>> a lot of businesses are not see a different destination regardless of the journey. >> the fact is we are likely facing a slower growth and sluggish economy as we recover out of this and that is a great backdrop for secular growth. >> this is not a balance sheet recession. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance. equity futures positive. i'm jonathan ferro. tom keene and jamie dimon kicking things off at j.p. morgan. tom: this is so important. each bank comes out with a different look and feel. there's no question this is a bank coming out with confidence. he was emotional right from the

top of his comment on the employees and what they've done during this crisis. what i see here is best in class confidence. you wonder how the other banks will adapt to that. call it: let's conservative confidence. you can see where the headwinds are. they are going to be with us for quite a while. lisa: they boosted their reserves for credit losses highlighting some of the concerns about the economy. shares of jp morgan right now and have the open up almost 4%. we will get more of a sense of how much of a port in the storm they will be. we will get consumer price index data which may point to the

biggest rise in consumer prices in seven years due to some of the energy increases. lots of fed speak ahead of the blackout period. jonathan: we have to kick things off with bank earnings on wall street and crossover to sonali basak. >> pretty amazing here. even with more than a billion dollars more in bloom losses than wall street expected, jp morgan is also coming in with profit that's better than expected at a very tough time here. jp morgan sold off a ton. this is not 2008 for jp morgan and they are showing that right now. the reserve bill is not too bad when you look at the corporate as well. tom: this is the acclaimed hp 12

c calculator, which is what we use when the banks report. here's the number. 24.3. putting into scale how big this bank is. they took an $8.9 billion reserve and that is 24 days of revenue by a quick calculation. we forget how big these banks are, don't we? >> and jp morgan is the biggest of the big. they are fine. we have wells fargo coming up in an hour. it's possible they report a loss. and if they were to report a loss, what kind of confidence does that sent to the market? you have a big dispersion within the banks here. i wouldn't take jp morgan as what everyone will look like. toa: wondering if your went

see the same kind of increases on the trading revenue side. >> that $7 billion fixed income revenue is $2 billion more than we expected. course it has trade numbers in there so that's a little bit at her. it is still the biggest shop in town when it comes to fixed income that has been seeing a real boost here in this market. catch up witht to you. bank results coming out through the week for jp morgan and early trading firm at 2.5%. orlando.ng in phil >> thanks for having me back. jonathan: what's your first take? >> two great data points. numbers stronger

revenues, stronger earnings despite having a larger loan loss provision. i would put that in the win column. tom: there is going on here about bulls and bears. ofs incredible the lack bullish tone. how unloved is this market? >> i think it's the most unloved rally in the history of the stock market. cannot the near term long-term tug-of-war. we think the longer-term is quite bright in terms of the trajectory of illnesses and pharmaceutical responses. in the near term you had a 47% rally in the last three or four months and we are bracing for a 45% decline in s&p earnings overall. we took some chips off the table a month ago and reduced our

equity overweight which had grown to 5.25%. 2% becausedown to a we thought that second-quarter gdp and corporate earnings were going to be a challenge. jp morgan and fedex have gotten a soft -- us off on a good first foot. lisa: are you willing to get more bullish again and put money to work? seen two companies. look at the overall earnings season. for 45%s is looking year-over-year decline. financials have underperformed radically and the expectation for earnings is they are going to be down 55%.

so why leave got a good number here, let's wait until we see .ells fargo and citibank jonathan: we've got some long-term negatives. you've got to believe that's going to turn around or at least get incrementally better in the quarters to come. do you believe it will? >> absolutely. our view is this recession that started in february and did i the middle of the year. are expecting a pretty strong snapback in the second half of the year. we are not in the camp that the recession is going to bleed into the second half of the year. phil: i know you are an additional investor in tesla.

there are so many lagging sectors including banking. what will be the catalyst to get these lagging sectors including james dimon's jp morgan to go go go? >> the sectors that will do well and be tech, health care the more defensive categories. the more economically sensitive categories including financials are going to have horrific numbers. what's going to get them going forward is a safe reopening of , a rolling down of this second wave of infections and some confidence that we are making pharmaceutical progress. gilead's remdesivir put out some terrific news the other day. decline. it looks like we are making great progress on the vaccine

front with moderna and pfizer and there may be a few others. it looks like we will have a vaccine at least for emergency use this fall. that's all good from a confidence standpoint. we will start to get economic activity back here in the second half of the year. some of the data points that we are seeing is an important step in that direction. tom: phil orlando, thank you so much. there is one number in all of this. it's been discussed. it is absolutely remarkable given the natural disaster that jp morgan delivered tangible equity of 9%. for them to do high single digit tangible equity with which adp that's plunging 20, 30% with an unemployment rate published 18%. you and i know it's way higher.

9% them to nail in a tangible comment is an act of god. it's just absolutely extraordinary. the level of certainty going into the end of the year is still really elevated. our fortress balance sheet is a port in the storm. that's going to be with us through to year-end into 2021. tom: absolutely. you really wonder what we are going to see from bank of america. as you begin this season -- i'm going to go back to pepsi-cola which i thought was a remarkable organic revenue growth doing better. this goes back to gina martin adams. the gloom is all there, but the reality of what they are publishing is better than the gloom.

jonathan: people are buying big reliable brand names like pepsico, like quaker oats. that's what happened yesterday with pepsico. for the other names that are this, we justd to had a massive provision build. a lot of that is guesswork. from banks that trying to guess how much they need to provision. lisa: it's going to be a guessing game. i do want to point out the strength we are seeing in the capital markets business will also raise some questions about how much of a boon the government has given to these lending programs. but also on the trading volume side as people are pushed into credit read sort of the alternate side of the story which is not so great to -- for

the economy. jonathan: from new york city this morning, good morning to you all. higherfutures drifting by nine. join us, the head of investment management from wells fargo. this is bloomberg surveillance. ♪ >> mike pence tells -- to protect -- however they can. closing indoor dining and bars and the largest school districts said they would offer remote learning only. matt hancock will make the announcement today.

labor unions and opposition politicians have questioning prime minister boris johnson's government. joe biden unveiled his plan to boost clean energy and cut the use of fossil fuels today. the democratic presidential candidates will call for setting a 100% clean electricity .tandard 2035 in 2035.ng a new round of pandemic relief next week. mcconnell says he's working with the white house on the plan. negotiations will begin with democrats. they've already come out with a $3.5 trillion plan has passed the house. invest inin talks to india's geo-platform. a deal could be announced in the next few weeks. google will join facebook and a number of private equity firms.

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>> we are moving back into a modification mode of our original stay. we are now effective today

requiring all counties to close their indoor activities in the following sectors. restaurants, wineries, tasting rooms, movie theaters, family entertainment centers, zoos and museums, card rooms and the shuttering of all bars. jonathan: the reopening reversal from gavin newsom. $3 trillion economy going in reverse. state in thege united states of america unwinding some of the progress over the last couple of months. from new york city this morning, good morning. still positive up eight points in the s&p 500. check out this line from the delta leadership. demand has largely stalled. that's the story of the here and now in america.

the middle and the mac side of -- backside of this horrific pandemic, all of them are bad. there are too many including delta that frame out a most distressing guesstimate for the one headline, total revenue per available seat mile down 21%. i'm going to really be focusing on this and officially right now i'm going to call this revenue season. would go i agree and i even further. we were seeing some real sequential growth. we are seeing it roll and stalled out. out.llover and stalled lisa: delta revenue has dropped 91% in three months through june. who is traveling? to a lot can't travel

of states. jonathan: can this administration engineer some kind of recovery to campaign on? now it has stalled out. tom: you are dead wrong. it's not about november. it's about getting to the final week of july. kevin cirilli is the only one left in washington. i'm sorry. these kind of stories from mr. signal and exceptional urgency to a july meeting of the minds on our fiscal package. >> i would argue it's not just big business but also main street needing that type of liquidity. the republican from arkansas last week, he said that really the bottom line ahead of the next round of

economic stimulus is going to be to make sure that the funds that are available are more rapidly dispensed into the economy. withrying to come up solutions to relay micro-target these smaller businesses to make sure that they have the cash they need to keep their businesses open. debateinto this broader whether it's manufacturing or education is this desire to get this across the finish line before the august recess. the president has put a $1 trillion price tag on this bill. can tell you based on conversations with democrats, they want to see much more money allocated. tom: we are talking one trillion. the democrats want 3 trillion. in the new number is this is all in the backdrop of the potential for trillion dollar deficit. does any of that matter to the

people in washington? or it's just about getting reelected. on and in hist note he really highlights the and the light years apart that republicans and democrats are on right now. it also alludes to the notions of republicans very uneasy with spending more money. the second point is there has been some economists in the saying --cho chamber has not suffered greatly economically because of the funds that were spent so quickly during the rounds of economic stimulus. there's another thing we have to talk about. we are rightfully focused on the august recess deadline. but there could be another round of stimulus come the fall before the election. jonathan: there could be. it is three-month band-aid after

three-month band-aid. if it's about getting reelected, let's hope they realize that to get reelected they are going to have to do more. there is a real risk of hitting an air pocket of demand in the second half of the summer. totally agree, but kevin cirilli, what was the significance of the california announcements in the last 12 to 16 hours? overlay these micro-state announcements on the ballet in washington. >> i think the markets have readjusted in terms of looking at hospital beds as opposed to headlines and chiron's. that's really kind of where we are going here. it's one thing to look at it as a failure of leadership. takeanother perspective to to say it's actually tracking the data and understanding the spread of the virus. you use the analogy of a weather storm, if there is a lot of snow on the roads people aren't going to leave.

you have to wait until it melts and the roads are cleaned up. we are in this virus pandemic weather storm model until there's a vaccine. jonathan: how many of these loans of people that have borrowed from banks like j.p. morgan have been supported by the amount of money that's been pushed out from washington, d.c.? that handsome unemployment benefits. how many americans have received that money? that is a huge issue for these banks. when you talk about credit loss provisions, there's got to be a decent understanding of what the fiscal help is going to be because unemployment is still going to be elevated going into the new year. 10% of mortgage holders evidently were delinquent over the past couple of months. that is with enhanced unemployment benefits and all the support that has been doled out. what if that subsides?

we have companies that have been pushed into the debt capital markets. that has been really a big help in terms of the capital markets business. how much longer can they keep doing that? have had ahese banks massive helping hand over the last quarter or so. i know it's been a difficult time. how many of these banks have received loan repayments they wouldn't otherwise have received if it wasn't for the fiscal help we've had? tom: no question about it. the theory of that goes back to ben bernanke where the integrity of the financial system is the only way to allow the rest of the system to heal. now the question is how do we get the rest of the system to heal? after the california announcements yesterday, the joey is really out. futures still up 10

points in the s&p 500. and -- tomime keen keene and lisa abramowicz, i'm jonathan ferro. this is bloomberg surveillance. ♪

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jonathan: from new york city, this is bloomberg surveillance. we are live on bloomberg tv and radio alongside tom keene and lisa abramowicz, i'm jonathan ferro. we kick off our earnings season in new york with j.p. morgan earnings. up 13 on the s&p 500. positive .4%. the last 24 hours were really interesting. as soon as you test the post covid highs, we rollover. in the bond market yields just a little bit higher. and there it is again on a q. week for europe. strong euro. , tom keene. big week for the continent.

tom: you've got gold under $1800. i would even note euro swissie which is -- swiss franc weaker against the euro. he's in charge of tea leaves at wells fargo and head of investment management research george, it's real simple. i looked at the u.k. to year yield today and i couldn't go logarithmic because it's a negative yield, but the mass is real simple. it's a persistent trend. how grinding is this bond market and does it indicate for you that the u.s. 10 year yield could grind ever lower? >> it could grind lower. since june 5 where we hit points, webasis

think it's probably going to stay in that range. unfortunately we think it might trend a little bit higher. i 10 basis point move higher in 10 year rates is a negative one point 2% return for investors here. so that's the challenge that investors are facing right now. backup can cause a pretty significant negative yield for clients. jonathan: the front end is hypersensitive to expectations about the policy rate. what's been more interesting is what's happening down the longer end. in the united states we can converge down to the policy rate on a 10 year maturity in the treasury market. do you think that can happen? >> it's feasible. that's not our base case scenario. certainly what's happening

domestically is we are catching up to what we are seeing overseas and that's actually not a good for us. we like the fact that the yield curve is actually widened and steepened a little bit. that is part of our base case forecast. i think the key is it's going to be gradual. is that's going to happen the issuance potentially coming out. seen if that'se going to be happening going forward in the fed is going to have to step in from a quantitative easing perspective to stave off any kind of rate tantrum you could get if you don't see them stepping in. benchmarkcally when government yields are the slow, that is negative for the economy. a lot of people going further into risk with a preference increasingly for high yield over investment grade. why is this a good time to take credit risk at a time of so much

skepticism about the recovery being expressed? question.great we've been stepping into high yields a little bit. we are neutral on an overall right now. we are looking for opportunities to take on credit risk. right now you are actually getting compensated to take that risk. you had such tight spreads there were no opportunities to do that. yields, historically that's a good opportunity to get into that even if it seems like a challenging time to get into it. we think those returns will offset any kind of volatility or defaults you are going to see. we think it's a good opportunity. investment grade corporate's, high-yield corporate's. perspective there is such a dearth of income that you are going to see a lot of demand coming into that and

that's going to support those levels. lisa: the spread you are saying is sufficient to absorb the losses. we are seeing the highest default rate among u.s. high-yield debt in 10 years. of default rate is your analysis pricing in to make the 5.8 percentage point yield cushion worth it? >> default rates are roughly between 5% and 8%. we still think it makes sense to stay within high-yield right now. you are getting compensated. if you look at where else you go in the market this is a challenge that every client is facing right now. pre-covid, for fixed income he could count on getting good income and an offset to your risk or folio. going forward, you will have to choose one or the other. orher the income component risk offset which is treasuries, agencies, but you are not going

to get the income. isthink going for the income making sense and more and more investors are going to be doing that and will support the high-yield market. tom: the backdrop here is a new statistic. many others have talked about. -- about it it's a bond analysis of what appears to be $4 trillion of national debt. that's the new statistic. not 3 trillion, 4 trillion. what do you say to wells fargo clients who say wait a minute, there's $4 trillion out there. that's a number we've never perceived. >> it's scary. the amount of stimulus in the marketplace is something we haven't seen before. saw 340 crisis he trillion dollars in fiscal stimulus over a two-year timeframe. trillioning to see $2

over 180 days. six times as much in stimulus. that's a huge debt burden and that's going to cause challenges. to -- wety is we need need it. this is the time to be adding the fiscal stimulus. we are doing the right thing on the fiscal side in the monetary side. for the short we really need that to jumpstart the economy. tom: can we do this with stability? not only in the bond world but the equity world as well. do you see this as a stable process? or are we going to have some volatility out the? >> resilience is one of the key things we've talked about over our midyear and the idea that the path back may be quite a

bumpy one. we are going to see that in the stock market. we are slightly favored towards equities. roughly forecasting about a 3% growth. thathan: a question basically addresses why people like lisa abramowicz would be following, which is waste management. 2024 debt, $3 million worth. that's a loss for the federal reserve. two central-bank losses matter? central-bank losses matter? >> they are going to have some losses unfortunately. over the long term i think they will be in good shape. over the short term there is going to be some bumping this and they will have to absorb that in order to get back to more liquid while operating market.

think over the long-term things will pan out fine. lisa, a hung -- a $120,000 loss for the fed. lisa: i don't love that they suffered a loss. jonathan: don't you? lisa: what is fascinating about this story is that highlights how different corporate markets are from treasury markets. the federal reserve is buying directly from the banks in order to support this market. they are subject to the whims of a market that is traditionally over-the-counter, not done electronically. what that means is potential losses right off the bat. they are price insensitive by which will lead to trouble at some point. i don't know how you do that with an infinite balance sheet.

tom: where did this word come from? everything is resilient right now. jonathan: i think that's what you are facing when you were -- what you say when you are facing a little bit of trouble. are you resilient? do you feel resilient? lisa: i can't help myself. jonathan: don't encourage him. tom: it took me years to figure out what relegated means. jonathan: jp morgan firm in the premarket. uncertainty and these companies still can't provide us with any real clarity or guidance. that's going to be the take away from earnings season. tom: buried in the jp morgan release, they are not even

talking share buybacks until q3. that's that uncertainty out there. when can they really institute use of cash. takeaway -- jonathan: one takeaway for the banks is they suspended ibex before the regulator did. actually been really conservative throughout all of this. get over their skis in any shape or form. has been thean port in the storm. not as much wells fargo. a lot of people wondering how much they are going to cut the dividend after the stress test. fortress andthe they remain that way. somehan: that sounds like language from jamie dimon. lisa: is it not true? jonathan: i think amazon has been the port in the storm.

in terms of stock performance, yes. in terms of which bank is able to weather the downturn, jp morgan is gaining some strength. jonathan: up later, dws america's chief investment officer from new york city this morning. good morning. this is bloomberg. >> president trump is downplaying the risk with infectious disease chief anthony fauci. rift with infectious disease chief anthony fauci. thei says he hasn't seen president since early last month. the u.s. is escalating tensions with china. denouncing beijing's claims to the south china sea as unlawful. china stepping up a campaign to

dominate the resource rich region and the smaller missions there. bloomberg learned that advisors were content -- considering a move to punish china but dropped the idea after opponents argued that could hurt the u.s. , gdp fell at an annual rate of more than 41% from the previous three months. economists see the second quarter as a likely bottom of the cycle. lady gaga is back on top of the pop music world. she was the biggest popstar in the world this past month. she toppled puerto rican rapper monthnny after a three run. her album was the best-selling in the u.s.

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>> the virus remains public enemy number one. but the actions of many

governments and people do not reflect of this. to only name of the virus is find people to infect. mixed messages from leaders are undermining the most critical ingredient of any response. jonathan: that was the who and faster -- inspector general. this is a story that has been building for quite a while. the era of sitting on the fence is over. the united states has been unhappy about the use of huawei and 5g networks for decades to come in the u.k. has made the decision. 5g networksi from in two stages from the end of 2020. this is going to take a while. all of huawei 5g must be removed from networks by 2027. it's going to take a while, but the u.k. has had a bit of a reversal in the last six months.

tom: a huge reversal. the comments made on the floor of the house of commons, these are sweeping announcements by the johnson government. interesting,ost has there been any evidence that they have been spying. there is evidence of funding by the government. have we really seen, and anyone say that they've seen them spying on his cell phone? -- a cell phone? jonathan: i can't say i have. governments might say a little bit different. cutting the dividend from $.10 a share. reporting first quarterly loss since 2008. lisa: worst performance since 2008. really highlighting some of the weakness.

wells fargo in the weakest position with respect to the stress test. really interesting to see. the estimate loss per share $.66. this is the guidance. listen to the language. tom: why is that different from dented airlines? jonathan: it's not. this recovery is stalling. if you had a thought about how long this pandemic would last, i think you've got to push that out once again. tom: that's a very careful headline. i want to review the length. the timeline here ramping out of 10 days ago and the severity of the downturn. the magnitude of what we are going to see.

let's move on to the pandemic. max neeson joins us with bloomberg opinion. our wonderful columnist on this horrific event. what is the magnitude of the pandemic right now? >> it's quite severe with the americas, thee united states, south america. very much continuing to expand. there's not much that is good to say about the trajectory of the moment. signs finally get some that states are beginning to take it more seriously with the announcement that california is substantially rolling back activity. the broader context is that it's doing it based on numbers that are on a per capita basis that are actually less concerning than states like texas and that have not taken as acute action. a story that's likely to

epidemic that is growing in severity rather than going in the direction you would like to see. lisa: the death rate is still far below where it was in new york and the other states that were hit earlier. do we get the sense that the remedies are so much better that the mortality rate isn't what it was initially in the pandemic? >> sure. death rates are complicated story. one thing to point out is that most of that delay is just pure data lag. the real upsurge in cases was close enough that you wouldn't expect to see quite as many deaths. the second is this current moment is fundamentally different from the wave in new york where the virus was spreading completely unimpeded without extra compressions --

precautions for people we know to be more vulnerable. i expects the uptick in the death rates will be less steep and not quite equivalent to what we saw in new york for that reason and because of improvements in therapeutics. unfortunately the reasons the death rate might be lower, that is something you can't take for granted. it's not something that's going to last if you keep adding this many cases. you lose the ability to protect more vulnerable people when you have a certain amount of spread in the community. any benefit of treatment sort of drops when you have less ability to treat people in the best way possible which is what happens when you get a sufficient number of cases and concentrated areas. lisa: there was a survey of high-yield debt investors that show more than half of them believe there will be a vaccine

available for emergency use. is that realistic? >> it's about the soonest that you might expect one. the question you have to take into account is it's not just whether you have a vaccine. it's what vaccine you have and how much of it and how well is it ruled out. have auation where you stock, available loss of now do a really got -- good job an extremely complicated helptical -- doesn't transmission. you have to evaluate what you mean by vaccine available.

it is have to be careful and watch the data and make the evaluation based on that as opposed to your highest hopes of one a vaccine might be. we won't know until we get large-scale clinical trial data. jonathan: great to catch up with you. we see that playing out in california in the last 24 hours. reversing the reopening in california. .5% on the s&p 500. balance sheet at j.p. morgan. talking about liquidity continues to be extremely strong. the sentences speak to the difficulty of this moment we 2020. in in july of

tom: the decline in revenue is substantial but there's some great liquidity. bianka.: up next, david this is bloomberg. ♪

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and this summer, xfinity is creating a virtual summer camp for kids at home- all on xfinity x1. we're committed to helping all families stay connected. learn more at xfinity.com/education. >> a lot of businesses are not buying into the v. they see a different destination. >> we are likely facing a slower gross -- growth and sluggish economy. that is a bait -- great backdrop for secular growth. >> this is not a balance sheet recession. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: it's an exceptionally busy morning.

the bank derby as they