>> just how accommodative will they be? >> they are not trying to make things nice for the government. thehe fed has access to -- -- every crisis we -- >> this is "bloomberg keene,lance" with tom jonathan ferro, and lisa abramowicz. ♪

[no audio] tom: good morning, everyone. "bloomberg surveillance." we welcome all of you worldwide, on bloomberg radio and bloomberg television. some technical difficulties there, which usually start with tom keene because i am the one

most remote today. i am still at my home here near the mount sinai complex. it has been a most extraordinary morning. let me give you a sense of the new slow right now before we get to our good conversation this morning. is certainly decidedly new and more grim news on the pandemic. this has been the seachange news this morning. we have seen it over the last couple of days as well. and in the markets, as jonathan ferro has mentioned, a real deterioration over the last number of hours. all of this the reality. i think i could simplistically just say because we have wiped away any sense of a v-shaped recovery, that ended somewhere in the vicinity of 2:40 p.m. yesterday, didn't it? i think there was jonathan: -- jonathan: i think there was a little bit of exuberance over the past week or so.

what i think you saw over the last couple of days were some subtle hints that that was starting to pause to reflect on where we are. we have seen decent positive surprises on the economic side of this reopening. i think we were all waiting to see what we would see only health care side. over the last few days, we have not had encouraging signs from laces like arizona, texas, florida. there is i hope that we can handle this better now then we handle bit i can february and march, but there is the reality there on what this would mean for confidence, business confidence, consumer confidence. even if they continue to reopen, if this is what we have to grapple with simultaneously. tom: one of the great things is the bond market. miserable was -- priya misra was great on that yesterday.

lisa, i have ignored what this all means for high-yield, including the investment grade market. what research have you seen in the last 12 hours? fear ofs, there is this a resurgence in virus cases, but the federal reserve's underpinning borrowing costs dramatically. if you take a look at forstment-grade bond yields top rated companies in the united states, they are one basis points within all-time lows to borrow at a time when their leverage ratios are picking up and potential profits are coming down. in the high-yield space, a little bit of a selloff. still, a real demand is there. if you have the federal reserve underpinning these massive markets, what is the argument seenst risk, even as you all of these headwinds facing the economy? resetn this june 11, we

off of this fed meeting. maybe we are thinking about the 2021.eting of january 27, we will have to see. we welcome all of you on bloomberg television and radio, coast-to-coast and worldwide. this is our simulcast. what we've been doing is trying to have conversations with good guests. i get critical notes saying, why are you so short-term? so let's go long-term. afsaneh beschloss is with rock creek, but that rarely describes her interesting career of teaching international economics at oxford and moving into a storied career at j.p. morgan. we are thrilled that she could join us this morning. investors, how do you shift, how do you recalibrate over the last three months, and even trying to look three years forward? afsaneh: a lot changed obviously

in march. traditional investors, though, have not been behaving the same way we saw with the euphoric retail investor. institutional investors have ,een looking, as you said behind the numbers we are seeing in the short term, and be in much more cautious, whether it was with the rebalancing between the last few months or looking forward to new opportunities. i think if you look at most portfolios, you will see a little bit more cash still in institutional portfolios, but also looking potentially for some opportunities and not jumping in those areas too fast. topics thatthe big institutional investors are looking at, the 60-40 portfolio or 70-30 portfolio of equities versus bonds, there's not a discussion going on of whether

you can get the returns you need in the bond market, especially given what we continue to hear from the fed. well, this is so important. i am going to ask you this, something would ask somebody doing market forecasting at any firm, but from an institutional standpoint, is dividend growth the new yield? afsaneh: obviously some people are thinking of it as the new yield. i don't think that way myself, but also, i think that a very big topic that we need to be way marketss the are looking at dividends and .eturns and earnings it has been a little bit over-the-top over the last few weeks. when we look at potential earnings and the impact it might have on our dividends looking

that thei don't think earnings with the market are actually going to crystallize. i thought maybe that was the reason why you start seeing the impact of jay powell's speech yesterday. he wasn't seeming to say anything really new, but people started realizing that there is a connection between the economy and the market, which they have been in wearing over the last month or so. thethan: you brought up 60-40 split in a portfolio. i want to talk about the bond side. a lot of people asking what role treasuries play in a portfolio through the next several years. they don't offer the income they use to offer me, and they may not offer the support in a risk off environment. how are you thinking about that issue at the moment? afsaneh: what you need to do is actually look at hedging part of your portfolio versus allocating percent or 40% in the fixed , or finding other

things to put in that category. you are seeing people gravitating more toward equities not because the earnings will be so high, but because on a relative basis, you will be doing better. within that, you have seen a reaction of some to increased allocations to emerging markets than in the recent past. commodities is another area to look at different inflation, that might push certain economies huge. investors are looking more and more towards where can they find yield, and certainly, fixed income is not going to be where they expected to get the returns that we've had particularly in the last five or six years. lisa: there's a growing concern that the fed policies about propping up markets will curb

innovation and investment going forward. this is really the focus of your current firm and what your look for. how much are you seeing evidence for zombie companies that would have failed if they didn't have federal reserve policies? afsaneh: what is really interesting is at the same time as all of the negative trends you have been talking about going on, innovation actually has continued. we have some of the biggest flows in the past you are to, and that has continued. while we do have this issue , andre traditional economy then the other side of this, let's say we have close to 40% of our economy now in the medical companies. -- in the meta companies.

and china, that number is more than 60%. you have that trend at 11 time other new companies are getting at anotherat trend time where other new companies .re getting point jonathan: always fantastic to catch up with you. thank you so much for joining us from rock creek group. in your market this morning, good morning to you all. equity futures down 68 on the 500 and off i 2.16%. and around about 18, call 19 minutes from now, we will have .dditional jobless claims forbout 20 minutes, looking confirmation, potentially.

let's see if we get any opt is that. optimism on tom: you're right, this is a huge deal coming out at 8:30. the question i did not get to is what does this do to the actuarial assumption? i am never going to retire. i get that. that's with the math says. but i really wonder how we set up a sub for present pension a sub-4%. -- for jonathan: the other issue we have to talk about is the future of capitalism as well. we have discussed this many

times. the fed had to do what it had to do. we understand that. this is not a criticism of the fed response per se. they had to reach the other side to make sure this economy did not fall off a cliff. but you have to acknowledge there were also just be consequences. of bianco research was brilliant on this. "what happens if you don't allow capital to flow away from the bad businesses to the more productive ones? like." that economy look you really wonder if we can get where it is almost zombie nations we don't care out of markets. jonathan: we will talk about it more through the morning. alongside tom keene, i'm jonathan ferro, together with lisa abramowicz. this is "bloomberg surveillance. " we are live on bloomberg tv and

bloomberg radio. that economic data about 17 minutes away come most equity on the s&p 2.2%. this is bloomberg. ♪

>> all of us has investors would have expected a second wave, but maybe expected it in the fall. so the second way starting here in the u.s. so early in the

summer is a bit counterintuitive and really a sign that reopening is a very delicate situation. jonathan: alessio dolonc us of invesco -- alessio de longis of invesco. the stability we had over the last several weeks, relative to the chaos of the last several months, starting to build out a little bit. in this market right now, an hour in 10 minutes away from the opening bell, from new york, alongside tom keene, i'm jonathan ferro, together with lisa abramowicz. we break down session lows going into the cash open. longis ofssio de invesco on the program about an hour ago, talking about the counterintuitive nature of some of the things he is seeing. cross-ice at this morning, very intuitive.

equities lower, bonds bid. the curve's ladder. three basis points lower on the 10 year to 0.7%. strength between the bulk .f g10 tom: it will be interesting to see how they play out, not only in the opening, but what we will see in about 10 minutes, the jobless claims. right now, george bory with us. he is with wells fargo, and he writes brilliant notes summarizing the what to do in the fixed income markets. what do i do right now? i've got a small pot of money. i don't want to be in equities. i own enough apple. i own enough amazon, whatever. i need coupon. where is it? >> good morning. great to be on the show. thanks for having me.

you asked one of the most important questions all people face. what have i done with my money? in the last couple of months, we have seen a massive rush into a very secure money market and .overnment you have seen money market funds by up to -- grow $2 trillion. historically, that will tend to stay in the front end of the curve while the economy starts to shake itself out. as we have seen today, we are seeing a bit of a risk adjustment as people take a little but of a breather after a pretty spectacular run in most markets. at this particular point in time, it is still a good idea to incrementally move yourself out the risk spectrum. , ands are very low

maintaining income is going to be in increasing challenge as we move forward. the fed told us that funds are staying very close to zero through the end of 2022. that means the reach of yield for any investor is going to be really significant. i have been on the show for many years. we have discussed this this is not a new phenomenon. it is just a reminder that it is going to be with us for a long time. so we look for safe places to park money to basically try and earn a little bit of income and protect your capital. we find many places in the world of fixed income to be able to do that. jonathan: in my long risk because i long this economy, or because i long financial depression? george: you are long risk up to

a point. i think with the fed has done over the last two or three months, there's been a massive reduction in volatility. i think what the fed has done very well is they have allowed markets to reopen. they have relook with five markets. they have repressed volatility. i guess there's some theoretical limits as to how much risk they can ultimately repress, but we don't seem to have reached that point yet. but they have been very successful at to relook with a markets. reliquifying markets. the idea of don't fight the fed is still alive today. the way we viewed it is they delivered a very strong statement of concern. they highlighted the uncertainties.

it wasn't necessarily new information, but it was a stark reminder that the outlook is .ery unclear they have increased credit availability. mightdit available smooth the economic shock, but it doesn't to limited the economic cycle. that is what they told us yesterday. expect a long, drawnout recovery with the potential of more shock. so you are seeing markets respond accordingly. lisa: seeing these means we will continue to see bankruptcies. are you talking ccc's, even though there's a high likelihood that the fed will not banks to -- will not backstop these companies? george: the world of fixed rick -- byranched by

risk. these companies are largely in survival mode. they have refinanced their securities. they have bolstered up their balance sheets in anticipation of rougher times ahead. think -- i think they are exercising their financial flux ability. as you go down the risk spectrum, it gets increasingly difficult to do that. we would still have a bit of a higher quality bias as you get further down the risk spectrum. there's less support. the fed is not willing to help these companies. there's less financial flux --lity, and then very cute very acute economic pressures. view is that we

continue to rise on a 12 month basis. that is not a historical high, but it is certainly at a stress level. when you go down the risk spectrum, our point of focus is going to be cash flow durability. there are functioning bitterly bb'sere are functioning and bbb's that are good opportunities, but they are few and far between. jonathan: george, we've got to leave it there. george bory of wells fargo. lisa abramowicz waiting for the day that someone comes on this program and says they are long ccc's so she can pounce and ask them why. [laughter] ccc's doinge the right now, lisa? jonathan: i am waiting for the day. lisa: me, too. down 80: equity prices

on the s&p 500, down 2.5%. from new york morning, good morning. full coverage coming up on bloomberg tv and radio. this is bloomberg. ♪ ♪ when you say what you're in the mood for,

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jonathan: from new york city, this is "bloomberg surveillance." we are live on bloomberg tv and bloomberg radio. alongside tom keene, i'm jonathan ferro together with lisa abramowicz for your jobs data in america. that's crossover to michael mckee. michael: just waiting for the initial jobless claims numbers. about as forecast. week, that isthe a decrease of 355,000 from a revised number the previous week . it does not look like it was significantly revised. the number everybody wants to see his continuing claims, and isay what we are looking at 20,929,000, which is up slightly from the forecast. a low bit higher than the forecast. from thee of 330 9000

previous week's revised levels. continuing claims fall. part we are not sure about is what role the pandemic unemployment assistance, the extra assistance that goes to gig workers and the self-employed not included in the overall totals. that is down a little bit from last week 796,000. this is for two weeks ago. continuing claims are two weeks ago as well. the number that matters to jay -- 29 and company, 29 million 504,000 in the week of may 23. that is the total number of people getting all kinds of benefits. still an enormous number of people out of work. we also got the ppi. .4% on a month over

month basis. if you go to the poor rate -- if you go to the core rate, it is down. final demand year-over-year by .8%. disinflation on the headline numbers. the poor up .3% on the year showing no inflation -- the core up .3%. jonathan: equity peters down 2.5%. the question ahead of the data, can we reconcile what we see this morning with the two prints of the payrolls report from last week. exuberance ofhe the payrolls report from last week. how do you reconcile the shop with the reports. michael: go back to economics 101. one month does not make a trend. the fed was surprised like everybody else, but they do not think it means we are out of the woods and it will be a v-shaped recovery. they are expecting other data to show issues in the economy,

particularly in the labor market. when you look at the dispersion of forecasts chart from yesterday, it is very wide. with all of their phd and all of their computing power, that officials do not have a clue how fast this will get better. jonathan: too early. brilliant work, thank you. tom keene, this is the issue off the back of the payrolls report. when you see early surprises there is a risk you extrapolate that improvement too quickly. for the next several weeks, what we were looking for was to see whether the payrolls report of friday was validated with significant improvement elsewhere. we were looking to see that potentially continuing claims -- i think it is a stretch to say we see that this morning. tom: i agree. it was a stretch and it is not there. we will go to next week claims as well. i would suggest more than anything we are hung up on the minutia of the data versus the

blunt instrument, which is fed policy, the blunt instrument which is fiscal policy. i think we will hear more about that in the coming 48 hours. also the blunt instrument which is the calculation of our economic growth. joining us from an exceptionally ,trong dartmouth economics douglas are weighing in trade and a guest we have often, david blanchflower, is andrew levin, who has a truly distinguished career advising monetary authorities and professor of economics at dartmouth. thank you so much for joining us today. i want to start with a simple media question. jerome powell is not an economist, and he seems to be getting awfully good, awfully smooth at these press conferences. how is the non-economist doing?

decisiont was a great he made when he started a year ago to have a press conference after every fomc meeting. that was a brilliant decision. the truth is yesterday the fomc statement, there were no changes , there was no reference to the fomc mating -- the fomc statement last friday or any of the recent data. the committee is relying on him to be the spokesperson who comes out after the meeting to explain as clearly as possible what are the issues, where is the uncertainty, and i think he should be applauded for doing that in a tough job. lisa: it is especially tough. we are having a difficult time getting our hands around unemployment rates, with friday's much better than expected jobs report blowing away any expectations from economist, and today, i want to

sit on this, the fact continuing claims payment almost one million higher than was expected at 20.9 million individuals receiving unemployment benefits in this nation. i'm trying to get a sense from you on whether there is any historical precedent and whether you have a sense underneath the data of what we are looking like in terms of labor market disruption? andrew: it is terrible, it is devastating. we have multiple sources of data, and in this case it is helpful to have that. the economy is a little bit like a medical patient. we are in a difficult situation and the fed is a team of physicians dealing with the situation. the more information they can look at, the better to make diagnosis and assess the risk. , the senses has started a weekly survey, the

census household pulse, try to get a pulse on the households in the economy. that survey indicates that half of households indicate they have lost significant employment income in the last couple of months. families areth worried they will not be able to pay the rent for their mortgage next month. families cannot feed their kids for have enough money to do that. it is a terrible situation we are in. the right number look at in the report that came out is not the 20 million, that is the traditional number, the right number is the 30 million, which is the total amount of unemployment insurance people are eligible as unemployed to receive. that number do not improve. the latest we have is from may 23. that is the week after the survey for the employment report last friday. we've been seeing this total number come down a lot in the last several weeks, we would be

a lot more comfortable we were on the right track. improvement the fed needs to start making his communications. the projections they're released is just a baseline outlook. it is a benchmark diagnosis. what they need to start doing is to talk more about upside risk, downside risk, where they coming from, what is the fed's backup plan? tom: that is right where i wanted to go. if you are just joining us on bluebird television and bloomberg radio, andrew levin is with us from dartmouth college. vix.big figures on the to 3093 on spx in the dow. we are not down -1000 points, but we were at -900 points moments ago on dow futures.

i want to go right where you are in this comes off your stanford phd, which is the land of rule-based authority and the great work of the wonderful john taylor. i have rules and i have discretion, and then i have make it up as we go. clearly we are at make it up as we go. reframe the kind of language the fed has to do to explain to the american public the rules of making it up as we go. i think the medical analogy is helpful. a mathematical rule will not serve the public well at this point. that works reasonably well as a benchmark in normal times, but probably not right now. what can the fed do? they talk about here is our diagnosis. given what we know now, here's what we think will be the appropriate policy. that is not just the standard monetary policy. what they need to do, and i

think they can do it, there is a , it iser out on monday all over the web if you want to look for, we show how the federal reserve can start producing alternative scenarios and start explaining what they would do. that would help a lot. i was a student of john taylor and i admire the emphasis he had many others have made over the years. it needs to be transparent and systematic. that is a critical part of it being effective. jonathan: andrew levin of dartmouth, fantastic to catch up with you. looking at the market, equities breaking down. down 82 points on the s&p 500. this morning was important. would the data validate the

optimism payrolls friday fueled? we can look back at the data and say no. the economic improvement people got excited about over the last week, will they continue to have that in the coming weeks? and the health care is the extra layer. the breakdown of the fragile pandemic backdrop in the last week relative to the stability in the last month. tom: i do not negate the pandemic update. this percolated over the weekend , barely in the zeitgeist, monday and tuesday, there it was yesterday, with a vengeance. the pandemic shifts into our economics, our finance, and our investment. jonathan: much more still to come on this program with equities breaking down going into the cash open on the back of a huge rally. we break down a little bit more. down two point 5% on the s&p 500. in the bond market, yields down

four basis points to .68, approaching 1% last friday, all the way down in again, down about 20 basis points for the week so far. from new york, this is bloomberg. ritika: the u.s. labor market focus today shifts back to job losses. economist estimate to jobless claims numbers will show more than 1.5 million americans filed for unemployment benefits last week, more than seven times the pre-pandemic average. meanwhile, the total number claiming benefits is projected to decline to 20 million. that is more than the 11 times -- the pandemic. president trump will resume his campaign rally june 19 in tulsa, oklahoma. it is the date and place that have meaning for african-americans. juneteenth is the commemoration of the end of slavery, and tall is the site of one of the worst massacres of black people by

what people. the trump campaign says the president has a record of success among black americans. president trump will keep the names of confederate leaders on bases in the u.s. endingd the debate over tributes to treasonous soldiers. beganow airport has cutting frontline jobs. will seek voluntary departures after agreeing on a severance plan with unions. the airport had previous warned the quarantine could lead to one third of its 7000 jobs being cap. -- being cut. the amsterdam based real delivery service will pay to buy grubhub in a deal. the deal sidelines uber, which had been in talks for grubhub with months. there were questions whether u.s. regulators would approve such a deal. global news 24 hours a day, on air and on quicktake by

bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> there will probably be a second wave in china because i do not think there honest about the number of new infections.

they want to put the economy back to work, but people are reluctant to do more than they have to in terms of social contact. mallaby onebastian the council of foreign relations and china and this pandemic. your price action shaping up as follows. equity futures session lows, down 2.6%, -83 points. live on bloomberg tv and bloomberg radio this is bloomberg surveillance. alongside tom keene, i'm jonathan ferro together with lisa abramowicz. i will be catching up later with lori calvasina of rbc on the equity market as the value reopened rotation breaks down in the last couple of days. jonathan: certainly a big pullback. , and this is in celebration of constructive infrastructure in america, is amy liu. she is at the brookings

institution, but far more importantly does urban policy and is known for success. her public service to the nation under henry scenarios -- under henry cisneros is noted, but her policy at brookings is truly world-class. thank you so much for joining us. we are celebrating in new york the miracle that is a new terminal at laguardia. 100% of our viewers and listeners want to know why we cannot do more laguardias coast-to-coast. succeed ino hard to infrastructure in this country? amy: good morning, thank you for having me. the good news is there is bipartisan support for andastructure reform investments in infrastructure. the challenge right now is there is not agreement on how to

orance that infrastructure what is the infrastructure of the future. were is enormous debate that cannot just continue to repave highways in the same way or asnect rural areas together the highway act have traditionally done, but instead we need to invest in more digital infrastructure, global connectivity. more multimodal choice given the fact people today move in different ways. we do need to think about a future oriented infrastructure with a much more diverse public/private resources. i am theme make clear, only one in this conversation that can remember dwight david

eisenhower and the advent of the interstate highway system. tons has been written about that. why can't we have an interstate highway system of the digital world? why can't america be apollo class on that? go to the moon class on that? the u.s. isink incredibly behind in thinking about a world-class modern the way a lot of our international peers have done. we need a vision for infrastructure. what is so interesting is we have had calls for up to $1 trillion of infrastructure. what thes said infrastructure is. we do need air connectivity. we do need water-sewer infrastructure upgrades and to

make sure every single household, including those in flint, have access to clean water. we have to have digital infrastructure like a new digital highway. are of those systems financed differently. it is not going through the state dot system the way the highway system was built. it is a lot more complicated, which means we need stronger public/private partnership to make sure there is a broader set of infrastructure and it is supported, invested, and modernized. lisa: we are talking about infrastructure, which may be in the future when the government gets together with some sort of infrastructure bill to help stimulate growth and do major projects. in the here and now we are reopening economies. this week new york city reopening. there is a question of what the fate of the united states's major cities will be coming out

of the pandemic, given the fact the spread has been the fastest in these areas. how concerned are you about the death of the modern city and that went blank in population a lot of people are calling for? amy: i think we have to remind people that this pandemic is impacting everyone, no matter what kind of community you live in. , the growth of new cases are not in the big cities, they are in the suburbs, the smaller cities and the rural areas. the pandemic has no borders. when i hear questions about the future of the cities in a post covid world, there is an assumption that density puts you at high risk. the reality is the risk of infection is true no matter where you live. in the long run, what we have seen his cities have continued to rise over the centuries.

theknowledge economy, global economy continues to reward places with a high ,ensity of talent, of amenities top-tier research universities, global airports, and other innovative firms. i do not see that changing, but only accelerating. that said, i do think the high cost cities like new york, like the bay area, there are questions about whether one can afford to live in a superstar city without a job or with economic uncertainty. facebook and twitter have announced some of their employees can telework permanently and that may spur some workers to jump at the opportunity to move to more affordable cities in the heartland, which to me is great for those cities and still good for the economy overall. thank you so much.

amy: my pleasure. tom: thank you so much for joining us, thank you for being with us today. with the brookings institution after boulton policy program. institution policy program. as .91 two cups of coffee ago. we have seen 80 really yield compression with a flatter yield curve. the two-year compression has not given way. futuresquity markets, -82. dow futures were -900. right now -885. most germane to the markets, the vix up 4.5 point. if you do not understand that, that is a huge vix move. 32.08 on the vix. that will be a careful monitoring this morning as well. the president just out now,

tweeting on the protesters. i am sure that will be a theme for david westin as he speaks to the speaker of the house at noon. this is bloomberg. good morning. ♪

♪ jonathan: from new york city per

audience worldwide, good morning, good morning. the countdown to the opening bell starts right now with equity futures deeply negative. we begin with the big issue. the data does not validate. the latest jobs report this morning not supporting the optimism last friday's payroll support inspired. and the pandemic numbers take a bite, slamming the brakes on the market exuberance. >> the probability of a second wave is rising. >> the question is whether there will be a second wave. >> we are looking for recovery on the demand side. >> we have had a good run of news flow. >> a lot of the data suggesting we have found a bottom, but if we have not found it we can see it. no matter which data you look at, there is a high level of uncertainty t, especially as we reopen the economy. >> the downside does not give as much of an indication of where we are going.