>> in the short-term, stagflation is something we really have to monitor right now. it has an impact on very specific services. >> inflation is going to remain elevated. we are probably looking at 3% inflation. >> there's owing to be a time when the fed becomes the major market driver again. ex there's a 20 year history of the fed missing inflation targets. >> this is "bloomberg surveillance." jonathan: coming off seven straight months of s&p gains. good morning, good morning. i'm jonathan ferro alongside tom keene and lisa abramowicz. tom, the rally continues. tom: i think when you left it was a number of difficult days.

a little bit of sweat out there. the characterization of the last number of days, for whatever the news flow is has been john, the bids there and the bid sustains. we saw it yesterday and with a vengeance we see it this morning. jonathan: we will get the view of the status on buying in a moment. tom: i will go with that but i see a vix that is normalizing. it was like headlining 18, 19, up to 23, lower numbers in a better market with a 15 handle 16.15 and is this market prepared for a vix of 14? i don't think so. jonathan: week leap -- we keep climbing a wall of worry. tom: they are seeing people going up and hedging so the people looking for further gains to justify with -- why this is

not frothy, at a certain point you wonder if it is just market reasoning. jonathan: is the fed obsession a worthy conversation in this market? even with withdrawal, we know that the fed can start hiking the equity market and it goes up. you can reverse engineer that in the equity market could go up. lisa, why do we have this conversation every day. lisa: i think that if friday's mark -- friday's number is a big number, it will change the market perception. a tighter labor market then what previously was thought, it will change the perception of a path of a fed that is still data dependent. i do think that the fed matters but right now the bond market is seeing what the fed is seeing. jonathan: upside surprise of good news bad news for this market? tom, your thoughts on that? jonathan: my answer is its september data, september 1 and

what we have done is extend the x-axis. six months ago we were pontificating about wait until september. it didn't happen. everyone, including chairman powell, has extended out into somewhere in 2022 and frankly i have seen very little literature on 2000 22 versus the equity guesses. lisa: so his answer was punt, john. tom: no, that's very good. do they do that in english football? jonathan: i'm not sure if that's the technical term. tom: we have so much to catch up on. jonathan: it's so good to be back. want to talk about renaldo back to manchester united? tom: how did king play for enthusiasm, i thought he had two feet out the door. jonathan: these players have got to turn up. what's great about him, back to united, it's so, so good for the young players to see what that kind of polity, the effort that

goes into that kind of quality, it's one of the hardest work in the game, the sport. the younger players, they need to see the work that goes into that game. tom: partition for me, renaldo is going to be on nbc-tv premier football america, england, the whole razzle-dazzle. lionell is stuck at paris, psg. compare and contrast of those events. jonathan: on the biggest days of the champions league, they've got a good shot here. how many people miss to this and have no idea? your equity market is up 15 on the s&p. into the bond market, i've got so much to say after being away for so long. the fx market, advice.

tom: can we talk about qpr in the next hour? jonathan: we can do that a little bit later, tom. lisa, it's up by 1/10 of 1%. lisa: i'm just getting emotional listening to you back together. it's lovely. not to bring it down, but we have some economic data. u.s. adp employment changes through the private payrolls for the month of august with an expectation of 638,000 additional jobs created. this is versus 330,000 in the prior reader. of course it's unclear how much this actually matters or the jobs report on friday. we always talk about if this is an actual precursor despite the delta variant. 10 a.m., i would argue that this is possibly going to be a more important data point to watch. the ism manufacturing figure for the united states, the idea being the increasing costs is

dramatic. unfilled orders that we saw arising to record levels in europe. how much is this pressuring factories in the united states? today opec members are planning to meet virtually not in vienna and they will be discussing whether to stay the course and continue with output increases after pandemic. remember, president biden came out and tried to jog them into increasing production even more. highly unlikely they will even do that. others saying why not keep production where it is because demand is dropping. it's unclear whether they have any incentive to do anything other than say what they were going to do back in october. jonathan: lisa, thank you. let's get straight to june and emmanuelle. each in their time talking absolute nonsense, so let's start right here. any pullback is one to buy or sell and why do we keep climbing the worry?

>> if you look at it, whether it is the absolute low level of interest rates, the extraordinary monetary stimulus that's already been in the pipeline, essentially you set the conditions for the economy to run above trend growth into 2022 and perhaps into 2023 and frankly, what it comes down to, john, is bull markets have corrections every now and then. we think it's likely you will have one before the end of the year but bull markets don't end unless there is a recession on the horizon. it's difficult to see a recession on the horizon before the middle of 2023. jonathan: the people that worry about this cycle are more worried about the fed staying too loose and not becoming too tight anytime soon. the idea that they will ultimately be overwhelmed by inflation because they are too loose for too long is a big change from what we are used to.

julian: it's, you know, it goes back 40 to 50 years. policy unlike anything we have ever seen and frankly from our point of view, we share that concern. when you look at it, if you look at the surprises in the data over the last three months to five months they have consistently been on the upside in terms of inflation surprises and yet have been on the downside in terms of the rest of the economy that i think actually points to what lisa was saying a few moments ago, the importance of the data between now and september 22 and we would agree, if things come in hot on friday and the data stays steady, which is a big if between now and the 22nd, the fed is going to have to move and markets may not be prepared for that. lisa: elaborate more, what could the reaction be? could there be a drawdown or is there enough sentence --

sentiment for that to be a possibility? julian: john is back from vacation and drawdowns only happen when he's gone, but in fact look, here's the thing, for us, if you go back 16, 17 months , the impossibility of the market being at 4500 was found. we think the pendulum has swung completely the other way to wear, you know, the market does not believe it's possible for stocks to draw down unless the fed is raising rates specifically. we think that is a bit too cavalier. tom: how do we think that fits around xp 550? are those based on earnings expansion julian:? they could be based on earnings expansion. the one thing we take issue with his people being disquieted a bit by multiple impressions and

that should happen at this point in the cycle. it's actually healthy, in a way. frankly again, the backdrop of the economy is still low with rising interest rates and completely supports those kinds of numbers. jonathan: missed you, julian. got to catch up. i did miss julian. [laughter] we are honest with each other, aren't we, tom? tom: what did you do, did you go to a spa where they put little rocks on your back? is that what you did? jonathan: i meditated. tom: did they do volcanic pumice? [laughter] jonathan: to really embrace gains, you can't be consumed by losses. it was profound. tom: i watched the great manny pack yellow's fight -- manny pachiau's fight. those guys with the cups and the

suction things? do you have circles on your back? jonathan: it's a questionable picture that we will put on the front cover of the book. yet. tom: cut, chiseled. jonathan: me hiking. that was nice. [laughter] jonathan: tom keene, lisa abramowicz, jonathan ferro. from new york city on radio tv, equities are up. we cover the markets, sometimes. yields are higher by a basis point. tom: what's a small caps? lisa: jonathan: -- jonathan: from new york city, this is bloomberg. ♪

>> a term when many women don't even know they are pregnant, the supreme court could acted today, though there is no firm deadline. opec and allies meet today to provide halted oil production with another increase in output in october with prices that have mover -- mostly overcome mid-august but the lookout for the rest of the year is relatively complacent.

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>> we will follow and monitor the new rulers in kabul and also

make it clear that the nato allies have the capability to strike from long distances, terrorist groups, if they try to reestablish themselves and afghanistan. jonathan: a tremendous set of conversations this week. good morning, i'm jonathan ferro. your equity market this wednesday morning is shaping up as follows, we advance one third of 1% with yields hard by on the basis points as we kick off the month of september with an ecb meeting around the corner. the euro, tom, stronger by 1/10 of 1%. tom: is it just a so what? jonathan: i think there is more than a so what going on there, tom. equity markets, jack, i've tom: bad is the crisis -- tom: how

bad is the crisis fatigue in washington and at the white house? >> i'm not sure that there is as much crisis fatigue in washington as you might think. the biden administration came in very prepared to deal with crises. i say that not as a value statement, but they knew they were going to have to aggressively approach the pandemic. the actions in afghanistan are a direct consequence of the plan to pull out of their. between a presidential election in the first midterm, the republicans are very, very willing to play up any crisis that may help them in 2022 and afghanistan clearly appears to be one of those if you look at the response to the polling. so, there's not really crisis

fatigue but more of a willingness to amp up importance of any crisis. as for the hurricane, i don't really necessarily see crisis fatigue. we haven't really seen congress having to act to provide more money to that just yet. but the politics of that, they could respond. jonathan: it's all central -- tom: it's all central asia, pakistan, the hurricane, there are two bills i believe attached to each other in congress. have they been buried by the crisis fatigue and hype? >> know, they have been buried in the news cycle just because of the congressional's eye jewel. we are in the middle ground between the budget framework about in the actual building of the $3.5 trillion or maybe less bill, but that is still moving forward. there are challenges as to how

they actually get the infrastructure bill and the social spending tax bill across and we saw some difficulties in the house as moderates pushed back on the idea of tying them together, but they have moved forward. it's still as difficult as it ever was to do both of those, but there was still progress and in september i think we will see more action on those. lisa: senator bill cassidy came out to talk about hurricane ida, the fortified levees, and how important it was the finance additional work just like that. how much of that is indicative of a sea change in the republican party to push more and get at least a bipartisan bill across the line can be more open to additional spending? >> on hard infrastructure there is clearly bipartisan support and this probably doubles down on that instance in which at

least the infrastructure improvements in new orleans made sense hurricane katrina showed direct value. there were obviously problems with the electrical grid compared to katrina, but that is never really been the challenge with the infrastructure bill or anything else on the democrats agenda. there is clear support for the hard infrastructure in the senate has already passed that. the big question around getting this done is everything else the democrats want to do, do they have time to do that? this is sort of the icing on the cake in terms of congressional support for physical infrastructure. lisa: i want to throw you a curveball, i want to talk you about the crisis that will be as we had to children going back to school. the biden administration has said in person learning is important but we still have a situation where 12 and under kids are not eligible for the

vaccine and there isn't a consistent methodology in getting kids safely back to school and there is a fight in florida about whether there can even be and eight. does the administration have a comprehensive plan about getting kids to school on time and in a consistent fashion? >> the evidence right now is there is not really a comprehensive federal plan for how to approach getting kids back in school. enough of the power has been left in the hands of states and localities to determine that. that is why you are seeing this become a very politicized issue with inconsistency and confusion and there may be a much more cohesive federal approach if there is some greater level of approval for the age bracket knowing down from 12. where some kids can get vaccinated. that would be the sort of unified national issue to address this. but outside of that, the federal

government isn't pushing particularly hard for states to take a certain approach. jonathan: jack, thank you. we keep bringing up september, kicking off the month of september, we have been anticipating this for a while. return to school and the end of additional unemployment uninsurance. a story this morning that is getting a ton of play, states that ended house federal unemployment benefits early have so far seen about the same job growth as states that continued offering pandemic related extra aid according to a "wall street journal" analysis. that's been a big debate coming into september, how would the labor market respond as the other states that did not, how would they respond when it ended this month. tom: they saw reduced consumption in those states versus what they would have

seen. to me it's there, i've got that statistic coming up on friday and we will see on that. but the trend is in the right direction, claims are in the right direction. job market, the right direction. in a way, people are extrapolating out. maybe the new september is november. jonathan: labor market headed in the right direction? lisa: this is a really important point about the enhancement of an employment that if it's, what if it doesn't have the same reaction that people expected and we think about the permanent scarring to the labor market? at what point does this push into the longer put -- longer picture? jonathan: away from the headlines, some of the states that removed it early, those were tight labor markets. maybe getting the same amount of gains in the economy on a much tighter labor market, perhaps that is better? lisa: the pendulum of uncertainty.

again and again, that's the bottom line. tom: standard investment -- jonathan: from new york, stocks up, we advance 16 points on the s&p 500. from new york city, this is bloomberg surveillance. ♪

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jonathan: live from new york city for our audience worldwide on tv and radio this wednesday morning, september, here's the price tag with the s&p advancing and a lift on the equity markets with seven straight months of gains. we were up 4% last month with the russell up two. outperformance in the nasdaq versus the russell. up around 16 on the russell, advancing by 7/10 of 1%. a look forward, 4825 year end, the next year is 47 15. ending the year higher than the pullback. the y from chris harvey is simple. for many people the secret sauce is in the bond markets. five and 10. i want to talk about the five

year just briefly. the five-year is interesting. why? any success that the ad has around rates will show up in the front end of the belly of the curve. just a nudge below 80 basis rallying through the valley of the curve, really capturing that story of dealing qe on the right path of the federal reserve. jonathan: -- tom: or we are halfway to the new range and that's fine but can we control that path and not upset the markets? that's the big question. jonathan: bank of america was looking for something like more than 2% this morning. what does it mean for the fx market? that's really complex. perhaps this year, maybe, putting a lot of caveats on that. maybe at some point this year, what does it mean for the rates

in the foreign exchange market? x wyatt 9267 and advancing over the last year by one third of 1% with a chop in between but ultimately over the last year we haven't done much at all year on year. let's get you some movers this morning and check in with romaine bostick. romaine: rosenblatt downgrading this one, interesting note about ad spending on the shift away from platforms like facebook and the competitive position with apps like roku and apple offering to these digital ad buyers. tiktok stealing a bit of the thunder from facebook, shares down 4/10 of 1% with zoom shares slightly higher on 4/10 of 1%. cassie it investment funds purchasing 200,000 shares, we will see if that will be enough to lure investors back to the

stock after the big selloff in the biggest mover on the upside on a percentage basis belongs to a software company that came out with earnings that had so script -- subscriber numbers that looked pretty good here with guidance on the year-over-year in revenue that seemed to buoy the infection -- the biggest percentage movers on the upside and the downside with long motives that were down 15% and remember, they went public back in july. the lockup for big investors inspired it -- expired at midnight. 13 of the past 14 sessions here, a 16% drop. getting technical, it's tied to a series of warrant where the concern is that it would then be flipped immediately into the market for profit, taking the yields down in the automotive

space with a chinese ep maker trimming its delivery forecast for the year not only because of the semi conductor shortage but also because of issues around the maker of trends for the company, tom. very good. -- tom: very good, james of standard chartered joins us now, thrilled he can join us from aberdeen standard investments. thank you so much for joining us . james, it's september 1. guys like you have to re-rationalize. how much rationalization is going on right now? how much institutional money is behind the benchmark? >> that's a good question. the fourth quarter brings that special set of dynamics. normally it's quiet around

private market activity and is generally pretty dead and in august we look towards the fourth quarter and say there is still a lot of funding out there coming to markets and you get this kind of concession event in the fourth quarter supply of the year. but it's a bit more complicated as we have the potential for some relatively major monetary policy changes as well. both of those have the potential to drive bond yields higher but as you talked about in your previous section there, thinking about bond yields in isolation doesn't get you far. thinking about the dollar and risk assets, it gets more complicated and i'm of the opinion that it will be a flatter curve in the u.s. tom: trailing 28% year-to-date, it's terrible. how many people are behind? jonathan: a lot of people.

density risk appetite, we know the equity market can go higher in a rising regime at the federal reserve and can rally even as they pullback. what will hit risk appetite? >> yeah, we know these things until we don't. i try really hard not to spoil into the basic cognitive status quo buyer traps. this is one of the strongest that we have a tendency to believe, that what's true today will continue to be true tomorrow. you guys week after week say that you think the equity market is fragile, then i end up with egg on my face more often than not. but it is one where you get such long periods of grinding low volatility rallies and then you get it in one go and i still think we are headed for that kind of episode. the phrase that we use is vulnerabilities, not triggers.

it's almost always impossible to point out the event or the data point or happening that is going to be the trigger for things to turn around, but what you can do is look at the market and say how vulnerable is the market, how expensive is it, how much are investors positioned and what is the sentiment like on the equity market with people buying on margin? what's the median stock doing relative to the index itself? when you look beneath the hood with all of these metrics like the unsustainable drivers, i have no idea when the equity market will crack, but i strongly believe the fundamentals, which are supposedly storing equity prices up here, are not as supported as many make out. jonathan: getting that idea around what you don't want to own, what do you want to own? >> it's difficult to answer that question outside the industry, where should i put my money and

i give a big sigh. not just with financial alternative assets across the board, but there are crises going on with alternative places to park money, it's terrifying in the extreme. for most investors, still owning diversified portfolios. the basic financial asset types, it's very sensible. what do i particularly want to own and myspace? it can be expensive but it's not as expensive relative to the economic outlook. that's the biggest. lisa: to be clear, are you buying the longest day did notes? is that how you are getting your confidence? >> in the u.s. that is exactly how we are positioned on the long end. ultimately it should be the clearest and cleanest expression of potential output of the u.s. economy.

my observation, and it goes back to the conversation you had before about the labor market, when policy steps away from the u.s. or any major economy, the economy literally has a heart attack. without temporary input for policymaking, the current state of the economy is unsustainable and we tend towards negative growth until we find equilibrium and of policy that we engage in is unsustainable and it tells me that we are still living in this unhealthy, imbalanced, over indebted economy with lots of structural weaknesses that people try to deal with around fiscal policy and it caps the yields around that that rise until there's an accident and i think we have seen a little episode of that already this year and i continue to believe that long-term duration has better value than the alternatives jonathan:. -- alternatives. jonathan: when i read james tag,

it does have the vows in aberdeen. lisa: you are just trying to trigger him. [laughter] jonathan: third year at the moment, 194, aberdeen looking for a flatter curve. lisa, lower yields on the long end? lisa: to me it raises the question of what really gets us there. does the jobs market indicate faster growth, curtailed growth? a slower growth environment? they are not the same with the different influences over the market. jonathan: you read the morgan stanley piece, i know you always do. i do as well. brought by fire or ice, the equity market, they say the following, it could be continued tightening policy leading to higher interest rates. or we get a payback in demand with weakened confidence over

what the consensus expects and the former is cyclicals and the latter has defensive's. how do we come out of this midcycle transition? lisa: they are talking about a barbell on those sectors and you are right, honestly it seems like, tom, this will trigger you, the pendulum of uncertainty. can we do the toilet paper this morning? jonathan: which one is it? tom: i thought the 30 year bond was interesting. jonathan: i agree, that's why a brought it up. that's why lisa asked the question. [laughter] jonathan: uncertainty, good to be back. from new york city this morning, good morning. heard on radio, seen on tv, this is "bloomberg surveillance." >> with first word news, i'm ricky to goop death -- first

word news, president biden sang the exit timing saved american lives from afghanistan and said he would not extend a 20 year war forever. hurricane ida leaving new orleans in darkness, several saying it could mean more support for the infrastructure bill in congress and it could be an opportunity to build a grid that is more resilient to the increasingly violent storms of the gulf of mexico. california, high winds to keep a raging fire out of lake tahoe, they have mostly been able to keep it away from there on the southern shore of the lake and the blaze is one of a dozen major wildfires in california. walmart trying to fix supply chain issues with a hiring spree on more than 200 and 50 walmart and sam's club distribution centers and transportation offices with order fillers, freight handlers, and management positions. canadian rash -- canadian

national railways being dealt a potentially fatal blow, rejection of a use of a trust to pay shareholders and offering canadian pacific it's on offer with the canadian prime minister releasing a platform promising tens of billions in spending on new initiatives fully financed by tax revenue on the recovering economy and polls show that liberals are in a tough fight to stay in power. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> people are starting to move around the world again. we all started seeing companies thinking about what it would look like when we went back to work and they are really preparing for a hybrid work approach. jonathan: a tough time presuming, the stock down by 17% yesterday. that was the zoom cfo from new york. i'm jonathan ferro. this is our state of play in august, with 12 record high closes. we advance one third of 1% into the bond market yields, drifting a little bit higher now. tom, a quick check on prude for you, up one quarter of 1%. $68 and $.68. tom: 1.94 on the way, maybe back to 2% as well. dave wilson is with us now on the consumer discretionary's

with procter & gamble, coca-cola, costco, the staples. >> absolutely, tom. looking for signs that we are back to the.com years? you can see it in that industry group. we have seen the waiting of consumer stapleton stocks. food, beverage, tobacco. boring to some, but nonetheless the key is that you have got the lowest weighting of that group within the s&p 500 since march of 2000. and of august, five point 75%. -- 5.75%, putting it together this has been the worst performing group this year among the 11 may firsts. tom: are they buying back those shares? the ceos of dr. and gamble,

walmart and the rest, they have to say let's buy back the shares? >> no doubt there's some of that going on, but the group is going up this year and isn't keeping pace with the s&p 500. that's in part why the weight is coming down. less than half of the peak that it was in 2008. tom: help me, it's health care and radio with technology. >> i mean that's what it's been but if you are looking for echoes of the end of the.com, here's one of them. tom: thank you so much, dave. ira, what are you writing about? what is the september 1 message that gets me out on the coupon guild through december into january of next year? >> the big

thing is people talking about the taper being fully priced. starting in the fourth quarter, i think that there is a lot of people missing the potential flow effect here. right now dealers don't have to own a lot of bonds because they know they will have a captive, a captive buyer all the time and they can just pass inventory onto the fed whenever they need to or want to reduce their risk in that won't be the case going forward getting into the first half of 2022 as the fed reduces bond purchases and dealers lower their prices to basically make offers for bonds. lisa: with the u.s. selling fewer bonds going forward, how much does that offset the influence of the taper? >> probably only a third.

the fed is buying treasuries every month. not $80 billion in supply. probably more like $80 million to $100 million a year. it's true that the federal coffers are going to be pretty full with cash, assuming we get over the debt ceiling first. it's true that coupon issuance will be cut in november and deficits are not going to be running at $3 trillion a year like they were over the last 18 months or so. but that not only offsets a small portion of what the fed has been buying, thinking about it it's been $1 trillion in debt on an annualized basis every month for the last year and a half. whether or not that goes away it is still going to change the demand dynamics more than supply dynamics. jonathan: what's more important?

supply >> outlook for the economy is going to be by far what's been driving yields and will drive yields going forward. there will be incremental shifts because of technical factors and i think that is worth 25 basis points, but ultimately if we are ever going to see in our lifetime again at 2% 10 year yield, we need confidence that there will be growth that will be significantly higher. tips are pricing for growth in the longer-term to basically be very modest. in real terms, -1% on the 10 year is not pricing for a very healthy economy. tom: i got overnight reserves after a pause of the week, breaking out at 1.2 trillion. what is the so what?

>> it will fall a little bit today with the little spikes at the end of the month and a bigger one at the end of september because that quarter and is several times the effective month and. the so what is we don't need all this cash, we don't need all these reserves and it's one of the reasons why, one of the big reasons why the fed is going to reduce asset purchases. they basically did their job and stabilized the market by purchasing all these bonds and they have added all the cash and injected all the cash that was wanted and as you just noted we have an extra $1.2 trillion that the economy doesn't need and that is why it is being shipped back to the fed. no point at this time where we continue to ship things based on what was done in the past. jonathan: looking ahead to the fed to, september 20 second,

many people are giving chairman powell a pat on the back around the guidance on interest rates. the plot is going to be fascinating in september. that could really money the communication from the chairman. tom: i'm not really a fan. jonathan: i don't think the chairman is, either. tom: he's going to get a jobs report with hard and soft data and i sound like a broken record, but they are completely data dependent and massively exposed. it's going to go slow motion. i guess i can talk it up because i have been right on it so far. tom: you have been right -- jonathan: you have been right and people have different ideas on how policymakers will react, but those projections on the reaction function, so to speak, this is how we will respond to it and that will be the dot plot, lisa, and i think it could be messy. lisa: i would agree and you have

to look at where the balance of the risk is again when it starts to shift. jonathan: from new york city this morning, we are up 15 on the s&p. heard on radio, seen on tv, this is bloomberg.

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>> committed to fiscal 22, as you have seen it there is one configuration that is proved to be a crisis and its skincare. flex at some point or other we get a shock and the policymakers overreact. >> there will be a time when the fed becomes the major market driver again. >> 20 year history of the fed missing inflation targets. >> we are trying to balance out how transitory it is, how long will it take and which companies can navigate it? jonathan: good morning -- tom: good morning,