♪ >> what we are seeing this quarter is the consumer is pushing back and saying you can't raise prices. >> inflation is high, not going to be back to 2% anytime soon. >> the overwhelming urge to fight inflation can create volatility. >> the risk is they raise more

than you see price in. >> still some possibility of a recession by the end of 2023 by 30%. >> this is "bloomberg surveillance," with tom keene, and lisa abramowicz. jonathan: live from new york city, good morning. this is "berg surveillance." alongside tom keene and lisa abramowicz, on the nasdaq we are down 1%. we are off session lows. tom: it continues on air and it is a massive recalibration across what we do economics, finance, and investment. the chitchat as we had with claudia sahm will start with economics. what does any central bank do given the cards dealt? jonathan: chairman powell says keep on hiking and i imagine there's a relationship with the market.

which a bank is saying we are at the recession crossroads for this -- deutsche bank is saying we are at the recession crossroads for this economy. tom: i sound like a broken record, if that is the thing that spins around and you put a needle on it. the bond market is leaning away, real carnage, and i'm sorry, the central banks in some way face -- save -- face-saving form. what is important here as they are going to adjust and adapt. jonathan: that's what you think but in this market they are worried that the fed won't. lisa, exacerbating the trends yesterday the retail numbers. from amazon to target to walmart and now kohl's. lisa: kohl's coming out with

their expectation of a much lower multiple coming out. full-year adjusted eps $6.85 from the seven dollars or seven dollars 50 cents that they expected, and shares coming in low, $.11 versus the estimate of $.71. how much of a repeat visit of what we saw in walmart and target? shares tank more than 6% premarket. how much are we looking at consumers pushing back, not buying goods because of the higher prices as they transfer their money to other areas and ceos have not prepared? jonathan: down 11% yesterday, another 6%, really got hammered. finding the balance in the c-suite is something we are struggling to do. going from this positive demand shock, they tried to wrap up capacity and get the supply and

buildout inventory and they arrive in 2022 different moment. lisa: this is about margin compression. the revenues, nominal sales are coming in strong. this speaks to the point tom was saying, there is more money in the system and people are spending it. the first quarter was above consensus at 307 -- that was expected. this really speaks to the costs they have to manage, how do they manage those and how does it bleed into sentiment jonathan:. what a moment to be a ceo. tom: i think everybody is gauging this is the way it will work and it always works this way. late summer, autumn planning into 2023 codified on wall street in a february bonus. other corporations are different . all of that with a vengeance will be pulled forward into june. jonathan: the price action, down

1% on the s&p. on the nasdaq 100, down more than one full percentage point. dale writes in, you would have been proud of my kid. the dow jones lunges, no one cares about the dow jones. that from a 12-year-old listening to bloomberg. lisa: i love that they are giving you pep talks. it is a life that some of us do have as well. retail earnings front and center. kohl's and target carnage yesterday, down 25%. the biggest drop is those shares going back to 1987. walmart with a similar trend day before. how much is this a story of margins? on a nominal basis people are spending more money because things cost more but that does not translate into profit and how do they spare that given they are paying so much for labor, materials, and compensated for a disruption in

what people are buying at a pace we've never seen before? economic data includes u.s. jobless claims and home sales. i am watching potential job cuts because this speaks to how different companies are rightsizing. how about the builders? housing frankly has started to show signs of being a little bit nervous in the face of interest rates that are so high, mortgage rates that are so high. you are seeing the potential rollover in a number of construction workers could portend for weakness in the u.s. economy. president biden is focusing on alliances, sweden and finland's heads coming to the white house to make a bid for nato. i am sure turkey will be a big discussion. and then president biden heading to asia for the indo pacific economic framework. we are talking about one geopolitical crisis to another.

how do you account for disruption in taiwan as china comes out and says what the u.s. is doing in terms of rhetoric is getting dangerous? jonathan: i can't even get there. lisa: i know. jonathan: so hard to focus on an additional thing. lisa: exactly right. tom: the only one on the planet that will care is annmarie hordern and what does she know? jonathan: we will catch up with her later. lori heinel joins us now. you've got that big cash position. what are you waiting for to deploy it? lori: first of all, there's a lot of uncertainty so i would say the biggest theme around our portfolio is less about the directional trade and more about the relative value. we've been trading around different markets, deploying capital into the u.s. which we thought was a safe haven relative to other regions but also looking at places like commodities and gold. and as you say, holding a 5%

cash position. tom: you the perfect one to talk about right now -- and this is the esteemed chairman of bloomberg telling me in times of stress you see transactions in combinations. kohl's is flat on their back. they have just announced within all the troubles over decades, board thoroughly testing standalone strategic plan. will we see one big roll up of american finance and corporations out of these risks and challenges? lori: every situation is idiosyncratic and what's striking about the consumer side is we've known for a while consumers are likely to move from goods oriented purchases to service oriented purchases. while we've had the news out on retail franchises, the other side is airlines and service providers seeing very good demand and actually have pricing power.

it is not just the one-size-fits-all. there will be idiosyncratic behavior. companies that can think about their exposure and how to hedge those where they do have pricing flexibility or power will survive. tom: i can't emphasize enough the need to see one sizes wrong. target, 450,000 employees, kohl's 35,000. yet people like to compare the two. they are completely different including the 10 year return. target gets it, kohl's has been a disaster. lisa: they are responding to the same macro economic backdrop. when you take a look at this multifaceted backdrop that is not just one narrative, what gives you conviction that the market is ripe, that the fed will blink before it raises rates to restrictive territory which seems to be the zeitgeist in markets? lori: what we've been talking

about is on one hand we still have inflation, which we could argue whether we will keep inflation or not. we all know eventually that wears itself out. that is happening at the same time that growth from a macro standpoint is slowing. this delicate balancing act is that the fed has to navigate and everyone is afraid they will get it wrong and chances are they will. we are a little bit more dovish in terms of what we think the fed will do and if they move in the summer and do take a bit of a pause, there's a chance we come out of this without a recession. jonathan: lori heinel with state street global advisors. that is the consensus on the street, you can push back, agree or disagree, but that is the consensus. near term will be messy but long-term we get a rally. many believe we get to the end of the summer, the fed reassesses and takes a step back. tom: it is a 32.27.

there is a lot of agony. maybe things get worse and we get up to 38 or 40 vix. my point is institutions adapt. these corporations just like kohl's which has been a 20 year train wreck, kohl's will attract and adjust to what they've been handed. jonathan: when things like this happen and we go back to the work of soros, markets can shape to anticipate. some of this can become self-fulfilling. tom: no question about that. bill gross was good about that over different cycles. you do get a securities nature and you have to be aware. -- circuitous nature and you have to be aware. bonds are down like we've never seen this and spreads are well contained. jonathan: just about to break

the account, where are we, pushing 500? lisa: the highest levels going back to may 2020 in the high-yield space. how much is this getting people's attention? not much but this is perhaps what the fed will blink out -- at. jonathan: futures down 1.2% on the s&p, on the nasdaq a little more. ♪ ritika: keeping you up-to-date with news from around the world, china's top diplomat has warned the u.s. about increasing support for taiwan in a so-called national security advisor -- u.s. is going down the wrong load and that could lead to a dangerous situation. but top american naval officer said taiwan must prepare itself against chinese aggression through military -- beijing is strengthening energy ties with moscow just as europe heads

towards banning imports. china wants to replenish its strategic oil with cheap crude from russia. the world's richest -- saw his -- tesla falls to the lowest levels this year, knocking elon musk down. cute launching -- launching his bid for twitter, part of that has to do with the wider selloff. president biden has invoked emergency powers on the defense production act to boost production of baby formula and ordered that government pays for imports. it has emerged as the latest crisis for the white house and has been months in the making. it could ease soon. 7.8 billion dollar hedge fund

melvin capital management, more than a year ago it was grievously injured with gamestop. it never recovered. global news 24 hours a day, on air and bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪ at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect. so you can enjoy more of...this. girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast. i know some consultants with great ideas. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech like robotics and ai. that could really help us manage inventory. and boost our sales. and save us a ton of dough.

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♪ >> we feel responsible for the capability of the state and its people to defend themselves. we see a number of -- which are

needed for the foreseeable future in the next months. jonathan: the europeans are in a tough spot. that is the german finance minister. this is "bloomberg surveillance." the negative follow-through on the equity market, the s&p down by more than 1%, the nasdaq down 1.2. there is the move on crude, $107.65, down about 1.8%. tom: brent is fractionally pennies above where west texas intermediate is but it has its own gyration and we are focused on the distillate market which is when you -- what you do when the oil goes through. marc champion and jack fitzpatrick join us. i was rude and spent way too much with fitzpatrick the last time.

i think the grinding news of the war in the american press shows a new phase. do you agree with that, there's a new phase to this war or are we just getting more exhaustion? marc: no, i think it is right and it's a little different from several phases already. those changed as a matter of choice on largely the russians so you have the first phases with the initial invasion that was going to be quick and all that. clearly didn't work. then they started a new strategy . that didn't work so then they pulled back from kyiv and focused on the donuts reason -- donnette scott -- you can still call it a new phase in the sense that it is pretty clear that we are in for a war of attrition that will take a long time, months or years rather than weeks.

if that's the case, it changes calculations for everybody about sanctions, weapons, training, reserves. lisa: and also fiscal spending. we are hearing about the potential alliance between european allies for fiscal spending to ukraine to rebuild and also on military. how much has this been ending the austerity of europe and a move to greater fiscal spending that could come in the near term? marc: we are talking about quite significant numbers. collectively, europe has deep pockets but they are a significant number. we are into this for quite a long time and it's not only about the reconstruction of ukraine when it's over. it's about how you keep the country moving while the war continues because it has to have a functioning economy, has to

have infrastructure, work. all of that has to be done. it is quite significant. lisa: there's a lot going on obviously in this war -- and this war in ukraine exacerbates issues about inflation which is dominating the headlines in the united states and the political landscape. how much is this administration focused and how much is it choose your own adventure facing -- based on the day? jack: lacking a narrative i think is a fair critique and responding to one crisis after another, if you want to try to criticize the white house's messaging, fair enough. some of it may be just very bad luck. that's a significant issue. you see it with democrats in congress too mentioning the inflation concerns, a piecemeal approach to trying to show the american public they are taking

action in any way they can. some of it is a bit clumsy. democratic pushback even to the democrats' bill on price gouging and the attempt to shift people's focus on price gouging or corporate greed as seven democrats are putting it. but the struggles are real to try to focus the attention where they want it to go rather than playing whack-a-mole trying to respond to daily crises. tom: for our international audience, summarize the election of two days ago. how did the center of both parties do? jack: the center as traditionally described for the democrats did not do well. john fetterman in the pennsylvania primary is seen as the progressives pick and won over connor lam, the moderate house member who had impressively won a house eat and slipped it.

fetterman won by more than 30%, big win for the progressives. on the republican side, we will probably end up seeing a recount that it is a very narrow lead for former president trump's pick in mehmet oz. you could say he is essentially the establishment pick if former president trump is the establishment but that is tough to say how that will pan out. jonathan: jeff fitzpatrick -- jack fitzpatrick and marc champion. futures off the lows, still down 1% on the s&p and nasdaq 500 -- s&p 500 and nasdaq. less bullish -- the china headwinds are hard to ignore, still bullish but lowers the price target from 1400 to 1000. the success of the china story on the supply and demand side

are linchpins to our long-term basis in investment. the current shanghai lockdowns have been an epic disaster. tom: bring up the board again. we are looking at 696.53. i am looking at a 15 day chart of musk, also known as tesla. this guy is in some real trouble. i don't know the details and i don't get it. jonathan: you have joined the dots between what is happening here and what isn't happening with twitter. that's your view? tom: just page it -- basic margin call dynamics and there is always stuff you don't know. i'm just looking at a stock from 1100 down to 709. when you are doing margin and debt, bad things happen. jonathan: this is a big move from early april down about 37%

from the highs. lisa: some might say this was partly due to the shift in sentiment against some of the darlings of the pandemic era. others would say it is the flight of retail investors though we've not seen full capitulation. a loose cannon in the c-suite seems to be dealing with certain disruptions in china and beyond and how do you do that without some sort of focus and predictability? jonathan: just looking at the bloomberg chart, we are down more than 40%. there are so many other names. tom: fair. jonathan: brutal beat down in this equity market. from new york city with tom keene, lisa abramowicz, and jonathan ferro, this is "bloomberg surveillance." ♪

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jonathan: live in new york city, good morning to you all. here is the good news. we are off session lows. here's the bad news. some follow-through from an ugly session yesterday.

big chatter over at deutsche bank -- binky chadha over at deutsche bank does not think it is over yet. he thinks the downside is 3650 in the near term on the s&p, and then we recover. we've been hearing this on wall street, a near-term price target, more downside, long time, a relief rally. if this belief perceived by the federal reserve as an unwarranted loosening the financial conditions and something they should push back against? that is the complete opposite of the last 10 years, a real regime shift for this equity market. tom: we are rationalizing the moment and we are comfortable and used to doing that in equities. we need to rationalize the bond market as well. i don't really see that going on. jonathan: the relationship come the traditional one between

stocks and bonds, is back for now at least. we can talk about that right now with equities lower in the bond market doing this. yields lower too. so that inverse relationship is decent at the moment. on the 10 year, 2.83%. two mondays ago, 3.20%. tom: if you triangulate it to the vix, 39.91 right now, that is stressful. what if you pop a 38 or 40? jonathan: what do you do with equities start to rally again? if equities start to rally, do you get a move higher at the front end on the two-year? do you get a move higher in treasury yields because people believe the federal reserve has to come in and do more? tom: now you've put the politics into it. how does the fed link against the slowing nominal gdp and slowing real gdp? jonathan: that is what needs to

break. tom: and that will be there relationship that will break of this mathiness we are talking about. jonathan: it just isn't right now, which is why we keep hearing the same thing. three-month price target, 12 month price target. near-term bearish, long-term bullish. tom: who's doing stocks? jonathan: bramo is going to do that. she's going to do something will names. would you like to do that now? this is one of my favorite diva limits in this program. i get to go cross asset and lisa has some single names without a bearish tilt, obviously. [laughter] everything is negative. lisa: what else is going on? if i am to negativeo we will have -- if i am too negative, we will have tom come up here. you were talking about the

broader picture. how much do these specific names color what we are seeing? target shares down 0.9% after yesterday's absolute carnage, down 25%, the worst day for the stock owned back to 1987. you've been picking up on the scum of the dollar tree stores and some of the other discounters that cater to the lower income tiers, down 1.2 percent. it is incredible how much these were penalized. i wonder if this is going to be the epicenter of what we see going forward. jonathan: things are super tough. the margin story for some of these names come of the fact that they can't find the right balance. what i have struggled with is trying to understand whether the c-suite has just gotten wrongfooted in the last 18 months or whether there is something we should be really concerned about right now. are the airlines telling you the same thing that target is telling you right now? i would say no, the airlines are telling you consumer demand is

decent. everyone wants to travel. prices are up. is this a change in the price makes come the product mix, or a change in the consumer? lisa: or is it a confluence of a lot of things. kohl's is a very specific story. i know tom has gotten into that about the management. shares down more than 5% after it really was another margin story. revenues came in better than people expected, but the profits not so much, and this has been a huge issue. there's a second screen. i whipped through this really quickly. this is where the other toxic route comes into play. the supply-chain disruptions in china. cisco last night came out and basically said any sales growth would be wiped out in the first quarter not because of demand. it was because of what is going on with china and the lockdowns there. cisco shares down nearly 12% ahead of the open after really

reporting this. this is not demand driven. this is a supply chide -- a supply-side constraint. zoom down 114% ahead of the open. amazon continuing its downward slide after a huge selloff. tom: you killed that. it was the pendulum of toxic brew that i heard. jonathan: only lisa abramowicz could come up with a pendulum of toxic brew. [laughter] tom: pro tip. this is really important. it is a little more complicated than yield up, price down. lisa: thank you, tom. crushing it. jonathan: are you trying to say stocks are more complicated than bonds? tom: i think if you look at a five ratio dupont series, yeah, there are some complexities there. it is just a different kind of

mathematical dynamic than what you see in the fixed income. would you like jonathan: -- jonathan: would you like to explain that to our next guest? tom: let's go to collin martin, fixed income strategist for charles schwab financial research. they look at their bond portfolio monthly. they are going to look at the computer screen and go, what happened? how do they claw their way back with yield up, price down big time? collin: we do think it is going to be difficult for them to claw their way back, but you are right, that is the most common question we are getting. it is not just the shock of seeing the price declines. it is what do we do now. the unfortunate news we have to break to them is that we don't necessarily see a rebound in their bond mutual funds because a lot of our clients are likely holding etf's and mutual funds. something you all touched on before in terms of how much lower can yields go if we get a risk off environment, we just

don't see that much room to go lower with inflation so high in the fed likely to hike aggressively. so unfortunately we can't undo the past and the core performance we have seen this year, but the good news is that we see a lot of opportunities out there, especially with higher quality investments. with yields up from treasuries and high-quality corporate and munis, we are at yields you have not seen in years. the highest of the post financial crisis era. it does not undo what we have seen. it is not going to make the value of your bond funds suddenly get back up to the level they were at the start of the year. but we do think it is an opportunity for investors who had been waiting for hide yields to put some of their funds to work. lisa: so where is the pain trade? especially as we look at inflation that does not show signs of slowing and a fed that is very concerned about this, at a time when you have a complete reset of the global inflation trends that lowered inflation for so long. what is the pain trade are people who say that bonds

provide income when on a real level, they are still not? collin: it is very difficult. when you talk about a real level, that is the question we get. if you look at a 10-year treasury yield below 3% when inflation is at 8%, a real yield of -5% is not very attractive. we think that tips are one way to address the inflation situation, especially with real yields moving into positive territory. if you look at tips with maturities of seven years and beyond, you can actually earn positive yields for the first time really tense the pandemic began. what we are focusing on with our clients is not to take additional risks. when you talk about the pain trade, where we see more pain ahead is likely in the junkiest parts of the market like high-yield. you were showing headlines before about single names especially in the retail sector read coming into this year we were concerned about corporate profits. we don't look at single names. we look at it from a high-level

standpoint. when i look at specifically -- what i look at specifically from the corporate bond market is all of the corporate info, the small, medium, private. corporate profit growth is really slow in the fourth quarter of last year. we were concerned about how the beginning of this year would look. unfortunately it is not looking too good, and we are seeing even these big companies that should be able to manage a lot of these issues, especially supply issues, still kind of stumbling. that poses a risk for the junkiest part of the market. you have those ratings for a reason, and you might not be able to handle any disruption to your operation, supply chain issues, volatile cash flows, things like that. so we think there can be more pain with junk bonds. jonathan: just one point, and it is a question really for the equity guys. there's a lot of people coming on the program right now, i see it a lot in the research on the equity side, that you get to the summer after a two-month call and then you get a relief rally

because the fed backs away. what you think needs to happen for the fed to back away from what it is determined to do at the moment? collin: i will steal powell's line and say we need clear and convincing evidence that inflation is retreating, and we don't have that just yet. if you look at the cpi report for april, it did come down. it decelerated from the previous month, but still at a very high level. there are a lot of things under the surface that indicate that inflation could still remain high. we are still seeing wages grow and we are seeing a lot of prices paid indices with various fed indexes from the ism indices, both manufacturing and services, that prices are still high. if we get to the summer and inflation has only showed a modest retreat from the highs, that might not be enough for the fed to slow down or get even when we talk about a slowdown, the fed is not going to stop hiking rates. they might just revert to 25 basis points as opposed to 50.

if you look at what the fed funds futures archivist pricing and, despite all of this volatility over the past five or six weeks, markets are still pricing in 2.7, 2.8 despite all of that. jonathan: and some think it is going to go higher than that as well. awesome as always. collin martin of the schwab center for's financial research. thanks to all of you for writing in. "take this man's tang away and put him in timeout." [laughter] you've unset some people -- you've upset some people this morning, tk. from new york, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. president biden meets today with the leaders of finland and sweden to discuss their bids to join nato. turkey's president erdogan is opposed to the move because of the countries' stance on kurdish

militants that he considered terrorists. in london, police have wrapped up a high profile investigation that already caught prime minister boris johnson. more than 26 fines have been issued over covid rule breaking parties held at downing street during lockdown. a spokesman said johnson will not be fined a second time. true lots -- sri lanka has fallen into default for the second time in its history. sri lanka's government has been struggling to halt an economic meltdown that has punted mass protests and a palooka crisis. authorities worn inflation may hit 15%. another we take -- another u.s. retailer cutting its profit outlook. kohl's sales and profit missed estimates. kohl's says it is reviewing alternatives and continues to engage with what it calls multiple interesting parties.

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. ♪

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bring on today with unbeatable business solutions from comcast business. powering possibilities™. today's challenges require real insights, to get to tomorrow's opportunities. ( ♪♪ ) what can we expect in the coming year? this has been a record- shattering year for m&a. five trillion dollars in deal value. and we're still very bullish on the deal market for 2022. in this kind of climate, what are you advising clients to focus on? we really think companies need to elevate their risk management processes and also scenario planning. what's your outlook, kim, for the 2022 labor market?

organizations really do need to take a pivot on their lens of their people and talent from a cost center to make that a value creation center. for key insights into what matters today and what lies ahead for business, this is real time business with ey. >> stocks don't go up when inflation is running north of 4%. historically that is the case. so i think it is a tough situation and i don't think the market is going to put in a great year. jonathan: that was andrew's lemon -- andrew slimmon. we are -0.9% on the s&p. on the nasdaq, down by about 1%.

the ecb accounts in the last 10 minutes. tom: lisa, way and here -- lisa, weigh in here. [laughter] jonathan: i don't know why they call them the accounts. the outlook for third-quarter growth is still "relatively positive." do with that what you will. their account of the policy meeting reads as follows. "officials saw the war slowing, not derailing the recovery." lisa: that is what i picked up on as well, i do time where more people are talking -- as well, at a time where more people are talking about recession as the base case in europe. how much is this the ecb setting up a rate hikes and possibly getting to zero the end of the year? that i think is what they are trying to confirm. tom: can lister city -- can lester city beat chelsea today? what do you think? jonathan: they have a chance.

chelsea is not exact playing well. tom: kriti gupta is going, let's go. what do you have this morning to save us? kriti: if i can harp on what lisa was talking about, recession odds in europe seems to be the base case. this is feeding into a lot of flows for the dollar. i want to tie the dollar story to the stock story. the 40 day inverse correlation between the stock market and the dollar, essentially what you are seeing is a sea of red. what it shows you is that during the pandemic there has been this dynamic, he would your dollar equals higher stocks and vice versa. right now you have that correlation sitting at about 0.4%. statistics nerds will say that is not significant, but it tends to bounce back to a 0.7%, which tells you that is a very serious relationship, especially when it comes to capital flows. foreign investors in the face of covid lockdowns and european recession odds flock to the dollar, and therefore flock to u.s. stocks? keep an eye on this relationship. tom: greatly appreciate that this morning. this is a timely conversation

with somebody that has covered all of american politics from his new hampshire decade and decade in this topsy-turvy world. reg valliere, h -- greg valliere, agf investments with us. three, 4, 5 years ago, if you and i were having a beverage of our choice about robert plane, we were talking about a bright attorney respected by republicans and democrats. he's driving the ship at the white house. what is ron klain and biden staff doing to provide a cohesive message for a president struggling? greg: not a lot. good to see you this morning. i thing there is a perception, fair or not, of the white house being in disarray. i think with a debacle shaping up in the november election, biden has to do something. he's not going to get much legislation by joe manchin, so i thing but biden has to think of,

it sounds harsh, but he has to think of a staff shakeup. if it is a staff shakeup, ron klain would have a target. tom: but if we say he is panetta-like, all of us internationally, domestically, forgetting about the previous administration, whatever you think, are baffled by this white house. help us with the next round of shakeup, if you will. greg: i think the have to focus on not just personnel. they have to focus on policy. will there be a decision finally on student loan relief? will there be a last-ditch attempt to work with m anchin on some social programs? they need to show the public they can get something done. with the exception of pretty good unity within nato, there is not much they can show. lisa: there's a lot of controversy over the spending that was done during the pandemic, particularly the stimulus checks a lot of people look to as part of the driver of inflation right now, but other

people are saying, especially heading into what could be a downturn, spending will be important, especially some specific areas of infrastructure and defense. what are you seeing in terms of any consensus in d.c., given the disruption and turmoil you talk about coming to get some of that done into the midterms, but really beyond? greg: isn't it ironic that just when the economy starts to look like it is failing, just when you could use some fiscal stimulus or monetary stimulus, you get neither? i think both fiscal and monetary policy will be contractionary. frankly i only see one area on fiscal policy were spending could go up by a lot, and that is defense. i think there is a consensus in washington that we've got to do more on ship loading, purchasing new jets, and maybe coming out of this weekends meetings between biden and asian leaders, we get a commitment for even more on defense. lisa: how much is the focus going to be on taiwan at these

meetings? greg: a lot. there's two or three things they are going to focus on. can we have south korea get on more with japan, the new government in south korea? can we bring indy on board? washington has been disappointed by india. i think they will try on that. but the main messages to send a signal to china. i don't think xi is ready to go after taiwan now after what happened in ukraine, with all of the sanctions. i think you will see a strong signal from biden largely because of anxiety over north korea. jonathan: are they going to use words or policy? greg: more words than anything else. they want to show the flag. they want to let our allies in that part of the world know that we will never do in afghanistan again, that we are rocksolid in our support, and i give biden credit on what has happened in ukraine, but he needs to send a signal because north korea is very close to testing more

missiles. jonathan: they've sent a signal, haven't they? look at what has happened with ukraine. wooden the chinese just look at what has happened and say we will do what we want anyway? greg: i do think china has to worry if they try to pull what russia did. they would face enormous world sanctions. they would not succeed militarily. so i think that would be a signal that has always been well received by beijing. jonathan: greg valliere of agf investments. dk, you said it, and i don't know why we can't say things out loud anymore. tom: because this show is a toxic brew [laughter] jonathan: the previous had adminstration was chaotic. it was messy. you can say it. someone might accuse you of being a democrat. they might accuse you of being a republican. it is objectively a fact. you can also say this, that if the previous had ministry can

was not there, you would say that this administration was the messiest administration you had seen in a long time. tom: i will let the full brit make that opinion and not me because i will it in the timeout chair. true story, we have this acclaimed bloomberg information system called the message system, which basically is one part twitter, one part email. i had one message come in from a wonderful fan once that said you are to the left of putin -- the left of whatever, and the exact next message said i was to the right of attila the hun. jonathan: how money guests have you heard say ron klain has a target on him? ron klain is still there. tom: true. jonathan: i've heard that so many times in the last year. futures down 0.8% on the s&p come on the nasdaq 100 also. this is bloomberg. ♪

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