>> they still think the fed has more to go and also will ease policy last year. >> i do have confidence the fed will do what is necessary and ultimately get back to something close to 2%. >> drilled emergence comes in 2023 west fed is expected to continue to hike. -- the real emergence comes in 2023 when the fed is expected to continue to hike. jonathan: from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." if you wanted a quiet end to the week, you didn't get it.

down one full percentage point. tom: i broke out between jacket. i just saw the first leaves in central park beginning to change. this is the beginning of autumn and you saw it yesterday with the collapse of the currency market. it continues this morning. the emerging market, the united kingdom is a litmus paper for the stress in the european system. jonathan: autumn started on august 19. he said the leaves are changing in central park. this is from barclays, stocks may face a reality check next week. the fairman -- chairman how set for next friday. tom: i use the dow jones industrial average for this and the average is the dow, even with three days of stress, sits between a solid moving average and two standard deviations up.

we are technically not at a stress point or the markets but i think a week from now you could be. jonathan: the federal reserve is upside down. shouldn't they be saying the other thing. kailey: we have seen a metamorphosis for the hawks and doves. now one is saying i want 4.4%. jim bullard has been the pusher and the first to vocalize he wanted to move 50 basis points. and now he said i want to go 75 again. jonathan: we will hear from chairman powell next week. here is the price action to close. negative .8% on the s&p 500. the nasdaq is down 14 percentage point.

it have to tell us when you are out of cash, tom. euro-dollar all of the sudden looking at parity once again. kailey: that even at 1.01 on euro-dollar. the u.k. is dealing with a cost-of-living crisis and that is resulting to a summer of strikes. a london underground strike happening for one day only. plus pilots for easyjet starting a three day strike. it is speaking to the high cost consumers are facing in everything of their daily life. they want higher wages and that is causing issues with labor. one very economically sensitive company will be announcing earnings, the biggest maker of agriculture and machinery. how is it working through inflation pressures and supply chain challenges.

it has been able to increase the charge choose to customers and they are paying up because the demand for food is high. finally, at 9:00 a.m. eastern, the federal serve president will be speaking. will he be more where they don't want to go too far too fast or more like jim bullard who wants to move 75 basis points come september. regardless of whether they move 50 or 75, they are really trying to push back on a market that thinks they are going to cool things off. they are also saying we have more work to do to get inflation down. jonathan: are we down with earnings -- for now. kailey: it is pretty sleepy from here. jonathan: equity futures down .8% on the s&p. on the nasdaq, down one full

percentage point. joining us is sebastien galy, senior management investor. where in the market do you think there are the shocks? sebastien: it is trying to build a sense of confidence of where we are going to get a slowdown and where we pick up. once you can figure out where you get the pick up in 2023 and 2024, then it is an awesome time for equities. we are trying to trade in advance of what we know. the reality is between now and six months we don't actually know how to control inflation because we don't know what the mutual rate is. the fed models are extremely primitive and they don't know. the consequence is they have to hike more than we expect so 75 basis points is more likely and we will see the fed chairman next week confirming that they need to tighten.

tom: if you are in luxembourg, one of the most interesting continental people we speak to. how do you use the signals of foreign exchange and what we have seen literally in the last 18 hours? sebastien: what it tells you is that it is starting to trade, looking at the u.k. and turkiye, higher yields and risk for people who take unorthodox measures. when the fx market rises from a sleepy market is not attractive for people to invest in. if they start to get worried, that is a forewarning for other asset classes that may be ahead of us. there are different points in time in the business cycle and

has proven interesting but not relevant. it is short-term in its use on the fx side. emerging markets forward-looking and sometimes it is very forward-looking. if it was easy, it would already be priced in. our interesting elements within the fx market that it starts to trade like and emerging-market. it is interesting and worth studying but not necessarily going to explode. kailey: it seems like a lot of the dollar strength is not really by the central bank but about risk sentiment and a demand for a haven. other than the dollar, where can you find reliable safety? sebastien: swiss franc, norwegian krone. high quality credit.

it would be awesome to speak in -- live in switzerland. jonathan: so i aren't you living in switzerland? sebastien: i made a huge mistake. tom: zurich, i think that would really work out. jonathan: did you hear that, i made a big mistake. sebastien galy, great to catch up your did you read from j.p. morgan yesterday? tom: i missed it. jonathan: i'm not sure what this is for. the fed indicated, that one should keep in mind the price targets at year end and not close. some of fire from the team at jp morgan. tom: that is the emotion right now. i think it is people recalibrating around clients who are miserable. how many people are x basis points bolo, typically the s&p

500, not the dow jones industrial average. they are miserable going into q3 and they have to make it up by year and to keep their job. jonathan: i will get to the market call that there will be no global recession and inflation will ease. they went on to say in positioning is still very low. kailey: cat raises the question of what has been the driver of the rally we have seen over the last few months. is it just a short squeeze because people were bearish and overly pessimistic and now things turning into an optimistic direction come whether a dovish move and that had to unwind. if he thinks that has further to go out and will drive us up to 4800 by year end, he may may not speaking to those who are well below that. jonathan: yesterday it was kneeled on this program. the market is looking for cuts

and they are saying it is a hold. the san francisco fed addressed this. i really think the raise and hold strategy as one that has historically paid off for us. we get into the whole part and it is a race to what? maybe will get some input -- indication from chairman powell next week. tom: i have the y axis and the x axis and so is jim bullard with a more optimistic view of the economy. these people are extending out. it is like the extend and pretend. they are extending out to use time to heal the economy after the pandemic. jonathan: let's wrap up the season. kailey: a little early come eps up. it has revised lower it outlook for earnings for net income. the stock is down. i am looking to the statement to see why.

no this is an inflation and supply chain. it says it will have cost efficiencies driven by the difficult supply chain situation, according to the chairman and ceo. deere down at the bell. jonathan: they changed the range for the end of the year to $7.2 billion. the estimate is 7.13. tom: what harry and liam did when we met in davos. jonathan: that was one direction. tom: when i first saw you from across the room i could tell you are curious about euro swiss. i hope you are short what you are looking for, because the dow jones industrial average. kailey: do you have harry styles tickets for the weekend? tom: i go in one direction. kailey: that was good.

jonathan: futures down .8% from new york, this is bloomberg. ♪ ritika: keeping up-to-date. fed officials offering mixed signals about the next interest rate increase. the meeting set for september 20 one of the most hawkish policy, james bullard, backs a big move to another 75 basis point height. kansas city's was more cautious saying the fed has already done enough tightening. stakes rose for the g20 summit in bali, it came from the indonesian president in and interview with the bloomberg editor and chief. >> i know you have invited president xi jinping to come to the g20. has he said he will come here in november? >> yes. xi jinping will come.

tom: has -- >> has put his putin? >> president putin -- has president putin? >> president put in said he will come. ritika: european intelligence officials say russia is probably using a nuclear power plant in southern ukraine to shield troops and equipment and undermines security. the u.s. and the eu have asked for access. confidence declining to -44 in august, the lowest since records began in 1974. concerns about recession and soaring inflation tightening the household finances. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries.

>> i don't think we are in a recession right now, as we continue to raise rates and raise costs across the economy, should be putting the brakes and the economy and that will see more likely to be in a recession. jonathan: running up some fed speak from yesterday. from new york city, with tom

keene and kailey leinz, i'm jonathan ferro. the s&p, just about set to squeeze out a fifth straight week of gains, the longest week streak of the year so far. tom: a little fragile to say the least. i don't know what to make of it. i can't correlate the foreign-exchange gloom we are seeing right now in the equity markets. jonathan: did he see rochester this morning? euro-dollar down to something like 97 by the end of september. doesn't the we are priced for the recession. tom: when they get to 98, 97 in terms of recalibrating, we are going to recalibrate with our bloomberg reporter, jack fitzpatrick. what they talk about is the candidate quality.

a civics question of friday morning in the summer -- who picks the candidates? jack: that depends. in this case, one of the challenges you are alluding to is at least indirectly, former president trump, if he doesn't pick candidates, has a huge hand in republican primary victors and as it pertains to the senate outlook, look to pennsylvania, where the cook political report nudged that from a tossup to a lien democratic race, and it does look like mamet oz is having a edge. in the republican primaries come it can have a warping of fact as to who is the most electable person who might be in the general election. tom: the senate might be in axis

of trump and mcconnell. is there in mcconnell part of house republicans or does president trump own the house? jack: the house and -- has been more trumpified then the senate. that is a big question that maybe the midterms will help answer. if you look at the impact that trump has had on the party in a variety of ways come in the ways some members talk about foreign affairs, fiscal policy, the senate republicans are still a bit more of the old guard. mitch mcconnell types, a tunnel -- mcconnell is leader of that caucus. the republicans, by virtue of the fact that the house has elections every two years rather than six, shifted more quickly to the kind of stances qc president trump taking.

they have been aligned more quickly with trump in the house. kailey: in regards to development around president trump, you had a judge saying at least part of the affidavit for mar-a-lago needs to be released and you have the cfo of the trump organization pleading guilty to tax friday. which of those is the greater consequence to trump himself? jack: i think overall trump himself, the mar-a-lago issues are of greater consequence, at least just because the plea deal with allen weisselberg means he has to testify against the trump organization. but that has not extended to trump himself. there is much more of a possibility, at least as is apparent right now, in implicating the former president in these issues regarding keeping top-secret documents from the white house. if he didn't do it, there must be somebody who did it and that

is an issue that affects the former president personally much more clearly. the trump issues can extend to him. there are a number of issues is concerned about. the mar-a-lago stuff could be directly facing him. kailey: the department of justice in regard to the affidavit did not want it released because they said it would impede the investigation. we expect this will be still a battle or is this a done deal? jack: this is very much an ongoing issue. for one, the judge in this case has said he is not inclined to fully keep the details of the affidavit secret, but there is going to be a debate about how much they can read opt. the justice department -- can react. -- readact if they redact

everything, a judge can decide what is put out. so there's a huge debate about what was up to the public and if this really does affect continuing investigations in terms of revealing how they got the tip that the documents could be in mar-a-lago. there are many other shoes to drop in that investigation. jonathan: jack fitzpatrick and d.c., thank you. have you seen the video of dr. oz shopping? he mixed them together because people assume he is not from there. kailey: i am not going to, and that. all i am going to say is get a cart or a basket. he is gathering things in his arms. jonathan: more wrong with it than that. have you seen the video? tom: i haven't. i think a lot of it is trying to

do old campaign style in a new modern day with the speed of social media. i am not sure the old stuff works. jonathan: do you have asparagus with salsa? i am curious. you need to catch up with american politics. tom: i am too busy listening to one direction. harry has something new out and i am listening to his new project. he dropped a couple days ago. i know the language. jonathan: we are down .8% on the s&p 500. the nasdaq 100 down .9%. equities softer as we try to squeeze out a week of gains, looking at a day of losses that could take that away. this into michael hartnett. the 17.4% gain we had off the

lows, apple, microsoft, amazon, tesla contributed 30%. tom: he is way correct. it has been credibly narrow. jonathan: we are going to talk with steve chiavarone on that story. features lower from nearest city, good morning. this is bloomberg. ♪

jonathan: good morning to you. the average, 17.6% rally. we just had 17.4% off of the lows. textbook bear market rally. features down .8% on the s&p 500 the nasdaq down .9%. closing out the week, we anticipate what chairman powell will or will not say it next week. he will be in jackson hole next week. tom: i am doing my dr. oz a look and carrying all of my stuff in my arms.

jonathan: we can talk more about that in a moment. to the bond market, twos, tents, 30's, two year yield last friday 324 this morning. it is closing basically where we were last friday. yields up five basis points to year, tenure, to basis points. the 10 year a bit higher. the bond market, foreign exchange over to europe, euro-dollar, sterling, consumer confidence the lowest since 1974. brutal. we haven't talked about it much. tom: it is a unique big -- it has a big deal you talk about stronger euro versus sterling, the united kingdom is an emerging market and this needs

to be discussed? kailey: i was laughing too hard at tom. jonathan: euro-dollar negative .3%. tom: you have to do a mckinsey study and see if we can get a kailey cam. jonathan: like the bramo camera. tom: we are going to go to steve chiavarone now. what is so important is the stock leadership is apparently -- inherently about home equities. but a gloom over everything. is the gloom three-year horizon or is it a six-month horizon? steve : i think it is somewhere in the six to 12 month range.

we have been bulls for the better part of 15 years structurally because we believe it is right. markets move higher three fourths of the time and up limited -- unlimited upside. when you look at the market conditions in front of us, we just have a more cautious play. you have to be objective and that is what you hear us be a bit more cautious. tom: what is your cash is issued? are you running long are you in with the general counsel saying we have to be at 15% cash or is it in between? or are u.s. cash percentage? steve: -- where are you in cash percentage? steve: we are somewhere pushing 10% cash. i think we would like to put that to work in younger duration treasuries, but i suspect if the fed continues with this dovish rhetoric and markets warm to the

idea they are going to be hiking or longer, you are going to get a higher yield that will allow us to buy treasuries and more attractive prices. jonathan: if you have an historical parallel you are clinging to, does anything work? what is the playbook? steve: i think you have lessons from a bunch of things. you have geopolitics that look like 1939. you have a tech valuation that looks like 1999, inflation that looks like 1979. there are a number of historical parallels. how is the fed really going to come down here? they run the risk and they are worried about over tightening and they should be, but they run the risk if they pull up too soon. on the other hand, if they go too far, too fast, the recession that comes could be more severe. the nine hike cycles in the

1970's ended in a recession and the two that didn't certainly felt like recessions. that is just starting point. kailey: john has brought up the research from bank of america this morning and one is that very few fear the fed. as we have a conversation about over tightening, is the market expectation that the fed won't want to over tightening as conditions ease you the thing that causes the fed to over tightening because they have to rein that in? steve: the fed actions this year have been pretty reasonable. i think they were late starting but the aggressiveness with which they hyped is reasonable, but the rhetoric and communication strategy have left a lot to be desired. of all of the peaks we talk about, is peak fed credibility that we have to talk about. you are in a scenario where the fed says we are not backing off until we have compelling evidence that it is back to 2%

good we went from 9.1 to 8.5 on the back of softer commodity prices and the debate about how far we should go here there is a disconnect there. with the numbers tell you have fed chair powell saying we are close to neutral and every fed governor afterwards essentially contradicts him. it would be nice to have a much more consistent communication strategy because the market is doubting in either direction in line with their own bias what the fed is going to do. he has an opportunity at jackson hole to provide more consistent direction. kailey: if there is a mispricing in the equity markets that is too optimistic about the pivot, what about the bond market because we have been yields moving substantially higher off of the lows? what is appropriate given your expectation of the policy? steve: you have never gotten high inflation under control

without a federal funds rate that exceeds the inflation rate. i think inflation will come down as the economy slows, but the market has only allowed itself to price in 375 in terms of the terminal rate. i think it has to go closer to four or 4.5. i think you will ceo to rise. it is the duration. the fed will cut but i don't think that is the first half of 2023 event. i think at the earliest that is a late 2023 event. i think they will be there for longer and the bond market has one more opportunity to price net income at which point we will buy the treasuries because we think they would rally on the economic slowdown. tom: for retirement plans, are you reallocating or not? with a three year, five year

perspective, do you get cute in late 2022? steve: i think for retirement plans for longer-term plans, what you are trying to do is be defensive and gorge here. you will see high-yield bonds in the back of an year, really attractive yields and a three year treasury and then you could have spreads at it hundred or 900 points range that will be -- a hundred or 900 points range -- 800 or 900 points range that would be attractive. when sentiment is really poor at some point next year, gorge on the risk assets and setting them up for a long-term run. jonathan: what would you sell today to raise cash for the opportunities you expect for

tomorrow? steve: i think the rally in the tech stocks are just too high, trading at 25 times and we think they need to trade closer to 19. we would be inclined to sell here and by dividend paying stocks. that is the cell. in general, right up the junk and do high quality bonds. jonathan: heidi feel like asparagus with tequila and a salsa? does that work? steve: i think it is less for me. -- blasphemy. i like my tequila neat. jonathan: and your asparagus cooked. tom: can i weigh in here? one of the wegman's way back was

a camp mate of mine. wegmans is a rochester, new york institution that everyone respects in the food business. i think we have the vin is io -- video of the senator to be. for those of you it is dr. oz walking the aisle of the wegmans produce section. the problem is, if you want to win in pennsylvania, you are not buying organic asparagus. they sell three things a week, 1.5 pounds at $5.24 apiece. if you want to win in, the sausage premium pop open. you have to buy the hotdogs at $6.99 each. that is a breakfast that leads to victory in pennsylvania.

it is good because you don't have to drive to cosco and wait in line -- costco and wait in line. jonathan: i can see you doing one of these trips and blaming the president at the end. tom: republicans, pennsylvania, you are buying asparagus? come on. jonathan: and and dipping it in salsa? tom: by a case of schaefer beer is where you start and you follow-up with something from bergen that gets it done. jonathan: futures down .9% on the s&p. futures down on the nasdaq by one full percentage point. equities weaker, yields higher. the dollar is stronger. euro negative -- euro-dollar is negative. this is bloomberg. ♪ ritika: keeping you up-to-date

with the first word. part of the fbi to get a search warrant for a search a judge says should be released. news organizations have been asking for it to be released. the worst week of covid infections since midway -- since mid may. there more than 18,000 new infections in the weeks that ended thursday. the sister of kim jong-un has rejected a disarmament for aid deal offered by south korea's president and called it a stupid plan and said that north korea has no intention of getting rid of its nuclear arsenal. even if your company isn't planning layoffs, the one next door is, according to a study. is it more than 700 u.s. executives and board members

said they were reducing headcount or plan to. a return to the market. a company seeking since the startup of new via dead it could help qualcomm reduce. rectors -- markets reacted after a 56% in investment. the retail investors are feeling the pain. bed, bath & beyond is down in the last three weeks. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> we saw china and lockdown in large amounts of asia in lockdown in regard to international travel. i think that will open in the next six to 12%. we can see half-million dollars and maybe more just on that front alone. jonathan: looking for maybe a return of higher crude prices. good morning. with tom keene and kailey leinz, i'm jonathan ferro. we are down 1% on the s&p. on the nasdaq, negative one point 16%. in the fx rockets, euro-dollar up to parity. 1.0061 this morning. five basis points higher on the u.s. 10 year.

tom: we are watching the foreign exchange. right now in the airlines, we all have stories about trying to get back to travel and get back to normal. savanthi syth joins us. which is the american airline to believe in over the next three to five years? which is the stock that is getting it right? savanthi: i think the cyclical sector, you have quality and a good balance sheet. tom: mcauley has me looking at an app where i can watch the airlines take off. last night at newark, controlled chaos, 17 planes in perfect

weather trying to get up in the air. how did we get here with actual physical airports are a mess? savanthi: this has always been an issue, you look out and the weather is perfect and the weather has long been a frustration. also, more recently, air traffic control staffing in the past year. staffing levels are correct to the activity we saw pre-crisis. hopefully things will up and will resolve. it is a lung to be resolved that is shed -- it is a long-term

issue that needs to be resolved. kailey: it is global when you look at what is happening with the airlines globally. we know it has been going on at heathrow with everyone including the tarmac on strike. what about wage pressures? are they going to pick up as the people employed demand more because of inflation? savanthi: that is probably going to be different on this side of the atlantic just because of the way labor contracts work. last year you had a lot of gate agents struggling to staff with wage increases. that is a small portion of labor costs. what we haven't seen is pilots, mechanics as the contracts four

and usually have been amended. you'll likely see wage increases their. kailey: -- there. kailey: let's talk about what everyone will have to pay to get on, have we seen peak fares? savanthi: i think we have seen peak fares because earlier in the summer you had this perfect storm for various reasons, capacity being constrained and 10 percentage points below. it will catch up to demand. it has doubled in a short period

of time. fuel has pulled back a little. that will be somewhat set off by wage increases for staff. tom: i want to go from grand forks, north dakota 82 miles south to fargo. if i want to fly from fargo to new york, it is almost cheaper to go to minneapolis to fly out. is american aviation giving up on smaller cities? savanthi: not completely. i think fargo is probably going to continue to have service. our pockets that airlines are struggling of pilot supply in service. that will get resolved over time. it is for small cities, you will see maybe less frequency or in very small city instances maybe

no city service. the result is a pilot supply issue and a cost issue. it is getting hard to spread that around as wages move up. jonathan: savanthi syth on an industry we all have an opinion on. are we filing -- flying together next week? tom: i don't know if we rp right people haven't reached me on that. i got a thing that said you want to take a wagon train west and save money? jonathan: how does that save money? tom: if you get to kearney, nebraska, you just get to see the mountains in the students. jonathan: so you will take the train on sunday and i will see you wednesday or thursday morning. tom: it just beckons for you and me. jonathan: we will work that out. tom: shenandoah is there the

week after. jonathan: down 1% on the s&p. on the nasdaq, down 1.4 basis points. tom: since we started this epic show,. 1.08 on dxy. we are making jokes and it is friday in the summer and we are weight in -- waiting for the foliage to cac in -- to kick in. jonathan: equities lower. crude down 5.9%. kailey: how much is that a demand china story. it feels to me that is what is dragging down the entire region. expectations of chinese growth getting lower, 2.8% is what it is said they are looking for. by the pledges of stimulus they have been promising, the market isn't buying it.

jonathan: do you have any complaints you want to share? kailey: i will not check a bag on any flight. jonathan: i want to see my mom and she wanted to send me back with things and i said i wouldn't send it back. are you taking bags? tom: i am taking four or five. ♪

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>> the hard work the fed has been doing. >> we still think the fed has more to go and it also will ease policy last year. >> i do have competence the fed will do what is necessary and ultimately get back close to something like 2%. >> will real virgins come in 2023 where they are pricing rate cuts and the fed expected to hike. jonathan: really defensive friday morning. for our audience worldwide, this is bloomberg surveillance.

features down 1% on the s&p. the nasdaq down by 1.1%. tom: jane fully will talk about her foreign-exchange and it speaks volumes about the tensions out there. jonathan: rochester looking for another move lower. barclays pushing back saying we are set up from a reality check from chairman powell next week. and -- tom: some of the strategists can stop the market cold. it is not normal lazy summer weekend. jonathan: pushing back against all of this. price targets from the guy over

at jp organ. tom: are we going to see the third quarter right up september 26? jonathan: super defensive going into chairman powell friday. kailey: it looks like the only thing people want to buy is dollars. equities lower. risk is getting taken off of the table. there is a massive options, to $20 worth and that may add volatility and that has been largely absent for parts of this market. jonathan: and we have wrapped up earnings season rate it wasn't as bad as people expected it to be. kailey: it was a question if we were too pessimistic going into the second quarter. most companies beat expectations, but the bar was lower. going forward, are we starting to see more revision? michelson and morgan stanley

have been warning about that. jonathan: features down 1% on the s&p 500. on the nasdaq, down one full percentage point. yield higher by six basis points on a 10 year. euro-dollar negative 21.0059. -- negative to 1.0059. kailey: cap much bout the central bank story. there are a number of risks europe is taken. and in the u.k., there is risk in the form of labor. it is a some of the strikes that continues on the london underground. all of our colleagues will have

difficulty getting home today. easyjet on strike for the next three days, pushing labor to push for higher labor. we will hear from one fed speaker and where he comes down in the course of voices we have heard this week. is he more with jim bullard who said let's go 75 or take it easy and not overdo it. we will wait to hear from him. in commodities related to energy prices, a read on shale and supply and how much they are drilling. we have been focusing on demand in the oil market but about supply, are we still underestimated the constraints in the oil market? jonathan: i have a great video of us trying to get back to west london with the tube shut down and had to try to get on buses

and had no idea what we were doing. it took three hours. tom: but this is indicative of what we will see with inflation. jonathan: more strikes? tom: i think a primal scream it from labor. jonathan: features down 1% on the s&p. joining us is michael shaoul. it is been said to sell tech. you agree? michael: the s&p has had a powerful bounce and at a level where it is seeing the point back up. i don't know i would pick on technology but this is a market good look at and if there were stacks you hung onto in june and you don't for great about them, this is a reasonable chance to say goodbye to them. tom: you have always been so

thoughtful about what to do with a portfolio. do you have a prediction or is it the summer of unpredictability? michael: we are in the middle of significant tightening by the federal reserve and that is causing market panic. you have had i think a typical reaction. i am uncertain how long this bounce goes on for but i still think we have a period of significant volatility had of us before year end. kailey: the fed would like to see financial conditions tighten and that is what they are expecting for the broader economy that will operate with a lag and in theory it should be affecting the market and we have seen financial conditions getting looser. as the fed waits for the lag, will they have to be more aggressive to signal to the market we are serious and the

risk is ending up to tight? michael: it is a great question. i'm not sure the fed directly targets financial conditions but markets -- targets the market. the transitory effects have been delivered and they have a little leaf with inflation. for financial conditions, they reflect what i say about the equity market, down for approximately zero and a 50% recovery of the bear market and credit markets, where spreads are back to the high-end of normal. i'm not sure the fed directly targets financial conditions. if i am right and you have a period of volatility had a view, that is something that will fix itself. what i would say is the fed is

not scared of financial markets at this point. with that does is open the way to more aggressive rate hikes if they feel like doing that. back in june, the fed is looking at financial rockets and thinking they can get away the basis hike or not. jonathan: what we look for from chairman powell? michael: i think he will keep his options open and repeat the mantra that the fed is serious about halting inflation and will do what it takes, reverse mario draghi but the same quote being used. i think is going to try not to commit. he is not to be ben bernanke. powell understands that it is a tricky situation here and he will do his best to not say very much. tom: the truth is we don't care what you think about the markets we went through our surveillance

and ferro thinks he is taking over. jonathan: what has gone wrong? michael: think it is just a horribly managed organization with football itself. a shocking series of mediocre decisions at the most senior level of the club. the ownership should never have been allowed to buy. tom: how can they not sell its explained our asset with a capital gain? don't they have a moral duty to unload after chelsea? michael: i think the price chelsea got probably alerted some people in the household. i think they have always taken the view that sports is always valued more. i don't know. i would be delighted to see a change in ownership.

but i would rather be owned by a family event country. that is just my personal feelings. jonathan: michael shaoul there. tom: what do you think of him wearing a man city tie? it is confusing. kailey: you could take a moment that we also appreciate his opinion on the markets? tom: bramo would never say that. you have to toughen up, lao;eu. jonathan: bramo is plenty tough and is back next week. -- you have to tough enough,kailey. jonathan: bramo is plenty tough

and is back next week. hand luggage only. tom: some of the stories i invert this year are brutal. jonathan: checking a bag is a high risk strategy. tom: you have to say why? what is different now versus november 2019 in terms of the baggage? jonathan: they don't have the staff. tom: pay for it. jonathan: pay them more and then you have to also get the security. coming up, we will catch up with evan brown.

features down 1% on the s&p. from new york, this is bloomberg. ♪ ritika: keeping up-to-date with news from around the world. fed officials offering mixed signals about the next interest increase. the meeting is set for september 20, where the most hawkish fed, james bullard, backs a big will come another 75 basis points. kansas city's fed more cautious saying they have already done enough tightening. european intelligence officials say russia is probably shielding troops and equipment, a tactic that undermines the security of the nuclear facility plant, the u.s., inc. k -- u.k. have demanded it be inspected. the biggest producer of nickels used in batteries wants to be seen as a repository.

the president spoke to bloomberg's editor in chief. >> what we want is the electric cars, not the battery. we want to build electric cars in indonesia, from four to, hyundai, japan -- from afford -- from ford, hyundai, japan, cars. ritika: there has been no agreement. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> the fed doesn't know where it is that the world is very ambiguous at this point, and minutes of a meeting are a very poor way to convey a collective message. jonathan: on the same page as tom keene, the former fed treasury, live from new york city, alongside tom keene and

kailey leinz, i'm jonathan ferro. features negative a full percentage point. yields higher by six basis points on a 10 year. yields climbing, equities dropping, crude down by 2%, 88.59. euro-dollar threatening to break to parity at 1.0057. tom: a more broader -- or narrow trade index we haven't touched yet but getting there in moments. the bloomberg dollar index, a more complex she reads -- series showing strength on the dollar. sterling leading the way. we will be in jackson hole next week. it is not a lot of fun and games. it is 38 degrees and cold in the morning. we are lining up exceptional

guests. one of those scheduled not to speak with us is like the silence of the lambs, it is the silence of the treasury sick -- treasury secretary. jack fitzpatrick joins us. where is janet yellen? jack: that is a fair question. the biden administration pretty broadly has tried it to let the federal reserve speak on inflation concerns and lets the fed take the lead. janet yellen for her name recognition and prior roles has not been super vocal. that may be a product of the white house struggling to figure out how to talk about the economy lately. it is a bit surprising that she has not necessarily been a more high-profile cabinet secretary

i'm not sure i have an answer for why that is. it has been tough for them to figure out how to talk about the economy and when it comes to inflation, a lot of the time insert has been, well that is the fed. tom: i get that, but should she be taking a victory lap for the legislation just signed by the president? jack: it might be difficult for her to take the victory lap. for one, the administration is excited about it and ended up getting there in part by stepping back and letting the senate just figure out what they could do. maybe there will be more of a victory lap they had the bill signing but with congress out and many lawmakers there, they will have further events and talk about how they are implementing this. on the treasury stuff, it is a bit of a dicey political issue.

i don't thing the biden administration wants to play up the irs components of that that the republicans are campaigning on. i don't think that is something that lends itself to janet yellen taken -- taking center stage. i don't think it lends itself in a politically advantageous way to her taking center stage. kailey: the domestic politics is only one thing that president biden has to worry about but also geopolitics. we have one saying that vladimir putin and xi jinping are going to show up to g20. if vladimir putin goes, does that change president biden's plans to attend? jack: i don't know if they are going to back out but it is difficult to imagine the scenario entirely of president biden, xi, putin and given mine

volodymyr zelenskyy was invited and supposed to be there as well. it seems unlikely that the four of them would be there at the same time. regardless of exactly how the white house decides to respond to this, it is very clearly a failure from their perspective. they were trying to push for putin not to be invited and pushed for russia to be kicked out of the g20. clearly they have to figure out how to respond to something that is absolutely a disappointment to the white house. kailey: xi jinping and biden have issues of their own, specifically when it relates to taiwan. has policy shifted as we've seen more activity in the taiwan streets -- straits? jack: the policy may shift but right now the white house seems to be laying a bit of a game of wait and see it. not only was there at the

chinese reaction to speaker pelosi's trip but another congressional delegation that visited taiwan and military patrols happened again around taiwan. the white house has tried to not overreact to that, but it makes it more difficult for them to make a decision on lifting tariffs or any number of other policy items that would be difficult to figure out regarding china. it may lead them to find common ground, like on climate for example, where they can work with china. it is difficult for the white house to figure out exactly how their policies on china would change now because there are so many moving parts the last two weeks or so. jonathan: jack fitzpatrick from bloomberg. talented economists who have been invisible in the administration and right now is the time.

tom: it happens my basic take is that it is always the comfort of the president and all we can suggest is president biden is not comfortable. i am baffled by it. jonathan: there has been reports that she is frozen out of meetings. tom: i am biased here. what i love about janet yellen is when she gets angry her accent changes to central brooklyn. it just changes to her childhood. jonathan: i haven't seen her get angry too many times, tom. tom: i would make clear that the word she owns is the word "s lack." kailey: 5% reduction of the global workforce affecting 870 employees on wayfair. did you see the survey? it interviewed 700 executives

and half of them said they are planning to reduce headcount if they haven't already. jonathan: pretty brutal. futures down .9%. tom: i was watching the doctor as video. jonathan: on the nasdaq -- the dr. oz video. jonathan: on the nasdaq, down 1%. this is "bloomberg surveillance" ♪

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jonathan: from new york city, good morning. -1% on the s&p, down 1.04% over at bankamerica coming out with all the stats. for names, microsoft, apple, amazon, and tesla are making up 30% of the move we have had off of the lows. all 17.4% of it from the peak

not so long ago. tom: 7.4% apple, amazon 3.5 percent, tesla 2.1%, 13%, make it 19% of the index. jonathan: big moves from those for stocks as well. looking back at the last 43 rallies of more than 10% since 1929 and identifying the fact that they average about 17.2%. that is the average bear market rally of more than 10%. this 17.4% one he is saying is a textbook bear market rally. we are fading right now. tom: we are fading now and we are doing it. jonathan: we will get to the fx market in a moment. we start with the bond market. talked about where we closed out

last week 3.24. we faded after the fed minutes building weight back into the front end of the curve. of 6 or seven basis points on 10. you can see that against cable, against euro-dollar. pointing out this morning that we are not priced for a recession at all. the move down to 90 on euro-dollar. 1005 four, just about holding on the parity. tom: i wonder how the central bankers are going to adapt and adjust to the dollar and multiple currency dynamics. another tangible and they will be in the back of mind at jackson hole. jonathan: the weakness through the fx channel exacerbate

problems they have. then you get a grip on that again. the 50 basis point hike is real potential. tom: we need madame lagarde at jackson hole. jonathan: at least we cleared that up. let's get you some moves with kailey leinz. kailey: beginning with bed, bath & beyond because it is an absolute plunge. one man is to blame, the founder of julie dotcom who is now no longer a shareholder in bed, bath & beyond because he sold his entire stake. the fact that he was a shareholder is in part what drove the rally in shares that we have seen. the stock was up 400% from late july through wednesday then down 20% on the news that he might sell, he did and the stock is down 43% and you are seeing air coming out of the meme stock

trades. that is one highly speculative area of the markets. another is crypto and given the risk off sentiment that we are seeing bitcoin is sinking. down 8% and that is weighing directly on crypto equities like the exchange down 9%. there are earnings stories though today will be the wrap up of earnings season after deere reported this morning, lowering its profit outlook due to inflation and supply chain issues, down 5.4% as a result. even applied materials cannot get a gain even though the revenue guidance was better than expected. it is manufacturer of equipment that makes semiconductors. even though the outlook is softening there feeling bullish for their revenue picture, but that's not enough to do it for the stock on such a down day. it is flat before the bell. tom: the vix now down a full stick. a higher vix showing angst out there. evan brown is with us as we

calibrate into september. i need to know if it is a time to sit tight or time to be supple? evan: you know, i think it is a time to be supple. there is so much macro uncertainty right now. you have start elation in europe and the u.k.. you have inflation in the u.s. but we don't know where it will land. a lot of moving parts with central banks. it's not the time to be taking vague absolute directional bets. jonathan: where does that leave the bond market? not just equities? evan: with bonds, yields can drift higher, but it is more about the flattener. you have the situation where growth is slowing but the fed is tightening. two different moving parts and

that should put pressure on front end yields. looking further out, you have an anchor on long-term yields because of what is happening in europe, but particularly in china. we are not seeing the stimulus that we expected to really take hold. the small interest rate cuts are not going to be enough to boost domestic demand. that is going to put a lid on how much u.s. and global yields further out the curve can grow. jonathan: what does that leave for dollar? evan: more dollar upside. you have this -- a fed that will have to continue to raise rates, or at the very least keep sending the message, and send the message even more that the cuts priced in in 2023 need to come out and the easing of financial conditions that we see means that the fed will have to keep pushing back more. in the meantime you have a slowing china that is weighing

on global growth will stop u.s. growth is doing ok. in europe, stagflation, it is very difficult to get real interest rates higher. so, real interest rate differentials are favoring the u.s. and the dollar goes higher. kailey: to that point, the headline across the terminal a few minutes ago is that the yuan is that the weakest level since 2020 on the widening rate differential. as we talk about growth in china, slowing from the second largest economy, stagflation in europe which is in crisis, how much of that has a bearing on the federal reserve? jon made the point that chairman powell might not want to bring up the rest of the world because that runs the risk of being seen as more dovish given how brutal the picture is elsewhere. evan: that's a good point. the weakness in the rest of the world, particularly the strength of the dollar that has come from that, is putting downward pressure.

we saw that in the last inflation print. that is helpful for the fed in achieving its price stability goals, but the focus is going to be shifting a lot more away from the core goods inflation come the temporary effects coming off, but then still stubborn services inflation. powell we can acknowledge that improvement from core goods happening in the rest of the world, but he can't lose sight or deemphasize a tight labor market, rising wage growth, rising shelter inflation, services inflation. navigating that is a tricky message. kailey: as we talk about the dollar and the strength we are seeing, i wonder if there is another way to hedge? i'm looking at the markets and you don't want to buy bonds, stocks, commodities. the only thing anyone looks like they want to buy is the dollar. is there another way to play

defense in this kind of market? evan: i think that the main way to play defense is through the dollar, but also in less cyclical. you can talk about health care, you can talk about factor-wise minimum volatility which is kind of a risk ivanoff sector but not as expensive as staples and utilities are. those are interesting ways to have a little defensiveness within equities outside of fx. jonathan: thank you for being with us, sir. evan brown of ups asset management. it is a difficult morning with features down 1% on the s&p. we had a couple of mornings where we had negative moves in the morning and then they faded into the close. the yields are higher, stocks are lower. we are up six basis points on the 10-year. tom: is the gloom now different

than the rationalization of gloom june 10 or 12th? jonathan: the gloom has changed in that the data is ok. the gloom has been pushed down. the same debate is around the federal reserve. how long do they stay there? that is the big debate around 2023. we keep playing the clip from j.p. morgan. i think he's right on the money. that's the split. the fed saying that we go and we hold. the market is saying you will go only so far in then you start cutting will stop they are back against that. tom: for our viewers and listeners who have invested in the stock market for retirement and serious issues, why is this chit chat different than june 10 of this early summer? jonathan: i'm not sure it has changed except for the price of the story has changed. kailey: i would argue that the thing that has changed is earnings season happened and it was not as awful as anyone expected. i wonder to what extent this

rally is on better fundamentals versus just hoping about the federal reserve because both were happening at the same time. jonathan: payrolls blew up the story in a massive way. i think the real one that added real spice to the division right now or the outlook is payrolls holding up the way they have. when you look at claims climb and this theory kicks in, which is now we see the weakness in the labor market, just like that. tom: we will get claims sitting on the lawn at jackson hole lodge next week. what if they go better? it is a lower statistic. i got so much vuja de. the only difference is back then the yankees were winning and now the yankees are not winning. that's the distinction. jonathan: do they lead in that division? tom: i don't follow yankees, but

the red sox were losing then and they are losing now. jonathan: futures down 1% on the s&p. i'm jonathan ferro. lisa is back on monday counting down to jackson hole, wyoming. this is bloomberg. ♪ >> keeping you up-to-date, a judge says the part of the fbi affidavit used to get a search warrant for donald trump's estate should be unsealed. the judge has given the justice department a week to propose what should be blacked out. these organizations and others have asked it to be released. the first week of covid infections since mid-may. outbreaks in vacation hotspots that risk spreading across the country. there were more than 18,000 new infections in the week that ended on thursday. if your company is not planning layoffs the one next-door is according to pwc. it polled 700 executives and

board members and found half are planning to reduce headcount. 52% implemented hiring freezers. deere cut its outlook warning that supply chain issues and higher production costs. it has been able to offset some of its problems with price increases. california-based pimco is using its deep pockets to buy assets heard by the cost of. the firm has spent $2 billion to buy leveraged debt backing consumer companies that struggle to offload. pimco's broader strategy to capitalize on prices. global news, 24 hours a day on-air and on quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> the market has been getting inflation has been better since it was very bearish. we've had better economic data. i don't think that these issues have been resolved, and we still think that the fed has more to go, and that will also ease policy less year if they want to say serious about inflation. jonathan: we need to catch up with this market now with tom keene and kailey leinz. i'm jonathan ferro. the equity down .9% on the s&p, the nasdaq down .4%. the price action is elsewhere. gilt yields are higher, bund yields are higher, italian bond yields are much higher i 18 or

19 basis points. let's call it 350. on the back of some of this the dollar is ripping through. sterling is down .9%. the euro-dollar is holding onto parity. tom: it is to use language carefully i will not say that sterling plunged or sterling in freefall, but it has elements of that as we approach the 117 level. the north american complex, the loonie and peso, 20.25 gets my attention. jonathan: maybe with the exception of the swissie against the dollar is basically unchanged on the morning, but that speaks to the defensiveness elsewhere. tom: we are watching euro-swissie and will continue to do that this morning.

futures -39. julian is definitive on oil. he writes for bloomberg opinion. he is an oil strategist describing his academic acuity in the market. in supply and demand, what is a distinction that you would write about next week? julian: i think next week it will be about two things. it will be about the will they come along thank revive the iran nuclear deal and it be about outlooks for the broader economy. this side of the atlantic we are in real difficulties. tom: a huge question for me is, is it doable to measure demand? or is it entirely after-the-fact where you have to wait for the time to go on to see what the demand did? can you get out front on demand analysis?

julian:julian: i don't think you can get out front, really, on measuring demand. even if you look at trying to measure demand historically, that is notoriously difficult. you see revisions to demand five years more into the past. it is always on demand more of an estimation game. so, people will be looking at all sorts of outlooks of other things to get a read on demand. kailey: we focused so much on demand in recent weeks given the narrative of growth slowing. are we overlooking how constrained supply still is? julian: there is certainly in some circles a concern that we are doing just that. bloomberg tv had this interview earlier this week with the new secretary general of opec who said we have no spare capacity,

or almost none. we have european union sanctions on russian crude due to come into effect in december. we have had a rebound in the last month or so in libyan output, but that remains fragile. that could be gone again in almost the blink of an eye. we are still in what has been a mercifully quiet hurricane season in the gulf of mexico, but that is still not over. i was on the coast of florida, the coast of the louisiana border last summer and i ran away from a hurricane then. i caught the edge of one. a big hurricane could tear through and do big damage to production. there is a lot of fragility on the production side. jonathan: i want to wrap up with the reality check on the european front come september after all of the summer vacations are completed and

hopefully the likes of spain, italy, portugal, and greece can get as much money as they can because i am hearing that we are going to go through serious effort to reduce consumption. what do you think we need to pay attention to? julian: i think many of these ideas are around natural gas rather than oil. electricity too. one of the things we are seeing is more oil being used to generate electricity in industrial heat where you can. saving energy is important. i think we are going to see people turning the lights off in office buildings. people turning the lights off on iconic buildings that are flood lit. we still don't seem to be seeing a great deal done to retrofit insulation in homes. certainly not in the u.k. and i don't think in other places.

that is a longer-term solution, but it is an important one. we need to start getting serious ahead of this winter about saving energy, about using energy more efficiently. jonathan: four-day workweek, is that what we are headed towards? julian: i don't see that yet. working from home more perhaps is a real possibility. i think the pandemic has shown that for many people that is a realistic possibility. we may well see people asked to do that again for a very different reason. jonathan: julian lee with the latest out of london. the prospect of real effort to curtail energy consumption in europe later this year. tom: nothing about this is going to be funny. the only thing that i can come up with is what landau said the

morning of the invasion, the war in ukraine. he said you will see a fiscal impulse from europe that no one living understands. that is where we are heading. jonathan: the pandemic playbook is there in a way, this is just a different issue. kailey: it is very different. demand and be reined in by people working from home and not commuting, but the seismic shift in supply and ability to access energy to power our communities, working from home cannot solve it all. the demand reduction to get consumption down to levels that can be matched with supply and inventories available will be a hard effort. jonathan: monetary and fiscal policy will look different than what they looked like in the spring of 2020. we are down .9% on the s&p. towards the weekend it looks like we are about to close the week with a week of losses.

coming into friday by positive 1%. futures have eaten into that. we are down .9% on the s&p. the nasdaq 100 let's call it one full percentage point, tk. tom: we have heard people say stocks move the market. the spx and the dow i don't think have ever been wider. stocks with a market cap of 19% and four of the 30 dow stocks make up 29.4% of the index. that is ridiculous. that is ridiculous. jonathan what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work.

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>> the markets are focused on the idea that the economy is softer and the fed is not quite done yet. >> we have seen stocks bounce back and some of the most speculative areas of the market bounce back and that is going against one of the things the

fed is trying to accomplish. >> i don't see how the fed will be able to bring inflation down to 2%. >> the fed never stops hiking rates when the real fed funds rate is negative. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. kailey leinz is in for lisa abramowicz. don't ask the cdc if the pandemic is over. ask mary barra and general motors. it's a wonderful symbol of how the nation moves forward. jonathan: it has taken time for them to catch up. they hoped to pay out in spring of 2020 and they are back with nine cents a share resuming the share buyback after a two-year hiatus. if you want to go there it is the end of the pandemic, i guess, on that front. tom: the word for me is opportunistic. plan to resume opportunistic

share repurchases. we were told that he thinks that tax on share buybacks doesn't matter. it is noise. mary barra is doing a tech equivalent. jonathan: a much, much smaller size because the tech firms are doing it at a bigger level. they have rallied hard off the lows. we start to fade, down .8% on the s&p. the nasdaq down one full percentage point. the -- tom: we do it within a market that is challenging. can we jump to fx? let's talk about the import on a summer friday. these are markets on the foreign-exchange move. kailey: this is super defensive end we have seen the dollar rip into g10. we've seen that and it happened this morning. sterling weakness.

euro-dollar -3%. what we are all bracing for is not pretty at all. tom: kailey leinz is all in. i looked at the emerging market index and em enjoys strong dollar as well. kailey: or it is getting brutalized by it. every asian currency is weaker against the dollar. the south korean won hit a 13 year low relative to the u.s. dollar. a lot of it has to do with not just a haven demand for the dollar but the weakness potentially coming from china. the chinese yuan offshore weakest levels since 2020. tom: with the stock blue man stock reset we will get to patrick armstrong -- stock blue and -- stock bloom and stock reset, we will get to patrick armstrong. maybe that's a signal with the trading day looks like. kailey: in line with risk -- jonathan: in line with risk more broadly. yields are much higher and that

could lead to struggling on the s&p and the nasdaq. it is all about next week, chairman powell next friday in jackson hole. tom: i wonder if we are certain? i agree, jackson hole and all that, but maybe there is other noise? i agree, it's about europe, and i noticed that the netherlands net gas even out to new -- jonathan: how does chairman powell navigate those issues? tom: this is the heart of the matter. over a beverage of choice last night it came up that he is giving a speech central banker to the world. he doesn't have a choice. jonathan: it is a dovish speech given what is happening in china and europe. tom: he is not going to throw lagarde and bailey under the bus given the war in ukraine. it will be a speech about the pressures they face. right now and important interview with patrick armstrong. patrick, i want to cut to the chase most of the level of gloom

approximates early june. can you belong equities? patrick: i am net long equities where i can be share of mandates. i have 50% on my portfolio, long equities, 30% in short. they're extremely cheap stocks out there that i have not seen in decades. it is paying me a 12% dividend deal, buying back shares. it has a lot of cyclical risk, rates are going to collapse, markets are going to collapse starting today. i don't think the rates collapse until next year. supply chains are being challenged, a lot of bottlenecks. there are a lot of goods that need to be shipped. oil and gas stocks, the same scenario but not to the same extent. markets are pricing oil plummeting in the future. i don't know if it will. we haven't seen demand destroyed

and supply is not coming on stream. jonathan: it sounds like you are long inflation. patrick: i think that inflation has plateaued in the united states and the strong dollar and lower commodity prices will continue to go down in europe and the u.k.. commodity prices have not following the same way because currencies have fallen into and electricity prices are rising. i think that you have a lot of stagflation forces remaining in europe where the u.s. is probably past the worst of it. jonathan: how bad is the story in europe and how bad relative to the price of the story in the market? patrick: i don't think that the market is really priced in how bad it can be in europe unless something dramatic changes were you do get russian gas into europe again. manufacturing is going to slow and hiring is going to slow and there will be brownouts and blackouts and people told to work from home. those things are negative for the economy, obviously. germany is going to solve its

reliance on russian natural gas, just not in 2022 in the winter of 2023.it will be another year and a half before they can get the measures in place that they are not reliant on russian natural gas. kailey: one of the lines in your note that stood out is the market has the ecb hiking while the fed cuts in 2023... no way. what is more likely, neither is hiking or both are? patrick: neither will be hiking when we get to 2023. the u.s. economy is slowing. the employment still looks robust. 29% of small companies say they are having trouble filling job openings. there is evidence of layoffs coming with pwc surveys talking about half of companies doing layoffs next year. but it is not being able to fill the job openings they have an the fed will be hiking in september in maybe once more after that.

while the economy slows and the rest of europe falls into a deep recession, i don't think that the fed will be doing much in terms of hikes next year but there is no way that the ecb will be hiking with that backdrop. kailey: i understand how it could lead to the federal reserve backing off, but does that leave the job on inflation undone? patrick: powell characterized were rates were after the last hike as neutral. i don't think that could be scripted. i don't think it is at neutral. another 75 basis points you could say it is possibly at neutral. if the economic situation does get weaker and the rest of the world and you have a really strong dollar, that continues to move down inflation. a strong dollar means that all of your imports are a little cheaper and that is disinflationary. you can see that scenario where the fed does not have to hike next year because of the dollar strengthening and the rest of europe is probably in a pretty bad economic situation. jonathan: how useful is this conversation around neutral,

such a fussy concept. they are talking about a longer run neutral level. how valuable is that conversation right now? patrick: if you get any insight into what the fed thinks is neutral, that's important. that will guide you on where to put policy. i don't think that powell believes it is at neutral right now. you have seen a lot of liquidity in the markets, you have seen meme stocks rallying, and you have not seen the fed meaningfully reduce its balance sheet, another thing they indicated they would do which hasn't happened yet. we are neutral is is what no one will know. even historically you don't know where it is, but it guides the fed in what they are trying to achieve as they are driving half blindfolded. jonathan: good to catch up. patrick mentioned the pwc survey. we have mentioned it a few times . let's go through it. they surveyed 700 u.s. executives and board members across a range of industries. half of the respondents said that they are reducing headcount

or plan to. 52 percent have implemented hiring freezes. more than four in 10 are resending job offers. a similar amount are reducing or eliminating the sign-on bonuses that had become common to attract talent in the tight job market that we have been talking about for the last couple of years. tom: the selected industries are still booming, but they are selected. it shows right over to the political ballet. you didn't ask me about the neutral level. i believe in newtonian 19th-century economics. jonathan: can you translate that? tom: i believe in plug and chug economics, the plug and chug of a neutral equation is a comedy. there are too many moving parts and the valet of neutral policy. jonathan: still the pushback from mohamed el-erian? tom: i believe that you have an

equation and you put in one or two things and maybe some cocktail talk. you put in three or four or five things you are assuming -- it is just silly. kailey: have you noticed that tom's cocktail talk is different from ours? kailey: it would not call it casual cocktail talk. geometry. tom: we are doing two things this summer. i talked to john about this. the effort on stuart england when the pharaohs first came overcome a really interesting about the end of the civil war. i am revisiting man skis thermodynamics because there is movement there which shows how stupid the study of the neutral rate is. jonathan: i am looking forward to the books. tom: that is what you do when the red sox are in last place. kailey: can i get the cliff notes when you are ready? jonathan: we will all take a round of those notes. good morning to you all. it is defensive out there with

yields higher by eight basis points. coming up on this affects market the dollar is stronger. james foley. -- jane foley. this is bloomberg. >> keeping you up-to-date, fed officials are offering mixed signals. there to-day meeting is september 20. one of the most hawkish policymakers james bullard backs a big move. he told the wall street journal there should be another 75 basis point hike. the kansas city president was more cautious saying that the fed has already done a lot of tightening. xi jinping and vladimir putin are planning to attend a group of 20 summit in indonesia according to the indonesian president in an interview with bloomberg. their presence which -- would set up a showdown with other leaders opposed to the invasion of ukraine. intelligence officials say that russia is probably using a nuclear power plant in southern

ukraine to shield troops and equipment undermining the security of the plant. the nuclear facility as europe's largest. shares of bed bath & beyond are plunging and investors reacted after news that ryan cohen has sold his stake in the retailer. the retail investors are feeling the pain. footlocker is surging. the athletic retailer said richard johnson will retire and be replaced by the one who ran global marketing for mcdonald's. global news 24 hours a day on air and on bloomberg quicktake powered by more than 27 hundred journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> i think they will continue to raise rates. i don't think they will take a pause anytime soon. i don't think they will get it exactly right. i think if they are going to make a mistake it will be on tightening a little too much because they really want to make

sure that they bring inflation down. jonathan: the former federal reserve governor from new york city. this morning with tom keene i'm jonathan ferro with kailey leinz. here's the price action, down lower by .9% on the s&p 500. on the nasdaq 91 full percentage point. yields are higher by eight basis points, higher in europe. look at foreign-exchange. the euro-dollar is hanging on to parity. sterling is breaking down for a third straight session. a weaker pound sterling. against the dollar, 11830 seven. -.8%. tom: our interview of the day, jane foley. let's get to it. jon has a lot of technical questions. i have one that is similar. there is a vector of weaker sterling and then it rolls over. at what level is the tipping point you have in your head

where things fall apart for governor bailey? jane: there is pressure on governor bailey already. liz truss looks like she could be the next prime minister of the u.k. we could be heading down and -- tom: i don't mean to interrupt, but if we go to 114 is that a controlled trend, or to borrow a phrase in politics, does it unravel? jane: at 1.15, 1.15 that depends on the dollar and specifically euro-dollar. if euro-dollar dips, and it has been dipping, it is difficult to hang on. it has been dragged lower. that said, there is a lot of sterling weakness. if the pound has been suffering i would say for the last four or five years, since the 2016

referendum the pound has never been able to recover. investors are still skeptical of the post-brexit u.k. economy and government that we have had that hasn't been able to convince investors to come back in. the u.k. has a deficit. they are looking at the u.k. and not liking what they are seeing. the study is likely to adjust lower and that is the situation that the pound finds itself in. without the growth, the investment them i think sterling could remain weak for a while. jonathan: do rate hikes make a difference? you are saying they don't? jane: i don't think they do. may we had an interest rate hike then, 25 in may, and sterling dove. the reason is because the bank of england at that point in its quarterly review downgraded the inflation -- sorry, downgraded the growth number. if we go, fast-forward to august come in the next quarterly review, this is the one where we

have the governor saying that we will have a five-quarter recession. sterling reacted badly. if we think this is about lack of investment growth in the u.k., investors need something to hang their hats on. they need to see improvements in productivity and growth. that is not what they are seeing now and that is where sterling is really weak. kailey: the boe is in a tough spot. the ecb is too. there is a question if they can do anything to support the euro. if we get a break of parity again, where the bottom? jane: if we were to break parity there is every reason we could fall fast towards 95. i think you are right to make some comparisons between the bank of england and we the ecb could find itself in a few months. if we look at the situation in the euro zone it is about energy. we know that. we have blackouts in germany's

industry groups over the winter months. we have the market panicking about what that would mean for growth, the lack of growth in the euro zone. that would not necessarily do anything to bring inflation down. we could have an hawkish ecb in that scenario.that would not be a scenario which would be beneficial for the euro. again, it could be that the growth worry overtakes the outlook for the currency over the hawkish nest of the central bank. kailey: there is a question of causation. is it weakness of the euro or the strength of the dollar? on that point, where do you think the peak is on the dxy? jane: i think we will remain strong for the next six months. i think you are right. if we look at the g10 currency performance today, the euro is holding in relatively well. actually, better than many of the g10 peers. this is about dollar strength. there is euro weakness and the energy story is important, but this is dollar strength.

oral while the dollar has these two-pronged -- for a while the dollar has these two-pronged factors driving it again that the fed could be higher for longer in terms of interest rates that may be in needs to keep interest rates higher next year in order to really get the inflation back in the box. the other factor is safe haven. at the start of the week we had a lot of poor chinese data. that is bad for emerging markets and world growth. that is part of the attraction of the dollar. the safe haven flows. both of those things together have been pushing the dollar higher. i don't think the dollar is done yet. jonathan: what is the downside when you take out the mid-july lows? jane: 115, 114. we will certainly see there, but

it depends on where euro-dollar goes. it is more of an equal battle between the poor fundamentals in sterling and poor fundamentals in the euro. the guide will be euro-dollar. tom: people love this. i did a long interpolation of eurosterling over sterling dollar. 111. if you get sterling to strengthen against the euro as ms. foley talked about it roughly interpolates to 111. jonathan: big numbers in the mix if you're just tuning in. equities are softer. we are down about 1% on the s&p. seen it many times on the nasdaq, down 1.2%. there is dollar strength, with euro-dollar claiming to parity. sterling is clinging on to 118 against the euro-dollar. tom: it makes it all the more interesting. 117, 1 16, and the degrees of freedom. where are we on the election?

thank god it is shorter than the u.s., but is it a big weekend? jonathan: we will have this wrapped up by the end of the month into september. into september we will have it ready to go for you. we could get a leadership contest, maybe not an election. tom: maybe we could have a crowning of the prime minister with the premier league visit. the fall foliage -- jonathan: we should skip school on monday. that is what we should do. that is what we should do. kailey has the at cdw, we get if your network power goes down, your business goes with it. recording: thanks for calling, we are unexpectedly closed today due to... cdw experts can keep you up and running with an apc smart-ups lithium-ion ups from schneider electric. it offers cloud-enabled remote monitoring and three times the battery life, so you can get the performance and certainty you need to stay open for business. for resiliency at the edge,

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>> buy for new york city this morning, good money to you, lights on the data and we are counting you down to jackson hole wyoming and annual fed get together. chairman powell set to speak 10:00 a.m. eastern time next friday. good morning with tom keene and kailey leinz, i'm jonathan ferro. we're down s&p, nasdaq 100, 1 point one. equities south, yields having north, 296 fit --

euro-dollar 10 053 and commodities softer, crude lower, $89 a barrel. 1.65% down on the day. tom: currency market is moving. we will see what we do in the next one hour of the market opened dxy open 108. we are sterling, 11831. we will speak to him today powell speaks and the day the fed will change to next thursday. morgan stanley will join us and they will be cool, calm, and collected and we're thrilled they could join us this morning. your note is frightening, the brewing storm you talk about, sounds like winds of war from 1939 in all. define the brewing storm. what is the distinction of this august of 2022? >> i think for markets, august is always a little quick to the

moment so you will see all sorts of [indiscernible] but when it comes to the macro front, you have three key economies in the world, the u.s., europe, china, and china we know is struggling. they had a contraction in q2 and got this housing problem they're trying to solve. the pboc just had to ease policy , and a bit of a surprise move. we think beijing, through various policy, will come to the rescue but the question is when does the inflection point happen and do you get a big rebound or soft? with the euro, you have this restriction in gas flow from russia's invasion of ukraine pulling the european economy. we have a baseline view of a recession in europe, q4 being outright attraction, he won being another detraction so that is not great. right now, pretty solid. we have retail sales report in line with expectations that be

consensus a little bit. knock on perils was strong one 500,000 but is good news good news in this case? i don't know. they need to slow the economy down so the stronger it is now, the more frightening it gets. tom: we always look at our guests and we figure out from the back of their bookshelf what they are thinking and it is good to see you have tony chris anstey of -- what does it tell you? seth: i think the bond market is struggling about what is happening. we saw the sense of relief in markets when we got cbi tipping over and when the market heard the fed saying we are taking a balanced approach on both the economy and the inflation paired with the market did not hear enough of is the way inflation over the next two years is going to come down to the fed's target

only enough to get enough slowing growth. as a result, we think the peak rates of the market priced it about right but cuts the market has in place for a lot of next year, that is not consistent with our forecast. kailey: on that point, the market thinks the fed is going to get to the terminal rate and quickly thereafter, down from it. we have been having the conversation all week as to whether that is true. how long do you think they have to stay up there? seth: how are baseline forecast has been a bear for years so that you peak rates in december and the first grudging 25 basis points easing off in terms of a fed cut in december 2023. the short answer is no one knows for sure. we think the u.s. economy has a fair amount of momentum behind it and more importantly as i said before, they need to slow things down a lot. they need to take job growth from 500 per month, closer to

100,000 per month or below, in order to get the real underlined trend inflation down so they will have to stay tight for a while. kailey: how low do think realistically inflation will get? is 3% the new 2%? seth: sadly this is where you get the a head of economists talking about the two measures of inflation, i think three p sent -- 3% on cbi is possible. i do not think the fed for pce inflation, i do not think they will be happy landing at 3%. they will be happy when he gets down to 3% if it is on a downward trend, but they will not declare victory if it is hanging out at 3%. tom: frame your and allen's enters x-axis. to me is the now, now, now of how policy will move. is this a six quarter, each quarter, or 12 quarter path we are on -- eight quarter, or 12

quarter path we are on? seth: that's a great way of phrasing it. i think one issue important for everyone to keep in mind is that monetary policy does in fact work with the lag. we know markets are pricing in peak rates close to where we think the peak rate is, just over 3.6%. in terms of actual drag on the economy from that policy stance, it has not shown completely at. we see in housing it is important and we will see it in durable goods and we will see more in durable goods but that has to play out so it is not what is going on right now that matters. it is as you say what happens over the next two quarters, over the next four quarters, and ultimately over the next six. tom: how do corporations and their investment react to a 4% or 5% inflation? in the united kingdoms, everyone from liz trust to mr. thune i suggest there is a dearth of investment in the u.k.. what we see a dearth of

investment in the united states? seth: i do not think we will see a dearth of investment but we should by all expectations see a slowing in that investment spending. when you see in the macro setting specifically, business investment spending tends to follow the overall trajectory of the economy. so you're right the slowing in housing in durable goods spending and with it slowing in jobs leads to an overall slowing in aggregate demand, then businesses should be looking around and saying there will be less of a need for that aggressive investment spending. i do not think it drops off of a cliff. i do not think we will have a massive shortfall. the u.k. has its own idiosyncratic issues, let's say. we should see things are slowing down as aggregate demand flows down and pay attention to that. jonathan: we all know morgan stanley research there's a lot of it on this program. i'm wondering of course when i receive the note that says

global recession is the base case. how close are we to you sending that note? seth: the sec would get mad at me if i previewed forthcoming research. we definitely had a global recession and one of the scenarios when we put out our midyear outlook in april and we are very much moving closer and closer to that scenario. the gas situation in europe a matters a lot and we have a recession in europe as a forecast. there is clear downside risk to china from the housing situation that has gotten worse since we wrote the note so we are moving in that direction. i think it is too soon to make a call. tom: what this means is carpenter has to publish before next thursday. jonathan: that's true. [laughter] we needed before jackson hole. awesome to catch up. seth carpenter there of morgan stanley. in the midyear outlook for morgan stanley, they talked about the prospect of a global recession. we are getting closer to that bear case i think for a lot of people and the surprise to the downside, we are not talking

about the states, europe has been a basecase problem for a while now. the downside is coming out of china. tom: i will do a shout out to our good friend allen's that in her giving us flyfishing lessons from jackson hole. she was transitory and to her great credit she turned on a dime in the spring of i think last year, i can't remember. jonathan: sure. tom: but it was amazing. she said this is not what will happen. jonathan: you will never see me, at least i hope you will never, go to an economist and strategist for being wrong. i'm interested in the process. how it is developing. my frustration is something out of jp morgan, the line from the note yesterday seemed to take a dig at some of his peers. clearly something changed this year, the start of this year, particularly with the invasion of ukraine by russia. the policies in response to

that, prospect of european recession, these were not on the table as a base case in the way they are now and things change and you have to adapt a framework and think what will happen. that is just normal. that is the process. tom: it is the grace and humility because people are wrong. i think jim cramer at the death star has been really good about this. it is like baseball, you are walking back to the dugout, 60%-70% of the time. people are wrong a lot. jonathan: is this the red sox? tom: no, the red sox are walking back about 74%. they are rebuilding. they are rebuilding. this is how tough the sport is. to the points, is man u rebuilding barry:0 a cost a lot of money to rebuild -- rebuilding? jonathan: i cost a lot of money to rebuild. they have 10 days left to try to rebuild. good luck to them. tom: is that like when the trading will end. jonathan: when the window

closes. tom: i did not know that. i'm learning every day. jonathan: futures down on the s&p, defensive on the nasdaq. who are they playing? tom: somebody i can't pronounce. jonathan: the big game is then monday, right? tom: yeah, god be the big game. jonathan: thank you for being with us. kailey: my pleasure. jonathan: putting in the actor shift, we appreciate it. -- extra shift, we appreciated. tom: she is smarter than us, watch. kailey: i learned the most about the fall leaf pattern. jonathan: that is what people tuned in for this week. tom: most of what she got was from hate mail from -- got was hate mail from virginia tech. jonathan: i will catch up around the opening bell. a stacked show coming up. erik knutzen - heuberger berman group

esty dwek - flowbank sa dan suzuki - richard bernstein advisors. from new york, futures down, this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world, i am ritika gupta. part of the fbi affidavit used to get a search warrant for donald trump's estate will be unsealed. the judge and gave the dusted -- judge gave the justice department a week to propose what should be blacked out. news organizations and others are -- if your company is not planning layoffs, the one next door is. that is according to a consulting firm that pulled more than 700 u.s. executive board members and found half said they are reducing headcount or plan to. 52% and lamented hiring phases. starting september 15, and automaker will pay a quarter dividend of nine cents per

share. gm halted its already eight sent payout in the early -- 38 sent payout in the early [indiscernible] the company warned supply chain issues and production costs. they have been able to offset some problem with price increases. a california faced fund manager, pimco, is using his deep pockets to help with the cost-of-living crisis. it set $2 billion -- global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪

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>> after weeks, the morbid -- market has become more dovish. has it undone the work the fed has done? to get back control of the situation, and this talk about hawkish gains. tom: that's the chief strategist principal global investors with all of the different opinions we have seen this week. kailey leinz and tom keene, lisa abramowicz scheduled to be off until monday, a 50-50 chance, we will see her. jonathan ferro is going off to another property. right now it is perfectly timed on a friday in august where you need to recalibrate for september and beyond. barry ritholtz joins us, with master in business, a wonderful

podcast. barry, i give you the greatest credit for writing about the agony i faced a few years ago, 1975 and 1981, which was a comedy of defining, beginning of a bull market out of her -- of a horror of 1973 in 1974. you write really really -- write brilliantly. it secular a long term view of the market. barry: secular means there are massive forces at work in society, in the economy, in the markets, in the labor will, in the consumer spending world, and history shows us that, day today , it's very noisy. the world moves in big ways. my favorite examples, post-world war ii from 1946 to the mid-1960's. the build of suburbia, the rise of civilian aviation, the

electronics industry, on and on, 40 million gis returning home with the g.i. bill and getting educated and getting good jobs. that does not last a quarter or year, that goes for decades. tom: so where are we now? where is our g.i. bill now, where is our nifty 50, where his modern capitalism compared to the years we lived? barry: so we measure the start of able market when a trading range ends and markets make new highs. the secular bull market that began in 2013 when all three indices surpassed the pre-financial crisis high, that ran until we hit an externality, the pandemic lockdown. i do not believe in the 20% it is a bull or bear market, that is a media -- made up media number. there is no data saying 20% is significant. you have 20 figures or toes so

therefore we can look at 20%. when i look at what took place during the pandemic, normally a 34% drop, if it is caused by market or economic factors, is usually enough to say whatever preceded is over, but this was a meteor from outer space. this was any externality unrelated to markets or the economy. it had massive impact on that so when i look at that as an externality and look at the $5 trillion in three different cares act's under two presidents, that looks to me like a giant reset and it is hard to be bearish there. the secular impact of all of that money will have a huge impact for years to come. to say nothing of the three or four other spending packages including the infrastructure package, which will be in place. we are looking at the first half of the year selloff as the cyclical bear within a longer

secular bull. and what is 20 percent to 22% between friends when you are already up 300% of 400%? and all of the underlying foundations are positive. maybe we see a change from the fed, the rise of inflation, rates going higher, and perhaps a recession next year, or later this year. so that could help slow down this secular bull market, but from my framework, it is hard to look at this and say we are in new bear market like 66 to eight or 2000 to 2018. kailey: something tells me you won't give much credence to the idea over the attempt to define whether this is a bear market rally or not that we have seen over the last two months. whatever you want to call it, it has been a rally, a surprisingly strong one, one that seems to be going against the federal reserve. i thought we were not supposed to be fighting the fed?

what do you make of what the market is not hearing from federal reserve policymakers? barry: there's this tendency to anthropomorphic size market and you have to look at the markets as the probabilistic risk/reward bets made by the collection of investors. if you want an interpretation of what the market is saying is, there is a recession out there but it is a short, shallow recession. it will slow growth down and maybe it slows profits down, but the underlying strength in the u.s. economy is just too powerful to get too bearish at these levels. besides, even at 2.5%, is that what you want? do you tie up your money -- do you want to type your money in treasury? let's assume a peak is 5%-6%. i'm only losing 3% per year

buying treasuries and that is not appealing. it is very easy to inver the yield curve starting at zero. tom: that is barry ritholtz, thank you so much. kailey, and the time we have left, let's focus on bitcoin. you have got to frame up crypto for next tuesday. will you be here tuesday? kailey: i am. tom: or are you on holiday like everyone else? kailey: i will be on holiday the week after. we will focus on mining when it comes to bitcoin mining because a lot of what has come cryptocurrencies isto proving us to prove of steak and not proof of work, so clearly you see that deflates. bitcoin is down 8% or south of $22,000 once again. it definitely speaks to the broader risk off sentiment in defensiveness we are seeing. you are seeing that evident not just in cryptocurrencies but fiat currencies as well with a brilliant dollar strength. tom: let's talk about renault currencies, they threw the miners out of china, right?

kailey: yes. tom: where they mining this week? kailey: a lot in texas, which has been a difficult problem considering the climate issues texas avenue. some of them are in the arctic. there's an environmental energy conversation we will get into on tuesday but i will have my weekend first. tom: this is a valuable show. i cannot say enough about this. crypto is trying to not be a cheerleader for the industry but to bring diverse opinions about these raging debates. i will be mining for bitcoin this weekend. [laughter] you know. with that bill. stay with us. this is bloomberg. ♪

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jonathan: yields up, stocks down, good morning. let's wrap up this trading week. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg be open. -- bloomberg, the open with jonathan ferro. [bell ringing] jonathan: live from new york, we begin with the big issue, pushing back on the pivot. >> the fed is not scared of financial markets at this point. >> market volatile at the is pricing in the pivot for the pause. >> the fed