>> it seems to be we are set for the fed to pause in june and i would expect that to be the case. >> our argument is for economic deterioration, a slow burn. >> certain amount of pricing power is accrued to corporate's nothing part of inflation that will be relatively sticky. >> we generally like non-us markets because we think the u.s. is on the more expensive side. >> we have it penciled in for march of 2024 so we have still white a ways to go before we get the first cut. >> this is bloomberg surveillance with tom keene, jonathan arrow and lisa abramowicz. jonathan: we need special mood music when they say the talks were good. do you know what i mean?

and violins if it gets really bad. tom: i think the nation is worn out by it. let's get to june and get it fixed and move on. jonathan: talks were productive, are you ready to move on? tom: i saw it last night about 8:00 p.m. and starting to see the language area you mention this yesterday, janet yellen's phrase that this way but we have phrase at this weight just this week but let's look ahead toward tuesday. jonathan: we will catch up with greg valliere a little later. if the x day is june 1, we are in trouble here. lisa: that's why the mood talks are helping. people might say their list of reasons but it's clear that it's political dynamite for either side to allow the u.s. to default. at the same time, they are not

getting closer to a resolution but the deadline is drawing near so the chance for a technical default arising. tom: we will start with an expert on those dynamics and all that. i think the debate is removed from what we see in the markets. this is now a political debate and i will go to the immediacy of it, something changed yesterday come you saw it in the meeting and today, it's next week tuesday, that's all there is to it. jonathan: yields are climbing for eight consecutive sessions, up again this morning on the front end. we had it to year yield that was lower back in -- back on may 11 and we were about 390 so we've had a big adjustment at the front end of the curve and that fed refuses to call this a pause. that seems to be the approach. lisa: jim bullard it one step further. he says we will rates two more times by the end of this year. there is a tension between a

banking crisis that isn't an economy that is, it's really grinding forward. at what point do people reset back to a pre-march reality and do that in the yield space? tom: is bank of america resetting on a bull market call? that got a lot of play yesterday. it was out there. jonathan: we will catch up with them a little bit later this morning. they were at 4000 for this year. tom: this is a big deal. up, up and they are doing it with rates going up, it's bizarre. jonathan: live from new york, this morning, good morning, good morning. tom: tom is in his office falling apart because mr. roy died and bramo is making a cameo. jonathan: stop there, no spoilers. tom: i'm not.

jonathan: are you done? tom: everybody was all over twitter yesterday. jonathan: bramo is the star of the show. lisa: there is a little picture in the far distance. it meant a lot to me. jonathan: equities are softer in the s&p 500, negative by 0.2%. manufacturing data for the eurozone is terrible. services were just about ok and the euro is breaking down, $1.07, another retreat this morning. lisa: you point to the manufacturing side but on the others, the services sector came out better than expected with increased pricing pressure. this is two sides of the wrong going for a region that still faces a lot of inflation but potentially some sort of decline in what we see. we will get that view on u.s. economic data but today we hear a host of different speakers from the qatar economic forum.

it will be interesting to see following on the ryanair discussion yesterday. when it comes to pmi in the u.s., we get that around 9:45 a.m., a sense of if we see the same kind of bifurcation in the u.s. at a time when economic data has been surprising to the upside at the fastest pace going back about one year. tom: are these pmi's's the same as they been? jonathan: you get pmi and you get ism. tom: which one do you look at? jonathan: pmi has a longer history. everything counts. everything's important. you are trying to derail the program this morning. tom: what is a pmi? lisa: the dallas fed president is looking for progress in henry

kissinger is speaking on his 100th birthday. jonathan: still going? tom: he's focused on immigration. he's focused on the diaspora of america. jonathan: he's not retiring, still active. lisa: that's impressive. the u.s. microstrategy joins us now. speaker mccarthy says the town was better, does that bring you any comfort? >> it's been impressive considering it took so long to get to where we are. two months nothing was discussed and now. the prior debt ceiling showdowns you had more acrimony going for the last minute but this one feels like they are trying to createkumbaya toward a resolution. it does help that they are more optimistic. we could see some actual details

for the markets change. tom: if this gets fixed, what does the three-month t-bill yield do? >> the curve has a bunch of up and down type movements which are sending mixed signals but a lot of it is related to the debt ceiling debacle. we should get some normalization closer to the funds. we should get a smoother yield curve. tom: i look at the smoother yield curve we will get but does it reset low? are you modeling in a disinflation as so many others are? >> we really have two views. one was a glimpse that we had a shockwave in march as well as the lingering bank crisis and turmoil that -- if that path continues to exert credit tightness and it develops in the u.s. economy, the fed has to cut more than what's priced in.

on the others, if it's just disinflation and we will head toward the fed target over the next 18 months, that's a more gradual easing pattern. we are at a point where the rates peaked and the fed has a challenge here. when the fed stops threatening, it's hard to defend that position. lisa: the fed is saying stop listening and expecting us to tell you what we will do at the next meeting. in the meantime, we have seen a repudiation of the death of the dollar story in light of the debt ceiling debates. how long can the sense that the dollar re-strengthen even though there is concern about the u.s. defaulting on its obligations? >> i think the default issue as long as we don't have a last-minute move, there is some certain expiration around the idea that we should avoid the

fault even it gets down to the wire. europe had the benefit of the weather at the beginning of the year and germany is slowing down. the dollar is a view on both sides. you are seeing dollar strength. many times in the past, we've seen dollar strengthening higher and it could -- could create a risk off environment for the summer. lisa: we just saw this data that was stagflation or out of the u.s. -- out of the europe. do you think you could see further dollar strengthening? maybe there is a since the europe has gotten over played? >> i think that's spot on. we had this narrative at the

beginning of the year. even with the fed being done, you can still have a strong dollar. it's not purely based on interest rate parity. we have a dollar shortage story and is still the reserve currency and there is a need for the dollar to transact. that plus the overall economy weakening globally, the dollar showing strength. jonathan: -0.3% on the dollar. thank you so much for breaking things down on the european side and the dollar side as well. data in the europe has not been great over the last couple of weeks. tom: are they having a debate over sticky inflation? my impression is that the inflation is entrenched in europe, it's not sticky but just there. jonathan: they want to go further. tom: couple of days ago, christine lagarde came out with

headlines and it was a separate thing from the debate in america. going into june, it's too stark a difference. jonathan: the federal reserve is a little bit further down the road. over at lowe's looking to come in at -4%. the estimate was negative .92. they had seen 1360-14 dollars. tom: jim bianco was talking about how retail sales are inflation added sales, retail is not as good and the headline from lowe's competing with home depot, first quarter comes heard by lumbar deflation. lumbar deflation figures into the top line. that's how you get a more

challenging come study. jonathan: the stock is down a little more than 3%. lisa: i like it being a home depot-y type read. people upgraded them and now they are flying around the world. jonathan: it's like the pull forward and demand in the tech center -- tech sector with home improvement. we will talk about how much time is left here on the debt ceiling debate. yields are higher by two or three basis points and yields are up again in the equity market with futures softer. this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word -- i'm capitol hill, there is still no deal on the debt limit. the two sides are sending optimistic.

president biden and house speaker kevin mccarthy were at the white house monday night. they called their talks productive and promised to keep negotiating. the president said he and mccarthy have agreed a default is off the table. russia is presuming other countries including india is pressuring them behind the scenes. the kremlin is threatening to upend defense deals unless they help block expected moves in punishing russia over there invasion of ukraine. document show ukraine once the financial action task force to add moscow to a so-called black list or gray list. that would put the russian government in the same company is north korea, iran and myanmar. the hungarian president has won the support of rivals. the longshot third candidate said the president -- said he asked his supporters to back the president. erdogan was eliminated from the

first round of voters. he led the earlier vote but fell short of the 50% majority needed for an outright win. walgreens has reached a tentative settlement with consumers who said the drugstore giant was willfully blind. consumers in arizona and california had alleged walgreen has offered the company's blood tests at its stores even while it had good reason to suspect there are in -- their technology did not work. the founder of theranos and former president are serving prison time for fraud. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> we both talked about the need for bipartisan commitment. we we sell it to our constituents. we are well divided house. it's not any different in the senate. >> i felt we had a productive discussion. we don't have an agreement yet but i did feel the discussion was productive in areas we have differences of opinion. jonathan: say the word productive a few more times and we might believe you. happy talk from president biden and kevin mccarthy. treasury secretary janet yellen

issuing another warning to lawmakers. we estimate it is highly likely the treasury will no longer be able to satisfy all of the government's obligations if congress has not acted to raise or suspend the debt limit by early june. greg valliere wrote the following. pretty scathing from greg this morning. tom: someone that knows the calendar of washington from decades, he briefs is this morning on may 23. i've been calling it next week tuesday. i saw people last night talking about next week is suddenly upon us. is it? >> yeah, we're getting there. i've been very negative as you

know but the spending caps are really crucial in the democrats have agreed to a spending freeze. that's a big deal so i think we are not going to default. however, i don't think they can get it done time. i think there will have to be an extension of a week or two. there is a lot of members in both parties who need to be persuaded. we are getting a little bit closer. tom: which can kick down the road is better for americans? is it a shorter-term one where they fix in two weeks or maybe september? >> you really don't want to go into september. i think that will be annoying to the markets. the longer this thing sits out of the sun, the more it will attract flies. i think we've got to get something done and i think it can be done but there will probably have to be a short-term extension. lisa: it's already annoying to

marcus and it seems there has been a shift in rhetoric. -- it's already annoying to markets. is this a political shift on both sides to say we are not going to do this and not holding the u.s. hostage but negotiating in good faith? >> i think there is a growing feeling on capitol hill this could be a pox on both your houses if we don't get anything, the level of disgust toward congress will increase if that's possible. i think both sides want to get this done both sides genuinely do not want to see a default. what is annoying is at the last minute, they brought up revenues. we will talk about taxes now? that seems to be an issue that complicates things. lisa: tax receipts and tax income this year were so far below what the u.s. was asked acting and part of the reason why the x date is earlier than some projecting.

is this because of a lack of investment in the irs or loopholes or simply because the economy is doing -- is not doing as well? >> there are many variables. the one that could snag this whole thing is a proposal to cut back dramatically on the irs funding as you mentioned. if they did that, that could drag this thing will into the summer. they probably have at least half of the deal done so the ads will continue to improve that we will get a deal in a week or two. lisa: what happened to the intransigent members of both parties, the ones on the right who have been saying we will not pass any increase in the debt limit, we will mandate all sorts of cutting over our dead bodies that was the platform they ran on and on the other side, people pushing back on joe biden and asking why he is even negotiating? how much are you seeing those two sides willing to come to the

table and vote for a plan that is hashed out between mccarthy and biden? >> it's a big wildcard right now. could both parties hold their members? mccarthy has done a pretty good job at holding republicans. a lot of democrats don't want to be seen as contrasting with joe biden. in both parties, there is a resignation they will have to get this done. tom: i was thunderstruck in the early morning yesterday of the telegraph of london having as its lead headline the op-ed from the washington post on elderly presidents, led by president biden. what was the ramification inside the beltway of the post-study of many older presidents? >> i think a lot of people think this has been overdone but overnight, hillary clinton who

is late 70's is saying yes, i understand joe biden is real old and this could be a liability. it's an issue that is not going to go away. as i point out, donald trump has a birthday in about a month and turns 77. jonathan: don't you think this is a way of avoiding the actual elephant in the room? it's not about age, it's about mental acuity. why are we having that discussion. i know some 90-year-olds who are sharper than some 60-year-olds that i know. why aren't we having a proper conversation about this topic? >> you are right and you mentioned that henry kissinger turns 100 today and he is still really sharp. you are absently right, i think that's the big issue but it's going to be a blunt object used against joe biden whenever he says something inarticulate or when he looks frail. it's an issue he will not be able to avoid. jonathan: thank you, we

appreciate it. i think people seem to be happy right now to have this conversation, 80 is really old i think that's offensive. maybe the conversation should be is the sitting present fed enough to run for another term? does he have -- does he have the mental acuity? tom: we have a distant history of woodrow wilson and ronald reagan failing as well. closer to the election, i think we will shift from age to whoever the two candidates are. jonathan: can he campaign? we talked about this a million times, he didn't really have to campaign. that was the campaign strategy, stay away and make this a referendum on the sitting president the big test is whether this president can campaign and -- in a way he did not in the previous election. lisa: we have observed him more public and having more events. tom: they made jokes about the

white house dinner. lisa: this is a grueling schedule for anyone, let alone someone who is more senior. this is the issue. he flew back from asia, from japan and had to restart negotiations, no wonder it was at 5:30 p.m. how could anyone be functional at that point? jonathan: it's a lot of work for sure. we will pick up on this conversation again this morning. tom seems to like talking about it, you bring it up a lot. tom: i think the washington post article yesterday was important. this was an editorial. it was not like reporting. it was an editorial from the washington post and they clearly made every effort not to make it just about president biden with fancy charts of presidencies going back for decades. nevertheless, there was and i was thunderstruck that the telegraph in london picked it up right at the top of the

masthead. jonathan: it's a big topic but i think you need more detail than simply saying the president is a certain age. the issue is whether he has the mental acuity or not that's what's coming up in the polls. that's the issue at play. you can be a young 80-year-old or a very old 60-year-old. how old is tom now? lisa: in his 80's. jonathan: charles schwab will join us next and equities are little softer, from new york, this is bloomberg. ♪

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jonathan: equities on the s&p 500 are little softer, negative fight 0.1%. the real story is in the nasdaq. march 10, that's a couple of days after svp started blowing up, the nasdaq 100 is up 17% since then. look at the bond market. the two year has had 50 basis point move? that's the last seven days and still climbing this morning. tom: i thought you were reaching for it at 4.40.

we will take a couple of minutes to explain this. if you beat middlesboro 1-0 and you go to wimbley, this is like -- this is a huge deal and john lived this as a kid, trying to make the sky blue. jonathan: trying to but didn't quite make it. i was a teenager. tom: others talk about it and you tried to do it. jonathan: some of my friends were there and they made it and they were fantastic futbol players. you can be the best player at your school, you got to be supremely talented and incredibly dedicated. maybe i lacked a sense of dedication. tom: they will have 40,000 tickets at wimbley for the championship league and if they win, then they play manchester city. jonathan: you get serious money

as you get into the playoffs. tom: pete player or the team? jonathan: i'm not sure what the bonus agreement is but they get a serious point of money to compete at the highest level and then you have a decision to make. do you chase the title just staying in the league by spending a lot of money to do that or do you try to do something a little more conservative? you run the risk of overspending dropping back down and struggling to get back up. tom: this weekend, i watched five minutes of somebody playing theb's and it was not in america. it was a minor league ballpark. it was a tiny stadium in dorset. it was a team i think that came up last year and you have this mega team of megamoney playing in this little team with the fans up against the front and that doesn't happen in america. jonathan: they had an old

stadium that got knocked down but that was right in the middle . i remember my first game there. i think it was manchester united-coventry. tom: they will going to wimbley friday? jonathan: if i knew we were going to have this country -- this conversation, i would be prepared for it. tom: it is the sky blues. jonathan: you are a sky blue support or not? tom: i think i am. lisa: are you done? jonathan: i wasn't done with the data check. thank you. we promised to talk about coventry city later this week. in the fx market, the euro is at a session low. we are -0.4%. francine lacqua is inqatar at

the economic forum. francine: thank you so much. i am absolutely delighted to join in a robust conversation on the economy. it's a little bit noisy and everyone is having their coffee. i don't know about how the view on inflation has changed on the u.s. economy in the past months. >> it has pretty much say the same. we are still fighting inflation it's interesting because everybody focused on the federal reserve. the last time we had inflation, there is a big debate called guns and butter. the united states was in the vietnam war and there was a lot of choices to make. a war environment is inflationary and people underestimate how inflationary it is to conduct policy at home. i think inflation will stay higher for longer.

i don't think the fed is easing. francine: so you expect no cuts from the fed. >> i think they will be higher for longer. francine: do you expect the credit crunch? >> credit is tough out there and the cost of money is going up. it's hard to get credit and it will continue to be hard for a while. francine: what do you worry most about the markets now? >> probably just a continuation. i think we need to -- the continuation of the wars in the background. this is not front and center of the conversation. in the 1970's when we had inflation, it wasn't such a hot topic. no one is discussing it as a fundamental driver of policy that results in inflation.

i think it's one of those things that will continue to drive inflation. francine: how much do you worry about the debt ceiling? >> not as much as every buddy here wants to. i think it's a great news item is like watching any great negotiation. no deal gets done until everybody walks away from the table at least once. we are doing that in the global environment. sooner or later, the debt ceiling will be yesterday's news. francine: are your bankers using chatgpt and will that change things? >> we are just walking with it but as you put information to the system, you have to be careful. it becomes part of the system so there is a lot that has to happen for us to get use out of it. all ai will change a lot of things.

francine: is it too soon to say how much it will change and what at what pace? >> like all things, i've been shocked every time when i look -- look back at the curves and how quickly things get adopted. i suspect there will be a significant amount of change. francine: talk to me a little about svb. >> i thought you were talking about suv's. when things are difficult is when you have to make big moves in life. great opportunities don't come when you want them to. it comes because something happens. when svb had their issue, we moved that weekend. we saw their tech team is a spectacular opportunity for us and we hired about 12 managing directors out of the group. the m&a environment is not

perfect but i don't think that will become available in a perfect environment so we are building for the next five or 10 years. francine: is that a space where you will grow? >> it doubled the size of arotech footprint. it fit like a glove and there was almost no overlap. we knew the people we try to hire them before svb did. we knew they were our culture and we knew the overlap was perfect for us. this is the biggest feed pool in the world right now. software alone might be the biggest feed pool. out of those 12, seven of them were software. we look forward, it doubles our footprint. francine: are you looking to hire anyone from credit suisse? >> we did higher in the

industrial in business. we're looking at that more and one opportunity as people decide. svb was amazing how deep and organize they were. it's a team that understood each other and work together for many years so it was a good opportunity to do something different. francine: what about the crypto meltdown? i imagine there were great hiring opportunities from there. >> we've been doing our restructuring. we been involved in almost all the crypto restructuring. i don't know how much more there really is to go. i think there was a big way post-ftx. we are dedicated to blockchain and we cover it. this tech team is more about software. francine: given everything we've

talked about the conference, how do you think your firm will change in the next two years? what will you focus on? what part of the business will grow? >> there is a big string waiting to uncoil. the question is is the economy going to go into recession? the inventory of the transactions doesn't go bad or spoiled. it doesn't go away. when the fed stops and when we have some clarity, it could be a month or quarter. when it comes back, the m&a market will come back strong. we are just preparing for that we think we are unlevered we have a great opportunity to build the company in this downturn. francine: there is a lot of money in this region and there were reports you were involved with possible takeover of standard chartered.

do you think there will be more opportunities like that for investors large, chemically important banks? > when you come here and i encourage everybody to, it's optimistic, it's energetic. it's pro-business. the enthusiasm and optimism and desire to grow the region is really invigorating. yes, i believe the region has a bright future and is almost on the opposite cycle of the west right now. they are looking forward. francine: it helps to have deep pockets, thank you so much for joining us. with that, back to you. tom: thank you so much. that was an important discussion on the events of the moment off green yesterday.

each of these firms is different, it's all about the people. someone like sonali basak keeps track of this but the greenhill transaction yesterday was something after their collapse from $80 to $10 per share. jonathan: there is some consolidation in certain parts of the banking sector. tom: did jamie dimon talk succession yesterday? jonathan: a five-year plan. lisa: this time he said 3.5. jonathan: he said the corporate team had intentity. bank of america in the next hour coming up shortly. lisa: keeping you up-to-date

with news from around the world with the first words -- qatar airways is beefing up its presence across the world as it continues to recover from the covid-19 pandemic. the ceo spoke exclusively with mannus cranny. >> now that we are ramping up, we are introducing new routes in europe, africa and asia and going back big-time into china. lisa: is this ticket prices will continue to be higher and the airline will wait and see before ordering new planes. ukraine cannot win the war against russia, that's from the hungarian prime minister who spoke with bloomberg at the economic forum. he said with nato not ready to send troops, there is no chance for ukrainians to win this war. he is blocking a further 540 million dollar installment of european union financial aid to

ukraine. it poses new sanctions against russia. blackrock favors private credit over public as the banking sector turmoil makes traditional lenders cautious. the blackrock strategists say private credit could help fill a void left by banks, pulling back on lending and offer potentially attractive yields to investors. private credit has been booming as lending conditions turn type in the wake of silicon valley bank's failure and the credit suisse shakeup. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

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>> you are already seeing credit tightening up. the easiest way for a bank to retain capital is not to make its next loan. i think you're going to see that. i think everyone should be

prepared for rates going higher from here. 5% is not enough and fed funds. i've been advising this to clients and banks. you should be prepared for 6, 7. jonathan: jamie dimon from j.p. morgan at the investor meeting yesterday talking about higher interest rates. they raise their cash allocation by 2% listen to this shift in commodities. rotating from energy, the reasons being recession risks and potentially unfading channel just china grove impulse. shifting from energy to golden commodities, interesting. tom: deutsche bank said the same thing today. that's the first time i have heard that. jamie dimon framing out if

anyone's ready for 6% interest rates. maybe james bullard is but no one else. that's the first commercial banker who has talked about getting used to a 6% rate. lisa: i think he also said that in 2014 and 2015. tom: i don't disagree with that. jonathan: preparing for higher rates is a little different in the banking sector then in the market. running a bank and it running a portfolio are slightly different things. tom: we love to talk to ceo's about microeconomics. i've never really understood. -- about macro economics. we talked to liz ann saunders about economics. she is the chief investment strategist at charles schwab. she's been a great supporter of our effort and joins us this morning. i want you to translate for people with a little bit longer term timeframe what to do with

the focus on net shorts. i want to talk about saunders and the net shorts right now. there is of that we are going down? >> there is but it's interesting, there are times when extreme positioning or sentiment indicators are a contrarian move. the deposition in terms of the larger speculators tends to result in choppiness in the shorter term timeframe. it's not a clear contrary indicator for longer-term. what it potentially sets up his short covering which we've seen throughout this year. there is certainly those institutional speculators that are betting that something could happen and it could be debt ceiling related. tom: someone will walk into charles schwab today and have huge gains in seven stocks that have gone up. maybe we will pick on apple.

do you sell your apple shares or hedge them? do you hold them and do something else? what is the prescription for people heaven forbid that have large gains? >> i won't speak specifically about apple but yes, the concentration is extraordinary. it's a function of the banking crisis that when you look at that bias to the largest cap needs, that occurred almost exactly to the day with one silicon valley bank sale. there is the macro highly wicklund stronger cash flow type of names but there is also an ai component to that shift. we have to be careful about wholesale selling but be mindful of concentration risk and the possibility that at some point, you see some convergence in terms of the remaining 492 names in the mega caps.

it can last for a while but this is maybe where you can rebalance with more frequency as opposed to waiting for some calendar point in time. lisa: does this point to higher highs? if the rest of the stocks have been left behind and they catch up with a concentration of the big winners, that's up? >> that's the ideal scenario is that you can catch up by the remaining stocks as opposed to catch down. as we headed into 2022, 20 21 was a strong year on the surface. you had no more than a 5% drop i the s&p 500. that set up convergence with the biggest names catching down to the weaker names. fast-forward to the letter part of last year, october of last year, even though the indexes took out their june low, under the surface you would see better breadth.

that i think is what carried us into the beginning of this year and unfortunately that concentration has picked back up again. it's a much better scenario if we start to see better performance under the surface. we are just not quite there yet. sometimes the convergence can happen in both directions. you can get some pullback at the higher cap end well you see greater participation by the average stock. lisa: the biggest confusion in the market is a look at expectations for fed rates in about a year. that was before svb collapsed. it was 5.4% in january. now, you're looking at 4.5% even with people writing off the likelihood of a banking crisis, saying it is not a crisis. if it was, it's over so how do you reconcile the two ideas? >> it's hard. i think there is something very odd about the narrative around

rate cuts in the second half of this year. to your point, not having a significant spike in the turmoil in the banking system, let's assume disinflation continues in the likelihood of it getting to or near the fed target in short order relatively stable labor market and and ok economy. it's certainly possible the fed could cut rates in the second part of this year but not necessarily. when they would see a green light would be much more turmoil the banking system or a much bigger hit to the economy inclusive of the labor market. other than that, they will stay where they are. tom: ben ladler does a big piece today on volume. it's not linked to performance and i happen to be in the same belief. do you care about volume right

now? >> i don't think -- i think volume in decades past when the structure of the market was a bit different probably had some value in repping into your technical analysis. it's just not something i focus on to a significant degree because of how the market environment has changed. i don't put a lot of weight on it. jonathan: as always, we hope to see you in the studio soon, thank you. such a big range of views out there on the equity market. in 10 minutes, we will catch up with julian emanuel of evercore. the federal reserve says don't call it a pause. neel kashkari in minneapolis says it's a close call.

they could be skipping. if you say pause, the market hears cuts. tom: deutsche bank says the same thing. jonathan: neel kashkari says we might take a break from hiking and then is conditional on the data. how much do we need to hike? do we hike again? they want to keep it open and conditional because they know if they start to say pause, this market will lean harder into cuts and that's not what they want to signal. there is a difference between what they think they will do what they will signal. maybe they think they might have to cut this year but at this point in time, they don't want to signal that lisa: you have seen a loosening in credit conditions since svb collapsed. you look at forward expectations for rates and they have come down by a full percentage point. how do they raise the expected rates in markets without doing anything.

it's a time when they say we don't know. this is a difficult needle to threaten us the reason why you're getting these tortured skip/pause. they will have to come out and explain you guys are wrong and these are the reasons why in a more comprehensive way. jonathan: we've got to work for the debt ceiling mess and washington, d.c. as well that continues to the middle of june. then there is a blackout time. lisa: anyone in particular? jonathan: they don't do that. tom: merriam-webster does not conflate pause and skip. i did not expect to see that. jonathan: that's official. that's what they are doing on the federal reserve at the moment. lisa: they are working with a dictionary? jonathan: julian emanuel of

evercore is coming up next. ♪

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>> it seems to be we are set for the fed to pause in june and i would expect that to be the case. >> our view is for economic deterioration. >> a certain amount of pricing power as accrued to corpus and that's the part of inflation that will be relatively sticky. >> we generally like non-us markets because we think the u.s. is on the more extensive side. >> we have to first cut penciled in for march of 2024 so we have still quite a ways to go before we get the first cut. >> this is bloomberg surveillance.

jonathan: waking up to the smell of debt ceiling optimism -- nothing better than that. in new york city this morning, good morning for our audience worldwide. the side i frombramo is piercing. your equity market is unchanged from the equity market. the talks were productive, productive talks between speaker mccarthy and the president. tom: i will say this a million times, only idiocy debt ceiling over the years, we have a president who has miles of legislative experience. he is just grinning and smiling and hanging out and that's all part of the deal. are you kidding me? that is the ballet. jonathan: lisa's side eye is how everybody feels now. lisa: it's like get back to bed because it will not change. they are making progress in the

talks but we are not sure of the details. we have a sense of some of the requirements behind the scene but the ultimate question we don't know is -- let's say bye and mccarthy come to a deal, do the rank-and-file get on board? if they don't, what happens then? the dropdead date is getting closer. tom: that is the point in that changed yesterday. there was a shift in the wind. this is next week tuesday. jonathan: follow the calendar, follow the numbers. 60 billion is the cash balance of the treasury now. that was the last thing that i looked at. x if the date is june 1, it could be early june.

we are in trouble. there simply maybe not enough time to write a deal into legislative language for for lawmakers to read it. there may be time to reach an agreement. it goes to show house narrow that window is. lisa: that's why people are talking that a possible kicking up of the debt limit by $100 billion to get breathing room to try to negotiate this deal. if you look at t-bill yields, it's an issue over the next month. six months seems to be the stress point. jonathan: all these different fights happening across the curve now. the growth story is further outcome of the t-bill story in the two-year piece, you got repricing higher around the fed story. it gets more interesting. tom: that's an important observation that we are not looking at twos and intends been looking elsewhere.

the three might t-bill is the just for months t-bill is the identifier. jonathan: in the equity market on the s&p 500, it looks like this. yields in the tenure up, and away. it's call at 375. lisa: partly because of hawkish speak from fed officials. we get economic data in the u.s. . the bifurcation we saw in europe, i'm curious to see what we see here. the economic index is reflecting higher. the wqatar economic form continues and we will next talk with bill winters.

today, we get fed speak in the dallas fed president will be at 9:00 a.m. will she be is hawkish? jonathan: there is no pause from neel kashkari. tom: when will they talk about bank failures? jonathan: dick's sporting goods says we are not footlocker. adjusted eps for the first quarter is 340. they see the same for eps for the year ahead. lisa: this is the motley performance of certain retailers. if you fish or hike jonathan: or get outdoors, all the stuff that tk does not do. lisa: if you want hiking goods or pants, you can get that at

dick's sporting goods. jonathan: you wear sneakers from product. what are -- from prada what are you talking about? let's get to julian from evercore. bank of america was constructive and jp morgan not at all, where are you in the team now? >> everything has been in between for the last seven months. this is one of these times where the signal and the noise are incredibly difficult to parse and there were times when it just isn't that much information. what it comes down to is we are waiting to see if one years worth of incredible tightening can be really historic and will it have the effect? we are seeing minor parts of that affect things. for us, it comes down to we expect the recession to start in the second half and the oak at, that means -- and the equity market, that means down first

and then up again. tom: take the dynamics of the hymen recession in the first quarter 2024 and there is dramatically lower inflation. you've got spx 4150. how will you frame equities forward given the hyman recession and disinflation? >> when you think about it, we have been guilty of not thinking about this given the fact that we've had seven difficult months of sideways action. the view 24 and 36 months is unequivocally positive because inflation is likely to fall below 3% sustainably. lisa: have we work through the stimulus during covid? how far are we down in that? >> if you look in terms of the excess savings on the part of consumers, you are only about halfway through.

that is one of these things that we fail to appreciate, the idea that there was so much money put into the system monetary and fiscal that it really still works its way through. this is given the market action, the glass half-empty and glass half-full. the glass half empty is if we could have had the banking problems over the last several months in an environment where stimulus still working through, maybe that's not so good. the left -- the glass half-full is the stimulus has been so profound it will engineer this adjustment we have had. lisa: this is the tale of two narratives. how do you work in an environment where you can basically come up with whatever story want. you might as well be happy and go with stocks, right? >> we think you need to stay invested. we think this is an alpha extraction time.

defensive sectors have worked and then they have not worked. ai as we all note seems to be the overriding principle right now. we are concerned there is too much concentration there and we think there is a bit of catch down to do given the fact that small caps of underperformed the way they have. you need to stick to your guns. the interesting thing is with rates where they are, if you want to hedge a portfolio, it's extremely cost-efficient to do so. jonathan: i've heard that before. is for breadth an indication of how much oxygen is left in a rally? i feel they've complained in the last 10 years and he carried on so why can't this continue? >> it can continue provided we get that glide path in terms of the stimulus we were talking about a few minutes ago wearing

off. this whole rate cut talk, forget about it. they are not cutting. there is some repricing that needs to occur based on that misperception. jonathan: what's interesting for me is that we've repriced yield on the front and and taken back some of the rate cuts and the nasdaq is still fine. explain with the relationship is ? >> the relationship is this question of the time before the recession. remember, we have had a lot of excitement around ai in these last two or three months and what investors are harping back to his the 1998 yield curve inversion. i saw something this morning that said that starts with the nasdaq since 1998. first you had a roaring bear market in 1998 and if you get defensive, you gave up 300% gains in the nasdaq over the

next 1.5 years. that is the conundrum that people face. that's perhaps the right decision is not to let go. tom: you have the most eagerly anticipated daily call. tell us the message from your shop to people in cash scared stiff. >> the message is is that it's ok to be in cash for now, but if you are thinking long-term, you need to be prepared for that time for you need to shift assets. but that is not coming until we get inflation sustainably lower which again, the path to get there is through an economic slowdown. jonathan: final question, optionality. do you want to hedge to the upside or downside? >> that comes down to one's own portfolio preference. look at your portfolio, think

about how you feel and we say for the retail investor, when the market is going, we think you are at the upper end of the range. we don't think this is a breakout but if you have fomo options are cheap enough to buy the cheap side in themes around the world. we prefer portfolio hedges with the s&p 500 where you can sell upside to finance downside and it's very cost-effective. jonathan: brilliant, that was wonderful. do you want to talk about the debt ceiling? >> pass. jonathan: up next, we will talk about the debt ceiling. the latest on washington, from new york city, we will be back in a couple of minutes. lisa: keeping up-to-date with news from around the world with the first word -- on capitol hill, there is still no deal on the debt limit. the two sides are sounding optimistic. president biden house speaker kevin mccarthy met at the white

house monday night. they called their talks productive and promised to keep negotiating. the president said he and mccarthy have agreed that a default is off the table. saudi arabia's top energy official is issuing another warning to royal short-sellers over a week before the opec alliance will meet. the energy minister spoke at theqatar economic for him today -- form today. >> you would think it any market they are there. i keep advising them that they didouch. lisa: he's famous for telling short-sellers they would be left ouching like hell. they are the underwriter of the economic forum. european allies are looking to speed up training for ukrainian pilots and f-16 fighter jets. they to finalize plans as soon

as june according to the denmark acting defense minister. he made the comments in brussels after the u.s. gave its support. shares of julius baer slumped the most in a year. the swiss wealth management -- manager posted a weaker used with business than some analysts expected after turmoil at credit suisse. the zurich-based bank reported assets rose just 1% in the first four months well net new money had a slow start at the beginning of the year. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

>> we both talked about the need for bipartisan agreement. we have to be in a position where we had to sell it to our constituents. it is not any different in the senate. we've got to get something done both sides. >> i thought we had a productive discussion. we don't have an agreement yet, but i felt the discussion was productive in areas we have difference of of opinion. jonathan: productive is your headline. just about productive. president biden and house speaker kevin mccarthy following high-level talks around the debt ceiling yesterday afternoon.

here is treasury secretary janet yellen on the so-called x date. she is reinforcing that it could be potentially as early as june 1. if you believe it is that early, we are really running out of time. we are there right now. tom: something changed in the wind yesterday. you heard it in the tone of the two protagonists yesterday. i thought it was more constructive. lisa: there is a since they did not win political points and that's been a shift in rhetoric. before it was if we have to make it default, we will. that has been eradicated. there is a sense that will not play well for anybody. jonathan: one development i appreciate as they do these talks after the markets close.

i've stopped hearing the stupid comments trying to encourage market turmoil to get leverage from that. i think they are taking it seriously. ultimately, they don't know what the x date is. you have a range in tax receipts you don't even know. the balance shifts all over the place. we are down to about $60 billion. tom: we think that it could be lower. who's got the greatest linked in page of everyone we talked to? terry haynes. at the top, he is a photograph of the hollywood post-gazette. the headline is catastrophe seen, crisis looms. jonathan: what year is that? tom: i don't know. you hate the guy on linked in with 11 experiences. it's three pages long. that would be terrence haynes,

founder of pangea with legit washington experience. actually somebody who's been in the room. i've been dying to speak to you. when things change in the wind as they are now, describe the legislative ballet between two legislative powerbrokers like mccarthy and biden. what is the actual body language that goes on? >> the body language here is that the principles will be the adults in the room. staff will go bash out the details and make difficult choices. importantly, what will probably go on this week is what didn't go on last week which is the principles are giving staff fairly clear instructions. they are trying to put put a deal together where is leslie, steph flailing on their own -- where last week, the staff was

flailing on its own. they need to understand the parameters of the deal, one of the old washington saws is that nothing is decided until everything is decided but tried to put together the parameters of the general deal. my interpretation is we are down to figure out what we will bring back to the purists to keep them on site. tom: we heard some thunder from lisa that the purists were out there, are they part of this discussion on the left and the right? >> they are being informed, but are they part of the discussion? no, they had their moment last week when you saw from the progressives concern that anything would be cut on domestic spending. that's with the 14th amendment strategy was. that was curious because this is so important you need to take power away from the legislator and do-it-yourself as opposed to

let the legislators do their jobs. on the right, they understood very well that the house bill that passed would be the high water mark. but they are looking for fundamentally's acknowledgment from the administration that there will be some spending restraint that we will start trying to turn the battleship around a little bit. my view is that i think they will be good with it. lisa: what's the likelihood that we kick up the debt ceiling $100 billion to get more breathing room? >> i think right now, it's a little too early to make that call. only because i think there is still enough time to do a deal. janet yellen f has beenuzzing up everything. first it was june 1 and we might not have enough money by june 15 and yesterday, they tried to walk that back.

they understood the impression they were giving. the signal that politicians are getting from the treasury department and the white house is probably getting it first is that there is little bit more time than june 1. there is enough time to do a deal here. as i said to markets last night, he will not get something before the end of the week at the earliest. both parties will decide there is time to milk things first. lisa: you talk to people in the market and wake up to the debt ceiling negotiations and they will have more mind spinning of this topic. how much are they paying attention over the past few days? >> i would say not a lot. i talk about this wishing and hoping. there is a general sense that this will work out because it has always worked out.

there are folks who are legitimately worried. since i've been bearish all along, i would call at six month ago, i was telling everyone they would be a 60/40 likelihood of a problem by midyear and here we are at like 70/30. they understand now they have to pay attention. they also understand that as always there is money to be made on lost in the short term turnover. jonathan: can you help me understand how things would be if things are not going well. we are used to reading the fed speak. when it comes to the politicians, with experience, what would be the tell for you that this was falling apart. >> that there would be a hard-line. it's out there in view right now. i don't think we will get there but it's out there in view, the

idea that somehow we will have to talk about revenue raising. that has come up at the last minute and that's never what this was about. this is about doing debt ceiling and trying to curtail spending and what are some fairly modest parameters. we are not talking about touching 60-70% of the overall federal spend. we're not talking about very much. the president has been going back and forth by accusing republicans of draconian cuts and at the same time saying in writing that he proposed 1 trillion and spending cuts himself. this is about a little bit of spending discipline. if the democrats and the president personally will continue to talk about revenue raising which means more taxation among other things, that will go south. jonathan: wonderful to get you on, come back soon.

if you watched that gathering with reporters and speaker mccarthy yesterday following the meeting, he really rolled out new tax hikes. someone followed up and he snapped back, were you not here for the earlier part? he is very firm on what he thinks about that push. tom: i got a letter from the irs two days ago and they are revenue raising. it was a small number and it was not as painful as i expected. revenue raising, what is that? jonathan: blackrock will join us shortly. from new york city, this is bloomberg. ♪

jonathan: equities are doing ok, equity futures unchanged. squeezing out another day of hard gains. it is been quite a run. we are expecting the equity market to sell off. in the bond market, the two-year 4.3865. up another seven basis points.

this is something like a 40, 50 basis point move over seven trading sessions and he keeps going. lisa: pricing out a regional banking crisis, trying to revert back to where we were. jonathan: right before svb failed we were up 5.1. tom: jamie dimon asks for a .1. lisa: everything that has changed has been positive with respect to stocks. something has to be a miss. everything has changed for the positive? tom: that's a topic of the year. jonathan: going into summer, and

foreign exchange everyone who has booked a vacation to europe this is what you want to see. a breakdown in the euro. 1.0782. tom: i looked at it an hour ago and it's a brief -- breakdown. jonathan: eating away at some of the price codes. they called it a nibble, the rate cuts in the second half. lisa: talking about vacations in europe, do you guys use yelp? jonathan: to read or to write? lisa: either.

i can see both of you writing them. have you ever written a yelp review? lisa: there is some speculation that they are going to be purchased. an investor will deliver a letter to the board. you can get twice as much in those shares are popping 11%. you are seeing advertisers yelp going to them more. dick's sporting goods, people who like sports are buying and continue to buy. their shares are up 2.38%. jonathan: they are not a foot locker, exporting goods. lisa: one thing i thought was interesting the ceo came out, even as consumers face uncertainties athletes have

prioritized sports. jonathan: they call their customers athletes? tom: i tried to walk into the grocery store and they would not let me in. jonathan: they sell fishing rods. lisa: you could buy fishing rods, sneakers, athletes continue to shop at dix. lowe's is down 1.1%. jonathan: it is like the parents with children. you are such an athlete, so special. i remember walking past a playground and the kid was trying to throw a stone at a bird.

this is what the mom did, don't do that honey. great shop though. -- great shot though. lisa: i once took my kids to the playground and i saw a father with his son running laps around the playground and the kid stops and he says keep running, and the kid said no, not time. tom: everyone is an athlete. lisa: only at dix sporting-goods. tom: head of macro credit research and she joins us right now. i love your research.

how you take the cpa into credit. the credit sales of your heritage as well. i am fascinating what is signals to you when we see mega companies doing backup bond deals where they call for people and ask how much they want? translate a $40 billion transaction to us? amanda: thank you for having me. it signals that the credit markets are open and corporate treasuries are adjusting to this environment. they are not waiting for rates to come down but they are moving forward with their plans. one of the interesting things to us is that investment-grade issuers have not been immune from a lot of the pressures facing corporate profit landscape and we see that manifest in the same performance in the high end of the yield market in the low end of the ig market.

there is a mixing of performance across the rating spectrum. the capital markets are open. companies are moving forward with strategic planning. tom: you talk about quality exposure. amanda: quality means more than ratings and there is pricing power, ability to manage through elevated services backdrop for corporate credit investors, capital management priorities. what is the appetite for leverage, what's the share buyback program. when we think about quality is that competitive set that will allow the company to manage a challenging growth inflation and policy backdrop. lisa: they put out a note on private credit being better than public credit getting 12% yields

in this area. taking over firm thanks. why is this an opportunity rather than a risk if companies could get lower borrowing risks elsewhere? amanda: we see two specific tailwinds for private credit as we move forward. the catalyst there was the contraction and bank lending come through in the survey. the first tailwind is an expansion of the addressable market of private credit. they might've gone to the bank channel or the ipo area are now going to private credit. they may not want to be a public company. they are moving in that direction, they would not of done that two years ago.

the second tailwind is the enhancement of pricing power that private credit companies can provide to these companies relative to the public markets and that's reflective of the certainty of execution. the capital markets are open now but there have been periods where they have been shut down on the public site. lisa: this is coming out in time where there is a lack of demand for smaller businesses. it is not different what you are experiencing? amanda: it is sector specific. there are companies moving forward. for the companies that have the luxury of being patient, they may be taking a step back and waiting to obtain that funding. the lower demand is indicative of the market waiting to see what the growth backdrop is.

do they want to move forward with capex, growth? there is a cohort of farmers who will take advantage of private credit. lisa: based on the fact that you are in this market, do you think the end of the banking crisis, people who are writing this off, is that too soon or that it was overstated? amanda: the thing we can feel comfortable back is a contraction and bank lending. we are seeing that and earning calls, and we think that trend will persist for a period of time. we can feel comfortable with that. as it relates to the banking sector, there were two areas we were watching. one was the asset liability mismatch in march which was the acute focus of market participants. over the long-term we are watching sectors that will

impact credit quality of the broader market. in her sectors like commercial real estate. i don't think that will be a near-term issue that we can expect to see flow through into credit quality immediately. it is something we are watching over the next few quarters and maybe next two years. jonathan: it is on everyone's radar in a massive way. some brilliant conversations coming from the cat are for own. looking ahead, we will catch up with bill winters and that conversation will take place in about 30 minutes. we are looking forward to the conversation between francine lacqua and bill winters. in the next segment, we will catch up with savita

subramanian. i remember coming into the new year, the big risk was upside risk in the equity market and that is what has developed so far. tom: some people have emailed in, she is truly an expert on esg. jonathan: we will try to squeeze that in. are you an athlete tk? all athletes here. s&p futures down .20%. this is bloomberg. ♪ lisa m: ukraine could not win the war against russia. victor or von who spoke with john micklethwait at the qatar

forum. with nato not willing to send troops there is no chance for ukrainians to win this war. they are blocking financial aid to ukraine and imposes new sanctions against russia. russia is pressuring other countries including india behind-the-scenes. they say they will up in deals if they block respected moves punishing russia over actions ukraine. they want to add moscow to its blacklist or gray list which would put vladimir putin's government as the same company as iran and myanmar. central banks normalize cost after a long period of low interest rates.

>> we have had very low rates for a long time. you will continue to have bubbles along the road. this is not a systemic crisis. global regulated banks have risen to the capital levels from 2 trillion to 3 trillion. we are and a strong position, banks are resilient. lisa m: she expects central banks to keep levels or raise them. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo, this is bloomberg. ♪ ya! save 50% on the sleep number limited edition smart bed. plus, special financing and free home delivery when you add any base. only at sleep number. if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify

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[office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. >> it is ok to be in cash for now but if you are thinking long-term, you need to be prepared for that time where you need to shift assets but that is

not coming until we get inflation sustainably lower. again, the path to get there is through an economic slowdown. jonathan: a range of views on wall street, there are many technical signals the conflict with the idea that this is the beginning of a new cyclical bull market -- extreme narrowness, poor breath, quality/defensive leadership and broad cyclical underperformance. that is mike wilson. we preferred the equal weighted s&p to the cap weighted. double the returns potential given risk to make a tap -- mega cap. i remember widths of said upside

risk is the least talked about risk of 2023. the first half zip second half grip. tom: i was weaned from 1974, 1970 six, no one saw it coming. it was against the lift. the experience of that singular risk separated from your best, careful analysis. joining us now is savita. savita: we looked at a variety of signals, first of all narrow brett is not a precursor for doom and gloom. i want to get that out there.

i think it is a false negative. when you look at valuations, they look hi which is why no one wants to buy stocks. valuations look hi when you are in over a session -- and a valuation recession. our call is the riskiest asset class is the risk-free, treasuries are the bubble. everyone has been buying treasuries and pushing interest rates down and we are working through that. if we are in the sticky inflationary environment do you want to be in cash or bonds, don't you want to be in stocks the participated in inflation? stocks are reviled because everyone is worried about a recession. we have been positioning for this recession for six quarters. we are at a point where the average money manager is mostly

in defensive's. more overweight defensive's than cyclical. i feel like this is another set up for a cyclical rally. 4300 is it that far away from where we are today. i do you think you can make money by owning some of these unloved cyclicals that will not get really old by a recession. our economists are forecasting .8% peak to trough declines in gdp. that's not bad. jonathan: 4300 is not the headline. it is leaning into cyclicals. just go through industry groups, what is it about cyclicals that you like? savita: nobody wants to talk about them. the recession we are heading into it's not that bad and we are at a point where cyclical

sectors have become higher-quality. i know this sounds crazy to say, if you look at energy, metals, financials, these companies have been forced to get disciplined because they have been starved of capital for a long time. we have been in a decade where nobody wants to invest in commodities, mining, banks. these companies have to become disciplined and self-sufficient and they are higher-quality that a lot of these secular growth plays that have had a free ride from cheap capital, globalization and low-quality sources of growth. lisa: let's talk about the other side of the call, equal weight is delivering twice the gains of market weighted cap.

as it simply trading sideways allowing cyclicals to gain in lifting the index or do they sell off? are they going to go opposite each other? savita: i think there is a way big tech can do all right during this. and that is if this they shorten their duration risk. a lot of these tech companies offer growth in the future. they will get hit harder by the changes in capital. what some companies are doing is acknowledging that they are too big to grow quickly so they are returning cash. that is the way we can start investing in big tech again. if we get more money up front. i know it is heresy to say some of these companies will initiate a dividend. look at a lot of these tech companies in the past that

initiated dividends, they have rallied on the news. i think this is one of these themes that as we move forward, tech companies could navigate higher levels of inflation. smaller banks i worry about the big banks are in a good capital position. tom: you have such a wide net at bank of america, or people cautious? gloomy? what is the collective mood? savita: they are probably long on big tech and they are seen as defensive. i think those stocks are more cyclical. the mood is very gloomy and i think they are just waiting for the downturn. the one thing that makes me think we won't get a downturn is

the question we get most frequently is, i have capital, i would like to put it to work, should i wait until the debt ceiling is behind us? if everyone is asking that question, we will probably not see a major downdraft. jonathan: you think a debt agreement will deliver a rally. savita: there is this sense, even when you listen to the bearish investors, we all kind of thing we will get a deal done. that is the base case. why bother selling if the base case is resolution? jonathan: the psychology of this woman is fascinating. if you make the call already in your market, it fine.

savita: here's the thing, if you look at us up a location's there are overweight bonds more than stocks. if you look at our own client flows, individual investors have been selling for the past four weeks. we saw a big spike in outflows that would indicate capitulation like levels of selling. folks of brace themselves for this calendar date and it is not necessarily the case. jonathan: do you want to stick around? tom: good morning wayland. he emails and says go on fender. fndr, 5000, $700. great call.

jonathan: savita, thank you very much. with the call of the equal weight s&p 500. it is up 9% and that speaks to the big tech story. tom: this equal weight analysis is very important. jonathan: the people wait down, that's very important. very well thought out. jonathan: sam stovall is coming up next. savita, it has been great. how long is it been? savita: pre-covid.

jonathan: wow, thanks for coming on. this is bloomberg. ♪

>> people have checked out and there is not much going on. this is going to be a volatile market.

we still feel confident that the fed will pause and they won't deliver another hike in june. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning everyone, it is a tuesday. really, what we are looking at is the bond market speaking volumes. sam stovall will join us in a moment. we are looking at a two-year of 4.375. jonathan: it has been relentless at the same time the equity market is handled it well. tom: they said they are looking at the 10 year real yield.

up 1.49 percent, is an elevated and adjusted real yield. jonathan: i think a lot of people are expecting a pause from the fed. we will get more information next month. june 2 as payrolls, june 13 cpi. those of the things were paying attention to. tom: the fact is, there is a nuance between pause and skip. the stock market doesn't want to this top or skip. lisa: at the same time they don't have the data yet. people are sick of being depressed. you turn to the next to you and they are bearers. a wellpoint can you say if everyone is looking for the win to jump in, what will happen if

they get some sort of catalyst? tom: year-over-year, four point 3%, that's sticky. it is not where ed hyman wants to be. jonathan: if we don't hike in june what is the next move going to be? if it is a cut, why would it be a cut? because growth rolls over or is it because the inflation information it is improved. in the immaculate disinflation. but if it's because of growth, that's not so good. lisa: that has people spinning their wheels. citigroup released data on card spending and it contrasted with some of the encouraging signs elsewhere saying that restaurant spending has gone down significantly month over month.

there are signs that people are spending less even in services. at what point do we had that area? tom: we have to get to bill winters and sam stovall. we have to stop here. it is no fun going to any restaurant anymore? it's outrageous, the prices. if you have two kids with you and you look at the check, you go really? am i wrong? jonathan: you are not wrong. tom: i think the restaurant thing is an important one. jonathan: i had of 5:30 reservation. it's not 8:00 p.m. anymore. lisa: i'm in bed by then.

jonathan: futures are negative. a stronger dollar is eating away at the dollar shorts in the rate cut calls. futures are just a bit softer. tom: we have done a lot of equity today. mike wilson at morgan stanley so we have sam stovall all, chief investment strategist. do you have the confidence to deploy cash and buy shares? sam: i think what we're experiencing right now is a little bit of sideways action. it depends on your time horizon. if you're looking short-term we are in a challenging. right now, anticipating the debt

ceiling and the federal reserve on june 14. in the potential for a recession. long-term, i am in agreement that we should be deploying our cash and the greatest opportunities lie in the mid-and small caps. tom: with the heritage of cfra, was the marginal characteristics of your five star rated stocks? what is the nuance that makes them distinctive? sam: growth at a reasonable price. looking for where the expectations are for earnings the expectations for growth. when we look into 2024 we're looking at all sectors posting positive returns with many of the growth in cyclical groups posting double digit increases.

with a lot of doom and gloom focused on 2023i think we need to look beyond that and look beyond the valley into the coming calendar year. lisa: i'm wondering if you agree with sid vita that we could see a rally? even though people say stock investors have not been paying attention. do you agree with savita? sam: investors have worked themselves into a frenzy, reminding themselves of 2011 when we have the last dead crisis that caused a downgrade in the u.s. credit rating. we saw all styles and sectors in negative territory. as we were looking last week through thursday with the increasing optimism of some sort of debt agreement we saw a reverse situation where the

underperformers were your safe haven staples, health. in utilities in the out performers were discretionary intact. we will see a short-term pop that then could get muted the closer we get to the fomc meeting. lisa: you have to wonder if it's the psychology of a market where people have been wrong about a recession that has been delayed or taken off the table. they are sick of being gloomy, not earning more. at what point is this a narrative driven by price gains that people will pile in on and they get blown up? sam: the question itself implied again followed by a loss followed by again. first off, i think tom would

remember that americans are by nature optimistic. it is not really good to be overly bearish because if you are, and you are right you are hated. really, the thought is where are we likely to be going and what is the time horizon? when we look to valuations, -- tom: sam stovall, what you just said is absolutely critical. could your father have been as productive as he was in the media mill you now? can you frame american optimism in the ballet that we live in now? sam: there is a lot more noise today than there was when he was

in his prime. there is a lot more confusion as a result. media is focused on sensationalism. the world is going to end tonight at midnight. jonathan: you mean brammo? lisa: the world kid and different ways. i'm just kidding. tom: sam stovall is invested, he doesn't care about data from the economy? jonathan: kashkari says a mild recession would burying inflation down? do you agree? sam: oh absolutely. we should be at the fed's target by the end of 2024. we see fed funds above the

inflation rate which would implied the fed is on pause or would have only one more rate hike in the because starts in 2024. average timeframe should be about nine months on average. jonathan: unless we get some stagflation? lisa: that's the risk people are talking as much. we are back to the banking crisis that will help things along. something is not adding up to me? tom: you and i were talking about this the other day, there is a cadence to studying the markets. one of them is to open barons on saturday morning and read it and with sam stovall's father who we all worshiped at his altar. he was foundational and how we learned about op demonism and equities. -- optimism in equities.

you got earnings off section two of the wall street journal. you sat there with the pencil and circled the companies. i think that was revenue, income and chairs. jonathan: sam, thank you. we are at this point, s&p up nine percent, nasdaq 100 is up by 26, 27 percent year to date. you came into the year saying you could pick up yield, four, 5%. then you get to this point where people are like, i want some of that. that is what i start to hear from people on the south side. talking about the upside in equity markets but not in cap waited, s&p 500, but the equal weight. lisa: i am just waiting, and two

months people will go headlong into tech. i was looking out a story that this ai start up back by alphabet raised 450 million in funding despite all of this freeze. you mentioned ai and you get a million. jonathan: people start to attach stories to it and they say it is ai, cost-cutting. and then people say i want to buy. i wonder if we see more of that? fantastic conversation with our colleague francine lacqua at the qatar economic forward. hello friend. francine: i am delighted to speak to bill winters. we will speak about everything from marcus.

we will talk about the banks and takeovers. what do you worry most about the markets is that the debt ceiling is it a banking crisis? bill: i think things feel like a reasonable stasis. i heard from president biden to mccarthy and i have to think these guys knows what they are playing with. i think the structural resistance to inflation is the biggest concern. as a plays out over time, what does economic growth look like? i'm impressed by the resilience. francine: if you look at the debt ceiling, are we playing with fire? bill: the politicians in

washington have been playing with the debt ceiling for decades. so far, there has not been an accident. every time we wonder, is this the time? the fact is, the treasury markets are behaving well. credit markets are behaving well. francine: there is a lot of money in the middle east, are they after bank like yours? bill: everyone would love to own a piece of standard chartered bank. we have an interesting footprint and we are cheap. if somebody wants to say we could add more value to this bank, we have been growing at double digit growth rates, profits are substantially higher. the fact is, we are a global

bank. adequately scale for the environment. that's all and focused on. francine: if you look at regulators in the u.k. and elsewhere, would they be ready for a large systemic bank? bill: there was a takeover of a large systemic bank in switzerland that happened in the weekend. in the right circumstances, regulators can get things going. it's impressive to see how various investors in the gulf, we are sitting here in qatar today with the head of the investment qatar authority. a lot of experience investing and i think these various countries in the gulf are diversifying their economy. that is why we are here. we see huge opportunities to connect back capital with

opportunities in asia and vice versa. you need a bank to do that. when you have a bank that's like us to play the role. francine: what are the biggest concerns for banks like yours right now? bill: the banking industry is extremely liquid and will remain liquid after we go through a period of timing. but the rules of changed, after svb went bust, everyone is looking hard at their deposits. as so many things have made it through these testing periods, from a banking view, the best thing that happens to our business we keep trade levels high.

but china is accelerating, it is opening up its capital markets. for a bank, that's a good thing. francine: how can you make sure it is opening for real and not just two steps forward and one step backwards? bill: for a couple of decades, china has been racing ahead and that's quite normal. structurally, china is part of the global economy and a big way. it wants to remain part of the global economy. in order to do that, they need to liberalize the arrangement for capital moving in and out of china. that has been a study objective for decades. it has accelerated at the moment for all the reasons around the geopolitical tensions and it will continue to move forward. will they take time to consolidate and pull back? francine: when you talk about

deposits and liquidity, do we look at the depositors base at banks? will we see more regulation and is that wanted? bill: that's a good question. it is very clear that there were some deposit bases, that were too concentrated. we know the market was merciless with those players. in the u.s., the fed put a funding facility in place. it is not a guarantee but it's substantial backstop. i don't think we will see another credit suisse. but let's think about how sticky those deposits are? banking is a confidence business and if we have a banking system, you keep deposits and lend. we will have to accommodate that

with transparent liquidity facilities. francine: does mobile banking change that? bill: no. mobile banking means everything goes a bit faster. bank runs or fast runs and when you lose confidence hard to get a bag. credit suisse businesses are being distributed across the banking spectrum. some of the money had moved before. almost 200 billion of outflows. it is not all going back to ubs. we are picking up our hands. we are picking up assets and market share. francine: how much?

bill: we had 20 billion in inflows last year and another 7 billion in the first quarter of this year. first standard chartered it's material. francine: we talk about the u.k.. do you worry about the u.k. as a capital market? bill: i'm a big believer in the u.k.. it is fundamentally resilient. politically, they have a challenge given everything they have been through. i think the country is doing the right thing. the fact that there is been a drop in a recession is notable. francine: thank you so much.

with that, i will send it back to you in new york. jonathan: francine lacqua with bill winters in the middle east at the qatar firm. plenty of speculation about abu dhabi coming in. he was not screaming we are not for sale was he? tom: she brought it up early in the interview and he was receptive to talking about it. standard chartered is a wonderful bank. can you imagine being an executive and steve englander comes in for a briefing? their heritage is emerging markets and everything around the china ram, they are at

frontier bank. i don't mean that in a narrow sense, they have a heritage that you would think someone could pick for distribution. jonathan: if you're just tuning in, welcome to the program. plenty of conversations coming from the qatar forum. plenty more fed speak through the week and then we have mike mckee with us in the studio. but if we heard so far from the fed officials? mike: the fed is divided on what they think is necessary to do on june 14 because half of them think we don't have tight enough policy to bring down inflation. friday we get pce numbers but we have an unusual number of fed officials that say they will be willing to vote for a rate increase on june 14. jay powell has come out and said

what he doesn't think we need one. lisa: do you have a sense of what they are looking for? mike: friday we look at personal spending and income to see if americans are still hanging in there. then we get the pca deflator which is what the fed looks out in terms of inflation. forecast are that it will stay where it is. we got the easy stuff out of the way in the hard work of bringing down inflation begins. then you have jobs next week and the 13th, the day before the fed meeting is cpi. we won't know the reaction to that before we get the fed decision. mike: i am riveted to the minister tomorrow. and the new word, skip. what is skipped? mike: people are trying to parse

the idea of not tightening in june by suggesting they could go in july. that would be a skip instead of a pause where they don't go again. the question is do you think you are tight enough? tom: i was with michael mckee when they brought up the v-shaped and he spit out his coffee. jonathan: it has to be frustrating to talk about it. when they say pause the market here is and that is something they're trying to manage right now? mike: tried to manage the see a financial condition because the markets are calling for cuts and that's one of the problems they have with the idea of are they tight enough to bring down inflation because we see some loosening out there and that makes it less likely that we will get a quick reaction and inflation markets. jonathan: it is good to catch up

and we will catch up the next hour. also dropping by, jared woodward, sarah hunt and amy wu silverman. lisa: i know who will be set with you. i will just swing by and ask him some things. tom: run some video of michael o'leary laughing at scott kirby. jonathan: pilot contracts at denver airport which i was quite impressed with. it wasn't too bad. lisa: how long were you there? jonathan: 30 minutes, that was enough. ♪ what do you see on the horizon? uncertainty? or opportunity.

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tom: bloomberg surveillance on a tuesday. the dead and the deficit is very next week. meanwhile, yields are higher. 4.39% on the two year yield is a shocking move off 3.85%? lisa: a .5 percentage point that we have seen. tom: we have a greater inversion out there. i'm going to go to the real

yelled, 1.4 9%. lisa: lori logan will be speaking at the top of the hour after hawkish comments from james bullard. he weighed in on the impact of what is going on. nonfarm payrolls is likely to continue to slow down over the coming months as the lagged effects of the fed hikes continue to have a negative impact in particular in the sectors more vulnerable to higher rates, including tech and retail trade. when will tech wake up to interest rate sensitivity or have we shifted away after the ai craze? tom: i'm trying to figure out what my opinion is on it. i do take the point that tech is

in its own universe and i can see that in the equity market. we will follow all this economic data into the june 14 meeting. torsten, i want to get to your amazing chart but i have to follow up on lisa's note on nonfarm payrolls. let me give you a short phrase, where should nonfarm payrolls be? torsten: during the pandemic they were thrown 5 trillion, it is no surprise when you throat 10 trillion out an economy, it is taking time. it is not surprising it is taking time to get liquidity back and taking time to get household and corporate savings drawn down. we need to go through it before

we get the slowdown. tom: you have nonfarm payrolls coming down at some point. your spectacular chart shows how incorrect all the doom and gloom talk. torsten: this is critical, when the fed was just hiking rates 25 basis points, they were looking around at how the economy was doing. once we got through that process, there were already tightening credit conditions and banks are seeing much less demand for commercial real

estate loans. those indicators are and now 2008 levels. it increases the risk that we could have a nonlinear slow down where a tighter credit condition could be accelerating the slowdown in the economy. lisa: is this recession delayed or recession interrupted? we are looking at data, is there anything to give us any indication ahead of it? torsten: absolutely.

on the one hand, we have stimulus, stimulating. at the same time the fed is trying to slow things down. we have tighter credit conditions. the fed will look at inflation at five and say we have to do more to get inflation down. there are two reasons for that, first of all, housing is beginning to recovery. it makes up 40% of cpi. that's lifting inflation down the road. wage inflation is also coming down slowly.

that raises the risk that inflation will be sticky and that means that tech, growth and venture capital, the fed is trying to slow down growth. that means grow should not be performing well. tom: david rosenberg posted on sticky inflation and he goes to tony and anna's looking at first, second derivative. west a derivative on the inflation we are seeing and where do you have to get that where you are legit second derivative convexity? torsten: inflation is up five. tom: five is not four. torsten: it is not even moving down to two. it is still moving sideways. it is true to say that housing

and inflation could be coming down. with existing home sales and homeowner confidence going out. if the housing component goes up, recession will turn out to be more sticky. tom: we said my hang on to every word you publish. mortgage rates are back up, we are 7.04% at a 30 year. torsten: jobs and wage growth have both been strong. that is why housing has started to show her recovery. there are more bids for homes sold now than there were six

months ago is stunning when you think about where mortgage rates are. we will get to that inflection point. eventually, the fed will succeed with inflation coming down. lisa: which takes us back to where we started. this 10 trillion stimulus pumped into the economy and the uncertainty of where we are in terms of breaking it down and pulling it out of the economy. how much was sucked out and what keeps getting circulated in terms of wages? torsten: that's the key question. the only way we can get a handle of that is to see how much savings is left? citibank, bank of america on the private level and the conclusion

, is better today than it was in the fourth quarter of 2019. use either restaurant performance rolling over. maybe consumers are beginning to hold back. there are some early signs of cracks for the u.s. consumer but is difficult to get a firm handle on the timing. no one should doubt a recession is on the horizon. lisa: there is a big question of what caused inflation? is it really globalization or do you globalization or how much is it that modern monetary policy failed. how much can you parse out these two things? torsten: when you lower the

supply side, you have more demand and less supply. we are trying to balance that by hiking rates to get the economy more in balance. the fed funds rate should be nine, that is not where we are. we need more to do to get to the point where there is more balance. tom: let's go to the chicago school, and to doesn't have recent academic validity. what does that mean? torsten: m2 is a reflection of potential in terms of rapid demand. it is now collapsing because the

fed is trying to withdraw the economy down. the fed has to slow down growth, hiring, we need to slow the economy down in order to get inflation down. lisa: with the taylor rule, how mispriced do you think fed funds rate should go in order to slow the economy and bring out the stimulus? torsten: thus the debate. fomc saying we don't need to hike more and some say we do need to hike more? i think for sure we will have rates elevated for a lot longer. tom: he said he is leery on

monetary tightening right now. torsten: there is a lot of discussion about sequencing. how do we tighten policy? if you think it's needed to get along rates of. lisa: we have seen this grind higher as people rethink. torsten: the recession has been delayed. may be raised do need to go up. tom: futures are at negative nine, the vix is elevated at 17. stay with us on radio and television, good morning. lisa m: keeping you up-to-date with news from around the world. qatar airways is beefing up its presence as it recovers from the

covid-19 pandemic. the ceo spoke with bloomberg at the sidelines. now that we are ramping up, we are introducing routes to europe, africa and china. lisa m: ticket prices will continue to be higher in the airline will wait and see before ordering more planes. saudi arabia was energy official is asking oil short-sellers, he spoke at the qatar economic forum. >> i keep advising them, they will be outing. lisa m: united airlines is

announcing its plans to expand its denver line. a dozen new gates and three clubs including the largest once in the u.s. network. they will add new nonstops to six more destinations including four not served by any other denver airline. we will speak to united ceo scott kirby in the next hour. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪

>> seeing the data and hearing from my contacts and banking, it could be worth as much as a

couple of rate hikes. >> right now, absent a big change, i will be comfortable saying let's look and see how things play out for a little bit. >> there is a whole month's worth of data coming between now and then. i don't prejudge june. tom: a lot of fed speak, we have more fed speak coming today. lisa: i am curious to see what data they are looking at. tom: seriously folks, you get the majesty of what they wrought in 1912 and what mcchesney martin did, these people are different. lisa: just to highlight how

different this moment is. what happens when you pump 10 billion -- 10 trillion into the economy and then you have to understand an economic model that doesn't have a parallel and that is there struggle. tom: brent crude of 1.29%. american oil is elevated. brent is not back to $80 a barrel. i thought it would be good to get a carbon analysis while we are having that qatar financial convention. set the scene, of how the middle

east right now looks at oil. will: i think they would like prices to be higher from here. $77 is not what it used to be and a lot of the states have big spending commitments and they need those oil revenues to meet those. at the qatar economic form today, they were clear people should not get too comfortable with oil, they prepared to surprise the market again. there were a lot of hedge funds who were very short this month. the hedge fund positioning has

been as short as it has been in 10 years. they tried to send a clear meeting with the opec plus meeting a week away. tom: this idea that we have in our head of whatever of fair price of oil is and certainly you are saying, it is much higher. give me a statistic. where is the correct price for brent crude to find that general equilibrium theory within oil? will: the people at the top of the saudi government would probably say, if you look at saudi finances they would be more comfortable with oil price to $100 a barrel. lisa:ofupply

and demand, javier wrote this column talking about it's not so much a demand-side story but rather a supply side story and the fact that russian oil has accelerated and protection. iranian oil is making its way to the market. all of these actors that were thought to be removed are anything but. how much of that is part of the story? will: i think that is exactly right. russia has nearly half a million barrels a day. from what we can see, they have claimed to do it but it's hard to see that in the market. at the end of the day, what matters to the supply and demand balance. they are still rising.

there is some frustration that russia is not pulling its weight. it hasn't been expressed publicly but behind the scenes, computing with middle eastern oil in asia. that is weighing on sentiment and prices. lisa: what is this do to opec-plus, russia's voice of the table is that much fraught if

they are working in august of the goal of the opec members of oil $100 a barrel. will: russia is committed to the alliance. it claims to be doing what it promised to do. from the opec side, and the gulf they want and need russia to step up. you wonder what the intentions

that lie underneath. it will be interesting to see what the minister say when opec meets next week. tom: i am looking into japan within economic experiment that we have never seen. how critical is japan, the marginal price of oil? we studied it was critical. will: i don't think it is what it used to be. it is still important, the market is being driven by chinese demand. china's economy is slower and weaker than people expected. when we look at india, that's

when you watch the marginal end of oil that is just going to soak up energy. it is so hot there. people turn on the air conditioning but it's illustrative of a country that is getting richer quickly with a middle-class growth. japan is important but the country we need to watch is india. tom: to watch is india. tom: really can't say enough about will. he really circles back to javier and others who say india is growing. there is further curve and version, the 10 year yield becoming elevated.

when i say corporations adapt, i am looking at it from accounting standpoint. she took it right over the bonds which is hugely important and she said without hesitation they are adapting and adapting fast. lisa: it has an increase their credit worthiness on the margins because they pay down their debt. you have all of these factors coming together to support credit when a lot of people have

been protecting going further in debt. when do you see that benchmark rate go higher? it's impossible to try and understand the different, various inputs here. tom: we are finally getting back to a normal rate environment. savita mentioned the risk-free rate. we have never experienced getting back to where there is a n actual calculation of these days, our households depend on the internet more and more. families grow, houses get smarter,

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jonathan: equities doing ok, bond yields keep climbing. live from new york city, good morning. futures are softer, 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 with jonathan ferro. jonathan: live from new york, plenty of optimism but no sign of a debt ceiling deal as yellen doubles down on a june date.