>> one of the key sins, our stocks -- key questions, our stocks in a bubble? >> the credit card spending data is going to start shifting to the business sector. >> consumers are understanding that what happens this year is not what we should expect next year. >> it is pretty clear that whether it be the september meeting, jackson hole, the fed is going to have to address the tapering. >> i think it is time to end these emergency measures. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what a fascinating week. 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. tom keene back with us on monday. joining us this morning, kailey leinz.

your equity market, 4360 on the s&p. retail sales 90 minutes away. lisa: more of a sense of how people are spending. how much that is affecting people as they are going out and how much the delta variant is slowing things down. jonathan: we've been waiting for the advisory from this administration on doing this is in hong kong. lisa: this has been a steady drumbeat. it has been several weeks of the biden administration taking a particularly hard line against china. you wonder at what this will affect chinese businesses, at what point it will affect u.s. businesses that do a lot of transactions. we spoke with marriott's chief executive officer this week. he said we are monitoring it. basically, it won't affect us that much. really? [laughter] jonathan: is this a corporation usa, or is it beijing? kailey: waiting to see what, if

anything, we get from beijing because this just continues to be a ramping up of tensions and rhetoric, of shots back and forth across the bow. i question whether or not the biden administration means them to change their behavior because of this, or if this is just sending a signal to beijing that we are monitoring your behavior in hong kong. jonathan: we will head down to washington in just a moment. your equity market set up as follows coming into friday. futures looks like this. equity futures up seven, advancing almost 0.2%, portugal -- 0.2%, approaching 4360. euro-dollar just about holding on to $1.18. lisa: i'm watching the euro weaken versus the dollar, and i am ready to go degrees. coming up in about 90 minutes,

8:30 am, u.s. june retail sales. how much of a transition to experiences from buying goods? how much do we see the bleed through of the increase in the delta variant and how much people may not be spending going out to eat or going on vacations because of that? i 10 a clock a.m., i am really interested to see what the july university of michigan sentiment data shows when it comes to inflation expectations. there have been a number of academic studies showing that when people expect inflation to increase, it is more likely to increase. they change their behaviors accordingly, and it has basically a pylon effect. how much are we going to see that in today's data? we know fed chair jay powell is watching this closely. to answer the question why are treasury yields so low, there's the potential answer of is it just foreign flows. we will be getting the treasury capital flows later today at 4:00 p.m.

jonathan: high-yield debt one point -- high-yield at one point read your pursuit -- at 1.32%. incredible. lisa: is this a sign of stagflation, of the inflation we are seeing now leading to slower growth down the line? jonathan: that's the bond market. let's turn to the airlines. can we get some good news for the likes of delta, united, american? premarket, positive by 0.6% for united. what is in store from this administration? kailey: we will see what is in store. biden is waiting to hear from his people and whether they would recommend reopening the travel corridor going the other direction, allowing europeans to come back here to the u.s. lisa and i did this on sunday, coming from greece to new york. no problem at all. if we were greek trying to come

to the u.s., we would not have been able to do that. is that going to change? the administration calculating the delta variant into that equation, so it is still an open question. jonathan: you make the important distinction, what is the science behind that? people would want to know, even if the rules don't change. lisa: how much could we potentially get reversal if the delta variant picks up? in conversation with friends, with other parents, people are really worried about the school year and what happens if the fall does bring a resurgence in cases. we just don't have an understanding of what the threshold is for this to become a public health threat. -- a public health threat. jonathan: some people might be interested in what is happening in yields. here's the board right now. your two-year yield of about a basis point. -- yield up about a basis point. we don't talk enough about the

five year yield. that is where the action has been over the last several months. yields are higher by a couple of basis points. some of us are entertained by it, lisa. our next guest thinks that segment of the curve is where you should be focused. darrell cronk of wells fargo, the cio. the first question to you, why? darrell: the short side of the curve, most people don't realize, the five year treasury has gone up fourfold to 80 basis points this morning. as the fed expectations of a more hawkish fed start to get priced in, we think that is where you have to pay attention. there's less of the qe effect. everyone wants to stare at the 10 year, but watch the short side of the curve in the second half of the year because we think that will tell you where economic growth goes and how quickly the fed will begin either tapering or not tapering. along with that, i would also put in the other indicator you

should watch is the u.s. dollar. we think it is the most deep liquid market. if the 10 year is getting affected by what the fed is doing around tapering, then the dollar becomes a much more important barometer. lisa: if you zoom out, what is this area of the bond market telling us with respect to whether the fed is going to commit a policy error, whether they are going to hike to quickly, and that is what is behind the decline in longer-term yields? darrell: the market has priced out and inflation overshoot, and they have priced in the fact that the fed overreact and aborts the recovery in some regard. that is where rates are where they are today. that, along with term premiums, have come in particularly on the long side of the curve, which just means for those term premiums to widen back out, you need the fed to be right. inflation needs to be transitory , meaning growth can take back

over if the fed doesn't have its hands forced, and that will drive what we see in either steepness or shallowness of the curve in the second half. kailey: how do you factor that into your calculation for the equity market, when you think about these inflation concerns? how do you approach portfolio construction? darrell: we very much like equities. this is a great environment for these. a 1.3 who present -- a 1.32% 10 year, you have to be long equities. we think you get a stronger, bullish reaction in the second half that most people expect. everybody expects growth to subside. what you want to think about here is shortening your equity duration, just like you shorten your bond duration. that means owning companies that have high shareholder dividends, high buyback yields, so please like energy, industrials, materials, the classic cyclicals. you can own tech here, but you

want to have high amounts of cash return to shareholders. that is the place to be in equities the second half of the year, and it also predicts you somewhat if rates start to move back higher again later in the year or in 2022. jonathan: what is the catalyst for that? darrell: actually, we think the fed is correct, that inflation is transitory. you have some sticky months in here, and going back to your earlier point, it allows the fed in essence not be as hawkish, not throw the recovery off its tilt, and you get a growth steepening of the yield curve basically, and growth persists into 2022. we still think u.s. gdp next year is well over 5%. jonathan: darrell, good to hear from you. darrell cronk, wells fargo cio of investment management. this is the question, what does the final quarter of this year look like? lisa: right now, the consensus

seems to be that we already saw bp growth trade fade. we saw peak expectations for yield curve steepening. so are we at a point where the consensus could be that we are not going to get this reflation trade the way people expected before? could the consensus be for big tech anyway that sets it up for the reversal later in the year? jonathan: i think the consensus right now is that the consensus broke down. if you look at the bond market at the moment, can you find the consensus as to why we are down? the reason i ask every day is because i get basically a different answer to what is happening. i will catch up with priya misra of td a little later this morning. she's making the case that this is just a positioning story. lisa: i'm laughing because i am thinking of the derivative of the consensus, and if tom were here, he would be talking about the delta and the gamma of the trade. we are not hearing as many calls for 2.5% 10 year yields or 3%,

so perhaps that is the take away. jonathan: should we stop using the c word for the next few minutes, consensus? lisa: we could just make it a drinking game. [laughter] jonathan: the nasdaq versus the russell comedy small caps versus big tech. this week has been interesting. kailey: you went right where i was going to go, without using the c word. betrayed coming into the year was a small overlarge, and the has totally flipped on its head to today, where we trade now. very interesting dynamics. jonathan: very true. if you are just tuning in on radio and tv, it is "bloomberg surveillance," and the c word on this program, consensus. [laughter] i think that tells you a lot. the s&p advancing a little more than 0.1%. this is bloomberg. ♪

ritika: with the first word news, i'm ritika gupta. the biden administration warned u.s. companies about the risk of doing business in hong kong. it said china has pushed to exert more control over the financial hub that threatens the rule of law and endangers employees and data. today's move underscores how quickly that beijing promise of one country, two systems in dealing with hong kong has come to an end. for the second day in a row, federal reserve chair jerome powell told the senate banking committee that the reopening of the economy has driven inflation well above 2%. he reiterated the forecast that

higher inflation will be temporary. in germany, at least 81 have died in the worst flooding in decades. people climbed onto rooftops and into trees after the houses were inundated or collapsed. pj solomon is the latest wall street firm to raise salaries. new salaries raised to 225,000 dollars for third year associates. pay has also increased for junior bankers. 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. ♪

♪ >> if unemployment is at 4.5% at the end of the year and things

are progressing the way i am expecting, i would guess that some adjustment would be in order somewhere in that timeframe. but it is going to depend on the data. jonathan: another week of fed speak. charles evans, the federal reserve bank of chicago president. from new york city this morning, good morning. alongside lisa abramowicz, i'm jonathan ferro. tom keene back with us monday. kailey leinz with us for the next hour or so. the s&p advancing a little more than 0.1%. what a week again. 1.3238%, yields higher by a couple of basis points on tends. lisa: the amazing thing is this comes on the heels of higher inflation prints again. we got the cpi, we got the ppi. we got the sense of the manufacturing, where input prices are climbing to all-time highs. start to wonder whether this is really the turning point this week where everyone buys the transitory story. jonathan: do you think they do?

do using we are building towards agreement, consensus in this bond market? there we go. lisa: cheers. [laughter] i am curious to see whether analysts are going to change their tune because we still -- and lower 10-year gilts. jonathan: let's bring in wendy benjaminson and head down to washington, d.c. wendy, good to catch up. we have been waiting for that advisory from the administration , for corporations doing business in hong kong. who is it for? wendy: it's an interesting question. jonathan: it is kailey's question, not mine which is why it was an interesting. [laughter] wendy: congratulations.

obviously there's a lot of money to be made in hong kong, but you would think the companies have people telling them about the national security law and what the risks are, so i think the biden administration is signaling this as part of its tougher on china stands -- china stance, trying to show it is tough on china as it begins its foreign policy push. lisa: that's exactly where i wanted to go, hoping you could put in perspective this directive. in other words, the trajectory of different china actions that president biden has taken. do we get a better sense of what the ultimate goal is by the bind administration against china -- the biden administration against china? wendy: he says he wants the relationship to improve and to work as strong competitors against each other. i think he's also stemming off in the midterm elections and for

2024 the republican note that biden will be soft on china. there are already ads running showing him looking warmly towards xi jinping. but that is a problem for him, so i think he's been trying to address that. lisa: how successful has he been in tightening the alliance backup with european allies? i speak about this on the heels of the visit of angela merkel to the white house. wendy: that's right, she was here yesterday. they talked about the areas where they disagree. example, on nord stream and on the travel advisory for europeans coming here. there were areas on the gas pipeline where they agreed that they would both be tough on russia if russia tried to interfere, but they also wanted to help ukraine make the money

it does from the gas coming through from russia to germany. so they were trying very hard to repair those alliances. they do have some differences over china, and that has yet to be worked out. kailey: when we talk about china , president biden is trying to pitch infrastructure spending as a way to compete with china in addition to being a jobs engine and everything else. when it comes to those in for structure packages in question, we heard from aoc, the democratic representative from new york, saying she would crush the bipartisan package if there's other measures, the more social measures, don't get pushed through by the senate. are the progressives going to be a problem here? wendy: yes, a problem for biden. it depends on your perspective on that, but the whole thing is devolving into this arcane congressional procedural mess that even those in washington roll our eyes about. what is happening now is that

the bipartisan infrastructure framework known as bif, that is the bipartisan bill that chuck schumer, the senate majority leader, wants to start having boats on on wednesday -- having votes on on wednesday. near saying hold on, i haven't seen the fine print yet. house speaker nancy pelosi is holding up the budget reconciliation bill until this is passed, and vice versa, so they are all in this thing about which one is going to get past first, and alexandria alexandria ocasio-cortez did say progressives would tank the bipartisan agreement if they didn't get their social spending and climate spending, which is important too in the reconciliation bill. so right now they are playing chicken on the highway. kailey: business as usual on capitol hill. when it comes to the specifics in these bills, what about the salt cap? i know people watching in

washington and new york probably care about that. wendy: i'm sure they do. it looks like there might be some relief for that because there are the new york, new jersey, connecticut delegations that are very interested in getting some relief on the $10,000 cap on state and local taxes off of federal taxes. so they are looking at getting some relief on that. the trouble is that takes away revenue, which means some of these expensive social programs don't get paid for. jonathan: wendy, wonderful as always. wendy benjaminson, bloomberg deputy managing editor for government. believe it or not, i want to spend a few minutes talking about social etiquette, and the difference between the first question you ask in the u.k. and the first question in america. in the u.k., this is what we do. what is your name? in america, what did you do? people ask you what you do so they can place you. when you asked that question next, perhaps in a bar in new

york city, and they say i'm first year analyst at a bank on wall street, you know they earn $100,000 a year because citigroup, barclays, jp morgan, guggenheim partners, they are all in on this, $100,000 is your first year salary out of school. it has been up near that level anyway, but these banks are all pushing it higher. this retention push is huge. lisa: just to be clear, the first question is what is your name. the second question is what do you do. then what neighborhood did you live in. jonathan: i thought you get to the third when after asking the second one. that's the whole point of the second one. [laughter] lisa: then they figure out whether they should buy you drinks. but basically, the idea that we are looking at $225,000 after your third year, it raises the question about who they are competing with for talent. how much is this competing with facebook, with google in order to get people? jonathan: we've been saying it a while, no one has been buying

that. i think with this salary push, things might change. kailey: does bloomberg count as a tech firm? jonathan: i think you're going somewhere with this. we are out of time, apparently. [laughter] coming up on this market, yields 1.3828% on tens. this is bloomberg. ♪

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♪ jonathan: live from new york city, for our audience world wide, good morning. here's the price action this friday morning. equity futures, 4358 on the s&p, up a little more than 0.1%. nasdaq this week, positive for eight straight weeks. we are positive by 0.2%. equity futures on the nasdaq up 25, advancing 0.17%. in the bond market, we been walking -- we've been working our way through this all morning, struggling to find a consensus. maybe the consensus is now that the consensus around this bond market is totally broken down. everybody has a view, and it seems to be very split one way or the other. what on earth is going on? a breakthrough 1.30% again.

yields on the session higher by a couple of basis points. on the week, lower. just a couple of basis points lower through a week where we had hot cpi and ppi, too. this is what i want to finish on, twos-tens. the curve in the treasury curve, the distance between the two-year yield and the 10 year yield. at the end of march, that was wide relative to where we are right now. 50 basis points lower. at the moment we are at on hundred eight basis points on the u.s. twos-tens curve. i think the call of the week came from stephen major of hsbc. it goes something like this. every single cycle, we add more debt to this economy. every single cycle, the peak for interest rates is a little bit lower because every cycle, our tolerance for higher interest rates is diminished. in stephen major's words, we cannot afford higher interest rates. in his mind, maybe we have seen a peak already.

maybe we have seen a peak in the twos-tens curve not for the year, but for the cycle. lisa: not only is it potentially that we cannot afford higher rates, edit also -- it is also due to the current circumstances and suppressing growth long-term. i keep going back to this, using their free cash flow to buy back $1 billion of pandemic era debt, that is money that could have gone towards investment, towards other things that could have generated further growth. how much are we suppressing growth long-term? this is a major question et al. husseini -- question ed al -hussainy i'm sure has been thinking about, joining us on the phone. how much -- i think we are having some issues with ed. we will get to him a second. is it a question of a fed policy error, or long-term growth

simply being lower for longer, period, regardless of what the fed does? jonathan: i will start with where i was last week coming into this week, going into that print on wednesday or tuesday that we had cpi. cpi came in hotter. last week, the big discussion i had with everyone in fixed income, i'm not interested in the data. i want to understand how the market will respond to that information. if we had a hotter cpi print, what will the yield curve do? would curves be higher or lower? in the initial aftermath, what we had was a flatter curve, and what we had at the front end was a bit of a selloff, yields higher. that spoke to this idea that hotter inflation would bring the fed in early and choke up growth. this idea that front in the yields would rise and longing deals would fall. then we had that really messy auction on the 30 year, literally three, 4, 5 hours after that.

after the 30 year auction, the mess that we had an the 24 hours after that, i'm as confused as the next in. i have no confidence or conviction what is happening in this bond market at the moment and how are a response to any given data point. take your pick. lisa: let's ask ed that question. how do you interpret the flatter yield curve we see over the past few? ed: hey guys. i think it has been a pattern in place since the end of march, so it has been a persistent move in the curve. i first, i think the rise in real yields in the first quarter of this year in retrospect was perhaps a little bit too excessive, and the steepening we saw in that time period is being unwound. i think we are halfway through.

second, there was a lot of optimism around fiscal policy, and i think it was correctly placed, particularly after the georgia senate elections. we opened up a very broad window for fiscal possibilities. i think that window is narrowing. i think there is cap this is him around for the fiscal stimulus coming through, and to that end, the interest structure package is not near fiscal stimulus. it is a long-term piece of policy. i think markets are looking ahead and seeing both fiscal and monetary policy start to roll over. monetary policy, very likely we will start to see that paper and kick in next year. we can argue about the timing, but i think it is clearly on the horizon. fiscal policy is going to step down. we have pumped in about 25% of gdp over the course of the past 15 months or so. that fiscal impetus is going to

be unto about 2% of gdp next year, so it is a big step down, and i think markets are becoming open to the possibility that once the fiscal stimulus is out of the system, we will return to trend faster than anticipated. that is been the big driver of the curve flattening here. jonathan: are we back to 1% as opposed to 2%? ed: you know, the jury is out on that. the reason i say the jury is out is at the moment, we are probably all struggling to come up with a narrative that stevens the curve, right? you are saying it is likely as the fed has brought forward in response to higher inflation. it is very likely that it flattens the curve. i think there are sort of three

ways in my mind to a steeper curve from here. first, we get some leadership from outside of the u.s.. rates have been depressed in europe. the growth story there remains challenged. the fiscal story is significantly weaker in europe. all of those things met accelerate in the second half of the year. so if global rates rise and we are starting to see some of the smaller g10 central banks pullback on accommodation if they recover faster, we will get some spillover from those rates markets into the long end of the curve. that has happened in the past, but it is relatively rare. kailey: so what are the catalysts that really matter for this bond market? jon asked the question, is it the data? what is it? ed: i think the bulk of it is fiscal policy and monetary policy at this stage.

there's very little, in terms of near-term data, i have very little confidence that we are going to move the market because the signal-to-noise ratio is exceptionally low in both employment and inflation data at the moment. we have known that this is where we were headed at the start of the year. we are sort of at a point where i think the data is sending multiple signals. there's an element of truth to some of them, but we won't know really until optimistically, at the end of the year, and more realistically the summer of next year, in terms of what is the underlying inflation story. is it just a return to trend which we are seeing at a very accelerated pace and components that have been affected by the pandemic? or are we changing the trend, are we shifting gears in the 2% to 3% range which is where the fed wants to see it? we won't know until i suspect

the middle of next year. lisa: let's talk about the breakdown in consensus leading to a lack of conviction for a lot of people. what is your highest conviction call right now? ed: we really like the value of the curve. i think if you look across the curve, the flattening and the pricing of the fed cycle has really made carry attractive, right around the five-year point of the curve. we think the fed is patient enough that advise us some time before that part of the curve starts to move up aggressively. so i like the protection that that offers if you are switching out of a flattening theme in the curve. the long and to me is roughly fair. if i think of the next 25 basis point move in the 30 year yield space, roughly same odds up or down after the flattening, but the belly of the curve i think

offers that are value and better protection. jonathan: good to catch up, as always. on the bond market, this has generated a huge amount of debate. the other debate we need to stay on top of are the restrictions around the pandemic. kailey, i know you have been on top of this story. the restrictions of the u.k., some news coming from the telegraph that jp morgan and goldman staff will be told to wear in u.k. offices even after those restrictions get moved around in the u.k. in the next week. kailey: if you live in l.a. county, you better put your mask on inside even if you are vaccinated. the rules keep evolving and changing. the messaging isn't entirely clear, especially around this delta variant as it evolves and spreads. what we are being told we have to do is constantly changing, whether you've had your shots are not. jonathan: are we moving forward here, or moving just a little bit backwards? it's is a baby step backwards? i'm alluding to l.a. county.

ed: there's a question -- lisa: there's a question also, what does this do to people gooding vaccinated if they have to continue to wear masks anyway? you get the likes of morgan stanley saying get back to the office. we will pay you more, but get back to the office. how does this, kate it when people are being ordered to wear masks? it is not very pleasant. jonathan: this is a really divisive story, and i am going to call it the most vice of story in business right now. billionaires going to space. i honestly think that is one of the most divisive stories of this moment. we will have special coverage for you on tuesday. blue origin's rockets going to space with jeff bezos. that coverage starts at 8:30 eastern time. believe it or not, can you imagine paying $30 million for a to cover something and then saying you have a scheduling conflict? lisa: i can't imagine paying $30 million for anything. [laughter] jonathan: but what is the scheduling conflict? kailey: unless you are getting married or having a baby, i do not think there is an excuse to get on your c2 space.

-- your seat to space. lisa: getting married? maybe. jonathan: that's an excuse, isn't it? $30 million on a ticket, he has a scheduling conflict and will not be on the rocket. amazing. equity futures, 4357. equity futures up a little more than 0.1%. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. in california, los angeles county told residents they must wear masks indoors even if they are vaccinated. authorities are reacting to a surge in covid cases and the spread of the highly contagious delta variant. l.a. county added 1000 new cases yesterday for the seventh day anoro. 10 million people live there. the u.k. is holding out the prospect of restoring some of its pandemic restrictions, just three days before it plans to drop all social distancing rules. the number of people in the u.k.

with covid has risen 43% in a week. the country's solicitor general told sky news the situation becomes -- that if the situation becomes unacceptable, it could be reimposed. authorities will temporarily ease restrictions on food and medicine imports. thousands of people to the streets to demand freedom and food. cuba's economy shrank 11% last year. intel reportedly is exploring a deal to buy semiconductor manufacture global foundries. according to "the wall street journal," the company could be valued at about $30 billion. 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 think we are in a situation where we can taper, and i think

setting those parameters the right way, we don't want to jar markets or anything, but i thing it is time to end these emergency measures. jonathan: i know the line of that that lisa is focused on. that was james bullard, the federal reserve bank of st. louis president. live on tv and radio, from new york, for our audience worldwide, alongside lisette rewards, and jonathan ferro. tom keene back with us on monday. lisa -- lisa abramowicz, i'm jonathan ferro. tom keene back with us on monday. lisa away for a week. playing musical chairs. yields come up to basis points. we've had a week full of fed speak. let's pick up on the line that jumped out for you, lisa. i imagine it was the "we don't want to jar markets or anything. " is that the right line i think upon? lisa: you got it. the question is, how to they do this? and what counts as jarring

markets? is it going to be something that is disruptive enough to threaten the economy in some kind of fundamental way? what is the threshold for that, and how much are they considering that as they take a look at housing prices at record highs, inflation reads that even jay powell has said have come in hot? that is what stood out to me. you nailed it. jonathan: he talked about the context of the original decision , the crisis they faced comedy possible depression they faced, and how we were no longer in that moment, and therefore we should reduce purchases. i think that is a pretty decent argument to go to the fomc within the next couple of months come on this meeting coming up and the one after that. jonathan: you know what i do every thursday at 4:00 p.m. i look at the fed balance sheet because that is the most exciting thing to do on a thursday. it hit a new record yesterday, $8.2 trillion. you have to wonder, at a time when we hit record highs, the

longest streak of records going back to 1997 with record low borrowing costs, you do wonder, what is the purpose at this point? jonathan: what do we get at $120 billion a month that we wouldn't get at $40 billion, $60 billion? kailey: and i wonder when we are going to start to see more inconsistency with their answers because lisa was talking about the messaging we got from powell this week, and i would like to say he was just sticking with the party line, but i wonder if it is really the party line or if it is just fed chair powell's line because the tone he was striking seemed different to me than the tone bullard was taking. jonathan: i think that is an important point. where is vice chair rich clarida on some of these themes? if these issues with inflation data right now, hotter than

expect it cpi, hotter than excited ppi, if they are all traced back to supply-side issues, bottlenecks, if the fed scales back qe, what does that actually achieve to the dynamics we are talking about right now? lisa: which is why i liked what ed had to say, that this is more of a statement on fiscal stimulus going forward in terms of the flattening yield curve, in terms of slowing expectations or reversion to the mean than any fed accident, because what does fed policy actually achieve at this moment, whether it is easier or tighter, given where we are in the cycle and given some of the pressures causing inflation to rise? jonathan: we had a bloomberg subscriber right in on that, coming it the joe manchin flattening. are you willing to call it that? lisa:lisa: i think there are people looking at the size of the potential interceptor spending plan, and it has gone down from $6 trillion, now talking about maybe $1 trillion getting through at a bipartisan level, and then perhaps a wish list being tacked on after that.

jonathan: that yield curve a big story for this equity market. this bond market set up what the stock market has done in the last couple of months. the divide between big tech and what has happened elsewhere. our stoxx editor dave wilson -- our stocks editor taking a look at that. dave wilson, a couple of weeks away from these names. dave: we have really seen some fluctuation in the strength of tech stocks, and it is something that jumps out when you look at the nasdaq 100 index relative to the s&p 500, which michael shaoul at market field asset management did in a report yesterday. you saw the ratio get to a record in february, so that is really when the tech stocks peaked. it came down into the middle of may, and since then it has been up about 7%. the way that he is looking at it , there will be no room for forgiveness when it comes to

tech earnings simply because you have seen this renewed strength in the group. actually, if you move beyond this comparison and look at the s&p 500 information technology index, you find out that, based on historical earnings, it is the most extensive it has been since 2004. if you look at it based on projected earnings, it is a little more reasonable, but still on the high-end relative to the rest of the 11 main industry groups in the s&p 500. it has been in the high 20's for about a year now. lisa: a lot of people have pointed to long big tech is a very crowded trade, the most crowded trade in the latest bank of america fund managers survey. however, how much has the strength in these equities been driven by a renewed consensus that yields would remain low for the foreseeable future? dave: that is definitely part of the mix because we had seen concern pop up in the last few months that as treasury yields

rose, there would be less incentive to own technology stocks. a lot of them don't pay dividends, for starters. but that has kind of shifted away, and then beyond that, we have had the broader transition back toward the faster growing companies and away from the cheaper stocks. in other words, gross reasserting itself relative to value after having kind of fallen back in the last few months. jonathan: good stuff. looking forward to the numbers from big tech coming. really great to catch up with ed about 20 mins ago on this bond market in this program. he writes in again, something to explore. i think this is important. the long and yield and the decline in them has happened without any changes in risk. credit spreads remain tight. all this has done is exacerbate the positive stock treasury correlation, and this is a problem for asset allocators. i think it is a good point worth exporting a low bit more. lisa: this is the reason people

have point to bitcoin and certain other commodities as an asset class that is less correlated, and this really has been one of the angst he points underpinning a lack of conviction in the 60/40 portfolio. but again, have we divorced the credit cycle from oven the mentals -- from fundamentals? the lower that yields remain, the more risk on it will be for the foreseeable future, and that will not change for perhaps years. kailey: bitcoin as the 40% in a portfolio? jonathan: if that were lisa was going? kailey: i don't know. part of it? playing a role that maybe bonds can't right now? i think it is an interesting question. the narrative seems to be that reason that we have seen the long and yields come in had to do with shorts getting squeezed out, positioning changing. is that still the narrative, or is this something is entirely? jonathan: one more hour to go for them to get to their weekend. from new york city this morning,

good morning. i'm joking, lisa. [laughter] jonathan: i'm not implying you don't do any work after 9:00. futures up a little more than 0.1% on the s&p. yields higher by two basis points on tens. from new york, heard on radio, seen on tv, this is bloomberg. ♪

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>> we think that the fed is correct, that inflation is transitory. >> one of the key questions is are stocks in a bubble. i don't think they are in a bubble, but they are expensive. >> we don't want to jar markets, but i think it is time to end these emergency measures. >> when they looked towards tapering their asset purchases, a lot of traders are going to be caught off guard. >> we are looking at a secular passive low growth around the very low range and yields. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa

abramowicz.