc in chicago. that did not go well for that election.

potentially this could take some of the shine off that momentum they have. the momentum is clearly on their side which is why republicans want trump to remain on message. even the ft poll last week that said more individuals trust kamala harris on the economy. when u.s. people if they feel better, the trust remains with the trump administration when it comes to the economy and immigration. jonathan: he is struggling to remain disciplined, let's put it that way. this week is stacked. we also get earnings from consumer facing companies. macy's, target, t.j. maxx. those names report -- we talk about some of the contradictions between what we're hearing from companies on the consumer in america and what we are seeing in the hard data. lisa: the hard data also being walmart which does not see any fraying of the consumer. a key question is how much is

this the big getting bigger and walmart gaining share at the expense of target versus -- this is not the same kind of strong consumer that can lift everybody. that is what we will see in some of the earnings. jonathan: look up for those numbers on wednesday. the main event friday when fed chair jay powell delivers remarks at jackson hole. the rate cut debates shift from how soon to how much. joining us is nila richardson of adp. i want to go back to something we were talking about a few weeks ago. you said it is too early to talk about hard landing. you said the middle part is difficult to read. can you walk us through that again. the data over the last week or so validates your approach. nela: this would be a very different jackson hole conversation if the data did not break out the way you did last week. what we saw's they're still strengthen this economy.

you sought with the consumer and the job market and you saw inflation was going down. it was way too soon to talk about recession or hard landing and i think the ball to me for this conversation -- the goal to me is to put the brakes on the fear mongering about the recession and tell us what normal looks like. we as an economy do not have a good view of what a normal economy looks like. not in the unemployment rate and not in the inflation rate. we are coming from a period where inflation was too low before the pandemic, not too high, and where unemployment was below 4% comfortably. we are not in that regime so what does normal look like? what do you -- jonathan: what do you think normal looks like and what would you are chairman powell? nela: i would make it clear we are not going to do an emergency rate cut for something under 5% unemployment rate. that was ridiculous.

i would shape that narrative of what is the natural rate of unemployment for the economy. the second thing i would do is talk about this framework. i know this is a conversation the fed will have next year but we left the pre-pandemic period with the fed who said they were comfortable with inflation peeking above 2% to 2.5%. we would average the 2% target. we are not in that regime anymore. what is the comfort zone around the target the fed is willing to promote. it may not, in the conversation this week but it will certainly, at the end of this year and into 2025. lisa: you said the idea of emergency rate cut is ridiculous for under 5%. that was where you thought he should start. that is why i think it is so fascinating that the theme of

this jackson hole is reassessing the effectiveness and transmission of monetary policy because it comes through them flapping their gums. this is the main aspect of monetary policy we hear. forward guidance. at what point does forward guidance have to dampen the building blocks immaculate disinflation being celebrated in markets? nela: what you hear in the jackson hole arena is a more contemplative fit. -- a more contemplative fed. and the limits of monetary policy. you see this peak in the housing market. there's is only so much of the fed can do. you will still have this ice land in the housing market because there is not enough inventory. there are other places where the fed's reach is not as effective as it was 20 or 30 years ago. there is a humility about the transmission mechanism you will see this week that is not part of everyday conversation. lisa: if that is the case, what

difference will it make if they drop rates or borrowing costs significantly or not in the near future, especially if that is already being priced into financial markets? nela: you're already contemplating my answer. those who are thinking this rate cut will change main street are overestimating the power of 50 basis points on the street. not the wall street, the main street. it will not make that small business higher five more people. it will not change the calculus of someone living paycheck-to-paycheck. it will matter for people about to buy big purchases like housing, leasing their car payment. will it matter for the rank and file of main street? not as much as it will matter on wall street. lisa: this is the key question. will rate cuts bolster asset prices with little other effect in the broader economy? nela: in the short term.

in the long-term it leads to a normalization of the u.s. economy where we started the first question of the conversation. what is the natural rate of unemployment? is inflation going to go back to sleep like it did the 20 years preceding the pandemic? i think not. i do not think the disinflationary forces are the same or as effective as they were before the pandemic. if the fed is confronted, if central banks around the world are confronted with periodic bouts of inflation that they did not have to confront before the pandemic, that changes their game. it changes how they view inflation and changes the actions they take now because they set a precedent with the future. annmarie: i want to talk about the housing market. last week the data was soft when you look at new housing starts and the confidence with builders. even home depot was saying they are seeing it with consumers. kamala harris has this proposal

for $25,000 for new homeowners. doesn't that increase demand and then when it raise prices? how do you view that? nela: it is interesting to me housing is not more of a voting issue. many americans pay more than 30% to 40% of their budget on housing. prior to the financial crisis every administration, republican or democrat had a national housing plan. that evaporated after the housing crisis. stiffing your towing these waters that affect so money americans, either candidate may get breathing room. in terms of that consumer, that worker, warehousing does make a difference. does the plan go far enough? i don't know. the conversation on housing is important. jonathan: appreciate your input as always. you're going to jackson hole,

right? you can catch up to the team there. there are some banks looking for a 50 basis point cut. one of those is andrew hollenhorst at citigroup. he said "the continued contraction of manufacturing, falling housing starts, the rise in unemployment rates are telltale signs the economy is poised to tip into recession." that is the latest from citi, still looking for 50. lisa: this goes back to the theme of jackson hole. how much can a 50 basis point cut ameliorate the situation in housing and how much is housing divorced from the other fundamentals of the u.s. economy? deep questions and i'm excited for the philosophical debates on friday. jonathan: i'm keenan lisa abramowicz talking housing on friday -- tom keene and lisa abramowicz talking housing on friday. here is dani burger. dani: hurricane ernesto has

strengthened into a category one impacting the u.s. east coast in the canadian atlantic coast. life-threatening surf and rip current conditions are likely. it is expected to weaken tomorrow. mary daly told ft she has more confidence inflation is under control. even so she our greed for a patient approach to policy saying gradualism is not week, it is not slow, it is just prudent. she added the economy is not in an urgent place and while slowing the labor market is not weak. amd has agreed to buy zt systems from his $5 billion. it gives -- four almost $5 billion. zt is the kind of customer that has been pouring billions into new ai capabilities. the video is the chip leader in the ai boom but amd is its

closest rival. that is your brief. jonathan: thank you. up next, rate cut bets weighing on the u.s. dollar. >> we have seen this movie before. we did not believe it on the six interest rate cuts. we do not believe it at the beginning of 2023. third time's a charm. jonathan: we have seen this movie a few times. live from new york, you are watching bloomberg tv. ♪

jonathan: live from new york, welcome. on the s&p totally unchanged. in the bond market totally unchanged. i imagine after last few weeks a welcome thing for you all. rate cut bets on the u.s. dollar. >> we have seen this movie before. we did not believe it at the beginning of this year on the

six interest rate cuts. we do not believe it at the beginning of 2023 when fed fund futures priced in three interest rate cuts. third time is a charm. there is no doubt the fed will go in september. i do not believe the seven to nine. jonathan: u.s. dollar extending losses as investors await comments from jay powell friday. expectations for a september rate cut pushes the bloomberg dollar index to its lowest level since march. steven englander writing "we expect 325 basis point cuts for the rest of 2024. we also expect a steeper rate cuts in 2025 totaling 75 basis points in q1 and 50 basis points in q2." steve joins us for more. let's start with your calls for three cuts. can you help us or our audience understand whether that is an adjustment based on following inflation or whether that is a

shift to accommodation. steve: more the first. if we think week growth, which is not our baseline, but 50's are in the picture. the 50 story is a typical rich chest and fall off a cliff stork -- is a typical recession fall off a cliff story. as we get into 2025 with the on employment rate drifting up and inflation getting closer to target, all of the considerations of how tight should real interest rates be matters. that is why we think they will be able to cut more aggressively and bring the fed funds closer to mutual in the first half. i think the fed would prefer not to do it in 2024 because they want to be sure we are still on track for getting target inflation that they want to be sure if they do a 50 the economy is in dire straits, but by 2025 they will be more confident they

can do an isolated 50. jonathan: there are two different conversations. there is a key distinction. the conversation about removing restrictiveness and shifting towards accommodation. how does the dollar trade in one backdrop versus the other? steve: the dollar is interesting. we thought the dollar -- we are saying 25 basis points. the market was between 25 and 50 in q4. as the market pullback we thought the dollar would strengthen. what we have seen so far is the asset markets and the currency markets are paying attention to the a bully and's you are seeing -- to the ebulliance you are seeing in equities and that has been driving the dollar weaker even though the interest rates moves have been more in favor of the dollar than against it. we have to see if that persists.

there is a long way to go before we get rid of the 100 basis points and get back to 75. we still think the dollar could not stronger. 2025 will be a weak dollar year because that will be all systems go to get back to neutral. the fed will converge with everybody else. lisa: does it bother you that the bond market disagrees with itself? you have fed fund futures talking about your view of things, but then you have a two year trading at 4%. you start talking about the dollar. before you get there the market cannot agree with itself. steve: i never asked the market to be consistent because there are different segments in the market. the two year is pricing in the fed funds by the end of 2025 in the beginning of 2026 we will be around 3%. we are now 5% so the two year

averaging where we are going to be versus where we are now. i would say this and i think this is important. if it does turn out we are in a typical recession, all of the charts of unemployment everyone was pulling out -- that this economy follows the contours of a typical recession -- the margin is way off base. the fed will take real rates to zero, maybe negative. that would mean a 2% fed funds rate or even below. right now the market is pricing in a very comfortable sluggishness in the u.s. economy that most 25 basis point cuts can deal with. if it turns out that is not the case, we could go back to the early august world where equities are mispriced because the economy is weaker and fixed income is mispriced because the

cuts will have to be a lot deeper than what is priced in now. lisa: this raises a question going forward. dollar weakness or dollar strength depending on rate cuts. i am wondering how much some of the dislocation or some of the overweight on the dollar versus the yen or things like that, how much those carry trade's are flushed out of the system last week, giving more of a clean slate that will lead to more controlled -- not the violence we saw. steve: from the indication we had, what you would call fast money, hedge funds, high-frequency traders, they got out of the long dollar positions quickly. the market is pretty queen -- the market is pretty clean. there could be segments of the market where there catching up. positioning is much lower than it was two weeks ago were a week ago.

certainly not in terms of dollar yacht -- dollar long. jonathan: are you satisfied we have broken the correlation between the japanese yen and what happens with risk given equities are holding up ok even with a much stronger japanese yen? steve: i never thought the yen trade was what was driving global risk. it did drive asian fx. that is why all asian currencies are strong. it did drive the unwind. i think the big equity market moves we saw and the big fixed income moves we saw were driven by recession fears. those could come back if it turns out the unemployment rate keeps going up .2% a month. we are not out of the woods yet. jonathan: will be playing this game again september 6. looking forward to it. if you are just joining us, a flavor of what is happening in foreign-exchange.

against a g10 the dollar is weaker against all of it with the exception of the canadian dollar. dollar-yen with quite a move. real japanese yen strength. dollar-yen down .9%. equity markets unchanged on the s&p. it welcomed moment for a lot of people who have been whipsawed. lisa: it goes to what steve said , which is a lot of the carry trade's have been unwound. a lot of the leverage that would lead to the correlation where people would have to sell u.s. risk assets to bail themselves out of the carry trade's getting blown up on the yen trade is not as much of a pleasant factor. jonathan: i get the feeling we are only one jobs data point away from playing this game all over again. lisa: is that that fund? jonathan: september 6 circled on the calendar. coming up, met gordon will be joining us alongside kelsey barrow of jp morgan. this is bloomberg.

jonathan: ♪

>> the labor market is still tight. u.s. economy is still relatively strong. >> perhaps the fed chairs talking the talk and walking the walk. >> the federal reserve has a decision on timing and the extent of the cuts. >> may be fade the idea they will be over tracked aggressively everybody else does. >> -- >> this is "bloomberg surveillance" with jonathan

ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of bloomberg surveillance starts now. it is a much calm her morning following the better expected data we saw. nothing scary in inflation for cpi and ppi. that means your equity market is on a seven-day winning streak. into this morning your scores look like this. s&p 500 unchanged. the russell pulling back a touch. the week ahead is stacked. it starts on friday with chairman powell. that is the top of the bill this week. then we work backwards towards the d&c. let's start with chairman powell on friday. if this speech was conducted two weeks ago the tone would've been so different than the tone right now. lisa: the emergency rate cut that was suddenly necessary, how much does it differ from that type of tone at a time where there is going to be a fed chair

talking about rate cuts to respond to inflation, but nothing alarming that might seem like it indicates weakness in the economy. there is a real question about how effective the monetary policy is in if they discuss that as their theme would suggest, i think a lot of people would be interested to understand how they understand their ability to influence an economy very much hinging on other factors. jonathan: the backdrop matters. can you imagine what this would look like in q1? if we had done in a few one a jackson hole get together and the title was the efficacy of monetary policy we would be asking questions about whether we could go further. the conversation q1 was not about rate cuts. we were talking about the possibility of another rate hike. the very different story in q1 than where we are the second half. lisa: which raises the issue of

how much disinflation is due to fed policy and how much is due to other factors? would they be able to measure that in any way? with they present papers on that. then you end up with what nila richardson was describing. any rate cuts will not affect main street unless they become extreme but they will affect wall street, widening the gap between asset prices and the main economy. jonathan: the timing is fortunate. the evolution of the data has been favorable. the fact that inflation as continue to show progress, disinflationary trends. unemployment starts to climb but not too much. you can make the case at jackson hole this week it is time to think about risk mitigation, risk management, the evolving balance of risk coming for that you need to take away restrictiveness. it is an obvious message they need to send. lisa: it is a message that has been telegraphed by host of fed officials over the past couple of weeks. the question is will that be

enough given the fact markets take an idea and run away with it and they've run away with the idea of a 50 basis point cut next week. what is the threshold? i do not think jay powell say this is the balance of risks. in terms of how steep they can go in terms of the neutral rate is also an interesting idea with steven englander talking about dropping the real interest rate to negative in the face of some sort of economic stress. jonathan: projecting confidence will be objective of the fed and that will be an objective of the d&c. over the last week they've struggled to project confidence about what they want to do with the u.s. economy. annmarie: they're coming out with his economic plan when everyone is focused on this idea of price gouging which kamala harris tried to clear up on friday saying all she wants to do is to encourage congress to say to the ftc there is a federal ban on price counters when it comes to brochures. this is had serious pushback

from economists close to the democratic party. jason furman hoping this is not a really -- really idea. in a good case price gouging is a message, not a reality. they need to say we heard what you had to say and this is what we are trying to do. a lot of this is then on details. governor gretchen whitmer says do not read too much into the price gouging. the issue is then why put it out there if you're already being attacked that your policies are communist in nature -- from the republicans -- then why talk about things like price controls? lisa: this raises the issue of what we actually know about what the policies are? jonathan: not much. lisa: we are talking about the fact that no one is taking it seriously? what are people taken seriously? the deficit. that is what will see in volatility. jonathan: there is a pivot.

i think implementation is important. we have to acknowledge that to some extent this legislation exists at the state level and it can be effective. the big shortage in this country. in new york we saw some retailers increase prices, and there is space for the state to step in and say you should not be doing that. design and implementation will be so important. without any real detail on what the design will be in the of limitation will look like you have no idea what the outcomes will be. the outcomes will go from nothing to soviet style shortages and people lining up in food lines. this is the problem of when you come out with a poorly informed decision to throw out a line without any detail on design and of limitation and that is exactly what has happened with the harris campaign over the last week. lisa: there is a real question about how you become the party that allows business to thrive and the concept of being

competitive in the united states. how you give that image if you're also talking about attacking profit margins? is that what you're going after? what is the difference between profit margins and price gouging? these are some of the things that would be important to define whether this is antibusiness or whether looking for specific policy prescriptions in cases that fall outside of the laws that already exist. lisa: i spent a lot of -- annmarie: i spent a lot of time on the phone talking about individuals close to kamala harris and -- they said what companies are calling you saying are so worried about this. i said what companies do you think are price gouging? it was only a few months ago when this white house was touting that all of these companies, walmart, target, were cutting prices and listening to them in inflation and their policies were working. inflation was going down, prices

were working. they cannot answer. this comes down to this polls well and kamala harris is incumbent. instead of placing the blame on themselves, which the voters do, she is trying to put it on corporate america. jonathan: don't you think it reveals something about instinct? stay just interventionist -- state intervention is the instinct of this ticket? it is hard to distance yourself from that when that is something you have thrown out. there is nothing on policy. a campaign website does not even have a tap to click on policy. then you throughout something like this. that tells you a lot about where in-state is? lisa: will they walk it back at all at the d&c? it is a good question and were putting out and talking about because there is absence of much else. jonathan: equities on the s&p 500 totally unchanged. going nowhere in stocks and bonds.

the two you're still ended around 4.05%. the 10 year at 3.8730. equities looked calm. dollar-yen delivering quite a move. 146.28 on dollar-yen. lisa: people wait for explanation on how much further japanese officials can go. how much is this an acknowledgment of the yen can strengthen without the world falling apart. you have hedge funds going long yen for the first time in a long time after chronically shorting it and building up leveraged positions. that is what this indicates because the world is not falling apart. jonathan: this is not with the story was a couple weeks ago in foreign-exchange. the line up next hour looks like this. we'll catch up with matt orten of raymond james with the s&p on a seven-day winning streak. bloomberg's bobby ghosh and

kelsey barrow of jp morgan. traders await jay powell's remarks on friday. matt orten writing "i expect jay powell to more explicitly set the table for the start of the cutting cycle in september. this is consensus down the key question is by how much will they cut? my base case is 25 basis points." let's talk about where we are at the moment. slowing for not breaking. is that sufficient for markets to continue grinding higher? matt: i think it is. the fact that we are starting get normalization, the fact that growth will come down to what we expected it to be but still be positive, that is very positive for the equity markets because you can start to expect a rate cut, you can start to reaffirm how gradual this might be and most importantly it gives you more visibility with respect to corporate earnings. we have not been talking enough about how resilient corporate

earnings have been through all of the volatility with different narratives, what is happening to the consumer. corporate america has done very well. what is most encouraging to me is i'm seeing the broadening of earnings growth playing out over the past two scope orders continue in the second quarter and we are finally starting to see the trend into price brats as well. you are seeing more sector start to work despite the big events of the last weeks and that gives me encouragement when i talk to clients who say when you have downside volatility, that is a great opportunity to use that volatility to better position your portfolio for a more normalized growth environment. that means you own a number of different sectors, not just information technology. jonathan: when it comes to breath, what is most encouraging for you? matt: has been most encouraging

to me is you have seen resilience in earnings for financials and that is finally starting to translate to price, not just insurance companies but you are seeing a lot of the central bank starting to do well , you are seeing regionals reflect optimism with respect to a rate normalization environment, and you are starting to see deal flow back to the market. m&a is picking up. that is an area of encouragement to me. you've also seen positive surprises in sectors like health care, utilities, real estate. those are parts of the market that have not performed for a long time. you're finally starting to see things work -- hmos are starting to work. that resiliency is translating into price breadth. when i talk to clients those are parts of the market i am encouraging them to lean into because valuations are still attractive. lisa: you point out we have seen

expansion in profit margins and you say that gives you confidence we will not see mass layoffs in the near future. how do you distinguish between the idea of healthy profit expansions versus squeezing blood from a stone or price gouging or other political hot potatoes? matt: price gouging is the word to shore after the economic -- is the word de jure after economic policies were announced. if i look at the statements across our company, what you're seeing with respect to profit margins is companies are being more innovative. we complain about not seeing enough ai monetization, but when you look beneath the surface you're starting to see more efficiencies come from companies that are dabbing their toes with respect artificial intelligence to drive productivity. on top of that you are seeing wage gains start to normalize as disinflationary environment

continues. that is also giving the companies the ability to make profits while keeping prices consistent. on the services side you are seeing prices increase. you are not seeing the dislocations that cause the issues that have led to inflation over the past few years. disinflation has not decimated our ability to generate profit margins and that is a very important message for customers going forward. you can have confidence there is resiliency there. we are not seeing that story fall apart. jonathan: does this picture -- lisa: does this picture of resilience chive with the idea of 200 basis points of cuts next year? matt: not for me. i do not perceive these mass rate cuts a lot of the market started to price and aggressively with the volatility of the past few weeks. given the fact the economy is slowing we are not heading off a cliff.

the totality of the data does not support that, especially what we heard last week. i would be surprised if there was a 50 basis point cut in september because it is not justified based on where we are. the market needs to rethink the depth of rate cuts that need to happen or the pace we get there because it might not be justified with where we are in the fact there are still sticky components to inflation. housing has been a problem area. you are seeing issues with respect to insurance prices. you see some wage gains. there are issues to deal with but they can start to cut in september. annmarie: lisa mentioned price gouging. can you give us a sense of how politics or playing into your investment playbook? matt: i get this question a lot from clients, especially with election season coming. what can i do to position my portfolio for whoever will win the election? my answer is the same to every

client. don't. don't try to do it. what i encouraged our investors to look for our secular growth themes that will be durable throughout whoever ends up winning the election and there are a lot of those themes. i point artificial intelligence to point out, which is who are the beneficiaries of the hyper scaling spent. we have seen $200 billion of capex committed. that is a lot of money to go around and a lot of visibility with respect to turning streams for companies. electrical equipment maker's look attractive. defense tends to do well heading into an election season. there are a lot of pockets to try to avoid the noise of politics and then sift through the dust once we have a tangible outcome. annmarie: both of these candidates want to spend next year and there will be tariffs in some form, either a

continuation or the walls will come up much higher. are you worried at all about the deficit? matt: i think the deficit is one of those issues where you will know it when it actually matters. i do not mean to downplay the severity of the challenges but where we are right now it will not impede some of the themes driving this economic cycle at least into the medium-term. that said, what we do today will set the stage of how severe some of those issues will be in three or five years. i encourage investors to think very carefully about what those policies are going to do. on the issue of tariffs is another reason i do not like china as an investment theme. there are so many other opportunities across emerging markets international to develop markets -- you don't need to play the china game. as you pointed out, tariffs are

universal issue at this point. jonathan: matt orten there of raymond james. on the global outlook, the deficit, 20-year bonds, $16 billion worth. lisa: when will we find out when people care about the deficit? i think about the -- all of the long-standing fears about the deficit. at some point it will matter. this is the key question for me. not shifting the borrowing costs but causing ongoing volatility we were talking about last week is kind of the new normal. we were sitting such volatility in 10, 2 year treasury yields. is that what we can expect with inflation but also the physical patch up. jonathan: making auctions great again by lisa abramowicz. here's your bloomberg brief with dani burger. dani: israel and hamas leaders are blaming each other for a

stalled cease-fire and hostage deal. benjamin netanyahu accused thomas of being obstinate while hamas said benjamin netanyahu is fully responsible. antony blinken is in israel now meeting with top leaders and said this is a decisive moment and may be the last opportunity. the u.s. talks on a gaza cease-fire are in the final stages. european airlines are outpacing the u.s. unclear jet fuel. the eu will require airlines to use 2% sustainable aviation fuel starting next year. estimates from the international air transport association shows most airlines are lagging far behind their pledges. their use of sustainable fuel grew just under .2% in 2023 come up from .04% in 2021. the ports of l.a. and long beach, which account for nearly one third of all u.s. container imports, are seeing a frenzy of volume rivaling the highest input level set during the pandemic.

the volume stands in contrast to concerns over pulling the economy. retailers are stocking up ahead of the u.s. tariff on chinese goods and a potential strike by american dockworkers. though there is a threat consumer spending weakens meaningfully, leaving warehouses full and companies with too high inventories. jonathan: some of those numbers reported over the weekend are staggering. up next, donald trump's swing state offensive. >> starting the day i take the oath of office i will rapidly drive prices down and we will make america affordable again. jonathan: that conversation is up next. good morning. ♪ investment opportunities

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jonathan: seven-day winning

streak on the s&p 500 looking to make it day eight. equities just about positive on the s&p and yields lower by a single basis point. 10-year 3.8730. donald trump swing state offensive. >> starting the day i take the oath of office i will rapidly drive prices down and we will make america affordable again. under kamala harris and crooked joe biden the american dream was did and it is as dead as a doornail, they will never bring it back unless we win. jonathan: donald trump hitting the campaign trail with a full week of d&c counter programming, from hosting rallies across swing states to making a visit to the u.s.-mexico border on thursday, the same day harris is scheduled to give her acceptance speech at the dnc. it has been a complaints of republicans about their nominee.

can he remain disciplined enough to stay on topic on immigration, on the economy? annmarie: they do not want him veering off into attacks against kamala harris they think that makes independent voters say i do not like this, i do not want another four years of these grievances back and forth. what they wanted to talk about are things he pulls well. it was pulling higher than biden and harris about the economy and when it comes to the immigration which is why thursday will be interesting. this is proper counter programming. she was given this task of looking after the root causes of immigration. some journalists ran with that and call her the borders are, now they're trying to -- the border czar. they are saying she was not the border czar. republicans say no, you called her that than and it did not work. this is one of the biggest problems facing the harris ticket. it is the economy and immigration. trump will start -- trump will

try to stay on message. lisa: there is a fisher emerging in the republican party and not just with trump and whether he should stay on message. it is within the party and whether his advisers are making the right kind of plead to go more moderate indicator to independence and whether that is fair that a lot of people are saying lead into what has made you as possible as you are which is your base. you can feel that tension coming to the fore with calls to replace the likes of corey lewandowski. this is interesting to watch with you trump listens to. is it the growing numbers of commentators sourcing stop in and go back to what you used to do or his own advisors? jonathan: we talk about the differences between these candidates, but can we talk about the similarities? kamala harris copying one of the policies donald trump would like to introduce, no taxes on tips. very different language from the

vice presidential candidate on the republican side and the current vice president. jd vance says people who have kid should pay fewer taxes. , harris says we want to bigger child tax credit. tariffs, harris is saying it is a tax. i did not hear anything about removing the tariffs that exist. there are massive differences but there are a lot of similarities between what is on offer from both parties. annmarie: what is clear to me is the child tax credits may be going up. this is populism on both sides. jonathan: coming up we will catch up with bloomberg's bobby gosh with peace talks stalling in the middle east. this is bloomberg. ♪ a lot of code. if an application needs to be modernized then you'll need time, resources... and caffeine. if this sounds daunting

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jonathan: this just in from bramo, says that if she gets -- if they take away taxes on tips, she will pay less in tips. restaurants around the country. lisa: whoa, whoa, you are putting this on me? jonathan: spread sheeting what will be consistent in terms of what she's offering if they get rid of the tax. quite a take from lisa, moments ago in our short break. lisa: really? [laughter] that is totally what you were saying. jonathan: i was questioning if people would actually do that.

would you do that but i do that? annmarie: guess what, guess what, the policy, it's not happening. jonathan: you don't think so? annmarie: this would be very difficult to get through congress, one. what it actually be effective, given the tax rate on people that work on this industry, they are already mostly not paying that income tax. three, the loopholes that could be used against this that democrats would not vote for, like if you are a hedge fund, could part of your pay, your bonus, could it be considered a tip and then you don't have to pay taxes? lisa: the only reason is it -- it's ok is that no one thinks i would go that low. that's not in character, not how i would act. jonathan: you think you have the personality of a good tipper? lisa: i do, i am a good tipper, so i have that personality. jonathan: just wondering. annmarie: it depends.

jonathan: it's an endorsement of someone's personality if they have the personality of a good tipper? lisa: i think a penny pincher, the way that they are treated, if they have the capacity to pay even tax free, i don't think they would adjust it. annmarie: i will settle this, do you tip on credit card or you do you give cash? jonathan: i don't carry cash ever. annmarie: now i'm judging both of you. jonathan: you carry cash to tip? annmarie: self-righteous, sometimes. jonathan: what's that about? you never tip, i've been for coffee with you. what are you talking about? [laughter] seriously never seen that in my life. what are you talking about? the nasdaq, seven-day winning streak, the longest on a daily basis going back to july. it's not the length, it's the size of the gain that is phenomenal with a move of 6.8% higher, the best such a run

going back to 2022. lisa: such a whipsaw, that's what i find interesting. this is without reassessing whether state cuts could be necessary. that seems to be where we are at and markets. jonathan: the bond market seems to be stable over the last week. a lot of movement between, but 4.05 percent two fridays ago, 4.05 percent this morning, anchoring the front-end as we drift towards jackson hole and we continue that conversation about whether it is 25 or 50. lisa: one thing that has been lost is this idea that the neutral rate might be 4% or 5%. no one is saying that anymore. people are saying it's back to where it was before and there is this feeling that the fed has more room to cut than six months ago, which is for the stock market a new and beautiful thing. jonathan: first messages on the

terminal, are bonuses tips? straight away, subscriber. i'm sure they have their own pay in mind. lisa: you have to say to the company, is this where i need to be taxed on this? annmarie: exactly, employees are going to say are the extra bonuses that we get technically a tip and they will start to want to not pay taxes on it. jonathan: this conversation connected to the bond market because there's hardly any proposal connection to policy raises? what will happen to the trump cap -- trump tax? pushing them forward, donald trump says he will. will they expire where elements of it expire? have they been clear on that? lisa: a couple of studies have been done on the deficit increasing and it increases under either of them. how much has been different, ranging from one trillion to 7 trillion. a lot of people saying the trump plan increases more than the biden plan, there is a lot of political discussion around the

analysis of proposals that are lacking in detail. all of this, no one will say that we are reducing the deficit. jonathan: making options grade again with lisa abramowicz. dollar-yen looks like this, this is such a snarky market check, we have a move of 1% to 4% with no development of risk and that lack thereof is important compared to where we were a couple of weeks ago. price action is under surveillance, kamala harris holding a narrow lead over trump in the latest washington post abc news ipsos poll, standing at 49% with trump at 45% with swing state leads. this is a tight race away from the pole. going to the swing states, it's still supertight. annmarie: and there was one from over the weekend showing how quickly harris is able to tighten up the race when it

comes to the sunbelt. it's a pure political player in a state like nevada, where the hospitality industry trumps everything else and they are going for those votes. looking deeper into that pole, yes, she is tightening the race and even winning slightly, but the top two issues, he still has the advantage, the economy and immigration, which is why some members of his campaign want him to stay on message. jonathan: let's pick out one, the economy. recession lowered with economists citing retail sales and jobless claims data where if the jobs report looks good, they could cut the number back to 15%. it comes back to that date on the calendar all over again. it's the august payrolls report. let's get that cpi report where one week after that is the fed decision. they increase that forecast on august 2.

on the 19th it was based on the data that they received in that timeframe. earlier they asked me -- you asked me if there is a possibility of a narrow shift, but is there a possibility of not getting a shift between now and the 18th given the fact that the economic data has been all over the map with the revisions on wednesday that we have to keep going back to? all of that data being revised, payroll numbers, it will move backwards over those surveys done through other indicators and this highlights the fuzziness of being data dependent on unreliable data. jonathan: the growth scare didn't happen in isolation, it was also with gile -- with jobless claims and that depressing employment component. if you get a increase in unemployment again on september 6 but the rest of the data looks decent, are people willing to discount that? do you think that we would go back and started all over again?

lisa: it depends on what happens with the carry trade and other random trades. it's a good question and it is important to ask, what is the perfect recipe for a fed rate cut for the right reasons? i don't know the answer and frankly markets don't, it has been different every single time. at this point to read into what we saw as a growth scare versus markets that became overpriced, either way what we can see is a federal reserve sending a message that allows for control to come back. the laws of falling a bit. -- applauding a little bit. jonathan: supporting by that incoming data from the last week with retail sales and jobless claims. turning to the story, israel and hamas blaming each other for stalling the cease-fire deal. antony blinken is meeting top

leaders before heading to egypt tomorrow with talks set to resume. bobby ghosh joins us with more. good morning to you. two sets of talks, the one between israel and working out what happens in gaza, but then the set of talks that we will catch up on later with lebanon. how connected are the two talks at the moment for you? >> they are connected in that the overall objective of all of the talks, the reason that antony blinken is there is to try to bring down the temperature across the region. israel's assassination of a top hezbollah leader in lebanon raised the stakes. then israel's assassination of that hamas chief in tehran raised the stakes even more. it matters because of those reasons. but for the moment where everyone is focusing their attention, blinken and the biden administration, that's on the cease-fire talks over gaza.

now, blinken this morning and perhaps even while we speak was meeting with netanyahu and other top leaders, going into those meetings he has used what for me is surprising language, saying things like -- this is the last opportunity for cease-fire talks , the last opportunity to bring the hostages back. that's pretty strong language. it also puts the biden administration in an awkward place. if blinken comes back empty-handed, this is trip number nine, number 10. if he comes back empty handed, already having described this is the last opportunity, where you go from here? what we're hearing from the main protagonists, each is blaming the other for stalling. hamas says that netanyahu is making new and impossible demands. netanyahu saying that hamas keeps asking for more and more and more. in private, speaking to journalists off the record, the

biden administration is saying things like it's mostly netanyahu. in public they blame hamas but in private they say it is mostly netanyahu. reports from israel also blaming netanyahu. polls coming out saying that the israeli public and a sizable majority, 60%, they want a deal now. netanyahu has consistently disregarded what his own people are saying and what the biden administration is saying. so, his position that he is not going to move does not seem to have changed. jonathan: the language, you have identified it as surprising and even important. begging the question where is it coming from, why is that language being used? >> frustration, the biden administration has been pushing for this deal for months. it's a last ditch -- last ditch effort to get both sides to focus and get netanyahu to focus. no matter how much the biden administration has pushed him to

do so, he has not done. he's been more interested in the actions of the biden administration than the words. they are trip attempting to deliver all the arms that they need and as long as he keeps getting the weapons, i don't think that netanyahu is actually going to move his position at all. annmarie: last week the president insinuated that the cease-fire negotiations could mean new retaliation from iran. we have the foreign ministry coming out and saying that is not correct, these are not directly linked and iran will retaliate. last week when the weaponry was going to the gulf, everyone thought it would be immediate but so far we haven't seen anything from tehran. >> i think that the biden administration was sending a hail mary. when they get the confidence to speak for iran, i don't know.

this was them reminding everyone in washington that we make our own decisions, we have our own timeline and agenda, you don't get to speak to it. iran also doesn't want a war. they didn't want a war with israel over israel and the united states. that's the working assumption. they did not want a war over the killing of iranian civilians. top iranian scientists and sort of the most important iranian general, sulla money. they are not going to want a war over a leader of hamas, however important they may be. they will retaliate in some way. i suspect that the longer this goes on, it gives iran license for a smaller retaliation. we saw this with soleimani. immediately after the soleimani assassination, there were rockets fired in the direction of the american bases in for a long time they continued to say

-- we are not done yd we have not yet taken revenge, we will come after the united states in a big way, but in the end that didn't happen. the longer they allow this thing to slide, they are hoping that they by themselves license to make a smaller, more symbolic attack. jonathan: great to set the stage with you this morning. great to see you, sir. setting the stage for a conversation cap that will continue in a few minutes with the presidential advisor. let's get an update on stories this morning with your bloomberg brief. here's dani burger. dani: corporate america is attempting to hedge their bets on who will be the next u.s. president. fewer ceos are opening wallets at this time around with election data showing june 30, five of the 230 one members of the business roundtable having donated to either candidate. it does not mean that companies are ignoring the election. since july 1 319 u.s. companies

have mentioned the election on their earnings call, double the number from four years ago. neel kashkari is open to rate cuts in september, telling the journal that the balance has shifted in a change from his tone in june where he said that a rate cut might not be necessary until the end of the year, saying that the conversation shifted because inflation is making progress and the labor market is showing concerning signs. x, shutting down operations in brazil while keeping the service available. the post said that the brazilian supreme court justice threatened their legal representative with arrest if they did not comply with censorship orders. in a separate post, musk said that the decision to close the office was difficult. that is your bloomberg brief. jonathan: up next, we count you down to jackson hole with equity futures positive on the s&p, coming off the back of the biggest gain of the year so far.

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jonathan: equities on the s&p 500 coming off the back of a seven-day winning streak. looking to continue such a streak with positive zero point 03% on the s&p 500. bond market yields are lower on a 10 year, but under surveillance this morning we are counting down to jackson hole. >> the fed has the opportunity to shift to the narrative and they are starting that process now. when powell shifted to labor over inflation, long overdue, i would argue, that is step one. the next step is to say -- hey, look, we don't think things are slowing in a notable way but we recognize that the policy is for completely different inflation visions than we have now. jonathan: all eyes are on jay

powell, turning to how many rate cuts the fed delivers. cassie barrow wrote the following -- a simple party rules suggest the fed could have started easing by now, true even before the last jobs report but further confirmed by the recent cpi report where risk reward favors durational portfolios approaching the star of the easing cycle. cassie joins us now for more. language is important. you say easing, some might say removing restriction. are you talking about a shift towards accommodation at the fed? >> you are rightfully so picking up on a bit of a differentiation . when i say easing, i think the fed in their mind uses that as reducing policy restrictiveness. when i look at the environment more holistically, putting aside the conflicting noise we are hearing in terms of the labor market and the consumer being weak or strong, the inflation

backdrop alone at this point probably justifies at least 100 points of rate cuts. not immediately, but a policy rate closer to 3.5% or 4% is where we should be trending based on that alone. inflation is coming down, it is more broad-based and concentrated in two categories, shelter and auto insurance. jonathan: let's get into that a bit more. the breath of the decline in inflation, how encouraging has that been for you? where is shelter, is that still a sticking point? >> it's been very encouraging. thinking about last year's inflation or disinflation, that was primarily a good story and that was the low hanging fruit. more recently we have seen the disinflation broadening out, now including the services category. the shelter category, i know there is a lot of hemming and hawing over whether it's coming

down fast enough or if it's coming down, but the year-over-year rate is not 300 basis points or 3% over the last year. it's coming down and i think it will probably continue to normalize over time to levels more consistent with pre-covid, where the majority of the cpi basket is already trading. lisa: you have been talking about this for many months and the rest of the market seems to be on board with you, it's now consensus, priced into the market, some arguing there's already been a move from the federal reserve that has not moved where affective rates have dropped. how disruptive would it be if jay powell doesn't lean into the rate cuts being priced into the market in his speech on friday? >> that's a really good question. you know, i look at the moves in yields this year, right, they have all been driven by data. not one has been driven by fed speak. you know, it is the data that is driving the market reassessment

of how many rate cuts need to be done this year and earlier in the year when there was concern over rhe acceleration with hot inflation, the market priced out rate cuts. they didn't need fed speak to do that. i guess where i am circling back to is when i think about jackson hole and what the responsibility of chair powell is, i think that what we will hear from him is that he is comfortable with the inflation backdrop and it's an environment with the fed can start to remove policy restrictiveness, but i don't think that he will be particularly explicit about how many rate cuts that will be or how far they need to go. i think that they will kind of continue to let the market do that work for them. lisa: in other words, he won't be leaning into it one way or the other, raising the question of the theme around transmission of monetary policy that's effective. how effective is the control over the transmission of the monetary policy if all of the

moves this year have not been driven by rhetoric but by data? >> i think that is because we moved out of the era of true reliance on forward guidance. if you think about what forward guidance was and why it was created it was created for an environment of zero lower bound. cutting to zero but you needed to be more accommodative with no tools left and we already tried quantitative easing, 1, 2, 3, what can we do? we can try to jawbone the markets and promised them lower rates for longer. the environment we are in now is not an environment of extraordinary policy where the foreign guide -- forward guidance that we need is that type. i think that the environment that we are in this one where rightfully so the forward guidance is not what is most relevant, what is most relevant is where we are in the business cycle into be frank we are all learning that together, including fed members watching the data.

annmarie: data-dependent market moving, it comes from the fed basically saying that the market should be data-dependent. will they circle back on that this week before the potential cut were keeping policy in line? that you shouldn't be so data-dependent? >> there is probably an opportunity for him to use words like gradual to describe the cycle. he's likely aware that commentators in the media, financial market participants have been talking about the need for intermediate cuts after the july jobs report, the need for potentially 50 basis point cuts. the data that he is seeing in a mosaic probably doesn't suggest a need to be that quick to move. so, while i think he wants to communicate that they have the capacity to be quick if

necessary, the current environment is one where they can adjust slowly and recognize that and that in the event that something goes wrong, we will be positioned to respond because we are not near the lower zero bound in the policy space, which is what the bond market is picking up and while the yields are coming down, spreads are well contained. jonathan: present company excluded, the last year has been dominated by a bunch of people trying to sell bond funds and give out cash. i hear it again now, scaring people out of cash to say that the rate cuts mean get out of money market funds. why is now the right time to do that? i have seen head fake after head fake over the last 12 months where people give up five point 5% and rush out to purchase duration when maybe they didn't need to. if i now different? >> i was just looking at those numbers myself. i said normally the conventional wisdom is that once the fed is

done hiking, that was july of last year, it's time to start extending duration. if you were to have moved just a little bit of that cash into a one year to five year high quality corporate credit, one year to five year investment grade credit you would be 200 basis points at of cash. i think the proof of the statement is already there. that's before the fed even started cutting. jonathan: kelsey, that was not aimed at you, defending your sales bench -- sales pitch. if you are listening, you have been thinking about the cash, 5%, shifting now, is now the time, are the rate points with cuts actually coming? lisa: six months ago, than now, but the interesting is the delta between one to five year and 10 year. fewer and fewer people say 10-year. jonathan: i agree with you on that. coming up, we've got the third

hour of "bloomberg surveillance ," catching up with multiple guests. ♪

>> we have a good situation here , things are getting better. >> you're seeing that u.s.

exceptionalism is still there. >> it looks quite positive. as we look ahead at the second part of the year we are not quite as optimistic. >> i think things will simmer down a bit. >> markets have to reconcile themselves. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: 90 minutes from the opening bell and the third hour of bloomberg surveillance starts now. your scores on the s&p 500 unchanged. pulling back just a touch on the russell, the small caps down 1/10 of 1%. talking a lot about the week ahead. starting the conversation with chairman powell. that big speech at the annual get-together for the federal reserve. a bigger speech after the conflicting data over the last month. lisa: increasing expectations for 25 basis point rate cut if not a 50 basis point rate cut.

after a tumultuous couple of weeks pretty much everyone out there is praying it will confirm what's going on in market so they can go on vacation because that's what i hear from every person. i'm knocking to be here after the jackson hole speech. i'll much does this please confirm it seems like we are on the same page and that we can go on vacation. jonathan: do you think he needs to go that far invalidate pricing or the idea they will be reducing interest rates. lisa: he can talk about other issues but it's not going to be prescriptive type of speech it will be a philosophical one, it's not to be the speech where he comes out for eight minutes and says pain. talking about the balance of risks and all sorts of other things, it will be maybe less declaratory than the past. >> not mission accomplished but maybe risk management reducing interest rates and getting ahead of potential weakness. >> it feel like that's the ark of the fed speak over the last

couple of months so it won't feel too jarring. lisa: the idea of preemptive rate cuts will come to the floor, landing this sort of soft landing, you have to get ahead of the weakness and cut rates in tandem with inflation coming down. we talked about gradual rate declines from aaron daly over the weekend. we heard from a whole host of others. people will say great i can go on vacation. jonathan: to fill in the gaps that mystery we need to talk about the politics and policy out of the dnc this week. we have had a vacuum when it comes to understanding what the policy platform is on the democratic ticket. sprinkle of language about price gouging and child tax credits and not having taxes on tips which is something we heard from the former president donald trump as well. we wonder if we get more detail this week. we are really lacking detail about what policy will look like in 2025 and if we are to have a

serious conversation about monetary policy in jackson hole don't we need a serious conversation about fiscal policy in chicago? annmarie: it's hard to have those conversations about what it will look like depending on who is going to win the white house. when it comes to democratic ticket and their economic policies we heard a sprinkle of that but it's really lacking in the details. jason furman saying when it comes to price gouging he hopes the proposal ends up being rhetoric and not reality. i think that's the take away for the entire policy proposal at the dnc. a lot of rhetoric likely not a lot of reality. >> it is so sweet saying wouldn't it be nice if we get more details. don't you think we will. of course we won't. but keep hoping, it's really endearing. jonathan: this is what makes it so difficult rate anything from the federal reserve on friday have to acknowledge there's a lot of stuff they do not know about 2025 and beyond. jonathan: which is why -- lisa:

which is why people are adopting we don't know what we don't know and we will talk about the near term. jonathan: the outcome of all of that over the last week has been by stocks. seven days of gains on the s&p 500 equity futures just about positive on the s&p but almost 1/10 of 1%. yields lower by a basis point or two. coming up this hour we will catch up with jim of morgan stanley with stocks off the back of the best week of the year. amos hochstein as israel and hamas talks come to a standstill yet again and lindsay on the fed's september tight rope. stocks notching their best week since october of 2022 as investors digest data points to a still resilient u.s. economy. the saying perhaps the price action told us more about market positioning than economic fundamentals which are normalizing not collapsing.

the speed of the market move is more significant than the magnitude. jim joins us for more. i want to rewind a couple of weeks because we caught up at the height of this growth scare and this big cratering and markets all over the place and you said by some of that fear. you were walking into it. saying by this market here. what gave you that sign and are you sticking with that view from here into year-end? jim: thanks john and good morning. we spoke in early august right after all the volatility in the market. our view was that around 350 in the s&p 500 was a fair level for markets played that basically represented $275 earnings in 2025 and 19.5 multiple. i think that's pretty reasonable. the overshoot we saw did not match up or lineup with economic fundamentals.

with a slightly softer payroll number which created a lot of excitement and the carry trade, all of these happened at once. there was an unwind of a lot of positions. that's what made us say what matters more to markets, is it technicals or fundamentals? will technicals trigger something fundamental and we basically said no. this was a good opportunity from a value and risk balancing perspective to add to equities and we did. we had to japanese equities, u.s. equities and really just the debate. we went right into markets and we might parse that a bit, but effectively we still think the market is a secular bull market. this also 5350 is still my number, so the fact we are a little above that or decently above that now is making us think about taking some profits on that. i think it will be difficult for the markets to run much higher than around 5600 which was close

to the highs we saw in july, so i think we have a recovery and now it's time to rebalance some of those risks and take some chips off the table. jonathan: where were those go? going against the grain of the equity market at the start of this month i wonder if you're willing to go against the grain in the bond market given what we heard about 20 minutes ago. rate cuts are coming, after duration avoid reinvestment risk. are you taking the other side of things in fixed income? jim: yes i am. effectively a think the markets pricing and one of the big overshoot we saw was the market was turning to price in 200 basis points of rate cuts to 250 basis points of rate cuts. we thought that was excessive. so effectively if we get a policy move by the end of 2025 where the fed funds rate gets down to 4% or 3.5% i don't think 10 year yields will be materially far away from where they are today.

what we have to remember in fixed income as there were two components. one is the price movement. i don't think over the next 12 to 18 months you will get a lot of appreciation of the price movement. rate cuts by the fed really ensure that you are likely to get that so the return expectations for fixed income should likely be that at the point, not so much the price movement which is what we refer to as the duration element of markets. i am pushing back against it because i think the bond markets actually are running well ahead of even what the fed may say coming up jackson hole. jonathan: we talk about the fed lisa: -- lisa: we talk abut the fed women talk of the belly of the curve. i'm wondering how much the fiscal backdrop weighs on you when you start talking about 10 year treasuries and beyond? jim: the fiscal is my number one worry. people say what keeps you up at night, that's what it is. it doesn't matter what the next

administration is, we will have to deal with this fiscal problem. the issue is we have a deficit around 6% of gdp in a time when things are kind of going ok. imagine if we did fall into a harder recession and typically there needs to be fiscal expansion to support the economy. where does that put debt to gdp? where does that put deficit to gdp, doesn't put it around 10%? this becomes a bigger problem for us. what it tells us is the safety net from the federal government to that fiscal expansion to be countercyclical in the weakness is a lot less today, it makes the u.s. economy in a more dangerous or vulnerable place because it does not have the ability to do countercyclical policy as much. lisa: there are two different sides to this. but that might not be a supportive to risk because going forward there won't be the relief valve in some sort of downturn and on the flipside a question of whether yields have

to be higher and options messier going forward. is it the fiscal response to some sort of downturn or is it the fiscal overhang that causes bond vigilantes to raise from their grave? jim: that's a good way to put it. it's a little bit of both. i think it's really the fiscal maneuvering that we have a lot less of. i think that's much more important. if there's a profit to be had with long bonds and yields are going down that will be taken but we have to think about the shape of the yield curve. what we have to understand is in this particular environment, if there is an inflationary backdrop which i believe there is, when the fed cuts rates, when there is fiscal expansion, that adds an inflation impulse to the markets which means the curve steepen sprayed if the old playbook was let's cut rates and bring down the 10 year rate and bring that five-year rate, the

answer today may be that 10 year or five year rate may not come down as much as it used to when we were in a disinflationary deflationary period. that is the risk, the rate cuts don't ring down the borrowing costs for most people buy cars and houses and things like that and corporations. the five and the 10-year. that's when -- one of the big things i don't think you spoke about enough. jonathan: i love the you answer that with a straight face, thank you. lisa: as he should. >> protesting like pitchforks. >> let's give an update on stories elsewhere. dani: donald trump is battling kamala harris for momentum this week. planning an aggressive schedule as the dnc kicks off in chicago. trumbull hold rallies in swing

states and visit the u.s. mexico border on thursday ahead of harrises acceptance speech at the dnc. he will sit down for a series of interviews. saying an intentional effort to goad harris into an unscripted interview herself. a new poll shows trump lagging harris by four points. sanford vsco fed president mary daly said she had more confidence inflation is under control. even so she argued for a patient approach to policy saying gradualism is not weak or slow its not behind, it is just prudent. she out of the economy is not an urgent place and while slowing the labor market is not weak. her comments, ahead of jackson hole where chair powell will speak on friday. estee lauder ceo fabrizio will retire in june of next year. the company says it is well in advance of its hunt for a new president. he will remain in charge until a successor is named. estee lauder forecasted annual

growth missed expectations. as of the friday close, shares have fallen 35% year-to-date. jonathan: thank you very much. one further top story, happy birthday to our good friend mohamed el-erian. you can check that out i promise we stopped counting at 50. till i catch up. lisa: happy birthday. what national event will he be out? taylor's, what's the next sort of -- jonathan: sort of like a 12 month celebration. thank you for being you. we appreciate it. the morning calls plus white house senior advisor as israel and hamas truce talks stall once again. that's next, you're watching bloomberg surveillance. ♪

jonathan: live from new york city, welcome to the program. down -- your scores look like

this on the s&p 500. equity futures positive by 1/10 of 1% looking to build on a seven-day winning streak on the s&p. piper sandler downgrading shake shack to neutral. the firm tempering its view on fast casual dining adding risk reward for the burger chain has become more balanced. that stock is down. downgrading hp to equal weight. keeping it is a $37 price target. the personal computer company offers limited upside on estimates of valuation. martin nathanson sharing coverage on apple. saying ai potential is already priced in. but noting execution risks are still on the table. that stock is just about positive by 0.6%. let's turn to geopolitics. the secretary of state arriving in tel aviv as israel and hamas truce talks stalled yet again. the senior advisor to the

president playing a key role in easing tensions in the middle east for the biden administration. great to see you. widely regarded as one of the president's most trusted security advisors you were in beirut in the last week as well. help explain where talks are currently between lebanon and israel and what's happening in the gaza strip as well. >> i was in beirut last week. we've obviously rising tensions and escalation of different reprisals and different threats across the region. the president had ordered large parts of military u.s. military to the region and of course diplomacy to commence as well to be able to reduce tension sprayed the most important thing the president is focused on now we want to achieve is a cease-fire agreement that brings the hostages home finally to their families. brings relief to civilians in

gaza and sets the stage to end this war. the talks last week continue right now as you said secretary blinken is in the region and israel today and i take issue with stall. i think the press wants to have movement every single day, but these are very serious discussion that will continue over the next several days. >> where has there been movement? >> for obvious reasons i can't go into the details of the talks but they are progressing, things -- that's why secretary blinken is there. and the work will continue. it never happens overnight but i'm confident it will continue to push as hard as we all can when it comes to lebanon. we had a ratcheting up of escalation we are trying to ring some of that down. i was there to talk to folks about how do we think about the day after and talk about bringing some normal dutch sense

of normalcy for lebanon. it's in a war that i think it's people do not want, that they did not really start. hezbollah decided to join the conflict on october 8 and we have been in that ever since. so it's really important that's a critical piece not to allow to escalate as it has ramifications for the rest of the region. annmarie: you spent a lot of time with lebanon speaker of the parliament who is close to hezbollah. what did he tell you about their intentions when it comes to israel? amos: hezbollah and israel have gone through rounds of conflict over the last several decades every several years. we have had relative quiet since the 2006 conflict ended through the security council resolution 1701. it's never really been implemented by either side so we need to get to a point. i think the speaker as well as most lebanese people just want this to end. lisa: what tools -- annmarie:

what tools does the u.s. have to pressure lebanon? amos: we can talk about what is it look like to end not only this round, but to put things in place but will create stability for the long term and create prosperity in lebanon. it's one of the most -- they were in total blackout the other day because they lost the last fuel in their place. this is a country that should be prosperous. that's the view we can do and i think the people of lebanon want that. you have to get past this. one thing that will make it easier is the cease-fire. annmarie: let's talk about the cease-fire in gaza. the president said this could potentially be a way to halt iran from retaliating. iran said that is not true, we will retaliate. secretary blinken is talking about the last-ditch final effort this week as halting an iranian retaliation or does the administration expect rhea --

iran to retaliate? amos: i think the president has made it clear his expectations when he gave the order for the u.s. military to take several actions to defend israel and the region from potential retaliation from iran. we don't believe iran should retaliate, but we want to de-escalate and that's why the filled up of u.s. military is there. at the same time we are focusing on the diplomatic efforts and push and that's why bill burns and brett mcgurk were in delhi last week and why secretary blinken is in the region today and meeting with prime minister netanyahu. united states put down a draft on friday, so we are working with the parties to be able to. annmarie: who is at fault here? amos: there is no time to waste now. neither party has an excuse to delay. if you want to bring some relief

to the people in gaza, if you want to bring the hostages home, this is the time to reach an agreement. jonathan: why is this the time? amos: it's been a long time, this has gone on. jonathan: we keep hearing now is the time. what happens of secondary blinken comes back without an agreement. amos: i don't think he's going there to come back with an agreement, it's a move along to get to a point of an agreement. this is the most important moment. there's talks that have been intensifying. we see with the chances and odds are for escalation. that's not what anybody wants. lisa: tony blinken said this may be the last chance to reach a cease-fire agreement. what happens after that. amos: i want to focus today on being able to get there so that's why the president is saying he will quit as much of his efforts that he can in order to get to that outcome. annmarie: how difficult is it to

put all these in when he's viewed as a lame-duck? amos: first of all he is the president of the united states. i can tell you i've been traveling the world i don't think that is the view. everybody knows we have an election coming up for the next six months per and this is a crisis that cannot wait six months. if you're talking about things that will happen over the next several years they will focus on talking to the next president, i think for now these are not crises paid when you talk of the u.s. economy, of the crisis in the middle east, these are not things saying let's just take a break and wait till january. that cannot happen. so that's why you're covering the economy the way you are in the president gets brief the last couple of weeks we've seen volatility in the markets. we do not pretend we will wait till january. jonathan: how often do you speak

to the president? amos: as needed. jonathan: when was the last time? amos: just a few days ago. jonathan: how engaged is he in these talks? amos: extremely engaged. meets with a seam on a daily basis, he is very engaged, he has calls with world leaders, regional leaders. also weekly. in order to be able to push this forward. jonathan: your future, does it end with biden or continue with harris? amos: i serve president biden, asked me that again in six months when president harris takes office. jonathan: we will talk again in six months. before that no doubt, it is good to see you. white house senior energy advisor. on the state of play in the middle east. annmarie: he did basically say when secretary blinken says this is the last opportunity to get a deal is not actually can be coming home with the deal so these talks will likely continue

even if there is no breakthrough in the next 24 to 48 hours. jonathan: we will can chop -- catch up with michael schumacher of wells fargo. monetary policy and ultimately what it means for the bond market. your equity market on the s&p 500 shaping up on the s&p just about positive by 1/10 of 1%. yields are lower by two or three basis points. music to amos's ears brent crude is lower 9/10 of 1%. i'm sure you would love to find time to talk about what's happening with the s&p but we will have to do that another day. this is bloomberg. ♪

jonathan: we are about 60 minutes away from the cash open. equities positive .1%. no drama. nasdaq up .1% also. into the bond market, two year where it was a couple of fridays ago. 4.04%. volatility through the week, particularly last week when retail sales came out better than expected and jobless claims came in lower than expected. the 10-year down two basis points. further along the curve, a 30

year at 4.1%. want to touch base with the fx market. the dollar weaker over the last four weeks. his longest losing streak going back to april 2023, four weeks. on dollar-yen, more dollar weakness. we have noted this observation this morning. interesting we have this move in dollar-yen. the equity market is not selling off in the face of this which gives the impression that a lot of that work has been unwound. lisa: this raises the question of how much of the carry trade has been unwound. there are people saying the probability of months and months of the carry trade being completely unwound seems unlikely. that said, there is a peaceful feeling with dollar weakness. not just the yen but also the euro crossing through 1.10, strongest levels to the end of

last year. there are shifts of foot being massively disrupted. jonathan: you know that feeling when your european vacation is complete and you do not care about the direction of euro-dollar anymore? you say do whatever you want now. bramo is done her trip. annmarie: much better when i there for the g7. jonathan: leases kids went to tokyo and now dollar-yen does not back -- lisa's kids went to tokyo and dollar-yen does not matter. lisa: they really enjoyed the sushi. jonathan: euro around 1.10. ever want to know where you're going next and when. the dnc kicking off with president biden set to deliver primetime remarks. tim walz delivering his acceptance speech wednesday and thursday kamala harris will accept the presidential nomination.

amory, you will be -- annmarie, you will be there. annmarie: if i can take off. i tried last night. the first part is biden flying in and flying out in the room will want to make sure he gets the proper sendoff. that it will shift to this coronation of kamala harris. i would go to what jason furman said is that he hopes the price gouging proposal ends up being rhetoric and not reality. what we will get is a lot of rhetoric and not a lot of reality of some of the policies we will hear. i would look at all the analysts we have on which says enjoy your vacations and look at the polls after labor day. jonathan: comeback for the first debate in september. lisa: especially to see whether they will talk about issues, whether it will be a trash talking contest, whether the ongoing continuation of the honeymoon period you noted with kamala harris.

jonathan: the issues do not go away. we still have a sitting president trying to address two conflicts. the tension between israel and lebanon to the north and the tension between israel and hamas in gaza. the talks are ongoing. we use the phrase stalled. it looks like talks have stalled when you have a repeated sequence of talks that continue to go nowhere. they tell you there is progress but will not tell you where we made progress. you asked about sticking points, you asked about what is holding us back, is that the israeli side or hamas? i understand the nature of the conversations means you cannot share too much but these talks have been going on for a while it is hard to point to progress anywhere. annmarie: it does seem -- when asked about who is at fault he said everybody gets to -- everybody needs to get on board. antony blinken who is in israel meeting with benjamin netanyahu

says this is a last ditch effort. they are trying to get this done before november 5. you asked why now? what is happening at the dnc is there will be thousands of protesters outside painting kamala harris as part of what they believe is failed policy in gaza. jonathan: it is a problem for the party and the ticket in november. chicago fed president austin goolsby telling face the nation on cbs that inflation policy from harris or trump must be scrutinized. avoiding directly speaking about the presidential race but warning about the misrepresentation of inflationary impacts of tariffs and corporate price hikes. the problem for all of us is it is very difficult to set monetary policy for 2025 and beyond when we have no idea what we have in store in 2025. lisa: if you listen to how he answered some of margaret brennan's question, it was

fascinating because issues have been so politicized it is hard to happen on risk -- it is hard to have an honest conversation they'll be treated as nonpartisan. tariffs, price gouging, tax cuts, other things that are being proposed. what austin goolsby said is all of these issues have been politicized so i do not want away and on tariffs and price gouging, etc. this becomes a moment where it is unclear what the policies are in a lot of economic analysts are looking at this and saying i do not to weigh in for fear of being viewed as political. michael: you can -- jonathan: you can have those debates later this week in jackson hole. i will be careful with language. in jackson hole, wyoming. the cliche police have called. avoid using the phrase "all eyes on jackson hole." it has been classified as a writing felony.

the feds economic symposium takes place this week and chairman powell delivers a speech because he has been invited by the kansas city fed. the speech six place at 10:00 friday. what are we looking for? michael: you did well. i'm just glad wyoming is in the united states. they use the dollar. lisa is going. we do not want any problems. lisa: ok. jonathan: wall street hopes are overdone. you look at mohamed el-erian, a good friend of the program. he has a long list of things in his op-ed jay powell should say i do not think you will get to. the main question for everybody on wall street is doing get the green light for a september rate cut and i think you get some shade of green from powell because the data support that. he will also warn we still have data so we will watch that.

the stuff about what is the neutral rate and where do we go, he has been asked that and he does not answer because he says we do not know. their plan, basically, is to take it meeting by meeting and if the data are still on the same track in november may be they cut again and maybe again in december if that is the case until they figure out where they think neutral is and we stop having some sort of restraint on the economy. the theme of the conference is the transmission of monetary policy and has that changed? he might preview the idea we are going to do a review of our monetary policy framework this year but he is not going to talk about what he expects it to be because he does not want to front run that. michael: -- lisa: do think it will be an eight minute pain speech, we did it. jonathan: painful speech. lisa: they pain speech or a

painful speech. you remember a couple years ago when he came out of there would be pain, it was eight minutes and that is all you're going to do? i wonder if it will be a long rambling discourse on whether interest rates. once upon a time there was an interest rate? or will it be direct, we have room to cut, we will cut. michael: probably somewhere in between. this is getting back to the way fed chair is usually address the conference when they are not trying to make a policy pronouncement and they will talk about some of the history behind where we are and to set up the academic part of the conference. it will not be a pain a speech. it will not be eight minutes long. i think we will have a full complement of remarks. jonathan: michael mckee, we will be the grammar police.

lindsay plays a joins us now. do you think the cpi report gives the fed and the chairman space to validate some of the market pricing going into september? lindsay: it certainly gives the fed more wiggle room to move forward with a rate cut. the fed, when we look to jackson hole, will continue to reiterate the data-dependent stance. the market has clearly been overreacting. we have seen the market calling for a larger than 50 basis point cut. i think the data come the strength and retail sales, the strengthen jobless claims justified with the improvement in the cpi and ppi and coupled with volatility in market reactions, i think chair powell will keep his cards close to the best in reiterate that data dependent stance that we need to

see confirmation of this further disinflationary trend and further data points between now and the september fomc meeting. lisa: it is a bold idea, the idea that it is the question so many people have been asking. how effective is the transmission of monetary policy? do you think they will say, given all of different demographic and economic shifts, their role in the u.s. economy is much less than it used to be? lindsey: i don't think he is going to say that. i think he will say the fed continues to face a number of challenges. the economy is changing. we face challenges at a collecting data making sure we are accounting for growth and inflation in the economy so he will reiterate the ongoing transitions of demographics and different factors in the economy

but he will not downplay the very important role the central bank and monetary policy play in shaping the business cycle. when it comes to the expectations for policy he will remain very vague and talk about the need to review policy and update policy and reiterate the importance and ongoing challenges. lisa: it sounds like you're not expecting much. is there anything you think we could get from this that could be market moving reframe the fed's reaction function going forward? lindsey: i think it is going to be disappointing to the market. i think the fed chairman's comments will fall short of the markets expectation for a commitment to a reduction in september. that is what we saw in the july statement. the fed maintain the language they are not confident a policy pivot is appropriate. that was disappointing to investors and i expect we continue to see that.

that being said, a september rate cut is still a possibility and an increasingly likely possibility. the fed wants to see that confirmation in the pce. if we see that the fed is likely to focus on that green light for september. if we don't, the fed wants to maintain that wiggle room. the fed will be clear we are not there yet. we are almost there. they want to keep their policy close to the vest. jonathan: appreciate the update. lindsey piegza there. for more on the address and what it means for markets, joining us is mike schumacher of wells fargo. i want to go to this question, whether you still believe the big drop in yields is behind us and not in front of us and if so why is that? mike: we do. when you look at the market

action over last few weeks, especially early august, markets one boppers, yields went down a ton, and if you look at the relationship between long-term yields and fed fund pricing -- it tells us if you think yields would drop down to 350, you would probably need an extra 60 to 70 basis points. that seems like way too big of a hill to climb. for the marketer price 250 basis points of easing, i think that is far-fetched. lisa: do you believe this idea the fed should be easing by at least 100 basis points to remain neutral at a time inflation is decreasing at a rapid pace? mike: the fed should cut aggressively. real yields are still very high. we have talked about that a bunch. that story has not changed a lot. jay powell probably mention this on friday. taking real yields down fairly

soon makes a lot of sense that suggests fairly aggressive cuts. lisa: how do you think the rally is behind us? do you think the market has priced in the aggression? basically it will not get much more than this going forward? mike: you look at market pricing today, plus were -185 basis points for the next year. that is quite a bit. i can see that getting bumped up to 200 or 200 in change. the idea that going to 250 seems unlikely. i think will get zero out of jay powell. when you think about the outlook -- still, when you think about the data outlook early next month. a lot of events in a tight space. those will determine what the fed does. the idea of getting extra 30 to 40 basis points priced in is a tough thing to ask for. jonathan: i am not going this year.

lisa has to try to promote it and you are not helping. are you going to put that in the promo? lisa: i would just go canoeing. you can come with me. i have gone canoeing and kayaking. you cannot really hike by yourself because of the bears. this year the bears scared you away. jonathan: they did. you should be frightened about the bears. that is a sensible approach to go about life. i want to change the story away from chariman powell and his address in jackson hole and towards what will take place before that. the dnc in chicago. how are you thinking about political considerations and if i would ask you who the inflation candidate will be, can you point to one versus the other at this point? mike: that is a tough call. when you think about the idea of inflation, for us it still boils down to do you get a sweep? what is the chance republican sweep versus democrats.

or likely on the republican side. that would tell me donald is more inflationary as far as price controls. kamala harris, we can talk about that all day long, i think it is a bad idea, but it lends to trump being more inflationary and more the senate going with him then trump versus harris per se. annmarie: how much credence to give one of these policy proposals where some people say it is just rhetoric to get voters out on november 5? mike: it is tough to get ramped up about it and that is why a lot of analysts and economists talk about various scenarios but do not have a base case. you do not know how the electoral map is going to work out and most importantly you get a sweep or not? those are fundamental questions. for us that has been the main issue regarding the election. there are interesting talking points but we do not get too hung up. jonathan: sounds like everyone

should go on vacation. michael schumacher. sleep in on friday, skip the speech. do not bother with the dnc. lisa: by the way we will be broadcasting live from jackson hole. if you want to take a nap just turn it on. jonathan: solid promo from michael schumacher. lisa: do want to go hiking with me? michael: i don't worry about the bears. jonathan: what is the line. just don't be the slowest. michael: i just have to run faster than you. jonathan: i always felt more comfortable around tom. guaranteed you would not be the slowest. [laughter] lisa: love the way you think. jonathan: with the brenna bird belief -- with the bloomberg brief here is dani burger. dani: ernesto is passing near canada. the national hurricane center said life-threatening surf and rip current conditions are likely.

ernesto is expected to weaken tomorrow. the ports of l.a. and long beach which account for nearly one third of all u.s. container imports are seeing a frenzy of volume rivaling the highest import level centering the pandemic. the volume stand in contrast to concerns over pulling economy. retailers are stocking up ahead of u.s. tariffs and a possible strike by american dockworkers. there is a threat consumer spending weakens meaningfully leaving warehouses full and companies with too high inventories. amd has agreed to buy zt systems for $5 billion. it is a direct challenge to nvidia's ai dominance. zt make server computers for owners of large data centers. it is the kind of customer that has been pouring billions into ai capabilities. nvidia is the leader but amd is seen as its closest rival. that is your brief. jonathan: thanks for that and thanks for this morning. up next, setting you up for the

week ahead and we head over to the dnc. you are watching "bloomberg surveillance." ♪

jonathan: 38 minutes away from the opening. equities positive .1%. here is the calendar. tuesday we get results from lowe's and toll brothers. wednesday target and macy's and tjx earnings. thursday the jackson hole economic symposium begins and on friday fed chair jay powell delivers his remarks. turning to the other event, the democratic national convention kicking off in chicago. president biden said to deliver prime time remarks. tuesday it is barack obama

followed by minnesota governor tim walz on wednesday. on thursday kamala harris scheduled to deliver her acceptance speech. kailey leinz joins us from chicago. let's get into it. walk us through not just the schedule but what you and the team will be focused on in the week and days ahead. kailey: of course. it is going to be about energy. energy is what has defined kamala harris's young candidacy. it was roughly four weeks ago that she became the presumptive and now is the official democratic nominee. this week will be a coronation. the nomination is already locked up. it will be a week of celebration. starting tonight will be a week of reflection, not on kamala harris but on president biden. he is slated to speak this evening introduced by jill biden in what will be a swansong where he is probably going to talk about his own legacy but also try to make the case for the path forward, which now includes

vice president kamala harris who everyone in chicago wants to see win the election in november. something else we are watching for, in addition to the slated events is something organizers are not excited to see happening , which is protests over the war in gaza and the conduct of israel during that war. there were already protests in chicago yesterday that made traffic difficult. there could be more disruptive protests as the week goes on and we have already seen protesters showing up at kamala harris events on the campaign trail. she has handled them in many different ways. one time she told them they were speaking come at other times she has used that to call for a cease-fire in gaza. the way the protests will be disruptive, considering this is a convention in chicago, we saw another one also marked by protest. that will be creating the contrast to what is happening inside the united center where democrats are enthusiastic about their candidate in the vice

presidential nominee as well. on the outside we could see more tension. annmarie: given those will be the pictures coming out of the dnc, how unified is the democratic party? kailey: the party itself is pretty unified when you think of the party elite and leadership. the ones that were influential in forcing joe biden out of the race in the first place. you do see the political glitterati aligned behind the harris campaign. there are fractures evident in the democratic party based on the fact that there are uncommitted delegates to the convention because of the protest vote against joe biden and the democratic primary process which he won before stepping down. there are divisions over that issue but this is a party that has been energized by their new candidate and that is showing up in polls. we have pulls over the weekend. abc washington post fall shows harris nationally leading by

five points. all of that giving them energy into this week's events. jonathan: thank you for jumping on with us. hopefully we get annmarie on a plane and she can be alongside you. coming up, bob michele of jp morgan, neil dutta of ren mac all there and a lot more. from new york city, this is bloomberg. ♪

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matt: there's little changed but in the green after seven days in a row of green. seven days until the cash trade. i am matt miller. sonali: i'm sonali basak. katie: i am katie greifeld. bloomberg: open interest starts right now. ♪ sonali: we are in waiting mode. investors looking ahead to jackson hole later this week for clues on the policy path ahead. matt: a record offer for the owner of 7-eleven and what