>> markets, they are always fragile so you are looking for the next shoe to drop. >> the fed is driving us toward a stall speed and then you become unstable. >> maybe they hike once, maybe twice, that is it. >> the fed being on hold should not be confused with job done. >> don't think the soft landing has been ruled out entirely. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. lisa: day two of waiting for a bull market, welcome back, this is bloomberg surveillance from new york city. john is supposedly working in

california on a beach, tom is on vacation. you have me again and also julian emanuel, chief equities derivatives and -- at evercore isi for the hour. it is a time when we are seeing a 20% potential gain, since lows in october, since lows in october cut is the rally real ? julian: i think so. our base case is sometimes -- sometime in the next few months, you will have a recession, so you will have a pullback. but this is a cyclical rally where we think the hallmark of the last week or so is a broadening of participation. lisa: you don't want to call it a bull market or a pause, a skip, why does it matter? >> if you go back to the tech bubble burst bear market, you

had several rallies of 40 and 50% and the nasdaq of we made the final bottom. rather than labeling, you have to think about how you want to think about the long-term as an individual investor or an active manager. this is one of those times where those considerations are different. lisa: is this fun? julian: it is a tough time. but in the end, we are happier when equities go up. lisa: we are also seeing risk as a big picture scale. whether what we saw in ukraine with the dam bursting, concerns about mass glade in war, or ratcheting up tensions in china between the u.s. and china. how much are you looking at potential tail risks, or has that dampened the valuations? julian: it has dampened the valuations and again, the period we believe we are entering is a time when despite those risks,

we think we will see multiple expansion, which is counterintuitive. frankly, going back to our options expertise, the vix with a 14 handle is fabulous in terms of protecting downside risk or for some underperforming and may get pulled into a chase, upside risks. lisa: we are burying the lead. sunday you upgraded, increased your expectation for the s&p to 4450 and you might see that as soon as july. explain. julian: that is a hallmark of a momentum market. the nasdaq has been in a momentum market since the end of march. for us, the last week or so is encouraging. the s&p broadly has joined with that in the clear move above the 4200 level, basically six or seven months, we are starting to

see a broadening into the small caps which is encouraging. but again, this is an environment where the momentum takes on a life of its own. that is also a function of the fact that if you look at it, sentiment, whether measured in terms of the stock market, the economy, or thinking about risk, is poor. at the same time, we are seeing data that says there's a chance this recession gets pushed out. it may end up getting pushed out to 24. lisa, -- lisa: we are seeing another day of this with the federal reserve, but when it comes to the international reserve, the 4300 watch, we did not get there. ongoing weakness in the euro but basically better at 1.068.

10 year yields lower after ism services data came out. disappointing, even still in expansion. i said john is on the beach. he is in newport beach, which is a reason he ditched me along with tom. i will speaking with the ceo, cio dan iversen and rich clarida . that is at 9:00 a.m.. annual shareholder meetings will happen for zillow, urban outfitters, palantir and freeport-mcmoran. we saw this downward revising of expectations, shares off today. it is interesting to see commentary coming out of these meetings at a time of fluctuation. i know you love politics so i

wanted to get you on this. former new jersey governor chris christie is expected to jump in the race to become a republican candidate for president. he has been called the trump slayer, people say he has no chance but his objective is to act as an attack dog on debates with trump. potentially 12 candidates by july. julian: you do wonder if he will announce with the boxing gloves on his hands. this is healthy. you can call it that. let's see what happens. my question, hopefully someone will answer it, who among the field aside from trump and santos could rise to create a three way race? lisa: people are looking to virginia potentially. we will get into that later.

what we heard in china, a recommendation that state owned banks start to reduce their deposit rate to increase their margins. tom mackenzie, who covered china for more than a decade, is in london. what do you make of this and the fact that it is not a mandate but a recommendation? tom: there is a fine line when it comes to policies. but it builds off last week, the measures being put in place, puzzles being discussed to shore up the real estate market. now you have more piecemeal efforts to put a floor on the growth from china. less strong than many expected, leaning on the banks to reduce the deposit banks. trying to propped in april and

clearly there was concern about the fact that there was not traction going forward in terms of liquidity and the for loans. households, businesses, -- households of pay down their mortgages. is there demand even as it becomes easier to take out a loan and access liquidity? is there a demand to tap into that? lisa: it is stimulus light and positive for growth. but it indicates perhaps the chinese communist party sees a bigger problem than they are letting on. which is it? tom: speaking to a respected strategist, he said it seems to be like a government running out of ideas. bloomberg economics views the chances of a benchmark rate cut. further one year and the five-year medium-term

facilities, -- but there is a debate. they are saying they take the action to lean on deposit rates and therefore given the scope to reduce low rates, it pushes back the benchmark rate cut. they have cut just 50 basis points, half a percent since the pandemic in 2020. but they have this massive debt pile and there is concern in terms of adding to that if they go over the broad benchmark cut. but now, the bloomberg economics team thinks it is likely. lisa: tom mackenzie joining us from london. julian emanuel with evercore isi with me. what do you make of what is going on in china and the growth running out of steam? you feel the story has been priced in and is on the wane? julian: we think it is the bumpy path to a more sustainable number. not 6% or north of that, it may

settle toward 5%. the issue is a couple of things. first, the way china wants and will likely grow is unlike the last 20 years. we are making the transition to a domestic consumer led economy. the issue is, you have had a second covid wave over the last five or six weeks and it is hard to say how much of a dampening effect that has. but in hearing the suggestion that banks reduce their rates, i'm reminded of the phrase moral suasion. i suspect he will get a degree greater of moral suasion if things don't pick up. obviously the government is very in tune with the pulse. lisa: the beatings will continue until morale improves. there is a question about how much of a tailwind or headwind

china will be. as you talk about the forecast for u.s. equities, do you see the u.s. being a new spot of focus after everyone was looking international for the first half of the year? julian: it is a mixed bag. if you look at the consumer focus names selling into china, they have sold off in the last month even as the rest of the market has stabilized. obviously parts of it have rallied it strongly. that tells you it is an open question. the one thing that seems clear is the idea that china will be a discrete reason for inflation to take another leg higher. that we don't subscribe to. lisa: in your morning meetings, what do they seem like? do people seem like it is a waiting game, but today we see more gains? is it a momentum discussion?

julian: it is, but ed hyman who has been on the forefront of the view that inflation is going to come in faster than people expect. the last month has been choppy, next week, that is likely to be a sign. lisa: we saw that from the ecb consumer inflation release -- consumer inflation release, saying expectations fell considerably. coming out on tuesday, ahead of the fed meeting on wednesday, are they expecting them to pause, skip and do the same thing later? coming up, the co-ceo arrow -- co-cio of p jim -- julian emanuel sticking with us. >> keep you up-to-date with news from around the world with first word, i am lisa mateo. crane says russian forces have load up a giant dam in the south of the country. it unleashed a delusion of

water, putting 10 villages and others at risk of flooding. residents are being told to prepare to evacuate. the president summered -- had an urgent meeting to discuss the attack. and french unions are holding strikes against the pension reform from the president. the first protested more than a month, which will test whether the president has succeeded in getting the country to move on from the politically damaging bite. emmanuel macron has faced months of protests when he enacted the legislation without a full vote in parliament. expectations eased in april, given the european central bank ending its run of rate hikes the summer. according to the monthly survey, expectations fell from 5% in march and for the three years ahead, they slipped to 2.5% from

2.9. jamie dimon on capitol hill today. the jpmorgan chase ceo will meet with a group of moderate house democrats to talk about banking and the economy. the lunch takes place as he has been urged after the 2024 presidential race, despite protests he does not plan to run. global news powered by more than 2700 journalists and analysts in over 120 countries, i am lisa mateo, this is bloomberg. ♪

>> ultimately, this is going to be about a choice. it is as much about joe biden as it is who republicans to choose, or if there is a third party candidate. the election is going to be a wildcard for the market, for this year and next year. lisa: that was ed mills, raymond james policy analyst, talking about what we have ahead of us for more than a year of excitement of the 2024 elections. the candidate pool for republicans has gotten big and is getting bigger. we have heard from the former

vice president, potentially chris christie today saying he will enter the race. and i am not here with john or tom. john will be here at 9:00 a.m., in newport beach. but we have julian emanuel stepping in for the hour to join us. i have to say, we got over the debt ceiling drama. how much are you turning your focus to the political sphere ahead of the election? julian: it is interesting to conjecture. but as even the most devoted political followers will say, it is a long time until iowa and the general. so much can happen. it is a consideration. but in terms of moving the markets, very little. lisa: it moves the news airwaves. former newco -- former new

jersey governor chris christie is likely to enter the race today. the wildcard is whether glenn youngkin joins the fray over the next couple of weeks, what pimco is looking for. ringing the pool to potentially 12. running us is terry haines, founder of pangaea policy. do you think it is likely we will have 12 republican candidates trying to get the upper hand from former president trump? terry: why not? the more the merrier. what people have reverted to in the republican field is the idea there is career advancement involved. you can advance your career by joining, not staying out of it. there is a why not me aspect. what a lot of people and candidates sense is that the electorate will be hungry for alternatives as trump continues to be way down.

there is a good opportunity for them. in a sense, the field is looser, more entrepreneurial that it has been. lisa: there was an article about the trump slayer, chris christie. his job was not to get elected, but he would, with boxing gloves on and have a go on stage with the same tenor the former president has had on some of these debate platforms. do you think that is a good approach, likely? julian: we see that from a lot of people. governor christie is capable and successful. for most of the republican field he comes with the detriment that he is from new jersey. a blue east coast state that is distrusted in the heartland. but the big difference between 2016 and 2024 will be that the

vast majority of candidates come in honed to take trump down. there is a possibility there might be a path swarm mentality that helps let the air out of the trump balloon. julian: let's step back. trump is the front runner and desantis is the clear second place. who amongst the rest of the field is almost like a kentucky derby bet, betting the field, who is likely to emerge, call it by labor day, as the potential challenger? terry: i don't think it will emerge necessarily by labor day. the two i would suggest folks look at our former governor haley of south carolina and senator scott of south carolina.

haley is making a good pitch. to those who want less partisanship, but people to move along and move forward in washington, she is offering that alternative with a good deal of specifics. a refreshing change of pace in terms of how she talks about it. senator scott is the classic feel-good story. he is articulate, a worker in the senate and very conversant with policy of all kinds. both of those are going to distinguish themselves. lisa: talking about the field, i am wondering about policy. speaker mccarthy spoke about how he does not see more aid heading to ukraine at a time when it seems there has been an escalation in the war, with the accusation that russia blew up a dam. how do you focus on this, one of

the talking points of the republican side is to cut off or and monetary aid to ukraine. terry: i am focused on it. right now, right after the debt ceiling -- which is important. what speaker mccarthy is talking about is we just negotiated spending deals. i'm not going to deal with this by blowing up the deal in a supplemental. i will wait and see what they need and address this as part of a regular process in the fall and winter. we have a lot of republicans in the senate, people like lindsey graham, saying they need the aid now. what is going on underneath is my suspicion that if the ukrainian counteroffensive does not succeed completely but at least in part, what you will get

in 2024 is a lot of western ally pressure to settle this through negotiations. on the other site, china already tried to make these moves by reenlisting emmanuel macron. this will be the summer that tells the tale for ukraine. speaker mccarthy does not have to make a decision soon and is trying not to. lisa: terry haines of pangaea policy, thank you. as we talk about the issues with the candidacy and the growing field, there are reports that jamie dimon is headed down to washington to meet with a group of moderate house democrats to talk about the u.s. economy, banking. is he running? julian: probably not. the scenario where he runs is if president trump clears the field and his legal woes overtake him next year as a potential sub

suit. but i think jamie dimon is among the foremost anchors of all time, likely very best positioned to continue rendering financial advice in that context. l -- lisa: how do you feature the tit for tat that you don't have the market moving but policy applications? how do you factor that into models that are claudia? -- cloudy? julian: we know the fed has to issue more debt. we fixed that and there is a crowding out effect. we also know that as minor as it may be, we may have turned the coin on the runaway growth in spending. we got a little bit of a concession. all of those factor in to this idea that there is less of an

infinite boost to the government supporting the markets and the economy that there was. in the long run, if you shift back to the private sector, that is good. lisa: so you are not concerned about the issuance, liquidity -- you don't seem like. you look for 44 50 by july, upgraded from 4150, a shift on sunday. coming up, pooja sriram. from barclays. does this show the rapid deceleration ed hyman is looking for? a pretty quiet day, possibly a newer market. this is bloomberg. ♪ harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. ♪

because investing isn't one size fits all. ♪ allspring. purposefully divergent.

lisa: welcome back. this is bloomberg surveillance with jonathan ferro, tom keene, lisa abramowicz. but they are both off. jonathan is in newport beach, waking up at the crack of dawn. we will get to him later. julian emanuel joining us from evercore isi for the hour. you are seeing a range bound feel as we tread water, trying to bump up against the 4300 test. a lot of people, not just julian emanuel, but others upgrading the forecast.

we are seeing dollar strength versus the euro. but that has been range bound. the russell 2000, going nowhere but not lagging. overnight there was a significant move from the reserve bank of australia, expected to hold rates firm. raised by a 25 basis points to 4%, the highest level back to 2012. in the same breath they see inflation rate exhilarating, in europe, the ecb is saying consumer expectations of inflation have dropped considerably in march. what is the truth? is inflation decelerating or is it sticky and re-accelerating? michael mckee will give the answers. what is it? michael: i wish i knew because i would be able to tell julian how to bet for the fed meeting. the problem is inflation has stalled out in the u.s. in the

fed thinks it's going to go back down again but that is what they thought in australia. then inflation came back and they felt they were forced to raise rates. they came out with a statement that reads like we are going to see from the fed, that further rate adjustments may be necessary depending on how the economy evolves. they are leaving their options open to go the other way further. the expectation numbers don't tell you much. it is largely based on what people are seeing with energy prices. gasoline and that sort of thing. those are likely to turnaround as gas prices go up. saudi arabia cutting production. we could see changes. the final point i would make is inflation numbers are backward looking that they are all the central banks have to make their decisions. if we get a big number next week, which we are not supposed to according to the survey, the fed might be forced into raising rates.

lisa: i can feel the blood moving up in julian's arms. he thinks inflation will not surprise the upside, reaccelerating. any pushback? julian: it seems like we are going to the next level. australia is perhaps a one-off. listen to madame lagarde, saying we have to stay tough. but the expectations falling. are we into the point where it is more like talk, jawboning, and that in the context of we believe they will pause next week? michael: it is jawboning to an extent. but can they back that up. the problem for the fed is the markets front run them. if we do get and inflation scare or something else that happens that causes the markets to move, the fed will be forced into the situation of reacting or raising

questions about why they are not. the reaction function is not well understood at the moment. they are hoping they can just stop and hold. but they go into the meeting with the idea that if we do not move the rates, we're going to leave people with the impression that we might in july. it is a more than 50% chance that they are going to raise rates in july according to future trading. but i asked this question yesterday. you get futures telling us we will get rate increases and at the end of the year, cuts. but the people making these trades are saying we believe the fed. we think they will raise rates or hold, not cutting. is it the same for you? julian: for us, the prospect of cuts later is a risk management situation. our forecast says you are going

to get a recession. the question is how deep and how long. if it is the down one, down two quarters that ed hyman expects, we don't think the fed will cut but if it is deeper or reverberation of the banks, that is it. what i think the expectation is there will not be a cut in the near future. lisa: everybody seems to be pushing back -- including pooja sriram. there pushing back the recession -- penciling in july and september. joining us now, u.s. economist at barclays. is this a no landing for now until later or is this something where the pain will be greater because of the delay in the meantime? pooja: good morning.

a great question. we revised our outlook, looking at the sheer strength of the data on hand. at this stage, on the rate hike side, one would have expected monetary policy to have gained more traction. that has not happened. if you look at the length and breadth of the data, whether consumer spending, labor markets, hints that housing demand is beginning to firm. it seems to suggest the slowdown we had might take longer to materialize. we think there is a slowdown that will happen. but it would be later in the year. we are also penciling in a shadow recession. if it is about three quarters of modest negative growth, pushed down into q1 of next year.

a tricky situation. we think it will take longer for monetary policy tightening to see some effect on demand and activity. it will hopefully land. lisa: this is what i keep hearing. it seems like a soft landing scenario is coming back. nobody wants to say it because this time is different. a natural curse. a are you in that camp? pooja: i guess it is hard to see this playing out. of course there is the risk as julian emanuel pointed out, we could get an aggravation of the lending crisis and it could force us into a stupor recession. that is a risk that we have. but looking at how things are playing out, this is where we stand now. julian: from an equity perspective, we are flummoxed by the idea that if you look at the

financial crisis in 2008, the equity market did not make its final peak until two months before the recession began. what are the one or two guideposts you are looking at in terms of higher frequency data that tell you recession is closer or further away? pooja: one of the things we have been focusing on is what is happening to the labor markets. the resiliency we are seeing in the economy can be tied back to labor demand, very strong payroll growth. we want to look for signs that perhaps we are seeing job openings come off gradually. signs that maybe initial jobless claims will start ticking higher. definitely some progress in terms of labor market conditions easing. a lot of this data is backward

looking, we don't get much high-frequency numbers. but i would look at that more closely. we also have soft activity data that typically provide decent signals. like the ism surveys. which have been pointing to some moderation in activity recently. we got they services print yesterday. that seems to have central in, a modest growth in the sector. we see new orders coming off, employment having come off slightly. let's say that continues to move in the right direction. assign we are entering into the phase where we should expect activity to slow. lisa: you said in the break that macro does not matter as much. it is earnings and valuation. the piggyback off what peter was saying yesterday. bad news is bad for markets,

sort of like the 90's. how much of that is predicated on the fact that the fed is done, maybe another 25 basis points but otherwise no? julian: we have done a lot. no question. the fed perspective, part of the frustration is everything they have done since march of last year, you've only seen telltale signs with regard to the labor market. it is having effect. but if you are the fed, this whole dynamic of the expansion and stimulus, monetary and fiscal that we got in 2020, 2021, if you look at the charts, it tells you the countervailing force of the tightening over the last year, you are still in the point where it has to flow through. for us, the net out of that is that it is the goal to predict the macro. but the fed is certainly -- if

the inflation data does not heat up again in a mindset where we are not going to cut, we are going to keep markets on guard, but we are waiting to see how it develops. that means earnings and valuations, sentiment matter more. lisa: our 6% fed funds rates off the table? pooja: never say never. it is not a base case. we have two additional rate hikes in our baseline, about 5.75% by the end of the year. let's say inflation remains persistent. not much signs of labor market slowing. and if the fomc wants to show resolve and is determined to bring prices down, we can't entirely rule out additional rate hikes. lisa: projects around of --

pooja sriram of barclays, thank you. and michael mckee. that's what people are saying, the fed is not done but getting there and they are not as important in some ways. julian: if we have less volume of fed speak, at least we can concentrate on fundamentals more. which is why this is not bad. lisa: you say fundamentals, but everyone is focused on the presidential race and everything else. the headset from apple, whether they will buy it and kids will want it. dan ives will be talking about that next. enhanced in our reality. from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. apple had to extend losses after they launched the much mixed reality headset at a price of

$3499. analysts were optimistic about the product but acknowledged the price point was high and would limit the number of shipments in the near-term. the industry-leading headset sells for $1000. the debt ceiling presenting a challenge to u.s. banks. lenders are struggling to hold onto deposits as customers opt for higher yields. money markets have soared, quicker than banks to pass along the highest interest rate supported by the federal reserve policy actions over the past year. morgan stanley planning to move to a new office in singapore as it looks to expand its presence in asia. the company is in advanced talks to take over five floors of towers under construction. a boom in private banking, other services has boosted demand for

swanky offers in the business district. hearings in a tesla lawsuit against a protester who climbed on a car at the shanghai auto show and shouted that a brake failure almost killed her family. tesla denied this claim and filed a case against a protester, seeking 700,000 dollars in damages. global news powered by more than 2700 journalists and analysts in 2700 -- in 127 countries. i am lisa mateo. this is bloomberg. ♪ three nights, esg... the broker will take your bonds. -diversification, futures, options. fiduciary. leverage. [whispering] -frothy markets. psst. virtual real estate is a lock. ♪ cold hard cash ♪ j.p. morgan wealth management knows the world is full of financial noise. i'm looking at your asset mix and plan.

you are right on track. great, thanks. our easy-to-use app and local advisors are here to help you figure out what's right for your investments. j.p. morgan wealth management. hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. >> in the same way mac introduced us to personal computing and iphone introduced us to mobile computing, applevision pro will introduce

us to spatial computing. this marks the beginning of a journey that will bring a new dimension to powerful, personal technology. lisa: tim cook announcing apple's new headset that resets for 3004 hundred $99 and is set to watch on the next phase of products. we are here with julian emanuel and tom and jonathan not here. we will see jonathan ferro at 9:00 a.m. hour when he broadcast from newport beach. nothing remarkable in the opening. notable, the run-up in tech shares. more than 40% gains in apple. record highs, touching a $3 trillion valuation. this feel real to you? julian: there is no question about the fact that you go back to last year when ai, generative

ai basically came into the public where we could get on our phones and ask a question. it has changed the psychology. whether it is exactly like 1998 to 2000 or a less -- lesser echo, there is a transformation. i met his with the market cap. lisa: one person who has gotten it right is dan ives, one prognosis after another. how much do the bears hate you? dan: it has been a hate party. i appreciate it. some of the smartest people i know are bears. i just think it is something where the shorts, the bears came out of their caves feeling good going into the year. my view is it was going to be

better than fear in terms of overall tech spending. but it was our view that it is the most transformational trend we have seen in tech since the 90's. you can't fight that. that is why microsoft, nvidia, apple and others continue to go higher. lisa: lisa: some of my best friends are bears is always a prelude to something negative. after the announcement yesterday, you are still doubling down on artificial intelligence and barclays of apple, this is where they are going next. other people did not necessarily take that away from the conference. what gives you confidence that that is the next phase of the explosion in valuation and growth? dan: that is typical. for the last decade, apple has fought it. they will just see a leaf. they don't see the forest for the trees. what cupertino and cook are

building is another ecosystem in the app store. right now there is a battle, and game of thrones for developers between google, microsoft, in terms of what we are seeing, the $800 billion ai revolution. apple understands it. that's why they have the developers. the first step on a broader strategy to build another move for developers and consumers. julian: that big five, big seven, however many stocks you want to target that have capitalized on the ai momentum, who among the second tier of those companies that have not yet fully realized the potential do you see as most attractive? the second question, what industries do you think are likely to benefit over the next year or two?

dan: great question. the first derivative, the new york city cap. the second or third derivatives, i think salesforce will be a derivative no one is talking about. names like palantir, another on the ai front. what you are starting to see from the cybersecurity perspective, as you have more moves to the cloud and ai, will have huge benefits. palo alto, ford and others. that is why i believe this is not just -- today, 5, 7, 10 stocks. the next one, three years, it is a 1995 moment, and ifo of moment -- and iphone moment. macro aware but from talking to developers, enterprise, what we've seen in spending, i see a green light for lisa: tech stocks. lisa:-- tech stocks.

lisa: this is faith-based. there is a faith ai will be transformational more than the augmented reality sets that people will not buy their children for the holidays. personally. but it is not about one product, it is about engaging in a new way of doing business and getting out front so the different companies can use your technology software, whatever you have, in a way that transforms the way they do business. correct? dan: it was faith-based until the guidance heard around the world. the ford billion dollars raise. all of the bears went into hibernation for the winter. that is what changed everything for tech. that was the numbers. now, in redmond, we are going to see it. the next few quarters. investors are not looking at the

next one to two quarters. they are looking out over one or two years and greeted the opportunity in terms of a market where many are still yelling fire in a crowded theater. julian: what do you say to clients worried about valuations echo >> it is the same clients over the last 22 years. i will sit down, transformational tech names, amazon, google, tesla, if you look out over the next year on transformational tech, you will miss every transformational tech stock the last 20 years, the next 20 years. it is no different coming out of the draft, michigan and brady. the first camp being like i don't know if it will work. that is my view as to how you look at the transformational tech names. lisa: are you buying into this? you feel you have to be overweight tech even after the rally?

julian: for us, we realize the momentum aspect, whether 1995, whether dan is right this is 95, not 98 or 99, we have further to run. or later in the cycle, we like the kinds of names that have shown price momentum, earnings momentum and importantly in a momentum driven market, still offensive positioning. and by that, whether it is a bid to put, high short interest, and you get the number of second and third tier technology names dan mentioned, as well as other industrial names that may or may not end up using ai more directly in the immediate term. lisa: a lot of people talk about positioning. the over waits for the big tech names have gotten fairly extreme. everyone is piling in.

as much as the bears might be more vocal, once reaching out to say no, hate mail an expert tips, most people are saying we are in. how much will that challenge the ability for these shares to rally even if people buy into the story? dan: institutionally speaking, many have been on the sidelines with their reasons to be negative. now maybe they can focus on the weather, hurricane season. there are other reasons. i think what is starting to happen is you are looking at derivatives. you look at apple from the parts perspective, a stock that continues to go higher. you look at the macro, it is not rosy and rainbows. but what is starting to happen, the next four, six quarters, there will be names that ultimately fake it and that is the froth that will come off. if you pick winners, the

fundamental names for cybersecurity and ai, that is how you win. lisa: what does that mean for fortune 500 companies? dan: by 2025, we are looking at $4 trillion or sooner. lisa: dan ives putting the bears back into hibernation as we see the rally in tech shares. it is interesting we are not seeing any interest rate sensitivity inditex. -- inditex -- in the tech sphere. julian: it is accelerated growth and opportunity. one of the best things when we talked about this earlier, macro matters less, we flatlined in terms of yields. let's let it be calm. lisa: anywhere other than big tech for apple, a new all-time

high, shares lower by about .6%, just off records.

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>> markets, they are always fragile. you are looking for the next shoe to drop. >> the fed is driving us toward a stall speed. and you become unstable. >> the fed is behind us. maybe they hike once or twice, that is a. >> the fed being on hold should not be confused with job done. >> i don't think you can rule out the soft landing entirely. >> this is bloomberg surveillance with tom keene,

jonathan ferro and lisa abramowicz. lisa: everyone seems constructive this morning. welcome back. this is bloomberg surveillance on bloomberg radio and television. jonathan ferro, tom keene and lisa abramowicz, but they are both off and you have me. you will also meet greg peters, co-cio of pgm will be with us for the hour. joining us on set, do you buy the constructive feel everyone seems to have? >> i kind of deal. we are past -- do. we are past the debt ceiling, and unforced error. the data continues to be strong. we are closer to the end of the hiking cycle than the beginning, obvious statement. i feel like we are in a better place for a little while. but there is still uncertainty in the future. but i feel we are in a decent

place over the near term. lisa: we just spoke with two equity analysts and the optimism was overwhelming, threatening bears, saying you're going to keep getting it wrong. do you think the optimism is misplaced, or do you jump on the same boat? >> it was optimistic. i'm not quite that optimistic. but maybe the recession that has been talked about for the past 18 months is pushed off. that is the curiosity in the bond market and the pricing. the markets are pricing in another hike and cuts which implies the fed is going to admit in a few months time they made a catastrophic error, the economy has rolled over and they have to cut. it is not about whether you are bullish or bearish. it is about the incongruence he of the equity and risk markets, versus the bond market.

lisa: that seems to be something we see on an ongoing basis. you are seeing a return to the 60-40 feel, where it is working, a little inverse relationship. stocks slightly softer in premarket trading. bonds getting a bid after the ism data yesterday that was softer than expected and the services sector. you are seeing dollar strength, though this has been stagnant, close around 1072106 -- 1.065. it feels like the same in crude, lower after people reassess the cuts we heard from saudi arabia. i want to talk about the optimism from some of the stock market bulls and the pessimism implied by yields. and i want to bring in our next guest. jonathan ferro is in newport beach, he will speak with ceo

emmanuel roman, dan iversen, and richard clarida do. we get annual shareholder meetings from urban outfitters, zillow. today, chris christie expected to jump into the race to become a publican candidate for president. how much are you watching that? >>: i'm watching it closely. it is a curiosity and i do think it is important. the next presidential race, where the house and senate continues to evolve, it is important for markets, the economy. predictably on the global -- particularly on the global stage. it is important. lisa: we want to get to our guest, anna han, equity strategy -- strategist at wells fargo. good to see you. everyone is getting back in person which i love.

you are not as bullish as others. why? >> we have our price target below where we are in the market. we expect a pullback. when you asked before, is the optimism misplaced, i would say it is concentrated. this one part of the market is very tech, ai and growth oriented. maybe five to 10 names holding up the market, leading this rally. if we don't see that expand, that is a cause for a pullback. people are kind of staving off the recession, 18 months or more. we still expect something. and there still is the concern that if the consumer gets hit in the pocket with labor, that is something we have to consider might cool the market a little. lisa: how much of that is tech names you don't see continued to rally versus the others catching up? they are so dominant, where the tech goes, so goes your forecast.

anna: you're right. we have a index driven by market cap weight. you have these names in the index, it makes it difficult. is this the indicator of the health of the equity market, or the health of these select five top 10? when we think about the market, it brings concern to see there are weak parts. you have brought a couple up, you've have mentioned some risks. these are things we have to keep in mind. we're not quite ready to move our price target. we are holding firm, 4200. it is still going to be an up and down ride. >> how sensitive do you think the equity market is to rising rates? last year it was all about rates. stocks had duration. now no one cares. what is the importance of rates in your to your forecast? anna: crucial. there is a beta to the equity markets. when we think about how much

yields impact, like you saw, yields up, growth markets down, equity is down because growth is a big part of the equity market. what is confusing as you have seen yields go back up, the 10 year, 20, trending back up or 30 basis points as markets start pushing out the possibility of cuts. at the same time, growth leading the market. they thirst for ai, the exposure people are trying to get has these clashing forces. went to those fundamentals kickback and? lisa: i have been looking at credit markets. they are the ones that tell you when everything is going to fall apart. what they are signaling is it is ok. you will seek triple seat not do well. some other names do well. people are looking at resilience and potential growth given that revenues are going up with inflation. it seems like it is not that negative, things can keep

chugging along even with 5%, 5.5% had funds rates. greg: the resiliency is amazing across all markets. credit market is notable because the construct has changed. if you think about whether risk has moved in credit, it is out of the high-yield bond market into the levered loan market and the private market. the risks are more opaque and less leaning as they have been in the past. i think the signal that credit has provided in the past will not be the signal in the future given the move toward opacity, whether levered loans or private credit. lisa: does that mean the models that have been used to forecast weakness don't have the same clarity because some of the readings will be muddied by trends that? and out: i would agree. even the traditional parts of

the market, the canary in the coal mine, might not be as sensitive anymore. have we forgotten there could be unrealized losses in the regional bank space? but credit markets are reflecting healthy spreads. we saw ig spreads last month, a round-trip of 10 or 15 basis points. we are back where we are. these are the things that maybe has equity volatility contained for now. something we have to remain cautious and vigilant to stay in front of. lisa: what would you have to see to become more bullish? anna: a goldilocks scenario. either we keep unappointed low and inflation can come down without the fed having to do too much heavy lifting. that is a patient's name. i don't know how patient the equity market or consumer can be. we are trying to keep steady and keep the patients. but if that can't occur, you are still going to see more

volatility, and the vicks handle will be lisa: hard to sustain. lisa:-- hard to sustain. lisa: anna han, always great to have you. i wonder how much more you have become over the past couple of months. is there a fear people are being brought in for the kill? greg that is classic. -- greg: that is classic. i am more constructive. it is a bond and fixed income person, higher yields help. that is the important aspect. lisa: there is an equity perspective in terms of credit. are you seeing less willingness to go into the risky areas, or are you getting more constructive because of the resilience in the economy? greg: i do see a bifurcation.

whether it is leverage, highly cyclical underperforming. it makes sense to me. if you look under the covers, delvin, you are seeing a healthy rationale in market action. it may be checking out ai is a different story. but broadly, there seems to be decent differentiation. which i think is a healthy sign, not a poor one. lisa: do you feel like people in the market are not used to this, there waiting for the fed to tell them what to do and trading on macro themes, not specific names? greg: yes, and i think that is where things can unwind quickly. investors are using an old playbook. if you look at the market, in terms of rate cuts, it is overly heroic. the fed and global central banks

are fighting inflation. they can't turn on a dime when inflation is above the mandate. i think markets are putting too low of a bar around rate cuts. big mistake. lisa: people are thinking rate cuts will happen before they do. still seeing rate cuts price into the market by the first month of next year as people say job not done. greg peters sticking with us, you jim fixed income. in the next hour, neil dutta from renaissance macro joining us. we will look at what is to come including cpi tuesday ahead of the fed rate decision. skip, pause -- this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word, i am at lisa mateo. russian forces have blown up a giant dam in the south of ukraine. that unleashed a deluge of

water, putting villages and other areas in risk of flooding. president zelenskyy summoned an urgent meeting of the ukrainian national security and defense counsel to discuss the attack. unions holding a day of strikes against the pension reform in france. the first nationwide protest in a month will test whether the president has succeeded in getting them to move on from the politically damaging fight. emmanuel macron has faced months of protests and strikes. he anchored many when he enacted the legislation without a full vote in parliament. deutsche bank's asset manager dia -- david -- dws group is expanding work flexibility. they will let people work outside performance a year. it is different from other firms, stepping up efforts to get people back to the office.

blackrock told employees to be on-site at least four days a week. joining the ranks of major funds looking to the frontier of the investment universe to boost emerging-market returns. patients like uzbekistan and the dominican republic are -- making them attractive to portfolio managers even as they reduce exposure to china. global news powered by more than 2700 journalists and answered -- analyst in 127 countries. i am lisa mateo. this is bloomberg. ♪

>> you can advance your career more quickly by joining the field then staying out of it. there is a why not me aspect, what a lot of people sense, a lot of candidates, is the electorate will be hungry for alternatives as trump continues to be way down. there is a good opportunity. lisa: that was terry haines, founder of pangaea policy as we talk about the growing field of republican candidates for resident. chris christie potentially coming in today. the question around the governor of virginia, whether he will get

in. market seeing a softer tone, but not anything dramatic. we are seeing yields lower, crude, down 2.2%. even after what we saw yesterday with saudi arabia coming out and cutting production by one million barrels per day. john and tom both off. we are here with greg peters of p jim fixed income. -- page them fixed income -- p gim fixed income. this is not staved off. greg: this is something that makes you revisit that. there is something in the market price action here. it has a lot to do with china, but it is a global growth slowdown story. it is hard to ignore the fact that markets have moved past the opec-plus cuts and continue to

move lower. a worrying sign. lisa: we will continue to parse that as time goes on. a lot of people thinking it is not a permanent cut but a one-off. greg: is not really a cut, oil flow out of russia and iran, it is not a true cut. lisa: or a lollipop or whatever. we have been hearing a lot in the tit for tat between the u.s. and china. for we get into the race in the political sphere coming into 2024, there is an easing of tension between the u.s. and chinese. you are seeing potential talk of meetings in beijing to come to more munication, to set the stage for a softening. annmarie hordern and washington, d.c. of bloomberg joining us. we are going to get to the election later. but how significant is that that

there have been these talks by senior officials in china and the u.s. in beijing? annmarie: one of the most significant is we have the highest ranking u.s. official to date since the spy balloon incident. an individual in charge of asia meeting that vice foreign minister in beijing. according to readouts, these were frank and candid conversations. it seems that you see the administration wanting to meet with counterparts. this could be the laying of the groundwork. it comes on the heels of other meetings between high-level u.s. officials and counterparts. gina raimondo meeting her counterpart, jake sullivan spent a lot of time in europe recently. there was a secret trip from the cia director, to china. it looks like there is a growing of outreach. at the same time, the rhetoric

is heightened now. we saw that over the weekend at the shangri-la dialogue in singapore. a cordial handshake, but there was no meeting between the defense chiefs of washington and beijing. that is a question for the broader national security apparatus as well as business community. what does this mean for them if you can't have your top level military chiefs, which is ground zero, and where a lot of tension stands, is in the taiwan strait. we saw that this weekend with a chinese vessel coming close to u.s. worship. lisa: as we gear up for the applicable circus of the election, how does this play in? the china u.s. relationship between publicans and democrats, how much splintering has there been? we have heard there splintering over ukraine aid. to be get a sense of where positions are coming out?

annmarie: you would be hard-pressed to find anyone in washington or on the campaign trail not wanting a tough stance on china. it could be very difficult for the biden administration as they try this rapprochement from china. you're waiting to see whether secretary blinken will go. this trip got derailed. janet yellen still plans on going to beijing. how does that look? you're going to have questions to republican nominations. the field is widening today when the former governor of new jersey enters the race. they will take a tough stance on china and they will want to do anything to say the administration is being soft on china. but we have seen the biden administration has not lifted the trump era tariffs. they went after china in terms of export controls and chips for the military. but china will be the foreign

policy target for all of these candidates. greg: how do you see the risks receiving them? each candidate wants to be more hawkish than the next. how do we get out of this vicious circle if everyone is talking tough on china? annmarie: it is a great question. that is what the business community is grappling with. dan tannenbaum picking to bloomberg saying a lot of this is optics. you look at comments from lloyd austin and huishan fu in singapore, when you look at the hard data, you see record trade between the u.s. and china last year. for businesses it is going to be more complicated as they try to navigate. they are waiting on what is happening with the outbound investment restrictions from that u.s. and other g-7 countries. they have talked about this at the g7, de-risking.

sequoia capital is cycling off its china business because they find the regulatory environment too difficult. are we going to see more businesses do that taco -- that? lisa: thank you. i wonder how much you can factor this into investment thesis. if it is bipolar in terms of whether there are restrictions put on. greg: you are entering a phase where china will no longer be the dominant global growth story we have witnessed over the past 20 years or so. on top of it all, you have maturing economic cycle in china that will have a different dynamic on the global stage. will they fight against it or allow it to happen? lisa: how much has that

influence whether you are interested in global bonds or chinese security is they are easing policy on the margins? >> that is important. with the bigger picture story is the growth out of china will not be the growth in the future. what does that mean for not only global growth but global inflation, labor markets, the like? where to invest is a smaller story. the bigger story is the influence china has had will be very different going forward then what we have been investing around the past 20 years. lisa: how do you hedge against geopolitical risk? >> very difficult. the lesson learned last year is you have to pay attention. in the past you weren't rewarded as an investor to ignore it. what happened with the russian invasion is have to pay attention. geopolitics is taking more and more importance into the thought

process. it does not go away. as geopolitical and local -- politics within the country, like around the debt ceiling. lisa: how much are you overweight in the u.s., saying this is bias when the risks are significant? greg: i think when the u.s. wins and continues, we like the dollar and the u.s. and we don't believe the story that the u.s. dominance is fading. lisa: dollar marginally higher now versus the euro. morton next about the fixed income space with collin martin of charles schwab. just how much people are shifting back to the u.s. after going overseas for the earlier part of the year. this is bloomberg. ♪

what do you get from lisa: this is bloomberg the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

surveillance. tom keene is on occasion. jonathan ferro is in california and will be broadcasting from there at 9:00 a.m. markets, softer tone as we look at a quiet period for the federal reserve. but not anything but when it comes to geopolitical actions. a bit of dollar strength, it of resilience in the russell 2000. bonds, yields marginally lower. perhaps people have a sense that there is not runaway growth fueled by the services sector.

10 year yield at 3.67%. 10 year -- two year at four and a half percent, a bit below. euro-dollar sticky over the past couple of days. over 1.0691 as people try to understand whether the ecb will stop cutting rates later this year. a look at some of the names moving this morning. retracement of apple, retracement of nvidia. marginally, both names down, less than .5%. exxon's shares lower, following from an underperforming level this year, even after the cuts from saudi arabia. glad to say that to date we are joined by greg peters 47:00 a.m. hour of fixed income. i keep thinking that this market is going to melt. that is what has been happening every day.

greg: lack of data should help that along. from summer quiet period might help. but we still have the fed still have inflation. the data is mixed. it might not be as planned. lisa: our next guest is also in studio. before we get to him, is everyone going back to the office? have you seen that accelerate recently? greg: there is that move. from an investment trading perspective, being on the trading floor matters and matters a lot. you have natural, free-flowing exchange of ideas. we are reverting back to normal. lisa: and we also have free flow exchange of ideas with colin martin, fixed income strategist of --. colin: yesterday, the commute

was busy. we are seeing more activity. lisa: are people revolting against that? there was a story about farmers group in california. a ceos said, you guys can all work from home then a new ceo said he will not be remote after all. same thing at amazon. are you hearing about that? are people excited to go back? collin: i have heard it, but i think it is mixed. i would be surprised in that instance if it was my plan to work remotely, but i think people are ok going back in camaraderie, exchanging ideas is an. we are seeing that on our end. lisa: your boss can know he check those boxes. rate. i want to start with this general sense of optimism and this idea of a soft landing or something that looks better than it did two months ago. are you buying into that belief? >> somewhat. we are still cautious but every

month and week that passes, we are getting more data that pushes back that arrival of the recession. we've seen a lot of mixed data. what we are seeing is the lot of the surveys are pointing to slower growth -- whether it is regional indices, ism manufacturing yesterday, but when we look at the hard data, labor market still appears state -- appears tight but with some cracks. spending is hanging in there. it is not defined the having we would've expect -- the way we would've expected. we think we will continue to see growth slope. gdp at close to 1.5% will likely continue as the impacts of fed tightening excess weight to the economy. -- way through the neighborhood but things have not slowed down the way people expected greg: what do you think about inflation? you talk about growth but inflation is still hanging around. how is that driving or forecast

on the rates side? collin: it is still sticky. if we relate the inflation outlook to the fed, it is difficult to see how they cut anytime soon. fed funds futures market is still present in a cut. with inflation, instill 4% or 5%. look at average hourly earnings. it is moving in the right direction. we look at those numbers of .3%, .4%. that is too high. we out that all in with a strong payrolls number and things are still ok. we do think inflation will decline over time, but it is proving stickier than a lot of us thought. lisa: both of you think rate cuts are off the table for the rest of the year. i am looking right out fed funds futures. it shows an implied rate of 5% at the end of this year. we have priced out a lot of cuts that were present in earlier. markets have not gotten shaken. has that surprise you, greg? greg: it has. more interesting, it is praising

in a hike and then a cut slightly but not as extreme as the few weeks ago. i am taken back by the narrative that the that will cut -- the fed will cut and therefore risk assets will do better. this is a central point is to wipe they would cut -- why cut the first place. the hurdle has to be high for the fed to cut. it will not cut just because they feel like it. echoes back to the inflation question. -- that goes back to the inflation question. collin: that is our view. they only cut if the need to. they do not want to cap. that is stimulus. look at what might happen if they cut and if that is good for risk assets, we are in the same camp as you. that is not a good thing. they are cutting because they need to to stimulant the economy, not a good outcome. lisa: but the fact that we have seen such resilience in credit markets suggest that this is an economy that can stand higher

rates for longer than expected. at what site they keep rates where they are -- say they keep rates where they are for the foreseeable future. collin: you outlook is negative because of the point you made -- higher for longer. over the past 15 years, we have not had high rates. every time we've seen them rise, they have come down and companies have been able to take advantage of that lower entry point for you go back to 314 or 2015, oil priced induced spread rise, -- we are a point where high yields are at 9% or 10%. they will have of the state there for a while. if you look at the leverage loaned market, because companies are getting it right and are hit hard rising expenses, seeing annual expenses double and triple. that will hit their bottom line

at a period when revenues are dropping. collin: i still think there is a good chance rates will be higher for longer and surprisingly so. if you script out this soft landing narrative, the fed does not cut, the front end stays where it is in there is a normalization of the curve. real possibility, what we are planning for. as far as pricing is concerned, as a fixed income investor, you are paid to be sure the front end. you roll up. it is extremely advantageous to be short versus long. that is telling you something. it matters. the bias does for higher rates, not lower. it is predicated on the feds not moving. lisa: are you saying the whole curve could be up for 5%, 5%? greg: in a normal world, it should be. should we be persistently inverted? the inverted curve is telling

you that the fed is cutting rates or -- and/or we are entering a recession. if we do not enter a recession, and the that does not cut rates, something has to normalize. that normalization needs higher rates, not lower. collin: good point. we could see normalization but probably at a lower level. to get all fields of to 5%, it is not just a soft landing. it is everything is fine. the economy can withstand these rate cuts and high yields. if we get this soft landing, maybe we see an immediate long-term yields rise a bit. then overtime the that cuts rates but at a higher level than what the markets are projecting right now. maybe 3% but 4%. lisa: if you're rates in -- -- a viewer rates in, how much of this is a higher rates are stimulatory? people are getting income and can reinvest it and we are

having the deflationary idea of negative or zero rates. >> piercing that now. it is good. we talked to investors and the rates they are learning these are the highest yields they have seen in a while. we do look at it is limited in the system. on the household level, it is lower than we have seen in previous periods of excess. especially in the mortgage worker, with people locking in low rates. the rise in yields is not impacting people as much as the fed would have expected. greg: history is going to shine an unfavorable light on zero and negative interest rate policy. i think higher rates is great for savers. the history books are going to look back and sake not a great idea. collin: i agree. i think the whole idea of zero interest rates has distorted what we have seen in the markets, where prior to

2007-2000 9, 0 was not anything. if the fed does cut and only down to 3.5%, maybe an immediate long-term yields will not fall as much as markets are expecting. lisa: all of this is constructive. normalization after two decades of extraordinary policy. yet, all those excesses, we will not see any overhang? we will just chug along, everything just fine? at what point do we say there will be distress in commercial real estate for private credit? collin: we are concerned. we have been cautious on credit, focused on higher quality. with those where they are, this is the main thing. if you can get 3.5% or 5% or more of high-quality investments, why take that risk elsewhere? there will be better opportunities down the road. reduce the risks. when the fight -- fed takes to whatever the peak and being and holds a while, we see negative

impacts there. greg: the darwinian process is just starting. how many business models have been predicated off of zero interest rates? you're seeing cre. you will see it in the corporate community. it is taking more time than initially forecasted, but i do think it is occurring. lisa: sp jim reed at deutsche bank said this morning, we are playing the waiting game. greg peters, you are sticking with us. coming up, stephen short of the short group on oil -- potential indicator of global growth. what does it mean that oil prices are still during lower even after output test from saudi arabia. -- output cuts from saudi arabia. this is bloomberg. >> jamie dimon will be on capitol hill today. he will meet privately with a group of moderate house

democrats to talk about banking in the u.s. economy. the closed-door lunch takes place as diamond has been urged to enter the 2024 presidential race, despite protests he does not plan to run. apple is said to extend its losses after the iphone maker launched its mixed reality headset at the price of 3500 dollars. that while analysts were optimistic about the product, they acknowledge that the price was high and it would limit the number of shipments in the near term. meta-'s headset sells for $1000. the warring rally in tech stocks still has further to go. according to citigroup quantitative strategist, who saved the buzz around artificial intelligence and hopes for a positive the federal reserve's rate hikes gives m&a's. there positive for both in june and see more tailwinds than headwinds. consumer expectation for eurozone inflation gives the central bank more reason to end

its run of interest rate hikes this summer. expectations for the next 12 months fell to 41% from 5% in march -- 4.1% from 5% in march. gun demand in the lowest level in seven months. no background checks fell 11% in may. that is according to the fbi's system, which is a proxy for sales. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. >> saudi arabia sees itself as the central bank of oil. as the minister said, they will do anything to stabilize the

market. demand has not been what people thought. there has been disappointment over china, uncertainty about the u.s. they do not want to get into a situation where prices hike further. lisa: that was s&p global vice chair speaking with david westin yesterday. today, oil prices lower yet again, even after output cuts promised by saudi arabia of one million barrels per day. this is a game interesting aspect of today's markets. flat s&p, nasdaq upward attach in premarket trading. softness in the euro versus the dollar -- 1.0687. yields a touch lower. a crude level 2.5%, fascinating given what we heard yesterday out of vienna. i am here with greg peters. jon and tom are playing hooky.

you were talking earlier about how this is important to watch is a key indicator going forward. greg: great read to global economic growth. a big part of the reason why oil has softened is because the belief is that growth is coming off the boil. demand is lower. that is driving energy prices. maybe we are still out of bounds with the cuts. global growth insight story. lisa: especially given the fact china seems concerned enough about growth that they are working on stimulating, perhaps performing measures, whether it is encouraging, not mandating, state owned banks to drop rates. i am curious about what is reflective of what is going on with china. stephen short, how much is lower the prices the resection of the chinese economy? stephen: oil, as with natural

gas, is your greatest leading economic indicators. there is always jubilation in the market when you see low commodity prices. somehow this is good for the consumer but no. you have low commodity prices because you have plaguing economic demand. this is the scenario we are at now. natural gas prices are depressed and oil is failing to hold support write about $70 level. this is a sign. we knew this going into the meeting. when you look at the markets term structure, whether domestic, european, the least north african, we have seen the command -- collapse and we have seen this inversion in terms of pricing. that is a sign that there is an imbalance between supply and demand. opec took an odd step. they made a mistake here. that is saudi oil minister.

he has been very vocal over the past month, warning speculators that they are going to ouch. this is an uncharacteristic move made by the saly. it tipped their hand. in one of these statements, he said -- that is clear. he tipped his hand at this point, almost asking wall street to stop selling. now it is a political time for opec. they been talking the talk but have got to walk the walk. the bigger concern is what we are seeing in the credit markets, that economic demand led by china is a major concern. we have seen that reflected in christ. greg: how are balance do you think the market currently is? what do we need to see in your mind in terms of cuts to bring

supply and demand back into balance? stephen: we are starting to see rates in canada and the u.s. take serious declines. abnormal outside declines we've seen over the past month -- our first telltale. but there is always that push and pull between international energy based in paris and opec. iea is the, ok, not enough barrels on the market. opec is the same demand is not as strong. i trust opec at this point. they are telling us they too may undercut in april, ongoing discussions over the weekend, we are probably out of bounds upwards of 2 million barrels between supply and demand globally going forward into the summer season. lisa: how much is this a short-term confluence of events, where you will see short-term weakness that only leads to higher prices later on because of a lack of investment?

stephen: short-term weakness we are now seeing. it is interesting the saudi was saying, wall street, stop selling. going into that weekend, traders that trade on their own firm's behalf, those bullish desks increased to the highest level since april 2020. they took a bullish position that we have not seen in the past 58 weeks short-term effect. with the lack of investments in hydro bonds, the games you're playing on wall street, zero-sum game, i cannot put any dollars into a hydrocarbon because they all have to go into renewables. if that is the way you want to invest, you have to be willing to pay. when we are not putting those dollars into advancing hydrocarbon -- greatest axiom in economics, not being well

treated, not welcoming hydrocarbons. therefore, that can only lead to greater volatility and higher prices when you do not have sufficient supply to get that oil from where it is being produced to where it is being consumed. lisa: i wonder how much this is starting to reverse?the already saw pushback from shareholders of big owners -- oil companies saying stop it was renewables, invest in your report business. -- ports business. despite signs that global warming is continuing and climate is an issue, people are saying we have maybe overstated that. is that what you felt as well? stephen: the climate has been changing for the past 5 billion years. who is responsible? i am going to say nature. what you are seeing in the global economy is that germany, europe's largest economy, is a recession. why? they went all in on renewables

and growth natural gas prices but to the equivalent of $600 last year. hence they are in a recession. the u.s. is going that way with regards to its move to get away completely from hydrocarbons. let's learn something from germany. there is a balance here. when you invest in renewables but that cannot -- this cannot be a binary investment. you have to been also indulge hydrocarbons. slowly, that pendulum is beginning to turn. lisa: you are nodding, great. is this something you keep hearing? greg: dancers both. -- the answer is both. europe is a great example, has to spend four near-term energy security and renewables. what you are seeing in europe is they have to spend in ways they did not envision in the past.

lisa: how much are you willing to fund that is a debt investor? greg: in european physical history, there was too much austerity. it'll more, but it is a delta balance. but i feel better about spending and trying to grow then continuing to retrench. lisa: 24, i am wondering how much you are focused on the u.s.? you were talking about that earlier. you do see some upside to the dollar. how much? this is going to be a driver of 2023? greg: i do not think it is a not civic move higher, just a steady stream. and we will have the sequencing shift. let's say the u.s. rate market starts to stabilize coming your continues to raise rates. you will see a switch, but it is too soon for that. lisa: this is been fun. do you want to become a tv host? no one is here, no one is watching. greg peters, thank you for being

with us. truly fabulous having you. right now, in markets, you see that desire to go upward with the nasdaq in particular. just crossing into green briefly. s&p still a touch lower, but still treading water near that 4300 benchmark. 1.0681 for the euro-dollar. yields in softer on the 10 year ahead of next week's fit meeting. put prices lower by 2.2%. this is bloomberg. >> welcome to another roland garros update. last year's finalist coco golf reached her third career final at the slams after she got past. after edging the opener 7-5, the 19-year-old took control in the

second before closing it out 6-2 after just over an hour and a half on court. t's find the right investments for your goals okay, great. j.p. morgan wealth management.

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jonathan ferro and tom keene both ditched me. but this renaissance macro did not. he is joining us for the entire hour. you were laughing. why? >> just a reminder when you put two strategists in a room, you are lucky if you get six opinions. lisa: seems like there's even more the case now. not just near-term, even long-term parameters for how to look at the world. >> demonstrates there is a

letter confusion in the market. that is primarily a function of the data. it has been a mixed bag. i think that is why you are getting, so good news is back to being bad news. there is a lot of confusion in the markets. that is ok. lisa: a lot of people are saying that the fed is perhaps less important. a heart of next week's meeting -- ahead of next week's meeting. seems like they're pricing out this idea of a material increase in fed funds rates going for. we are done and have to see with the economy is doing in this data dump we keep getting. neil: i think the die is cast for the fed to probably not do anything at the upcoming eating. when they do going forward remains to be seen. we saw for example with the rba

overnight, they had paused for a couple of months. now they are hiking again. i tend to think that the economy is far more resilient than is appreciated. that is going to mean that the fed going to have to do more than what is price. lisa: are we place for an earnings recession? -- poised for an earnings recession. neil: yes but we do not have one. i think primarily that was actually driving the market is earnings expectations, which have generally been improving over the last few weeks. one of the things i have learned so far this year is that when people talk about breath, these are just coping mechanisms for why you have been underperforming. there's honestly what i believe. the end of the day, the stock market is a function of risk premium, earnings, and rates.

rates are broadly unchanged. your date. -- year to date. an earnings are up. that is why the markets are up. you could say that is only for this company or that company, but to me, it is irrelevant. my mother is happy that apple and google and microsoft are driving gains in the market. it is like saying, the stock market is being led by the companies everybody owns. lisa: [laughter] all very positive. somebody else has a different view on what is to come, particularly with earnings revisions. markets, you are seeing the nasdaq treading water but slightly up in premarket trading. basically fat -- light in the day's people reassess a quiet day is fed speak and economic data -- none of them of import. crude prices alloy or fight about 2.2%. $70.59 even after opec-plus's

cats. our next guest has been talking about an earnings recession and about health you could see a soft ending port companies ratcheting back with profits. wonderful to have you on. let's start with yourself -- your thoughts on what neil was talking about earlier. >> i do think we should acknowledge this is an unusual time markets. i think that opening clip showed we have some of the highest core inflation since the 1980's, most inverted yield curve in the u.s. in 40 years, in germany in 30 years, one of the lowest unemployment rates in the u.s. since the 1960's. investors are dealing with unusual data. our view is that the economy is going to so in the second half of the year, that the full effect of taping has not yet been felt by the economy but that tightening will continue to play out. and even if you do not get a

recession, the effect of slowing growth, of actually effective sowing nominal gdp, is going to be bad for operating leverage and pressure on earnings and current expectations for growth are still high for this year, which creates near-term downside. as you look out, the picture looks a bit better, but near-term, the market still has to get through some key challenges. lisa: andrew, you just put out a report talking about s&p earnings declining 16% to the end of this year. how have you explained why you see that even though people have been revising upwards? andrew: investors are skeptical of the earnings move, which is understandable. it is a below consensus estimate, but also you have investors who say you have had economic data that is held up ok so far. you have had good performance from some of the largest companies in the market. that is indicative of investors

being more optimistic that ratings could be stronger going forward. what would say to that is a couple of things -- first, we do run forward earnings indicators and estimates. those models have been good at predicting the events so far. those models are saying there is going to be more downside to consensus than what the consensus expects. if you look at some of those larger cabin into the been outperforming, actual earnings growth has not been particularly strong. even for the market overall, earnings growth is rapidly approaching flat year-over-year. this is a market even with strong nominal gdp is struggling with earnings. that will get more difficult as we move ahead, as the market in front the legged effects of rate hikes and in further tightening in bank conditions. neil: can you explain how the long and variable lags work? we have been hearing this argumentf o -- argument since

last year. i would expect to see significant slowing in credit- sensitive areas of the economy, but that is not what we are seeing. housing, autos, they looked like they have been doing a bit better. can you explain how that will actually work when it has been several quarters now that they have been hiking? some of these credit-sensitive areas are picking up. andrew: that is the challenge with long and variable lags -- they are long and variable. rate hikes, you feel the full effect, maybe with a 12 month lag, which means that if we had rate hikes sitting at the beginning of last year, you are only now starting to feel the full effect of those rate hikes in the u.s. and europe.

we have not yet faulty for effect. that is to come. moreover, if we think about the will policy rate from of the interest-rate relative to inflation, that is still going through some of his largest increases over the next several months, as inflation falls and the things effect in the ecb keep rates high. the first element if we have not yet seen enough time to see the full effect of those rate hikes to economy and we have not seen the full effect of rates relative to inflation. as it relates to be more credit sensitive sectors of the economy, that is fascinating. as we discussed at the opening, the equity market is strong. the most credit-sensitive parts of the markets have struggled. commercial real estate, credit sensitive, has struggled. we are starting to see some of the impact of that tighter

policy play out, not of the overall market cap level but below the surface. we still have some of that to come which is why we think growth decelerates further in the second half of the year. lisa: how does this idea of a deceleration in earnings growth hair with a soft landing? andrew: they are quite compatible. if we think about the types of forecasts we are seeing, we saw a market in earnings outperform the economy over the last 18 months. one way of thinking about our estimates is that yes earnings in the market underperform going forward -- especially because we thank earnings are much more geared, much more linked to nominal gdp growth, which is decelerating sharply, more so than will growth another part of this that is important is they were market it is you have a soft ending, you are inherently talking about fruit -- fewer job losses and in a recession. that is great for workers but

might be more of a challenge for margins is the top line is slowing and costs are nothing pullback. -- not being pulled back. lisa: neal, what are your thoughts on some sort of pullback, some sort of deceleration, particularly in interest rates of commercial real estate banks? neil: to couple of things. number one, it has been a year. he said 12 months. it has been about 12 months and what have we seen? housing is accelerating. u.s. housing is accelerating. new home sales are surging. those are sign contracts. that means that the home is sold and construction spending picks up. with respect to long and variable lags, they exist with fiscal policy also. you have to state this -- the government did an unprecedented amount of stuff during the

pandemic. when you give people money, that becomes income. they spend it. it becomes somebody else's incomes. you are talking about state and local governments sitting on pandemic relief money. i think i just saw connecticut announce a significant income tax cut. it is being drawn down but you still have excess savings out there. there are long and variable lags of two policy pushing monetary policy effects. lisa: and some have underestimated those long and variable lags, including me. i did not understand just how significant that pile of cash was great right now, we are seeing some softness but not necessarily in bonds. this is bloomberg. ♪ lisa m.: suspension of the federal debt ceiling presenting a fresh challenge for u.s. banks.

lenders are struggling to hold onto deposits as customers out for higher alternatives that mutual fund assets a balloon to an all-time high, quicker than banks to pass along to customers the higher interest rates supported by the federal reserve's policy actions over the past year. you pain says that a few princess russian forces of bone of a dam in the south, putting 10 villages at risk of flooding. residents are being told to prepare to evacuate. volodymyr zelenskyy summoned an urgent meeting of ukraine's national security and defense counsel to discuss the attack. morgan stanley is planning to move to a new office in singapore as it looks to expand its presence in asia. the company is in advanced talks to take over five floors of clout -- currently under construction. they joined as boosting demand for swanky officers in these --

offices in singapore. test the lawsuit against a protester who climbed a car at the 2021 shanghai auto show and shouted that a break failure had almost her family. the incident field online criticism of tesla in china. tesla denied the claim and found a case against a protester seeking $700,000 in damages. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg.

at morgan stanley, old school hard work meets bold, new thinking, ♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪ >> during that china has fully

recovered.

-- for the hour and really focused on china. i do not know how much people can account for it in their models, but how much do you think that is the story behind oil that has been driving it? neil: hard to know. in some respect, demand has been holding up. if you look at consumer demand, people are going to work more, probably more, jet demand is higher. i think the industrial side of china has been a disappointment. that speaks to broader global manufacturing conditions, which have been sluggish. but at the same time, at least

as for as the u.s. is concerned, there is probably some room for improvement. inventories are low everywhere. at some point, if consumer demand is basically just holding steady, you will have to rebuild inventories eventually. it was interesting about china is as weak as it is, just look in china's neighborhood. a of strength there. japan is on fire, india is on fire. it is likely gravity model of trade. even though china is weak, you have signs of improvement in other areas of the e.m. asia complex. lisa: david dropped by of bloomberg intelligence, covering all things emerging markets from the credit sphere here at bloomberg. from that perspective, you are seeing that dynamism in other areas. add to that this idea that perhaps we will get more

stimulus from the chinese communist already, as indicated overnight. how much are you looking at something that could surprise to the upside with respect to all this activity? david: for every japan, i will show you others. the disappointing thing about china is the industrial sector. it is not playing ball the way it has in years past. the housing sector is weak, private demand is weak. what we will see overnight in terms of the pboc gently nudging the big banks to deposit, deposit rates are a function of the fact that they do not want to extend credit. household borrowing is basically nonexistent. corporate bond issuance is going to be relatively weak as well. despite it all, how much? how much can policy cuts really impact the chinese economy? the rest of the world's hiking rates. what kind of impacts will that

have on hussle balance? lisa: you are not seeing this is a risk on moment? damian: confirmation of perspective. lisa: what about what we saw overnight in the reserve bank of australia -- the opposite trend? you are seeing the acceleration of certain economies. meaning a reactivation of inflation that australia is looking to fight. damian: kimi australia, i will show you india. -- showed me australia and i will show you india. and look at chile and mexico. they are going to be on hold for far longer and have indicated as such. in this type of environment with the six now below 50, it is difficult to see when something is going to drop. everybody is thinking something is going to break. maybe it will not, maybe it will. you cannot manage a portfolio with that in mind but you have to assume that this is an environment was inflation low interest rates high. emerging markets expect that to

probably continue through the summer if something does not break. neil: does the market need china? the broader global market. china, i remember in the years following the financial crisis, the china hard landing serine area -- scenario was as perennial fear that every investor had. it lot of the final assembly has are the out of china. so what if china is not working. to me, a lot of it is contained within china. you talk about cre. in the u.s. their entire property sector is a disaster but we've been talking about that for how many years now? how do you feel about the china spillover? damian: to do the rest of the world? that mechanism is not as strong as before. you are seeing an economy transitioning from being export oriented to inward looking. china has not been working from

global contagion for years. they're not stimulating of the export side. they are stimulating domestically. the private sector in china is not cooperating. sentiment there is so weak. if you look at local debt levels, $25 of debt outstanding in china a massive number. if you look beneath the surface, you look at local government finance vehicles, 86% of tax revenues have to be funded by subsidies from aging. that is out and it is a massive amount of subsidies. basically, there are no land sales in china anymore. lisa: francis is a list is not as great as it once was but there are some still there still some big nose of contagion. if apple slows down and cannot any fractures of the parts, there could be a real issue. how much, though, is it just the

absence of that growth engine? how much is that what is going to guide the contagion because china will normalize something below what it has in the past? damian: touristy growth engine good going to be china but europe or the u.s.? it is a matter of where the growth will come from neil: divide of these companies, you mention apple, they have been leaking final assembly out of china, moving it to india, other parts of asia. it is important to remember that a lot this has been going out of china for a while now. they are important to the global supply chain, no doubt, but they're not as important. for me, it is about what is happening at the margin. lisa: we are showing record amounts of trade with china and the u.s. do you think that is overstating the relator's ship because of specific distortions? -- relationship become specific distortions? the u.s. has been decoupling for a while.

is that your sense? damian: to make certain pockets part one think we are not talking about is the second wave of covid and how it has hit china. they are using restrictions in a lot of urban areas. tough to quantify that, but if you want to talk about the impact, you look at export out of south korea. they may be bottoming, but they are not taking up to the extent you want. that is not a function of china but more a function of demand from u.s., and the rest of the world and striving semiconductor demand. china is just an assembler. china's role in all of this is quite large. to is no getting around it, but its impact in terms of at the margin, is it going to be the driver of interim -- increment a risk? i do not know. lisa: what you think? neil: china is important. there is no getting around that. tired not have a strong view on china, but you bring up the covid issue.

that may hurt growth of the margin, but companies have been moving away from china for several years now. this is going to be a secular theme you will have to deal with probably for the rest of your investing life. it is a bipartisan phenomenon. everyone wants to be hawkish on china. you can expect more of the same. look at the chips act. lisa: neil dutta, you are sticking with us. damien, thanks. coming up, more on this economic sphere, and uncertainty going forward. she u.s. economist at bnp paribas joins us. this is bloomberg. to keep the people that have been here taking care of us. learn more at getrefunds.com.

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this is bloomberg surveillance. tom and jon are off today. i have nil data from renaissance macro alongside me. -- neil dutta incredibly important read for the fed. softer in the s&p, down about .1%. euro-dollar basically 1.06 seven. softening in the euro and strengthening --. kurt down to .2% despite the

opec-plus cuts. -- crude down 2.2%. there is this question of how much we have to hinge on the head and whether the fed matters last. it is nice to have the fed at her less. before we go to our next guest, great friend of the show, i am wondering how much there has been a psychological shift in workers, that basically there has been some kind of pandemic- driven mel as that is driven some -- malaise that is driven confusion in the data. neil: hard to know, but with respect to workers, this is the first time that for most of us we have had to deal with a structurally tight labor market. for people who are working, they probably half more power, labor power, and they have in a long time. even though we have noticed that the rate is declining and things like that, there are signs of

normalization in the labor market. they are still at levels that they never were before the pandemic. i think that to me is an interesting structural theme that is unfolding, which is what is we just have a structurally tight labor market? because employers have had so much difficulty finding people during the pandemic, that is increasing their reluctance to fire them, even in the race of somewhat sluggish growth. they are worried about what it might take to bring them back. lisa: this is one reason why people do not see the fed hiking rates next week, but the week after, i do not know. the set is next fed is in a quiet period right now carlos bnp paribas wrote we expect deteriorating economic conditions to obviate the need for additional restrictions later this year but we cannot rule out the prospect that upside surprises in economic data might spur that officials to reengage with further rate hikes.

carl joins us now. i wonder how much people overstating the need for more rate hikes if you see such a deceleration in growth, or understating it based on the fact that you see this structurally tighter labor market? carl: maybe that was not the most opportune quote. our view is another hike at the july meeting. that may have been from a pre-nonfarm payrolls report. we thought maybe the june rate was final but in light of the resilience result and that liebert data, not only the headline prints that far surpassed even the most optimistic forecast from the consensus pool, significant upward revisions to the prior two months, we think we are getting close to the end point but we are not quite there yet. jerome powell and company have sold the idea of a skeptic. we should not call it a pause but a skip. by the time july rolls around --

we are in a decelerating trend, tax collections, gdp growth -- there is deceleration taking place. by the time the july meeting rolls around and we look at that you two senior lending officers survey from the dead, policymakers will beat more confident they have the right prescription in lights. we -- in place. we can evolve from hiking to holding longer. it will be the mantra going into the back half of the year. neil: what is the point of skipping? carl: to take in new information. you could call it a pause but they do not think you could sell it to the hawks on the committee. you need a pause with a strong tightening bias. would it make more sense to do it then? hindsight is 20/20. had we not seen that nonfarm payrolls print last friday, there would have been a more compelling case for a pause,

given what we are seeing in the manufacturing survey. they need to see what is happening in terms of credit conditions more broadly in the economy. by skipping june, they will have the benefit of the q2 data ahead of the july meeting. neil: if you look at the fed's forecast, they have 0.4 percent or 0.5%? carl: those forecast will have to change. neil: it could be dramatic. the imf has their 2023 estimate twice that. the an appointment rate they have 4.6%. what do you think the odds are that the goat more than one more time this year? in september, they will have another cut. neil: if i thought it was higher than that, that would be my baseline. i do not think the time we get to the september meeting that they will see the need for additional increases. what fundamentally is happening

here, when you push the fed funds rate above nominal gdp growth, things tend to unwind and decelerate. that is where we will be at midyear. if the fed is about 5% in july and nominal gdp is below 4%, historically that has led to a deceleration or outright recession. for that reason, i do not think they will have to reengage, but again this unique labor market environment we are in with labor reporting and -- hoarding and resistance to let go of workers could change that dynamic. lisa: why hastn't anything broken? some point to the mortgage market. that is recovering. are you surprised economy has held in as well as it has and seems to be continuing along? carl: we should not have the

mindset that something has to break. we just have to see downshifting, possibly contraction in interest- sensitive categories. that is your definition of break, it has to break but we do not need bank failures and that sort of thing. it is surprising to me that we have not seen more pullback in sectors like housing. we are still generating impressive job gains. it looked prior to the last jobs report like we were seeing job creation in fewer and fewer sectors. that was not true last friday. we saw losses in the tech and information sector and buses in manufacturing but where else was pretty robust job gains. the most surprising thing to me is the resilience in the housing sector. but again it may be too soon to tell. we are now finally moving into a national home price declines. that could change the flavor of things and could impact banks'

willingness to extend credit in those sectors. neil: partly seeing national home price declines? if you look at the latest data, there has been an improvement but if you look at weekly data from redfin, there has been a pickup in prices and inventories are still low. carl: we should be careful not to get too washed up in seasonal effects on the housing sector. it has been decelerating. i think we are due for a spell where we could fall deeper into contraction. it is an affordability story. if you believe the employment -- unappointed rate is going to move -- umployment rate is going to move up -- you are seeing income decelerating. to even out in the housing affordability equation, you have to have some prices. neil: there are long and variable lags to policy, wire

homebuilding starts on the s&p 500 at 52 weeks? why do you think of new home sales are -- carl: they will have to reconcile with fundamentals eventually. if there is a wii acceleration, that will be justified. neil: are you surprised that new home sales are at a one year height? carl: i am a bit surprised, but again that factors into the resilience in the labor market. the income creation is still holding up. it is these long and variable lags. if conventionally a 12 month lag on monetary policy, 12 months ago, we had a 1% fed funds rate. monetary policy is working his way for the python. that will short more going forward, depressed activity, weigh on prices. lisa: one reason why it has been

so confusing as we have the manufacturing sector. interest-rate sector moving on the one hand and services on the other. now, especially after the ism's yesterday, it seems like you have a decline with respect to the services sector, at least from relative to where people expected that you have a rear acceleration in certain areas. how long will that keep inflation higher for a much longer period of time that previously expected? carl: inflation is persistent, sticky, higher-than-expected. that has been distorting for much of this cycle. the fed has to have a more forceful policy response until we see wage pressures coming down anymore material fashion, i would be surprised to see inflation pressures coming down while wages are still sticky. you have to pick your metric, whether it is pci average

earnings, they have to because he to 3% than the 4% or 5% readings if we were get back to 2% inflation. lisa: two gates disagree on housing that seem to great on the deck she seemed to agree on the idea that inflation is sticky and the fed has to do more. from that perspective, how does that make a difference? there seems to be resilience. do you agree there needs to be some sort of response that goes be on the market expectation for the bed right now? neil: not meaning they hike again or hold policy study. if they are holding policy sticky their city, the markets are pricing in cuts. a lot of these great cutbacks are just -- rate cap bats are just hell risk. people are lashing into the idea that recession is imminent. as you get closer to each meeting, those expectations will

come undone. rates will go out. it is not unusual for the bond market -- it has a habit of praising in tightening cycles before they start. once the tightening cycle does start, bonds price in before the cycle ends. that creates trading opportunities on the front end of the curve. it is not that unusual. l carl --lisa: carl, thank you for coming in. this is been a perennial debate on where we are in an unclear economy. coming up, breaking news in the crypto space as well as catching up with jonathan ferro, who is in pimco headquarters at newport beach. this is bloomberg. ♪ >> jamie dimon will be on capitol hill today. he will meet privately with a

group of moderate house democrats to talk about banking in the u.s. economy. the closed-door lunch takes place as jamie dimon has been urged to enter the 20 pretty for presidential race despite protests key does not plan to run. higher energy costs reverberating through european economies and keeping inflation height. the that central bank governors spoke in luxembourg today a week before the ecb is widely anticipated to raise interest rates further before another projected increase in july. in france, unions holding a fresh date of strikes against the pension reform. this is the first nationwide protest in less that's more than a month and it will test and whether the president has succeeded in getting the country to move on from a politically damaging fight. emmanuel macron has faced months of protests and strikes, angering many and he enacted the legislation without a full vote

in parliament. the sec is suing coinbase, claiming the cutgo platform's rules for years. coinbase is accused of allowing users to trade numerous crypto tokens that were unregistered securities. bloomberg reported in july that coinbase was under sec investigation. volunteers -- global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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somebody would ask her something and she would just walk right past them, (laughs). she didn't know they were talking to her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i could hear everything. unlock our best deal of the year during our 75th anniversary sale. call 1-800-miracle today. >> the fed is behind us. maybe they hike once more, maybe twice. but that is it. we can start looking at earnings.

i think goodness will be good news for markets. vendors will be bad news. lisa: that was the head of microstrategy yesterday. good news will be good news. bad news will be bad news. neil is alongside me for this hour because my coanchor's are off, except that jonathan ferro is in california at the chemical offices. he joins us now. jonathan: good to see you. do not feel sorry for me. tk has come with me and is working the cameras. the lineup this morning speaks for itself. absolutely phenomenal. some of the brightest, best people at pimco and beyond. in 10 or 15 minutes, we will catch up with dan iversen and close out with manny roman. if you want some fence speak, we will catch up with richard caretta around 9:30 eastern.

we will discuss u.s. policy, the u.s. economy, take your pick. if there is a theme that you want a better understanding of, not just for the next couple of quarters, the next five years when the secular outlook drops, we will bring you some of that. lisa: for the record, i was not feeling sorry for you. and was not giving you any sympathy. just to make sure you understand . tell tom he needs to keep the camera steady and not move too much. jonathan: tk will step out. there were some big issues elsewhere. there are some issues that tk and i need to talk about tomorrow, plus spurs reportedly has a new manager. there is news beyond pimco and all this fascinating stuff. lisa: thank you. cannot wait until your interviews the next hour. with me for the hour is neil

dutta of renaissance macro. breaking news about coinbase getting sued by the sec. quick recap. i'm linda is joining us now. emily: we had a feeling this was coming. now it is here. coinbase told his earlier this year it expected to receive a lawsuit from the sec. that is lender today. the sec has said coinbase has been selling unregistered securities because it also offers several services under its wings -- a clearinghouse, a broker. lisa: thank you. we will keep track of this as the day goes on. how much do you pay attention to put down? neil: i do not. lisa: why not? some said it was a macro driver,

risk appetite in frothy areas. no longer? neil: there was a time bitcoin treated like the nasdaq 100. no that nasdaq is rallying, bitcoin has not been. that narrative can be put back on the shelf. i do not pay attention to crypto. i am more of an equity and bond market person. lisa: let's talk equities. you were talking earlier about the homebuilder stocks, how they were surging at 52 week highs. you think a lot of people are doing this conveniently. why? neil: the linchpin of the bearish economic call is long and variable lags, putting milton friedman of there is your krach. if you were to tell someone that mortgage rates would be close to 7%, would new-home sales be accelerating in that environment? i do not think most people would say that is going to happen homebuilding stocks will be at 52 week highs. something is clearly going on.

part of it is there is no inventory in the resale market. to the extent that he had a strong democratic patch in the country and people are demanding homes, they will be pushed to the new housing market. typically, the new housing market represents maybe 10% or 15% of inventory. now it is twice that. at the margins, people are going to new homes. the builders have the ability to buy people down. the person buying a new house is not paying 7% on their mortgage, probably substantially less. that is making the math work for a lot more people. lisa: let's pick up on that. right now, we are seeing 7% mortgage rates. people are asking why this not slowing things down. you are saying is because nobody is paying that. whether they are getting a rollover of old mortgages being

refinanced for new people or you have this thing where if you have a company that is making enough money from lower input costs, they can fork over the cash to give a cheaper loan to a potential homeowner. neil: people in america that own homes are not in the business of selling homes. homebuilders are in that business. they will figure out innovative ways to do that. one of the things we are finding sequentially things are getting better. i was talking to my friend rick, housing analyst at john burns real estate consulting. he is telling us, look, april was a solid month. may is a solid month. new-home sales represent sign contracts. that is why they have long been considered a leading indicator for housing market activity in the battery can make it what you can expect going forward, first home sales, that housing starts. i would expect to see things like lumber prices start to pick

up. there is underpinning demand. that will push up residential investment. that was a linchpin of the bearish call last year. lisa: to push back, the argument has been you have had less interest rate sensitivity because not all costs are going their way to the market. you are not actually seeing a lot of companies paying these higher costs because they refinanced so much during the pandemic you are not seeing homeowners pay these higher mortgage rates because of some of this financial engineering of different companies, as well as the fact that people have locked in mortgage rates. at what point is that time run out? do people start having to pay the price the sticker seems to suggest? neil: in the housing market, it will take a long time. the fed has probably done more to break the canadian and u.k. housing market than the u.s. housing market, because in those countries, there is no such thing as a 30 year fixed rate

mortgage. they do not have that. if you look at adjustable-rate the u.s., in 2004 275, that was 40% of the mortgage debt. now it is less than 10%. this long and variable lag story, with a c statute of limitations on that argument? we have been talking about that for it feels like 18 months. one, it reinforces higher for longer. in the short run, it increases the probability that the fed will have to get closer to 6% than not. lisa: kevin is this interest-rate insensitivity of the economy in this way that is leading to some resilience. neil: to me, is more of an income cycle than a credit cycle. credit has been tightening for several quarters now. the senior loan officer survey -- people finally discovered that a couple of months ago. that had been showing tightening credit for the last four or five

orders. bank lending, ha data, another point nobody was paying attention to, that has been showing slowing credit for a while, particularly for cmi. during that time, the u.s. economy has generally -- the dating has been surprising to the upset. people are conflating to some extent the credit cycle for an income cycle. incomes are still relatively robust. you talk about disinflation? what will that mean? people are paying less for groceries, less for energy. that will boost disposable income. lisa: what aren't new-home sales below pre-pandemic norms? neil: up is out. we are basically where we were in between 19, which was a very good year for the new housing market. lisa: this is something a lot of people are increasingly fighting with. if the market or the economy is not responding enough, does the

fed have to go further? will that pause some sort of steeper decline? do you think this means the recession down the line will be more significant because the fed will have to go to 6% on beyond? neil: if you do not get below trend growth now, you may have to get slower growth later. it is clear that we do not have below trend growth at the moment. lisa: this is been fun. neil dutta, thank you for being here. neil: you want me to put a bow tie on next time, i am happy to. lisa: what is on your type? neil: dolphins. last time was a holiday theme. lisa: coming up, jonathan ferro broadcasting from the west coast. 10:30 a.m. eastern, gary gensler can weigh in. he is much more focused on crypto than we just then.

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