>> the amount of growth we have had coming out of this recovery. >> we are arguably the most expensive market in well over 100 years. >> the stock market will be higher than it is today but we are in a period where risk is high. >> monetary fiscal stimulus will start to wane. that is a 2022 story. >> inflation will be at 4% next year. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jon: from new york city, good morning, good morning. this is "bloomberg surveillance ." alongside tom keene and lisa abramowicz, i am jonathan ferro. going into saturday, sunday, monday, tuesday, wednesday, said

decision day. tom: stop at sunday. tottenham-chelsea is what i'm looking at. i will say tuesday, maybe the markets liven up. jon: and then straight onto november 3. 2/3 of economists surveyed expect that to be the time when the federal reserve makes that call. tom: before i get to andrew at a smart conversation, jon, is this about the lack of shift of service sector growth? is it about another thing? a third thing? a fourth thing? jon: all of the above. tom: imf the halfway line drowning. -- i am at the halfway line drowning. jon: people are pushing that to the back end of the year. that might give people a little more comfort to wait, just a bit more time. that is the view from a lot of people on the street.

tom: what about commodities? jon: crude, energy prices. what is happening in the u.k. right now? the winds stopped blowing. tom: that is idiosyncratic. what i am paying for fancy pickles. jon: i am with you. we turned the economy off, turned it back on, flushed it was a load of stimulus. i am not going to take a view because it is so polarizing right now. that is the expectation for people at a lot of central banks. tom: do you really see it with non-store retail sales? it is amazing how we have bund off the long-term line. jon: this quote from ups, it is worth remembering such data when reading sensational stories of supply chain disruption. this is not a world of

shortages, if goods were not getting through, retail sales would not be happening. lisa: some people talking about how we are seeing faster inflation, places like the united states, it is a direct correlation to the checks sent to individuals. the service sector rebound, i am wondering about the longer-term consequences of the delay. is this a recovery delayed, or interrupted? i don't know if we have that answer and i think the fed is leaning on that question to delay. jon: three options. one, you have the supply shortage on the labor side start to ease over time. workers come back. or two, you have to raise prices, wages go up. or three, that demand is time sensitive and that demand starts to erode. that will be the fear on people's radar going into next year. lisa: the idea that some of

these jobs are starting to evaporate. we are seeing restaurants shut down at limit hours because they do not have the staff. jon: equity futures down 11 on the s&p. we are down .25%. into the bond market, yields go nowhere. 1.34 on tens. euro dollar, 1.1780. lisa: is there a bit of disagreement among the inflation projections? i am watching the fda panel meeting throughout the day on the vaccine posters. this comes as andrew pekosz was talking your how does the booster discussion complicate those discussions? today is quadruple witching day for u.s. markets. there is a question about what this means.

for different types of derivative contracts. it is typically one of the high volume days. does it lead to an actual decline in markets? some people are suggesting this time, it does. the bearish overtone we have been hearing could bleed into markets. this might be the most important in point of the day, maybe not saying much. university of michigan survey coming out. the one year inflation expectations that recently had the highest mark since 2008, along with the five to 10 year inflation expectation, which speaks to how much buyers are -- consumers are buying the story being sold. jon: supply constraints wing on demand could potentially for big companies in america. we talked about nike being downgraded this week. our producer -- tom: hold on.

you have a private producer? jon: i have a producer for the open at 9:00 eastern live on bloombergtv. you don't have a producer? tom: no. i am nobody. jon: that could be a problem. are you alone in the studio? andrew slimmon joins us now. andrew, number one question in the equity market here, can we get a second run of those cyclicals? andrew s.: i think so. we are seeing the mirror image of the spring. everyone thought rates were going to 2%, the bond market rolled over, cyclicals rolled over. and then the economic data this summer validated that. we are seeing weak economic

data, but rates are starting to go up. i think the financial markets are telling the reverse of the spring, which is the acceleration of the fourth quarter. tom: help me out. i have seen more collective gloom in the last 6, 7, 8 days than i have seen in measures. where is the needle this morning? andrew s.: i am watching the bond market. i still say, last time i was on the show, i will be wrong is rates go back to 1%, but i am noticing yields are slowly creeping, creeping higher. energy prices are slowly creeping higher. that tells me that my fourth-quarter thesis is not wrong, but i will be wrong if this all rolls over. lisa: can we actually get any

economic signal from bond markets that are so distorted -- distorted is perhaps a fair word -- influenced by not only the united states, but overseas. andrew s.: no question. no question. look at where rates are. stocks should be higher on a valuation basis. i think the stock market gets the gig that the fed has been buying bonds and rates are artificially low. just to be clear, if rates go up, i am not so sure it is great for the s&p, which benefits from this low rate environment, given the fact it is full of these growth stocks. jon: you think we should get another run at the cyclicals. many people think, though, andrew, we need a catalyst, similar to the one we got last

november, when we got efficacy data for the vaccines. do we need that kind of catalyst to get the second run? andrew s.: i think you are going to see the economic data re-accelerate off of the third quarter, the view of analysts. i think you will get a very good earnings season. you were talking about supply constraints, but i was just at a conference and heard a lot of industrial companies said they were backlogged, or very strong into next year, and they are very confident about their earnings outlook. stronger economic data, stronger retail sales, maybe the covid variant comes down a little bit. you have the makings of a good fourth quarter. jon: such a good point. downgraded q3, upgrade to q4.

they are looking for a step up . tom: i am so glad you said this. there are 47 flavors of opinion. i am watching my corporations are doing. the pixie dost i am seeing -- the pixie dust i am seeing. jon: this rear acceleration into next year. is that what you are looking for? andrew s.: yes. the opportunity is not in the s&p, it is in all the stocks below the largest companies, and are off all their highs because they are cyclically exposed. jon: interesting. andrew, thank you. andrew slimmon. lisa, step up q3, q4. lisa: we have heard that from a

number of people. they have downgraded their expectations for q4. the retail sales number yesterday showed the willingness of american consumers to spend money, even if they cannot go out and spend on services. that supports the step up people are predicting. jon: bet against the u.s. consumer at your peril. tom: is it triple, quadruple witching? i have no idea. jon: what do you want to call it? tom: i have no idea. jon: quadruple. [laughter] -.25% on the s&p. from new york. this is bloomberg. ♪ ritika: i am ritika gupta.

a survey suggests the fed is moving toward scaling back. economists surveyed say a formal announcement will come in november. they predict the fed will hold interest rates near zero through 2022. china is trying to -- the quarter funding needs. china has injected cash into the financial system. the work at an enrichment facility is a sign. reports sandy enrichment plant has been expanded in recent weeks. it is the worst stretch a performance for the british retail sector in weeks. down .9% from july. that is due in part to every surgeons and coronavirus cases.

-- that is down in part to a surge in coronavirus cases. one claims to be making $500,000 a year. 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. i am ritika gupta. this is bloomberg. ♪

>> we still have a long way to go, but i am confident congress

will deliver to my desk the bipartisan infrastructure plan and the build back better plan i have proposed. i have said many times before, i believe we are at an inflection point in this country. jon: from new york city this morning, alongside tom keene and lisa abramowicz, i am jonathan ferro. futures, negative. -11 points with the s&p. yields going nowhere. a special good morning this morning, tom keene, to the ab ramowicz boys tuning and ahead of mom's birthday tomorrow. i hope you got mom a nice card, a nice present. she is in a really bad mood this morning. lisa: [laughter] jon: make sure you deliver tomorrow, boys. lisa was just brutal this morning.

tom: in the diagram of both children being well mannered. jon: they are very mild-mannered. they know the market. i took one of them, a member taking one of them onto radio a few years back. he was wonderful. i know a lot of you out there want rid of me one day. if i vacate this seat, there is someone in the running. i hear he might be bullish. lisa: [laughter] tom: emily wilkins is here with bloomberg government. i said what should we talk about? she said go to the 50 yard line for jon ferro. a gentleman from ohio state got injured in the nfl, picked up the pieces and went to stanford. he has done better than good. anthony gonzalez of ohio walks away. why did this wonderful person,

whatever your politics, why is he walking away from public service? emily: anthony gonzalez, when he was recruited to run, was a dream candidate. had the ivy league, the nfl. he was one of 10 republicans who voted to impeach former president donald trump and donald trump has not let him forget that. he has endorsed a challenger for him and his primary. the pressure is on. not only -- he broke this to the new york times last night, he said not only is he facing a difficult primary shouts, he is concerned about the future of the republican party. even if he was to win his election, he is worried about what kind of policies he will be a part of. tom: this is important. does the gop offend the gentleman from ohio state? emily: some republicans who have

backed congressman gonzales. there is a thing or if you support your own members, but there is a growing sentiment within the republican party that you have to pay attention to the wing of trump supporters and what they believe. there are a number of republicans who are keeping a close eye on their primaries. that is pushing the gop further to the right in terms of what they are supporting and saying. tom: lisa is scrupulous about corrections. we need to correct emily wilkins. ohio state is not part of the ivy league. >> thank you. there is an issue right now. i am glad you are talking about the 2022 election. we talk about the disagreements within the democratic party. lisa: how divided is the republican party? a lot of members want to try to

move forward. emily: the republican party is divided right now. it is hard to see those divisions. when you are in the minority party, you are against the majority. all of the republicans can coalesce around their dislike of president joe biden and the liberal socialists. it is easy right now for republicans to present a united front. but behind the scenes, and i think in solace -- i think gonzalez's retirement highlights this -- there is some concern over what the party will look like in a post--trump era. there is a question that republicans are really grappling with right now in terms of how much they try to cater to that part of the base that was energized by trump and how much they try to win back the more moderate republicans, traditional conservatives, independent voters who took one

look at president trump and what he said and what he did and said no thank you and support the democrats. lisa: i want to take a step back. it is philosophy friday. i am wondering whether this congress has moved beyond the dysfunctionality we saw pre-pandemic. there was a brief window where things got done. have we moved beyond that or do we see a new functionality for the need for infrastructure spending and the support a lot of people had for the previous spending bill? emily: you look at infrastructure and you have to give them credit. that is a bipartisan bill. if you look anywhere else other than the bipartisan infrastructure bill and it is the same partisanship we have seen. look at the debate on the debt ceiling. this is something democrats and republicans were able to come together on under president trump, but we have seen a number of republicans hold firm. mitch mcconnell had a discussion

with janet yellen. she was telling him he had to support the debt ceiling or the u.s. would not be able to make payments after october. mitch mcconnell is a firm "no." he said democrats need to take control. both parties to a certain extent know they must, they must raise it or find a way to extend it and republicans are holding firm. things are very partisan in d.c. we are only expecting to see that partisanship heat up the closer we get to the 2022 election. jon: thank you. the director of the national economic council under an american broadcast said the following, confident the debt ceiling will be dealt with. that is the line for the national economic council director. tom: another idea that is really important. i would love your thoughts. matthew on twitter has incredible insight that goes back to lawrence kudlow years

ago. all of the sudden, jon, we have to do legit nominal and real analysis with this new elevated inflation for the first time in ages, it really matters. jon: we go back to some work from a long, long time ago. tom: when was the last time we did this? jon: five years ago. i know a lot of studies have been done. for many, many people, it is nominal. maybe it is different right now. tom: the british own the high ground on this. the brutal depression that britain had, not only in the 1930's, but most of the 1920's. britain is hardwired on a nominal analysis.

that is where the phrase comes from. when you say you are having a beverage. jon: this was good. everyone has to work out what was real and what was not. tom: "bloomberg surveillance," we are at the 50 yard line of the show. jon: this is bloomberg. ♪

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jonathan: a relaxing morning so far. it is friday morning, from new york city alongside tom keene and lisa abramowicz. i am jonathan ferro. the next leg of the cyclical trade, morgan stanley wants to lean in, a re-celebration, something to think about. a step up in re-acceleration is something we need to talk about more on this program. this is a flavor of things on this friday morning. yields unchanged on tens.

we have gone nowhere on treasuries. 134 on tens today. the range of outcomes, wide, wide into next year. we have been talking about it. we started the week about job openings, sky high. three things could happen, the prior issues could exist, they could ease, or they could demand . that is the debate. if the range is that why come how predictable is fred -- fed policy through next week, and what difference does it make? we are talking about a couple of months, but let's finish on this, china, the dashboard so to speak right now. the chinese currency is just off the strongest levels it in the past three months. they are three's -- -- tom: the drawdown -- jonathan: all of this is going

on within economy that is decelerating, with the regularly -- greg the tory regime that is unpredictable. -- the regulatory regime that is unpredictable. if you are sitting here wondering about these matters, the chinese currency -- tom: it is a drawdown. jonathan: is that mandarin for drawdown? lisa: that is not anything. jonathan: how do we know whether that is true or not you say something like that? your whole career, joking about stuff, and then you come out that golden nugget and i don't know if it is real. tom: can i go home now? jonathan: you can. tom: romaine is going, why am i

here? romaine: i think you just summed up my whole opinion about this show times. it is a pretty quiet day right now. but everybody is talking about this story, invesco. who knows that this deal is going to get done or not? shares are finally higher on the day, not seeing much with regard to like rock. this is a threat that goes all the way back to trying on taking a stake in invesco last year. the consolidation is really the only way you would have a formidable competitor. a few other things, lucent motors actually higher here. up about 6%, and finally announced certification of its

vehicle the air. it does appear they are on track for a decent competitor in a luxury competitor to some of the tesla models. a delay in some of the video titles here, these shares lower by about 1%. this is setting up for the fifth straight day in declines. this is all based on exposure to the concerns about chinese regulations. tom: thank you so much. jonathan: focused on markets, that is what we like. tom: greg staples is with us.

i love your single sentence note where you talk about my worst word in finance, hope. whenever i see the word hope, i circle it, because it is money going down the drain and you are looking at the hoping of a correction, is it going to kill us? greg: you are right, the income managers have gotten -- [indiscernible] but a lot of them have not gotten the interest rate call, particulate during the second quarter. they got it right in the first quarter, but on the second quarter they were caught on the wrong side. my most fundamental models, the 10 year should be 20 basis points to maybe even 100 higher than it is today. but since march hasn't worked --

maybe next week, it could be the tapering announcement, but i think we are stuck in this. lisa: it is pretty boring this week in terms of markets moves. we have been talking about everything is just a marginal reaction to anything we get across the board. you see any change to that for the next few months, or do you think we will be in this sort of brownish -- range bound place? greg: the answer is no. this is the perfect time for this statement because things are so quiet. if you wait any longer he runs the possibility of getting into the budget debate. as far as the fed is concerned, they are taking great care to inoculate the market. our biggest concern is what is coming out of washington. you have covered it really well. we think this will be a bigger deal as you go deeper into

october. there are two camps within the republican democratic side as well and the contention could be a big deal. the debt ceiling is a big deal. lisa: that is what i was going to say, brian deese saying he is confident. greg: the path will be contentious. if you think we are going to be there, you got to tell us how we are going to get there. there is the continuing resolution which needs ten republican votes or you deal with reconciliation which means you have to race that that ceiling. that is terrible optics. i do not think the democrats are willing to go there. i don't know how to get there. tom: the common theme within this pandemic is a fixed income

market, and it is completely not in the textbooks -- [standby] -- and you look what happened as a result, the index of currency volatility is low any whether -- worry whether there is a coiled spring waiting to react good we are probably in world of low interest rates. this is come down over the last 10 years and there's no reason that it will not continue to be low. tom: how do you respond to

inflationistas? greg: i am not too worried. i think a lot of the nominal markets are not quite prepared, so you state short on duration and you do it on the short end particularly. you stay short duration for the belly of the curve. that is the best you can do right now. jonathan: thank you. i think you just told me that china -- trying to understand this market, when you're so heavily influenced by a price incentive, and when it is totally unpredictable what the data and the market will do come how do you make a call right now? it is so difficult. tom: none of this is in that theory. we take this stuff seriously.

we need to emphasize every day we are talking without theoretical foundations. jonathan: let's make it simple. cpi is running at 4.5% -- tom: or last guest said we would see quiet sit inflation. -- quiecent inflation. lisa: what is the tolerance of policymakers to higher yields, and i think you have asked this before, a lot of people are asking, do you just look at that tolerance level come how much would yields have to rise before they would have to be some sort of ripple to all of these assets that are hinged on rates remaining where they are, that determines were policymakers will want to keep things.

that really highlights why it almost does not matter where inflation is. jonathan: there is a belief that there is a stabilizer in the market, that this sellout that we could get to be self-limiting for everything you described. tom: he was interviewed here and he is still at 1%. that is lonely. jonathan: a lonely place. coming up shortly, a conversation from this morning, the vice chairman looking forward to this conversation. from new york city, for our audience worldwide, tom keene, lisa abramowicz and jonathan ferro. this is bloomberg. ♪ ♪

leigh-ann: speeding up -- ritika: speeding up efforts for greenhouse climate changes. the white house will unveil a new goal for reducing emotions. china is joining the asia pacific trade agreement. officials in berlin have warned that the kremlin stop cyberattacks that have intensified in the run-up to the election. the german election is seen as wide-open and moscow has repeatedly denied in meddling in elections.

ceo christian sewing told officials that deutsche bank does not share those views. meet the chinese alien air who is the world's biggest loser, the founder of this e-commerce platform. this year he has dropped by $27 billion and no one has lost more , the internet crackdown has led the american depository -- 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. ♪

>> our current view is that it will not begin to get better until at least and of the middle

part of next year, and it is still very fluid so we are not -- we do not have a high degree of confidence. jonathan: great to catch up with the cisco chairman and ceo on supply restraint. demand is decent over at cisco, the constraints set to persist. from new york city this morning, good morning, tom keene, lisette abramowitz and jonathan ferro. tom: i was in a fog yesterday. did you do that interview yesterday. jonathan: i did that. lisa did not show up. tom: you are on the nasdaq. >> absolutely. i found out yesterday that there is such a thing is that nasdaq 100 technology index. you take out a bunch more --

amazon kind of fits into the discretionary category. for the last five years, this tech index, which is equally weighted, has trailed the equal weighted version of the nasdaq 100, and this year it only got worse. the last three days you've seen the ratio between the x tech nasdaq, set record lows, that is just how much technology is dominating the market. if you look at the original nasdaq 100, 56 percent -- 56% of its weight is in stocks, and -- this is the industry classification, so this is one

way of looking at markets. tom: david, thank you so much. enda curran is with us right now in hong kong, and this is really serious. we talk about the creditors of people that own this garbage, lining up legal help. does the government just come in and quote, unquote, help? who helps? enda: that is the big question in terms of how are all of this goes. nobody is calling bankruptcy or total failure yet, but the same time, pain is expected to be inflicted. heading into next week, we have interest rate payment coming up that everybody will be looking towards, we have homeowners

lining up outside these offices looking for the payments, so there's a lot going on. it is all coming to a head and putting pressure on the government to resolve this, and people are wondering just how much pain will they allow before they step in and do some kind of restructuring. jonathan: a little bit more detail, if you can come the payment schedule, the timeline? enda: the big one is next week there will be interest rate claimants -- payments due. this may not happen, but that would certainly raise questions about what happens next. on the one hand we all know that the playbook is the authorities do not want eight major liquidity crisis.

there is a question of attacking moral hazard, the theme of this government, so there is a question over whether these payments next week, and what happens with the managing products. i think next week we will see where we are going, but as i said, there is a feeling that is coming to a head on how to reach resolution because this is weighing on the economy in a way that a broader crackdown could not. jonathan: was reading a story of years, just how much this debt is as a proportion of the overall high-yield market in china, just how big is this story? enda: on so many levels it is a big whale, in the credit markets, that you referred to, it has an outsider's role in the real estate market and real estate makes up about 30% of the

economy, so that is a key player. it is the most indebted property developers, so these are also year's figures and it will take a long time to work this out. the key thing to watch, is the inventory, there's about 1.3 million homes that they promise to build and sell, and if they have to or sale that inventory, it will deflate the prices of real estate for everybody, and that would be a big knock on world effect in a market where homeownership is seen as a touchtone. lisa: this was seeming to be the takeaway on this issue that that it is unlikely to see a catastrophic cascade of insolvency, however there was

this risk of a more protected slowdown in economic growth in china as a result of this affair. can you talk about that? enda: this goes to the moral hazard story. we have had a bad bank earlier this year, and we thought this could be a big credit event and the government restructured. that is what is going on again, the feeling that way to minute, they are looking at this at a time when the broader economy is slowing down. we know what is going on because of the covid story, but there is a big regulatory crackdown just starting, and then you have ev ergrande, and i think that is why people are saying it may not be a total failure, but how much pain will they enforce on

investors and how much will they push the moral hazard line? that is why there is this big question. it will hurt the real estate marker, and that will hurt the broader economy. they certainly do not want to -- jonathan: thank you. it great to catch up with you. enjoy your weekend. this scenario is an uncontrolled crash. this is the number i was looking for, 16% of outstanding notes. tom: thank you. i did not know that. those numbers are huge. for family members over there, there is no other issue in china

except for the empty real estate. jonathan: yields are unchanged, up almost a basement -- basis points. this is bloomberg. ♪

>> the amount of growth we have had coming out of the recovery has been accelerated. >> the stock market will and higher than it is today but we are in a time where -- >> the stimulus will start to wane, and that will be the 2022 story. >> this is "bloomberg surveillance." with john keene, jonathan ferro