>> my baseline is the fed cuts 25 basis points. >> i think they will go slowly. >> i am discounting the probability of 50 basis point cuts. >> it will take weakness to push the fed to 50. >> i think they will start in september with 25 but i hope they will ramp up to 50. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning. it is a quiet start to the last week of august.

a quiet start into tuesday. equity futures looking like this. futures positive .1%. coming off the back of weakness in big tech. the nasdaq 100 yesterday down 1%. equal weight, flat, small caps, unchanged. the relative outperformance there to stay in yesterday's session. lisa: i spent a long time thinking about our higher rates good or bad for big tech and if you have lower rates how much does that give a boost. this was a complicated question when big tech benefited disproportionately from low rates because that boosted valuations. that it was rates did not matter because they had so much cash. now where are we in that? how long can this outperformance continue? jonathan: i will share the view of bank of america, powell sealed the deal for a september rate cut. we'll catch up with a few guests

on the same page looking for the same rotation to continue. lisa: as long as the economy continues along with the rate cuts. that is ultimately the tension we felt yesterday from a lot of guests on the show who said right now we are pricing in a level of cuts commensurate with some sort of downturn. there is a tension with the amount of optimism baked into risk assets. you have to pick your poison. you want rates to get cuts that much, 200 basis points the end of the year, or an economy that is intact? you will not get both. jonathan: let's revisit things. the big one for earnings tomorrow, nvidia. thursday morning, jobless claims . today we have $69 billion of two your notes coming to market and consumer confidence later this morning. what takes your fancy? lisa: consumer confidence will be important. don't tell anyone, but i think

they will probably not be all that interesting this week. you have two, five-year, seven year. so much demand for u.s. treasuries, i cannot imagine it will be overly messy. to me it is about positioning ahead of nvidia. ahead of wednesday is how much is this the necessary overweight for fund managers at a time when you are dammed if you do and damp if you don't with one of the biggest weightings indexes. jonathan: this is the snooze 24 hours we've been waiting for all summer and we never got it. equity futures just about positive .1%. yields higher by a couple of basis points. the euro showing just a touch of strength, 1.1169 on euro-dollar. coming up we will catch up with chris marangi, ed mills of raymond james as trump and harris debate the next debate,

and kitty jukes of socgen on what a labor slow down means. stocks taking a braver -- taking a breather. chris marangi writing "we expect continued rotation from make a cap tech to small caps based on valuations relative to the prospect of lower rates." back in the old days we would say low rates, low growth, by growth, why is it different this time? chris: it has been turned on its head. big tech has been a safe haven, great cash flow, secular tailwinds, especially ai. that has propelled them to do well in a higher rate environment. rates have come off with the prospect of a soft landing we are seeing some rotation to riskier assets but assets that are more levered and will benefit from lower rates because the balance sheets will be in better shape. jonathan: does this remind you

of the end of july when we were punishing big tech and buying trash or is it healthier? chris: the valuation got too wide. we were seeing more value in smaller companies outside of technology. you've seen a lot of that correction take place already. i would add in asterix. as we head into the election and volatility increases we could see a move back to big tech as a safe haven trade. lisa: the sleepy week everyone has been looking for for august, how much signal and noise are we getting? peter tchir was talking about the incredible volatility of the moment and how the market is getting jerked around by options trading and some of the other dynamics in markets. are you doing anything during this week? chris: i think it is a lot of noise. you look at the chart since the beginning of july. not much has changed in the economy and ultimately in the

market, we are back to almost where we started. there are a lot of externalities. we are focused on longer-term growth. we are focused on policy differentials. lisa: based on the longer-term not changing and short-term seeing volatility, it seems like a good time to be looking for certain opportunities. if you have a thesis and there are certain dislocations, what on the margins are the strategies you are looking to execute in certain moments? chris: we are biased towards quality and safe havens, defensive names, names that will benefit from cuts in interest rates. lisa: what names are those? chris: utilities. utilities are back. valuations have gotten reasonable. they are historically beneficiaries of rate cuts. some staples, some selective industrials.

we expect to some softness in the economy. we saw that in second-quarter earnings. we do not think there is a recession but the economy is slowing down. jonathan: you identify defensive names. then there are relief type names. use the word trash, we can boy -- we can be more diplomatic. what is the story with regional banks? chris: we shot sort squeeze last week and some of the smaller banks, that is driven by technical dynamics but also the prospect of increased demand for things like mortgages and loans and an improvement in the balance sheet assets they have. there's still a lot of trash out there so you have to be selective looking at those companies. jonathan: i know you will not give us a list of names you think are trash. can you describe them? can you go through companies? i can share this quote from goldman. fomo will increase.

i get the sense when the market starts to run people come off the sidelines and start chasing trash. what you suggest people steer clear of? chris: bad balance sheets. over levered companies. companies have assets that are troubled. we are talking about banks and commercial real estate, companies without pricing power. i don't think inflation is gone. lisa: before we call things trash, we were talking about trash and zombies and all sorts of pejoratives and we were washed out in this period of high rates. are you seeing they are lurking? chris: lots of zombies. i would say there is cash in trash. among the largest holdings we have our republic services. those are great examples of terrific companies. lisa: that was glassy. chris: recurring revenue pricing

power companies. lisa: we have to talk about media. that is the space you focus on. i have one question about the paramount development. now we know edgar bronfman has been dropping out because the process was too involved. is it over? do we stop talking about this? chris: we can talk about it, reporters need to have something. it is not over. it appears sky dance has won. i do not think we have heard the lost -- do not that we have heard the last of edgar bronfman and his group. too many direct to consumer services. we will see what happens with warner bros. discovery and smaller names. jonathan: what are media organizations struggling with when it comes to legacy tb assets? let's take the month of july. a fantastic example of how engaged people in country are engaged with the new cycle. politics dominated everything.

i cannot think of a time like that since the pandemic when people were so engaged with the news flow but leaders are struggling to get eyeballs on their content. what is going on? chris: news and sports have to be consumed in real time. they are quite valuable. particularly sports. linear networks. people do not want to pay the tax. they think their other more efficient ways to consume content. if you do the math, the old pay-tv bundle we trashed for years and years is a pretty efficient way to consume content. it is dying slowly. they do not belong as public entities. jonathan: is there company you do like in that world? chris: i think warner bros., for all the negative headlines it has gotten, great assets that are very cheap. the prospects there are better than the market is giving them credit for. jonathan: good to see you to talk crash in more ways than one. chris marangi.

equity futures unchanged. let's get you an update on stories elsewhere with your bloomberg brief. yahaira: french president emmanuel macron is continuing talks to appoint a new prime minister after rolling out a leftist government. his office saying the left-wing new popular front candidate would be "immediately rejected" by all other groups in parliament. he is now pushing for a centrist coalition trying to end weeks of uncertainty after his decision earlier this summer to call snap election. since july's election france has been governed by a so-called caretaker government that cannot be toppled by the national assembly. in europe, shares of bhp are trading higher. the world's biggest mining company posted profit above endless estimates. revenue increased despite a deteriorating chinese demand outlook. ceo mike henry says he still expects china to hit its 5% growth target this year.

shares of bhp are down more than 20% so far this year. coco gauff comfortably advanced to the second round of the u.s. open with a win in the first round. the third-seeded coco gauff who won the u.s. opened last year shaking up early rest to advance. not such good news for fellow american sloan stevens who was knocked out in three sets despite winning the opening set 6-0. that is your bloomberg brief. jonathan: i was there and it was disappointingly gay one so long. lisa: why was that? jonathan: i was waiting for novak. i am supporting sloan. i am thinking this will go quickly. 40 minutes and novak comes out and i can watch a couple sets and go to bed. 7-5, 7-5, a second set. novak comes on before 10:00 eastern time.

lisa: how many hours did you sleep last night? jonathan: three hours. to see one of the greatest tennis players, worth it. everything will be trash for the next three hours. coming up -- >> we agreed to the same rules. the agreement is it would be the same as it was last time in case it was muted. jonathan: that conversation is up next. live from new york city, good morning. ♪

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mics off. >> we have to the same rules. the agreement was the same it would be the last time. in that case it was muted. i did not like the last time but it worked out fine. jonathan: the trump and harris campaign sparring over the rules for the september 10 debates. trump's demanding the same rules as an earlier debate against president biden where mics were muted while the other candidate spoke. ed mills with this to say, "if harris continues her momentum we will need to discuss the probability of democratic sweep, which is not priced into the market." we will get to that punchline in a minute. i would love your views on the presidential debate. you have to remember this was about keeping the former president quiet on the debate stage and then what we all witnessed was that became an asset for him, protected him from his worst instincts.

it is clear the trump campaign lawyer the same thing again. is this going over the final details or do you think there is an obstacle to making this debate happen september 10? ed: there is a debate on whether donald trump wants to show up to this debate. when we start arguing over the details it raises the question even more. your point as relates to mics on versus off, it is something the biden campaign push for because they wanted to make sure president biden got across all of his points, however it was something that was clearly helpful for former president trump during the debate. when you look at a lot of the takeaways from that debate on the dial test, number of things donald trump said scored really poorly with persuadable voters. trump arguably had a pretty bad debate. the good thing for trump is biden at a disastrous debate that overshadowed that.

harris campaign is looking to have the microphone on and all of her campaign has been about trying to trigger trump into going off and trying to have him come across as on presidential, something they think would benefit their campaign. jonathan: what the trump campaign lawyer love is to get the vice president in front of a microphone to answer some questions. i don't see how the former president walks away from any of this. can he walk away from this debate? ed: i don't think so. it will not be without a debate. since we have had vice president harris ascend to the top of the ticket there has not been a sit-down interview for her, there has not been a debate. almost everything has been scripted. the unscripted moments are where voters will have an opportunity to get a sense as to whether or not they will vote for her in november. the trump team sees a lot of momentum in the harris campaign and want to see if they can

disrupt that with unscripted moments. lisa: is the only way to get her to have unscripted moments to have these debates? ed: i think there will be interviews. she has highlighted that by the end of the month she will sit down and we are close to the end of the month. i don't think you can get into november without that sit-down interview. if i put my political hat on she has done quite well politically since she has ascended to the top of the ticket. if everything is going well you sit back and let it continue to go well until you are forced to have those unscripted moments. we will have them. it is politically to her advantage to let this hello -- to let this honeymoon period last as long as possible. lisa: i want to go to something you wrote in your notes. in polls it looks like kamala harris is in the decidedly but if you look at market action that is not being priced in.

the trump trade is still present in many pockets of the market. why do you think that is? ed: she clearly has the momentum. trump has kept a lot of these swing state polls close. you add in the fact that he is under pulled historically. i looked back at 2016 and 2020. nationally he is under pulled by 3%. in some of these swing states he is under pulled by 5%. if a swing state is tied, is he actually ahead? it is increasingly likely harris is able to capture that popular vote, but it is only about getting those 270 electoral college votes if we start seeing polls coming out of the convention where the lead in some of the states in multiple states have her in that lead, then we start talking about is sheet really in control of this race? is she continuing that momentum and what does that mean down ballot? we would be looking at some of these senate races.

if she gets that majority in the senate that unlocks reconciliation, that unlocks the ability for democrats to do some of the big policy things we have seen over the last couple of years. if she were to have 50 votes in the senate it would be 50 democrats, not 40 democrats plus joe manchin and kyrsten sinema. what would be done in a harris administration could be consequential next year. those are the things we are debating at raymond james, especially when we look at the deadlines of the fiscal cliffs of the debt ceiling coming back and taxes at the end of the year. health care reform needed with subsidies expiring as well. lots on the agenda. jonathan: it would be nice to know with those consequential policies and 2025 might actually be. we have had people around the table point out continuously that some of the market negative things the vice president would like requires congress, the

likes of a much higher corporate tax rate. some of the market negative things the former president would like does not require congress, things like tariffs. when you start to talk about blue sweep come are these market negative policies or market positive policies we would see in 2025? ed: everything in life is compared to what. at raymond james we have been clear that let's go through each of these scenarios, each of these scenarios have things positive for the market and are negative for the market. you highlighted the tariff policies former president trump wants to put in place, 10% around the world and 60% on china. getting stricter on immigration. what impact does that have on the labor force? what impact does that have on inflation? from that perspective the fed will pause and make sure they understand the economic impact before they continue on monetary policy. your right to point out a higher

corporate tax rate, higher taxes on high end individuals could have market impact in a harris victory. i wonder if there is a democratic sweep would we see a lot of selling as we head to the end of the year as people try to get ahead of higher capital gains rates or higher taxation on dividends. these are all things where we know with the possible impacts would be but we need to know the outcome of the election. i would not be surprised we have some weakness heading into the election, only to see the certainty reverse and picking the winners and losers immediately after the election. thing attention to each of the policies is really important. lisa: we heard on warren buffett that one reason he has not been deploying cash, he has been selling, including apple shares come is to get ahead of the capital gains taxes. there is a likelihood that kamala harris -- she has endorsed the tax rate going to 28% for big corporations.

how big of a shift in markets could you see on the heels of some of those policies, things not treated with any seriousness in markets? ed: on the capital gains rates we have got a lot of questions, the proposal biden and harris submitted to congress early this year which is for households above $1 million the capital gains rate would go to ordinary income plus additions to some of the payroll taxes. up to 44.6%. that is on a relatively small percentage of individuals, but it becomes a question of how many assets are subject to that. we saw a couple years ago as we were debating similar policies that when proposals came out in congress there was selling ahead of that that caused areas of volatility. ultimately approved to be the wrong thing to do from a market perspective. people are funny. they want to make sure they get in ahead of any potential risk

and even if it proved to be wrong i would not be surprised if they try to do it again, especially since on taxes you cannot make it retroactive. anything that gets done before january 1 from a trading perspective would not be taxed, but anything after january 1 could have that impact. that is why i could see that reaction after the election going into year end. jonathan: given how tight the race is and given what you said about the former president under polling in many circumstances, walk us through your favorite way to read the race. what you look at? ed: you have to look at everything. look at sentiment, look at predictive markets, look at polling. have conversations with voters. it is a mosaic and we have to be humble about the fact that we have a number of surprises and elections past. as we get closer to the election

i will caution folks, to the extent you really think you know exactly how this is going to play out, we could be in for another surprise. do not get too over levered to any outcome. understand this is in the voters hands and we have 150 million people vote predicting that is very difficult. jonathan: ed mills of raymond james on the next couple of months. i thought warren buffett wanted to pay more in taxes. isn't that the whole stick? lisa: that was the theory behind apple. i love how you try to get clarity and people are like what is the secret bullet. everything is relative, people are funny. jonathan: something like that. more on the crude market. we will catch up with ellen wald of the atlantic council. ♪

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jonathan: equities on the s&p 500 negative. down .06%. the pullback dramatic on the nasdaq side. the nasdaq 100 down more than 1%. leadership last week continuing into yesterday's session. people throw around this word healthy, they see better participation and they say that is healthy. what if we are talking about companies that are not so good, getting chased because they have missed out on the rally? lisa: it is noise being cast as

healthy at a time people are hoping for a broadening out that can sustain the rally. there is a question of whether a weakening economy is equal with the idea we are seeing bacon to markets that some of the weaker names can perform. is this a head fake? that is what nvidia earnings will show, especially at a time we do not understand of rate cuts or good or bad. jonathan: nvidia up tomorrow after the close. switch up the board and turn the page. let's get to the two-year come up by about one basis point. later on this afternoon, 69 billion dollars of two your notes, then later in the week five-year notes, then seven your notes. a lot of debt coming into markets. lisa: i want to see the seven-year debt. there is some question about whether we have priced in too many rate cuts. at what point do people start looking at the deficit and also the idea that if the fed is trying to get ahead of weakness to cut rates sooner, does that

mean they have less capacity to cut rates as significantly as people think longer-term because they will keep the economy afloat and some of the inflationary pressures. that is what we heard yesterday from the richmond fed president. i am very curious about this. tom barkin was talking about this, re-inflation concerns. jonathan: i mentioned the word fomo. we will catch up with phil camp rally later on. overweight u.s. stocks, overweight em, overweight japan, underweight u.s. bonds. how many people are in the boat where they are chasing the equity market? phil has been bullish for a while. a lot of people want to jump on the train and chase things into year end after what we heard on friday. lisa: this goes to the point if you have all this money, does it just going to bonds or does it go and everything as you start to move out the curve and go away from core money market

funds to try to get yield? it is a good question. there is a tension within the shame -- within the same shop. phil and bob michele might have a different opinion. can you get the good kind of rate cuts as deep as this market is expecting? jonathan: we welcome different views. let's turn to the fx market. the dollar, five weeks of dollar weakness into this week. the longest weekly losing streak of the year. dollar against the japanese yen by .2%, just short of 145. lisa: this is one of the biggest risks i keep hearing about into september which is dollar weakness and protracted dollar weakness given how much people were overweight to the dollar for the past 12 months. how much does that start traverses people pricing rate cuts, especially as you see signs of strength elsewhere. that is where you hear stories

about money being sold out of china and the yuan appreciation of 10%. either way, how much is this market coiled with that being a potentially disruptive trade. jonathan: which economy would you like to own? the one where we are cutting interest rates and the economy looks back or the one where unemployment is still around 4% and inflation is coming back towards target. lisa: are you throwing shots at europe? jonathan: may be a few shots at europe. maybe a few shots at germany. lisa: it is all relative. people are funny. there is a question of whether we have already price the weakness in. i think that is the existential question. i think kit juckes will tell you to stop worrying so much about dollar weakness. under surveillance, president biden's top security advisor jake sullivan lending in china for three day visit.

expected to raise concerns over china's backing of russia in its work against ukraine while beijing is expected to raise the issue of u.s. tariffs. germany, just a derivative of this story. lisa: how much these tensions are ratcheting up. canada piggybacked what the u.s. was doing. there was an interesting article in the financial times about which side -- the trump campaign lawyer harris campaign for the chinese government, which is worse. how will the tariffs evolve? this is a bipartisan effort. i am curious why this is coming now. what is jake sullivan going to be talking about with the chinese authorities at a time he may not be relevant in six months. ellen: how much -- jonathan: how much leverage do they have given what is going to take place in this country in november. apple set to release the new iphone september 9. a list of features available in all its new models.

we reported september 10. internally that was the date. it has been brought forward. unclear if that is because it clashes with the presidential debate. no explanation. lisa: i have nothing to say except how much of a trying to get ahead of that so they do not have to compete with september 10 when all eyes will be on the harris trump campaign and that debate. i do not know the answer but that is the first thing i thought when i read this. they want as much buzz as they possibly can. rather than do it on september 11, they will do it on september 9. jonathan: i have lots of things to say, we can do that later. the cfo stepping down. lisa: he will still be there. this is a shepherding in of the new guard. he is 60 years old. i imagine he wants to spend more time enjoying the amount of money he has made. that is part of the reason why

as they pave the path to a new guard they have done this in different roles. interesting how they change the page in a more controlled way. jonathan: more on that story next hour. let's turn to crude. wall street starting to sour on crude. morgan stanley and goldman lowering the price forecast as oil studies following the three-day rally as the threat of a halt in libyan supply is offset by shaky demand outlook. ellen wald writing "a drop of libya's one million barrels from the market was not foreseen by anyone and could forecast a period of tighter supply before opec-plus starts increasing production as they intend in october." welcome to the program. can we begin libya and what is happening and how temporary this might be? ellen: this is an interesting situation developing. the government in libya seems to have ordered a complete stoppage of oil production and oil exports for reasons we are not

entirely sure of. more will emerge as the situation develops. it seems like they are not entirely familiar with how the process works. you cannot turn off the taps and everything stops. the oil companies producing libya's oil are all subsidiaries of libya's national oil company are saying we will start slowing things down. we cannot just turn everything off on monday because you say so. we are definitely expecting to see less libyan oil production as the week goes on, but the question is how much will come off the market. is this a long-term thing, is this a short-term thing? what will be resolved? when you're talking about over a million barrels of oil a day, this is not nothing to the market. jonathan: -- lisa: brent crude

has written 7% over the last three trading sessions, the sharpest rise to april 2023. this comes at a time there questions about the opec-plus reaction function. how much is the swing factor? is this potential disruption in libyan oil production and output only going to push opec-plus to increase production of its own? ellen: i think the signs so far have been headed towards opec pushing off its planned production increases. we saw opec revise its demand forecast down recently, which there forecast were quite a bit higher than everyone else's. they generally tend to be but they were out of whack. that downward revision was expected and anticipated because it had to happen in order for the group to reconsider putting through their planned increases.

if libyan oil is off the market for the foreseeable future, if this continues through august and september, once we hit october, there will be a lot of pressure on opec to do the opposite. not to rein back their planned increase but increase more and compensate for the lack of libyan oil on the market. it is a situation that i am sure opec ministers are monitoring very carefully. they will want to react and not jostle things too much. they definitely like prices pushing the $80 mark but at the same time you do not want to see prices in october soaring too much over $85 or $90 because that is not so good for them. lisa: when you take a step back, there is a question of what are we missing? nobody was put in libya on their bingo card talking about what could cause oil prices to surge. they were talking about israel,

hezbollah, iran, russia and ukraine. how fragile is the situation with production right now given the hotspots emerging in multiple places? ellen: it is interesting because some days you look at the economic data and it seems like there is too much supply for where we think demand could possibly be headed stop if the economy starts to slow than supply will seem too high. at the same time there other signals pointing to robust economic growth. that means we need more supply. that says a problem in libya could impact the whole market. it is these kinds of things you do not anticipate a sudden shut down from libya or a sudden weather event that takes up production in the gulf of mexico or something in a place -- there could be a problem in guiana or

brazil we had no idea that could pop up. that is one of the reasons why opec likes to have this ability to suddenly react, to suddenly increase its production, which it can do. it is holding on to a lot of spare capacity it could put on the market if it is ever needed but at the same time it does not want to flood the market and cause prices to go down at a time the economic situation is also going down. jonathan: i mentioned the revision from goldman. i will share some of that note with you. we reduced our range for brent prices by five dollars a barrel. the 25 average brent forecast is now 77 versus 82 previously. they say that reflects upside surprises to oecd inventories. here is the quote that jumped out. "we still assume opec will increase production in 2024 where the market is shifting from an equilibrium where opec

produces volatility to a more long-running equilibrium they say will be focused on strategically disciplining not opec supply and supporting cohesion." forgive me for asking you to translate that last line, but what you think that means in practice? ellen: that is interesting language. disciplining non-opec supply is a way of saying we want to keep you in line as a way of keeping prices not too high so you cannot expand your production. we will treat non-opec supply as though it is opec-plus supply and we will use a different method of pressure. that is intense. they have to understand the non-opec supply right now is not the same market, not the same industry as it was in 2015, 2016, 2017. this is a whole different game now. there has been a ton of consolidation and big consolidation.

many fewer producers. this is not the kind of market where it is produce or die, it is at all costs. it used to be produce or produce just to keep up with payroll. we have increased productivity, we have much larger corporations running the show. they will find it much more difficult to discipline non-opec production if they're talking about the permian. jonathan: you think they are talking about the permian or do you think there talking about places like guiana? ellen: the problem with places like kiana is those are much larger projects that have been in the works for a long time and they cannot just turn that on and off. these are things that have been well forecast, well played out. they know how much is coming online at any given time. in the permian it is still more of a short-term wells, the wells

are more short-term. there is a lot more flexibility there to reduce production then in a place like kiana where the projects -- a place like guiana where the projects are long-term and cannot just be turned off. jonathan: ellen wald of the atlantic council. crew down .6%. brent a break of 81. with your bloomberg brief -- yahaira: mark zuckerberg allegedly biden administration pressured facebook to censor covid-19 content in 2021 during the pandemic. zuckerberg made the admission during a letter to the house judiciary committee and said the content included humor and satire. looking back, zuckerberg said "i believe the government pressure was wrong and i regret we were not more outspoken about it." shares of paramount are trending lower, more than 4% after edgar rothman junior announced he was

chopping -- announced he was dropping out of the bidding war for the company. he submitted a proposal last week challenging an earlier offer from sky dance media. sources say sky dance accused paramount of breaching the terms of the merger agreement by continuing to engage with another suitor. the first ever private spacewalk will have to wait. spacex has scrubbed this morning scheduled launch due to a helium leak. one of the four civilian astronauts is billionaire jared isaacman who has flown with spacex before and provided the funds for this mission. isaac spent and space -- jared isaacman and spacex engineer are expected to step out and perform a spacewalk. the next launch window is no earlier than tomorrow. jonathan: can we keep those pictures up? will get a star review in real time from bramo. lisa: i spent a little too much

time focusing on those custom-made spacesuits that are much easier for them to get on in zero gravity. they can plug into oxygen. they look more valuable. jonathan: it looks very cool. thanks for that. up next, avoiding in injury. >> we do not want to get ourselves into a situation where we are keeping policy highly restrictive into a slowing economy. that is a recipe for over tightening and injuring the labor market. jonathan: that is next. you are watching bloomberg tv. ♪

♪♪ ♪♪ sandals jamaica sale is now on. visit sandals.com or call 1-800-sandals jonathan: equity futures negative almost .1%. welcome to the program. in the bond market yields creeping higher.

10-year 3.8463. under surveillance, avoiding injury. >> ic adjusting policy is appropriate. we do not want to get ourselves into a situation where we are keeping policy highly restrictive into a slowing economy. every time inflation comes down the policy gets more restrictive. that is a recipe for over tightening and injuring the labor market and growth. jonathan: traders circling weekly jobless claims next week's report as key data points ahead of the fed's next meeting as officials warned of potential harm to the labor market. kit juckes fighting that while the labor market is clearly loosening, they're still uncertainty about how much it will slow. for the fx market come after the dollar climb so high the slowdown will see a dollar positions reduced. we have the economy and we have your call on the central bank in foreign-exchange.

can we talk about the central bank first? market participants were excited about the prospect of a lot of rate cuts. they took them all back an outlay of price them all in again. what is different now compared to the start of the year? kit: good question. the first piece is that even the fed is recognizing the labor market is changing, jobs growth has slowed, we have revised away a few jobs for the last couple of weeks. it is slowing down. there are signs of weakness in the housing market. what the fed has done is beginning to have an impact. the labor market is the center. that is why it got more mentions than anything else at jackson hole and we have seen one week labor market report, one downward revision, and we are waiting for more to provide any kind of confirmation. i would say the chances that this is a slow down our strong now. what kind of slowed down, much less certain.

there is enough and the labor market to say this is now slowing. jonathan: are way too dovish lee priced tour too conservatively priced at the moment? kit: if you pushed me against the wall i would say we are pricing for a faster pace of rate cuts that is likely unless things go badly wrong. the destination, an eventual fall to 3% is not an excessive fall. the last time the prophet rates were 3% was in 1992, when inflation expectations or a lot higher than they are now. real rates were less restrictive and the economic recovery we have surprised everyone and we caught it the great moderation. the destination is fine. the idea we get as many rate cuts priced in, the data need to be pretty awful. lisa: i was wondering whether

this would be the dramatic salvos heard across wall street burn the fall given the fact that so many people had been sober overweight the dollar. how offsides will this market be when it starts to adapt to the idea of the rate cuts the market is pricing in if we should get the kind of cuts that are currently being represented in fed funds futures. how much dollar weakness could we end up seeing? kit: a fair bit. there is a piece about the chinese yuan that was the most read story on your terminal overnight citing stephen jen who talked about an avalanche of money. i have been struck for years that the big dollar rallies in the 1980's and in the 1990's, both of them were completely reversed. the first without any recession. the second with a mild recession. there is a sense that we have seen not just carry trade's but foreign investors buying u.s.

equities, foreign investors buying u.s. bonds, everyone buying everything american for anything for years, and of people start bringing that money home, whatever they are doing with it, that you can have an outsized correction on the others over the course of the next few years. i definitely never saw how much the dollar was going to go up and 85 or how much it would fall and was continually perplexed by how strong it got and how much it fell between 1995 and 2004. i'll be surprised if the dollar goes all the way back that i'm beginning to understand how it happens. it is an avalanche of money going home because it has a great time being in america. lisa: the holidays are over but are they beginning? i hear jon ferro's voice in my head, where you want to go? germany?

china? how much confidence is there and a lot of these companies to go home from the holidays? kit: that is the really big challenge. if i look at japan and say with dollar yen, purchasing power parity for dollar-yen is in the mid-90's. how far could that go on no money doing anything? i cannot imagine euro-dollar going miles. i am almost certain in my mind that we are going to see another cyclical lower high for the euro after a series of them since 2008. we did 160, we get 127, then we did 123. i don't that we are getting close to 123 this cycle. i look at history and say once a stone starts gathering momentum it goes down. what are the conditions for an avalanche?

a lot of conditions of the top of the mountain. there's not a question of the bottom of the valley, is just going. jonathan: did you call stephen and ask him about that call? kit: i haven't. this is my first day in to work. i am as close to his office as i could usefully be in your offices but i've not spoken to stephen yet. jonathan: kit: jukes of starkville -- kit: jukes of socgen. chinese companies may be enticed to sell as the u.s. cuts interest rates, move that could strengthen the yuan by 10% according to stephen jen. lisa: stephen jen is the one who pointed the dollar smile. this is one of the fears. what are we missing in terms of how offsides this market is with respect to dollar strength? jonathan: massive call. coming up come the second hour

of bloomberg surveillance with sebastian page, matt sheppard, matt stuckey, and oliver chen. this is bloomberg. ♪

>> the market is broadening. >> we are seeing a weakening of a strong bull market. >> the fed will be slow to respond. >> if they cut 25 is probably fine. if they cut 50 that has been a bad signal. >> the market is pricing in a 20% chance of recession. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie

hordern. jonathan: the second hour of "bloomberg surveillance" starts now with equity futures -.1%. softer across the board. on the nasdaq 100, underperformance yesterday, underperformance this morning. on the nasdaq down another .1%, where the over performance has been small caps, the russell, down just a touch. that continued yesterday. small caps doing nicely. lisa: you asked if this is a healthy broadening out or not? the real question is is this a broadening out or not or just people hedging their bets? you do have people feeling optimistic because of rate cuts. on the other hand you've already seen incredible outperformance by nvidia which has led the s&p 500 and added 5% to the overall return this year. how much is this people trying to hedge a little bit considering everybody is

overweight because you have to be to be outperforming? jonathan: it is one of those markets where there something for everybody. chris bryant d, with us about an hour ago, you can identify the characteristics of this. then you can identify the trash, so to speak. some of the names that have rallied on relief from a we have heard from chairman powell. lisa: you called trash regional banks? kit: not all of them, some of them. lisa: there is the issue of will any fail or will we have the zombie companies that have survived that will be carried along by lower rates going forward? this is the tension in markets. are we entering a period of benign rate cuts or not? it seems like analyzing oil policy is analyzing fed policy which is analyzing political policy which we cannot give you insight into. there is a question of where markets are trying to find an edge but it seems like using

options to hedge nvidia seems to be the play. jonathan: will have a long conversation about how defensive nvidia is. i want to talk about the calendar briefly. wednesday nvidia earnings and for many that is where the week begins on wednesday after the close. that on thursday morning for all of the fed speak out there no one will adjust the federal on nvidia, maybe they will come ultimately they probably should not. this will come down to jobless claims thursday morning. lisa: how bad is this economy and that is the question at a time we saw mary daly rerate with michael mckee what we heard from jay powell, which is further weakening in the labor market is not welcome, they do not welcome further cooling, so what is the threshold to move in a more significant way? how far ahead of this do we get? there are two cams of analysts. one saint 200 basis points of rate cuts through the end of this year implies significant weakening.

there other people that imply the rate is low enough that 200 points of bases cuts will get us closer to neutral. it is unclear which camp will win out. i did not have a handle for much inflationary pressures left in the system and to jobless claims tomorrow how much weakness there is in a system where we have not stated in the headline data. jonathan: our survey coming together. 233,000 is the estimate for jobless claims. over the last three weeks before this we have had these reads that are pretty contained. if you think about what's spooked this market, unemployment going up a little bit more in jobs coming in at 114,000. 114 is not a terrible data point but we got blessed by big reads that were revised a lot lower. what is bad on september twitter -- what is bad on september 6? we need to answer that to -- lisa: no one has a full answer.

when you ask people they say it is the totality of data and it will not necessarily be one aspect. there is an existential fear you can feel and a lot of these fed speakers as they talk which is it never happens in a linear fashion. you never see unemployment just gently go up and end at 4.5%. there is usually a significant rise in how quickly the and employment rate can rise. if that is the case they want to get ahead of that in any kind of weakening below in terms of the jobs created what people were expecting could be considered one data point on that increase in unemployment people are fearing. jonathan: the change in the last two years has been amazing. we have people talking about a federal reserve concerned about its legacy. we think about policy makers and the risk management business, they are concerned about what they do not want to be remembered by, not what they do, what they do not want to be remembered by.

two years ago they did not want to be remembered as a central bank that allowed inflation to get away from them and repeat of the 70's. two years later you can feel the fear. the fear is unemployment getting away from them after a little bit of a move higher over the last few months. lisa: you talked about jay powell and the tone of his speech. it was not a victory lap but it was him painting history. it was him saying my legacy will be the soft landing we engineered everyone said was not possible. we are concerned of being able to do that because of where inflation is. that is a shift in tactic important to note at a time they're not willing to talk about whether they are flexible and the 2% inflation target and that will come with the bond auctions. jonathan: the stock market heard it loud and clear. the stock market heard it loud and clear. coming up, sebastian page of t. rowe price. matt stuckey of northwestern

mutual. oliver chen on key u.s. consumer themes. stocks steady as traders await the next big catalyst, nvidia earnings tomorrow. sebastian page writing "we are positioned for the marketer brought an out over the next six to 18 months and we like value stocks and real assets equities. " i will go to your line. aggressively neutral. has that changed after that speech on friday from chairman powell? sebastian: it has not. we are still have been the mother of all debates between the bulls and the bears. the bulls are being pragmatic and saying earnings are growing 11% and rates are coming down. those things are pretty good for markets. the bears are saying the economy is slowing and you can look at economic surprise indices where

manufacturing pmi going into the 47, 46 range, or the labor market. the bears are concerned with the economy. they are concerned with high valuations. what you do? when you see both sides making compelling arguments you know that over time stocks and bonds will deliver a return. i am adding bonds to that statement because were getting into a rate cutting cycle. you stay fully invested in your stocks and bonds and a risk level that matches your long-term risk tolerance. if your exciting -- if you want to make exciting you say you are aggressively neutral. jonathan: looking forward to catching up with you next time. we will leave it there. come on. give me more than that. it with the argument with the bulls and the bears, who has the most convincing argument? sebastien: you scared me.

i thought i was getting thrown off the air right away. [laughter] here is how i think about the stocks versus bonds debate. you have to have more conviction to be bearish than bullish. overtime stocks outperform bonds by 7.3% with a hit rate of 70%. when you in that situation, the base rate, which is important in forecasting matters. if you force me to take a position i will hold stocks in this environment. i do not think we are getting into a recession. you have a lot of guests saying we are slowing down but it is not a recession. i am in that camp. lisa: if that is the case, why own so much cash? jonathan: this is a -- sebastien: this is a great question and we are looking to

add to bonds in this environment. we just did a study of 12 fed cutting cycles over 70 years. this is an important regime shift. we are getting into a cutting cycle. this one is not exactly alike any cutting cycles in history. in particular the fed starts to cut when recession probabilities spike. right now they are at 25%. a pretty good environment for the fed to cut. setting that disclaimer aside, 12 out of 12 cutting cycles bonds outperform cash and they outperform cash by a remarkable average of 8%. we are looking to add duration. it is uncomfortable because bonds have rallied so much, but we are looking to overtime phase in some duration, start deploying some of that cash into

bonds. he did not want to be too sensitive to the entry point so may just phase it with discipline over time. that is what we're looking at now, deploying cash into diversified bonds. the kicker is if growth is now more of a concern that inflation , that is good for bonds as diversifiers. they start playing their role in the portfolio we know and love for bonds. they did pretty well with the last shock. bonds acted as diversifiers. lisa: is a moment of aggressive neutralness which is a dramatic distinction from just neutral. there is a question going forward about what rate cuts will do for stocks, particularly some of the high flyers in terms of big tax. you are one who believes in broadening out in the equity market but there is a key

question we've been talking about whether this is looking at some of the less loved stocks and seeing what -- the real believe in true growth. -- do you think rate cuts will help those smaller companies or do you think maybe this is something that will help big tech just as much in terms of valuation increases, it is just that the valuations of oregon up to the degree they have? sebastien: i think it is the latter. big tech has been fully valued. we still like a lot of these companies. as asset allocators we are position for the broadening. this morning you were talking a lot about small caps. i like value better for the market rodni in this rate cutting cycle where we do not necessarily get a recession over the next 12 months.

value stocks have high return on equity in small stocks. 13% return on equity versus 3%. i would like to neutralize small versus large and let the stock pickers utilize opportunities for higher quality small and mid caps but neutralized at the asset allocation level. by the end of the year, this is not very well understood. the year-over-year earnings growth for the value stocks is expected to outpace the year-over-year earnings growth for the growth stocks because the comparables are so advantageous for value stocks. i also think that alexion could be inflation. you had someone earlier talking about commodities. with the inflation swaps at 1.9% or 1.8%, there is room for

inflation to surprise on the upside, in which case you'll be glad you are in energy sectors. jonathan: when you a real asset equities, can you build on that? sebastien: that is a combination of energy stocks, infrastructure , it is broadly diversified. it has real estate and metals and commodities -- the reason i like it more than tips, it goes back to my statement, overtime stocks beat bonds every 12 month period stop i would like to have stocks that have a highly levered response. inflation is coming down. i have to be long because the mortgages in a smooth decline in station and inflation that there's a lot of room for society -- i'm not saying we're

going back to five prisoners of percent inflation at all, i'm just saying i like the hedge, because a lot can happen. jonathan: this was great. sebastien page of t. rowe price. that last bit got your attention? lisa: on the one hand you do not think inflation is going to be a problem. on the other hand you're trying to go into real assets as i hedge. it strikes me this morning, i write it down because it represents how i feel today. analyzing oil policy is the same as -- we don't know anything and we are shooting darts dartboard. how you diversified? what is the best way to diversify investments to hedge against all the ramifications of what we know. jonathan: we talk as if we are in the crystal ball business. we are in the risk management

business. lisa: how do you offset the risks while also not underperforming from a historical perspective. it is a wise way to look at it and i like the risk management point because there are a lot of unknowns at this moment. let's get you an update on stories elsewhere. yahaira: jake sullivan has arrived in beijing. the three-day visit is his first to china as president joe biden's top national security eight. he plans to meet with the foreign minister and raise concerns over china's support for russia and ukraine were plus taiwan and the south china sea. while china is likely to bring up taiwan along with u.s. tariffs and efforts to cut china off from advanced technology. apple has sent out invitations from a product launch on september 9 where it is expected to announce the iphone 16. the theme of the event is a reference to the interface used

by the new series digital assistants. apple says longtime seal will step down as part of a planned succession and had the role to his top deputy. eli lilly is selling its blockbuster weight loss drug to patients at about half the cost of its widely popular shots. patients with a prescription can purchase a month supply of single-use files through the direct to consumer site starting today for as little as $399 a month. a higher dose is going for $549 a month. the move is part of the all hands on deck effort to expand access and ramp-up supply for around -- that is your bloomberg brief. jonathan: real news. oasis back together. liam calendar -- liam gallagher out on x.

the great weight is over. summer tour next year. you in? lisa: i think so. i also need about three hours of sleep to come in and feel up to talk about the market. jonathan: we have a couple of minutes. tk comes to me doing the radio show and they say we can play music going up to commercial breaks. i picked some tracks from that album that came out 30 years ago, what is the story, morning glory. i never hear them. tk comes back into work and gets my tapes of oasis we are using and gets them erased off the system to make sure they are never played. he cannot stand the band. would not play my music. he wants 70's rock. lisa: coming up next, tom keene on why he hates oasis. jonathan: that was the end of music in the commercial breaks.

he got them erased off the system. tom keene banning joy on the radio. up next, managing u.s. china relations. >> there is no question the trump administration started with tariffs and the tariffs under biden are higher and more exhaustive than they were under trump. i do not see any scenario when any of the tariffs get off once they have been put on. jonathan: that conversation up next. from new york, this is bloomberg. ♪

jonathan: equity futures on the s&p negative .05%. in the bond market yields higher three basis points. the 10 year, 3.8463. managing u.s. china tensions. >> there is no question that the

trump administration started with tariffs in the tariffs under biden are higher and more exhaustive now than they were under donald trump. the u.s. tr, the department of commerce, the export restrictions are only growing. i do not see any scenario where tariffs come off after they get put on. jonathan: jake sullivan visiting beijing for wide-ranging talks with chinese officials come expecting to raise the issue of tariffs. the nation facing new tariffs from canada as the country lines up behind united states with 25% tariffs on steel and aluminum. bloomberg's mike sheppard joins us for more. that is the purpose of the trip. what is the prospect we get any result? mike: the real result, if you are looking at it from the biden administration standpoint is to keep things from getting worse

than they are. let's be frank, relations with the second largest economy are not great. we have heard the litany of things imposed by the u.s. and other governments against china when it comes to its economy and electric vehicles. all of those things are weighing on the relationship, especially because we are also seeing a softening in the chinese economy. we saw signs of malaise in china's economy among chinese consumers. today temu's parent gave a bloom your outlook than expected by investors. while it is not connected directly to jake sullivan's visit to beijing it is overshadowing it and one of the things driving chinese officials concerns. there watching their own economy and anything that might be affecting it. jonathan: we spent a lot of time talking about terrace coming from former president donald trump. you heard the words from

henrietta treyz who said there is no question the trump administration started with tariffs in the tariffs are high under biden and more exhaustive than they are under donald trump. what can we expect from harris? mike: we are not seeing any signals that harris will take her foot off the gas if she is elected president and her administration takes office in january. everything they have signaled so far is a continuing tough stance on china. what they are looking for from china is certain benchmarks in terms of how their economy is behaving. one of the biggest concerns is with electric vehicles and this is one shared by other allied governments from the european union to prime minister justin trudeau in canada. china has been supporting its domestic electric vehicle industry to an extent it puts manufacturers in other countries at a disadvantage. this is something harris has been emphasizing, the biden has

been emphasizing. we should not be looking for any change to that, nor to the regime of export controls the biden administration has been imposing on a wide range of advanced technologies, especially those used to produce semiconductor's. that is something we could look to continue. lisa: what is the real reason jake sullivan is going now? the timing is strange ahead of the election amid a number of hot wars. is it really about the tariffs or is there another agenda? mike: the goal is to make sure relations are locked in and stable as we head into this election. they want to make sure this relationship that the u.s. has tried to forge, staying tough on china while also staying engaged does not get any a worse and they are able to lock that in so it withstands whatever happens in the election in november. jonathan: appreciate your time.

mike sheppard out of d.c. on the latest between united states and china. you ask that question because you have something in mind. what you think it is? lisa: i wonder what kind of clout does jake sullivan bring under biden given biden is not running again? what is the goal? is it to try to pressure russia? what mike said i thought was important, which is essentially they do not want any surprises ahead of the election, they do not want anything to derail what could come down the pike ahead of that key november day. jonathan: there are a few reasons you use tariffs. another is national security. you've heard that repeatedly. the other would be leverage. they have failed to use this as a point of leverage. big failure. more on that still to come. this is bloomberg. ♪

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you'll never have to climb a ladder to clean out your gutters again. you know, that's peace of mind and then some. so, how do people sign up? call 833 leaffilter today to schedule your free inspection. or visit getleaffilter.com jonathan: live from new york, looking to the program. stocks on the s&p 500 shaping up as follows. slightly softer by 0.04%. the outperformance, we mentioned this a few times already, russell and small caps, just about unchanged yesterday at the close and this morning just about unchanged as well. lisa: we have been talking about this all morning and i am really excited to speak up next guest because he has insight into this but how much is the outperformance soup in the packet has a lot more to catch

up? if you owned nvidia, congratulations. if you are underweight then, you are lagging by more than 400 basis points the s&p 500 target, so that is the dynamic understanding may some of that we have seen the last couple weeks. jonathan: some catching up to do. that is the equity story. the page and get to the bond market. some supply for you just for lisa. lisa: thank you. jonathan: tomorrow, $70 billion worth, the five-year notes, after that, $44 billion worth of seven euros. how much is this given how quiet things are? lisa: do you want the real answer or the exciting answer? jonathan: i want the real answer. lisa: i am not that excited about it. 1:00 p.m. will probably be really solid, not exciting. i am curious whether people start to move away from that because it has been overweight for a lot of people. we heard that from mike collins yesterday. seven years were in focus. i want to understand how much

foreign buyers are not buying u.s. treasuries anymore, especially if you are talking but the possibility of a federal reserve trying to get ahead of any downturn. does this mean longer-term you will see higher inflation and higher benchmark rates? these are some of the questions people have going forward that will make the seven-year more interesting. jonathan: makes me think of what we have been talking about at bloomberg thanks to the team from london with the story. chinese companies may be enticed to sell $1 trillion worth of denominated assets as u.s. cuts interest rates. that could mean a move in the yen by 10%. this is a big bp call. we talked about the dynamic coming out of japan. not so much with regards to china. lisa: you can understand the logic especially with the trade deficit the u.s. has with china and the fight out deficit of the u.s. and how much is increasing.

whether it is put into practice is another theory. the theory gets dashed in practice again and again. if you start to see true money moving out of the yield curve, could that begin the avalanche process? may be. i don't expect that this week but that is why i keep watching these options closely. jonathan: every single time they come, as you should. a couple of calls we have had from morgan stanley around oil targets. reducing to $85, a new average price target for 2025. the average forecast now is $77 versus $82 previously. they see this effect upsets prizes to inventories among other things, and it was the last line we picked up on that i think is worth talking about a little more. we assume opec will raise production in q4 as the market is potentially shifting from an equilibrium or opec supports spot balances and reduces

volatility to something new, and the something new is a more long-run equilibrium focused on strategically disciplining non-opec supply and supporting cohesion. lisa: strategically disciplining non-opec supply to me screamed shale pets, stop producing so much and thinking you can do this in an unchecked manner while we try to be disciplined and coordinated with how much we produce. that has been the swing factor in how much they will try to reduce some of the profitability of u.s. oil producers, by increasing production a bit to lower prices. what is the target price that opec-plus is looking for that can potentially give them the profits they are looking for while also not delivering overly to the u.s. producers? jonathan: three-day run coming to an end on brent crude. under surveillance this morning, some top stories. meta ceo mark zuckerberg's and was pressured by the u.s. government to censor content related to covid-19 during the pandemic.

zuckerberg saying he regrets giving in to the demands. it is starting to sound like a bit of an apology tour to the other side of washington the last few weeks. lisa: that is exactly where i was going with this. why now? who is this for? who is the audience for this? is this hedging his bets in case donald trump gets back into office? is this something else? it is a question where there was a lot of time for him to talk about this and now is the time he is choosing. it is also interesting in light of the arrest of the telegram in france the founder there. there is a lot going on. i am curious what he is trying to get ahead and to argue for free speech and get ahead of policy shifts. jonathan: he sat down with bloomberg's emily chang and called the attempted assassination amazing and said he would not be donating two political parties this time around. you could see him distancing himself from some of these issues over the last couple years. lisa: saying trump was great in

his response to the whole thing. how much of this is trying to curry favor with both sides, and how much is this a true shift in his stance in terms of arguing for free speech and a reluctance to work with the government without putting up more of a fight? because they came under pressure and reduced their credibility. jonathan: here is the latest on spacex. the lots carrying four private astronauts due to a helium leak to perform the world's first commercial . the next launch window is set for tomorrow morning. spacex in the spotlight of the morning because that's at the moment because they are bailing out boeing in the next two months. lisa: bailing out or replacing, a key question if boeing decides to continue their space program. this also raises the question of, how many billionaires out there who will pay for a spacewalk? is this the next frontier? i can imagine my boys grow up,

if they ever had that kind of money, that is what they would do and they get to a really cool spacesuits. jonathan: this venture is less about tourism, more of a commercial business business, what he is trying to achieve here that's commercial business, what he -- commercial business, what he is trying to achieve. lisa: what is the ultimate goal? we don't know. jonathan: we will work it out slowly. i still cannot believe people are stuck in space and it is not the top story in this country. lisa: the guy has two kids, two daughters. jonathan: how many people know the names of these people? lisa: they are stuck in space. jonathan: if this was the 1960's or 1970's, every night it would be like, day 65, stuck in space. you would have interviews with the family members and it would go on and on and be a top story in this country. lisa: this is an open invitation. jonathan: is this a failure to sort it out? is that why there is not much attention on the story?

lisa: this is simply a lot of numbers. so many people have gone up into space. that is more than the 1960's. jonathan: can you imagine how boring people think going to space and coming back six months later might be for the people up there? it is a nuts story. nvidia tomorrow. results do out after the bell. expectations high. in the list expecting another strong beat. there is a risk guidance does not meet rising expectations. nvidia has been the driving force of positive earnings for the s&p 500 for the last year and a half. ai needs to continue to be an area of investment and ultimately roi for these trends to continue. matt joins us now for more. thanks for your patience because we have a lot to talk about. let's take a step back and talk about the contribution of nvidia to the overall market the last 18 months. has this been unsellable?

is it still unsellable for people you speak to? matt: i think it is one of those areas where portfolio managers are afraid to step into now because they feel like they missed out on the move. what is so unique about new video is if you rewind the clock a year ago and looked at what they were expected to earn in 2025, it was around $1.50 per share on a split adjusted basis. today it is around four dollars a share. we have seen the fundamentals accelerate in such a unique way for this company that it has cap a lot portfolio managers simply off guard. like you said earlier, if you did not have this in your portfolio, you are immediately behind the eight ball as it relates to the market benchmark by 400 basis points so it is a really challenging stock for portfolio managers to get their head around. jonathan: can you frame the risk event that is tomorrow afternoon? how big of a risk is this, and how is it priced? matt: it is fairly average for nvidia. percent stock reaction, plus or

minus. if you were to go back a few weeks into nvidia's price action, the stock was trading south of $100 per share and the setup was bullish into the print and that we have rallied 30% or so so you are looking at more of a balance between upside and downside, and the key here is probably blackwell commentary for their new systems, which are scheduled to start to really ramp up production in the january quarter and into 2025 and can be the momentum for nvidia. i think some of the concern about some of the ongoing manufacturing complexities with this is causing some consternation, whether or not they will be able to hit that ramp up in production, and so commentary might change the direction of the stock reaction so it will be really important to tune in not just to the report and guidance, but also to see how the production ramp is tuning up. lisa: you said it is about average, a 10% move.

put that into market cap perspective considering how much the stock has rallied over the past year. over 50% so far in 2024. that means that would be a decline or increase of $310 billion of market cap. that is two disneys. we are talking but a lot of money that gets moved around with an average move on a they are earnings for nvidia. where does the money go? does this create a risk off broadly or get translated into the lesser stocks? matt: in terms of its index weight, it is increasingly a bigger component of kind of where the trend and momentum of the market goes. revisions are a powerful thing. we talked about how the expectation for 2025 earnings have risen more than 150% year-over-year. if that were to continue, that takes away some of the underlying positive factors for the overall market just given its weight and how much the fundamentals have accelerated for nvidia.

lisa: does that jump to the broadening out, kill the broadening out, or fuel it? is it considered a risk off moment more broadly for other stocks, or is this something that gives people the ammunition to diversify in a more significant way? matt: if you look at the market and take away the magnificent seven, what are the fundamentals looking like you to date? earnings revisions there have come down about 7% year-to-date, not flat like the market is. if you take out nvidia, you take away some of the fundamental support to the earnings guidance for the s&p 500, so to me, i think it is more of a risk off environment, not necessarily fuel for a rotation. jonathan: lots of people talk about the secular growth story. how defensive is a name like this? matt: new vignette is high quality in the form that it has some of the highest margins in the world for a company. it is also high-growth but not defensive. it is not where you go for shots

ring if the macro were to roll over into economic contraction zone. that is more utility, health care, that environment is not nvidia. jonathan: does that make sense? is that the way it should be? is there a disconnect that should be explored? matt: the options market and how much is in that space, it makes sense to me. if you have a longer time horizon where you are looking three or four years out in the growth story for nvidia continues, it becomes more of a growth area for managers to focus in on. jonathan: this was great. fantastic work. just a programming note, this is one not to miss. tune into bloomberg technology, special coverage tomorrow 6:30 eastern time, and excuse a conversation with the nvidia ceo. do not miss that. get you an update on stories elsewhere with your brief. yahaira: wall street is starting

to sour on the outlook for crude next year. goldman sachs and morgan stanley lowering their price forecast, now expecting brent to average less than $80 a barrel in 2025. the banks expected premarket will be in serpas with prices trending lower the next year. oil is pulling back today after a three-day rally. meanwhile, donald trump is already thinking about who he would put in his cabinet if elected to a second term in the white house. he would ask tesla ceo elon musk to serve as a federal cost-cutting consultant but nothing the billionaire might not have trump also said must could give some very -- might not have time. trump also said musk could give some very good ideas. always this has announced a 2025 reunion outr ending -- tour, ending a 15 year hiatus. they posted on x, this is it,

this is happening coming to get past tensions saying the guns have fallen silent. come see, it will not be televised. it includes 15 shows across the u.k. next july and august. oasis split up into thousand nine a few years of inviting. both brothers went on to start solo careers, and fans speculated for years about a possible reunion, and they got one. jonathan: thank you. tickets on sale 9:00 a.m. u.k. time saturday the 31st of august. lisa: today will be the day they will throw it back to you. jonathan: nice. nice. lisa: by now, somehow you should realize what you got to do, which is by tickets. that was good, right? jonathan: appreciate that. good throwback. next on the program, the selective consumer. >> the customer is still a little bit squeezed by inflation. that has not gone in the opposite direction. from those discretionary spending companies coming onto here consumers are still looking for ways to continue their

spending. jonathan: up next, this is bloomberg. ♪

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jonathan: live from new york city, welcome to the program. equity futures right now just about in the green. let's call it unchanged on the s&p 500. in the bond market, lots of supply coming in the week. kicking it off with a two year. tomorrow, the five-year. after that, the seven year. the 10 year creeping higher by three basis points. under surveillance this morning, the selective consumer. >> we have a lot of information coming about the consumer. we already heard from some of those big box retailers, and the results have been positive. a theme that seems to continue as long as retailers are providing value to customers. obviously, customers still at the bit squeezed by inflation. that has not gone in the opposite direction.

from those discretionary spending companies, you want to hear consumers are still looking for ways to continue their spending. jonathan: here is the latest. retail earnings continue to roll out with nordstrom reporting second-quarter results after the market closed today. some remaining conscious on department stores. bifurcation is going across income cohorts as the lower income consumer is feeling pressure from high interest rates and high prices for items while continuing to look for value. oliver joins us now. always good to catch up with you. fantastic to get your thoughts on the consumers let's get into it. i want to talk about a bit of a disconnect we found difficult to reconcile. for the likes of walmart and target, they say things are ok for the consumer. for other organizations, they say things are difficult. you say this is a more choiceful consumer. they need to cut prices. you see that in the restaurant

industry a lot. once planes the disconnect at the moment? oliver: great to be here. the consumer is willing and able to spend but are being selective about how they spend and they are ready in different places. there is market share winners and losers, and what we have seen so far is the -4% comp at macy's but i positive 4% comp at walmart, so a real disparity. we are seeing green shoes. we are encouraged apparel was plus 3% at target and trending nicely at bj's and posco, and walmart seeing butterfly discussion returns, which is much better than negative, so things are moving in a better direction but their arbiters and losers. i was say department stores are in a tough place because they still need to appeal to younger consumers, and they are also facing ongoing share losses from the off-price sector. on the other hand, a retailer like walmart has needs and wants, meaning it has food and discretionary items. that is a winning combination in

this market where there is lots of crosscurrents, and the consumer is feeling pinched, specifically dairy prices, egg, food, as well as higher interest rates leading to consumer confidence being very volatile, so it really is very mixed. jonathan: you have explored the consumer discretionary recession in different parts of the world as well. i want to talk about the geographic differentiation as well. china is a hole that some companies in the united states are stuck in and cannot get out of for a while. what names are suffering from exposure to china, and what names are you looking to avoid? oliver: unfortunately, luxury goods is in a tougher spot now with as you know china and the property market and valuations and consumer sentiment. traffic has been tougher so we have been watching the turnaround at gucci. it has been cautious at carrying in traffic and repositioning the gucci brand is something

happening that we are cautious about. we are more positive on louis vuitton, lvmh, and the bargaining power and leverage they have in terms of price increases and the $10 billion of marketing they spend. we are recommending lvmh. we are more cautious on carrying overall. the china issues will continue to weigh on the consumer for the foreseeable future because housing valuations may not turnaround for a while, and we are hopeful the consumer will still spend, but the consumer could save and that will cause more problems as well. lisa: you talk about the winners and losers with respect to luxury but just in general in certain retail brands. you see this for example with adidas and nike losing. how much are you seeing a certain recipe becoming a trend for the winners versus the losers? oliver: the barriers to entry are lower than they ever happened before so numerous smaller brands can innovate and launch and captivate the consumer.

also, this direct to consumer relationship with consumers is important as well. i think the barriers to entry coming down is really testing larger brands where new brands can go quickly and take traction and new younger customers, it is in many ways a zero loyalty customer. with the advent of social media and things going viral, that is also helping emerging and new brands develop as well, so we will continue to see larger companies really needing to rethink growth. we are seeing this across beauty, sport, technology. we will continue to see aib imported and continue to see mna being important as well as consolidation to a certain extent as well. lisa: this brings us to lululemon. it comes at a time where people are starting to diversity -- diversify their leisure clothing. what are you expecting there considering some of the competitors that we have noted yesterday?

i will not go into them excessively today unless we get there, but i am curious, do you expect this to be represented, the idea that there are other entrants that are truly being competitive right now with the likes of lulu? oliver: the market has structurally moved in terms of comfort and performance. at target, we still have very strong performance apparel, so thinking about stretch, the versatility and fabric technology, competitors have naturally entered this space in terms of being alternatives because it is attractive and structurally where the consumer is moving, so we will continue to see that. that being said, lemon is a category creator. my colleague covers it, and there is a global story there but the exposure to china at large for many companies is going to be a conscious optimistic scenario in terms of the general environment we are seeing. jonathan: do you think vre is going public anytime soon? oliver: they raised a lot of capital, so we will see.

that being said, the equity markets have been tougher in terms of the ipo window and valuation, but lots of vibrant structural growth there, so part of that depends on the speed at which a company wants to expand globally. jonathan: what is it about those bands that are putting -- brands that are putting the squeeze on lulu? what are they doing that lemon has lost? oliver: it comes down to innovation and also we are moving very quickly with shein and the nature of ultrafast fashion and speed. as we think about a class i teach at columbia cosmetic and logic, it is about supply chain and agility but also about the magic and emotion of the product being special and different in the marketplace. many wardrobes whisper move -- will move to performance. the market is focused on this in terms of clothing, adding

comfort, the lifestyle component, and that is part of performance active meets sport, meets clothes. jonathan: next time you teach that class, we would love to be invited. oliver: delighted to have you. jonathan: that is where the market is at right now. lisa: magic. he mentioned ai, and i wonder how much this magic is presented in social media posts that are a i -- ai generated people. jonathan: isn't that great? lisa: if the barrier to entry is that much lower, how easily can you create the magic with viral post that make their way around? it's sort of raises the question of what new advertising looks like and how quickly things can adapt and the supply chain on the backend. i think that would be fascinating. jonathan: you should drop by. lisa: i will. jonathan: i will take the show. coming up on the program, jp morgan, seth carpenter of morgan stanley, and eric nelson of wells fargo. the third hour of "bloomberg surveillance" is up next. ♪ ♪

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and feel their way along. >> i am just coming to probability of 50 basis point cut at this point. >> probably will start in september with 25 but i hope they ramp up the pace to 50. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: this is what summer was supposed to look like. this screen right here. equity futures going nowhere. stocks not doing much. no big events. no political changes. no big central bank. just stocks not doing much so you can sit at the beach and wait it out until after labor day weekend. this is not the summer we have had. not the summer we have had at all. lisa: you want me to stay? this is not the summer we have had. we have come far and we have seen a whipsaw in terms of interest rate expectations that fueled this rotation. whether it can continue remains to be seen. it is summer and it is quiet which makes tomorrow all the

more notable when we get the biggest company in the s&p 500, a $3.1 trillion company reporting earnings that has driven all of these gains in the indexes so far this year. that does raise a question about how the quietness of the treating activity influences the magnitude on them -- of the move on the heels of those results. jonathan: ed ludlow sitting down with nvidia later on this evening. do not miss that conversation. for a lot of you the big one is thursday morning at 8:30 a.m. eastern time. given the shift in the market, we have gone to small caps regional banks, away from big tech. does this make the market more insulated from nvidia tomorrow afternoon? lisa: we were playing with that idea with matt stucky. considering how much that has led all of the gains so far this year on the s&p 500, that would be a risk off move so that is

the question i have. how vulnerable is the whole healthy rotation, the whole soft landing of anna we have been experiencing? how vulnerable is that to nvidia coming out with a negative print? i don't know what the answer is but considering significant of a weighting it is, it is something that could potentially be a real significant catalyst especially given the treating we see right now. jonathan: this tees up this question, and my answer, i sense from the guests we have had so far they would rather take 230 on jobless claims at a twin basis point cut instead of pronounced weakness in the labor market in the next few weeks and this conversation about maybe going 50. that is my take. not saying that is the right call but that seems to be the call at the moment. lisa: the fed will cut rates. possibly, quite considerably, but the key is whether growth holds up or not or the rate cuts that people are pricing in overstate how much of a soft landing we can actually have and how strong economic data is.

people will take an economy that is stronger versus more rate cuts because that is essentially what wiki fueling growth. can the fed cut nearly as much as people are expecting unless you get the kind of weakness? not a clear answer on that. jonathan: around 2:30 on jobless claims for tuesday morning. equity futures in the here, down 0.1%. in the bond market, yi creepingelds -- yields creeping higher. coming up this hour, we will catch up with phil from jp morgan as investors await nvidia earnings. boeing deals with another blunder. morgan stanley on the possibility of a dovish september surprise from the federal reserve. markets on hold ahead of nvidia. the nasdaq 100 under pressure as traders await the results from the ai giant. it has become a critical market driver.

the concentration of stocks driving the market higher makes sense given the ability for those companies to manage the current levels of rates as well as the earnings supporting valuation. we believe the momentum in equities can continue. good morning. phil: good morning. jonathan: let's get to some of your calls. what are you overweight right now in this market? phil: we are not overweight cash, and i love your quote that i saw on one of the monitors that said t-bill and show. i am probably dating myself with this reference but that is like nails on a chalkboard for me. we still run into that problem, and i am not talking but if you should be in equities or cash. i am a multitask manager. this year, the portfolio is up about 11 and catches up about 3.5, so we are tripling the

return for folks that should be in diversified portfolios, and i loved last friday morning at 10:00 a.m. the time has come for policy to adjust. that is like music to that use of investors after two very long years. 2022 the economy, go through some pain. last year, the message was we will either be high for longer or even higher for longer, so i think what we are looking at is that these cuts are going to greece the wheels -- g the wheelsrease -- grease the wheels. between 4% to 5% nominal gdp growth, every investor should be raising their hand for that. jonathan: for a while the sales team at jp morgan were saying you should get out of cash. we have this bond fund. allocate some long dated debt go into credit. also it's of things. have some fun. are they calling you now to make

the move? phil: the credit story is still not unclear clear because the credit story for us is we would rather play offense in fixed income than defense. the high-yield story, while spreads are not super wide and we will not get this crazy total return, we will out yield what we believe treasuries and just the core bond funds can do overtime, which is less glamorous then nvidia, but it is a form of alpha. importantly, this diversification story about what we have seen is as soon as inflation hits 3% or below and we are to .9% on cpi, you get the right way correlation back with bonds so you can get a day like august 5, the highest intraday volatility in the history of the equity market, my first day of vacation thank you very much, and we can hold onto our overweight to stocks and credit in that environment because we believe that finally bonds will be the diversifier

that we expect them to be. lisa: if that is the case, why underweight u.s. bonds? phil: we are neutral our benchmark in terms of duration but we would rather play the high-yield story suspending the cash in high-yield. we don't want to be underway in an environment where bonds can protect us. lisa: we were talking to sebastian page earlier and he was about how it is important to hedge against a multitude of risks in case there is a bigger downturn and holding hard assets in case inflation picks up more considerably for getting why in your asset location are you overweighting so significantly the idea of a soft landing and a positive economic backdrop? phil: it still goes back to this is an economy that is interest rate insensitive. you have an effective mortgage rate in the u.s. right now at 3.9%. the average effective mortgage rate when we had a zero interest rate policy was 4.3%. the u.s. homeowner with the biggest expense is paying less

in their mortgage than the zero interest rate policy so i think there is still interest rate insensitivity and this is a cycle that has been trademarked by good behavior from not just the consumer who refinanced in 2020, 2021, 2022, but also the corporate balance sheet looks good going forward. i don't want to give you the wrong impression. a necessary consequence of a soft landing is a lending so you have to slow down some, and that allows the fed to bring the easing cycle into focus. 100 basis points by the end of the year. i agree with you in your last statement, that is too much beginning people were coming into this year and we had 150 priced in for the full year and people thought that was crazy. now we have 100 priced into three meetings beginning that gets back to one or two 25 basis point cuts. jonathan: you are comparable we can take some of that back in the market will hold up? phil: i think we saw a snapshot of that in the april trade when

you saw the repricing of the federal funds futures market. that goes back to mecca cap tech, so you have the small-cap rally, the mid-cap rally, all of this rotation trade. i think that gives it up a little bit and our highest conviction you is still cap weighted s&p although our last trade was an equal weighted s&p just because inflation is now at 2.0% and that should expand some breadth. lisa: want to finish up with the last point on how leveraged this market is to big tech. nvidia earnings tomorrow. concerned are you that any missed or not a significant enough beat can cause a risk off moment for the market? phil: i think that would be somewhat short dated, getting back to the point that this market is driven by fundamentals, and it is not a gimmicky rally. if you look at the returns of these companies, about half of the return has come from earnings and about half from multiples. if it was all multiples, i would be right with you.

but it is not that. they have to continue to put up the earnings. jonathan: what do you think about the move in regional banks? what is happening with financials? phil: a lifeline has been given. i don't think it is a gimmicky rally because it is not a gimmicky easing cycle. i think we will be in the beginnings of an easing cycle. jonathan: got it. thank you. lisa: basically he is saying they are not trash. basically stop saying that. jonathan: is that what phil is telling me? what is wrong with you? phil: oasis back together. jonathan: would you buy tickets? phil: you beat me to it. jonathan: thank you, sir. let's get you on a bit on stories elsewhere with your bloomberg brief. yahaira: eli lilly is now selling vials of its blockbuster weight loss drug to patients at

half of the cost of its why the popular shots. patients with the prescription can purchase a month's supply of single use vials through the eli lilly direct to consumer site starting tuesday for as little as 399 dollars a month. a higher dose is going for $549 a month it is part of the eli lilly all hands on deck effort to ramp up supply amid widespread shortages. disney is still in contractor numeral talks with directv -- contract renewal talks with directv. this is a major change from the previous negotiations where channels were bundled together. according to reports, disney is open to the idea of offering some sports specific packages to distributors it is also willing to offer other types of smaller packages and negotiate some lower subscriber guarantees.

history has been made in major league baseball with one player appearing for both teams in the same game. danny jensen was catching for the toronto blue jays when their june 26 match against the boston red sox was suspended due to rain. jensen was then treated to the red sox in july and when the teams resumed the match yesterday, he was playing for the red sox. it was the first time ever a player has appeared for both teams in a single game. that is your bloomberg brief. jonathan: thank you. i have taken a lot of abuse but my first love. my second love, football. lisa: i see. jonathan: that was close. baseball. what unearthed is that? how did you play for two teams at the same time? >> i was very clear that the game was postponed to a different day and he was traded between the two days. lisa: shots fired. phil: yahaira did a great job at that. lisa: way to go. jonathan: yankees coming to

town. phil: first place. jonathan: up next on the program, the morning calls, plus boeing grapples with the future of the space program. that is just around the corner. from new york, this is bloomberg. ♪ recipes that are more than their ingredients. ♪ [smoke alarm] recipes written by hand and lost to time... can now be analyzed and restored using the power of dell ai. preserving memories and helping to write new ones. ♪

jonathan: the opening bell one hour and 15 minutes away. equity futures slightly softer, negative on the s&p 500, down 0.1%. bob euros higher by three basis points -- bond yields higher by three basis points. pulling back by 0.6% after a recent rally. we are down to $76.95 on wti. let's take the opportunity to get you some morning calls. citi downgrading hershey to sell with a price target of $182.

a challenging year for the chocolate giant things to growing weakness. the second call from morgan stanley, raising its price target on coca-cola to a street hi $78 with an overweight ranking. the stock is up by half of 1%. finally, your third and final call raising the price target on the video to $145 and keeping a buy rating. discussions with component buyers and sellers point to improving business trends for the chipmaker. we are down by half of 1%. a letter of people seeing the same numbers, hearing from the say customers -- same customers. lisa: there have been seven straight quarters of beats, not just beats, but these are not just your average ones. they are astronomical as well as upgrades to potential earnings forecasts for nvidia. how big of even in-line with this have to be to be something

negative for a stock that otherwise is very much front and center? people are seeing every opportunity for them. jonathan: stocks are a bit softer in the premarket. a big number coming tomorrow afternoon. do not miss the conversation with the ceo sitting down with bloomberg's ed ludlow on the west coast tomorrow. let's turn to the aerospace industry as boeing faces another reckoning. this time over its space program. we are looking ahead to the 2025 delivery expectations as the company builds up inventory. i think we need to take a giant step back and talk about this overall company that challenges for the incoming ceo. we have commercial planes, boeing defense, and the venture into space. that is when the difficulty is now. given the to do list, how long is that to do list for the ceo? >> thanks for having me on the program. certainly a long to do list. what we have a looking for the

last few months was first to get a successor ceo in the door, and a checkmark on that. from here, he just started three weeks ago so he is in the process of meeting with customers, trying to understand the problems, and sort of put forth a solution. unfortunately, you have seen a couple of negative headlines over the last two weeks between the 777x having a setback and starliner over the weekend announcing spacex will bring back the two astronauts up there. but maybe to contextualize things because it is important as you think about the boeing story, the business which houses the space business makes about 25% of the normalized business, call it 33% of the business today. within that business, 15% of it is programs of which starliner is one of them. so this program itself is relatively small, which is why you tend to see a lot more focus on the airplane side, and within that, a lot a focus on the 737

program. lisa: there isn't one of questions around why boeing should keep their space program considering how many losses they have posted for this. if boeing were to announce it is jettisoning its fleet and its relationship with nasa, how much could the share price rally? bert: it is an interesting question. the space program itself, we think of it as the united launch alliance, the joint venture between them and lockheed which is already rumored to be potentially sold. they could be monetizing part of that. there is the space launch system which is the sls program, a cost plus program, so the risk is much lower. nasa takes the risk. and then you have the starliner program. boeing has been working with nasa for decades to the question would become a what do they see from the space business longer-term? is this an area they want to be exposed to down the road or do they want to tighten their focus on the commercial airplane

business? i compare it to lockheed. they decided they were much better at fighters and satellites and weapons and they went down that path and that was very successful for them, so i think if they got out of this business, investors will look at it as potentially reducing a future cash drag, but perhaps at the expense of producing an opportunity in space down the road. it would be an interesting decision. interesting thought process on how much he just this is the future of boeing.taking a step lisa: -- lisa: taking a step back, there is a question on whether they could take the lead in a more meaningful way. i have been surprised they have not in one of the reasons is they are facing the same kind of supply chain issues that boeing is, maybe less publicized. i wonder if we have emerged from the post-pandemic induced supply chain disruptions that continue to plague the aerospace industry. bert: yeah, it is a great point.

think everybody thought after january airbus would be in position to take all of the market share and there have been limits to what they have been able to do, but for airbus, a positive the people overlook is they have really high targets so they are talked about getting 75. boeing is talking about getting a 50 on the 737. airbus is already close to 50 on their program. maybe even certain months above that number. they have seen the ability to get to their targets and they keep extending that, and part of the supply chain driven. there are many tears of the supply chain. there has to be an orchestration on how they work together. there have been shortages, geopolitical issues, labor issues, so these things have compounded. surprisingly here we are four years past the start of the pandemic, more than that now, and we are still talking about supply chain, but as we go to 2025, there is reason to be optimistic about where the supply chain is having and that is why boeing starts to look better. where expectations are today are

a lot lower than they were a year ago. as the supply chain catches up and boeing stabilizes production, they get back into a position where they can stem some of the losses they have seen to date and ideally start taking away the potential advantage airbus would have had. lisa: this is a tough question and i don't know if we can get a real answer, but how much is boeing any better or worse positioned because it is the american darling? because it is a u.s. company at a time of increasing fissures, especially in the likes of boeing having a huge presence in defense spending globally. how much is this turning into the fiefdoms of your allies are in terms of who decides to do business with boeing versus aerobus? bert: you are right, that is a tough question. there is a third player emerging. very early days, but it is the chinese backed aircraft producer, and they have a

program which will compete with the 737, a320. still very early days, using a lot of the same parts that would go into a boeing airbus craft. the question is that boei put upout numbers -- put out numbers on what china would look like and that is rising so the question is does china opt to purchase more airbus aircraft and do they purchase more of the chinese aircraft down the road? outside of that, i don't think there is this major issue between which countries choose to do business with airbus or boeing. airbus has certainly been the preferred partner of late, but the reality is if you want a new a320 aircraft, the waiting list is now 2031, 2032. with boeing, you could be getting that aircraft three to four years earlier so that is an advantage. airlines continue to look at what aircraft we need for the mission, what is the part of the aircraft, what is the confidence

in the company? probably more so than that but there is the china question so that may be a benefit as we think about airbus versus boeing. jonathan: how difficult is it for airlines to make capacity decisions when they do not know if they can get planes? if they have to wait, they have no idea how long and they have no idea what the market will be when they arrive. bert: it is typically 2% to 3% of the aircraft globally get retired every year so that ever has been quite low and we have seen the average global fleet age has been 20% higher than 2015. there is the aftermarket which has benefited from southern parts and services. what airlines have had to do is use older aircraft and they have been limited in how much they can grow because they have been unable to get their new aircraft. for example, southwest was supposed to get some thing like 79 aircraft this year and they are going to be closer to 20 so that has a huge change on what

you are expected to grow versus what you can actually grow but it has been a good thing for the airline industry because it sort of mandated more capacity. imagine had we not been in a position and airlines buying more aircraft, what we are seeing from a yield perspective would be a lot worse today. it has been a positive from that perspective. jonathan: this was awesome, just a clinic. appreciate it. you get on a plane and you see the sign, the no smoking sign, and you are like, this thing is old, really old. lisa: that is a consequence. jonathan: that is the sign that i am looking around, do i want to be on the plane? no smoking signs on the plane, not good. with ashtrays. lisa: i have noten in one of those. come on. jonathan: that is what i mean. ashtrays and no smoking signs. ♪

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jonathan: ashtrays indicate a real thing. the matters become much tougher. according to this gentleman on the bloomberg terminal. lisa: please write it if you have actually been in a -- please write and if you have actually been on an airplane with an ashtray. no smoking sign, yes, but ashtray? jonathan: so now you have seen

-- are you telling me you found pictures of planes and did not realize what an ashtray looked like? lisa: no. let's move on. jonathan: 60 minutes away from the opening bell. markets, equity futures on the s&p 500, negative by 0.1%. on the nasdaq, down 0.1%. on the russell kamal performance last week, underperformance this morning, down 0.4% on the small caps. spend a little time on treasuries and we will get over to the market as well. the two-year, get some supply a little later on. $28 billion worth tomorrow in fives, $70 billion worth today after, $44 billion with a seven year notes. still in and around 4% on the 10, glue do that. lisa: it is hard to see will that. you wonder how coiled the market

is heading to the jobless claims we get on thursday, but otherwise, the two-year option we get later today at 1:00 p.m., unclear how much that will move the needle considering there is plenty of demand. the seven year option gets more interesting thursday and that is what i will be watching. jonathan: let's switch to the board and get to the u.k. government market. selling off as well and we are up about four basis points across the curve, up a little more on the 10 year maturity. the word from the prime minister that the autumn budget will be painful, short-term pain for long-term good, things are worse than we ever imagined, which i have some difficulties understanding because the finances of any government are pretty transparent so they should have had a decent read on the finances before they went into government, so i would like more detail there. didn't they know? do they know now? then i would be asking, shouldn't you know what you know

now? why will this be painful come october? lisa: called it four years of rot under the prior rule. is this basically setting up for tax hikes? essentially saying we need to raise more money, it will be painful. is this going to say we will not provide social services, or neither and it will be a period of atrophying growth at the expense of the reputation of the country? i do know the answer but the response and markets is interesting, and he raised this point and i have been trying to find an answer. where are yields higher? if you think there will be increasing taxes and they will be paying down some debt, wouldn't that mean yields would be lower, especially if it comes with anemic growth? jonathan: this is the labour party. they would say they are somewhat centerleft. you can decide where they would sit on the spectrum of politics.

their instinct is to have a big role, that the state should be bigger, and my view would be given they think we have had 14 years of rot, there is enough things to spend money on. if you want to throw money at a lot of these things, you need to raise it. you are going to see both. you will see big spending programs and big revenue raisers taxes will have to go up -- raisers. taxes will have to go up. lisa: that is something that came up in this, some of those types of policies. jonathan: this is why policies matter, like really matter. you can get away in an election saying you are not the other person and wind and -- win and fungus be on the receiving end of the policies and think i did not vote for this, right? this is applicable to the united states of america. we have two months to find out what the harris campaign actually stands for and what the policies are and will be if they get into power so there are no surprises down the line. lisa: to be fair, to find out

what the policies are. we have no idea of trump 2.0 and if harris will be a continuation of president biden or not. i don't think it is likely we will get any public superstition in detail before the election but it is very sweet to hope that we would do. jonathan: hope casting some of this, hoping for it. under surveillance this morning, jake sullivan meeting with his chinese counterpart as both countries look to keep the dialogue open. sullivan is the first advisor to visit china since 2016. why is he there? lisa: why now? that is the bigger question simply because we are not far out to where joe biden is no longer president so it is unclear how much leverage there is or if they are talking about policy. what was really notable to me, this is a do no harm type of visit. please do not surprise us with anything ahead of the election. please try to get on board with this and create some peace

between russia and ukraine. more than the tit for tat we have been hearing with some of the visits we saw with janet yellen. jonathan: they have not been able to influence them on foreign, at least not publicly. we have seen no public policy shift out of china after these visits. lisa: i do not have a clear sense of what is discussed, if they have leverage, who they are talking with, whether china has leverage other than xi jinping. i am commute about the timing at this point given the point they said they did not have leverage before and have less now. jonathan: let's get to apple. longtime apple cfo will step down after a long time in the position. he will continue to oversee i.t. and real estate functions so he is hanging around but he has had quite a run, 10 years. i think you took over from peter oppenheimer in 2014.

oppenheimer was responsible for the change in the balance sheet at apple, and i always think of apple is going from the steve jobs years of innovation to the tim cook years of just sort of financial innovation. the financial engineering of the balance sheet, monster capital return programs. very much at the center of a lot of that. lisa: and a services company, not just a product company. congratulations. i don't know if he will be spending a lot less time is reduced role but he is 60 years old and has a pile of cash and can spend it. jonathan: a villa. lisa: stop protecting -- stop projecting. jonathan: there are two more data points this week that could factor into the fed's next move. thursday, jobless claims, and friday, corsi pe.

the labor market is now more of a concern than before and powell wants no further softening. we maintain our view that the cycle will start and continue with 25 basis point cuts, but a substantially weaker job market would mean bigger or more cuts. set joins us for more. good to see you. what is the difference between 25 and 50? what does the number look like? seth: the labor market report will be a big one a week from friday. probably in the 100 thousand range especially when you consider the last report everyone freaked out about initially was suppressed by some of the hurricane effects. if you factor in some sort of bounce back and you get a labor market report in the 100,000 range, that will say i think pretty clearly a bit more of a slowdown then we wanted and now you have had the chorus from the fomc coming out and saying it is time to start cutting rates. we want to prolong the expansion, keep employment going. jonathan: how much faith do you have in their ability to extend the cycle?

seth: it is a hard thing to quantify. one of the most critical part of this whole cycle in one of the reasons why we go back to 2.5 years have been calling for a soft landing, one of the most critical factors is a desire and willingness to do it. does not mean they will achieve it but that is what they are trying to achieve is critical so if we see signs things are slowing down too much, slowing down to the point where we might have a slump, they will be ready to take action. lisa: i think the other side of that question to build on it is the theme of this jackson hole meeting was assessing monetary policy efficacy and just the transition efforts. did not get an answer on how significant their ability to influence the economy is one way or another, but to the extent people say this economy was interest-rate insensitive, how much will it be on the way down? how much are we seeing a boost from the easing monetary conditions because they are being backed into the market already? seth: i think that is one of the key questions for this cycle, how sensitive or not has the

economy been to interest rate changes? but as you know, the market is forward-looking and has rallied a lot in terms of interest rates coming down a lot over the past few months. we have seen credit spreads despite the turmoil after the last jobs report. they are still pretty tight by historical standards. once the policy rate starts moving down, any debt directly indexed to the floating rate that will come down, we will start to see some relief that is a key part of why we think the fed will achieve a soft landing. but it will take a while. usually one of the key components of a monetary policy cycle even with the fall we have seen so far in mortgage rates, people made a lot of the surge in mortgage rate applications. quantitatively, it was not that big of a deal so in that regard, most mortgages are pretty far out of the money. lisa: let's go to the housing market because that has been the anomaly, the market torpedoed and yet prices have remained

elevated because of all of the people staying in their homes because they got mortgages and related rates, so why should they move? but there is an issue about whether lower rates will cause prices to keep going up even further about whether this will cause markets to be more affordable or simply become more so. seth: it is really tricky. the affordability measure you are getting at is a really complicated one because usually, a big shout out to my colleague who does all of our housing forecasting at morgan stanley, thinking about affordability, it is the combination of the price and the mortgage rate. put those two together and think about the monthly payment is relative to income. we are at a place where affordability is about as bad as we have seen if you consistently collect the data. mortgage rates -- lower mortgage rates will help in the short run but you are hitting on a real question. and moreover, there is a generational frequency. there are a lot of 25 to 35-year-olds that do not

own homes that would usually be primed to own homes. we don't see a weakening in home passes at all. could they go up further with rate cuts? that should be on the table. jonathan: what about the cost of renting? what would happen more broadly to the cost of shelter when rates come down? seth: that is tricky. the bls data are very bad looking. jonathan: i know. seth: super backward looking. if we look at what is going on right now in markets for new rents, it seems like things have stabilized, so we expect rent inflation as measured in the components in the cpi to keep coming down for the rest of this year and into the beginning of next year. normally what happens when you get a big increase in rent inflation, it is coming from lots of job creation, lots of extra demand for housing, so we are not accepting a big takeoff at any point over the next year or so, but it will not keep coming down the way it has been the past year. jonathan: this was great.

good to see you. seth from morgan stanley. joining us now is eric nelson of wells fargo. to follow on from that conversation, the kind of number you would expect to see that would change the conversation for the federal reserve from 25 to 50. what do the numbers look like between now and then? >> i think it is probably the underpayment rate beginning if you stick at 4.2 or go to 4.3 and you see it well below 100,000, that could get the fed to go 50. what people are missing is the discussion around the september meeting this is the terminal right, because yes, markets are geared up for a 50 basis point rate cut, and if you get a strong number, you could see a bit whipsaw in rates. markets are not close to pricing in a hard landing. if you get a bad number, it is not just the first meeting or two that will reprice but it is the terminal right and it will reprice a lot lower. jonathan: what would that mean

for foreign exchange come and do you have a favorite currency paired to play that with? erik: this is very much a classic question of walking the soft landing tight rope with the dollar. you look at the dollar canada exchange rate, u.s. dollar versus the canadian dollar, that has moved sharply lower in the span of just a couple of weeks, and this is the ultimate soft landing trade. it is lower u.s. rates versus canadian rates and not too much concern about u.s. slowdown. to me, it is difficult to see the exchange rate go much lower here. if you get a week number, suddenly the growth concerns come into play. obviously canada is very exposed to the u.s. if you get a struggle number, it is a u.s. rates play. we see dollar strength. lisa: you are making a pretty big call here to put a bow on this that dollar this is overblown and you will see more dollar strength going forward. how much confidence do you have

in that type of trade at a time when we are talking about a potential tsunami of selling coming from asia as the federal reserve cuts rates? erik: lisa, it is important to keep in mind here political concerns are very much a big piece of this dollar puzzle, right? who is in the white house in two or three months -- rather who is elected to be the next president of the united states is a huge factor. if it is trump, the terror concerns come right back to the fore and we worry about dollar strength. tomika miller trade -- to me, the trade measures are the signals. if harris is victorious, the risk premium continues to come out at least in regards to fx. growth is growth. who wins the white house in november will probably not have that which near-term impact on both either way, difficult to see a lot of near-term dollar weakness. lisa: are you basically saying

the trump trade is dollar strength and the henry street is dollar neutral or dollar week? erik: yes, it depends on what currency we are talking about. if you see trump come back in the picture, china will be a concern. but i think broad risk sensitive emerging-market currencies, trade tentative currencies are likely to be on the weak side. with harris, you still have the growth slowdown to worry about here. a real hard landing is not close to being priced in our view and that is an upside risk for the dollar, but i think that trade factor of being dollar positive without trump in the white house is a key dollar positive catalyst removed. jonathan: you brought up p.m.. you are sitting in london. let's talk about sterling. let's talk about what is happening. i want to go to the words of sir keir starmer. things are worse than we ever imagine. it will be painful. you have no other choice given

the situation we are in. the october budget statement will be painful. in dm world, when the leader of the country says something like that, i think austerity. i think central bank will have to lower rates. i think of a big rally in the bond market. what does that mean to you and what does it mean for this currency? erik: yeah, certainly pessimism is not in short supply these days around these parts. what is really key to me is you listen to him and there is a lot of talk around it is an absolute disaster, but they already struck a deal with some of the public sector unions. they are already starting to move to making strides in opening up some budget space in regards to reclassifying how the bank of england thinks about qe and qt losses. there is room here for the u.k. government to take some steps

towards providing more investment spending. to me, this is not the 2010's all over again. but obviously, i think you were talking about this earlier, it is hard not to see some degree of tax increase whether on capital gains or what have you. to sort of offspec the spending increases they want to affect. lisa: can you build this out a little bit? we were struggling to understand, if you are raising taxes to pay for some of this, shouldn't that be positive for the overall budget? why should you see some sort of selloff in the bond market at a time when you will see slow growth and potentially some sort of retrenchment in terms of budgetary constraints? erik: i think what is key here is the fiscal picture is just one piece of the puzzle. you look at u.k. wage growth versus any other country in the g7 and it is still running 5% to 6%, a full two or three

percentage points lower than everyone else. yes, the fiscal situation is still concerning here, but nominal growth in the u.k. is still pretty strong, and that is what is keeping i think the bank of england pricing a little stickier. now seeing as many cuts priced, and frankly that is preventing is huge rally even though we are talking about a bit more of an orthodox policy.an old friend told me you never want somebody else's problems and this applies to jonathan: countries and economies as well. jonathan:everyone has their own problems. -- jonathan: an old friend told me you never want somebody else's problems and this applies to countries and economies as well. everyone has their own problems. i have been asking the question and lisa has asked it, going where? chinese companies may be enticed to sell a $1 trillion pile of denominated assets as the u.s.

cuts interest rates. he went on to say the move could be generating a move in the chinese yuan. he is a legend in the chinese market. i am nobody to argue with him. i want your perspective. where do you think that money will go? will it leave the u.s. off the back of those rate cuts? erik: i am not fully convinced on this argument. i think part of the issue is if you look at a fuller capital flow picture and look at the fx settlement data, chinese banks on behalf of residents, those are still pointing to outflows out of china. not quite on the scale we saw in 2015 and 2016 but it is clear to me away from the export picture, people are still trying to get money out of china. it is a natural offset to the relatively wide manufacturing serpas we are seeing, but it does not seem to be there is this wave of money waiting to come back to china. we go back to 2002, 2001, very

popular, massive inflows in u.s. tech in the late 1990's. you our flow out of u.s. tech in 2000 and 2001. the dollar went up. cutting rates but the dollar was resilient. there is a lot more to this picture then just who is buying what assets in any window of time. jonathan: got it. appreciate it. equity futures just rolling over, down a third of 1% on the s&p. yahaira: shares of paramount are trading lower in the premarket, down 4.7% after edgar announced he was dropping out of the bidding war for the company. $6 billion proposal for the entertainment firm last week, challenging and offer from sky dance media. sky dance accused paramount of breaching the terms of their merger agreement by continuing to engage in another suitor -- with another suitor.

donald trump is already thinking about who he would put in his cabinet if elected to a second term in the white house. trump saying he would ask tesla ceo elon musk to serve as a federal cost cutting consultant but noting the billionaire might not have time. trump also said musk could give some very good ideas on things like ai. musk endorsed trump last month and created a super pac to support his reelection effort. coco gauff comfortably advanced to this grant of -- of the u.s. open. the not such good news for fellow american sloan stevens, who was knocked out in three sets despite winning the opening set 6-0. that is your brief. jonathan: it was a great game. thank you. up next on the program, we will set you up for the day ahead. the week ahead, just around the corner. ♪

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jonathan: the opening bell 36 minutes away. stocks pulling back by a third of 1%. a little bit of weakness into the catch opened with bond yields a little higher. 10-year continues to cheapen. 3.8596%. we are up by four basis points on the 10-year. big weekend kicks off tomorrow -- big week kicks off tomorrow. wednesday is when the week begins. new video reporting after the closing bell and we will get fed speak from raphael bostic thursday. u.s. gdp and another round of jobless claims. on friday, core pce and u. mich consumer sentiment. a final word, please. lisa: just how this market is to a couple of data points. you can talk about weakness rolling over but it is hard to see this as anything more than noise at a time where nvidia,

which is the biggest company and cunning for something like 5% or 6% of the overall s&p 500 index, is potentially ready to roll the markets. i wonder how outsized that move could be. jonathan: nice to have some quiet, isn't it? don't you think? lisa: yeah. jonathan: a summer tuesday. lisa: themore you say that -- jonathan: americans i love you. thank you for allowing me to make this my home. why do you wish away summer in the middle of august? why do we do it? lisa: who are you talking to? jonathan: we get excited about pumpkin. lisa: ok, have you had a pumpkin latte? jonathan: no, the leaves turning brown. lisa: not brown, a beautiful color, jade. jonathan: i see that and i think winter and six months of darkness. lisa: maybe we need to talk about that because you should see the leaves changing. jonathan: i have, believe me,

many times. lisa: i can't even. jonathan: other than that, i love it. i love summer. lisa: we will talk about summer tomorrow. all day. ♪ ♪♪ ♪♪ beaches jamaica sale is now on. visit beaches.com or call 1-800-beaches

katie: stocks continuing to struggle. 30 minutes until the start of trading. sonali: matt miller is off this week. "bloomberg open interest" starts right now. ♪ katie: coming up, wall street remains on edge. waiting for nvidia earnings and further clarity on the ai boom. a heavy slate of eco data adding to the wait and see mode.