>> the economy has pulled forward by several years. >> the indications are that we are seeing this re-engagement in the economy. >> expectations are not following, they are rising. >> you can actually pass those on to the consumer. . >> this is bloomberg surveillance with tom keene. tom: it is a new quarter coming

up. come up -- coming up a conversation on 2025. jonathan: we heard from deutsche bank earlier this morning. bank of america in the last hour denigrating european equities. these issues are so well talked about. why are they not well priced at this point? tom: we have had a preponderance of bull markets in the last couple of days and mike wilson has a different story. jonathan: are we starting to lean towards that tail risk that it becomes 20?

based on what we have seen through price alone over the last week? tom: lee said, of those 14 things, five or six are wrapped around washington with great uncertainty overnight. lisa: the possibility that we will not get any plan as gridlock and skews has been a potential tailwind to keep spending going at a time when people are getting concerned about the way sherry pressures. that is eating into consumer jonathan: sentiment. jonathan:-- that is eating into consumer sentiment. jonathan: we are up 16 after the smallest of quarterly gains. the biggest monthly loss since march 2020, we are down 20.

-- tom: let me -- give me some love here. a nominal 10 year. jonathan: let's get to five quickly. your five year yield is just south of 1%. that is where the conversation will be going into the new year. tom: the real yield negative 8.9%. we believe mike wilson will not be on the real yield this afternoon. joining us now, mike wilson of morgan stanley. we have had a whole stretch of insulation. would you say this is a nuance within able market wrapped around a income, commodities,

etc. or are we at a point of a major change in the vectors to 2025? >> we have had that view for a while. this was the catalyst to move us out of the world we have been in for 20 years. a lot those things were happening the pandemic. d globalization, that train had already left the station. pandemics are typically inflationary so that was the perfect foil to get the transition and it has begun. normally it happens when you see big trends changing. that is what we have seen in all the inflation indicators. my best guess is that it will settle down. it will be a long journey ahead.

it will take us 35 years. it will be a slow moving train. by the dip -- buy the dips on inflation. jonathan: are you saying it could drift towards that upper level, a 20% move? mike: last time we chatted about this it was prior to the situation in china. what happened here is we got more data. the idea we are not only getting tightening conditions from the fed but we are also getting a greater slowdown than is expected now. we are seeing in the earnings numbers issues and constraints

but there was also this payback and demand. i do not think they appreciate how much payback and demand there will be in these areas we have overcome to. the bottom line for us is the risk has increased. we are clearly moving that way. jonathan: whatjonathan: we have seen has been so clearly flagged but so poorly priced. why is that? mike: we talked about this too. it has been a rolling direction since march. the market has moved aggressively towards high-quality large-cap in particular. what the market is saying is we are taking shelter. the market has to own something.

they will move to the highest parts of the land away from the flood. that is where the high-quality stocks are. when you get to the moment of truth, which is now when their earnings start to get cut and the fed moves to tighten, then hi shelter areas are not protected. it is playing out to a t. generally speaking we are right on schedule. lisa: the rolling correction since march has left a lot of big stocks like big tech stocks down substantially. if we get a full 12% correction here, -- mike: though stocks benefited tremendously from march until recently so they had a huge move up.

now they are going to have their comeuppance. they may not even go back to where they were march. they will have to go down in the major indices. they will have 10% to 20% correction and they should. several of those companies are vulnerable to this payback and demand. lisa: what is the driver? will it be a yield story or is there going to be an earnings component as well? mike: the fire is tightening conditions and then you get ice in the background. it is normal. what normally happens is earnings continue to go up but because the amplitude of this was so dramatic you have to

assume that the midcycle transition deceleration will be more than average. there would -- tom: are we finally at a point where we have been so wrong that single digit 10 year spx, can you tell your team at morgan stanley to single-digit -- the single-digit equity return world is finally upon us? mike: it is easier to predict stock returns over a seven year. -- over a seven year perio then over ad -- your actual returns over a seven-year -- stock returns over a seven year period than

over a one year period. this is not a big goal by the way. that is what it is. that is the world we are in. a lower returns. jonathan: it is great to catch up as always. mike wilson of morgan stanley, chief u.s. equity strategist and cio. tom: this is what it is about. we got on the journey of limburg surveillance. it is about -- bloomberg surveillance. jonathan: that rolling correction through this equity markets started in march.

lisa: that is the most interesting part. the fact that mike wilson was talking about tech having our selloff because of fire -- more selloff because of fire and ice components is a fascinating outlook. tom: it is called a game of thrones a strategy. did you notice how on lisa's journey this tree is joining lisa's journey -- street is joining lisa's journey? [laughter] lisa: it will all be fine. jonathan: i know it is. tom: --

jonathan: equity futures up a third of 1%. this is bloomberg. ♪ >> house democrats went home last night without voting on that infrastructure bill. nancy pelosi will try again today. she is being held up by a fight between moderate and progressive democrat. they will not vote until the spending bill passes both houses of congress. they are planning a stopgap funding bill that maintains funding levels until november -- december 3. janet yellen has said that if congress does not raise the debts dealing the government may not be able to pay its bills. european natural gas prices

climbed to a record 100 euros. europe is struggling to find enough: gas. -- enough coal and gas. according to an interim analysis of a late stage trial, -- another hurdle for the global economy. a metal used in everything from car parts to phone chips is scarce. global news, 24 hours a day, i am ritika gupta. this is bloomberg.

>> you have acted to make our banking system laissez and that -- less safe, and that makes

you a dangerous man to head up the fed. >> you are thoughtful, deliberate and transparent, the antithesis of dangerous. >> our country will be better off with your leadership. jonathan: a dangerous man the quote of the week! good morning. tom keene, lisa abramowicz and jonathan ferro. we are pushing 150 again. at 100 49.44, we enter a dangerous -- 149.44, we enter a dangerous period in washington

dc. tom: what you call it " relative gloom," jon? lisa: relative gloom -- i like that. tom: house democrats our caucusing at 10:00 a.m.. what is a caucus? do they meet at starbucks? >> we are good at caucus here and by that i mean talking to each other -- at each other rather than to each other. tom: physically what do they do at a caucus? is it a zoom call? isaac it is an opportunity for

members to share their thoughts and opinions -- isaac: it is an opportunity for members to share their thoughts and opinions. lisa: trust falls and kumbayas. isaac: we saw some engagement and some clarity yesterday. we have the major stakeholders friend both ins -- ends of pennsylvania avenue talking. we had some clarity. everyone knew that $3.5 trillion for the social infrastructure program was not going to happen. we now know that senator manchin is pivotal in all of this. his top line is $1.5 billion.

speaker pelosi's offer would be $1.2 trillion. lisa: the problem with the topline numbers we are talking about is that it would seem highly unlikely the progressive wing well caved to that given some of the rhetoric. are we further along in the that gridlock is more pervasive and longer-term? isaac: that is a fear within the democratic caucus. i am of the view that things seem impossible right up until they are inevitable. speaker pelosi will be able to marshal her overall caucus to a yield. i think democrats are -- a final deal.

this is a moment where they have the pen and they capacity and ultimately something is better than nothing. tom: do liberals caucus different pandemic -- than moderates? lisa: i don't know -- isaac: i haven't been! lisa: as we head -- isaac: the way i describe it to clients, congress is going down the road. they avoided a government shutdown, but they have been texting while driving in multiple text groups. what scares me is that mack truck known as the did limit a

quarter mile down the road drifting into their lane 0 -- debt limit a quarter mile down the road drifting into their lane. it seems there is actual progress on the infrastructure deal, by that i mean getting a topline everyone can agree on. then we have to focus on the debt ceiling. ultimately it will be up to democrats to move alone. tom: what does bernie sanders do with $1.5 trillion? isaac: what will begin as a process of cutting and clipping. we can already see some of these priorities following to the wayside. in the two point one dollars tele and offered that the speaker put forward there were -- $2.1 trillion offer that the

speaker put forward there were some things missing. that is the cutting. on the clipping, things like making the child tax credit permanent, instead of making it permanent, you could extend it for a year or two, then dared the next congress not to reauthorize it. jonathan: love catching up with you. really great to see you with the team at btig. tom, a choppy path ahead this morning for sure. tom: i don't get it. i have no idea how the liberals rationalize cutting and clipping whatever. jonathan: this is a little more

efficient. tom: three of us in london, now that we can fly? we can go when you can go! jonathan: i can go and i can fly back direct. fly straight in, fly straight back. the only reason you want to go to london or is there another reason? tom: lisa can bring the kids. jonathan: i'm not sure lisa wants to bring the kids. tom: can i just say, it is the 40th anniversary of limburg and i need -- bloomberg, and i need to say good morning. [laughter] tom: that is how i learned about

the bloomberg terminal. jonathan: congratulations to mike and everyone involved. from new york,, this is bloomberg. ♪

jonathan: live from new york city for our audience worldwide, kicking off q4. bond market yields are up. mike mckee joins us now. mike: it looks like we are doing a little better than we anticipated. the spending numbers have come up eight -- incomes come in at 2/10. here is an interesting. the revision in terms of

spending numbers he thought it was 3/10. it was revised to negatives 1/10. since this is all in the third order it brings down the spending level or the third order. th -- third quarter. the core is up 3/10 and it is up 3.6% on the year, which is much the same that we had then month before in july. at this point inflation, still rising. incomes, rising. we are not seeing government transfer payments but we are seeing wages rise. they equaled themselves out in

the month of august. spending goes up in august, may be the back-to-school stuff, but the overall inflation rate continues to rise. jonathan: into the bond market with yields up about eight aces point 21 41.61 -- basis points to 141.61. >> we saw european pmi come in a little weaker but still strong. it looks like we are running flat-out but there may be constraints because of supply chains. we will see if that comes up in the u.s. as well tom:. -- the u.s. as well. tom: the journey of gloom we

have been on this morning into q4, less gloomy this morning su isse. -- this morning thanks to credit suisse. >> a lot of weakness was due to idiosyncratic factors supply-side situation, though we may be short on ships relative to where we went be relatively

for the next 18 months, production cannot happen. production is going to be really fast. this just happens to be a -- we have had a global trough in the growth rate and it will be rebounding in the second half of the year even though some of the troubles and worries about china and -- are degrading. >> you have shown me a great

optimism. you are a glass half-full guide. push back against the bloom we have heard this morning. >> the pandemic has done strange things. one strange thing is pmi has been much less correlated with industrial activity than they have been. we have real data on manufacturing in that country and basically the real data and surveys have not been correlated. actual production has been weak but it will be re-accelerating from here. demand is strong, inventory is low. we are worried about further covid. we are worried about china, but we should do better than we did in late q2. >> we are confusing that pace of

the journey with the director of travel. >> it is so good to have james with us. >> weighing on that, that word stagflation that is getting thrown around. >> the narratives and fears, everyone is panicking now and telling doom and gloom stories. we are going up. inventories are low, demand is good, social distancing is being reduced globally. employment will ground. as pressure on some of

these goods pricing shocks we have had. almost all of these are different from after a recession dynamics. the pandemic is weird. it is a different type of event. we have to be cautious about jumping to conclusions. >> it is a word being used. people are throwing it around. it is being used in the wrong way. >> you get some data surprises momentarily and you can have big market moves.

markets diverge from reality meaningfully. gdp is growing decently in the u.s. and liberally now. it is expected to do that for the foreseeable future. we are not at a level of activity we are happy with yet. industrial activity, you are sort of their. in goods consumption, you are beyond their, probably coming

down. you are coming up because we have to end this pandemic. when you add all that messy stuff up, you have the growth ahead and you are going to return to a proper level of employment. i do not see the contraction in that. >> this goes back to the point of trying to compare for example -- but not necessarily potentially catastrophic. >> -- >> you will have less inflation in manufactured goods in the next couple of years then we have now. it will be gradually falling on the surface.

all of that is probably consistent. is this something that everyday people need to worry about? not really a shed be happening while we are in this bigger recovery. hope lee the delta variant goes away, social distancing comes off and we have a normalization of economic activity. it is a little bit difficult to explain right now. >> thank you so much. sweeney has got to be on like every third day. >> i agree. i do not know if james want to do that.

>> i think it is important what james sweeney talks about, the stagflation comfortable -- >> that word has been thrown around so much. do you think the fed needs to step in here with a communication effort and backed that one away? >> no. the fed is struggling to communicate that tapering does not necessarily mean hikes. that is the main challenge. the stagflation worry will become less concerning when global productivity is reaccelerating. >> let's catch up soon. james sweeney, -- some of the dynamics playing out now are not good. they are clearly not good.

we have great demand and we cannot meet it with supply. >> the boats outside new york city -- he is 97 years old today . anyone can have their thoughts on jimmy carter the president, but this is a guy who nailed it in college. he went to the naval academy and was selected in 1946 to invent the nuclear submarine program. this photo from the navy archives, that is jimmy carter in the back, a shockingly young james carter. he is 97 years old. can you imagine being alive in 1903? >> tom keene, lisa -- that was

in the back end of august. you missed it. have a happy birthday for something that happened -- in new york city, this is bloomberg. >> house speaker nancy pelosi will try again today to get a vote on that infrastructure bill that is yang held up by progressive democrats over president biden's economic agenda. if the house and senate do not vote first -- one out of four companies have imposed vaccine mandates. another 13% plan to put a mandate in place. that is after president biden's directive requiring large to vaccinate their employees. bank of america warns the energy crisis -- that could lead to an economic

crisis. the price spikec crisis. the price spike

♪ >> we are working with our supply partners to gradually improve the situation.

what the big chip makers are saying are the constraints will be with us throughout the year of 2022 but we are hoping on a better level than what we have experienced this year. tom: the engineering under the hood at mercedes-benz -- this is a joy and it is a particular joy as luber today recalibrated our iphone sales guesstimate -- bloomberg today recalibrated our iphone sales guesstimates. sales are booming. some would say that steve jobs learned it all from dyson. he is the dyson owner and head

engineer. when you see this excess of what jobs did with his aesthetic, what do you think of the iphone is equivalent to your engineering ability? >> one is a phone, almost a piece of jewelry and hours a miss -- ours is a machine. ours is a tool that you use. rather than a piece of jewelry. tom: the original machine was a wheelbarrow that broke every rule. dyson was on the edge of spherical geometry. when you figured out the ball

barrow, how much did you -- >> will -- wheel barrows tend to be used on soft ground. i used this ball wheel. it was in -- i did a dumper truck shaped been. i've rethought a wheelbarrow from the ground up as it were. it was a simple product and we got 50% market share with it so it did quite well. lisa: you wrote this book at eight noma meant in the labor economy on the precipice of the technological revolution. what would you say going forward is that challenge to the next

dyson vacuum cleaner or the iphone? how do you start that innovation? >> i think we should encourage more young people to become engineers and scientists. we are talking about the problems that exist at the moment. it is engineers and scientists to consult these problems. the young are passionate about these issues. finding a different form of plastic, engineers can solve this. historically very few of us have wanted to become engineers and scientists partly because it is hard but also because somehow it is never seen as glamorous, as something that interests people.

greta thunberg has made it an interesting subject. lisa: where in the world are engineers being supported from an early age? i think about this as we talk increasingly about the tech wars between the u.s. and china. >> a vast number of engineers are being produced in china and india. one city in indiana produces 40,000 engineers a year, which is more than we produce in the whole of great britain. on a wholedepedtrare worse than producing engineers and scientists then developing countries. in the united states, -- we have to do something. we have been working in schools in chicago and england over a number of years and we try to

improve science and technology teaching in schools, bringing real products into schools and encouraging children to solve problems. tom: please give us an update on brexit. last time i talk to you you were up on a soapbox saying let's go england let's separate. give us a dyson update on the success of brexit. >> you have to give it a chance. we cannot get rid of red tape, european standards and all that overnight. that will happen with time. a good example of the success of brexit is the development of the astrazeneca brexit -- astrazeneca vaccine. that is a good example of britain going on it's own, living by its wits and doing

things independently. we signed a lot of trade deals around the world and i see ed as a psychological change more than anything else. -- it as a psychological change more than anything else. trade is not really the issue. it is a psychological issue and an issue of sovereignty. sovereignty is the greatest issue i think. tom: we are going to have to leave it. >> the united states would not want to be subservient to canadian law for example. tom: it is about engineering. i take the linkage here between what steve jobs did and what james dyson did.

lisa: people are looking for a surgeon productivity. what is the next apple? tom: we have a headline we must to touch on. this is the supreme court where we have a covid issue. lisa: justice kavanaugh has tested positive for covid-19. this highlights -- do you test people who are vaccinated? this goes to the vagaries of science in terms of transmission . we are finding out that justice kavanaugh has tested positive. monday the u.s. supreme court opens with the first arguments. there is a question of whether this may hamper it. tom: brett kavanaugh, age 56 with covid. we had a real reversal in the

market. please stay with us through the morning. this is bloomberg. good morning. ♪

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♪ >> good morning.

we advanced a quarter of 1%. the countdown to the open start right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: we begin with the big issue. mcwhorter, same issue. -- same issue. >> the trajectory of growth. >> growing anxiety. >> historically, september, october and november have been volatile months. >> the story is the same. >>