>> every single major spike in

inflation has been fixed with a recession. the question is if that is a big are already small r. >> as we go with continued high inflation it will slow. the question is how much does it slow. >> all inflation is the same at this moment for the fed. >> unfortunately we will see continued volatility. >> good morning everyone. thank you for joining us on bloomberg radio and bloomberg television prayed all of this going on in bavaria and madrid. the economic data, the markets up. housing up 21% year-over-year. is that the greatest distortion we look at? jonathan: how much damage do we need to do to get inflation back down. with these central bankers

determined to carry on doing what they've been doing including chairman powell. governor bailey you will hear from him tomorrow. we heard in the last hour from greg peters was fascinating. his view, financial conditions need to worsen because the central bank can tolerate these financial conditions when they are so determined to get inflation down. tom: i want to go back to phil hildebrand earlier. it's in the comments you mentioned with francine lacqua in portugal. to me it's this gravity of what we need to do to wash out the huge fiscal stimulus and the answer conversation after conversation is more pain. jonathan: i think you're asking a more important question alongside that. with a tolerate a higher level of inflation. they are not, share that with us

now. that's part of the guesswork for the back end of this year. how much inflation will they be willing to tolerate and what does that mean for your call in this market. tom: do we see any cracking home prices? i'm sorry, we are so taken by all these details, we do not see housing up 21%. lisa: this goes to the underlying fundamentals of the market. we are not looking at a 2006 style housing market where there was leverage fueling, flipping. these are homebuyers who want to live in homes and you have cash to put down and are not overly leveraged. the bigger question is how long will it take before you see some slowdown in housing markets. rents are still climbing at a record pace. tom: i'm going to look at the good feeling of equities over the last four or five days. 32 to a 26 handle.

26.97 on the vix. jonathan: it's a vacation. i'm just beaten down, i'm so upset. futures up on the s&p. nasdaq up a half of 1%. yields up four basis points. i use the word vacation and my family parades me for that now. it's a holiday. jonathan: -- tom: that is funny. [laughter] jonathan: you say holiday here and nobody understands me. you are a very confused a lot. eyeglasses. tom: can you imagine me not saying -- what what i do on a two week vacation? jonathan: what would you do? feels a bit like a vacation still. [laughter] tom: brent crude let's talk

about it. there is a lift. 6.5% in oil. jonathan: i think this is belief that the direction of travel. and the chinese demand picks up. writing into the show yesterday talking to a lack of impulse on china from the inflationary, maybe that could kick in and the back half of this year. >> this is an important conversation. head of equities capital market advisory, alicia levine always on the edge of enthusiasm. buried in your notes, the outlier what-ifs is a multiple for the market out of another time and place. can you actually multiple a gloom 12 times multiple on the market? >> that would be our extreme less risk. but it is out there at a very

low risk scenario when it goes something like this and it's similar to the conversation we've been having this morning which is earnings for the second quarter are expected to be up about 4.5%. the second half of the year earnings are still up on expectations 10.5%. i think it's probably not believable. margins must come down here. in the way stimulus increases the revenue shy they will also increase the revenue margin side. so earnings come down, of the multiples start looking higher if the market just stays where it is. in the recessionary scenario you can be down on earnings 10% to 30%. and with that the multiple goes with it. i would say an average recession multiple is 14 times. whatever those new earnings are, expected to come down from here. and then you put the average

recession, your about 3400. as the first stop before we can think about moving higher here. i think the rally in the last week or so there's an expectation the data we get on thursday is going to show some peak inflation. once we've rallied into it than where you go if it is slightly peaky. jonathan: is that a bearish scenario or your base case? alicia: that is a bearish scenario. we think there's a 50-50 chance of recession in the next 12 months. so there is that bumpy landing about 50% recession prayed on the others that we do think the recession is mild. the job market is so strong and

activity is strong in the economy. the wildcard of course is there some kind of contagion in financial markets. if we get a market dislocation event that could make it worse. right now we are seeing this is a slowdown, and earnings slowdown, mild recession. i agree with your previous guest the tightening financial conditions part of the fed solution inflation problem >> which equities do you see is bearing the brunt of the pain. i'm looking at goldman-s: retailers that are facing perhaps extreme margin pressure in the face of inventories and other factors. >> on the consumption side and consumer side it's about the inventory sales ratio. we know the inventory levels are up. the margins are going to come

down and it will hit earnings quickly. that is ground zero for where we see earnings conditions. the stocks are acting like it. you look at the staples versus discretionary. you can see the performance on the staples side. that's where you should see the multiple compression and the earnings compression first. >> have we already reached the point at which it's time to start selling out of the energy positions. the idea we've seen that wager rollover and now we are worried about recession and so too will the stocks reflect that? >> it is something we have to think about. we are bullish on energy stocks with wti. a technical level over 95 means the energy stock should probably still work here. there is some cyclical component

in the movement on energy sector but it's more structural. energies managed to tie with china one third of chinese locked out -- locked down. to the extent there is from china coming out of covid lockdown situation it should help support energy prices and the stock. you probably won't get that parabolic move. we think it's too early to sell out here. jonathan: some pain in those names are they bounced back last week. if you look at the federal reserve, they are targeting inflation expectations. inflation expectations are heavily influenced by what happens with energy. ultimately if you take that couple of steps further can you make the assessment this fed is targeting energy, demand destruction. i don't think you have to go

that far to make that assessment. tom: pce court inflator survey. the suits and ties and the fancy dresses are taking out the agony people are facing. this is serious stuff. there is some real agony when you look at rental data and eviction data. this is really serious. bloomberg type people bring it down to a 4% statistic. lisa: that's the reason why i think the retailers are so interesting. there are people who are making decisions based on how high gas prices are. what they can afford, whether they will make those extra clothing options available to themselves. these are the things that get into the structure of the

economy and how much pain is being felt. jonathan: i fear perhaps it's a story going into next year. china has been a big part of the story. we will catch up with the ceo of -- international. futures up a half of 1%. this is bloomberg. >> keeping you up to date with news from around the world. a group of seven nations have agreed to stick by ukraine to the bitter end. they pledged to ratchet up the cost of russia's aggression britain this resolved at the conclusion of their summit in germany. leaders told china to abstain from threats, coercion and intimidation measures. china has made the biggest shift in its covid zero policy. quarantine for inbound travelers have been reduced by half read this after beijing and shanghai

said they had no new locally transmitted covid infections for the first time since february. the sec has fined ernst & young $100 million in a cheating scandal involving the ethics portion of the certified public accounting exam. they said they misled regulators. it's the largest ever penalty. companies defy the coronavirus pandemic to go public at record rates. fears of a downturn have brought an abrupt end to the listing party. companies have raised a combined $4.9 billion this year. walgreens says it says decided to keep its businesses under its existing ownership. if the largest drugstore chain in the u.k. according to sky news. the reason --

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>> as you are seeing central banks hike rates to slow their

economy down. because of china's experiences was zero covid and slower momentum, they are lowering rates and that means the yield advantage relative to other currencies is no longer there. china is in a very different place. jonathan: china a big part of the story this morning. good morning to you. equity futures up a half of 1%. we woke up early to news out of china they were easing quarantine for travel. we can talk about that in a moment. crewed up by 1.5%. 111 .20 on wti. tom: the fact is we gave away yesterday. did we understand what we gave

way yesterday? jonathan: sometimes you can explain everything. some of the data points haven't been great. pmi last week. tom: i've got some dollar stronger, yen hasn't really moved. we are just focused on pc a couple days away. an incredibly important conversation. chief executive officer and really wonderful granular data about china. shanghai, i'm worn out by it. if i get the bullet train as i have and i got a shanghai, i go west to 5 million people and i'm going to butcher the name which is an industrial town west of shanghai. how was covid in the places we are not focused on? >> i think that the biggest story of the second quarter.

we can talk about things will get better now the lockdowns are easing and travel quarantines are easing. but the biggest thing about the lockdowns is not that shanghai was shot down, it's the secondary effects were more significant. it was reflected in the current conversation and certainly most data. the second-quarter numbers are much worse because of what was happening in april and may and the secondary effects. things will be improving but improving off of what it was a lot worse than people were acknowledging. just weeks and months ago. lisa: translate that into the economic backdrop. what are you looking at in terms of gdp growth in the second quarter and in terms of a full-year expectation on the back of that data. >> based on the weakness we saw in april and may, the

second-quarter numbers should contract. they will never announce a second-quarter contraction bread they made that very clear and may when they said they had an all hands on deck effort to boost growth and needed to get stable growth. senior finance officials came out a few days ago and said we will see reasonable growth in the second-quarter bread we have an internal bet on what they are going to hit. my number was closer to 1.8. the chief economist number was near a little but above two. we think they will throw this number on. it's not justified by the data. people are embracing the june bounce back which was not in the data. so they will accept a number in the 2% range that markets are excited about. >> they get excited about the support the chinese government officials will provide the market and they've been able to do that perhaps more than some people had expected because of

lack of inflation we've seen in the region. at what point did that shift and which side of the people are you on. do you have no consumer activity and no inflation or do you get a revival. in the same impulse you see in the rest of the world. >> that's one of the most interesting stories out of the second-quarter data. the fed is looking at it. this is great news. you had this real threat that you would have surging inflation out of china either because of the supply shocks shut down ports, logistics and would cause a supplies surge -- supply shock. or you would have this wonderful bounce back in june and july and others, a demand back and you have surging commodity prices. amazingly it looks like it thread the needle between not being too much and not too little. we are not seeing that surge of inflation in china just yet but this could change very easily. if things shut down again.

another fed has to be happy for just right now. >> with all of your skills your reading of the culture of china what is the next hong kong look like? leland: we talk about the future of this hong kong, the future of this hong kong is quite dreary. this is just another chinese city at this point. it's been sad to look at hong kong be what it once was and now become a secondary city of china that's pushed it's ex-pats out. tom: what should western banks do? what should they do with the next hong kong? leland: they are pretending to stay but most of them are moving out to singapore already. they want to make sure they are not offending the chinese government by moving in mass out

of hong kong. between the nasa security law, the covid lockdowns and quarantines, very little appetite for ex-pats to be in hong kong. you are seeing an exit this. even if hong kong markets stay relatively important going forward you're seeing a massive exodus of people. jonathan: thank you sir. just as we were conducting that interview and having that conversation have gone through the estimates of chinese growth this year. i don't think i can say i can never see someone he forecast for the three handle for chinese economic growth. ubs, morgan stanley, deutsche bank, bank of america, the list goes on and on. ing, pantheon, a jp morgan, td securities. just on and on. all these banks looking for three handle. that's the pitch for chinese

growth this year. it's changed in the material way. people are looking for something we haven't seen in a long time. >> you are going to have it -- half it to 3%. what is that mean for pacific rim starters pray that's why you see the imf and other institutions start to follow wto with sub 3% global growth. no one including michael has ever thought of. jonathan: a lot of people might consider that global economic recession. tom: there's no question. jonathan: the chief u.s. economist at jp morgan looking ahead to chairman powell tomorrow. pce data, a whole bunch of data this week. this is bloomberg. ♪

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jonathan: good morning to you, this is "bloomberg surveillance." through most of this morning, we stay that way, just a quarter of 1%. on the nasdaq 100, up just about 1/10 of 1%.

in the commodity markets, one sent on wti. tom: let's get right to it. a huge u.s. economist, the world stops at 7:00 p.m. on friday is when he and his clan release their weekly prospects. we get a lead on that into this week as well. michael, how are your weekly prospects on fridays changing, would you have anticipated the leaders statistics hours before? >> we will have to see what kind of data we get between now and friday. i'm perhaps a little more interested in seeing some signs

of momentum, a little more worrisome than others. tom: is the character on recession just a slowdown, the sluggishness, is that about a domestic economy, or is that the international component for that into it? >> i think it is more about the domestic economy but the real trait of the dollar is pretty significant. we went from essentially having some trouble with performance, perhaps that is one reason why we are seeing some of these down , now filing the housing sector lower. it is going to be mostly driven by fed policy, but i think some of those will be globally. but we will have to see how much global growth assets change.

lisa: earlier in the show thomas talking about a really important thing, deceleration of inflation. at what point does the fed say we are good, we can allow things to remain a little bit better than they have over the past decade and not raise rates to the point where we know we are going to torpedo the economy? do you believe that they really are committed to getting things back down to 2% inflation over the near-term? >> even on the near-term, i think in my mind, one of the big debates right now is big uncertainty, talking about essentially taking an outcome- based approach, which is to keep raising rates until inflation gets close to 2%. that would be a change from past procedure where there are more

forecastings. you would think if he saw the unemployment rate rise, you would wait, so i think that is the big debate right now. if we do see further weakening in activity, are they going to just keep going? lisa: based on what we are hearing and based on the discussion about the r-that we had last week that seems to have faded a little bit, what are you seeing in terms of a recession probability not with respect to a downturn, but i technical definition, in terms of the nature of how prolonged that downturn could be? >> is not a baseline scenario but it is obviously very elevated.

it could be a long one, particularly in my recession, case they wouldn't able to generate a speedy recovery. it should be a shallow recession , but it could be a bit longer. tom: how does the dollar break? everyone -- not everyone, we've got to be careful here -- but how does the dollar giveaway? the resilient dollar has been a lonely and very successful call. how does that actually give way? >> the simplest way would be for the fed to be a little more comfortable about achieving their goals. they don't have to be so aggressive in raising rates. tom: i need a single point estimate because it is just you and me. but if the inflation trend comes down from eight, 9%, where is

the king in the path where the fed changes its dialogue? is it at 5%? 4%? there has got to be a point where they shift the rhetoric. >> i tend to think of it more in sequential terms. core cpi numbers come in under 3/10, yeah. tom: interesting. lisa: we speak with michael as we had turned a warning -- earnings, particularly kicking off with big banks. the capital markets have been slowing down in a very dramatic fashion. certainly seeing financial market conditions tightening. the yield market is just a fraction of what it was last year, you can see it in the high-yield market. how much is that going to pose a sort of credit issue that does get the attention of the private market in a new way? how much do you see that being a risk?

michael: we are not yet seeing any elevated signs of credit risk that would suggest a problem there. i think i might distinguish the activity from the actual credit risk. obviously if the economy does slow down, we will have to revisit inclusion, but right now. lisa: a lot of companies have extended the majorities. does that mean you can see a much worse financial market performance for the underlying performance? it might not trickle into the real economy based on how much the financing has already been held in place, and based on the fact that a lot of people are removed from that activity in a sort of direct way? michael: we have to keep in mind there are several channels of

monetary policy. in each cycle, some are more potent than others. we've already talked about once, the dollar. we are starting to see that also feeding through in the weaker influence already having a pretty pronounced effect on housing activities. keep in mind it is not just one channel through which the policy operates. i do think we are seeing -- i do think that there are definitely real channel that are still operating and i think you are starting to see the fruits of that in the economic activity. jonathan: we have got deleted there. wonderful to catch up, sir. thank you very much. we talked a lot this morning about maybe some contradictory objectives of the next couple of days for g7 leaders.

on the one hand, they are exploring these oil price camps on russian crude. on the other, they are set to enable china. what was it, lisa, a systemic threat? a systemic challenge? lisa: a systemic challenge. this has been an issue of prior communique because they haven't really mentioned china, but sort of parsing out what you pointed out, which is this really important trading partnership that they had with china, but also, how do you not poke at that too much anytime when you're trying to get them to come along with you? jonathan: if you need to be part of that effort otherwise it really doesn't work. this is worth mentioning, they started discussing on price caps. that is something anne-marie mentioned a little earlier this morning. do you get india on mortality get china on board?

tom: that is where i wanted to go, all of this is because of india. this triangulation. it has been that way back to -- i'm not going to say world war ii, but certainly back 30, 40 years. china, russia, and then you got the elephant in the southern room, india. it is more complex. jonathan: it is highly complex. a lot of people doubt the g7 to come up with something that could practice, that would actually work and be effective. lisa: jake sullivan also talking about the tariffs. remember the tariff that were put on chinese goods. a discussion about removing some of those tariffs in order to alleviate some of the price pressures, since they basically increase the prices for the end consumers. how do you send a message, what message are you sending on the one hand if you want to, for the benefit of u.s. consumers, remove those tariffs, but you

also -- it seems very complicated. jonathan: you want to call a systemic challenge at the nato level. at the same time, you have to remove some of those tariffs because you are facing domestic pressure. politically because inflation is too high. some foreign policy become a big, big issue and then have to backtrack on several issues on the policy front on the international stage because of massive inflationary pressures. china, russia, i would throw in saudi. tom: the adults that i listen to are talking about the military expanse of the united native america to reaffirm what we're doing in the western pacific. robert was brilliant on this. one of the plan to reaffirm -- in the western pacific? that goes against all these

headlines about russia. jonathan: i will reaffirm this, we are in the cheap seats. this is a really difficult job. this is highly complex stuff. this is bloomberg. >> keeping you up-to-date with news from around the world, nato is set to label china a systemic challenge when it outlines new policy guidelines this week. the alliance will highlight beijing's deepening partnership with russia although nato won't go as far as to call china and adversary. a missile attack on a shopping mall in southern ukraine has killed at least 18. thousands more wounded and more

than 30 -- the attack was called a war crime. and finding out if she will spend the rest of her life in prison. a judge will sentence her on charges that she gave -- by former boyfriend jeffrey epstein. [indiscernible] the addition of new business lines, pandemic effect and higher extension. credit suisse is sticking to -- the swiss bank is promising to do business with rich clients and cut costs by simplifying technology.

they plan to grow the wealth management unit by focusing on markets such as hong kong and singapore. 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.

>> think the constitution was meant to be very. it is to protect capital -- not to shoot the lights out to get some great return. i do think we are going into a recession. tom: she is the giant of bowdoin. chief investment officer after early years at yale university under the late, great mr. swenson.

this is a really, really important conversation for endowment in institutional wall street. this is a woman with a track record second to none in investment management. trace the trail from yale to the stunning brilliance at bowdoin and now to the challenges of rockefeller university. >> paula was trained as a conservator and she basically studied to go to yale school of management and she did an internship for david swenson. she was really liked by him, she helped write his outstanding book on portfolio management and then she got a job at bowdoin where she managed the endowment. the last 10 years there, she outperformed the ivy league in every single category in terms of return of every other ivy league manager including david swenson.

the chairman ever investment committee was --, so she has been kind of a protege of both swenson and stans rockefeller. tom: the backdrop is the worst bond market that you and i have ever seen, over the last 90 days. down 12%, maybe down 18%. how did people like her and how is she adapting to price down? david: her view is we are probably heading into a recession and you don't try to knock out the lights by going for super returns and getting the highflying tech companies. she is protecting her downside and i think she is a very cautious investor. over the last 10 years, she outperformed every single ivy league endowment, and last year alone before she left, she hadn't return rate of over 50%.

she is quite impressive and rockefeller has done very well. >> one of the think distinctions for people seeing outperformance, the use of alternative capital. how has she focused that into the call of a traditional 60-order to get that type of internal return david: david: the portfolio approach is to use a lot of private investment. she did that as well. the trick she had was getting into these best funds because bowdoin wasn't as famous as some other organizations or university than inevitably, the marks will come down for some of the venture funds and probably therefore she and some of the other ivy league endowments will not have the same return this year they had last year. on the other hand, her returns are so good it is not likely to go down all that much in my view. lisa: how much is she actively trading into a time of uncertainty versus having a

long-term view post-recession that she sees and is sort of sticking to her guns on it? david: if she doesn't think she should try to knock out the lights by going for the absolute bottom of the market, she is very cautious. she is in some really good funds now, but she inherited a portfolio from somebody else was very good as well. she is remaking a portfolio into something that is more comfortable for her. tom: tell us about rockefeller university, this is not the old school. i think of david baltimore, the miracle of pfizer and moderna as well. it is not duke, is it? they don't have a basketball team, do they? david: i don't think rockefeller has a basketball team that i know of. it is basically an organization that is medical research and is a highly intensive place, a lot of nobel prize winners have been

there. it is a highly specialized organization and it is dependent to some extent on its endowment because the rockefeller family is now not bringing in a lot more money, so the endowment is really important to that organization. lisa: given the fact that you work in the private market, you talk to these investors all the time, how much do you think they are following in the same kind of path as what we heard just now? david: everyone is recognizing that the market is down, whether it is a bear market, a recession, or whatever you want to call it. people are debating how much longer it is going to be down before it goes back out people who are very cautious are basically not trying to set records right now, they are trying to see where the market is going. there are some people to see the great value in the market in those so-called value investors are going back into the market. i don't really think the market is likely to go down that much more from where we are. i think there is enough cash on

the sidelines to go back into the market and get the prices of some of the stocks of reasonable levels. but we are a long way away from being out of the woods, in my view. tom: take you for joining us, this is important conversation for everyone in the endowment world. lisa, i think that the deception here is that the bloomberg terminal is asleep. it is not, there are some really interesting nuances here with the 10 year yield on the 3.25%, and what we were the focus on is the yen struggling to go weak lisa: what we are seeing is a lack of certainty played out in markets. it is interesting and important, especially in light of some of the week liquidity -- weak liquidity. what are you even trading on this? is it a sentiment survey, or

every single survey, etc.? tom: yes, 9:00. what is interesting, we are going to get the april statistic , but again, housing up 21%, far beyond what we witnessed in 2006 into 2007. lisa: even if there is a cooling down, it is going to take a long time to find its way in the end. tom: futures up. stay with us on radio, on television. this is "bloomberg."

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.

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>> this is bloomberg's the open with jonathan ferro. jonathan: we begin wit