♪ >> the bump in the road is -- i am not surprised to hear the language of fed chair jay powell. they're committed to going at this gradually. >> what they don't want to do is take dramatic and drastic action. >> what they have said is that we will respond if we need to, but there ain't no inflation problem.

>> 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 lisa abramowicz and taylor riggs, i'm jonathan ferro. tom keene will be back with us on monday. right now on the s&p, 4252, advancing 0.5%. lisa: it is amazing to me that we are finding that the melt up to new highs is basically treated with a shrug. but people have faith that the fed is going to keep on hold for the foreseeable future. jonathan: and we are desensitized from all-time highs seemingly this morning. taylor: unbelievable, the resiliency of these markets being flush with cash every time there's a pullback. they are calm with a 15 print on the vix, and the calm within the bond market despite all of the ups and downs within the last week. a very well behaved bond market below 1.5 t -- below 1.50% on the 10 year.

jonathan: let's get to the price action right now. 4257 your intraday all-time high on the s&p. the advanced 0.5% on this thursday morn. yields unchanged at 1.4851% on the 10 year yield. sterling was a cap lower of the back of a bank of england decision. sterling weaker, euro firmer. euro-dollar, $1.1933, stronger by almost euro .1%. the price action has been already muted the last couple of days. lisa: i will say the most interesting moves have been in lumber, where you have seen the price come down significantly, and copper, were you have also seen the price come down. some deceleration in the price increases that have led to a lot of the inflation, and i wonder how much that is coloring the view being expressed by the bond market. jonathan: at some point you start to thing about 2022 and

2023. i think people are starting to do that a bit. lisa: you put forward peak growth kind of fears as being the main potential risk to markets right now, to equities at all-time highs. jonathan: and the uncertainty around the fiscal outlook as well. peter tchir of academy securities writing about that. want to bring in pete on that for more. the uncertainty around the fiscal effort down in washington , how important is that to what we are seeing play out in this market? peter: i think it is incredibly important. people have been talking about the impact the fed has had, but when you start seeing doubt about the fiscal stimulus, that is when you start seeing bond yields come down. i guess there's hopeful news overnight, but the package seems a smaller and it is taking longer to implement than i would've liked to see, so i am still quite positive on growth, but the fiscal story is probably as important as what is going on with the fed, and just not getting enough attention. jonathan: do you think that is

what is keeping back this bond market? peter: if you go back three or four months ago, i think people were expecting to trillion dollars, $3 trillion come along dated bonds -- $2 trillion, $3 trillion come along dated bonds being issued. so i think less supply is helping the bond market, and a little bit of concern that the growth won't be as quite as good as they wanted. that is being priced in his doubt right now. lisa: when i speak to fund managers and they say fiscal stimulus hasn't been priced in yet, is that hogwash? peter: i think it is not being priced into the economy. i thing it is being priced into the markets, if that makes any sense. we haven't seen the job creation yet. one thing we are looking at his we have this jobs problem right now where we already have a lot of unfilled jobs, so some of this infrastructure spending which would have been very good at creating jobs, how good is that if we can fill those jobs? i am hoping as we end the summer, as some of these stimulus checks end, and as

schools fully reopen, we will see that gap between the number of jobs available in the number of people wanting to work close because that has been -- because that is going to be critical for growth next year. lisa: not only do you not necessarily get the increase in interest rates, so this does bleed into the argument to buy them as a steady cash flow, but it also takes off the table perhaps some of the tax rate hikes people were talking about that would disproportionately affect big tech. peter: i think the concern i have is that on big tech, this minimum tax is the way this administration is trying to go. they are not going to focus as much on the statutory and effective rate, so that could impact big tech, and i think we are ultimate legal to start seeing higher yields because i don't think the inflation has gone away story is at all correct. people are talking about lumber and all of these other things. i think the biggest inflation news is us as a country going after the china solar providers.

i think we will see a more scrutiny into supply chains, what suppliers look like, and either they are not up to our standards in terms of how they treat their employees, how they treat sustainability, and that is going to be inflationary, whether they increase their costs or we have to find new suppliers. that is the story that is going to drive inflation. looking at commodity prices is one thing, but that is going to be the long-term inflationary driver, this push towards esg and real scrutiny of supply chains. taylor: settle the debate for us. jon and i were chatting earlier, my, flower rice at chip oakley -- my cauliflower rice at chipotle has gone up. is that the rate of change we continue to talk about? peter: i think it is going to be ongoing. we may have hit peak growth, but we will get 5% next year, 6% the year after. that is going to be plenty inflationary. if this is bringing back jobs,

the pressure to make everything sustainable, i think you will see price pressures, and when i look at sustainability, that's one of the reasons why i think we will see price pressures, the belief that customers can and will pay those prices. you like the cauliflower rice. it is very popular. so i think this is not a one time trend. i think this is ongoing. so i think we are peak margins in some ways, but what i am seeing when we talk to large corporations is you might be able to give up some profitability, and if you are deemed as more sustainable, if you fit that esg mandate, your p/e ratio can still go higher because there is such demand for that. i think the focus is on your final stock price. maybe you can have a higher stock price with smaller margins, especially if you're pushing into the whole sustainability, yesterday area attracting consumers and investors. jonathan: i don't have a view on this. i want to be very clear about what i am trying to explain. there's a difference between a

one-off change being permanent. you can still say that things are transient because what you are talking about is the rate of change being transitory, that these levels will not persist over time. i think those two concepts get confused. peter: yes, and if we go back to the cauliflower rice, we might not see another hike in that for two months, but there is sustained pressure, and you are starting to see wage inflation. you're seeing people demand higher wages, and that is going to continue. people knew look at lumber, it is probably still up 20%, so that is a massive gain. if you think about 3% inflation as the target, you have covered probably five years of inflation. so let's not get overly worked up about the current moves. i just think this is going to be very persistent. you are going to see prices continue to move up, and it is going to be on the things we consume. as one of the big things we all face. how do we actually measure

inflation, and what values are worthwhile, and what is affecting our day-to-day life? i would say right now, inflation is off the charts in what most of us actually buy. jonathan: this is from manny roman of pimco. "in march 2020, you had real opportunity in high-yield and credit. a lot of it has played out. this early in the recovery, a lot of the spread tightening has played out." just how different is this moment compared to recoveries gone by? peter: we have the investment cds index trading at 50 basis points. that traded as low as 29 pre-financial crisis. i don't see any reason why they -- any reason that doesn't get back to the mid-30's. credit spreads as a whole are fine. you have crypto moving all over the place. you have these massive bond moves. but credit as a whole did very fine, and i think it is a little

bit depressing when you talk to the active managers. everyone likes things to go wide. but the reality is i think it is a very boring market. companies are very comfortable he priced on credit. there is so much of an equity buffer for these companies, so much money coming into the markets. you are seeing corporations diffusing their pension plans by selling equities to buy bonds, so i think, as dumb as it sounds, i 50 basis points you are going to belong credit. take the summer off and watch it tighten. it doesn't sound fun, but sadly, that is the right trade right now. credit is very stable and should continue to grind tighter. jonathan: boring is good compared to what people expected to happen. good to see you in the studio. peter tchir, academy securities head of microstrategy. -- head of macro strategy. lisa: i will just say there was a deal that caught my attention overnight. it was a gun accessories maker called mag pull industries trying to sell $250 million of debt in order to pay a dividend

to their private equity sponsors. they pulled the deal. this might be because of esg considerations, but it is also because people are pushing back. there is discretion in markets even at these really tight spreads. jonathan: where are spreads right now? lisa: they are at 280. jonathan: the tightest since 2007. isn't it crazy? this close to the beginning of the recovery, we are already there. lisa: howard marks of oaktree has sounded the alarm on valuations, and set unfortunately, this makes sense, and unfortunately, for the economy, if you can borrow money for cheaply, that's good. but unfortunately for investors who are not going to be getting that much, and probably can't afford to sell. jonathan: the man himself, howard marks. when did you catch up with him, last week? i should go back and watch that interview. lisa: it was interesting to hear how he wants to stress opportunities. we can't find a reason for this to selloff, especially with the fed continuing the easy money

policies, and frankly, with cash flow just rushing in. jonathan: unreal. tom keene back with us on monday. equities closing in on record highs, up 21 on the s&p, up 0.5%, and just a shrug from so many people as this takes place. from new york city this morning, good morning. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. prime minister boris johnson is government is to convene a london summit on how to tackle the latest covid vaccination rate. at least 60% of londoners have had at least one dose, compared to 75% across other regions. daily fatalities remain low. queen elizabeth ii's income was hit hard by the pandemic with a 53% drop in income from tourists

to royal palaces. without places like windsor castle open to visitors, the income was cut to 13 one $1 billion -- cut to $13.1 million, down from $28 million a year earlier. china has filed a lawsuit against australia at the wto over dumping of some chinese goods. the measure targets chinese products including wind towers and stainless steel sinks. earlier, australia said it would impose duties on china for wine imports. lala move has filed for an initial public offering. it provides on-demand van halen and courier services -- van hailing and courier services across europe. i'm ritika gupta.

this is bloomberg. ♪

>> the u.s. economy is really on fire.

almost everything is growing much faster. we've had almost a perfect storm here of massive government spending, central bank accommodation, record low interest rates, and that is a recipe to really power and economy. jonathan: that was stephen schwarzman, the blackstone ceo. from new york city, good morning. alongside me, lisa abramowicz, taylor riggs. tom keene will be back with us on monday. i'm jonathan ferro. kicking off this thursday morning, approaching jobless claims in america, equity futures up to 4252, advancing about 0.5%. euro-dollar firm or by a little more than 0.1% against the u.s. dollar. yields unchanged, 1.48

35%. can we say it is a snooze? getting a statement that senator manchin is supportive of the infrastructure package. lisa: meeting with president biden, the group of bipartisan senators. 559 billion dollars, is that the end, or is that the beginning of the fiscal spending we can ask back over the next two years? jonathan: let's bring in terry haines, pangaea policy founder. let's start there, what we can expect ndc as far as the fiscal front. -- expect in d.c. as far as the fiscal front. terry: what we can expect is a touted roughly $1 trillion infrastructure package like the one i've been talking about for the last month or so, of which lisa says about $559 billion is new spending. it brings up a dichotomy for markets, by the way. you will hear washington pump high numbers, but a lot of it isn't new spending. that is important to understand.

the last covid relief bill touted as to trillion dollars, -- as $2 trillion, but only $1 trillion of it getting spent this year. will you get much more? i doubt it. the families plan i think is going to be very difficult to pass, even with all democratic votes. if you are into spending, which is going to be largely flat into next year, and you've got the debt ceiling as a potential surprise, but washington's attention is going to be taken up between now and the end of september, it time in which the house and the senate are roughly in only one out of those next three months, with getting the infrastructure bill done and otherwise partisan work on all of the other stuff i just mentioned. lisa: how much political momentum is there behind

balancing the budget, behind raising taxes or cutting spending ahead of that august debt deficit ceiling? terry: none. both parties talk about the debt deficit when it politically suits them. democrats did over the four years of the previous administration. but in reality, where the parties tend to come together, as we have seen, is on spending things. covid is a money spender. the china bill was a money spender. those things are money spenders, and the parties come together around those things. but most of the rest of it, i think federal spending is going to be largely flat, as i say, but the rest of it, they will fight over, but i don't think you are going to see anything beyond the infrastructure package today anyway. taylor: where is the momentum on how we are going to pay for all of this? terry: we are going to pay for it, taylor? [laughter]

the devil is in the details on the infrastructure bill. i edged up my audits to 75% on infrastructure last night on the news. but i will still give you 25% things fall apart, and one of the details is that we don't exactly know how they are going to try to pay for it, and they say they are going to pay for it. they say they are going to pay for it without tax increases. so there are not insubstantial difficulties here yet, and i think what markets see is a deal solidifying, in the likeliest scenario here come over the next week that they will see wrangling around this deal and passing it out of both houses through the month of july, so there's going to be a lot of volatility here, and one of the details that will cause that volatility is exactly how the thing is paid for. taylor: you don't worry about debt and deficits during wartime. when should you begin to discuss it? terry: my view of this very

simply is that unless washington gets a market signal that there is too much debt or too much deficit, washington is not going to heed a call. but my favorite example of this is the 2017 tax bill. no disrespect to anybody who put that together, but understand that the red line for republicans was they weren't going to spend, they weren't going to go into deficit any more than 1.5 trillion dollars over 10 years. so when you are talking about how to manage a deficit increase, that is a sign that you're really not serious about bringing the deficit down. that is the way washington is these days, regardless of party. lisa: if it weren't, people would be accusing it of not recognizing the reality we are in a really low you bond yields -- really low bond yields. is this fiscal package we

are seeing coalesce going to be viewed as a win for the republicans or for the democrats? terry: yes. the answer to that is yes. infrastructure spending is bipartisan. members of both parties want to see better roads and bridges, fundamental infrastructure. they all want to be able to go home and say they did that. the key for me at the same time be seeing if they can goose them along more quickly. in my own state of pennsylvania, there has been now a 10 year long project just to redo 40 miles of old interstate, and if things are going to take that long, there's going to be a lot of frustration out there in the world. one thing they're going to need to do is make things go a lot more quickly in order to gain the maximum amount of political benefit out of it. jonathan: that is the best way of answering a tom keene question. [laughter] lisa: i will take a note. jonathan: terry, thank you. terry haines, pangaea policy

founder down in washington, d.c. there's a lot more conviction at the beginning of the year about what we would get from d.c., and a lot of that has faded. lisa: if terry haines is correct and it is only 500 to $9 billion of new spending, still you can say the headline is $1 trillion, and is this -- and it does not come with tax hike, is it a wash if they can't pay for it? for market participants, how much does it matter if you don't have it offset? jonathan: right now i think the market is speaking for itself. just nothing. tumbleweed in treasuries after a repricing over the last week back to 1.48%. comfortably below 1.50%, in and around that level now we have settled down. taylor: unbelievable, a 15 handle on the vix and a settling down in the bond market. it was an average five-year

auction yesterday or today's ago. very calm, even as we are thinking about how you get through a five-year rate cycle hike with higher in place in her pressures, and there is still demand for some of that debt out there. jonathan: jobless claims in just a few minutes. good morning. this is bloomberg. ♪

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jonathan: from new york city for our audience worldwide, live on tv and radio, alongside taylor riggs and lisa abramowicz i'm jonathan ferro. tom keene will be back on monday. waiting for economic data in america. let's run through the price action. 4253 on the s&p 500. jobless claims coming in firmer than expected. the wrong kind of upside supplies -- of upside surprised. 411,000. waiting to see if we get a revision. a little bit hotter than expected. lisa: this is the conundrum. how much can we read into this data that has been messy? how does this give us a true read it have any people are filing for jobless claims. if people are looking in a tight labor market why are we seeing

411,000 individuals filing a new? jonathan: durable goods, we were looking for something like 2.8%. are we done with the big surprises in either direction? lisa: when you look at the surprise index from citigroup it does seem like that would be the case for getting toward a more normal state. the idea being 10-year gilts ticking lower. -- the idea being 10 year yields ticking lower. jonathan: did we get a move in the bond market of half a basis point? 1.48 on tens. taylor, your take? taylor: you have a federal reserve that continues to focus on these labor markets. jay powell continues to say he expected the jobs market to be better in the last few payrolls reports. when you get jobless claims of

411,000 versus 412,000 last week , it reiterates the unchanged nature with the federal reserve focused on the labor data. jonathan: let's bring in ira jersey. the economic data. your reaction? ira: it is uneven, and that is a trend we've seen over the last couple of months. the bond market does not like it when you have a slowing in the second derivative. basically things are still in an upward trajectory but they are not as quick as they were in march and april of this year. i am looking at some of the durable goods numbers and when you look at the revisions along with what we had, it is basically as expected. though the headline may have missed expectations, the idea is we have had these upward revisions for the april data. it is making it seem like it is unchanged. as we get more of this, the bond market will continue to be range bound because people are going

to wonder are we really in this upward trajectory for the long-term or not? that will be a driving factor for treasury yields. lisa: we just got more initial jobless claims data showing the revised outlook for last week, the prior was revised upwards, the wrong kind of surprised, to 418,000 initial jobless claims. is there something deeper we need to be taking from these numbers, especially as they start to roll back the enhanced unemployment benefits? the labor market is not coming back as quickly as people said and it has to do with something more pervasive than simply matching people with jobs or reducing some of the employment benefits? ira: is a little bit of everything. more people are being laid off and part of that may be there is not work to be done. this is a very uneven recovery,

where we saw this big reopening and a lot of benefits from that reopening, but now that is fading. the initial jobless claims only half of the equation. that is how many people are being let go, not how many people are being rehired. there are a significant number of injuries where you will continue to see rehiring, for tickly the hardest hit sectors. as hotels and different entertainment and recreation functions, as those reopen, you will continue to see growth there. it is the second derivative. while we already have large increases in employment, the pace of growth in those sectors in terms of jobs will start to slow a little bit. that is one of the reasons i think a lot of markets will be range bound until we get clarity on exactly how far this recovery can go. quite frankly, for the bond

market, the federal reserve turning more hawkish does not help the case for higher yields, not so much because they will necessarily raise interest rates soon, but because as they talk more hawkish late, people were worry -- people will worry they will make a policy mistake because of the fragility in the general economy, and there still a lot of demand for risk-free assets, even though the federal reserve might be pulling back on its asset purchases later this year or early next year. jonathan: always good to hear from you. ira jersey, bloomberg intelligence chief rate strategist. joining us now is stephen stanley. are you getting a clear picture of the economic data with the incoming data and the last couple of weeks? stephen: the economy in the short term is overheating. this started in housing, manufacturing, certainly the labor market.

basically demand has recovered faster than supply. hopefully supply will catch up soon enough, but at the moment that seems to be the overarching story. taylor: you have demand catching up with supply. there is a record number of job openings. is there a labor shortage or is there a skill shortage? stephen: right now there is a labor shortage. you look at who it is that is complaining in terms of companies about not being able to hire people, and for the most part it is firms on the lower end of the skill set. i think it is more a shortage of warm bodies, for all the reasons chairman powell and others have laid out. chances are things will ease up over the next couple of months as we move into the summer come into the fall things will start to normalize. lisa: we have seen a number of states throughout the united states reduce unemployment benefits over the past few weeks. i wonder whether we have any per limitary data as to whether more

people got jobs, whether this eased some of the frictions we have been talking about. stephen: it is a little early. i did see there was little bit of an uptick in inquiries on some of the job search sites on states that announced they were cutting the benefits early. the federal benefits numbers lag a few weeks so we do not have any hard data for the states that have ended the benefits. we will probably not see it in the payroll data to any meaningful extent until the july numbers which come out in early august. the june survey period was the week before the first tranche of states cut the benefits. it is early just yet. we may start to see anecdotes but will not get hard data for a few more weeks. jonathan: your view on how this is playing out at the fomc. do you think this makes sense? stephen: what we learned is they

have been surprised to the upside for economy and inflation and their backpedaling from their game plan coming into the year, which is to be on hold for a long time. my guess is they will be kept on that defensive stance. i think the inflation numbers will be high for another month or two. i do expect the labor market data will start to get incrementally better over the next few months. i think they will continue to be surprised to the upside and they will probably end up moving more quickly than they had envisioned. jonathan: what does that look like relative to what they envisioned? stephen: my assumption at this point is the taper announcement comes at the september fomc meeting and they start to actually taper in october, which probably puts me three months ahead of the consensus. we get a rate hike around the middle of next year, which may be puts me three to six months ahead of where the fed is in may be ahead of the market

consensus. lisa: how are they going to communicate that given the fact that jay powell has reiterated his dovish stance and some of the regional fed presidents agree with you that a 2022 rate hike is in the cards? stephen: right now, as powell and others have indicated they are not focused on rates just yet. the first order of business is asset purchases. they have to begin to taper those. most people on the committee would like to end asset purchases before they start to raise rates. to the extent they are feeling like they need to raise rates earlier, that argues for an earlier beginning to tapering, and a quicker process. that will be a key difference between this time and 2014. i do not think they will have the luxury of moving slowly on the taper process. i think they will have to get that done more quickly than they did last time. jonathan: that is the worry a lot of people have.

good to catch up. stephen stanley, amherst pierpont securities chief economist. we shave about .1% off the dollar index. bond market basically unchanged. down about half a basis point on the 10 year yield. lisa: downside economic surprises we are seeing, easy to understand how we can get to a place where we accelerate the hike, what would be the trigger? would it be labor market progress, would it be inflation that seems to be more persistent? based on what we are seeing with auto prices and lumber prices, not saying where that comes into play. this is a worry. i'm not seeing it played out in the data just yet. jonathan: is the commitment to being late from the federal reserve that they routed to their framework, we are now going to be data-dependent.

this will lead them to be late by definition. if they are late there is this concern once they start to move they have to move more quickly. lisa: that is predicated on the idea we will get inflation that will pickup more materially. that is the question. none of us know the answer to this. if people are worried why we not seeing inflation expectations pickup. jonathan: coming up i will be catching up with severe to some riemannian of bank of america. taylor riggs, final word before i run of this equity market climbing back towards record highs. taylor: record highs across the board. 25 basis points on the two year. we go nowhere. jonathan: taylor riggs, lisa abramowicz, jonathan ferro. mohler of us -- more bus tomorrow. -- more of us tomorrow. we get to call the sabbatical

when tom keene takes time off? your equity market 4252. see worldwide on bloomberg tv. for our audience worldwide, this is "bloomberg surveillance." ritika: with the first word news, i'm ritika gupta. the seaview side of the beachfront condo tower collapsed in miami earlier today. it sent a crowd of debris throughout the neighborhood. firefighters are seen pulling survivors from the debray. in a tweet miami-dade police said one person had died from the collapse. details of the genetic makeup of some of the earlier samples of the coronavirus in china were removed from an american database where they were initially stored at a request of chinese research. the u.s. national institute of

health says the data first submitted in march 2020 were requested to be withdrawn by the same researcher three months later. president biden is traveling to north carolina to encourage more americans to get the covid-19 vaccine. it comes 10 days before july 4. the cdc says so far slightly more than 65% of u.s. adults have had at least one dose. california governor gavin newsom is that face a recall vote after petitioners collected enough signatures to trigger an election. he has pasted -- he has faced scrutiny for his effort to control the pandemic through a strict lockdown. he was seen dining without a mask at a restaurant while telling californians to avoid social interaction. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg.

♪

>> i am concerned about inflation overshooting for longer, and i'm also worried we

will see a second half of the year where the economy is running hot, and that will have spillover into the global economy. lisa: that was the ubs chair talking about the hopes and fears of faster inflation for banks. faster inflation would be a good thing if it's deepens the yield curve and led them to more profitability. since the end of may the s&p financial sector is down 4.7% on the flattening yield curve. now we have the stress test by the federal reserve. we expect results today at 4:30. jeff hart will be watching that, piper sandler senior analyst for research. what you expect to get out of the stress test today? jeff: i'm expecting it to be much less eventful than in the past. this is the first nonpandemic under the stress capital

methodology. we are unlikely to get specific dollar amount from the companies we have got in the past so there will be less information out there, which will make it harder to call winners and losers tonight over the course of the next year. lisa: what is your expectation in terms of how the market will respond given the fact that all of the banks will pass with flying colors and will be able to buy back baker dividends -- will be able to pay back bigger dividends? jeffrey: it does not look like anybody should fail because all of the banks passed last year. the thing that could get interesting is to the extent someone stress capital buffer changes meaningfully from what it was last year, that could inject some excitement into it. it seems like it will be a fairly straightforward exercise.

we will see what kind of results we end up getting. the bottom line good news is the banks will start returning capital again. that means a big buyback and we will raise their dividends, which is unique to this year as well. in the past you've been able to call winners and losers. i do not think we will get specific dollar amount capital plans for many of the banks. to the extent we get some, that will make it more interesting. i think it will be more we will raise our dividend x amount and here is our excess capital, we would like to return it to shareholders in a prudent manner , something like that as opposed to two years ago, a company would say we are planning to buyback $5 billion worth of stock and you can judge that better. taylor: from the market perspective there is been big

underperformance for the financials. does anything change the game in terms of how you are thinking about some of these buybacks, a boost to the share price perhaps? jeffrey: i do not think it will change it a lot. banks have had a pretty nice run. when we start seeing interest rates going another way it became an excuse for some selling. when i look at the outlook for banks over a year or two, i think it is still constructive. capital returns are a big part of that. i think that is expected they will be good. i do not think we will necessarily get anything surprising that will make people that much more excited or that much more scared of the banks. taylor: in your research are you seeing a bifurcation between the big banks, the more regional players, or is this a broad-based positive environment? jeffrey: i think it is pretty broad-based positive environment. the bigger players, when you

start looking at the universal banks, the jp morgan and the bank of america, are in a better position. capital markets have been strong and they have big capital markets businesses. until we get the low growth and higher interest rates, not just at the 10 year scale increasingly important to banking. these guys have it. the environment we are in place into the big guys hands. as we migrate to low growth, which i think we will see, a matter of when, not if, and hopefully higher interest rates, then it becomes good for banks in general. lisa: zooming out, there is a question of how much financials hinge on the yield curve. a flatter yield curve tends to be bad for banks. what is -- was the reaction from last week's fed meeting concerning?

that the yield curve actually flattens, not steepen, that this will boat poorly for the financial sector? jeffrey: not so much. bank stocks tend to move with the 10 year, even though something like the five year six-month spread means a lot more for their fundamentals. the stocks tend to move. as we look at it, the 10 year coming down will bring the bank stocks down. i do not think the interest-rate environment for them has changed a lot over the last couple of weeks. we are still waiting for the short end to go up. that is what we ultimately need to see. ideally the fed starts raising short-term interest rates because they are responding to a strong economy and that is good for banks. the scarier situation would be if they are responding to inflation without strong economic growth. as lummis economic growth is driving, that should be good

news for banks. lisa: jeff harte, thank you so much for being with us. we are getting the stress test results at 4:30 p.m., the first post-pandemic stress test results. he talked about the underperformance of the financial sector and i find it fascinating it has been on the heels of her rejiggering of financial expectations, that there is transitory growth in inflation and the fed is correct. i am wondering what is being priced in? is your sense people are still going long financials or are they biking what -- or are they backing away because all of the good news is priced in? taylor: i have heard increasingly notes like ubs saying they rerate the procyclical stance. they -- they reiterate the procyclical stance. it really has been a bit of bold

, a little bit of cyclical. it has not been get out of the cyclical trade, it is done. lisa: i agree with you. people, the show, that is what they say. they are doubling down on the banks. it is fascinating to hear about these record highs every single day really not moving the needle in terms of our shrugging it off. it does not seem like a very active market. is there anything people say you are hearing about what could potentially disrupt this? taylor: i think all of the conversations we have had this morning, baby taxes being a headwind, but the conversation we -- maybe taxes being a headwind, but the conversation on the close is how do we buy am to money supplies -- how do we buy m2 money supplies? all of the signs we have gotten art we are in it. lisa: mike wilson pushing back

saying m2 growth has decelerated. we will continue to discussion. coming up on "balance of power" jared bernstein of the council of economic advisers. from new york, this is bloomberg. ♪

jonathan: for our audience worldwide, good morning. equity futures pushing all-time highs on the s&p 500.

positive .5%. "the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: from new york, we begin with the big issue. market heavyweights pushing back. >> the u.s. economy is on fire. >> we want to see inflationary consequences. >> prices are going up. >> wages are the most concerning. >> the economy is running really hot. >> too much money, massive amounts of stimulus. >> overheating. >> there is a danger this is