companies, strategists, portfolio managers has a great sense of what earnings will be in 2020 or 2021. >> the fed is literally looking at a television camera and saying we just printed money. >> the initial shock effect from reopening is going from no activity to some activity. then you settle at levels where you don't know where things are going. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: for our audience, good morning. -- this isomber "bloomberg surveillance." alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. economy,erds of this secretary mnuchin, chairman powell on capitol hill. tom: it has been a six months

that has been totally unpredictable and has led to this word going on forward, which is uncertainty. uncertainty and economics, uncertainty across investment. says it isnuchin across finance as well. to me, the hard question here, forget about hong kong, about boris johnson talking about the fdr new deal for your united kingdom. windows thehing is next round of fiscal stimulus appear. jonathan: there will be huge pressure to deploy yet. the message from chairman powell is we will not fully recover until we control this virus in this country. and the radical uncertainty being expressed by policymakers -- by fed chair jay powell as well as steven mnuchin gives people

certainty that we are going to get more stimulus both on the fiscal and monetary policy front. among the things i am watching today, we are getting a further read on the housing market after the pending home sounds data -- pending home sales data. we are taking a look at where prices are increasing the most. we will be hearing from powell and mnuchin, and then today, facebook is going to be meeting with advertisers regarding some of the social media marketing void cuts -- marketing boycotts we have been hearing about. interesting how they plan to push against this wave of maybe social awareness on the part of companies, may be a convenient excuse to cut their edger has -- to cut their advertising budgets. equity futures around six points. 12:30 eastern, chair powell and

secretary nguyen on capitol hill. ash and secretary mnuchin on capitol hill. andtart the conversation -- secretary mnuchin on capital -- on capitol hill. we start the conversation with david lebovitz of jp morgan. more stimulus is almost required at this juncture, but more hints from powell as to the trajectory that monetary policy may take over the next few months, the finally gotten corporate reddit facilities up and running, and the original term sheets were set to expire at the end of september. does he suggest that perhaps there is more runway around some of these new programs i think will be particularly important with respect to more on the fiscal side over the next couple of weeks. note fromught the j.p. morgan this weekend was

absolutely spectacular. they talked about things like yield curve control and being on mars or being on venus. your wing of the ship is on planet earth and you have to actually invest money in this great uncertainty. what is your six months strategy at j.p. morgan asset management? itid: we continue to play the way we have been approaching things over the last couple of months. when we were seeing rotation into value a couple of weeks back, we really held back on and bracing a lot more cyclicality in portfolios because by our delta this was about the or the rate of change. still grounded portfolios in things like technology, and from a regional standpoint, the u.s.. barbelling between investment-grade corporate bonds and securitized types of paper.

we do anticipate that the markets are going to be a little bit choppy here. i think there is a clear expectation that more stimulus is needed. i am not sure the path to get there is going to be smooth. as the economy is back online for longer periods of time. the big jumps we saw a few weeks back are going to become fewer and more infrequent, so investors are going to focus increasingly on where things stand, and that is going to drive a volatile and range bound market through the end of the year. purely investing on policy, purely investing on more fed stimulus, on some sort of fiscal bailout package from washington rather than look at any of the data, rather than looking at the rising trade tensions between china and the u.s. and potentially a boycott with social media. some of those

issues are secondary right now. it all comes down to cash flow. right now, the market doesn't care where that cash flow is coming from. is it generated organically like the companies? vis-a-vis several rounds of stimulus? as we gethink that closer to the election in see some you may secondary issues, particularly the more political issues come but could to crystallize in the eyes of the market and just become another force of angst. you could ride the liquidity wave for only so long, and at some point the economy is going to be left to stand on its own two feet. going tohat is coincide with the election later on this year. jonathan: that might be a story for several months away. right now, the market is

suffering in the middle of this tug-of-war between the direction of the recovery, still positive, expected to be so for the next several weeks and months, and the pace of it, that we will be below potential for a long time. as long as we maintain positive trajectory, do you think that is sufficient to drive further equity gains? david: i think equity upside is going to be a little bit capped from we get more clarity the corporations themselves. one of the issues we are going to be focused on over the next couple of weeks is as companies begin to report your second quarter profit data, are they providing guidance for what they expect in the remainder of 2020 and the beginning of 2021? the market has been standing on the three legged stool what has been going on with case growth, see the policy response, and the outlook for corporate profits. we see what is going on with the virus. we see what is going on with the

policy response. there is still a lot of uncertainty around how all of this is going to translate into actual economic activity and corporate profitability. i think that is going to be the key thing that either pushes equities further to the upside or perhaps caps potential over the next couple of months. chitchat, but the the bottom line is everyone is recalibrating their fundamental investment series. dr. whorton is even advocating 80-20. the pension plan in california talking about leveraging up. it seems like a world tipped upside down. what is the allocation you would recommend off of a traditional 60-40 split? david: i think you increasingly need to take more risk in equities. that is inherently difficult for some investors to do, but we would add some equity exposure, assuming that targets are in

line with what we see most clients trying to hit. within fixed income, we wouldn't get rid of fixed income. you need that balance in portfolios, and particularly given the view that things might be choppy going forward, we want to make sure we have that protection if markets were to strongly move to the downside. what we are really seeing emerge from all of this is a need for uncorrelated sources of income. one thing we have seen a lot of institutional investors do over the last couple of years is take some of that exposure that has historically been oriented toward fixed income and reallocate that towards core real assets like real estate and infrastructure. you obviously need to be selective, but that allows you to increase the overall income your portfolio generates without adding more equity volatility. that is really the issue at the end of the day. to stretch fornt return. we are seeing people looking for ways of accomplishing that goal.

lisa: one big risk people have been talking about is that liquidity does not equal solvency, and that would get a cascading wave of bankruptcies that pick up later in the year. say we will see the more optimistic scenario of that based on the liquidity. do you think we see that as we head into election season? david: it is a risk that needs to be on investors' radar. the bankruptcy rate and the unemployment rate have been very closely correlated. maybe bringing us back to where the conversation started, we are just now seeing the main street lending facility get up and running. i think that is going to help a lot in addressing those issues,

so given the support from the fed and the federal government over the past several months, that relationship may not play out the way it has historically going forward. jonathan: david lebovitz of jp morgan, always great to catch up with you. send my best to the team. policy primacy is a theme for pimco and other houses around the world at this point. fiscal, reopening, and monetary policy. the reopening policies looking a bit safely -- a bit shaky right now. tom: i mentioned in my opening script for 6:00, east of los angeles in riverside, out to palm springs in palm desert, i see you limits her at -- palm desert, icu limits are at 95%. underscores the american labor economy.

it is not even close to adequate . jonathan: we will catch up with kevin cirilli and washington, d.c. in just a moment. coming up tomorrow, a conversation you don't want to miss with john bolton, right here on bloomberg. with the first word news, i'm ritika gupta. the stage has been set for another confrontation between the u.s. and china. chinese lawmakers have approved a landmark national security law for hong kong. it will punish acts of secession, subversion, terrorism , and collusion with foreign forces. the law will shake the future of hong kong, whose freedom has interacted -- has attracted hundreds of companies. who warning that the worst of the coronavirus is yet to come. the reason is a lack of solidarity in fighting the disease.

most areas of the u.s. looking to scale back reopening's. intelligencemp's director promising to investigate allegations that russia offered boundaries for killing u.s. soldiers in afghanistan. john ratcliffe made the announcement last night. the white house says the president was not briefed on the matter. according to "the new york times," the bounty threat was included in a written report to the president in february. the ceo of barclays sees a gathering storm in the british economy in the midst of the pandemic. jes staley spoke to bloomberg in an exclusive interview. >> we are clearly not out of the woods yet. i think we have recovered more right now we would have thought, but there is the second storm coming in a couple of months. ritika: 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'm ritika gupta. this is bloomberg. ♪

>> most of the things which they talk about our already illegal under hong kong law, but they are not made illegal in the way that china wants because china

wants to be able to find those things in a way which runs counter to most of the views of the world on international human rights law. jonathan: what a privilege to hear from the former governor hong kong, chris patton, on bloomberg radio and bloomberg tv. .his is "bloomberg surveillance " alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. getting in shape for the price action this morning, with equity futures just slightly negative. two points lower on the s&p 500, closing out q2 and the first half of 2020. track to be the best quarter on the s&p 500 since 1998. the first half been a story of two halves in a major way. 10-year to 0.63%. the swiss franc outperforming

the euro. we come in about 0.3% on euro-dollar. dxy i am glad you mentioned , the blended index. this is one of the quiet stories at the end of june. kevin cirilli joins us, our chief washington correspondent. iss thing in hong kong beneath the fold on "the washington post," on "the new york times." guess what? taiwan is not beneath the fold. secretary pompeo is going to address this triangulation between beijing, hong kong, and taiwan. kevin: without question, it is a response to what we are seeing ,ver the last couple of weeks but the u.s. is really not looking at u.s.-hong kong

.elations they are looking at a broader geopolitical strategy that will extend regardless of the occupant in the white house. , congress is going to be unveiling a series of bipartisan proposals in october. these are just many of the steps the u.s. is taking. tom: except that mr. trump is not on that page. how much of this is a societal risk to hong kong? businesses that have financial dealings in hong kong were concerned about the

revoking of the international trade status, so clearly it is a concern among some in the business community. however, i would note that when you've got senator pat toomey, a --, working with would make, this it more difficult for chinese officials to do business with .he communist party it is part of a broader escalation i am told will really come to her wish and one month before the election -- come to fruition one month before the election. regardless of whether biden or trump is elected, it will continue as a recalibration of sorts of u.s. policy. jonathan: the president starts on china as something that still pulls well -- still polls well.

a little later today when chairman powell sits down with secretary mnuchin on capitol hill, how can they push the story forward to say that we are the safe pair of hands to control and develop the recovery be on november? foremost, thend timing of the stepped up recovery, whether it is at the end of q3 or at the beginning of q4, as around november 3, and that could have significant implications in the final debates leading up to the election, but also the framing of this. the economic indicators, the jobless claims, the unemployment rate, all of that will be wherel in terms of americans and independent swing voters feel the economy is going to be headed come 2021. secondly, to your point, this is really where the pressure of the state closures in texas and arizona, to some extent

the sense that some of these republicans who were very skeptical of trying to have another round of economic stimulus might have to do so, and chair powell could signal as much, even in more explicit terms,, couple of hours -- explicit terms, come a couple of hours. lisa: he had no public events yesterday, no public events today. we are not hearing very much from him, but we are hearing a lot about policy, whether it is response to china's curbing of hong kong's individuality or the increase in virus counts in the sunbelt. is president trump control over this media cycle? kevin: democrats would say yes. republicans would say no. from the democrat perspective, he is tripping over himself.

why step in the way when he is doing what really could be said that they want to do? in contrast, republicans would say, where is joe biden? i think it depends on what perspective you are looking at this, but no question, i can tell you that based upon my reporting, there are some behind-the-scenes recalibrating to get through what have been some difficult new cycles, to put it mildly, and to recover as we enter further closer into the summer. jonathan: kevin cirilli, always great to catch up with you. the absence of former vice president joe biden, maybe that is part of the strategy. economy,well on the but badly only handling -- the on thent polls well economy, but badly on the handling of the virus. to fed chairman is going tell congress that if you can't recover on the virus, you can't

recover on the economy. tom: the idea that the president has essentially disappeared is not my opinion. i think it is stated pretty much factually just looking at his schedule. he's got to figure out a new path forward, and there seems to be some fragility here as he greets the summer. jonathan: looking at this market, no sign-up fragility right now. equity futures basically unchanged. coming up, a conversation on this bond market you do not want to miss. hsbc, the global head of fixed-income income research, joining us at 7:30. we will catch up to give you a sense of the price action elsewhere. here's the bond market right now. we started the year at around 1.90% on the 10 year in america. your yield right now, 0.63%. the big turnaround in the bond market a key feature of the first quarter and a story that

stays with us into the second quarter as well. as we go into the third quarter, steven major's coming up next. alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. this is "bloomberg surveillance ." ♪

♪ city,an: from new york this is "bloomberg surveillance ." alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. good morning to you all. equity futures turning positive, up by almost a single point on the s&p 500 as we close out the first half of the year and q2, heading for the best quarterly performance on the s&p 500 going all the way back to the late 1990's. treasury yields higher by a single basis point to 0.63%. muted price action in the bond market this morning. the dollar stronger against the bulk of g10, with the exception of the swiss franc. strengths.ss after just some muted dollar strength coming for g10. tom: absolutely.

no question about that. i would note dxy back to a 97 level really gets my attention. right now, our interview of the day for fixed and come and for rates. steven major has been at hsbc for ages, and he has been on about the vector, the dynamic of the bond market, and particularly full faith and credit. to begin the conversation, bring us up to date on the inner sure -- the inertial force of yields lower. how much lower can the tenure go? steven: we are still some way from that. i know it doesn't sound very toiting to go from 0.63% 0.50%. is nearly 100.t clearly, our view is different.

what matters to me is looking through the noise. it is not about whether there's going to be a recovery or not. let's not confuse a bounce with recovery either. when we look at the long-term debt dynamics and structural drivers, including the impact of technology and the demographics, all of this points to lower for longer, and the fed itself is guiding rates for years into the future. for me, it is very difficult for bond yields to go up, and i think we are stuck here for a long time. year,. treasuries this 10%, andowards long bonds 15%. that's not bad for an asset class that is supposed to be value. jonathan: better than not bad,

considering where we started the year about where the treasury supply matters. the supply matter for the long end? steven: the short answer is no. do you want the long answer? jonathan: i would love the long answer. [laughter] steven: there's not a client meeting where somebody doesn't talk about qe supply, inflation. there's no lack of demand. economics,5-year-old trying to map the supply curves and looking at the various shapes. look at the savings rate in the u.s. we are not exactly sure where it is. people are saving because they are unsure about the future. the money that gets saved gets recycled into bills and bonds through the banking system. this idea about supply mattering

needs to be put in the context of the demand. i think that is being missed. it is really naive to look at one side of the equation. people look at the fed balance sheet and think that it has to be an inflationary sort of trouble. people looking at one side of , it is justsheet part of the whole dynamic. the fed has been able to buy during the last few months. the banking system is financing the fed's asset purchases. i've heard guest come on your show and talk about printing the money and inflation expectations. it is not understanding the whole picture. there's no lack of demand.

we will see this for quite some time to come. lisa: i would love a window into some of the response you have gotten two years theories and predictions going forward as they run counter to a lot of what is on wall street. moneyre no limit to the printing, to this idea that the fed can monetize the debt of the united states as the best deficit its deeper and deeper? first of all, it is loose talk to talk about monetization in the same way that some talk about printing money. there's an asset and a liability. there is a constraint. it is the banking system. when you look at this, the fed is probably aware of where that constraint may be. have you noticed how fast they tapered from the qe that started in march? ,t was reversing some of the qt

putting back what was missing into the system, and it was dealing with some of the dysfunction in the asset markets. plushe tapering is 90% from the original level. that happened without any disruption to the bond market. isn't it impressive how the yields have been in the 10 basis point range for the last two or three months. people don't get it credit for what it is clearly worth. the market is functioning very well and looking through the noise. i think it may be that people are victims of 1970's education, looking at the kind of money and freedom of things. i am not saying it is wrong. it is just inappropriate for the current time. tom: this has been a wonderful discussion of theory. i feel like we've got to reread it again. that is all fine and well, but for our listeners and our viewers in this simulcast, it is

real simple. there is no real return, and the nominal return is dickensian. it is out of the 19th century as well. that is unsustainable, isn't it? at some point, there's got to be a real rate of return, right? steven: it depends where rates go. today we are close to zero. we could go negative. it is not out of the question. it is a nonzero probability that rates will be negative next year. but aa small probability, huge impact. when you invest, you invest on the scenario basis. you think about all possible scenarios, not just one base case. it seems to me that when we look across the possibilities, rates aren't coming up anytime soon. i think investors will lower their sites in terms of return. if you can keep your money, that is good. don't lose capital.

maybe a total return of single-digit is going to be reasonable in the next decade. i think the problem is people have got used to have these huge returns in the equity market. is the rateainable of return. we've had 2%. then we will have to rethink for next year. you can go into investment-grade credit, for example. you can go after the yield curve, which is quite steep. jonathan: when you say rates could go negative, are you talking about the policy rate treasuries? steven: we've already seen bills trade negative.

you know that japan and europe have gotten that. i think it is more for next year, not for this year. it isntral bank that says truly all in and using all available tools would not by definition exclude the possibility, so everything is on the table. long drawnin for a out session, negative rates are a policy option. final question for you -- jonathan: final question for you. do you have more face in -- more faith in your call on the market or in your beloved west ham in the premier league this year? moren: i think i've got faith in the treasury forecast. i'm sorry. jonathan: i'm sure that is what hsbc wants to hear, too. always good to catch up with .ou, steven major of hsbc

a lot of people think increase in supply, treasury supply will lift long and yields. pushing back against that in the last month. lisa: and saying that quantitative easing is not the reason yields are so low. it is a structural high debt, low growth environment being rate slope area i am struggling with the concept of inflation because implicit in what steve was saying is the idea that inflation will remain low due to demographics and the debt overhang. i am trying to pair that with all of these calls about money printing and what happens when you get the federal government increasing the deficit in the fed monetizing that. steve throwing some water on that. inflation has been such a hard call to get right, and it is so key to understanding what comes next. jonathan: totally agree. the message is loud and fear. you've got to get used to lower returns.

people are really having a struggle doing that. i would think that a really good interview we could do and a bit of relegation would be steve major with lord king, when we see if aston villa or west ham are going to be relegated. then we could talk about monetary policy in the bond market with a villa fan and a west ham fan. , and lord king has got some real worries about the fundamental structure here, and the outcome of that could be higher rates. jonathan: i'm so proud of you. we've come such a long way, that now finally you identify guest by which football team they support. i just miss american baseball so much. nowred sox are doing better

than if they were playing. jonathan: because they are not playing. equity futures up three on the s&p 500. we advanced 0.1%. we will catch up with terry haines of pangaea on the view in washington in an important 30 days ahead. this is "bloomberg surveillance ." ritika: with the first word news, i'm ritika gupta. federal reserve chairman jerome powell will warn today of the extraordinary uncertainty that coronavirus is causing the economy. how will lissette to testify before the house financial services committee. he will stress the importance of keeping the disease contained during and a happy ionic rebound -- during an economic rebound. president trump is reigniting concerns that he's interested in preserving relations with the more than defending u.s. interests.

the president has shrugged off allegations that the kremlin u.s.ed bounties to kill soldiers to the taliban. democrats unveiled their climate change plan today that includes a so-called negative emissions proposal. the goal is to effectively thanre more carbon dioxide we have met after the year 2050. no more delays for american taxpayers. the internal revenue service will not extend the filing deadline passed july 15. the agency previously delayed the deadline for three months. taxpayers can still get automatic extension on their paperwork until october 15, but they must pay any money they owe july. -- is in has learned

talks to buy postmates. 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.

chair powell: at the central bank, we have the ability to create money digitally by creating bills or bonds or other

government guaranteed securities, and that increases the money supply. we also print actual currency and distribute that through the federal reserve banks. jonathan: you will hear from him again this afternoon, 12:30 p.m. eastern. full coverage here on bloomberg. on bloomberg tv and radio, alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. q2, q1, -20% on the s&p 500. q2 taking a large bite out of those losses. equity futures basically unchanged on the s&p 500, a few hours away from the opening bell in new york city. treasury yields creeping a little bit higher, up a basis point to 0.63%. showing a little bit inferior. tom: dollar stronger, and looking at the markets, great.

tomorrow we will be in conversation with john bolton on the path forward for conservative thought in america. been haines of pangaea has wonderful about speaking about the other america and their politics away from three zip codes in new york, to zip codes in d.c., and for you and a half in l.a. good morning. ambassador bolton has made clear he will support president biden. how does conservative washington and the conservative theology of america get comfortable with president biden? terry: i don't think they do very much. the misunderstanding going on is

that he is running as the centrist he has for most of his career. over the last year, you can see that is very much not true. for some time, i have been telling at the biden trojan horse. the policies have gone left. the supporters have gone left. he's involved in what i think is this quixotic pursuit to engage thatessives in the hope they can get out votes. clearerbecomes a little , we are not seeing the joe biden of the 1990's but something akin to a sanders/warren lite candidacy, i think he has real trouble in the heartland. where are we when it comes to extending unemployment benefits next month?

a lot of americans are relying on those benefits and others are saying people are earning more money than they had previously. that's a very good question. i think the answer is there isn't any conservative ideology anymore. shove,sh comes to washington will do whatever is necessary that is good for the markets today in these particular strains. part of the deal was to increase by $1.5 trillion over 10 years in order to get the tax bill done in the aggressive way that they did. know that there's not some kind of hard backstop. -- any see any resilient resistance to wanting to extend unemployment anymore. i think that will be a major component of phase four.

i think they absolutely will extend it. jonathan: let's talk about strategy. this administration does not want the vote in november to be a referendum. they wanted to be a choice between donald trump and joe biden. how today get people to see this race differently? start they've got to defining biden. the question is when they do that. it ank you would have seen lot earlier, but for the pandemic. biden would have been out there. the campaigns would not have gone on physical hiatus, that sort of thing. there would have been a lot more to talk about. but i think what they are doing is waiting for the right time to itthis, and the time when has the greatest possible effect. they have judged it is not there .et

four months out is a very long time. but i think they do that earlier rather than later. the question is whether or not the biden campaign has an effective counterpunch. tom: we are way out, even with theobtuseness with which conventions will be done. is the great shock of november a low turnout? shock i think the great of november might well be low democratic side more than the republican side. you've got a great deal more trump supporters than you do in biden supporters.

that has been demonstrated every which way. i think what you end up with is a question of how do you actually get groups that will be actuallyally for biden out, and how do you appeal to swings and get them out? to me, the great unanswered question of this election is how are the people, the college educated white men and women who were 33% of the electorate four years ago and went for trump even after telling pollsters they were 2-1 against trump, where are they going to go? i think that is the story of where this election ends up, but i don't think you have any intensity problem on the trump side. jonathan: always great to catch up with you. my best to you and yours. on theaines of pangaea election coming up in november. november feels like a lifetime away. in normal times, a week is a

month, a month is a quarter, a quarter is a year. this is not normal. a week is now a quarter and a quarter is several years. november, a lifetime away. lisa: it feels like a lifetime away, and yet we are seeing a number of investment managers saying this will be a pivotal time when it comes to market calls. what exactly is the application for the market? how important is the composition of the senate and the house? how likely is it for a democratic sweep? hard to know how to even price this. jonathan: tom, if you were going to pick a single issue for this market alone, taking away everything else, all important issues, taxes and taxes and that is it. tom: that is usually the case, ,ut i am going to say as well just real simple here. wind do we get the next fiscal tranche?

you've got to have that with 20% unemployment. jonathan: the pressure is on to sort that went out as we close out the month of june. good morning to you. this is "bloomberg surveillance ." ♪

>> no one at this point, analysts, companies, strategists have a great sense of what earnings will be in 2020 or 2021. >> you have a fed literal looking to a television camera and said we are just printing the money. >> that initial shock effect from reopening, which is going from no activity to some activity, then you settle in at levels where you don't really know where things are going. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. thrilled you are with us this final day of the first half of 2020.