ctive ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. a lot of investors have been shaken. we call it a goldilocks area where we can avoid recession. the fed has a hawkish bias deal. this is bloomberg surveillance with john --

jonathan: for our audience worldwide, this is bloomberg surveillance. your equity for our audience worldwide, this is bloomberg surveillance. your equity market -0.3%. jackson how starts from now, a week from today starts from nowa week from today chairman powell speak. lisa: how much will he lean into the section. we will have highwe will have hg but not raise rates higher in the short term. cuts are not in the threshold. jonathan: 5% 5% world, on this d market we start with consensus behind the move of the past month. consensus

behind the move of the past month. lisa: now it is time to buy and save but still, this to me is the ultimate question. will the fed not raise further but raise further but they will hold them straight for a longer time? aside good or bad news? it has driven of concerns about inflation and deficit. about inflation and deficit. jonathan: and then you have china, what a week for the second biggest economy. they've been delivering fixes with currency. based on the reporting they have intervened in the fx market. mainland exchange has investment funds not be net sellers of equity. don't sell, intervened and were trying to say. lisa: there were reports of state official visiting people's homes who have not gotten money back and wealth management funds. and either way, either way, they is, you are not seeing the market react they want. it's not working to stave off

the concerns or the selloff. what do they havewhat do they ho something bigger and can see the market while the mind of its own ? jonathan: they have a gdp target of around 5%. here is thehere is the reality,. that is their focus now, for next yearhere is the reality, 4. that is their focus now, for next year of for handle as well. lisa: it is not this year's long term. where will theynasdaq. we are opposed for a third week of losses, the law -- longest so

far. yields are down by five points. it's refreshing, i love it. apple shares are down more than 11% this month. when you take a look under the hood and where the losses are being driven is significant. we get a continuation of earnings, estee lauder the drip drip of the earnings season. it comes to had with nvidia next week. significant giving the 200% in the run up on the name. how much is this behind the decline the ai trade has gotten -- there is a 3:00 p.m. press conference with president biden trying to shore up leadership, the alliance and land of china. how much do they want to point

the bear? around 4:15 p.m. this is gaining a new importance. we get the latest read on commercial bank deposits. you can see bank deposits have been coming off but bank of america pointed out we have seen record inflow into cash. almost $1 trillion. when does this created an issue for banks? in terms of deposits exiting the company? jonathan: we have surpassed 2020. how much is this about return on capital. lisa: is this cash on the sidelines or as an active class that will not come back why would you go into a stocks when there is a time around how much you can get a return. if you get a 5% yield in the cash market?

if you see if lightning yield curve what's being affected? jonathan: people are talking about a sweet soft and they said the equity markets where the only place to be what about that now? do you remember that? jens, what a week from the market. state owned banks had been requested to intervene even anymore. from your perspective and you follow this. what capacity do they have to intervene in the fx market? jens: it's about capacity and what they want to do with that capacity? if you look at the central bank balance sheet they have 3 trillion in reserves that they could in theory use. since they lost one trillion in 2015, 2016 balance of payment

crisis they had they been reluctant to use as reserves. we have an unusual situation they need to interview not through the balance sheet but to tell the banks to do it for them. they have capacity to. but that is more in the hundreds of billions as opposed to trillions. they've been using that this week. i don't think they will be coming into trillion dollars during this episode. it is something they can talk about but i don't think they have an incredible amount of money that they are willing to use to hold the currency at a specific level. they are very keen to make and not a one way back that they are fighting the fundamental trend that will be hard for them to contain and i will give you two data points. they have had an impact on the

currency but every day, the equity market, interest-rate market, it's a weaker economy. two-year is going down every day. this week has been an incredible story of divergence between global bond deals going dramatically higher in chinese yields going down. it is not the usual situation and it will make it hard to draw a line in the said. jonathan: on the upside here, what levels are you thinking about? jens: if we think about where this breakout in the currency start it was around 725 we almost got there, back there overnight as they manipulated the market. that is a fair word to use. i don't think we will go much lower than that.

they have their warning shot this week and if the dollar stay strong we will have upward pressure and they will not allow it to crash. they have to think a couple of months ago it will be extremely hard to hold it at this level and increasingly expensive and these fixing singles that they send every year. we are based in new york, at 915 in the evening. how do you read that if they are not backing it up was central bank currency? it's only for so long those fixing signals will be taken seriously. they have been taken seriously up until now but they will have to back it up with action and we have seen some action this week but i don't think the amount they are doing is huge. that's relevant to that debate about how we will have a spiral where they come and have to sell

foreign bonds to intervene. yields go up globally. the flow into the bond market is not that big. it's a psychological game at this point. there is an element of them telling different players locally what to do. you mentioned in your intro that they said a vespa box the cell equity. that's insane. the currency market the players that are buyers of fx have been told to chill out. don't bide now, we wanted to stay stymied. lisa: you don't see the probability of mass liquidating you think this selloff we are seeing in the u.s. bond market is unrelated to everything in china? is there interconnectedness? jens: the trillion dollar

question, that is a one million trillion dollar question. when you analyze the price action we have had in the u.s. bond market over the last six weeks when we've had this big move high-end yields. we can talk about inflation. it is not inflation driving the bond market, we have the cpi prince, even measures in this market behaving ok. the fixed downgrade played a role but things like a couple of days. what is going on we have the japanese yield curve in the long end and that has removed an acre in global yields. the second thing is u.s. economic data that has surprised a lot of people to the upside. we have this change in thinking more people save may be the

economy can handle 5% rates for a while. if you had asked them to use ago they said the economy can't handle a 1%, the 2% hike. there is a question going on here looking into 2024, what is a sustainable level of interest rate and growth and is a correct that the economy can handle 5% for a same. of time in the market is booming in that direction but that's a big part of what's happening in the bond market. lisa: if the fed signals is willing to pause and not hike rates, will that be a good thing or a bad thing for long bonds? jens: clearly, if you have a central bank perceived to be behind, not doing enough to get inflation target then you can

have a problematic steepening of the yield curve with risk premium coming in. but what is ironic about this move that it is happening in the time when u.s. inflation indicators have been well behaved and when inflation expectations have been very stable. it's a different dynamic. i don't think it's a confidence game with the feds but maybe what the fed signals about this growth level that seeps into the concept is relevant around the meeting jackson hole. jonathan: get some rest there. we will get you up to speed on bloomberg outlooks. net income 9.7 5 billion to 10

billion, the previous range was 9.25 29.5. lisa: we have seen a lot of investment. they cite strong order books and positive industry fundamentals for giving them this booze. when did we start to see the industrial sector rebound after seeing ahead is a direct aftermath of the pandemic? not what people expected they expected services to come down. jonathan: the sectors rebounded, we will have a conversation with edouard yardeni. from new york city, good morning.

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>> we need households to start spending and this is been a problem with the chinese economy going way back. they have the highest level of savings in china and they can seem to unlock it. they probably need to get confidence in the private sector which is been on the sidelines. jonathan: crash of confidence we've heard it all we. live from new york city, good morning this week. a moving a step closer to the weekend. here is price action. equities negative 0.5%.

fx market not giving me much but getting comfortable with the 108 handle. crude unchanged at 80.36. it's a week for china with the pushback in the fx market. a fix or manage currency, we are strong overnight. they've asked investment firms not to be net sellers of equity based on the reporting the state owned banks of been asked to intervene strongly in the fx market and it seems is difficult right now to get a floor under confidence. lisa: if you look at the partners of the stay open eggs and developers that are struggling with the fault you have a housing problem, confidence problem, people are not getting their money back and starting to protest.

how did they tempt out about social unrest when it's clear there is a transition. jonathan: it is wonderful to have you with us on this program. we have heard this that what we have is the crisis of confidence. what could a policymaker do to address that. and a cola -- anna: intervention to try this upstart economic growth one of the things that is needed there is a deeper lexus to do that and we don't even know if it would actually make a different that is ultimately needed because this is about consumer confidence in chinese domestic population is about business confidence among foreign investment. the companies they are trying to attract and maintain the

business of. i don't think stimulus is what's needed fundamentally what needed is the certainty that the central government is actually prioritizing economic growth and not letting it be compromised by other national priorities. lisa: there has been ongoing decoupling with the chinese and u.s. economy. not as extreme as people imagine but it is real. how much is the u.s. want to see that stop? how much do they not want to lean into that decoupling at a time where china once or press the pause button and keep that fundamental international investment in the nation? anna: it depends on who you're talking about when you say the u.s.. the biden administration has been clear they would like to continue to have strong economic relations with china. they just want the protect

national security related things. the reality is there are policies coming out of both the administration and congress that do not just touch on those high-tech national security fundamental things. there are policies that are human rights related, democracy related that have an effect on the specter of goods and services. a big question that businesses are asking about sourcing from china, what is in between underwear high-tech semiconductors that is clearly allowed and will continue to be allowed for engagement commercially with china and the answer is not clear yet. lisa: during conversations with corporations trying to bridge this gap, where is their conviction? if they do not have conviction how much do you fear they will

accelerate to get out of china so they don't anger anyone in the communist chinese party? anna: they need more reassurances from the communist party and leadership in china the new round of policies that they have seen rolled out in the midst of encouragement of foreign investment. things like the amendments to the espionage log. things like the raids, targeted ones on business intelligence firms. they are not coming for them that they will continue to operate and do the business they have been doing for many years, decades in china. on the west side, they need clearer guidance about what is national security and not? what is state territory for industry a what is not? where is the business encouraged? in those cases, they get to the to the way. jonathan: if you asked the

treasury that question is state department you get two different answers? anna: they have different jobs. i think it's fair to say that the treasury department is interested in the business realities and how it impacts the u.s. and global economies overall in the state department's primary job is safety. those are not the only consideration. sympathetic to the fact that this is a complex thing for any administration to try to navigate and made more complex by the fact that is not the administration is also congress, where heading into an election year and politics plays a role. jonathan: it is not getting any easier. anna asked jen, thank you for your time today. a crisis of confidence. lisa: within china and outside

of china about the policies or remain a place that could enable business partnerships. you asked the right question, is there a contradiction within this administration about chinese policy and the answer is yes. how as a company can you make a plan based on the u.s. and game out the friction that will be between u.s. and china? it's completely in bisque he was. jonathan: you de-risk or diversified? apple for example a little lesson china. lisa: that's what were talking about. starting to move things out of there and at what point do they try to bring people back or to peter tchir's point, compete and say we will sell our products and compete with america, the united states, and africa, latin america. you're looking at the shifting sands and it will have an impact. jonathan: prices direct, quality

takes a long time to build a reputation. lisa: if i were a cynic speaking in an unsecured manner people would argue that there were questions around the safety of intellectual property of the company's forest to share all of their information with chinese counterparts so they are capable of making products. there has not been investment at the university level to create intellectual capacity to come up with new products. jonathan: fortunately are not censored, welcome to america. you might go to black in china but you could say that here. lisa: i don't think were on air in china. right now we are looking forward to understanding about contagion into the u.s. market to a degree. i wonder where that will change given the property market? jonathan: equities down by zero

point 1%. a three-day slide, is significant one but no drama in the equity market. a lot more over in europe and elsewhere. in the bond market, some strengthen the bond market on the 10-year treasury yield, succession we added 20 basis points through the curve. the 10-year is 4.21 92. we anticipate chairman powell in jackson hole, wyoming. lisa: i am very curious about the economic outlook of the time where inflation is the side. this is a pivot point. jonathan: from new york city, this is bloomberg. ♪ with your hearing, if you start having a little trouble,

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jonathan: three-day losing streak on the s&p 500 trying to prevent a four. your equity market is slightly negative down by 0.2%. some weakness there this month. negative by 0.3%. bond market, people are buying treasuries. 4.2192. the 10 year yield is the highest closing yield we have seen going back to late

2007 on the 30 year. have not seen levels like this is 2011. lisa: it's curious we've seen this selloff even with big investment firm saying it's a great time to lock in deals where they are. the bond flows confirm that. they have seen record inflows into bond funds this year. where is that money going? where is the money that's causing yields to go higher. jonathan: 13 consecutive days close at 4%. lucky for the bond ghouls? this one will hurt. lisa: you're still young, yields can come down. people saying this is just a blip in a sleepy august month is not normal coming to fruition on uncertain catalysts. next week, will jackson hole

lean into this and save these market moves are what we've been waiting for. they can our views. jonathan: yields are higher, and the fx market let's finish on the euro. 1.08, short of 1.09. going into the ecb, it's up first and then federal reserve a week later. lisa: is the ecb ready to pause and the time where inflation is more significant in europe but the growth sure is deteriorating more quickly than the u.s.. everyone expected the ecb to raise rates more than the fed and it seems like perhaps the ready deposit. maybe they are getting passed by powell. jonathan: jackson hole just a week away. bank of america warning of the 5% world as global bond yields surge.

inflation may remain above target leaving yields to push even higher. pimco putting out thoughts. auction prices are going up, if inflation does not come back down then yells have to go up even more to attract capital and at the supply away. lisa: yields could go even higher and at a certain point you have to wonder when to start break something or cause restrictive policy that people been waiting for that we have not gotten because companies have already refinanced so much. if companies are able to handle rates where they are, if individuals are able to keep paying a 30 year mortgage and responsible to lock that rate further and not feel the effects in this economy that can sustain higher yields for longer? jonathan: are we effectively restricted?

i always have neil's voice on my mind saying no we are not. lisa: he has a pretty loud voice in a push back against people who are saying the fed can stop right now. jonathan: the latest on china, developers warning of losses, housing prices with government backing 18 out of 38 builders reporting preliminary losses. lisa: and they said they are not paying bondholders and people are saying who's next? china seems to be ruling out the household focus stimulus that many believe is most effective. they don't want to hand cash to consumers. it's a policy driven by ideology

more than the effect. the willingness to take action. jonathan: every morning for the last two weeks to story after story of what is happening in china. i want to finish on that. in hawaii, the governor trying to prevent people from outside of the state trying to buy property following the wildfires. officials of come under scrutiny whether enough was done to protect residents from the fire. with the electric announcing that it restored power to 80% of customers and suspending bills for customers who were affected. lisa: in fairness thus the least they could do for electricity when you are displaced and investigations into the cause of the fire. the housing issue is difficult when you have a group of people who live somewhere and prices are inflated by tourist are people who move there who are wealthy from elsewhere.

thus been an ongoing issue within malley in hawaii. how to get the money and if you want to keep the balance previously? at a time with prices going up significantly? jonathan: these are vultures, the governor is not allowed to say a resident from hawaii can buy the salsa in california cannot. they are considering what to do about it this is a tricky legal question and is much as we would like to stop our figures and do it for the local people, it's hard. i wonder what they could do about that? lisa: how did they protect the 1000 families displaced and living in airbnb's and hotels that they can go back to a home and will be able to rebuild. it's an unstable situation as they continue the recovery process. jonathan: were over to sarah he now. we have to stay stateside and

talk about how much better it's been compared to how much worse is spent elsewhere. we are you with the quarter gdp with the whole of this year? sarah: it's funny because we expected we would have household employment and job gains are flowing unemployment is slow, vacancies are high. the labor market is going to be very supported to the economy. we think we will see a fed policy tightening will have an effect now that we have seen restrictive policies in real terms, rates are rising. core inflation if you look at the latest monthly inflation rates, you have had buying below

2%, court over 3%. policies days restrictive and the rise in yields be seen as well helps the fed maintaining restrictive subs. this will be a severe headwind in the u.s. where they will see a sustained rate and there is a risk for a downturn in the economy after 2024. lisa: jonathan asked who will raise rates this more the ecb are federal reserve and every single person said the ecb. sitting here today at a time where both the fed and ecb are looking to pause and tandem, what's the case? sarah: we are expecting the fed and ecb will stay on hold next month. for the ecb the problem is is

that core inflation remains sticky. we have seen better progress being inflation down in the u.s. compared to the euro area. we know us well the rise in unemployment needs to be more sustained in the euro arrow compared to the u.s. in order to cap wage pressures. the economic data is poor so there is real concern as we move into the third quarter as we approach the final months of this year the euro area growth is being restored. we have information coming next week that will give us a heads up on how q3 is processing and likely to show activity sustained below 50 and that brings some potential risk for the economy. in our view, it suggests that

the ecb could afford to pause at the next meeting to allow the policy tightening happening so far to really take effects and the impacts to become reflexive and activity. lisa: we've been talking about policy divergence terms of which central bank would raise rates more. when will we talk about policy divergence of which fred will cut more given the ecb will have a greater degree of reason to cut rates given the chinese data and weakening data in a rice rates will have a lead through two a lot of the consumer borrowing as well as corporate over on the continent? sarah: if we take comments we found from the ecb they appear very intent on maintaining rates at this high level for a prolonged.

ed period of time. it probably is justified. you are likely to see unemployment moving higher and having to move higher for a longer period of time. before it's reflected a wage behavior. in the u.s., is a likely to see ways behaviors shifting as unemployment rates rise. you have seen abu dhabi earnings moderating. we are likely to see the fed moving or cutting rates before the ecb does. we are expecting the fed to move in the early months of next year. assuming that they stay on hold for the next 18 and. jonathan: there is a hard

landing in recession, that is the way people think about this issue. in germany that has not worked. they had a recession, they have an inflation problem and why is that? sarah: you have some real structural issues that are underpinning inflation and to an extent you could say the old rules are not applying and the tools the policymakers are applying our blunt or less effective than they were in the past. there are very restriction options. either interest rates have to raise higher or policy has to tighten further. working in conjunction ultimately that will slow growth to a point inflation is part of the economy. it's a real headache from policymakers. this lack of policy tightening so far in science that you still

have relatively strong labor markets are wages acting accordingly in europe. there is real concern that wages , the ongoing wage price spiral is going to be a threat. you have businesses trying to recoup the losses that they incurred during the pandemic and profit margins as part of the story as well. the ecb's lagarde is outlining her concerns over the future in the region. jonathan: thank you so much, as always. ecb not too far away, september 14. the ecb is unknown what comes next even the hocks of not committed to another hike. lisa: inflation, the is worse in

wages and how much there is this wage increase and persistent in germany even with economic weakness. what's going on in china has a much more direct impact on europe. jonathan: will you indulge me with italian football. the competition from saudi arabia, he has been an absolute fortune this summer. lisa: you would not asked tk that, i'm so excited about the italian league. jonathan: that is the respect i am showing you that i don't showed a tom who complaints. from new york city, this is bloomberg.

oh booking.com, ♪ i'm going to somewhere, anywhere. ♪ ♪ a beach house, a treehouse, ♪ ♪ honestly i don't care ♪ find the perfect vacation rental for you booking.com, booking. yeah. the u.s. has become our international market and we see that every time you come to the u.s., we could see the gains

growing and the popularity growing. we see it in the numbers, the demand is there. it is growing really quickly. jonathan: that was the arsenal ceo on the growth of football in the united states and is not just america where taking off. saudi arabia is a moneymaking. it's a destination for the gamestop players with big names during the summer. earlier this month, saudi buffs have spent half a billion dollars on transfer fees for players alone. the rumors around emaar's project talking about cars, houses, millions a year. lisa: it's distorting everything

for everyone else. jonathan: the transfer window for some teams a certain team that stephen pagliuca is cochairman of the italian football club who kicks off their season laid off this weekend. it is wonderful to catch up with you. we wanted to start was saudi's influence on the gave. you are in the transfer market trying to acquire talent. how distorted is this transfer market in europe? it's been extraordinary. steve: we've been approached by the saudi's one of our players was purchased by the saudi's and it's been extraordinary. it has increase the price of players dramatically. jonathan: just as upset the

salary structure of clubs like your own. have players. a larger lots of money? steve: we have been dealing pretty well in the premier league has been dealing with thought and the saudis are no different. it looks like the players are getting paid three times what they make and premier, maybe even four times. it takes a lot of capital to get into football and it's becoming a global sport. jonathan: how does that shape your investment prospects. does that make things less what about a less six -- when you're

dealing with a pricey player like saudi arabia? steve: you have to have development capability and that is what we have here. we've developed hundreds of players for our own team and other teams. it will be a focus on development and discipline and making smart purchases and not paying inflated prices for me to you. i think it's no different with clubs directly controlled by sovereigns and they have lots of capital so it makes it difficult for the 16 clubs to compete there. lisa: there's a question about the economic model of these clubs. a couple of clubs seem to go into the commercial appeal and on the broader level not just the games for the games but series and popularizing it.

as out a way to key in and give economic upsides to potential players in a way that just paying them off does not cut? steve: you have to look at all mechanisms to help the players ended in european football, we have the most attractive team and situation and attractive sponsorships. that is what we try to do here. and obviously when. it is a big boon for us to be in europe where we can pay the best clubs. each team has to have that strategy and creative with play. as opposed to the u.s., if you don't spend and perform then you are in trouble. there is an upside down side in this case. lisa: lionel messi watching him of florida, he looks like he's had a joy ride. he is going through the field

kicking goals left and right. dominating in every way. people are still watching because all of you need is one good player, one drama to hook interviewers beyond competition. steve: he is one of the best players the entire world and it's great that they landed him. he turned out to hundred million and i've never heard that. that is incredible. they've done a great job bringing him in and continue to grow soccer in the u.s. and hope it continues to grow because it's a game that will benefit everyone. jonathan: have you seen the price of those tickets? lisa: i have not seen the price. jonathan: if you want to see the have to divide typically at a stadium like that with a team like that you would pay somewhere up to a hundred dollars, maybe. i thousand dollars to watch lionel messi in new york.

can we define success for this season. they want your view on the outlooks for the team look like this year? steve: where contending for a championship to boston. it's about championships and tried to construct a team so we can win. i'm very optimistic we have a great group of players coming in. we pulled off some trades and we're excited about the season and our fans are excited that i just can't wait to start. lisa: from a financial perspective do you expect the same amount of interest in buying sports teams across the world if we have a new interest rate structure and a higher cost of money? steve: it will impact, values are high.

as for as teams to grow 10, 20 times. that being said, for two thirds of my lifetime, we've only have this anomalous period since 2008 where they went to 1% and half percent. there's no more free money and that will impact by people can do. factors like saudi oil in the huge expansion of sports in terms of streaming and people getting into sports anytime you want with today's technology. it's really globalized sports you have people to different china to see lionel messi and you couldn't do that three years ago. when i was at home in the late 70's the best i could get with the international tribunal would give me the sports totals. or i would have to pay $20 a

minute to find out who won a game. this is a huge advance of my lifetime where you can get on your phone and be on the subway and watch the celtics play the lakers. jonathan: steve, atlantic, malan your club against my club. we will watch the together december 10 at atlanta. steve: that would be a big one for us. there is a lot of stuff and a lot to with the trading the things we've done with them and their rivalry. it will be a huge game. let's definitely do that, i'll mark it down. jonathan: congratulations for all of your sex and good luck this weekend. we appreciate your time. atlanta, celtics, lisa: he will be in the chairman's box jonathan: yes and

i'm in is sit beside him and support the other team. lisa: are you kidding? sitting in the box in atlanta. jonathan: i will not wear the jersey. lisa: we're just not say anything. jonathan: i'm just going to be quiet and respectful because i'm very quiet and respectful if you done any research. always everywhere at any time. lisa: you can even say that with a straight face. jonathan: how about that market? 0.52%. foreign exchange is not doing more but the euro 1.08. crude unchanged at 80.43. as we get you to the weekend before we do that we will look

for what you can expect from chairman powell and jackson wyoming. ♪ ♪ we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com how can you sleep on such a firm setting? gab, mine is almost the same as yours. with a partner that always puts you first. almost is just another word for not as good as mine.

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>> the people say this country's economy is in bad shape. this economy is strong, infected is booming. >> there are angles fundamentally that provide support for the equity markets. >> i feel like a lot of investors are chasing the trade. >> there is what i call a goldilocks scenario emerging where we can avoid recession. >> i would anticipate from powell next week, jackson hole, from the fed they lean into a hawkish bias still. announcer: this is bloomberg

surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: a year ago chairman powell talked about pain, a year later a lot of people in this u.s. economy, the economists asking the question, what pain? live from new york city, good morning for our audience worldwide, bloomberg surveillance on tv and radio alongside lisa bravo's, i'm jonathan ferro. your equity market on the s&p 500, three-day losing streak threatening to before. we are here 0.2%. the countdown to chairman powell and jackson hole has begun. how does his comments this year compared to his comments last year? lisa: i'm guessing pain won't be mentioned as much as it was last year. have gotten confirmation in response to you they basically came out and said jonathan ferro asked other we will hear from tera jay powell and the answer is yes, he will, and give a speech and he probably will give a short one that confirms a lot of what we have already heard. jonathan: expect to hear anything at 10:05 eastern

time. lisa: i'm curious to see if they shift their rate of what -- leaning into the bond market moves we have seen this week in the past couple weeks. i could be more profoundly disrupting. people have to reassess the bond moves is not simply a blip or technical but something that could last. jonathan: structural shifts in the global economy, is that broad to say whatever you want -- broad enough to say whatever want? lisa: everything is all is broad enough to say whatever you want. will he say there has been a structural shift for higher rates to longer and we are gaining that out in our understanding on how far we could even cut theoretically. if things do get more difficult. also, what is the threshold for them to cut rates? jonathan: how lie is it? lisa: yeah. it's like deceleration with employment. jonathan: i know what tk would say, chairman powell central bank into the world and he would love the international view of

rejecting all next week. as what i given the past few days in china. we have seen action after action from china and they delivered a strong fix to try to do something about the currency overnight. he told mainland exchanges to tell some investment funds not to be selling of equities. we see some firms told to buy back their stock and we have been told about the escalation in the fx market as well. lisa: and it has not worked. they keep coming out with new measures to try to create a new narrative other than distress around the chinese economy and it has not played out. still trying to wrap my head around with the applications are for the european economy, what the obligations are for the commodity world given oil prices managed to eke out again yesterday. even with the concerns with china's slowing growth and then housing market, is this contained or do you end up with something that does really shatter some of the other regions and other housing markets there out the rest of the world?

jonathan: let's turn to the price action to get you started. equities on the s&p negative by .1% -- .25%. yields lower after big move over the last week so far. lisa: to give you a sense of what we have been seeing this morning and throughout the day, we have gotten deere and estee lauder earnings. deere you see popping .3% but beating tremendously versus an estimate of six dollars 16, and estee lauder, this stood out to me. estee lauder results pressured by asia travel retail. in other words, the people leaving china and other areas in the region and going to buy makeup and other products. president biden is hosting south korea president as well as a japanese prime minister. this is to shore up some alliance with an eye toward

trying out. how aggressive do they get on that front? 4:15, we get the latest from the bank deposits on federal reserve. at a time where so much cash is flowing into money market funds, we have seen record flows already beating the 2020 total. you have to imagine this we on people's radar again with a long and variable lags. you can question whether that is a thing or not or how long and variable lags actually are. if bags are seeing their cheap money leaving and they are to pay up, that is going to constrain lending in a more significant way. maybe he can be overcome by some of the private investment managers but this is one thing i'm watching. jonathan: one thing for the downgrades from moody's. the banks over the last week. i spoke to someone, invest in your face. i'm not sure if that was personal. [laughter] lisa: i don't think so. i don't think he would say

invest your face. jonathan: at denny joins us now. great to catch up with you. you coined the phrase bond vigilantes and are the vigilantes back? >> i think they are. they are saddling up. usually the bond market is driven by inflation expectations and what everybody expects the fed to do about inflation. usually supply and demand don't matter that much because federal deficits tend to widen during recessions when the fed is lowering interest rates. this time we have federal deficits widening in the economy doing well. i think the bond vigilantes are concerned about that, way too much supply. jonathan: come much of this is a headwind to your bullish equity call? edward: i thought we would end the year at 3600 on the s&p 500 and we got there 10 of july and i decided not to raise my

forecast, so i'm looking for the market data to move sideways or continue with this pullback, maybe even down to the 200 a moving average and concerns about the bond market is -- bond vigilantes are going to do. by year end, we will end up around 4600. next year i'm looking for 5400 but in the short term here, it is why the market has been down since the end of july. lisa: is a 4600 level or 5400 level next year realistic or consistent with bond yields that do not materially go down from where they are now? edward: welcome back to normal, right? we had abnormally low interest rates for a very long time and central banks around the world trying to put more liquidity into the system to bring inflation back to 2%. now we are back to what we were before the 2007-2008 calamity. we have seen real interest

rates, the tenure to peel go back to 2% instead of staying around zero or slightly negative. 2% plus 2.5% inflation premium is 1.5%, so that is pretty close to where we were -- where we are. so for the economy is demonstrating normal is ok and even the housing market has recovered despite the fact that interest rates have gone up. i remember early 1980's, i was 6% in westchester so it is all a matter of perspective, right? lisa: housing prices were a lot lower. we had not necessarily seen the inflation relative to income, the inflation and assets spurred by lowering policies for so long . there was a theory before we got here that rates going up to this level would decimate these

bubbles that had emerged during that era. are you saying that is not true? the people have basically refinanced and managed their balance sheets well enough to avoid that? edward: [indiscernible] it's pretty clear that all this talk about a recession so far has not panned out. we still have the risk i suppose but the way it is -- has unfolded as a rolling recession in housing and then in goods and now it is commercial. given what retail sales did in july, the retail session might be over in the housing recession might be bottoming. jonathan: can i put it on the record if a bloomberg want to sell me their home for $50,000, i'm happy to pay 15% on along for that. lisa: it's on the record. jonathan: back then that was a lot of money for house. lisa: but what was the multiple -- jonathan: but what was the multiple for the average salary back then? edward: these are different

times, but on the other hand, i think the real abnormality was the period since 2008 through the pandemic until really 2022 when the feds had to start raising interest rates. i think inflation is coming down , i think you are talking about powell, i think powell will talk osher -- hawkish but when you look at the message, i think you will agree with john williams, the president of the federal reserve bank of new york, and say we are making progress on inflation and if we continue to do that, we will have to lower interest rates next year. jonathan: do you think you will entertain the conversation, the idea you don't want real rates to get more restrictive and keep a consistent? edward: i do. i think john williams is influential at the fed and i think he and powell tends to talk to each other quite a bit and williams tends to be the

year rotation and powell is the pragmatist that implements policy. they can't really afford to see this bond yield keep going up so they have got to calm the bond market down and i think they will have to concede or acknowledge inflation has come down. the cpi excluding shelters of only 2% year-over-year basis in july. the cpi core excluding shelters up to .5%. we are under 2%. all we have to do is we for shelter in relation to come down. lisa: where is the neutral rate then once we get to the 2% and how high had it be to allow the stockmarket rally to get predicting? edward: i have to tell you, i have to root -- i wrote a book in one of the conclusions i came to his not understand the neutral rate, the real rate, it is a theoretical construct. not something you can observe.

i'm data-dependent like the fed and that demonstrates real rate is higher in the sense that the economy has been able to withstand these levels of interest rates which we really have not seen in over a decade. jonathan: we are all bond market dependent, aren't we? always good fun. edward yardeni who coined the phrase bond vigilantes. a few weeks ago, ed was talking about not being bullish enough. bond market selloff later and you can see clipping the wings of the bulls out of the moment. lisa: significantly. you can see people retracing and buying the dip but they are not coming in so much. if you like tag wall 11% ago, why would you not come in and unload the boat? jonathan: welcome to the program. on the s&p 500, we are negative here by .3%. the next hour, we catch up with cam endorse an of new age wealth. the economist that cried recession, we talked a lot about those for the year so far. the economist that cried

recession, it is the retail crime recession. commentary after commentary on what will happen into the end of the year from target the other day, walmart yesterday. when you hear this from the ceo of one of the world's biggest retailers, it is worth listening to and here's the quote, rising energy prices, resuming student loan repayments, higher borrowing costs, tightening lending standards, the list goes on. bear with me. a drawdown in excess savings many household budgets are still under pressure. lisa: i noticed that from walmart's ceo when he was talking yesterday on the call as he really went true all of the potential reasons why the retailing boom can't last. there are two ways of reading this, one, they are lowering expectations to make it easier for them to beat cops and to they are seeing retailing discretion that gives them the sense that this will continue to this inflate as it were that the federal reserve would like. you see things like this, it plays into the narrative edward

yardeni was talking about where inflation will naturally shift down. jonathan: spending has been phenomenal, cruise lines year to date, airlines your today, though stocks have performed phenomenally well. lisa: philosophical question, how much you think is driven by the fact that people wanted to just live after the pandemic? jonathan: tons of it. lisa: how long does that last? jonathan: that's the distinction between goods and services, goods demand cap pulled forward and the service demand got pushed back and now we are trying to reconcile some of the things. lisa: my sense is people might be getting sick of the airport. jonathan: i've gotten sick of the airport for since the donna time. lisa: i'm saying maybe that will clip the wings. jonathan: getting worse. from new york, good morning. ♪

>> i'm not a fan of jay powell. i would not reappoint him. i thought he was always late, whether it was good or bad, but he was always late. i was surprising he was reappointed. i was very tough on him and if i wasn't i think we would have much higher interest rates for longer. jonathan: former president donald trump speaking to larry on foxbusiness alongside the former national economic council director. i miss our monthly catch ups with larry kudlow. i really do. he always turned up and we always had an exchange. i don't see that from this administration at all. when was the last time we caught

up with the national economic council of the biden white house? lisa: even if you do they're not quite as spirited. in the way. jonathan: every single month, every single month we would have the exchange. i watched that play out yesterday afternoon and when the president started to say things like he was always late, i thought he was talking about meetings and then i thought he would follow up was saying something disparaging about the content of their conversation together. lisa: you are looking for that? jonathan: i guess he was talking about policy, he was late to make changes. lisa: either way you don't think he was laid on the other side? the other thing i love tea said was i was always tough on him. so kept him in check. it raises questions again, what does that mean? jonathan: what does that mean? lisa: i don't know, the way you talk about fed independence, either way, ron desantis says he doesn't like pal. everyone is playing blame of the fed game and it will be talking

point. does this resonate with average american? jonathan: let's see if this plays out on the debate stage, a week away. amh, he was always late. what you think this means for the chair of the federal reserve? >> when i heard him say that i thought he meant to meetings as well as though he was giving the president waiting. it is obvious there has been a lot of drama between trump and jay powell so i think for the fed chair, he uses as business as usual from the president to use to go on twitter and disparage him and want to go against his moves and he was trying to hike rates and a trump to not want to see that happen under his watch and wanted to keep the economy hot. for jay powell, i think you will shrug this off and say this is what was expected. what will be more interesting is what some of the other candidates are saying. the cement into governor desantis, he said is a huge -- it is a huge pass on what he would do when it comes to jay powell. he said he would not reappoint him. he thinks there's too much money

in the system after covid and he is going back to what jay powell said regarding transitory which many are now saying that was incorrect. but we did catch up with governor chris christie, another candidate who will be on the debate stage next week, and he said he didn't think jay powell did anything horribly wrong. he did not have a firm yes or no but really wanted to say what he thought jay powell did was really unprecedented times. he was trying to lead the u.s. in difficult economic situations the past few years. lisa: in my world and the conversations, the fed is always front and center. with the general american population, does disparaging jay powell resonate? is that something that captures voters imaginations? annmarie: i think it does when you look into some details. talking about the fed, that does not seem to a heavy on u.s. voters. talking about inflation, that weighs tremendously heavy on

u.s. voters. that is one of the biggest issues the biden administration faced during his presidency and the economy still rates as a top topic as you vote in your elections, whether that is for congress, senate, or presidential elections. it's will be a huge issue come november 20 when he four. you can use the fed as a framework whether you get the biden administration or individual wanting to kick them out of the white house next year as your overarching view of the economy but then get into why. so you could see candidates, and talk about inflation and whether or not they want to bash biden on the biden administration at some point wanting to take more of a tougher stance on jay powell. something they have not done. and he comes down to obviously inflation with individuals facing in the housing market tecumseh mortgage rates. lisa: you mentioned the debate next week and the former president trump whether or not he would be there. his advisers are saying as reported by cnn he will not be there and he is considering

counter programming in some method. what kind of counter programming can we expect? annmarie: everyone is talking about potential counter programming. he would sit down with taco car's and -- tucker carlsen and this would be streamed on the platform like twitter or x i guess it is called now. that is what the counter programming is. the issue the trunk and would have if he did do that is he is speaking to the same individuals that already support him. it would mean they would offer up a lot more space on the debate stage for potentially one of these candidates to breakthrough, given the fact trump has been dominating in the polls. i'm not support raised -- surprised at this moment if he does not show up even though he loves to be the center of attention because he is also having -- not having his press conference monday evening. he would talk about his latest indictment in georgia, due to the legal advice from his team.

i might and his team does not want him in a position where he's forced to talk about his legal troubles. if you watch the kudlow interview, he was even asked about the debate nor asked about any of the four indictments he faces. jonathan: let's talk about the indictments, what about court dates? where are we now? annmarie: there is a bunch of court dates and a lot of them are lining up with a very interesting moments, obviously, when it comes to the november 2024 presidential election. one everyone is talking about is this large date coming before super tuesday and that will be when georgia wants to start the trial. and you talk to legal experts, no one actually thinks any of these dates will happen for or any trial will be racked up before november 2024. we know from the trump team and jack smith case, the documents case, they want that to be pushed back to well after 2024. they want it years after the election. jonathan: 2026 may be, annmarie.

can you imagine a sitting president going through something like that in 2026? annmarie: it is unprecedented times. it is hard to wrap your mind around if we were to see something like that. jonathan: amazing. thank you. i want to turn your attention to the price action, session lows now, -.4%. just these mild moves on mornings like today but the difference with today compared to the rest of this week is you have the move in the equity market will treasuries are rallying today. yields are lower by five basis points on the tenure. lisa: perhaps people taking a look at where rates might shake out and making resumption with equities. this has been a confusing weekend a lot of people say it is august, there is not that much volume, everyone is on the beach so everyone -- everything is getting magnified but it is hard to reconcile whether we are seeing stock investors came out life above 4.3%. this will be the new normal for

them, how they rearrange some of their holdings. jonathan: and this will pull you back from the beach quickly. cassie barrow of jp morgan on the fixed income market, the develop as we have seen so far. we have been asking the question is there any connection with what has developed in china and the selloff that has materialized in the treasury market, is it somehow involving the intervention or prospect of currency intervention from chinese authorities? lisa: to put this into perspective, china is a significant holder of u.s. treasuries. could they be liquidating them and the major seller at a time when they are trying to shore up their economy? nobody has confirmed that to us but there is a question on who is going to be the whale, the buyer on the other side to step in, especially since we have heard from some investors that they want to buy yields at these levels, that they think it is great to lock on a 4.3% tenure yield because they see yields going down. even edward any -- edward yardeni was talking about what that might mean. jonathan: could the stories be any more different between the

united states and china right now? the good news on the economic side in the u.s., yields up, china completely opposite story with rate cuts and yields down. and a dollar stronger and chinese currency is weaker. lisa: when you talk about how different the stories are, we were talking about 7.1% to seven point 5% mortgage in the u.s.. the average in china is 4.1%. if you want to cheap mortgage, go to china. jonathan: is that your message? move to china? [laughter] lisa: i was just saying, the mortgage rate is a lot lower there. so talk about different stories. i wasn't recommending a shift. jonathan: equities on the s&p 500 -- equities negative on the s&p 500. this is bloomberg. ♪

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jonathan: equity session lows on the s&p 500 negative by .4%. a three-day losing streak about to become four on the nasdaq 100. down for a third consecutive week. the longest losing streak potentially on the nasdaq of the year so far. i believe on the s&p 500, a three week losing streak on s&p 500 would equal the longest weekly losing streak of 2023. equity futures negative, 0.4% on the nasdaq down by about 0.75%. let's turn to the bond year, two-year, tenure, 30 year, quite the levels breached through 440,

the highest close on that maturity we have on the yield back to 2011 on a 10 year back to 07 on the closing basis. for two on a tenure now, down five basis points. jonathan: is it a screaming buy and will people say this is the week where you got a credible value or is this an adjustment to a new normal of longer-term, higher yields that could pressure assets in the longer run? this really is the question may be we will hear something from jay powell about x week. jonathan: i know a certain somebody will say it is a buy at about 60 seconds so let's turn to foreign-exchange. this coming up shortly, in affects the euro, 108 63, negative by your .1%. the federal reserve confirming chairman powell will be speaking next friday at jackson hole, pal addressing the economic outlook at 10:05 eastern, that is 10:05 eastern time. that is a week away. lisa: we see economist after

economist upgrade estimates for growth in the u.s. and the key question for jay powell, do you need to see growth materially come down, even at 0 to get inflation under control? or do they need to see things chug along from the macula disinflation that is finally coming to pass? that will be important for when the people see them raise rates to a punitive level. jonathan: could we have that growth slowdown from china? lisa: we have heard that from people that maybe this is on the margins a good thing because we could get disinflation and other people say how is this possible? that we can get none of the bad implications from china slowing down but all of the good applications from disinflation. try to pair those two ideas, it is heads i win and tails i went too. jonathan: here's the latest on china, delivering its strongest pushback in the currency market against a weaker currency as a looks to restore confidence for the markets following disappointing economic data. the pboc said it is limiting daily moves by 2% on either side of that figure.

720, a strong fix relative to where was traded. lisa: the strongest fix going back to data that was a concern collecting in 2018. here is the issue, it is not working. is china ready to make the moves necessary to stave off declines? mohamed el-erian out on twitter talking about how they have not come through with supporting any of the main economic issues, including insufficient domestic growth drivers and long-standing pockets of excessive debt, the housing market, which we have seen a lot of pain in. jonathan: mohammed coming up later. on the housing market, we had to squeeze this in, the average mortgage rate hitting levels not seen in more than 20 years, according to data from morgan stanley freddie mac, rates surging since falling below 3% and you remember in the pandemic with higher borrowing costs slowing the housing market to a crawl. this mortgage market is absolutely frozen in many ways.

i wanted to share this that with you, i think this is a great way of illustrating things coming from michael donna in bloomberg. how can you buy -- how much can you buy with a 2500 dollar mortgage payment assuming 20% down and the average 30 year mortgage rate? so in the lows of rates when you could pick up the 2% to 3% mortgages, the house you could buy, 758 thousand $572. guess the price now. average mortgage rate, 20% down, 2500 -- 2500 multi-dollar payment. $443,051. that's a change in about three years. how crazy is that? lisa: it's the reason why people were expecting significant tilt klein -- decline in home prices. the reason is i'm looking at existing home sales numbers that have fallen off a cliff. this is a market in stasis, we are not seeing that turnover because there is not the inventory of the people that can buy have the wherewithal to buy.

at one point, and this is why i do believe some degree of long and variable lags to the degree that if rates stay at this level for a prolonged period of time, at some point people will have to move and at some point you will have to see some of the ramifications plea out into housing prices. jonathan: less than 27 years. lisa: stop exaggerating, like 15. jonathan: 15 years? extra long leg. lisa: how else can you imagine it. if you can lock it in for 30 years, it does change the proposition and why would i so if i know i will get half of what i bought it for? jonathan: because you lost your jobs and cannot make your payments at 2%. it is the recession unlocked in the market. lisa: yes, in a negative way. the flipside is then you will have rates that get cut and all of a sudden you might get another fuel. here the sort of reasons why people are pushing past the rates and saying longer-term it does not have the same effect

because people immunized themselves against these rates. jonathan: kelsey barrow joins us now. good morning. kelsey: good morning. i want to talk about your bond market call, you have been bullish on fixed income, you have caught up yourself the past few months. this bond market moved against you. is this a buy now and why is it a buy? kelsey: the market has moved higher over the course of the month. it feels bond buyers have gone off to vacation but we do view this as a buy. the list of items that the consumers are going to deal with when they get back from their holidays and look at their bills, the list is really growing. for instance, we are coming back to the fall, student loan payments are restarting, mortgage rates as you mentioned are at their highest level since 2001, you have people in california, alabama, and georgia

who differed their taxes are now need to make do on that, credit card balances are also rising, interest expenses are rising on that as well. when i look at things like the retail sales report, which is an inherently volatile number, what i see is a pole -- pull forward of consumption, a lot of fun this summer, and we are getting to the point where some of the fund has run out -- fun has run out. we talk about the taylor swift tour, she is going abroad. the u.s. economy will have to make it on their own. [laughter] lisa: ok, alright. putting taylor swift in this, tailwind to the u.s. economy aside, how much conviction do you have about what is behind the move we have seen other than everyone is on vacation? kelsey: we have been looking back at the end of prior rate hike excite -- rate hiking cycles, 2000, 2006, 1990 five. although scenarios, when the fed stops, everybody thinks we have engineered a soft landing. if you look back at 2000 and

2001, 2 thousand 6, 2007, we were talking about the same things. soft landing, we were not short, policy was tight enough, looked like the fed had done it. now we are trying to assess is this another soft landing or is this potentially a false signal. there's a couple things we are seeing now that indicate to us that things may get more tricky. as we move into the balance of the year. things that did not happen in the 1985 cycle. for example, i use 1995 because that is the benchmark, everyone uses that as the perfect example of a soft landing. in 1995, the three-month 10 year yield curve never inverted. in 1995, credit in that ha data from the commercial banks you look at on friday at 4:15, never contracted. right now it is in contraction already. all of these things are suggesting to us that policy is actually restrictive. we need to get a time.

policy has only been tight for a few quarters. lisa: how aggressively are you buying now? kelsey: this is a time to be buying fixed income. lisa: have you been aggressively increasing her purchases? kelsey: we have been using a dial across the whole year. we had a view the fed would get to around 5%, they would be able to pause, and over that time we want to be increasing our allocation to fixed income for the diversification and income. that is what we have been doing and we continue to do that as we see new highs in yields and new highs but i would also point out that for 33 was the intraday high for tens, 442 was the intraday high for 30's. we have been able to hold off on those levels, been able to back up those levels. fairly encouraging there. jonathan: let's go back to last october, what is different to that selloff then what is happening here? kelsey: last october? jonathan: when we hit the levels you described on the tenure,

what is different about this moment behind the move now compared to back then? kelsey: i think the most striking thing is the terminal rate pricing has essentially remained unchanged, right? it has been static around 5.4%. so really no movement there. the market is comfortable with the terminal rate. i think if we were -- if we really believed these policy rates were not making an impact on the economy and no one was bothered by 7% mortgage rates, the market should be pricing a lot higher. on the terminal rate, and it is not. if the market truly believed policy was not restrictive, inflation breakeven should be taking off now. they are not. that is the difference. october last year, they had not done enough yet. it was still clear we had not done enough. i think we are in a different place. jonathan: the key dynamic we have not discussed is the supply story that was not discussed in october. it is being discussed now. does that change the way we should think about fixed income and treasury specifically at the longer end of the curve?

kelsey: yeah, so there is more supply. normally demand comes into match supply. i think we are seeing that. it may be at a slightly incrementally higher read yield -- higher yield to meet the demand but we are seeing that. one of the things i'm looking at -- two things i'm keeping my eye on to see if there is dislocation in the cash market, one is slop spreads. however cash bonds trading to the swap market, and the other thing is primary dealer holdings. if there is a big issue taking down the supply of people, if people were not interested, we would see those primary dealer holdings start a ramp-up. we have seen fairly good takedown at the auctions, indirect buying has continued to increase so there are people, stronger hands that are taking the yield at these levels. lisa: quickly, given the fact that spreads on high-yield have remained tight, how rich do you think that is. -- is? kelsey: i would be cautious with spreads in high yields in the

low for hundreds here. this is a pricing that is perfectly priced for the soft landing and when you look at the upside/downside, how much tighter can you go versus how much wider can you go on spreads, to me that asymmetry is very obvious. it is obvious in high-yield, i think it is obvious in the pricing the of -- pricing of the economy and in bond markets. a much higher can you go? maybe a little bit. how much lower? a lot. jonathan: basically near the tights of the year which is phenomenal. lisa: it is phenomenal. jonathan: for everyone talking about the breakdown and they agree market, briefly on the s&p 500, we are down 5% from the intraday highs in july, the nasdaq hundred -- 100 down something like that in the intraday high. if i say guess what is happening to high-yield, i'm not true would guess we're near the tights of the year. lisa: everyone would say this points to a market shrugging off

and saying edward yardeni is right and this is the new normal and it is fine. jonathan: kelsey, good to see you, thanks for the update. kelsey berro of jp morgan. we are negative by 0.5%. in the next hour on the u.s. economy, lower array of fs investments as we look ahead to chairman powell and jackson hole wyoming a week ago bashar week away today. lisa: kelsey was talking about the consumer and how much they will be challenged in the fall, that is the key question mark. will we see some sort of restraint in spending and is it just everybody was going off taylor swift concerts and traveling around? and then supported an economic acceleration that has defied all expectations and it will end or is it something sustainable? jonathan: you think people in california are pushing back their tax returns to buy the tickets? lisa: 100%. [laughter] jonathan: you think is a correlation between the tour and pushing back the tax returns? lisa: i'm not going to say

correlation is not causation but -- no, i think you are seeing some of the spending start to shift and we heard the tone from the retail ceos and you could be cynical and say they are trying to lower expectations. some people might suggest that. however, you have to think people are kind of rating it in a little bit around the edges. jonathan: done on the retailers any excuse in the oven right now. lisa: do you think that is what it is? jonathan: getting out of it. lisa: larry summers recipe, stick it in the oven? jonathan: a little bit of this and the little bit of that. upside surprise, things are great. up next, from new york, this is bloomberg.

he snores like an angry rhino. you've never heard an angry rhino. baby i hear one every night... every night. okay. i'll work on that. save 50% on the sleep number limited edition smart bed. plus, free home delivery when you add a base. shop now only at sleep number.

if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people. it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪ >> i think to go fully toward a soft landing, and we have been noting prospects have been rising, you need a few things. i think you do need to see the economy slow and the reason you

need to see the economy slow is the fed has been adamant if it does not, they think they have more work to do. i would anticipate from powell probably next week, jackson hole , from the fed that they lean into a hawkish bias. jonathan: that was the chief u.s. economist of deutsche bank upgrading his forecast for gdp in the third quarter to a three handle. do think we need to think about this consistently all the time, think about where we were 12 months ago, a week away from jackson hole and chairman powell delivering a speech. think about the content of the speech, talking of the prospect of pain and the pain that was required to avoid the great pain of embedded inflation for longer. and here we are with 3.5% unemployment, which is basically where we were 12 months ago on unemployment in the united states and we have got the likes of matt was eddie of deutsche bank talking of gdp at 3% something for the third quarter. lisa: some people saying the economy is re-accelerating and

it is doing so even with rates at a level that a lot of people thought was well beyond what restrictive could possibly be two years ago. suddenly there is a question of whether it is restrictive enough. people keep spending and they are getting bigger salaries and have more to spend even after the stimulus. jonathan: kelsey berro's point, we have these conversations everything time you get sucked into life to believe maybe you can sustain 5% interest rates and then smacked around the head by lags and then you end up in recession. basically that is argument but i feel like we have been doing that for 18 months. lisa: that's the reason why people are getting sick of it. the recessionistas on every analyst call i've ever heard. people are really struggling off the bearish view and saying stop being such a downer. jonathan: is that a message about yourself? what is that? [laughter] lisa: i've gotten so much mail to that degree you have no idea. jonathan: the last 12 months? lisa: completely.

look, our job is try to be cynical and pushback. jonathan: don't include me in this. lisa: oh come on. i will just own it, ok. i asked a think there is a question about whether reaccelerating could be more bearish for stats. jonathan: stock market looks like this on the s&p, s&p 500 futures negative by 0.5%. yields coming in as well, down five basis points to 422. a great guest joining us around the table, brooke sutherland. good to see you. thanks for being with us. prices, something you follow closely, are they recovering? we see the re-acceleration in this economy? brooke: i think we see early signs of optimism. it has been rough in the free market and when we talk about there are these calls for we will avoid a broader recession but there are recessions happening and in pockets of the economy and the freight sector has been one. it has been tough for them.

they saw the upside during the pandemic where everybody bought stuff because we were at home and there is nothing else to spend your money on. as people shifted spending toward experiences, retailers stuck with inventory, we are seeing companies have worked through that. we had good numbers from target, walmart, home depot. they are on the other side of the d stocking prox -- d stocking process and are getting smarter about what inventory they put on their shelves, thinking about what consumers want to buy in this post-covid period and that is giving hope to the trucking industry. lisa: how much is the decline in rates also tied to a deglobalization or re-globalization, some shift away from international trade to the same degree that it was pre-pandemic? brooke: i think it depends on how you want to shift your goods so you might lie more -- might rely more on railroads. our -- norfolk southern sees a shift.

you can see it through the souk in our panama canal but you have drought issues in the panama canal are now. i think that is playing out but you have to think about the fray market globally and the shipping industry has seen its fair share of pain from these inventory challenges. lisa: there's also a question about the agreement ups just true up with its labor union, this question of will higher wages for employees be borne out in higher freight rates and how quickly will that come through. what is the word from the people you need to speak to on that? lisa: ups sounded confident on their earnings call after the deal was reached that they were going to find productivity benefits to offset some higher costs. i think the question is, can you push through higher rates right now? i think that might be tricky as we are navigating this early stage of recovery read i don't know if the demand is there to get progressive on pricing again. certainly they will be looking for ways to cut cost and ups talked about automating their facilities, thinking through

ways where they can slim down and become more efficient. jonathan: my question other people asked too, the last big contract signed with the union, given what you said, in five years time, when the contract ends up delivering earnings of what was a, $170,000 for the average truck driver for ups, is that the last contract they just signed? brooke: it is hard to say because we have been talking about automation for years and i don't know if we are necessarily at the point yet where that is possible. otherwise you want to see a different outcome with that. jonathan: you certainly incentivized that acceleration of the trade, haven't we? brooke: absolutely. a lot of companies as they talk about remeasuring what their supply chain looks like, if you put a factory in the u.s., you will automated and certainly the industrial automation equipment companies have been benefiting. jonathan: we lost a trucking giant recently, yellow. it was that yellow problem? was it a single competent story

or did it tell us more broadly what is happening in the sector? brooke: a little bit of both. for that company specifically vented a large number of deals that were not probably -- properly integrated and they had significant debt and refresh and hit and it was about situation. i think one of the reasons companies are somewhat optimist about a rebound in the free market is you did have a lot of companies coming in and by overpriced equipment during the peak of the supply chain crunch. with interest rates rising, that gets a little harder to continue to finance and that might lead to some capacity taken out of the trucking market which would be a good thing for those that continue to operate. you have a tighter market there. lisa: we've been talking about how this era -- how there has been a recession in the good section and the question on whether the strike in the services sector will come down to meet goods or whether the goods will come up to meet services. it sounds it is the latter, that goods are starting to climb up

to the services. how much room is there for that to continue based on the people and conversations you have? brooke: i think there's room for people to spend on goods again because we have not been doing that for little bit. taking about it logically from a personal standpoint, maybe you bought a patio furniture during the peak of covid and you did not really need to buy anything for your patio for a while but now your grill is broken. we all live in new york, but for people that live in the middle of the country or other places where you have more space, you might be thinking about buying a grill. it has been maybe 18 months since you bought something for your outdoor landscape and you might need to buy a new refrigerator. some of that does fill demand but i would also say on the services side, i cover the airlines and we are seeing somewhat notable pressure there from the u.s. domestic side of things where people are not necessarily flying is much as they were before and the airlines say that is the shift to international but i think you have to be cautious about whether that canary in the coal

mine on a pullback of consumer spending. jonathan: every time we get the cpi report we get another september 13, i think we are told prices are down and we struggle saying are they really down? are they down in the u.s.? brooke: i know it doesn't feel like it but it might not feel like it because it's such an of fortnite -- unfortunate experience when you go to the airport and don't feel like you're getting your money's worth because the aviation infrastructure is not built up to the point it should be to handle demand. which rages interesting questions because the airlines are talking about shifting their schedules, deemphasizing tuesdays, wednesdays it used to be popular business travel days and moving capacity for the leisure travel. but we are not seeing the demand and infrastructure cannot handle extra capacity on peak days so i think that to me spells more pain at the airport. jonathan: can't wait, thank you. [laughter] thank you, good to see you. this right here, that conversation i think captures perfectly what is happening with

this white house at the moment. this white house has good things to say about decelerate in, disinflation, all of that good stuff, then we say consumers are feeling it, how do they feel? that is the difference between an adjustment in the price level coming down from or maybe not increasing as much, decelerating, and how you feel about it. prices are so much higher than several years ago. it does not matter if they're down the couple percent month on month. lisa: i do not feel it. lisa:if you use to pay eight dollars for a burger and now you feel $12 but someone says it is not $13 you are not like ea, that is how we are at. jonathan: cameron dawson up next. ♪ the victory of the spanish defeat of the americans in

toronto and don't forget, you can watch all of the actual bible the tennis channel.

there are pockets of value out there that you could buy this year. we have got comfortable about

keeping this status in sight. the fed is trading the balance sheet at a record pace. financial conditions have not fallen apart. this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning. for our audience world way, this is bloomberg surveillance on tv and radio along lisa abramowitz. futures are softer here by 0.5. already looking at chairman palo. it is been such a ride because of the moon to the bond market with the biggest three winning streak going back to february.

i am not hearing a complete explanation as to why now other than its august and people are on the beach. there is too much concern. at a certain point, we need a narrative to distill and were caught create way. it really started a few weeks back. it wasn't the downgrade from fitch. right. some of the supply from the yields up to 120. people have been entertaining the idea for so long the u.s. deficit is unsustainable but it has grown and able to borrow at the rates. why will people be convinced that this is where the buck stops? there is a cost for increasing

your deficit during good times leaving no room to make during bad times. why is this time different which is why people are pushing back against. jonathan: it does not mean to have a crisis in bond market just in this -- an adjustment. the u.s. debt is what time does the u.s. at the pullback in higher bartering costs that make it difficult to stimulate the economy. fiscal policy has offset the efforts for the last 12 months.

did we grow during the pandemic it isn't about where we are? lisa: do you have an economy the flows. all of these questions, people are talking existentially about where we are. what do they make of the bob follow-up. jonathan: session lows. for a 22.70 on the 10 year. cameron dawson is with us. good morning catherine. you will leave just come back from the beach. let's start from the bob iger.

>> there are three things to add to the supply discussion. there is less japanese when powell talked about cutting interest rates at 2024, inflation would be above target? they will tolerate. the higher inflation. on top of the outcome of the discussion about r-star. what is the neutral rate in the discussion that it could be higher that the long end of the curve is probably too long given the neutral rate of reality. jonathan: is something he discusses next week? . the new structure of the global economy. giving the nod to maybe we

should discuss mutual rates because we have raised rates so much? the economy remains resilient. the key here is after dedicated -- decade of quantitative easing. have we wrapped our head around the broader risk markets at a time of four .3% 10-year treasury yield. cameron: no because of where we stand with valuations. there is this disconnect from valuations moving in the operate -- opposite direction. you have seen valuations come outside. it is important to note, it's not about growth. we are not seeing estimates come down, these words about recessions kick up. this is all valuations in light of the context of interest

rates. lisa: if there's not been a reflection of us ask as -- risk assets do you expect a response and risk assess if he lead to a neutral higher rate in the idea that the market is actively pricing in a new normal? cameron: if you see upper pressure in bond yields. the 10 year yield is the only chart right now that has strong short-term momentum. if you continue to see that movement higher in yields you have to look at tech stocks traded up to 2021 peak a few weeks ago and that's why underperforming. they are underperforming because they went up a lot and got expensive and now in that context of higher yields you can't really justify that expense. jonathan: let's practice with the federal reserve next week. i am at the question life what evidence that we are restricted?

what would the point to? cameron: leading indicators moving lower, it came out yesterday it's consistent with recession territory. the only thing deriving lower is not real data it's soft data in the yield curve. they might say there is risk but you're not seeing it in the hard data yet. since powell talked about pay be delivered one trillion more gdp in the last year than in the prior year and one million people more employed. where is the pain? jonathan: that is what we've asked, where's the pain? we have to reflect on that 12 months later at five percent and we are where we were 12 months is not better? how did make the argument we are sufficiently restrictive? pliny people are asking this question. what evidence is that were received active and there are

logs which they are pointing to for the several past meanings. are they long or short? what can you point to? cameron: i would argue that the lines are longer in variable because of the dynamic of being able to turn out dead. if you look at corporations consumer you feel the impact of rising short-term rates. the mortgage rate alone, the effective rate is three point 6%. if you get a new one it's over 7%. a similar story with the spread of interest rates for corporate bond markets but the effective rate, out on that people are making more money from cash. one person's interest payment is another one's interest income which has a stimulus effect. lisa: if you believe the economy can keep going and the fed is going to allow it, if they lean into the idea of where can i accept a higher inflation rate on the margins, when do you

start buying? you have been cautious for the year. when do you see an opportunity in the selloff? both in boxes socks? cameron: it's getting the air out of valuation and we are looking at that level of august 2022 hi sis see we've retraced the move that seems to be positioning within the equity market and not fundamentally driven. you take the air out of valuation but find places to buy and times where we would be cautious. were not leaning into deep response. finding those areas where there is relative value when trading at discounts not tracing the hot stock. lisa: what about in the bond space and longer to your meals coming up. what's attractive about? cameron: we've been cautious

about adding duration or going overweight duration because we would like to see a little bit whites of the eyes that you could see actual science more than soft data, the yield curve that you could be having a recession or weaker growth because thought is the moment you want to get out of the shorted because the fed will cut rates and shift into the long end and we have been waiting and is taking a lot longer that we were expecting. jonathan: can we put you on the spot? equity market higher or lower? cameron: flat. i think there will still be the stern and leadership under the surface. it's hard for the equity market to meet year to date highs without contribution of top names. watch check closely, apple break below its 100 day moving average. it means you could still be having tech weakness.

then you have seen the class rallies at the end of the year. we can judge by october and chose through the end of the year. jonathan: thank you so much, karen dawson. lisa: are you thinking of the santa class? jonathan: especially given how it sold off and how they can attract people back. lisa: how many people have looked at services companies to generate content? jonathan: the iphone? that might lead to valuations but i want to know what's happening with the iphone? lisa: will you get it? jonathan: possibly. a lot of people sent me messages about how the engine and slow down. lisa: and then you'll buy a new one? jonathan: the engineering has

slowed down and i will stick with this one because it's perfectly fine and well made. but if the engineers slow down i will get a new one. same song, they have been really good cameras. equity futures are negative 0.5%. down for basis points, 4.239. lisa: our prices are going down and to where? is it a local destination because what we could see going forward with florida. jonathan: are they coming down? lisa: she said given the cpi data. but i'm not sure. jonathan: airline fares are

coming down? i'm not convinced. lisa: i just tried to book something and it was double than last year. jonathan: where were you trying to go? lisa: i was trying to go to portugal. domestic affairs played disproportionately into the cpi figures. international prices have not been coming down. that is factored into the cpi figure. jonathan: we will talk about airline fares in the cpi basket. lara rhame, is like a my really going to talk about that? probably talking about jackson hole. equity futures are down zero point 5%. this is bloomberg. ♪

the bond market is driven by inflation, inflation expectations and what everybody expects the fed to do about inflation. supply and demand of matter that much. that's because federal deficit tends to widen during recession when the fed's lowering interest rates. we have the federal deficit widening with the economy doing well and they're concerned about that. jonathan: the man himself who -- morgan stanley did

research is rare to see this large of unemployment being the slow. factory gate on the iphone. her business insider, our story from business insider. ifo owners are getting $65 over the factory gate scandal. apple will pay 310 million or 5 million u.s. dollars to settle a class-action lawsuit. it's over battery gate where they were accused of decreasing the performance of older phones. those who filed claims were approved will receive payment of $65. it is not a conspiracy. lisa: i have seen the stories i'm suggesting that you will not

get a new phone and how many other people will not get new phones at the time when they need it? jonathan: they can't engineer us slow down so the of grade cycle, with these things are well made and they will last. get out of the way. lisa: we couldn't go over conspiracy theories about anything. this is a question going forward not just about apple and whether the engineers slow downs but how did they get around the smart folks slow down broadly. it's a weakness that has not abated. if your battery is functioning just fine. jonathan: joining us to discuss this, i just wanted to see her face. we will not talk about that. chairman powell is scheduled to speak next week in jackson hole, wyoming. we note the title is structural shifts of the global economy.

that's pretty broad-based. what are you expecting? ira: let me see on the iphone, if there is lower demand prices should go down? maybe that's deflationary. on jackson hole, i think jay powell will have to toe the fine line saying we will continue to worry about inflation it's above our comfort level. jackson hole will be less important this cycle in this year than it has been in previous years because we just heard from them. we just heard from the fed three weeks ago, we have the minutes yesterday. we have press conferences the point out the new process of where policy is. i don't think we will get majorly different information from the july meeting. jay powell will continue to defend -- set the tone hitting

on the fact that structural changes that have occurred in the economy will mean that they remain reasonably hawkish. not a hike more but stay at higher policy rates than they have in the recent past. lisa: why did the bond market fall this week? ira: the bond market has been on edge basically all of this month since the announcement that the treasury department will borrow $1 trillion justice quarter. bond vigilantes, it shows investors are worried about the fact that we have these deficits when the economy is good. go back to 2016 donald trump was elected everyone thought he was going to increase deficits by

cutting taxes which ultimately happened a new saw interest rates go up to mckinley we the economy was good. when you have deficits of fiscal spending when deficits are solid you tend to get selloffs. when you look at the market, it's not inflation expectations. it breaks even, it hardly moves. what that tells me it's higher policy rates and supply that is a big concern for the market. lisa: do you expect the fed to embrace what we've seen in the past few weeks or expect them to push back and say they will eventually get rates down to a level four point 3% 10-year treasury yield's by not make sense? ira: in a way, this move benefits the federal reserve and

their policy rates because the fact the market has continued to prize for a substantial interest rate cuts in the future, that's why you have this massive inversion and the yield curve is still inverted. but not as massive as you saw because the market cap thinking we will have a hard landing, interest rate cuts and that helped to ease financial conditions. by easing those conditions it was counterproductive to what the federal reserve wanted. this move will be welcome. one of the questions we have to ask ourselves, is this a recast of yield ties or will we make new highs? it's hard to imagine the federal reserve not cutting in the future even if it's much further out the what the market was pricing in the recent past. our goal has always been the fed would not cut until the second half of next year and i still think that is the case because

the fed has to come out and say we will not cut interest rates until we start to see job losses. we have a reasonably healthy job market and normal recovery. he would never be talking about the fed cutting when you're creating 200,000 jobs a month. until we see job losses as well as lower inflation there's not a reason to think the federal reserve will ease interest rates. jonathan: let's talk inflation have you seen a ticket for the new york red bulls start at $496 have you ever seen a cost that month? ira: not even we had chelsey come over and play or arsenal play for the red bulls. we have never seen that kind of taken place. lionel messi is the greatest player of all time.

it's not disputable without world cup ring. the fact that a single player, similar to single concerts by one act or one singer can change the dynamic of the economics of a certain industry is interesting. the idea that you can come and see lionel messi play a game is fitting. it was expensive when cope america was here i was at the finals with chile and argentina and lionel messi was there and if you were not to chilly fan everyone was cheering. jonathan: can you imagine how tough it's going to be to get world cup tickets. 2026 will be absolutely ridiculous. it will cost a fortune. if you wanted to go watch the new york red bulls against d.c. united starting price?

$12. in miami they begin at 490 six dollars and go all the way did $10,000. it is nuts. lisa: will there be a breakout to see the lionel messi effect? jonathan: ira jersey, thank you from bloomberg intelligence. in the next hour a great lineup for you. mohamed a el-erian and george goncalves all of that more in the next hour on bloomberg t ♪ am i? ya! save 50% on the sleep number limited edition smart bed. plus, free home delivery when you add a base. shop now only at sleep number.

lisa: an hour away from the last trading session of the week end it's been a brutal week for tech stocks. people came out what four point 3% 10-year gilts look out. yields are coming off a bit of a reprieve after four days of hire and yields. higher than we've seen over the past 15 years. futures are down .68%. the euro weaker to the dollar as people look towards the ecb and have much they can

raise weights in the face of weakness from china? strength in the u.s.. it's been really surprising to a lot of people. economists surveyed say they expect an acceleration of 1.8% in terms of the gdp in the u.s. and the third quarter. that is up from 0.5 percent projected in july. there are increasing their projection for the third quarter when the consumer just keep spending. how can this persist, driving the sense of where yields can go? if you're thinking about this cinematic terms. what do you make around this enthusiasm along with the consumers enthusiasm to spend? >> this entire economic cycle has felt like it's been on fast-forward. we were talking about recession

at the end of 2022. and now are not even talking about a soft landing were talking about no landings. growth continuing to be this strong projecting forward on the economic side. we can have that income -- outcome without a significantly higher yield curve. this is something markets have missed. this steepening that doesn't feel good for any investor what will you get if you truly believe. we had to have gotten too optimistic on growth. do you believe growth will stay this strong? this is a outcome of that. lisa: what about people see seeing they are inflation creep in? there is deflation in smaller items on the margins. do you push back and say

that's ahead fake endpoints to weakness down the pipe? lara: one of the places i've been wrong is expecting disinflationary process to be more uneven and choppy. over the past four months it is preceded as well as he could expect. i think it's still too early to claim victory. 4%, 4.5% inflation encore is better than 9% then we had at the peak of last year. it's still very far away from 2%. you are starting to see some inflation creep back in. energy prices are starting to rise. food prices are starting to rise again. we are going to see some shop in inflation numbers. even if i'm wrong, we are still looking at not getting to 2%

inflation on the court into 2024. erupts into what we can expect from the fed ability to lower rates and that's driving your long-term part of the yield curve higher. annmarie: earlier we were talking about this is an investment thesis and you see rates above 4% on the 10 year and you say, this is just what it should look like pre-monetary easing. how much can you buy this interest rate regime at a time when we had quantitative easing at a time where there were tons of excesses that have not been worked through? lara: i don't think he's wrong because this is where in the mid-90's, a potential roadmap for getting out a fed rate hike

and escaping it without a recession. the 10 year with significantly higher than it is today. the quantitative easing pieces driven interest rates to zero and caused investors to miss allocate risk. going forward, this will be a long period of retraining. if you have interest rates flat, get investors to rely entirely on income. when inflation is persistently higher, that income is not where it is today. natural interest rates may have to rise more and as investors we will need to get more invested in income. lisa: the fed has to raise interest rates or longer-term interest rates to stay where they are? lara: this is the devil's

bargain. if long-term interest rates fall the fed will have to raise more. the fed is only going to be comfortable staying where it is if we see some further pain and higher long-term interest rates. the fed needs the income to restructure. look at what is happening on the wage front. these things are inconsistent with inflation that as well behaved. the only way you get the fed on hold this with a long-term interest rates rising in some of those natural information from long-term interest rates. i think it's going to be an unsatisfying jackson hole meeting. they are independent.

we will get more from the rest of the speakers. i'm interested on destabilization and underlying price pressures that have helped keep inflation at 2% and what way globalization has played into that. we could find interesting threads than that that out of powell's speech. lisa: something you are saying with respect to the new normal and how rates should be this high and it's like an 90's playbook. are we looking at a moment with logging and variable lines are short or so long we won't feel them until well after this cycle is over? lara: what are my favorite analogies through the tightening cycle has been the fact that the economy is an 18 wheeler with a lot of momentum.

before the fixed rate mortgage tsunami that hit our balance sheets during the early 2000 and's, when they pulled the lever on the semi truck they were hitting like a 10 wheelers. when you fix the floating rate, mortgage it cause the financial crisis you isolated a lot of these wheels on the 18 wheeler. now with this emergency brake they're only hitting four wheels. at that braking mechanism is still the place is less direct to households. you will see a lag that's longer and they may need to raise more you may see it in refinancing coming down the pike in 2024, 2025. we may still be feeling the lives of the rate hikes well into 2024. lisa: thank you so much for

taking the time. we will be in jackson hole broadcasting live with jay powell gives a speech at 10:05 a.m. local time. right now, i want to shift gears a little bit. we been talking about china and the ramifications of the chinese weakness on the u.s. economy. annmarie hordern, i want to talk about the significance of this meaning with the leaders of south korea and japan at the white house at a time where they are getting close together. annmarie: you can blame beijing for putting this reading together because that's been the impetus for these three with biden and's the leaders of south korea to have this meeting at camp david. historically, this is a big deal.

they say it's mind blowing that these two individuals who are the u.s. biggest allies in the indo pacific have had a difficult relationship amongst themselves historically dating to when japan had control of the peninsula through the end of world war ii. they are coming together and this is because of what they see as the new u.s. research is a what they want to do in the indo pacific and they are concerned about china and the concerns about north korea. one thing we've heard about the white house they want this to be a summit that happens yearly. this would be the first of its card but they plan to do it next year and depending on who wins a presidency, this continues throughout the course. lisa: what's the significance with the chinese economy decelerating. is it an economic overtone or a

military or strategic overtones with respect to north korea and taiwan? annmarie: i think it is twofold when you see these three individuals have a trilateral they are on the same page when it comes to north korea, they want a three way high outline and share military communications. they are on the same page. what i'm interested in is some diversion? that will be on the economic front. when it comes to japan is south korea, there has been a difficult relationship on the economic front with these countries especially south korea. when the president signed the inflation reduction act south korean companies were saying they were blindsided and felt betrayed by the u.s.. we have had treasury come out and give regulatory guidelines on how these companies can get more involved in the tax

incentives that this legislation is giving out. at the same time, you will see some concern because these two countries also have massive trade with china at the same time the u.s. is piling on things like export controls. when it comes to the military and strategy behind security in the indo pacific you will see them all agree. when it comes to economic issues there will be back and forth. lisa: especially at a time where is the question about inflation reduction act which i want to get to. in terms of what that does to subsidize the domestic economy versus trade international. some of what you are seeing overseas. if you're just joining the program we see an ongoing decline in the equity space after a week of losses. we see a .7% decline on the s&p. yields are lower but almost unchanged. as a session has gone on yields

of snack higher on par were they were yesterday at 4.266%. we have seen something of a tour yesterday with president biden going around talking about the inflation reduction act. is it catching on? annmarie: it remains to be seen with the bliss are having across the nation in the speech he gave in the white house this week if it will have any impact on americans. what we know from holy and there are great pull from the washington post only three out of 10 americans even knew what the latest legislation did. there are a lot of questions from americans about what exactly is the inflation act? part of that is because the printing. the president said he should probably should not have called it the inflation reduction act

because it encompasses more parts of the economy. the issue this administration has is that individuals give them poor remarks when it comes to the hanley of the economies said they're trying to explain everything they've accomplished over the course of the administration. at the same time, it doesn't seem to be resonating with everyday consumers who are concerned about high grocery bills and higher rent. lisa: it is wonderful to have you back this week from vacation. coming up, we've been talking about airline tickets. are they actually going down? someone who actually news. we have the chief airline anm jeffrey's next. this is bberg. ♪ that always puts you first. (we did it) start today at godaddy.com hey corporate types.

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i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. the list of items that consumers need to deal with when they get back from their holidays and look at their bills.

the risk is growing. the weakest sales report what i see is consumption, a lot of fun this summer and we are getting to the point where the fun has run out. lisa: has the fun run out? the fun of traveling around and flying around the world. so many people have been doing it which is fueled a big debate on bloomberg surveillance which is, cpi says airline tickets are going down but are they really? we are seeing stock options following a three-day losing streak going back to february. you can see those losses continue today. .7% decline on the s&p. how long can the consumer keep spending? senior equity analyst from jeffrey's answers the

questions we have been talking about. our ticket prices going down this much is this cpi report seems to suggest? >> prices are going down that is not in company all of those people buy tickets. over the long-term as we look at ticket prices, they have not been increasing. it's still a great value even though it's no longer $400 to get from the east to west coast. it may be $700. ticket prices have not been increasing over the long term much as people expect. we look at the industry overall, it's above 2019 levels. there is not much of an increase in what we see in the airline

market is a dichotomy between domestic and international affairs. domestic affairs see declines in q3 given demand softness. international continues to be up about 25% versus 2019. much more strength in international travel. lisa: i want to get granular, domestic fares might be coming down in general and international affairs may not be. there is an issue where domestically. is this a question of vacation are seeing prices go up and business travel which is not come back not seeing that same kind of pressure. mid tier cities are not vacation destinations but that's where prices are going down? sheila: it's out of the

macroeconomic data, so you can orchestrate a soft and hard landing. this is just specific markets that are seeing it? there are different futures going on in different cities. ohio may not be commuting to chicago in january. that's no longer expected. what we see in the u.s. market as well domestic capacity right now but we are expecting domestic capacity to increase at a 7% rate for 2020 two -- 20222025. what is flooding the market with capacity right now is the low cost of airfare like spirit.

lisa: if prices go down does that mean the experience gets worse? sheila: not necessarily, what we're seeing is an increase in the cost side of the equation. whether that's jet fuel, 30% salary increases. prices are going down, revenues are going down, the customer experience may be affected by that. lisa: at what point does it not worth flying anymore readjusting vacations to try to drive places or have some sort of alternative? are you seeing any exhaustion after two years of yield blows

in two years of revenge spending or traveling? is there any exhaustion away from the boone in the industry. it is driven the gains across the board. sheila: we are still bullish on certain airlines where they have a premium offering and is holding on to that pricing excitement and people are paying for that. they are also also putting in on credit cards. lisa: can we lean into the american express thing. whether the lounge is becoming a perk for credit card owners and less about people who actually fly around on the plane.

is that where this is going? how lucrative is this? i do time where people are crowding into the lounge and trying to eat as much as they can a drink as much as they can before they get on the plane? sheila: if you think about the airline industry, they're offering a 60% discount to the market. if you think about credit cards, like fisa that double and triple those bonuses. we see a focus on loyalty programs in that experience as well. delta does not post his percentage of cash flow buds generated from its dyna programs but we had it is happy and that helps the company valuation. the loyalty factor with people keep coming back to an airline

because of the pricing. lisa: you talk about delta and we talked about united and american with the gates we seen so far particularly with international travel and that resurgence. are they going to see their time in the sun? will they reassert their muscle now after locking behind? sheila: we don't think so. we downgraded southwest airlines because of the security, they're not part of the network carriers so there will be pressure and that's why they announced a $500 million plan to expand improvements in their earnings outlook with their network optimization plan that they are starting but it will not be for feld and stood in.

-- not be fulfilled until 2024. we are focusing on the lower cost carriers given they will see pricing improvement in see profits. lisa: when it comes to major airlines, how much of the game do you expect? business versus consumers and people vacationing? sheila: we see an increase of 4% of global air traffic. we have to wait for china to fully recover and wait consumer pricing. we are at this 85%, 90% level.

my travel schedule is a lot less than it was in 2019, clearly not for everyone out there. the factor is how airlines do with leisure and hybrid leisure and the shuttle factor and focus on operating internationally. what you're seeing in u.s. domestic leisure and latin american leisure is basically above a hundred percent. lisa: thank you so much for being with us and giving assistance of what we can expect in the airline industry. right now we are seeing softness in the markets after a week of softness wing and to understand how much further the bog selloff has to go. mohamed a el-erian

is joining jonathan ferro in just a few minutes time. ♪ wow, you get to watch all your favorite stuff.

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jonathan: what a week. one more day to go. live from new york city this morning, good morning. the countdown to the open starts right. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg "the open" with jonathan ferro. jonathan: coming up stocks poised for the longest losing streak of the year with invest