>> i think we started the new economic recovery. >> it will be more of a w shaped recovery. >> i think we are certainly in the midst of a slow moving policy mistake. whereyou are in the world one of the largest economies is authoritarian, you are not in a free state economy anymore. >> this is hopefully a short-lived crisis. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: for our audience worldwide, good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. counting down to a payrolls report, the most unpredictable jobs report in quite a while. tom: no question about it. what i would focus on is the conservative economists are on the same page as the liberal economists.

washington, do something, and do something on this august 7. jonathan: 1% away from all-time highs on the s&p 500 coming into this one. equity futures off by 0.4%. the data 90 minutes away. lisa: we are getting the u.s. july jobs report. this is backward looking, and only goes back to the first half before the virus started to re-shutter businesses. how much urgency is there for negotiations about the fiscal second round of support? i hear someone will be speaking on bloomberg television, national akamai council director larry kudlow, speaking with some guy that is on at that point. tom: oh really? jonathan: thank you for the promo. [laughter] lisa: then tomorrow, berkshire hathaway reporting earnings. really interesting to see what they are going to do with their $137 billion cash pile. this is a microcosm if the u.s.

economy. interesting to see any guidance about how some of them are weathering this period. jonathan: the price action shaping up as follows. in the bond market, treasury yields come in not even a basis point to 0.58%. , down 0.5%. have you picked up on the correlation? it is an equity market on a five day winning streak on the s&p 500. equities up and zero urgency in washington to get some thing done. if the equity market looked different, do you think the urgency displayed in washington might look different, too? tom: it would definitely look different at the white house. there is a tangible history if the president watches the stock market. i'm not sure if the congress does. what we will focus on and all of these conversations today, including the conversation with lawrence kudlow later, is the inequalities that have happened in this pandemic, and the

inequalities will be tear within the jobs report. jonathan: let's start the conversation with subadra rajappa, socgen head of u.s. rates strategy. what are you looking for in the paper report at 8:30 eastern -- the payroll report at 8:30 eastern? a: our forecasts are a little above consensus at 2.6 million come up there is huge variance between the numbers you are getting from economists, anywhere from down 600,000 to over 3 million, so i don't know if the consensus numbers really are something we should be focused on. it is the actual number that i think ultimately matters because we could see some very strong deviations on either side of consensus, which is around 1.5 million. tom: what i find fascinating is conservative economists are on the same page as liberal economists. washington has to do something, and they have to do that about

the imperative -- about the apparent inequalities in jobs. how is this going to skew towards the have-nots, really struggling, while the affluent service sector still does really well? subadra: i think that has really been the story of this post covid unemployment picture. it has been the lower paying service sector jobs. that is the ongoing theme because these jobs are very dependent on business is being open. i can work from home, but a lot of people cannot. i think the inequity is really going to be the highlight of the report today as well. lisa: howdy bond investors trade this? -- how do bond investors trade this? subadra: very cautiously. you are seeing a skittish bond market today.

10 year treasuries are near the low for the day. the bondare seeing is market is concerned about downside risk. in some respects, if you get a good number today, the bond market is going to likely shrug off the good data, but if you get a bad number, you could potentially break the 50 basis point level and had even lower from here. jonathan: so you think there is an asymmetric balance around tenure right now? -- around 10 year right now? subadra: absolutely. bonds are at or near historic lows, but there's not really that much of a -- you know, it is not going to take a lot to go even lower from here. jonathan: talk me through what you are talking about with your clients with regards to replacing treasuries in the

portfolio. so many people have brought this up on the program. the inverse correlation to risk assets, were to become aware not to be. subadra: i think it is a huge concern because the last four to six weeks, the place to be has been in real assets because of buying tips, gold, safe haven currencies like the yen. really running out of options. at some point there is not going to be a hedge. do we go from -1% in 10 year real yields to -2%? i just don't see this as being a forever traded bond. at some point, inflation expectations are going to get completely out of line. inflation expectations are holding around 1.50%. tom: jon did not slide in until 6:49 this morning, so he probably missed hsbc, but this

is a really important issue. they are saying the real yields are residual, and you have to look at the inflation expectation dynamic versus the nominal yield. is the surprise for the rest of the year that inflation expectations come in and are reduced? subadra: that is really the key risk because a lot of it is already baked into the market pricing for inflation expectations. 1.50% in 10king at year breakevens. the risk is if we do see weak data in the third quarter, we see a reversal in this trend, lower inflation expectations, perhaps lower gold prices as well. that i think it's a key risk. i just don't know how you can actually ignore the messaging you are getting from real yields, which is what a lot of economists are saying. why even track it?

there has to be some information value for trading. so i am just not in the camp that would ignore the messaging you are getting. tom: we track real yields because it is the name of a tv program. jonathan: subadra is familiar. she would prefer to be on that one and this one. [laughter] tohink you are referring what steve major at hsbc had to say about an hour ago. i was listening, and i spoke to it we week ago. he is basically saying they could go a whole lot lower. there isn't a limit here, and they have been deeply negative in europe, so why can't they go further into negative territory in the united states? does that rose with you? -- does that resonate with you? because inflation expeditions can't continue to rise. , the fede get to 2.5%

looks at it in conjunction with growth. we see 0.5% growth for the quarter, and inflation expectations are 2.5%, that is not necessarily good thing. that is not something the fed wants to see. they want to see a rise in inflation expeditions in conjunction with a rising growth. so yes, you can think of real yields perhaps as a residual, is the low before things start getting a little out of whack. are, somegs already people would argue. a lot of people expect them to continue to accelerate bond purchases as the u.s. sells a record amount of treasuries. how crucial is this? how much do you expect the fed to absorb even as inflation expectations to cap -- expectations tick up?

subadra: i think you see the fed positioning to increase the average maturity of its portfolio. if you look at the treasury refunding announcement that came out earlier this week, the treasury is issuing a tremendous amount in the long and. issue wasral 20 year supposed to be a size of 11 billion to 13 billion. that was the recommended size from the treasury advisory committee. now we are looking at the 20 year close to 30 billion by the end of the years. to fed is probably going announce that it is going to try to increase the average maturity , i.e. by more of the long end and keep a lid on how high yields can go. jonathan: fantastic to catch up with you as always. subadra rajappa of socgen. payrolls about an hour and 20 minutes away.

the median estimate in our survey, 1.4 8 million in positive territory. the low, -600,000. the range is incredibly wide. we have talked about it all week. incredibly unpredictable going into this print. tom: there's a standard error that is widely understood, with that huge job population of america, that the standard error is always wide. i would say it is not even correctly called a standard error. it is just mystery. jonathan: do you think it changes the dialogue down in when we gett 8:30 that job role sprint -- that payrolls print? tom: no i do not. there is a difference between the conversation at the white house and the conversation of those disposing on capitol hill. you may get a change from mr. kudlow. jonathan: looking for to that conversation.

8:30 a.m. eastern, we get the jobs report. one hour later, we catch it -- we check in with. larry kudlow from new york city -- check in with larry kudlow. from new york city this morning, good morning. this is "bloomberg surveillance ." ritika: all eyes are on this morning's upcoming job report. after a surgeon coronavirus cases across the u.s., all signs point to a slowdown in job gains last month or worse. it is following a combined rise -- of 7.5lli million in may and june. negotiations on a new arenavirus relief bill edging towards the break of collapse. a meeting thursday between white house officials and congressional democrats ended

with each side accusing the other of being unwilling to compromise yet the main sticking point is the top line number. the democrats want $3.5 trillion of aid. republicans want $1 trillion. shocked by it is the executive order barring americans from doing business with the company, and plans to challenge the order. holding stumbled on the news. .hares fell as much as 10% a grim milestone in india. health officials say the country has surpassed more than 2 million coronavirus cases. more than 41,000 indians have died. the spike comes as community health volunteers went on strike, complaining they were ill-equipped to respond to the wave of infections in rural areas. switzerland has struck a deal with moderna to supply the country with 4.5 million doses of a covid-19 vaccine. if the u.s. biotech firm successfully develops one.

global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

♪ close to a compromise position, but i think there's a handful of very big issues that

we are still very far apart. rep. pelosi: not enough money for food. nothing for housing, in terms of -- terms oforium rent. moratorium is nice, but it's not money for rent. sen. schumer: we urge our republican colleagues to come back and continue to negotiate. jonathan: talks break down going into the weekend. from new york city this morning, good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your price action shaping up as follows, about one hour and 12 minutes away from the jobs were -- the jobs report. equity futures are off 0.3%. let's stop the check right there. there are no talks scheduled on capitol hill today to resume fiscal negotiations. we have a completely unpredictable jobs report in about one hour and 12 minutes. we are 1% away from all-time highs in the market is barely adjusting this morning.

churning,arket is waiting for the data, and will absorb whatever we see. but we look for every single day is the right and left economists are on the same page. the former fed president of richmond is on the same page with the wonderful paul krugman from "the new york times." krugman says, how can this be happening? kevin cirilli, let me ask, in washington, how can this be happening? kevin: it is the culture that has led to this addition, with both sides feeling there is no political willpower to make a compromise. compromise in this town has become such a dirty word. i spoke with one well-placed source who is very close to the white house who told me essentially that they are looking at the end of this calendar year beyond the election, and they are well

aware of the economists predicting that massive furloughs, massive layoffs would likely be in the pipeline in the fourth quarter of this year. the stalemate is even more perplexing when you look at all of the economic data. of course, we are quickly approaching another indicator. but when you look at that, juxtaposed with the inaction coming from the nation's capital, it is going to lead to a palpable anger over the next three months. avenue 1600 pennsylvania looking into next year and a minority mitch mcconnell? kevin: they are looking in the sense of what they can do in the immediate short-term to pressure lawmakers in both parties to get to some type of agreement. the are looking from perspective of the executive orders as it relates to unemployment benefits, eviction moratoriums, and student loan debt as a path that they can

take. but the perception amongst rank-and-file republicans is secretary mnuchin and leader mcconnell represent polar opposite ends of the republican ideology at this, and are looking at different constituencies in their negotiations. jonathan: for a threat to be credible, we've got to have a credibility test. the president is threatening to go it alone and use executive actions. i have no idea how long he is willing to wait before he does that. if he believes he can make a difference, why doesn't he do it this evening? what is the deadline for him to say i am going it alone? kevin: i think you will see the president be able to take that in the relatively short term. think the economic data that could come out could actually really impact the timeline of those executive orders. the president tweeting yesterday, signaling that his staff is still working around-the-clock on those executive orders, which would signal potentially some

last-minute stages of those coming down the pipeline. but in terms of where this goes beyond that, it would allow for secretary mnuchin and leader mcconnell to continue to try to camps foreir negotiations with speaker pelosi. lisa: there's a timeline for how long any executive order could be an effect because president trump would be tapping money unspent in the c.a.r.e.s. act, because the power of the purse lies with congress. haveong would negotiations if president trump were to enact this exec it of water before they have to come up with some replace it? kevin: they could go along. when you are talking about an extension of an implement benefit -- of on and point december,hrough mid this is not even the final fight. you look at the fight that lawmakers, once there is a

,accine, could potentially have you look at the infrastructure battled the president still wants to have before election day, this is not even the fourth order. we are still in the second quarter in terms of actually contentious fights here. that is why it is even more perplexing to see inaction coming because they are not even at the halfway point. email asking, is lawrence kudlow still believing in a v-shaped recovery? i get he has a public official and he's got to spend the spin out of the white house. does the white house still believe in some form of gdp recovery? kevin: based on my conversations i've had, they believe a v-shaped recovery between now and november 3. but if you zoom out on the bloomberg terminal, that is when after november 3.

that is when we are hitting the fourth quarter, where because of the inaction in washington, these companies are going to have to make furloughs and layoffs. tom: do you see how cynical he's become? kevin: i'm an optimist. i totally push back on that. jonathan: d.c. is slowly killing his soul. kevin: no! . jonathan: kevin cirilli, great to catch up with you. the v, i hate it. it is a marketing device. it is all about optics. it is about replacing output in the same time it took to lose that out. there's no v. the constructive view on wall street is that we recover everything we lost maybe by the back end of 2021. tom: you go to a new level below. el-erian saidr.

it is the square root thing. the point is the tangible suffering that is evident area it would be something that wasn't evident. it is tangibly evident. jonathan: for me, it is the labor market. are we going to have a 3% year-end? everyone needs to get real. it might be 10% at the end of today, maybe lower. fed is at about 9% year-end. who is seeing 3%, 4%? no one. it is a ridiculous conversation. you may see some recovered output, but to fully recover this labor market, that is what makes up for the people, it is going to take ages. tom: the claims number yesterday was a little bit better, but it is the level it is at. it is like the bathtub. are we looking at the water in the bathtub? the water is in very good. jonathan: we are continuing the

conversation with ellen zentner, chief u.s. economist for morgan stanley, joining us shortly on this program. equity futures down 0.4%. this is bloomberg. ♪

♪ jonathan: payrolls 60 minutes away. here's the price action for you. 12, -0.3%.500, down a little bit of risk aversion here. in the bond market, unchanged. 0.53% on the 10 year. euro-dollar to one dollar 18's -- euro-dollar to $1.1817. tom: it is a very typical churn, but this is not a normal jobs report. it is one thing to do the market economics game and get it right one year, two year. then there is ellen zentner of morgan stanley. 2020 doing it again in with amazing prescience. get a briefing from ellen center

this morning. i want to look at the broader, bigger view this morning. link the urgency of this stimulus into what we will see at 8:30 this morning. urgency,re's the trying to stem the bloodletting that is already begun from household balance sheets. congress passed an important fixinge for unemployment benefits. we do believe they are going to pass something, but households are already going to be without than for the better part, if not all of august. boulder,our tenure at colorado, a microcosm of how we all think about these jobs report in that the bars are closed. they are doing takeout at the sink in boulder, but not much else. sectors thathese

are in depression, or it is -- or is this a broader slow down? ellen: it has absolutely broadened out. in the beginning, it was all services. it is where the job losses and closures were coming from. but it did take very long before a broadened out to all industries. this is a downturn. regarding us of the cause, it is a deep downturn. so it is unthinkable that regardless of this amount we get, we would not have to make adjustment. what we can see is the claims data and the jobs data, the job loss broadened out to all industries. it will continue to hit all industries as these painful adjustments have to be made. jonathan: you have done a tremendous job along with the team at morgan stanley of accurately gauging where this labor market is heading. what have you done, and what have you changed in your approach to understand that huge churn beneath these headline

numbers? ellen: we have done something we had to do after the global financial crisis back in 2008, 2009. we threw the models out the window. a standard model for predicting jobs works when things are relatively stable, when things are acting in a relatively predicable way. you can't use a model for this. to do a lot ofry subjective thinking around how many people could have come back, how many people separated, how many went from unemployment directly out of the labor market , what are we hearing about business closures, and try to wrap it all together into something that looks like a forecast, and hope that your standard error is less than a few million. jonathan: let's apply that to today. the change to nonfarm payrolls is the change in private payrolls. what is the approach like today?

headline payrolls we think is going to come in around 2 million. that compares with consensus around 1.5 million get if you just look at that number, we are more optimistic on jobs growth in july then consensus. but you look at private payrolls, we are expecting only it hundred thousand compared with 1.3 5 million for consensus. it would tell you we are much more sour on job. but why is there that huge gap? it's because there's about 1.2 million artificial numbers in there that inflated because teachers left early. it is these kind of statistical distortions. if you are about getting the numbers right, is about measuring those statistical distortions. what we have to recognize is that upward bias in the numbers reverses in august. that becomes a negative in august, and that is something that will be building into our numbers next month.

the story is even to million on the headline is less than half of the pace we created in june. that's the story. job growth will continue, but slow from here. improvements in the jobless rate will get harder and harder to come by as we have already digested the biggest chunks of labor coming back to the economy as jobs opened up. lisa: the narrative is improvement, but it is the pace and direction we are looking at. the end and plummet rate heading into this report -- the unemployment rate heading into this report, 11 point percent. you are expecting it to come down to 10.8%. how much will that come down with the remaining months of 2020? ellen: it is a good question. we've had these big drops each month, but pretty much very sticky going forward. by the end of the year, we have the unemployment rate barely below 10%.

very sticky from here forward. by the end of next year, we still have it falling, but to 6.5%. that is still 3% above where we were going into this. the labor market always takes much longer to repair, in this case because of dislocation, technological advances that will be accelerated, industries that have just dropped out of the picture here. it will take a while to get back to that 3.5%. lisa: looking under the hood, what are you looking for in order to gauge the composition of jobs being lost or created? how important is that in today's payrolls, as well as going forward? ellen: one reason why it is important for us to look under the hood is we have done this work around life after covid. a big study we did with all of our equity analysts and macro strategist, looking under the hood will help us determine, are we right on some of these things that we think of accelerated,

which means jobs will be growing in those areas over time, and areas where we think jobs will be shrinking over time. so this helps us gauge are we on track for that. there are some positive things about the labor market coming out of this that we also have to be aware of. people are working from home more. what does that mean? we should be women's labor force participation rates start to repair post covid start to increase because of those increased opportunities. disabled communities being able to participate more fully in the labor market. these trends have been accelerated. the deliveries and those industries, those should be expanding. health care should be expanding. technology within all sectors should be expanding. we want to make sure we are on track for those kind of trends so we can understand what life after covid looks like. jonathan: these talks in d.c. are breaking down. if we have congressional hearings today and you were sitting in front of some of

these congressmen, but would you say to them right now? that i wouldd hope say some thing they already know , that this is extraordinarily urgent. the only way they have been plugging the hole in income is through fiscal support. most of them don't have the opportunity to find a job right now. this is not the time to pull fiscal support away, or else we will see longer-term damage to the economy. i am not sure that they don't already know that. we do think we will continue to move towards passing legislation, but i think we always tend to have these heart attack moments before major legislation is passed. so this type of what looks like a collapse in negotiations tends to be a part of the negotiation. i do still think we get something, let's say hopefully next week, but the longer it takes, the longer folks go without that income.

maybe markets can look through that because they know it will eventually be back eight paid -- back paid. but households do have to meet obligation. tom: with the mystery we see today, could the great surprise of the end of the year ba disinflationary test -- of the year be a disinflationary tendency, where expectations for inflation are lowered. ellen: that is always a possible outcome, and it is something that is probably not far from something the fed would expect, given their own forecast that inflation doesn't move from here. you would expect that inflation expectations wouldn't move either. there's a lot the fed will be doing to try to lift inflation expectations. we have a forecast for inflation well higher than consensus by the end of the year. some of that is just the , some of the bizarre

depressing effects that come out of covid. but i think at this point, the uncertainty bands around where inflation goes are so high that it could well be much higher than today, or much lower. the latter is what would beg more monetary policy response. jonathan: brilliant to catch up, as always. ellen zentner of morgan stanley at of this payrolls report. a headline coming out of turkey from turkish president erdogan, saying turkey is firmly on its feet regarding fx reserves. you can see dollar-they were -- dollar-lira rolling over. my interpretation of what is happening at the moment in the fx market, it is what he is not saying. typically when the turkish president ways in, he lashes out , leans on the central bank not to hike interest rate. we are not hearing that kind of language from the turkish leader

right now. tom: i looked at the charts, and very simply, it is a massive cover off of the weaker lira certitude of the last few days. but you are precisely right, this is about your politics and the mediterranean region. he mentions greece, and very little about what the market is screaming for with the shift from a major growth oriented odyssey back to the responsibility of interest rates appropriate for the fragility of the economy. they are not there yet. jonathan: i will say he has only been speaking about 15 minutes, so it might change. alongside tom keene and lisa abramowicz, i'm jonathan ferro. coming up on this program, looking forward to a conversation on the equity subramanianservetus subramanian of bank of america. 500,e down 14 on the s&p

down by 0.4% as we count you down to a payroll report, highly unpredictable, and the range of estimates incredibly wide. from new york, this is bloomberg. ritika: with the first word news, i'm ritika gupta. president trump's move to ban americans from doing business with tencent holdings rippled through markets this morning. came's order on we chat after a similar move against bytedance's tiktok. tiktok says it is shocked by the order and is going to challenge it. hong kong will offer free virus tests to all of its more than 7 million residents. chief executive carrie lam said the government is hoping to test 400,000 samples a day. hong kong is hoping to identify silent virus carriers. mainland china will help with the testing, but beijing's offer

has been complicated by deep political mistrust after beijing impose a national security law on hong kong. a coronavirus outbreak on a norwegian ship is spreading. norwegian health officials say there are more than 62 confirmed cases following the outbreak. the ship's owner halted all cruises in norway closed its ports to cruises for two weeks. passengers who disembarked along the ship's route may have spread the virus to local communities. in beirut, rescue teams are continuing the grim task of recovering bodies. sent wavesxplosion through the capital tuesday. the blast was apparently caused by ignition of more than 2700 tons of ammonium nitrate that was improperly stored. an investigation is underway. the world has a new centibillionaire. mark zuckerberg's net worth passed $100 billion for the

first time thursday. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> it is going to be very bumpy, more of a w shaped recovery, and getting back to those pre-pandemic levels is not a 2021 or 2022 story.

it is going to be 2023 or beyond. p -- lindseydsay piegza does not believe in the v. alongside tom keene and lisa abramowicz, i'm jonathan ferro. ng, lighter byi 0.4%. that is not a big move considering the run we have been on coming into friday. the s&p just 1% away from an all-time high, and the nasdaq just keeps ripping higher. tom: a lot of good economics coming up really through the entire morning. what we are going to do now is we canhe hp 12 c, which do on our calculators on the bloomberg. you look at the gloom, so they do subramanian -- the gloom, so savitathe gloom,

subramanian, she is calling dow 23,000. or aat a day get savita day get me -- jonathan: is that at me?t savita or a dig who wants to talk about the dow? tom: old people. why the gloom? savita: i think there's one reason to keep the income potential -- to keep the stocks, which is the income potential. let's think about what we learned in financial classes. you take your normalized earnings number, you apply the appropriate cost of capital. even though we get really aggressive in terms of our equity risk premium, we are assuming a full recovery back to

normal by the end of next year, and a fair value model only gets 500 using0 on the s&p fairly aggressive assumptions. so we've added on a little bit extra just on the fact that sentiment is still pretty tepid on stocks, and maybe positioning could move a little bit higher. i think the reason the market is going up is simply because the income and the growth offered by competitiveis very relative to other asset classes. but once that changes, that is where i worry. if anything happens in the rates market, where rates start to offer more competitive yields in equities, i think a lot of those income investors moving to equities will go back to fixed income. if anything threatens the primacy of tech stocks, what is scary today is that tech makes up 50% of the s&p 500, and your

average institutional manager is overweight technology. that means your average institutional fund has more than 50% in one sector or one theme, and if anything happens with that theme, it is time to rotate into other areas of the market. i think those are the reasons we are not as optimistic on equities as levels today would tell you. on top of that, i think there's risks around stimulus being continued. if you look at a lot of the big move we had from the march lows, it wasn't necessarily driven by optimism about the economy. it was driven by another $1 trillion pumped into the economy by the fed and by policymakers, and i think what is sort of terrifying about that is as soon as that ends, what happens to equities from their? what happens to that liquidity driven, bullish thesis? jonathan: another way of saying

everything you said is the biggest threat to treasuries right now is better economic data. the biggest threat right now to growth stocks is better economic data. savita: totally. jonathan: that is a really hard message to sell people, that the threat to the equity market is better economic data. because it sounds completely opposite. but if you think about the fact an 11 yeare been in bull market amidst a struggling economy, i think it all makes sense. it is almost like opposite day. the s&p 500 moves higher on hopes for stimulus against the bad economic environment, and could potentially move lower if we do see some sort of solution to covid were firming up economic data. i think there are other equity benchmarks that would do well in that backdrop, but given how concentrated the market is within this cohort of companies that benefit from stay home,

from weak growth, from low interest rates, i think there is a reasonable preview that the market could go down against the backdrop of improving data. but you are right, this is a weird world that we live in. wherea new environment stimulus has played a much larger role in market performance than it has in prior cycles. lisa: what you are saying a somewhat controversial. we have a lot of equity investors who come on this show and say that equity markets can absorb higher yields of waypoint -- higher yields up to a point. what is that point? how high do 10-year gilts have to go? savita: i think it is a process. as yields increase, you will see investors move either out of roast or high dividend yielding stocks to maybe some down cyclicals, but also into fixed

income. at some level, if rates get high enough that they threatened the balance sheets of corporate's, i think that is where you see massive rotation out of equities into fixed income. we ran some numbers on this a while ago, and i think within a rate environment of zero to 3%, historically the market has done all right, but i don't know if those numbers old today because we are in an environment where companies have geared balance sheets towards lower interest rates levels, so it might be a much lower threshold after which equities start to feel pain. but i do think it is a process. as we have seen interest rates increase in other areas, your income investor looking for safe, reliable income is more likely to slowly shift out of equity yields back into bond yields, the same way they slowly shifted out of bond yields into equity yields as rates fell.

jonathan: i never thought i would call you a big equity bear, but that is what it feels like right now. [laughter] savita: i never thought of myself as being very bearish. i think the equity market offers one very key attractive commodity, which is income. i think that is where investors should focus their attention. but again, i think the market has moved much more aggressively than i expected. part of this is just the big surprise in the amount of stimulus we got. i can't forecast how much stimulus we are going to get. that was a big surprise to me. but from here, i think what we need to see in order to keep the huge going is continued stimulus applied to the market, and i don't know if we get that. jonathan: fantastic to catch up with you, as always. savita subramanian of bank of america, ahead of the payrolls report. coming up on the program, julia

coronado, macropolicy perspectives founder and president. we will catch up with jeff rosenberg of blackrock. this is "bloomberg surveillance ." ♪

> i think we started the new economic recovery. >> we are certainly in the midst of a slow-moving policy mistake. >> if you are in the world where the soon to be are just economy is authoritarian, you don't have a global free market anymore. >> this is an extra nearly severe crisis, but it is also hopefully a roughly short-lived crisis. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: -- tom: good morning, everyone. an extraordinary jobs report.