>> the narrative is changing and the facts are driving that. >> there are deviations from the trend. >> good news that we have a strong labor market. >> we are in a good position with respect to productivity. >> the markets continue to rally. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning good morning. this is bloomberg surveillance. getting your week started with futures on the s&p 500, positive by 0.2% coming off the back of

the biggest weekly gain of the year so far. the scores last week, s&p 500 up close to 6%. lisa: do you buy it? we are not getting a whole host of economic data. is this going to stick with some sort of conviction or is this an anomaly really set up by a bunch of extreme positioning? jonathan: the team out with this note. this dovish turn may have backfired with financial conditions easing significantly admitted softer data. we retain our view that momentum will force another hike but acknowledge they may push that out from december to january. lisa: i can't imagine, because we saw a reset over the weekend, as finally everyone is reviving and saying you think you get the most aggressive rate hiking cycle in the history of modern finance and not get something breaking? that seems to be suddenly the

comfort people are talking about. jonathan: deutsche bank, the fed is done. blackrock, the fed is done. that has quickly become the consensus view after this bond market we have seen. lisa: what i don't think people have grappled with, we don't have a sense of what the pain has already been, especially holding rates at 5% for this long. we don't have a sense of what the long and variable lags are, that jerome powell tried to reprise. jonathan: until we have a sense of the politics, 12 months out from the election. a big pull coming of the new york times over the weekend. big leads in four key swing states for former president donald trump overcurrent president biden. lisa: this is a vote against biden, not a vote for trump.

any other generic democrat up against trump would win by eight percentage points in this poll. kamala harris would do better than president biden. jonathan: which is kind of shocking. lisa: take a look at the internals of this poll. it means people do not want a repeat of what they had for years ago. the question is, are they going to get it regardless? jonathan: 52 to 41 in places like nevada. lisa: and of course michigan front and center given some of the pushback versus some of the recent biden policies. this poll is going to cause a lot of handwringing. whether this actually causes a different cast of characters heading into next year, i'm not sure. jonathan: let's turn to the price action. equities on the s&p 500 pushing high by 0.2% after a massive week of gains, inspired by a move lower in bond yields. higher by a couple of basis points. the euro shoving some strength against the weaker dollar. the euro against the dollar,

1.0749. lisa: today what i'm looking for and throughout this week, it is quiet when it comes to economic data. today at 2:00, the fed is -- this is what everyone was talking about three months ago. suddenly very much front and focus because we see a regional bank index still flat on its back. do we get a sense of how much credit is contracting? you talk about who the cast of characters is going to be. we have the republican that -- primary debate. the potential members that are going to show up, so far, ron desantis, nikki haley, chris christie. can any of them replace the former president at a time when a lot of people agree that it is going to be difficult for him to win if it is anyone other than joe biden running against him? ritika: i think a lot of --

jonathan: a lot of people have assumed we consolidate out of -- consolidate behind one candidate. nikki haley has the momentum at the moment. lisa: how much is national security going to be front and center? fed speak does return. chair jerome powell is going to be speaking on thursday. many others as well. he will clarify the maybe misconception that has been baked into the easing of financial conditions. all of this will have the drumbeat of $112 billion worth of treasuries being sold throughout the week. the reaction of that might be more telling. jonathan: there is a lot of supply coming later this week which is worth keeping an eye on. joining us around the table, chris verrone. have we got the ingredients lined up for some bond market stability? chris: as we were talking about when we came on, there is such

confidence, you'll -- i think we have to stay a little more to stay with -- say with conviction that we are done with rates up for the cycle all stop the trend in yields is three years old. it has been pervasive and after 10 days we are ready to close the book on it? we need to see more. at a minimum, i would say what is the plot twist in front of us? the playbook of rates have peaked, therefore buy risk everywhere, it seems a little too october 2022. is the plot twist we haven't seen the top in yields or is the plot twist we have and it is not as bullish as people think? that is the big question. jonathan: we need to break into that and drill down. you said i need to see more. do you need to see more in price or the data? what do you need to see more of? chris: i want to see prices interpretation of the data.

the 200 day is still upward sloping. the trends for 10 year and 30 year yields are still up. you could convince me the short end is probably topping in yield. looking at the two-year yields across europe, i can get there. i just think it is premature to make this call with longer dated bond yields. lisa: last week was set up with a pretty perilous hype and technical behind it. the short positions by hedge funds on u.s. government debt at the highest levels going back to 2006. have we washed out some of that unevenness or can we expect bouncing around in treasury yields? chris: there is this tension in positioning data, a lot of the things we look at would suggest there are big shorts still in the long end of the curve that might need to cover. when you reconcile that with some of the information out there, look at the last two weeks.

wall street journal, by bonds. there is potential for a bond -- a bear market that is three years old in bonds. you would expect there to be more fear. that just seems so inconsistent with how things have gone. lisa: we talked about the data and the response to it. is there data of economic slowing or is there data of how much debt the u.s. treasury is going to sell? is that more important for the longer end? chris: that is the secular tension. i like the steepener. either 10 year yields or 30 yield -- 30 year yields continue to rise, or two's fall faster. i think the steepener is still in play. it is the same exact chart. i think there is a case to be made, the steeper curve here is playing very much as it tends to do late in the cycle. you tend to get a steeper curve,

you tend to get a rotation in the equity market. what was one of the standouts last week? utilities. there is a shift underway that we have to be mindful of. jonathan: not typically the kind of dynamics you want to buy the equity market on. last week was a major rally in the bank sector. the banks on the kbw, best week of the year. we understand why. it is the relationship between bonds this year and banks. not typically the relationship we see. from your perspective, if we get a bond market reversal and it continues, is it bullish risk? chris: i think when you look at last week, we saw something on thursday and friday we haven't seen all summer. we got very good internals. 821 on the upside. five to one of the upside on friday. i have to give that the credit it has earned. as far as the financials here, we have had this odd dynamic between rates up and financials

down. that seems to have reversed a little bit. i think the big question is, if tends have certainly topped, is that as bullish for these groups or are we going to figure out, where are the bond yields falling? i lean more toward that camp. i will let the price action dictate that over time. jonathan: when does that start to change in your mind? chris: look at europe first. we are not as compelling or convincing, looking at the sweden novak's. that is a big tell. go back a year ago, it was europe first to turn up and express that procyclical message. watching europe here is going to offer some clues about geographically how broad this move is. lisa: when you talk about softness, one of the reasons people justify this idea that you could get a rally and risk even with the yield decline last week was because we are going back to the soft landing. what is the sort of threshold

where it is not soft landing and something just bad? chris: one of the things we have looked at historically -- in fairness, the soft landing is small. we don't have a lot of history of soft landings. but what to all of those three periods have in common? consumer discretionary rallied hard coming out of the soft landing. looking for a leadership clue that would suggest this is goldilocks, i think discretionary has to be part of that. i think it is premature to say discretionary has been resoundingly strong here without a couple of days in discretionary after a dreadful last six months. it is going to be a very important tell for us over the next number of weeks. lisa: some people have tried to wrap their head around what is going on in the middle east and the potential volatility in oil prices and what we might get down the line. some of that is hanging over the market. based on what you have seen, has that conflict had the potential to be inflationary for a

prolonged period of time or is it sort of not calculated into any of your baseline types of parameters? chris: the latter for now, although the history of conflict would suggest they are inflationary, not deflationary. what is the only asset class in the world about to make an all-time high? it is gold. what is the message from gold? we have seen this war premium come out of crude oil over the past two weeks and gold retains its bid. there is something we ought to be very mindful of. jonathan: let's finish on what you like. chris: like gold? i think gold makes a new decisive high in 2024 and takes a starring role in this movie. when i look at some of the leadership within the equity market, i like industrials. i know that sounds counterintuitive, but the track record of industrials, and expansion to slowdowns is pretty random. they can work even as the economy is slowing. homeowners -- homebuilders here

as well. crude is not active. the energy stocks, particularly see the gas names trade ok. jonathan: can we finish on gold? why is it starting to work? what is in its favor? chris: i've learned one thing in my career. by the time to figure out why gold is working -- i enjoy the ambiguity. maybe the fed is done. maybe dollar is speaking. i think the message, gun to my head, i think gold is attempting to tell us that all of these currencies are pretty bad and dollar in particular. look at the reversal on dollar-yen last week. from 50 to 49. -- from 52 right back to 49. jonathan: chris, this was fun. chris verrone of strategas with some big calls, particular on gold. lisa: because all the currencies

are pretty bad which raises this question. over going to go back to the gold bugs that are hiding gold bars under their bed as a hedge against people moving away from debased currency because of inflation. jonathan: only we could end up with something so gloomy after something so good. in our next hour, sarah han of equine -- -- sarah hunt of alpine saxon woods. equities positive by 0.2%, following the best week of gains for the s&p so far. good morning. ♪ ♪ e chase ink business premier card is made for people like sam, who make- everyday products, designed smarter. like a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more.

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>> threats coming from the aligned with iran, we will take

every necessary step to protect our people. we are not looking for conflict with iran. we made that very clear. we are working hard to make sure the conflict is not escalate or spread to other places, whether it is here or elsewhere in the region. jonathan: a weekend of intense diplomacy. secretary of state antony blinken speaking to the press after an unannounced trip to iraq over the weekend. let's touch on the price action. equity markets still elevated by 0.2% on the s&p 500 following a massive week of gains, close to 6% on the s&p. bond market yields aggressively lower through last week, back down to about 4.5953. a 40 basis point plus turnaround from the highs of a couple weeks ago. plenty of notes out there. this from bracket -- bank of america.

the s&p 500 had seen a fall back from the july peak. corrections happen one time a year on average. despite today's better entry point for equities, the frequency of clients asking should i wait for a better entry point has increased. gives you the feeling over the week or so that blinken may have missed it. lisa: you get this sense that maybe the rally has lagged a simile because some of the people were waiting for the time to buy. the idea that cash still provides such an alternative, i wonder how much that keeps people hanging out and waiting for a better entry point. but so far, based on the rhetoric i've been hearing,, and all the notes it feels like it has some staying power. jonathan: you pick up the phone to a client and try to sell a bond with a yield of 5% and they say nah. it is so weird. lisa: it is collective fomo. chris: let's get -- jonathan:

let's get to the intense diplomacy we witnessed over the weekend. joining us now is judy norman -- julie norman. always great to catch up with you. the pressure tour to collate an endgame given what has developed over the last couple of weeks. do you sense that pressure is ramping up over the weekend? julie: i get -- i think it is an very much from the u.s. increasingly, mostly behind closed doors. and this has been a issue since october 7, figuring out what would be next for gaza and israel. there are many different options considered but really none of them seem to be very good for either israelis or palestinians. israelis and palestinians are not looking for reoccupation of gaza. some have flowed of the idea of the west bank governance having a role in gaza but they are very weak, very illegitimate and

would not take on that role just yet. the u.s. is exporting options of having a multinational transition kind of group, like a peacekeeping force. all of these are very tentative options. i think crucially right now, trying to identify what gaza might look like after this in a way that is not just a continuing downward spiral for both gazans and israelis. jonathan: facing pressures from all quarters -- corners. can you what and if i any kind of success this administration is having, convincing the israelis of having some kind of humanitarian pause? convincing israel of changing its approach somehow? is there any success you can identify? julie: the u.s. came out strong in support of israel. some in israel have called this a bear hug, a public embrace but a private restraint and whispers in the ear. since the beginning, i think blinken was pushing for a

humanitarian pause over the weekend. that does not look forthcoming. in some areas where they have had some success, it is starting to get a little more aid into gaza. there are currently 100 trucks coming into the gaza strip, before the invasion that was about 500 trucks per day. still much less than was needed. the other area they had some temporary success was getting communications reinstated in gaza but i understand over the weekend there have been more blackouts. that seems inconsistent. i think that pressure for humanitarian pauses will continue for israel. i think they see that as perhaps halting the offensive and halting their overall aim of ousting hamas, others see it as absolute necessary with getting aid into the strip and getting people out. i think lincoln will continue focusing on that. i would note netanyahu suggested that if hostages were released, that might give room for a few minutes terry and pause. -- for a humanitarian pause.

lisa: antony blinken going to israel. was all the other meetings he had on this particular tour right now. he is in turkey. there is a question over bill burns and his relationship with jordan, and his two were in the region. what is our sense right now of some of the regional countries and their position, their involvement both in what is happening now, negotiating with hamas but also some solution after this conflict is over? julie: i think there is a couple different facets to this. one is the short-term, trying to get other arab states to back this idea of a committed terry and pause. most leaders are forthright about calling for a full cease fire. trying to get some space and keeping diplomatic channels open. the second was in terms of trying to keep the conflict contained and trying to avoid flareups in other arab countries and other areas like iraq, where u.s. troops are stationed and

iranian proxy troops operate. trying to quell any potential flareups. the third as you mentioned, trying to look ahead to what that endgame might be and what the role of arab states might be within that. would they be part of some kind of multinational transitional authority or force or something like that? right now, i think most arab leaders are reading the room pretty clearly with their own populations who are very some pathetic to the palestinian cause enernoc we do stick out their neck too far for what the u.s. is pushing for but at the same time, worked closely with the u.s. and some of the states with israel as well. a lot of diplomacy happening that i think will be continuing wholeheartedly over the next couple of days. lisa: has president biden lost the room with his own party at this point given his approach on this conflict? julie: i would say it is clear that the democrats have a lot of

internal divisions over this conflict. this isn't new to biden. he knew with an issue as difficult as israel-palestine, you are not going to please everyone, especially in a party like the democrats. he is getting a lot of very vocal criticism from many on the left, progressives and the pro-palestine side. he is also getting a lot of support from the more traditional democrats who appreciate the solidarity he has shown toward israel. in some ways, you're not going to please everyone and right now, the u.s. is trying to find a very difficult middle road and thread this needle between supporting israel but also trying to minimize cancel tees and to head to what might be next and best for the reason -- for the region. jonathan: it is going to be difficult going into the next year. big leads for the former president in arizona, georgia, michigan, nevada, a lead in pennsylvania as well. your thoughts on that? julie: this is going to be a big

wake-up call for democrats and the biting campaign. we've been seeing these in numbers for quite a while but to really drill down to the six swing states and see that five out of them, trump is leading with less than a year until the election is quite notable and this is a little different than past elections because both of these men are known quantities. someone like trump everything is out there already. they don't see a lot of this necessarily changing. obviously the pole that is a year out is a year out. i think for democrats who thought trump was going to be an easy target or something like that, it is clear that biden has a lot of work to do and it is going to be challenging to keep his coalition together. jonathan: thank you, julie norman of the ucl center on u.s. politics. where you find comfort is always the risk. you could see that 12 months out and do nothing about it. lisa: there is a very real question about whether these individuals are going to be on

the ticket come next november. there is a real aversion in the population for us getting a repeat of what we saw four years ago, and yet that is where we are headed. it raises this question, is this a wake-up call for president biden and does he get the message that it is him losing, not trump winning? who would that be? can we consolidate around some of the other candidates? jonathan: 12 months of this, still to come. lisa: i think gloomberg, people are calling us. jonathan: i have seen that message as well. jeff you of -- is going to join us of -- join us on the fx market. this is bloomberg. ♪

jonathan: day winning street -- streak on the s&p 500. the longest going back to june. positive by 0.16% on the nasdaq. nasdaq up. the s&p 500 also up. the banks last week of 11%. best week of the year. lisa: we were talking about

higher yields being better for banks. tightening sense of this from a fundamental perspective. earnings have been better than expected. jonathan: let's check out the bond market together. two weeks ago today, we had cycled highs. was it the data, the federal reserve, the treasury refunding announcement? lisa: it was a recipe. risking the refunding announcement. then you saw the fed announcement and that turbocharged the rally on the front and. and many into the idea of letting into what the fed wants. how much is this fundamentally? people are realizing that they got a little bit over this.

jonathan: it was kind of nuts, to be honest with you. the euro coming off the best week of gains since july. positive again this morning by 0.1%. troops encircling gaza city, cutting off the north from the south. israel's military says the ground forces took control of hamas airspace in the area. the biden administration has become frustrated by the number of civilian casualties. lisa: how much influence does washington have over israel at this point, given that benjamin netanyahu is not the most popular politician, but there is also a question of, is biden

losing the room with his own party? how does he tried to massage their role in a conflict has polarized society across the world. i do not know the answer to this. jonathan: did you see the protests over the weekend? lisa: i did. nuance is lost in this discussion. it is difficult to have the view that it is horrific to see children and families killed in gaza or starving, or suffering dehydration come at the same time that it was a horrific massacre in israel that cannot happen again. it is difficult to have that conversation, even though this cannot happen again. jonathan: it is difficult not to conflate the two when you see a protest taking place in the nation's capital with certain

flags being waived, and seeing slogans defended by people sitting in congress. lisa: receipt is saying -- even her own michigan democratic colleagues saying, no, that is not what it has historically. please retract it. it is difficult to have nuance, but some of the -- imagery has been clearly associated with the struggle troops. jonathan: it is difficult to navigate these issues. biden -- biden is down begin arizona, michigan and pennsylvania coupled while holding a narrow lead in pennsylvania. a big wake-up call over the weekend.

lisa: the fact that kamala harris was doing better than him in these pools is completely shocking. will president biden simply say, just wait, or will there be a very deliberate effort to come up with whom i replaced him on the ballot next year? we do not know what this ballot will look like. jonathan: many said the economy is headed down the wrong track. is it better of pre-pandemic versus post-pandemic or better off under previous leadership undercurrent leadership? lisa: on one hand, you have different economic cycles and the person in charge will get blamed for it, whether they are responsible or not. will it be economics that drives the cycle?

will it be something else, the social issues? jonathan: taking some real stick in the mud over the way she has conducted affairs over treasury issuance and that kind of stuff. lisa: are they trying to time-to-market and cater to the fact that they do not want to disrupt anything, in the long end? jonathan: already setting the stage for the big meeting that we are expecting at the apec summit later this month. is there any incentive whatsoever for this current president to play happy, happy, happy summit time with the chinese leader, going into next year? lisa: there is not, except for getting some sort of de-escalation, so people are not worried about that,

geopolitically. that said, it will open him up to criticism during the election cycle. you are buddy buddy with xi jinping? that is not going to fly. jonathan: really difficult stuff. we had a massive reverse over the last couple of weeks, data -- back down to 450 on the 10 year. with those -- where those highs the highs of the cycle? >> we tend to think about this as a symmetric process. yields ramped up very quickly. the third judgment clearly said this is going to be asymmetric. the process will be slow. after six months of pauses, they are going to start hiking again.

look at how the real estate market is doing. the u.s. and australia are very different cycles. jonathan: what do you think is going to stick around to lead to a retest of the yields that we saw from the federal reserve? >> it is going to remain high. that is what the ecb is worried about. i think the market is falling into this trap saying that unemployment rate is going to kick up and really start to drag down wages. what companies will run into when you lay off a lot of workers. there will be a lot of labor hoarding ahead. the labor market will remain relatively robust.

i do not think it will go lay anytime soon. lisa: if treasury yields are going higher, designing the economy is strong enough to support risk appetite? >> it depends what you are looking at, but talking about u.s. exceptionalism, for the time being, the economy is strong enough to sustain the status quo. if i look at our flow data, what are investors doing right now? they are going into it in the most conservative way possible. see them buying utilities, and they are getting some sort of protection and. they are waiting to go into equities as well, that is just a positioning view. still very cautious out there. lisa: we were talking earlier this morning with chris.

he likes gold and thinks it will be an alternative as people encourage a greater amount of debt. you buy that argument? >> i fundamentally disagree with that. gold should have been more susceptible to real yields. there is a marginal buyer, but is it from a liquidity point of view? does it story value when clients are chasing yield? i think that is a conversation that they will have. i do not think: should comprise a significant part of that conversation. jonathan: there is nothing else to like. you identify one that has a good story to tell? >> it is quite relative right now.

we have seen the australian prime minister trying to exert some pragmatism. looking at the aussie versus the euro -- and a european context, the sterling might do slightly better against the euro. i think the swiss franc could be on one of those runs again. there are alternatives to move away from the dollar. no one owns you and currencies quite as well. there are alternatives out there. some are just not willing to take the plunge yet. lisa: if we are going to be in a holding pattern, it is going to go back to growth differentials. is that what you're saying, that we are going to move away, back to what actually is happening on

the ground with growth to determine the valuation sanko >> growth on the ground at the household level is not high compared to 2007 and 2008 levels. i think that is often missed right now. also, it is growth, subject to how you are position. i think that is how they could fit. jonathan: they have a market bottom already. >> i think households seem to be deleveraging. in terms of transactions, there is something popping out, but we have had for months of negative lending, secured on dwellings. you barely get that over the course of a decade.

i think people are not taking out larger mortgages when they are paying back to reduce the household ratios. it allows them to keep spending money. jonathan: thank you, as always. we appreciate it as always. difficult to believe that we fully recognize the pain with certain housing market in europe. given how frozen things i in america, it is difficult to make that call. lisa: getting a real flood of any kind of activity in this is likely in the near term, unless something significant happens. are we seeing any kind of restrictive effect based on housing market that is stagnant, that is not moving?

what if they do not? higher for longer may be more punitive than anyone can imagine. jonathan: things would have to get so bad that you were pushed out of that job. would you sell it if you're sitting there with mortgage rates for the next several decades? lisa: that will essentially be the catalyst, the force of motion and possibly a negative way. jonathan: from new york city, new york crude market right now, 81.79. this is bloomberg. ♪ ♪ my brother max recommended you. so my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized,

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for the euro to rally. so, i think all that together means that it is going to remain range bound for now. jonathan: only a month or so ago, we were talking about double-digit crude by halloween. lisa: we said it was two days before halloween and it is not because of potential supply shocks being percolated from this conflict. jonathan: we got to 95. i have to say, surprise for me. the month of october. just short of 82. the month of october down almost 11%. a terrorist attack on israel the first week. all these calls for higher crude prices.

crude goes the other direction. lisa: it does not make sense from a geopolitics standpoint. it does make sense with decelerating points. that is something that people might be hooking into. a lot of industries are maybe not generating as much. jonathan: brent crude at 86, up by 1.4%. the senior executive, can we start with october before we get our teeth into november? what did you and the team make of that move? >> i think you and lisa hit the nail on the head. one, after the events in the middle east, in the beginning of the month, people were worried about a wider conflict.

the situation is horrendous, but fears that it might turn into a larger conflagration for now, down a bit. second is the increasing concern for the economy going into 2024 and what that me -- what that might mean. lisa: how much do you get the sense that volatility will be really high and oil over the next few weeks? talking about geopolitical shocks. there was a decline that we were talking about last month. >> that is exactly right. they unless open to analysis and more open to interpretation, which can lead to slayings the market. in that context, it is

interesting that they are trying to steer a steady course. if they announced they would keep that cut into december, i think it tells you that they share those concerns of demand. they will try to keep prices stable and steady where they are. lisa: do you get the sense that they are turning a blind eye to a host of things to keep oil prices going down, rather than surging up info -- surging up? nobody really wants to crackdown 200 because that whale is offsetting some of the supply disruptions that people are worried about. >> from russia, it is partly a blind eye, but the other thing

that has happened is that russia and their customers have built a resilient supply chain to get that oil from russia to india and china in a way that does not come against she sanctions. that supply chain has really become more secure, and that is why you are seeing this flow of oil. in other parts of the world where the question is pertinent, there was some talk that the u.s. might face pressure to clamp down. that has not happened, for whatever reason. they voted to increase the flow at have been, suggesting that whale sanctions are not flavor of the month in washington. jonathan: you can learn some things. are you getting a different picture versus everywhere else?

>> those officials with a benchmark against global benchmark pricing is, we got those early this morning. they suggest that they are still finding relatively easy to place barrels with those who want the barrows despite the flow of russian crude. saudi arabia does not currently sell a huge amount of oil. most of it heads east. they are more worried about europe than asia right now. jonathan: are you hearing from any of the energy players as well? >> i think one of the things that we saw is that they are worried that refining margins are weak. i think that reflects and we

heard about this over the weekend that demand for diesel is weak and suggest that the economy in europe is not very good shape at all. lisa: how much is used around the world? >> the bigger problem in europe is that europe's industrial base remains hit by higher energy costs. they have not recovered from the hit that they took following russia's invasion of ukraine. a lot of the chemicals demand remains fairly weak and has not recovered. the question is how much of a permanent hit it was.

jonathan: ultimately, it is a remco selling prices. what is happening in europe right now? is the economies starting to crack? lisa: earlier today we had data out of germany that coherent with some of the weakness that people have been expecting. some of the data, in terms of manufacturing has not been good, so how long is that going to be a divergence to the negative? jonathan: synchronized, all at once, the ecb, the bank of england. walk us through the approach. how much daylight was that? compare what we are learning and how much daylight is there. does it make as much sense, one

from the other? lisa: that is the only relevance versus europe, that is in a downright recession and not seeing a lot of optimism to revive. they both want time, but will it be the same kind of outcome they will be facing in two to three months? jonathan: last week, up by 5.8% on the s&p. positive by 6.5%. we mentioned the bank index a few times already. to see them up 11%, the best week since november 2020. given what you are told, it is a decent economy with high rates.

tanks get there and had a terrible year until they get weaker data and we absolutely rip off the bottom. lisa: remember when we were talking about this common acronym? people said just wait. now we are on the brink of doing that. if it really comes and deteriorating, yields are going down. it is so head spinning to get your head around this with some logic. jonathan: is that him opening up some sort of conference or is a -- is it a direct speech? >> it is a direct speech. but what is he going to say? jonathan: is it going to happen this week?

financial conditions are too easy now. lisa: i do not think so. jonathan: i do not think so. what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets

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>> the narrative is changing and the facts are driving that. there are deviations from the trend. >> we have a strong labor market. quest we accept the market to continue to rally. quest this is bloomberg surveillance. >> let's get your week started. good morning.

this is bloomberg surveillance. i am jonathan ferro. let's embrace the happy talk. the fed is done. goldilocks is back. lisa: is it driven by something fundamental or what you talked about earlier? jonathan: i think a lot of people are frustrated with the idea. lisa: this is such a frustrating moment. every week we have a new narrative and suddenly, people are changing their outlook on a dime. is it happening on technical reasons? it is a nuanced picture giving you conflicting signals.

jonathan: we can have some healthy debate here. the dentist chair may have backfired. mike wilson still saying this. this looks like a bear market value rather than the start of a sustained upswing in the market. lisa: our yields going down the thing, if it really comes with a certain degree of economic pain? has that been priced in? these are all questions that we cannot answer. people are ignoring all the bad stuff, trying to look at all the nuts and bolts and trying to sell it. jonathan: was it because the data was good?

was it because of the supply? lisa: we asked everybody who came on, why our yields going up so much? we have no idea. it is like baking a cake but not understanding what the potential measurements are. jonathan: you just come up with this one. stick with it. if you are just joining us, yields up. last week, they were down more than 26 basis points. down about 60 basis points so. shifting lower off the back of the meeting last week. the treasury would be funding announcement was not as bad as people may be feared. lisa: if you think this is a change, i find it hard to believe, whether this is people throwing darts at a board.

maybe we will get a sense of how things settle out. i want to know what regional banks are doing with the lending situation. does it confirm the slowdown that we have been talking about? does it lead to a possible continued pop? but otherwise, they have been completely battered. we have not even talked about politics. the third republican primary debate will happen wednesday in miami. it seems to be confirmed as of now. nikki haley, chris christie -- the field is going to widen.

jonathan: you know who the front runners are. but you said we do not know who is going to run for both parties , not just the one on the screen. have to go back to that pole from the weekend. nevada, listen to this. 52% to biden's 41. 12 months ago. there is a risk associated with that. lisa: i favorite part was that a democrat was running against trump by eight percentage points. it gives you a sense of how it is a referendum, in some ways. fed chair jay powell will speak on thursday. here is the question. he be able to say anything, or will this be as coming up with a

consensus? jonathan: he has said enough, hasn't he? i think he has said enough. sarah joins us now. sarah: i think he is trying really hard not to say anything. it worked to the point that the market looked at everything and said, we are done with everything, so now we can feel better. the biggest question is, are we going back to the rate policy that we had. or are we going to stick at a place where rates are a little bit higher? the up and down is looking for levels. they are trying to understand what that really need. the rally that we got to make sure that we start dropping

rates. i think you are going to see some of that sentiment continued. it was not terrible. the commentary was not great, going forward. companies are telling us that demand is a little lower. at some point, it will have to come together, but through the end of the year, we could see some positive action. lisa: we do get a shutdown and potential election color and a conflict that is going on. how do you put that together and understand this at a time when people are trying to look at things that make sense to them?

sarah khan they are not seeing it as being effect for them. we will see what happened. i think the issue of treasury issuing and not going so far out on the curve, there are 70 things happening at the same time, but it is looking for what the story is going to be. they have to come down. i do not know that is the case. lisa: the war between israel and hamas, i wonder how that factors in. sarah khan there was some this time, but i think it has already

come out of this situation. continuing between russian crude getting on the market, i think there is a lot of room where there will be companies that do well, but until you see that get worse, i think oil is being quite innocent here. there is quite access. i think it is telling you that they are looking at a world where, whether or not my base case -- they are looking at the perception that this industry is going away. instead of spending money exploring other places, they are going to consolidate the industry so that they can withstand what is coming at an put more money into other places that will be growth areas.

i guess it depends on what shareholder you are. some have not been enormously helpful, but i think that as a longer-term shareholder, if they get it back to you, it can be helpful, but i do not think in the near term is the best thing. to the extent that there has not been a huge premium, it has not mattered much. if you look at chevron, you do not necessarily want to be in those because people are not looking at it like it is a fantastic strategy. some of those energy mergers ended up being good, but sometimes it takes a long time for that to play out.

lisa: how much are you trying to justify? >> that is definitely a timing issue. if we are going into a slowdown -- it is why i think they are taking oil off the market. but it is going to be a problem for the energy patch as well. those earnings are not going to come through, if we are slowing down. but we also have had some real underperformance for several years and some underinvestment. lisa: have you shifted anything fundamentally on how you are approaching the moment? maybe we have seen the economy start to turn. maybe we are seeing a coalescing.

sarah khan you want to worry about where you are going to be positioned and for markets, and globally. there are a lot of things we cannot control. we do not know what will happen with the government shutdown. i think that is where we have spent a lot of time, zigzagging back and forth. i was not surprised to see a rally. i was surprised to see -- strong , so where do we stand now? jonathan: i can sense the frustration from you. some of them have already been written. i cannot wait to see how that consensus comes together. lisa: i completely agree.

i kind of love that. i think there should be a revision. jonathan: i think revision date should be march. lisa: that is what it was last year. jonathan: we are just about positive. best of the weekend for me. it came from the chief economist writing this article. sarah, he is calling it the new abnormal. leading to broad changes the investing landscape. is that how you are thinking about things? sarah: i think this is really the tension. we had these years of economic data where you had positive interest rates, that he had 15

years of negative interest rates . how is that going to affect everything? now we are flipping back rather violently. the fact that you have a lot of long-term data debt out there helps. but people were starting to go, oh my goodness, if we had to refinance, what are we going to do? jonathan: apparently, we just buy more credit. thank you. just wonderful, as always. in about five minutes, we will catch up and washington on the latest pool come out over the weekend. not great for the sitting president. ♪ (sfx: stone wheel crafting) ♪

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>> we recognize that we may not get all the appropriation bills done, but we are going to

continue in good faith. the difference is that this would allow us time to continue this appropriations process. we are committed to bringing 12 bills to the ploy. jonathan: the division persists. welcome to the program. here is the price action. looking some way. biggest week of gains on the s&p 500 sophia. yields a little bit higher by a basis point or two. way off the highs from two weeks ago. lisa: the volatility is shocking. we do not understand why yields went so high up or why yields are down so much. it is difficult to say, well now

we have stabilized around this level. jonathan: there is a hope that it can continue. these asset classes, talking about u.s. equities and non-dollar currencies. lisa: don't you get the impression that they are looking for ideas in a time of such little conviction, they have to change based on what the parameters are in a very difficult moment. jonathan: tons of bed speak. looking forward to it. very exciting. our chief washington correspondent, starting with that pole from new york times. big leads.

>> it is for the former president donald trump. poll after poll shows that voters do not want to see either of them running or becoming president. but when you look at this potential redo of 2020, what you see is that the former president is leading in swing states. five of the six that were polled, the former president is leading and it matches the morning console poll that shows that he is ahead in swing state and big issues like the economy, many voters say that they trump -- trust trump more than biden. talking about the fact that we have this new conflict between israel and hamas in as a common and they trust trump more. this will be another big wake-up call, but time and time again, you will hear from their campaign saying, it is too

early. we are a year out and we have not seen the millions of dollars that we will see unleashed on the american people when it comes to both of these campaigns. jonathan: where on the calendar does it become too late? >> first we have to get through these primaries. one thing that stood out to me was the former ambassador to the u.n., nikki haley, who is doing very well in terms of some of these polls in jai alai and new hampshire -- she beats biden more significantly than former president trump would. but also interesting, trump does much better than ron desantis against biden. we have kim reynolds coming out and endorsing governor desantis, so we we -- we need to see how the next few months play out. biden has to start campaigning

within the next six months. he will be talking about amtrak and ida now makes -- bidenomics, but right now he is embroiled in foreign policy. it is the economy that voters want to vote on. lisa: they're going to say that there is so much time, it is all the ways. what is the sweat factor, off the record, when you have conversation? >> i do not think that some of the sweat factor is even off the record. they were talking on state of the union and he said, i was nervous before the pole and he said, now i am nervous after the pool. people recognize that one of the biggest concerns that voters have during these polls -- just not as big of numbers as you are seeing. people are concerned about the

age of these individuals and that is playing out more sit in the for the current president. he has a challenger now. someone who could potentially take voter votes away from the current president in certain swing states. hillary clinton lost michigan by 10,704 vote. if the third-party was not there, she could have potentially won. lisa: how much is the issue with what is going on in the hamas/israel war. there are tensions in the democratic party. is there a reckoning that biden has to face off with that seems to be percolating under the surface? >> i think there are two things to watch, given the state of supporting israel and how much they want to support israel. you are seeing pushback and blowback over the weekend. she put out this video the

saying that there will be a reckoning for you, mr. president and bernie sanders over the weekend said, she is a friend, but if you are talking about river to river, city to city, this does not help. i just want to read exactly what he said. he said if it is meant for the destruction of israel, that is not going to work. individuals are saying that she has gone too far and they do not agree with her, but at the same time, you hear from democratic leaders who say that the u.s. needs to make sure that they are pressuring israel, which we know that they are doing behind the scenes, to stop the bombardment in of the civilian death casualties going up. many of those are children.

jonathan: are you seeing any signs of success, whatsoever? >> we have secretary of state antony blinken making a surprise visit baghdad. there is a lot of pressure. at the moment, what here is that they are not going to stop until they get rid of hamas. of course, there issue -- they have spoken about it in public. hamas has used schools, refugee camps, hospitals to place their infrastructure, to place their leaders. but as every day continues and bombs continue to attack gaza -- you see pictures of civilian death tolls rising. ec humanitarian aid struggling to get through. the calls will become much letter from the president and other members of congress and leaders to pressure israel for a

cease-fire. right now, the israel is pressuring for a pause. humanitarian aid and potentially, be could see -- we could see one. jonathan: how difficult was it to draw a distinction between those who were just conducting blatant anti-semitism? >> this is a big challenge. this is what senator bernie sanders was talking about over the weekend. he is not want to see palestinian children die and he says this is an incredibly complex problem and the issue is, if you are at a protest, it is hard to do nuance. even that can't that people will talk about at a protest, many take that as calling for the destruction of the state of

israel. and obviously, many view that as antisemitic, and it is, but then you have individuals who say, i'm just calling for a peaceful, humanitarian, peaceful rights, human rights for palestinian people and that is why this is so challenging. jonathan: we are going to talk about some big numbers in washington this week. later this week, $40 billion. $24 billion. that is a lot of supply. ♪

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jonathan: five-day winning streak on the s&p 500 index. equity market positive on the s&p, nasdaq, up .1% on the s&p. five-day winning streak, the longest since june. the weekly move we saw yesterday, the biggest move owing back since november on the s&p 500. lisa: and on about -- in honor of our guest coming up, we saw almost .75% plunge in bonds.

it is crazy how wild and violent some of these swings were. that is the equity analog in credit. jonathan: are we about to get assad -- whipsawed? strong enough data on the pretext of tighter financial conditions. they go want to say with financial conditions easing significantly this week, amid softer data, we retain our view the momentum will force another height. he call is early 2024. you start endorsing tighter financial conditions and backing away and guess what? it is not going to work for you anymore. lisa: i love the chess game that seems to transpire between the market and fed. the fed is trying to get the market to do the work for them in the market is saying, i see you so i am going to move where you are going to be. you end up in this circle. it is good. [laughter] jonathan: headline from barclays

s -- lisa: see? jonathan: up to basis points on a 10 year. pulling back on a two year, 4.86. last week as the cash has the bar for cuts got lower? lisa: yes, that seems to be the implication especially given the fact is fed seems to be saying -- seeing something the market is not. which is why people are curious about the sloughs later today. it is fun to say that. jonathan: is that why you keep repeating it? lisa: sloughs. they are curious to see whether that tightening is in the pipeline and let out -- bled out. jonathan: bonds, yields down.

this currency pair positive by 0.2%. u.s. secretary of state antony blinken in turkey trying to stop conflict in the middle east from spreading. blinken making a stop in baghdad over the weekend after meeting with the president in the west bank. this was his first visit since the west bank since october 7 attacks by hamas. the pressure building on the administration is getting bigger. lisa: the inability to put the pressure on the israeli government, also a point of question, especially given the west bank and some violence there. antony blinken said it was unacceptable, they need to tamp down on the israeli side. whether there is going to be a response, unclear what influence they have. jonathan: foreign affairs, international politics. domestically, good news for republican presidential candidate ron desantis expected key endorsement from iowa

governor kim reynolds. former president trump maintains his lead across the republican field, the iowa caucus is around january 15. later this week, third debate taking place on wednesday. lisa: this is a theme the rest of this year and next year. are we going to get a rematch of trump versus biden or are we going to see new entrants? i think after a number of these debates, there will be question whether warmer president trump needs to take part in these debates and what the feasible outlook is for the selection with people who are electable, given the unpopularity of those two candidates. jonathan: greatest hits of stories that frustrate you. the third one, house lawmakers working over the weekend on a stopgap measure to fund the u.s. government beyond the november 17 deadline. johnson floated this new funding deadline of january 15. we are playing this game until this deadline in the number --

in the middle of november. lisa: i feel triggered. jonathan: this story may not have or may have been elaborate. lisa: this one is rust rating because it is a lack of necessity to understand we are going to it another shutdown. what is interesting is that mike johnson has taken a more moderate take, attack, then a lot of people expected and is talking about pushing that deadline to early january in a more meaningful way. he had a different tone than some expected in the talkshows over the weekend. jonathan: amanda lyon joins us now. do not worry, we are not talking about that. i want to talk about cell up supply. $48 billion in three at your notes. these are big numbers. what is happening with credit supply going into year end? >> thank you for having me. credit supply had a flurry of

activity in september. it calmed down in october. i think with this tentative stability in the treasury market , that corporate cfos and treasurers may look to move ahead until the year and seasonal slowdown. it will be an important test for the market how this treasury supply is digested. the treasury secretary guided us toward the front end of the curve, not so much in duration and the announcement last week. if nothing else, the past months have shown corporate's this can be episodic in terms of windows opening. given we know that surety walls are coming up, for corporate, it is better to issue early rather than late. we are expecting a big week in the ig market. expectations are lower in high yield, i would not be surprised if we surprise to the upside in terms of expectations. lisa: which speaks to the opportunism that one told me about last week. he messaged me and said,

everyone is trying to come to market. everyone is lined up. is this going to be bad with credit spreads widening because we have more supply? >> i think the appetite is there and i think we have had a light supply, especially in high yield year to date and 2022 was a record low level, i think the appetite for the market is there. for the real risk is is that lowest quality cohort of the triple c market and that lowest quality rung of high yield, they are i think we have seen enhanced pressure. it is week results coupled with refinancing needs, have pressured capital structures. even on this swift rally and high yield spreads we have seen the past few trading sessions, triple c's have rallied but lagged on the way in. i think it is the market telling you there is an appetite for certain quality cohort in the credit market. ig is there in most market conditions. high yield is more tentative.

for the lowest quality rung, it is case specific and idiosyncratic. lisa: our people pressing imperfection here? >> with high yield spreads below or hundred, it is hard to argue there is much risk premium added into the market at the moment. i think what we are seeing is focused on selectivity from credit investors. asset allocations between high yield and leverage loans, sector selection, issuer selection. where high yield spreads are at the moment, the path of least resistance is probably wider in terms of choppiness with some headline risk ahead of us. again, as we have talked about before, where yields are, it is difficult to see high yield spreads breaking out in this range of wider from here. every time we try to reach 440 and snapped back in, there is a tug-of-war between fundamentals and technicals. even the most vulnerable fundamental pockets of the market have been the best performer. jonathan: between loads and high

yield, how do we understand what goes into making that decision on whether or not that has changed in the last few weeks? amanda: it has changed in the last few weeks for a few reasons. if you think we are at the end of the rate hiking cycle, if you think we have seen stability in login rates, you might think the bulk of the loan performance is behind us at this point. indeed, that yield pickup has narrowed. what we are seeing is more interest, say even within capital structures of investors saying, i am in the loan, should i rotate it to the high-yield bond? for given fundamental pressures of this higher for longer rate environment we are expecting, are loans disproportionately impacted by that because they have been contending with it for a longer time? i think on the margin given the strong performance of loans year to date, there is some refocusing on, ok, is the bulk of that loan performance behind us? jonathan: we saw a big equity move last week.

it is unique and idiosyncratic. give us the 35,000 foot view. capital structure now, is the price higher or lower? amanda: the high-end of the high-yield market has outperformed the low wind of the ig market. so, it is not as clear-cut as saying the underweight high-yield versus ig, there are nuances their. fourth choice, i would prefer to be higher in quality than high-yield. in ig, moving down into that triple b cohort is a relatively nice place to be for the most part. the vast majority of those corporate's are committed to maintaining investment grade earnings. i think that is important in this current environment, especially if we do not get a severe downturn in growth. lisa: i do not mean to be overly basic. when you step back, i wonder if we get coalesced around this higher or longer idea, does it make sense we are not going to get major default cycle either

in public or private credit if we are looking at benchmark rates that are 5% points higher than when these companies were firing in bulk not so long ago? amanda: we are seeing a modest uptick in defaults. we are under 5% in the u.s. when you combine high-yield average loans, well off the rock-bottom levels of 2021 and 2022. did we break out to the levels we saw in covid, 9%? i think borrowing -- barring a severe downturn, i do not see it. corporate have entered this period in a strong position. the other part is the investor appetite is there. corporate's are actually shifting to a more balance sheet friendly posture. we have not seen debt funded m and a. they are still investing in capex. i think corporate have discipline. i think the real risk is if there is a severe downturn in

growth coupled with a capital markets freezing, such as if these corporate do not have access at any price. i think it is difficult. as for the private credit point, historically look at losses between the two markets and private credit losses have held in better than public credit losses. part of that is because of the enhanced its ability those corporate have. the point remains, we are expecting an ongoing normalization higher and losses across asset classes. jonathan: given where we know where the majority is, can you identify where would be the least optional -- optimal time to have an economic downturn? amanda: the biggest risk is if corporate's try and time this opportunistically, they let the year end play out, they think the environment will be better in the first half of 2024. then, we have some sort of shock, whether that is geopolitical, unforeseen risk contraction. we are watching bank lending closely, although that has played out more benign than we thought.

that is the risk. if corporate's try to be almost too strategic about the timing and cut it too close, we saw that in the financial crisis or some corporate were shut out. that is why i think if i am a cfo or treasurer, better to issue early rather than late. jonathan: maybe we get more supply in the coming weeks and months based on what we have seen develop. amanda liana blackrock. welcome to the program, s&p 500 index positive by .2%. bond market yields up by a couple of basis points. 4.59 on a 10 year yield. we are going to get three endnotes, $14 billion worth tomorrow. day after, $40 billion in 10 years. day after, $24 billion in 30 year bonds. lisa: is the fire over? have we seen the bad actions and based on the idea of a lack of certainty around treasury and financing, that is key and might be the important data points this week.

if we get orderly auctions -- options that have good technicals, do people get conviction we have seen in pecan yields? jonathan: i think that convention has started to build already. [laughter] if 40 basis point move. lisa: 42 minutes, everyone will be on the others. jonathan: a lot of enthusiasm. lisa: enthusiasm is a good word. jonathan: that you do not share. lisa: i do not know. when you are playing ping-pong relet, it is a frustrating moment lacking nuance. jonathan: no one knows. what do we call this, ping-pong relet -- roulette? michael o'leary of ryanair, later next hour. ♪ what do you see on the horizon? uncertainty? or opportunity.

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(sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ >> in every war, there are unintended consequences and collateral damage. every human life is tragic.

we act according to international law. we make every distinction that we can make between civilians and terrorists. this is tragic, but we cannot allow hamas in unity because they hide their civilians. we want to separate the two. jonathan: that was the israeli ambassador to the united states speaking on cnn. a brand-new trading we, s&p 500 index shaping up like this. gains last week, close to 6% on the s&p. lisa: it was driven by banks, utilities, driven by big tech, driven by the winners as well as losers. broad-based continue. this morning, it seems people are getting conviction this has lasting power. jonathan: a note from evercore, we expect that his speakers this week will lean against continuation of the rapid

retreat in yields and easing of financial conditions. barclays talked about how circular this is. lisa: what are they going to say? things had gone tovar -- things have gone too far? at a certain point, how specific do they have to be versus being agnostic insane, we do not know what is going to happen? jonathan: if you stay tuned, we will give you the near-death take on things. in the middle east, joining us now is retired lieutenant colonel daniel davis. colonel davis, thank you for being with us. something you would like to talk about is something we would also like to talk about, maintaining a true presence, the united states, and places like a rack, in syria. can you help us understand whether the benefits of doing that outweigh the risks? >> i argue and have for many years, not only does it benefit us, it gives us strategic vulnerability. in 2019, president trump tried

for the third time to say i am going to withdraw our troops from syria. i was an advocate for that. i said, we need to get those guys out of there. he needs to succeed with that because all it does is provide an opportunity for these islamic groups to target them. if you take those troops out, we have no point of vulnerability. if those troops were there and doing something of value to the united states, they might be worth the risk. they are not. there is no value to our country at all. there is almost purely a vulnerability. it is going to be harder to take them out because people are afraid that, they will think we were forced out. you can't leave american troops there and leave a ticking time bomb until one of them gets killed. then, you have to decide whether you are going to strike, possibly iran and grow into a

war. nothing is worth that. jonathan: would you acknowledge the decision to withdraw them now since the events of several weeks ago is a harder one to make, or is it harder to make? lt. col. daniels: if we do not make that decision and say, people will say all of those things. then, americans get killed and the president is forced to make a decision to strike iran, which could draw more -- that would be catastrophically worse than men people -- then what people might think. lisa: when we talk about the philosophy of deterrence, how do you understand some of the aircraft carriers and other types of military ships in the mediterranean right now? do you think that is an effective strategy of deterrence? lt. col. davis: it is a big risk. there is pros and cons. when you have that much firepower, it causes anyone to give second thoughts to whether they should test us and go in.

with hezbollah in the north, there has been many people in the united states suggesting we should get involved because the law goes against israel. if anything helps -- else happens with iran and we want to deter the vote, that much firepower is causing deterrence on both. it comes with a risk. whether from miscalculation, foolish decision or rogue actor in the region -- if they take action that causes us to use that, that cuda be the thing that sparks us into a war. it is a double-edged sword. lisa: there are questions around around and our troops. how do you see that evolving right now as the u.s. gets more involved in conflicts, whether in israel or potentially on the border of ukraine? lt. col. davis: look, i am sure that everybody involved was similar when i volunteered to

serve. that is, we said we went to join our forces to defend america. if we are attacked, we want to defend our interests and if necessary, lay our lives down or eight. what we did not do is say, we want to put our lives on the risk for some other government. for iraq, they are not helping us. for syria, that is helping the democratic forces, not us. there are so many places where it is helping other countries, not us. it is not a good thing -- say the family members. when people are thinking of joining, do you want to have your kid go in and be a pawn in the middle of the desert that is not necessary for our security? it has an impact and it is not a good one. jonathan: secretary blinken and a range of countries, i know you have your personal thoughts on where and which country we should be talking to. can we talk about turkey?

what is going on with our relationship with turkey? lt. col. davis: that is the biggest one right now, because it is the most poignant potential risk. blinken is there as we speak. he had a meeting this wedding with some senior members of the turkish government. he is not going to have a meeting with air one. that is a signal, turkey said we are upset and not looking -- do whatever you want to do. you are talking about a nato ally who is emphatically against israel. they are openly for hamas. they are openly against united states and the west. there is a breach and potential problem. you talk about the possibility of iran getting involved in this war. if it is turkey that gets involved in this war, you have catastrophic problems. that is a nato ally. what are you going to do? it is vitally important we get this right and that has to take right already.

the strategic issue for the u.s. over any issue that may going on between hamas and israel, as important as that is, we have to look for our interest. if we do not harm our interest that would be across the board a big problem. jonathan: when you think about that potential involvement, what with that involvement look like? lt. col. davis: unfortunately, there is a wide range of things that could look like. whether turkey gives potentially just moral support to hamas, takes actions behind the scenes or off the front pages against israel. or, maybe breaks out of nato and says, i am done with the west, we are tired of these -- devil speak is what they are accusing us of. the worst case scenario, you could -- he could make good on his claim we are going to actively help the hamas side or

hezbollah, anything against israel. you have real problems if that starts to happen. jonathan: appreciate your perspective this morning. let's do this again soon. the retiring lt. col.. pressure on this administration in all directions. lisa: all directions in each party because there is a question of the importance of preventing a wider altercation in the middle east in the u.s.' historical role in doing that, and doing that while you maintain support and not ending up on the wrong side of the conflict. jonathan: i promised you one thing. interesting view from neil, different. unemployment has increased while wage growth has slowed to a pace consistent with their underlying objective. what has changed for the fed, they can credibly point to the labor market and say they have achieved a rebalancing. they can't use the job market to stay hawkish.

that is the view from neil this morning. that alone the reason to think about the fed surgically cutting interest rates. lisa: that is neil dutta? that is a real flip in his view when he was talking about a potential for a rate increase in inflation. my question for him is, does that mean he is taking back some of his belief we are in a new higher rate regime that is eventually going to have some consequence, or is he the bad news he was expecting? jonathan: going back to -- that is a question we can ask -- he is raising a point we can think about surgically cutting interest rates, which is not going further but reducing them in line with this drop-off off in inflation pressure, which i think where the market is going into 2024. lisa: surgical? jonathan: you can ask him what that means. your equity market on the s&p, positive by ointment percent on the s&p 500 -- by .1 percent on

the s&p 500. we are on a five-day winning streak, which could become six. ♪

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>> you look at the cracks that are developing, i think there is a decent chance the fed may have to cut. >> is that is still heightened

risk environment? >> we are seeing pockets of with -- of growth. >> i don't see how the economy continue in this line. >> whether it's hard or soft landing will remain to be seen. >> this is bloomberg surveillance. jonathan: live from new york city this morning, good morning, good morning for our audience worldwide, this is bloomberg surveillance. tk is back in a couple of days. a massive week of gains on the s&p 500, higher by close to 6% and the dovish language continues this morning. we've heard that the fed is done. goldilocks is back. lisa: how do you do that without loosening financial conditions? this is the cyclical kind of moment we are in that has heads

spinning. they are going to keep going with this. these are the cards we've been dealt is what they say and that's where the fed will be stuck between a rock and a hard place. what happens when financials are too tight? lisa: are they going to be gaming the market, market timers the way the treasury department seems to be? to market timers are trying to pin a market in between what particular range. do we get that kind of situation over the next couple of months? fed speak this week including chairman powell. they should try to lean against any rapid retreat in easing of financial conditions. once you start this, you can't put the genie back in the bottle. is that really going to happen? lisa: it could very well happen but it depends whether we have

eight lone star with respect to the data. so far, we've had a divergence with confusing and noisy data that is typical at the end of the cycle or close to the end of a cycle. when is that moment we reach a tipping point where the data speaks for itself? until then, will we be playing pickle ball? jonathan: it was called narrative table tennis. you could call it ping-pong. lisa: i saw a pickle ball match this weekend. i could understand a little bit. i went to the park. jonathan: did you attempt to play? lisa: it's a different kind of ball. it looks kind of fun. jonathan: if you lived by one of those courts, it's back and forth, no thank you. a big rally in the bond market

last week. we will get three and 10 year notes which is a lot of supply this week. 48 billion dollars, 40 alien dollars and $28 billion respectively. lisa: it's underscoring it for so much of last week when it became clear the treasury department was into into the market dynamics in a significant way. if we get a disruptive auction, how problematic will that be for the idea that maybe we've seen a peak in yields? that will be the most instructive aspect of this particular move. jonathan: early this morning on this program, it was said we could retest yields. lisa: other people would agree with that. if you take a look at inflation, it's not going away. are we seeing potentially the softening in the labor market data that could justify people making whatever argument they wants? this will be fun.

jonathan: just lighten up. extrapolating out the last week price action which is bonds rally and equities rally in yields drop in dollar weakens and credit as well. all good stuff. lisa: in fairness, people who have traded on the theory of recession have failed. people who have traded on the theory that 60/40 would work again of also failed and people have traded on the idea that eventually big tech would roll over with higher yields, that has failed. what theory has worked other than recency bias? it's either awesome or terrible. jonathan: equities are posited by 0.1% and a big rally on the s&p 500 last week area yields are aggressively lower this morning. the surprise of the year so far, just a fact that crude was down

as much as it was in october is stunning, down by like 11% but we are higher by a single percentage point. lisa: try to come up with a theory, geopolitical risk and oil prices higher, it all failed. we are seeing one narrative after another torpedo because of the different factors playing into this. it's mind is spinning. jonathan: let's come up with the theory with the global head of markets. good morning to you. >> i will take a stab at the narrative ping-pong. jonathan: lisa called it pickle ball. the move indexes the new risky asset gauge, what would you say back to that? >> certainly bond volatility is the highest across asset classes right now but i don't think it's the only measure. the vix index more than any other is what traders have on

their screen. right now, we need to look across multiple asset classes, rates and credit. it gives investors a better gauge for volatility. these are important asset classes to watch for as we go into the potential end of cycle. jonathan: is there anything about the price action that gives an indication whether it's sustainable? >> to me, the price action over the past two months has been extremely telling in terms of the pain points and people's portfolio and it's not to the downside. the pullback in september and october were quarterly because coming into the fall, the consensus and expectation was for a pullback. you saw the paint last week in the snapback rally but people scrambled for the upside because they weren't position for it. if you look at the s&p call ratio, it hit most a one year low.

they wanted to get the upside exposure they don't have in their portfolio. lisa: i love that the pain trade is there and people got knocked out. this is where we are in this moment of upside down and downside up. have we watch that outcome are we done? >> i don't think so. i think the consensus and even though economists have shifted to a soft landing, if you talk to investors, everyone is still so bearish and it will take longer to wash out than what we saw last week. that's why we see the durable demand for the upside calls in the s&p. lisa: are we talking big tech upside? is that what people have not love because they believe higher yields might take away some of the valuation? are people being forced to buy those again? >> that's one feature of this

year's price action. the ping-pong between sector leadership last year with tech down but this year it's up, that changing sector leadership, the dispersion in the market is part of the reason why volatility in the index level has been muted is because of the wild swings we are seeing in the sector at the stock level. lisa: how correlated have the bond and stock levels been? >> if we look at the past week, it's been incredibly unstable. i think that's a key feature is the equity bun correlation has not normalized to what people are used to and because of that, it's one of the reasons we are seeing more and more people gravitate toward equity specific hedges like options. fixed income is no longer diversifying.

you need to look at more specific hedges like buying asset puts or other hedges, that's been the trend and that's why option volumes have been hitting record highs all year. jonathan: from citibank, sit -- soft patch, not soft landing. they are looking at a temporary soft patch. last week's real loosening of financial conditions argues against a moderation and activity of inflation. does that argue we should be more nimble as we work through this? it's difficult to make projections for the next 12 months. you cannot cling to a theory when everything seems to change. it's painful in bonds, you get whipsawed in one direction and then another. what does nimble look like? >> absolutely, the heightened

macro uncertainty is options. if there is uncertainty and you know stocks are going up, by the delta one instrument. it's when you are uncertain and when you want to define risk reward, you want to know what you are at risk of losing when you are wrong. that argues for options. the max you can lose is not that much. this uncertain macro environment, even though it hasn't translated into higher level of vix, the long-term uncertainty has led to more and more people using options to to find the risk reward and manage the portfolio volatility. jonathan: you talk about volume and options, we talk about zero data. >> volume across all sectors are

growing higher but zero data has been the fastest growing segment. jonathan: you say it's not something we should worry about. >> because its balance. when people make the argument that zero day options are volatile, that's driving the market. if 50% of that is buy and the customer selling, then there is zero impact. we see is incredibly balanced and because that's the case, there is minimal market disruption. jonathan: this has been great. thank you. welcome, your s&p 500 is positive by 0.1% and yields are higher by three basis points. tons of dollar weakness last week. we are positive thereby 0.1%. i'm not sure what you started but andy roddick, former number one and 2003 at the u.s. open,

explained to me what diabetes tennis is. lisa: i have no idea. maybe he doesn't move around as much. i don't know what else it could be. jonathan: jim bianco will explain it. lisa: maybe he can explain it better than i can. i guess you don't have to run as much. the courts are smaller so maybe you don't have to be as fit. it looked fun to me and you have a personal problem with it. jonathan: it's the noise, people don't like the noise. lisa: can you hear that from your apartment? jonathan: it's when i go for a walk sometimes. i find it disruptive. an early morning walk on the weekend and you go past the pickle ball court, i don't need that noise. lisa: it's a flapping sound. jonathan: is it? lisa: have you ever played ping-pong? jonathan: of course.

lisa: i haven't played pickle ball. jonathan: coming up, michael o'leary joining us around the table to talk about the recent numbers plus the latest from boeing and whether this company can get enough planes. looking at your equity market, there is a lift again. the running of the bond market last week replaced with a little bit of a cell up with yields higher by about four basis points. a lot of issuance from treasury this week. lie from new york city this morning, good morning. ♪

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country that is reasonably in good shape. you've got winners and losers in this economy and the good sector that people accelerated purchases during the pandemic or may be as well. if you live in the experienced economy were most of us do, it's doing quite well. if you look at airplanes, airplanes are full everywhere you go particularly internationally. jonathan: i wish people could see your face just to get some reaction. >> it's great to be here. you've had earnings out this morning and we been talking about this tip it end of 400 million euros. let's share a couple of quotations on boeing. you said if anything is getting worse, i would have been confident until a month ago, we get 57 aircraft by the end of june.

we heard from the cfo this morning and he said the worst case scenario is 47 instead of 57. what did you want and what did you think you would get? >> they are contracted to deliver 57 aircraft. that's for summer 24. at the moment that has slipped. they have production issues in seattle and it looks like we will get maybe 10 short by the end of june. hopefully we get 45 or 50 by the end of june. frankly, we are too busy. we are reasonably hopeful we will get 45 or 50 aircraft but wit will leave a short which is inevitable which means we have slightly lower growth but we still have 45 aircraft and it will be enough to do 100 83 million passengers. jonathan: is there something in

mind where you have to cut capacity by next year? >> we haven't yet announced what the capacity will be next summer. we have strong forward bookings and good pricing but we cannot commit to the last 10% until we get a better picture from boeing. i think dave calhoun is doing a good job in difficult circumstances. we are working closely with them. anything we can do to expedite these deliveries will do because growth is strong in europe area jonathan: what is it about the management in seattle, what are they getting wrong? >> everyone is wringing their hands, blaming wichita. our issues are in seattle as well. i would like to see greater crisis management there. i would like to see a greater focus on quality control. i don't understand how spirit wichita has this succession of

production problems. jonathan: do you have options? >> in terms of? jonathan: what do you do if you don't want to work with boeing anymore? we are boeing's biggest customer by a mile in europe. i would buy airbus if they were 5% cheaper but boeing continues to be cheaper we've flown 125 of the max 8 aircraft and we carry 4% more passengers and burning 6% more fuel. we have ordered 300 max 10's which allows us to carry 228 passengers per flight suddenly just as they are making great aircraft but they are not making them on time. jonathan: is this a relationship that you are stuck with no matter what happens next year? >> yes but airbus is no better than boeing at the moment.

you have the pratt & whitney engine group which will be a crisis next summer. they will ground a significant number of airbus aircraft next summer. i think boeing will get its act together, is just taking a bit longer than we hoped. lisa: how far can you? prices if capacity is restrained? >> the real issue is how much lufthansa, air france and others keep checking a prices and the answer is a lot. they estimate europe is operating at a percentage of pre-covid capacity. you look at ryan air, less than 90% of capacity and that's not changing next year. aircraft manufacturers are delivering aircraft late. they'll be -- there will be less capacity to offer. lisa: it's good news for you

because you don't have to try too hard to be the lowest cost aircraft while still raising prices. how much can you raise prices last -- next year? >> lufthansa and air france and calen will drive fares by double digits next year. it will send more people in the direction of ryanair. they don't want to pay the lift on's outrageous prices. fares should go buy a low double-digit percentage gain which will be the third summer in a row we see double-digit fare increases in europe. lisa: this is the first time you are initiating a dividend. it's a 400 pound dividend. does this mean you have nothing else to do with that money? >> essentially, yes. we've done special dividends and share buybacks. we are clearly generating a lot of cash at the moment and pay down about two billion dollars

and we are down to her last $2 billion which we will pay back in the next year. we have specific requirements. many people worked with us during covid so they need to be paid. we are running out of the existing order to take the last aircraft in december of 2024 and the first of the max tens don't come out till 2027. we have very little use for cash. we want to return to shareholders and we won't squander it the way many other airlines do like buying hotels or whatever they do. delta would give monsters pay increases to its pilots. we need to keep our costs low and keep our efficiency high and keep passing on unbeatable service to our customers. as long as trading continues,

who knows what will happen in ukraine or the middle east. as long as we get a reasonable wind on trading, i think it will be very cash generative and return large amounts of cash to shareholders. jonathan: it's hard to know what will happen in ukraine and the middle east. are you seeing things slow down when you see these things escalate? >> we saw it initially. you had a sudden downturn in traffic into poland in those places. it recovered after two or three weeks. we are suspending about 30 flights a day into tel aviv until christmas. we want to see those scenarios resolve themselves but the underlying trend across europe, they all want to go back traveling after the covid lockup. we were still full during the

summer break and people want to travel more but there was only 90% of the pre-covid capacity. constrain capacity in europe and that's resulting in strong pricing for all of the airlines. jonathan: do you see prices down? >> not at the moment but it's inevitable if the consumer is under pressure, you will see ikea and aldi doing well at the supermarkets. lisa: what about making the experience nicer for people who may be frustrated? >> new aircraft, on-time flights in the fewest cancellation of any airline in europe. i don't know why people pay ridiculous airfares. on ryanair, it's efficient and cheap. jonathan: it wasn't that way once upon a time. >> i had to do a road a year ago

from frankfurt to zürich. they stung me for 900 euros in economy and am sitting in the middle seat in front of the toilet on an a-320. i could fly all year on ryanair for that price. jonathan: good to see you. the ryanair ceo. here is the line up in the next hour. we are starting a brand-new trading week with equity futures posited by 0.1% on the s&p 500. live from new york city this morning, good morning. ♪

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lisa: the biggest rally of the year last week and it continues today. welcome back to bloomberg surveillance. we can see a lift to the market after last week with an incredible rally particularly with the nasdaq and you are seeing ongoing dollar weakness. you are seeing s&p futures come back from some of the earlier highs and yields very quiet sent here. -- very quiescent here.

there is a question and web -- whether we've seen the highs underpinning some of the confidence or lack thereof amongst market participants. we talk about the geopolitical and political risk but we haven't really talked about the potential government shutdown that is 12 days away should there be no agreement in congress. we will discuss that now. is there actual progress getting made on how to stave off some sort of government shutdown and a to mulch was time geopolitical he and domestically? annmarie: it feels like déjà vu in washington because we literally just have this debate and it cost speaker kevin mccarthy's job but there seems to be a honeymoon period for new speaker mike johnson. he said they will continue to advance the single appropriation bills.

a lot of them are conservative so this is one way in terms of the strategy to pacify or placate to the hard right plank of his party and potentially, will they will not get all the part that's all the appropriations bill done by next friday, november 17 when there could be a government shutdown. then he will have some wiggle room to bring a continuing resolution to the floor. how he does that will be interesting. he mentioned a ladder approach so funding the government in a staggered way and potentially funding certain agencies. he has also talked about going until january 15 or even april 15 to give his caucus and give all the house of representatives more time to fund the appropriations bills. these are the potential options we can see in the coming two weeks before the government would end up running out of money. lisa: we will be hearing possibly what the candidate

proposals are for the economy and where they would like to cut and how much. they are thinking about how to reduce the deficit. how vocal do you expect the economy will be? annmarie: i think it will be top of the agenda for this debate on top of foreign policy. that's what the polls continue to show. the economy seems to continue to be the number one issue when it comes to inflation. whether or not is the latest new york times college pull or a morning pole, what you see in the data, there is a trust deficit among voters with the biden administration. you will see these gop candidates want to attack the current administration when it comes to the handling of the economy. they want to talk about cutting spending and where they want to cut is a small slice of the pie. no one will want to talk about cutting defense and no one wants

to talk about cutting entitlements. that does not garner good views from voters. one thing that could could separate some of the individuals on the stage and we saw nikki haley do this is some will potentially start to attack the trump for raising the deficit by nearly $8 trillion. . that will be a marker as to who is willing to go out -- go after what the trump administration did and that's just the current policies of the biden administration. lisa: is it a certainty next year that it will be biden/trump? annmarie: it feels more and more people are coming out and saying this is the election we didn't want but this is the election that is forced upon us. most voters in the polls want to see fresh, younger faces and looks like they are just getting a redo of 2020. again, we are a year out and there is still a lot of debates to go and it potentially can

change on the republican side but not on the democratic side. lisa: thank you so much as always. we've been talking about where we are economically and whether the fed is responding to an actual slowdown or whether it will be a head fake given that we still seek inflationary pressure we might see a patch of softness leading to yet another sense of strength as well as inflation early next year. one of those people thanks perhaps this might be a head fake is veronica clark from citibank. how much are you pushing back against the optimism we see in the rally of the treasury market last week? >> i think the rally we've seen is a response to policymakers last week. we had the fed and the treasury but what hasn't changed his we haven't seen much in the economic data that has changed. a couple of weeks ago, we got almost 5% growth and we had an employment report friday where there was a bit of a downside surprise. overall, it still looks like pretty resilient activity

especially for the fed. lisa: when you say the date is not as soft as people expect, how do you push back against the labor market report that showed significantly fewer jobs as well as several consecutive reads of jobless claims going up at a faster pace than people expected? >> i wouldn't read too much into it. there are about 30,000 striking autoworkers and those will be added back in november so the most interesting thing on fridays data was we have seen a rise in the unemployment rate over the last six months or so. we could look back next year and say maybe this was an early sign. i wouldn't read too much into that now. the unemployment rate is still low and we are watching the claims data. there are some seasonal adjustment issues with the claims and the fact that initial

jobless claims are still very low. lisa: do you think the fed is making a policy error? >> it's hard to say at this point. we don't think we are getting any more rate hikes from the fed but we could get into a couple of months of data where we had softer inflation data in june, july and august and one cpi print were the details were pretty strong. i think we will get some strong underlying details of three or four months of inflation data and it could look uncomfortable early next year and it doesn't look like inflation is sustainably slowing but rates should stay high for a while. that should slow things down. jonathan: lisa: this has been a view you guys have held for a while and you switched your view on the fed recently based on the recent rhetoric, saying you don't think they will hike rates again. what gives you confidence that inflation will pick back up

given consumers are clearly showing a strength and selectively moving away from certain areas and pushing back on the margins against prices going up too much? >> fundamentally, the underlying resilience of inflation has to do with labor market. we had the employment cost index data last week. the wage growth is still running around 4-5% and that will be more consistent with something like 3% inflation rather than 2%. in the up coming couple of months of data, we have detailed component forecasts and there is probably some strength. we will not because much of a push for used-car prices. we might be exiting a soft spot for inflation the next couple of months. lisa: what will break? if the fed is not going to raise rates further, will inflation

stay stickier than the fed would like? are you saying that something will crack in the meantime? >> i think it's both of those things? i could see inflation staying i until we get a real recession in the u.s., real slowdown and that could come from rates at contracted levels. rates and that level for long will -- for longer will weigh on activity. it looks like a recession at some point and that's what breaks inflation. jonathan: we will get the lisa: loan officer opinion survey. are you expecting this report will show something different and this maybe was why the fed had a different tone at last week's meeting? >> i've heard some conspiracy

theories that maybe the fed knew something we don't know yet. i think it will show that credit conditions are contractionary and people don't want to borrow or lend. over time, that's what weighs on activity but i don't think we will see anything too shocking, more of the same in his credit conditions are tight, that will matter at some port -- jonathan: jonathan: at some point. lisa: thank you for being with us. michael mckee is with us who will cover -- mike: that's a good thing. lisa: congratulations. i'm curious how important it is at a time when there is little other data more people seem to be clinging to narratives that change? mike: it's a quarterly report so we haven't heard from the bank folks since july. we will get the new news today. it doesn't really matter because

the fed's already got it and they've already acted on what they have seen. raphael bostic spoke with this friday and we asked him about it because they had already seen it and he wouldn't give his details but he said i read it but i didn't learn anything. bankers have been telling me for weeks that they have been tightening credit. you can assume that this will show tightening credit. lisa: are we going to hear anything new from fed chair powell? does he want to say anything or push back against a loosening of financial conditions we have seen over the past week? do you think we will hear anything? mike: i don't know that we will hear anything definitive if the market re-prices we may get something that sends bond yields up or down. it doesn't matter because we are six weeks away from the next meeting which is what a number of fed officials have said

friday when they started doing their tv interviews and speeches. there wondering why we need to tell you what we are doing now if we have six weeks. another jobs report will be coming up. let's wait and see. lisa: stick with us, we may get something that sends yields up or down. in the market right now, you can see the earlier rally and equities pull back a bit but still around 0.2% gain with the euro gaining versus the dollar and the dollar weakness is standing out. we were taking a look at the potential for gold to rally. it was said that's an indictment on the interactive missive other currencies. -- at the attractiveness of other currencies. michael mckee is still with us

as we parse through the lack of economic data this week and we get a whole host of fed speakers. do we have a sense of whether they are ok with the violent volatility we may have seen in benchmark yields? is that helpful because there is a dampening in risk appetite that goes along with such volatility? mike: that may be slightly important to the fed and that's the idea of a dampening of activity because of volatility may cause people to pull back a little bit. you want a good indicator what the fed is thinking, look at the fail rate. if it could skyrockets, it's not a systemic issue. the idea that the market was doing the fed's work for it had some nice cretins for a while and now it doesn't necessarily. do we know were bond yields are going from here? there was a story about how much of this rise in bond yields we

saw was due to massive hedge funds shorting. that's the kind of market think the fed cannot do anything about and can't plug into their models. lisa: do you think they will watch the $112 billion in options? mike: they will be watching but what's funny is we are seeing this 330 billion dollars worth of treasuries going out. they are wondering who will buy the step but nobody is saying that nobody will. it will get through somehow. lisa: it's just a question of what price it will take. thank you so much for being with us. coming up ashley allen on the state of the consumer as we look forward to next year. ♪

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sufficiently restricted to get us to the 2% level for inflation. lisa: that was rafael bostic, president of the atlanta federal reserve speaking with michael mckee last week. a little bit of lift in the markets. last week was the biggest rally we have seen in so far this year. one of the biggest rallies we've seen in bonds, very much a cheer based on the fact that maybe the fed would not raise rates more from here. looking at specific stocks, bumble is moving lower, 6% after the ceo said she would step down from this company. she founded it and there is a question around dating absent how much more popularity they can gain given the boom they saw over the past five years. there are questions around consolidation.

hilton shares are fluctuating back and forth, up 0.4% after announcing an agreement to buy blue-green vacations. there is all sorts of other potential premiums. 111% premium over friday's stock closing price and birkenstock shares are lower by a touch after hsbc analysts said the valuation feels tight unlike their shoes. moving on, is ashley allen joining us. she is from franklin templeton. thank you so much for being here because the big question is how healthy is the consumer after people have been saying they are running out of savings month after year after month? have we reached a point where we are seeing evidence of that? >> maybe, but it's been maybe for a few months. i think we find ourselves in an interesting situation right now

especially following 3q earnings. we heard from a handful of staples companies and restaurants, consumers are still spending especially on things they want to indulge in where just whether it's coffee or sweet treats. the data is backward looking so keep that in mind. until this point, resilience has been the word that economists have said over and over. they are still showing up to spend on the things that make them feel good. lisa: how much in the earnings calls you been tracking, how much you see this continuing in a durable fashion based on wages increasing in the fact the labor market is strong? >> i don't think it's durable at least of the same level we have sustained thus far. a lot of the resilience we've seen on the top line has been driven by price. let's call volumes flat plus or minus.

in the restaurant space but in the staples, we think about the grocery store and volumes are kind of flatlining. consumers have technically been pulling back from a volume can -- perspective. companies of realize they can still benefit from taking a price that likely can't continue forever going forward. lisa: some people argue that a lot of the household balance sheets look pretty good. it people want to lever up to get a latte, they can do that. is that what we are seeing is that people are continuing with indulgences but levering up to do so? >> potentially, it's always a may be. i don't necessarily think they are leveraging up to buy their latte but i think you have to look at the bigger picture macro. when you think about millennials waiting to buy their first home, you can't do that right now. spending seven bucks on a coffee is not going to impact your

ability to buy a home the same way rate policy does not affect them. it's less about them leveraging up but more about the bigger macro picture and what they are spending on and how they are supported by jobs. lisa: as an investor, do you recommend consumer discretionary in the small luxuries, people seem committed to these? >> there is something called the lipstick affect. in regards to beauty, women will still spend on small luxuries to make themselves feel good during times of economic stress. i think that same pattern or thesis can be easily applied to sweet treats, think about oreo cookies as well as the occasional splurge in regards to dining out and whether it's at a full price restaurant or maybe you are ok spending 20 bucks on

your meal, they will indulge especially during times of economic stress. lisa: do you buy that argument? >> not yet, i think drugs are really powerful for the individuals they were designed to help, maybe those with type two diabetes. consumer habits really diehard. i think it might take more than ozembic to change those patterns. lisa: we were just speaking with veronica clark at citigroup and she said they expect a soft patch in a re-acceleration in inflation because many consumers keep accepting prices where they are. do you agree with that based on a company specific analysis? >> i think if consumers can keep their wage gains we've seen recently, if those can be persistent, there is good chance

they will continue to accept the prices. it's a matter of who will blink first. will consumers reach a point where they say i don't want to spend six bucks on a box of cereal anymore. as long as they are supported by jobs and wage gains, i think they will continue to spend. lisa: when you talk to corporate executives and they can pass along these costs, are they hiring more people? >> no, because corporate's are also responding to markets. they are trying to recover the margin they lost over the past 18 months or so when inflation and input cost got out of control and markets -- profitability was hammered and they benefited these past few quarters from those price increases in conjunction with

falling input costs. those costs haven't completely reverted but profitability has been strong for them for the most part. companies have been rewarded when their bottom lines have expanded or reverted to pre-pandemic levels. lisa: to wrap this up, there is a question of whether some of the legacy retail companies and whether the legacy service companies can continue to operate and thrive based on their capital structures, borrowing costs were lower from another era and they would have to refinance at a higher rate. whether they are a credible company to invest in and the current environment, are you saying yes because they can pass along those costs to consumers? >> yes, they've been able to pass along costs but the maturity wall has been pushed out for several corporate's including those in retail and discretionary names.

they have balance sheets these days and the cash flow to support the interest expense they have now. in three or four years when the maturity wall comes due, we will see where we are and we can address at that time but at the moment, balance sheets are strong in cash is coming in and they can make their payments and they are passing along the higher prices. lisa: what are the strongest segments of retail right now? >> that's a great question. broadly speaking, beauty continues to do well. historically pets have been strong but we have seen some weakening there. it's probably a post-pandemic trend that's reversing. lisa: people are sick of spending their entire paycheck on fido. thank you so much. going forward, how much can we continue a trend where people can splurge and continue paying some of these prices? that's coming up at 4:30 p.m..

the chief executive officer will have plenty to say about ozempic and how much that will challenge their balance sheet going forward. there has been pushed back that maybe people have overplayed and how much that will change people's trends. in the markets, there is a bit of a pop right now. yields are inflecting a touch higher which raises the question of have we seen the peak and will we see stability with 112 billion dollars of treasury auctions? we hear from the fed chair jay powell this week. euro strength is softening attached, $1.07 and we are seeing a bit of a lift to crew. this has been one of the most for -- one of the most unpredictable areas of the market. crude prices are up about 1%. from new york, this is

bloomberg. ♪

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week started. equities higher. countdown to the open starts right now. >> everything you need to get start for the -- get set for the start of u.s. trading, this is bloomberg: the open with jonathan ferro. ♪ jonathan: live from new york, coming off the week of