>> all this money sloshing around with incredibly low interest rates, i think we risk and inflation surge. >> if the economy stays as strong as it is with all of the fuel we put behind it, you get inflation. >> the fed is likely to shift their policy stance in the coming months. >> we've never had a situation historically where the fed has not begun to normalize rates and there is an inflation concern in the market. >> no one knows if these inflation pressures are going to prove more transitory or less transitory. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity markets this morning positive 10 points on the s&p, up by about 0.2%. we had some pmi's out of europe

earlier. decent, better than expected. pmi's out of america a little bit later. tom: really sets us up for the weekend as well. what i would note is the nasdaq 100 gives you decent and better perspective off the mat of gloom, the pendulum of gloom we saw on wednesday or tuesday. we got a nice 4% move in the nasdaq 100. jonathan: the nasdaq up 0.2%. he division between labor demand and labor supply, that has been the debate once again this week. tom: you are dead on. it is the microeconomics of labor. we will talk about that in a moment, as we went to montana yesterday. we will go to minnesota on it. it is truly nationwide. 3.8% unemployment rate in montana. jonathan: a real-life case study playing out in this country, with more than 20 republican states saying no more additional ui. it's time to get back to work.

let's see how that works out. lisa: there was a tweet out yesterday from open put the york times -- from "the new york times" talking about how this is just a small component to some of the labor market shortages, the employment benefits -- the unemployment benefits people have been receiving. if the comp get the issue, the frictions are enormous if we try to restart a massive global economy all at once. jonathan: equity futures up about 11 on the s&p 500, advancing 0.3%. in the bond market, yields higher by a basis point on tens at 1.6335%. this is one you've got to try to get your head around. that a better-than-expected, the euro negative. lisa: try to get your head around a lot of the market reaction to the data we have been seeing. you mentioned pmi's. at 9:45 a.m., we get market data from the u.s. the idea being we will get 90

factoring and services information. we can see the frictions on every front. increased input prices, supply chain disruptions, labor shortages. are these temporary? are these long-lasting? will we get guidance from companies with respect to how long they expect some of these factors to crimp their businesses? at 12:15 p.m., talking about the transition of the global economy, the alice fed is holding a summit on technological disruptions post-pandemic. all talking about what it means for a labor force with more automation, with many more people demanding higher wages. how long-lasting could that be? today, joe biden is meeting with the south korean prime minister. the question to me really is how they are going to address some of these supply chain shortages,

the diplomatic issues in the south china sea with respect to south korea and china, with respect to how they deal with north korea. but interesting again to note that the first two meetings joe biden held, both with asian countries, japan and south korea. jonathan: next month, it is europe. the president with his first overseas trip to the continent, his first overseas trip of the presidency. he will be going to brussels. i believe he will be going to the u.k. as well. deere in the premarket up more than 1.5%, adding to the 30% gain we have seen so far year to date already. lifting the profit outlook, surging for the team at bloomberg. tom: what is so important is the guest we've got coming up, you look at the boom economy where he lives, and he is screaming. it is big. lisa: big.

jonathan: but not too big. let's get to jim paulsen, standing by patiently, leuthold weeden chief investment strategist. we had the market in some places absolutely ripping. you can have huge price gains but still have a valuation, a multiple that comes in because profit and profit expectations are up even more, and the profit numbers have been incredible. the earnings through q1 quite fantastic. jim: i agree. the numbers in the first quarter for the s&p 500 have come in at the $200 annualized rate. i think the full year numbers on expectations right now are 1.85% for the year. so wall street is way behind what corporations are already coining in the first quarter. we are going to be way above $200 for the year.

so it is very hard, i think. 100 $85 is a huge improvement. i just recently looked back, coming from the lows of earnings all the way back to 1950 and saying how long, if you look at one year from the lowest in the s&p 500, how much was that relative to the previous cycle peak earnings. most of those are down one year into the new recovery. you are still not even back into peak earnings. if we come in $200, two hundred $15 earnings this year, one year after the low, we will be up some 40% from the previous cycle peak, which just blows away anything else we've ever done in the postwar era and a new expansion. i think wall street in general,

economists, companies are having a really difficult time keeping up with how fast fundamentals are improving. tom: to the phd from ames, iowa, when in doubt, america always has to buy another tractor. that is what we do. we are optimistic. there's a boom economy. deere, we needed to tractor. is that mood out there right now? what does that mean for the underestimation of where we are? james: i think it is. i think there's burgeoning optimism here. if nothing else, just getting your shot in the arm and feeling some citizens normalcy -- some sense of normalcy has really elevated animal spirits i think of getting back to work and going at it again. you certainly see everything here booming again. traffic is something we haven't seen for a while that you're

dealing with again as people are going down to work. downtown is coming back to life. i think companies are starting to reevaluate. the thing we did here is we went from a depression or a bus to a wartime boom -- a depression every bust to a wartime -- a depressionary bust to a wartime boom in less than a year, just to be able to survive. then suddenly they were given a wartime boom, and as a result we are trying to catch up because suddenly we don't have enough labor, we don't have enough shipping painters, we don't -- shipping name there's -- shipping containers, enough chips. but eventually we will catch up. tom: there's a question of who benefits -- lisa: there's a question of who benefits the most, who can take advantage of the incredible surge in demand.

it looks like it is the big companies with their respect to -- with respect to their ability to pay workers more. small businesses were complaining it was hard with them to compete with the behemoths, and we have seen the behemoths increasingly gain share. do you bet on the bigger companies being able to succeed more in this kind of environment than smaller companies? james: actually, i am betting just the other way around. i really like small-cap stocks. i look at the small caps earnings, they are doing every bit as good. those earnings are coming back even faster than large-cap earnings overall. i think they have greater leverage to the economy, which is what you want to be. i think they do better in real inflationary environments where prices go up. the difference between large companies and small companies, large companies have wider

margins, let's say 10%. small companies operate with narrower margins, let's say 5%. so if you get pricing flexibility on top line, that is a much bigger impact for a smaller margin company then it is for large market companies, so their earnings have greater leverage to inflation. i think small companies are doing good, and after many of them didn't make it, those that are have a lot of operating leverage in their system. jonathan: jim, good to hear from you as always. your market this morning up by about 0.3% on the s&p, advancing about 13 points. the argument that jim and jonathan golub at credit suisse are making is that profits have been so great, you can still have this market where you have this huge price action, but it gets cheaper because the earnings have been terrific. that is the bullish view right now on wall street. tom: it speaks to the bulls we

speak to. nasdaq up 46%. that is a composite. spx up 41%, 12 months trailing. the dow lags, up 39%. i want to be careful here, folks. we are not trying to give our opinion. we are just framing out what people view, whether it is pa ulsen or golub. jonathan: i'm catching up with jonathan golub a little bit later. mohamed el-erian, too. that's the lineup in the 9:00 hour. stay tuned. are you going to watch that from the radio booth? tom: no, we are doing a conference call of harry kane. jonathan: whilst you are meant to be on radio? [laughter] nice. co. you down to the opening

bell, -- counting you down to the opening bell, two hours away. in the fx market, euro-dollar, $1.2270. crude doing ok. tom: entry point, bit dog? i have the bloomberg terminal. jonathan: on radio, on tv, this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. palestinians poured into the streets of the gaza strip to celebrate a cease-fire with israel. the hamas militant group and israeli forces are now observing a truce that ended 11 days of conflict. at least 232 people were killed by israeli airstrikes and artillery fire on gaza. dozens died knowing hamas rocket attacks on israel. the u.s. is now calling for a global minimum corporate tax of at least 15%, less than the 21% rate it has proposed for the

overseas earnings of u.s. businesses. some nations called that rate excessive. international negotiators are trying to come up with an agreement the summer -- agreement this summer. the european union is offering the battered tourist industry a chance to salvage the summer. negotiators have agreed on the introduction of certificates that will allow quarantined free travel within the bloc. the documents prove that the patients have been vaccinated or recovered from the virus. bloomberg has learned cna financial group paid about two weeks after a company trove of data was stolen. that payment was bigger than previously disclosed. cna sows the company followed the law. facebook is now the most favorite long position among hedge, according to goldman sachs. 27% of monitored hedge funds own

facebook shares. 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. ♪

♪ >> i fully expect that these misalignments are going to work

themselves out because we do have a market, and we will get back to a full recovery and that by the end of the year, we are going to be a really good shape. jonathan: good to catch up with cecilia rouse, the council of economic advisers chair. alongside tom keene and lisa abramowicz, i'm jonathan ferro. up around 14 on the s&p, 0.3%. your bond market unchanged, 1.6284%. in the bond market, euro-dollar $1.2220. pmi's out of europe not doing much for the euro. pmi's out of america coming later this morning, i believe 9:45 eastern. lisa mentioned the fed speak. if this wasn't a technology conference, i would've thought those three might have something to say about the taper discussion in a bigger way. tom: but they are not going to come a right? lisa: are they, though? jonathan: moderating the panel is bloomberg's kathleen hays. tom: she's tough as nails.

jonathan: so let's see where kathleen takes this conversation. tom: we will see what she says. i'm seeing a little bit of a pop to the tape on the screen. right now, josh wingrove joins us. he's got a twisted view coming out of canada. we speak to our white house correspondent. i want to compare and contrast the liberality of canadian politics with the liberals in washington. as we were talking to emily wilkins earlier, it's been a jumbled week, may be a transitional week here. where are liberals transitioning to in washington? josh: first and foremost, that transition we are seeing this week in terms of the issue of israel and the situation in gaza . biden has been under pressure from his progressive wing to show a little more daylight with israel, with netanyahu, and he really has resisted that.

of course, we saw him take that almost victory lap after the cease-fire was announced, expressing hope that both israelis and palestinians can live in peace, but also pledging to replenish the iron dome, sue sort of a signal to progressives that we are not pulling around 180 degrees here. biden has been trying to hold together the party. i think doing a little better than people have expected, but time will tell. you need to give emily a day off one of these days. she's working hard for you. tom: she's doing a great job. tell us about the mood at the white house. we are more than 100 days in, and there's a dynamic and a schedule. we are all getting used to it. a big difference from the previous administration area what is the mood of your white house? josh: they are sort of settling in, as you mentioned. they have a big day today, the meeting with the south korean president. i think the chip shortage is going to play a big world. they will speak at 5:00 p.m.

today, only the second time he's had an in person meeting with a foreign leader. but they are sort of settling in for the long haul. remember, this biden white house is staffed with people from the obama white house and the clinton white house. those white houses lost their majorities in the midterm election. there's no point in doing things slowly. go big or go home is the mantra, and that is what we are going to see from them as the continue to pitch the american jobs plan and look at whether the infrastructure part of it will split off into its own bipartisan deal. lisa: to be clear, it seems as if that bipartisan part is most likely to get done as a $500 to $800 billion plan with bipartisan support. what comes next? how likely is it that there's enough consensus among democrats to get the rest of biden's agenda through? josh: i think they will get some of it through.

biden has been tear he wants to try that, to split off what can be done on a bipartisan basis and then push forward the rest with democrats. there's a view even amongst democrat that are differing on taxes. joe manchin wants no higher than 25% on corporate taxes. joe biden wants 28%. they want progress by memorial day. does progress mean? we don't really know. it is the eyes of the beholder. lisa: especially as the messages are getting increasingly confused, i'm pointing at the idea that a number of states have rolled back some of the enhanced unemployment benefits to get more people to drive them into the workforce to get paid rather than sit home and receive a check. i am wondering how much this stymies the democratic message that this is a template for what people should be seeing with respect to a safety net. is there any pushback on that front? josh: i think so.

it is clear the democrats in congress don't all want a revolution that some of the progressive wing once. remember, it is not just one bill, two bills. the american families plan sources have told us that's the one they do as a longshot, the least likely of passing in any form, but certainly in its entirety. we are going to watch how that goes. remember the backdrop to this is the stalled reaction to the virus. we are all moving past it. the numbers are moving down. we have not hit more than 30,000 cases this week in the u.s. that has not happened since the start of the pandemic. it is remarkable. tom: one more question. where does the vice president fit in? give us a post 100 days day-to-day rhythm of the vice president with this administration. josh: i believe she will be

meeting as well with the south korean president. she's been in the room. biden wants her to be in the room. she got the deal that biden got from obama which is getting to be the last person, even the -- either the excitement or the burden of managing that border issue. so we will hear from her more today. she did speak yesterday as well with president biden when he signed that covid -- that hate crimes act, and the first time we have seen a full mask lists -- full maskless east room in the white house. jonathan: emily is going to have the week off next week in the 6:00 hour, which is good news, and you are going to replace her. [laughter] josh: did i pit myself into a corner or what? jonathan: so we will see you next monday and tuesday and

wednesday. at 5:00 eastern time. josh: my pleasure. happy to help jonathan: good to see you -- happy to help. jonathan: good to see you, as always. data out a little bit later. can we saw this -- can we call this a summer friday? tom: what i really see it as is a recovery friday. what i noticed wednesday and thursday is a decidedly different new york. i think all of our listeners and viewers are feeling that. we certainly hear that from mr. paulson in minneapolis. it is a summer thing, but to me, it is a recovery thing. jonathan: i'm told the weather in london is brutal and we had hail this week, so i'm not sure they will be calling this a summer friday. lisa: you will be getting hate mail. it's nice that you're sitting pretty in new york city while we are dealing with hail. jonathan: i'm going out to eat. lisa: go out to eat every night

to make up for the past. jonathan: from new york city, alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity markets up 0.3% on the s&p. yields unchanged at 1.6250%. heard on bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ♪

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♪ jonathan: from new york city on tv and radio, here's your price action. on the s&p 500, advancing 16 points, up 0.4%. on the nasdaq, up 0.4%. on the russell, up 0.6%. tom: it's the melt top. jonathan: we can call it a melt up. macy's out early this week with nice numbers, a nice forward look. stock was negative. cisco out with numbers, warning about maybe the supply chain story. on the day, positive. get your head around that. in the bond market, we look like this on twos, tens and 30's. we don't because i did something else. here's a chart. tom: i like that chart. [laughter] jonathan: that's my fault, not the control room's. here's a chart of the european

surprise index. tom: it is never the control rooms fault. jonathan:jonathan: it's always my fault. i just want to make sure the audience knows this one really is my fault. the european surprise index, this is moving up into the right in the big way. it is a really decent upside surprise again this morning on the pmi's. but we have been waiting for this, haven't we? for europe to start outperforming. here it is. the pmi's are great. this is what the fx market did. when is the story fully priced? euro-dollar better be here. there it is. tom: nailed it. jonathan: i had a plan and i am executing it clearly really well. euro-dollar negative about 0.1%, even with better-than-expected economic data. lisa: i love how you were jawboning at the screen. "it better be there." jonathan: with myself, lisa. tom: his other properties will be smoother this morning. jonathan: it's a summer friday.

give me a break. are we done? i need to run away. [laughter] pretty sure i'm done. tom: seriously, folks, for those getting into the weekend, as jon mentions with europe doing better, it is the rate of change. it has all happened rather suddenly. romaine bostick i believe is in the house. maybe he will be smoother in his reporting. romaine: i will try my best, tom. we will take a look at the movers and premarket. deere having a phenomenal year, the best start in about three decades. the shares already up 30% on a year-to-date basis, up another percentage point in the premarket. that forward guidance well above street estimates. i'm talking about guidance on a net income basis here. also benefiting really strongly from a big used in the export market. keep an eye on what has been going on in the ev space.

it has been kind of a topsy-turvy week. lordstown motors was down on a brutal downgrade, saying that new price target is now one dollar. a lot of that is because of what people are looking at with regards to ford. ford has been very aggressive over the past couple of months in rolling out there ev strategy. analysts are saying the real kicker with ford is the way they are pricing the ford f1 50, the electric version, and some of these other electric vehicles, it is going to be really hard for some of these companies to keep up. ford also coming up at the end of next week for a big investor day when they are supposed to lay out more clarity on the number of models here. that is going to put a lot of pressure on some of these companies like lordstown and others that aren't named tesla. jonathan:jonathan: the lead indicator -- tom: the lead indicator for the midwest is the detroit tigers. they are on fire. romaine: i haven't kept up with

the detroit tigers. tom: break up the tigers. romaine: here are a couple of other things. facebook, interesting note by goldman strategists say this is now one of the topics of hedge funds. not only that come but about 50% in -- not only that, but about 57% has this as a top holding. so they are signaling a sort of rotation back into some of these cap techs names. the cyclicals still rank pretty high, but a lot of these hedge funds have rotated back to tech. there was an interesting lawsuit that came out last night. a big media google -- media mogul sued mcdonald's with respect to suppose it raced to scrum a nation in advertising.

deckers outdoor's having a phenomenal quarter. this is the maker of uggs. i know you are a big fan there. tom: romaine bostick, thank you so much. jonathan: do you where uggs, tk? romaine: he does. lisa: then he drives his tractors. tom: let's do this. [laughter] we tried all yesterday to an void the -- to avoid the inflation debate. we decided we should get someone qualified to talk about the inflation debate that is front and center across america. ed a husseini -- ed al-hussainy is with columbia threadneedle, and joins us this morning. i love in your note, you speak of inflation dynamics, which is a real mature idea speaking of the complexities forward. everyone is talking

simplistically about inflation. telus the complexity of inflation dynamics as you look to the end of the year. ed: thanks again. i think you can kind of split inflation in two stories. one is psychology. the other is power. the psychology really connects to the expectations component. it is what the fed is trying to drive over the medium. our expectations are little too low for some of the target. the power aspect is the dynamics in the labor market, the dynamics and supply markets right now, where things are just not connecting. we have significant frictions across those markets, and those frictions will take some time to resolve, and i think there's a debate to be had in terms of how long those will take to resolve. what in the background, we have the fed essentially targeting not inflation at the moment, but the price level.

it put a temporary place level -- temporary price level target for us to make up for some shortfalls in the past. we are in this weird zone where the fed is really looking at the price level, the rest of the market is looking at short-term rates of inflation, and there's a big disconnect there. jonathan: is that a disconnect between policymakers that focus on the destination and market participants looking at the past? michael: i think -- ed: i think it is basically that. there is on the margin and element of out. essentially, we have a very poor understanding of how inflation is formed. we had the comfort of looking at inflation that has been relatively flat for the past 25 years, and we have rancor to -- we have re-anchored around that phenomenon. we will know if it is changing and will the fed had the toolkit and the right time to respond to that change, and that is where i

think a lot of the anxiety in the market is at this moment. jonathan: when will we know? how will we know? ed: i think the timeline that the fed has painted for us in various shades of gray at the moment is one in which we achieve inflation in excess of 2.5% roughly on a core pce basis in the first half of next year, and that persists into the second half of next year and the various flavors of inflation expectations are main elevated, i think the fed will start getting comfortable with the fact that inflation dynamics have shifted. underneath that is a core question really around wages. i think it is an incomplete story if we look at inflation isolation without looking at wage growth. unless you have nominal wage growth pickup, unless you have it sustained at levels where it

could potentially feedback into inflation, the picture is still incomplete. so we have a long way to go. lisa: one picture that we do have is the degree to which markets broadly, stocks and bonds, are leveraged to fed policy. the idea that even talking about talking about maybe talking about tapering caused an increase in real yields much automatically. could the fed really ever raise rates, or is it going to be too disruptive to the economy for them to do so? ed: it is a really good question. mentally we are all kind of anchored off of the 23rd fee experience. we don't want a replay of that experience. that is a sudden tightening of financial conditions. so the fed strategy at the moment is really focused on giving themselves a lot of room to start the discussion, to

outline the parameters of that discussion and eventually taper. the idea is as the market internalizes that and the timeline from the fed is relatively well through, the market believes the fed will essentially start the taper conversation in august or september, and now sit towards the end of the year -- announced towards the end of the year they start tapering at the end of the year. we have internalized that quite well. and that gives an advantage in the sense that they can delay. there's absolutely no pressure on the fed to bully trigger on this discussion -- to pull the trigger on this discussion in august or september. jonathan: thank you very much. ed al-hussainy there. just south the 30 year, and in the equity market, up 0.4% on the s&p to 4172.

tom: it was a quiet week. you need quiet weeks. you have an amount of what is called distribution, the back and forth until you get to the news. we got home sales i think. that is going to be a booming market as well. you move on from there to durable goods, things like that. but more than anything, you're going to get personal consumption and a new look at gdp, a second look at gdp. jonathan: we will take another look at the banks on wall street very shortly. we will catch up with the wells fargo head of large cap bank research after the rejig we saw at jp morgan, which feels like it took place a month ago, and morgan stanley's that took place yesterday. here's the price action shaping up as follows. your equity market is elevated. a list of 17 points. tom: melt up. jonathan: i was waiting for that. tom: go to cash. jonathan: 1.6267% on tens.

tom: go to cash. [laughter] lisa: what was that? summer friday. jonathan: wti, $62.56. we will get serious. tom: not on this property. [laughter] jonathan: that is so true. this is bloomberg. ritika: with the first word news, i'm ritika gupta. president biden says the u.s. will help gaza with humanitarian aid in the wake of the 11 day conflict with israeli forces. the cease-fire brokered by egypt took effect early today. israeli warplanes and artillery pounded guards there. hamas militants fired rockets. in the u.k., the number of cases of a coronavirus variant first identified in india more than doubled for a second week. more than 3400 cases of the very

have now been detected. prime minister boris johnson said it could affect plans to reopen the rest of the economy from lockdown on june 21. negotiations over president biden's 2.2 trillion dollar infrastructure plan after hearing a crucial stage. a white house team is in talks with senate republicans today. one republican tells the associated press they have increased their offer and are working in good faith. the white house has said they will find out whether a deal with republicans is possible. tesla ceo elon musk may have set his sights on russia. musk said russia is amongst the countries where the carmaker could potentially build a factory. he also says there should be more dialogues between russia and the u.s. 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. ♪

♪ chair powell: our key focus is on how and whether a cbdc could

focus on in payment system. it is important that any potential cbdc would serve as a settlement -- a supplement, not a replacement. jonathan: that was the chairman of the federal reserve jay powell on a digital currency. alongside tom keene and lisa abramowicz, i'm jonathan ferro. here's the price action cross asset. equity futures up 0.4%. is melt up the drinking word of the day? tom: mmhmm. the orange juice has pulp in it. jonathan: spiked juice. let's set on the euro for a moment. president lagarde speaking in the last couple of minutes about inflation, due to the temporary nature of things in 2021. should see through a period of

higher inflation, and fundamentals are not there. the recovery remains uncertain. tom: we will stop the show here. what david wilson has is important. but jon, it is a jumble of headlines. we would not of heard this from dr. draghi. jonathan: i want to be very careful with our interpretation. these are headlines we have taken from our comments, and i think you need to hear her comments to get the appropriate context. tom: fair. jonathan: but there has been some criticism of the ecb president and the communication over several news conferences more recently, the lack of clarity around things like the asset purchase program. tom: coordinated policies will continue to be needed? that sounds like a "surveillance" headline. [laughter] when is the ecb meeting? jonathan: june 10. tom: we will get more there. futures up 17. this is really important. david wilson parachutes in. we never have a clue what he is talking about. i am in the david wilson timeout

chair because jon, i did a big no-no. i just extrapolated the trend up , 2018, lousy bear market, and we hit s&p 5000 at the end of next year. david wilson here on the earnings drive to get to s&p 5000. extrapolation is dangerous. dave: it always is, but where we are now is definitely different from where we have been in the past 40 years. when you look at yields relative to inflation, real yields, that is the issue. tom: now you are promoting ferro 's show? dave: i am simply pointing out, among other things, looking at the earnings yield on the s&p 500, bear in mind it is the inverse of the price-earnings ratio, so if you figure s&p 500 pe of 30 works out to an earnings yield of about 3.3%, that is just about where it is at the moment. a touch higher than that, 3.4%.

compare that with u.s. consumer prices, up 4.2% in the 12 months ending in april. so when you put that altogether, you are talking about a yield of negative eight -- a yield of -0.8%. you have to go back all the way to 1982 see a yield that negative. tom: can we extrapolate and make a guesstimate of what it means? dave: it is a concern saying that stocks are looking pretty expensive at this point, if you are paying negative yields in essence or getting them. just bear in mind, bond market has been all about negative yields in much of the world for quite a while, so now you're seeing it show up in the sort of different way and stocks. -- different way in stocks. lisa: this is where i was going to go. it raises the question about the amount of liquidity that has been pumped into the system. as i do on thursdays at 4:30 p.m., the fed releases their

balance sheet total, and it is a record high of $9.3 trillion. there is this expectation that despite taper talk, the balance sheet will continue to expand going forward. can real earnings yields go even more negative, given the incredible amount of liquidity on the federal reserve balance sheet, as well as from fiscal spending? dave: there's always that potential, no question. you look back at the 1970's into the early 1980's, and you see yields that were even more negative than we have now. nonetheless, the idea that this is a change that really just happened in april, you have to at least ask the question, are stocks looking expensive here? they are certainly asking it. tom: is ferro still with us? [laughter] jonathan: yeah, were you worried you lost me? tom: it is a pendulum of

wilsonian gloom. lisa picked up on it. it is the high point of her day. jonathan: you were away on monday. lisa was bulled up. lisa: it's not that i'm gloomy. i am just trying to understand what is night priced in. looking around corners, trying to price them in. what's not being priced in? jonathan: it's constantly things to the downside, seemingly. lisa: not necessarily because we heard earlier that there could potentially be an upside surprise. jonathan: two upside risk. lisa: that goes to inflation. jonathan: there we go. the upside risk lisa wants to talk about his inflation. lisa: no, in terms of spending. jonathan: spending, ok. tom: david wilson, go away. look for him on friday. tom: symbols of -- dave: simple subtraction, tom, that's all it is. tom: dave wilson, thank you so

much. there is a bid to the market. i know it is not so much a percentage move, 0.5% on the s&p 500, but i'm sorry, there's a nudge this morning. jonathan: president lagarde with some more headlines. the ecb can miss its favorable conditions when it is a recovery. italy in mind with the 10 year yield, down through 1% over the last couple of weeks. i think that is the focused going into june 10 for the easy be meeting and that conference with president lagarde. tom: in the ecb's defense, they have been clearer about extending their timeline out. i think they have done a much better job than the fed of saying 2022 and even 2023. jonathan: it is time contingent forward guidance instead of state contingent forward guidance, where we say when we

get there, we will do something. are we done? ? tom: we are done. i'm looking at the bond market. do you say curve flatter? we haven't talked about it in ages. but there's some really interesting fixed income. jonathan: it has stopped steepening. i think you can say that. real yields were higher. tom: to tell you about "the real yield" this afternoon at 1:00 p.m., this will be something to get you ready for the weekend with a fixed income market coming out, the publications tonight. i can't wait just to see mike for rowley publish over at j.p. morgan this evening because there's a lot of shifting going on out there, and it is displayed in nominal yields, less the inflation adjustment, which gets you out to the residual. jonathan: ok. [laughter] tom: that's going to be the name

of my new program, the residual. [laughter] jonathan: doing my best to keep this on the rails. a couple more hours. we've got 45 minutes left with you. this is bloomberg. ♪

♪ >> all this money sloshing around with incredibly low interest rates, i think we risk and inflation surge. >> if the economy stays as strong as it is, you get inflation. >> economists and everyone, companies, are having a really difficult time keeping up with how fast fundamentals are improving. >> what we are seeing in the u.s. is a very rapid rebound in demand, and supply is taking a little bit of time to adjust. >> we see had a seven -- we see 80's amount of risk that inflation will -- we see a decent amount of risk that