>> the market is really getting ahead of itself. >> there is some risk in the market from a valuation standpoint. >> this is contrast between the bond market and the ackley market. >> this market is pricing the fed to return to a neutral stance for monetary policy. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning. "bloomberg surveillance" starts right now. coming into friday, on the back of the biggest one-day loss in the s&p 500 in two weeks. equity futures on the s&p 500 firm by half of a percent. the nasdaq 100 up by almost

0.75%. the rustle up by 0.5%. the price action in the hands of one man, chair powell of the federal reserve. down at jackson hole, wyoming. that conversation at 10:00 a.m. eastern time. weeks ago this would have been a different address following the payrolls report for the month of july. people were talking about 50 and maybe even an emergency rate cut. three weeks later, things are more calm. we heard from collins, none of the fed officials flagging any real emergency. you can thank the recent economic data. three weeks of jobless claims. maybe calling things down a little bit and putting some fuel in some high yields over the last 24 hours. the two year back to 4%. the 10 year shaping up as follows. just about unchanged at 3.8539.

dollar weakness absolutely dominating things. five weeks of dollar weakness on the cards. the largest weekly using -- losing streak for the greenback. a big morning ahead. we will catch up with stuart kaiser of citibank. harris accepts the democratic nomination and ian shepherdson of pantheon saying that the fed should not have eased back in march. jay powell's remarks. expecting a 25 basis point cut in september, stuart kaiser writing the following, "there is a low probability the chair would recommit larger cuts ahead of august payrolls. it would also raise questions about how worried the fed is about growth. stuart is with us. good morning. let's get to that speech.

what are you looking for from chair powell this morning? stuart: the question is will he sound more like the fed minutes or the fed officials that have spoken since then. the fed minutes, a vast majority of participants think a cut is appropriate. that will sound more dovish. it seemed like the blood days they tried to walk -- it seemed like the last couple of days they tried to walk that back. will he sound more dovish or more conservative based on the data you mentioned. jonathan: do you think it is important to the federal reserve chair? when i listened to collins, she has said no real need for urgency. is she saying no real need for urgency and can respect -- can we expect any need for urgency? stuart: i think the fed has really tried to guide the market back to center lane. i don't think he wants to see the fed in another direction because there is only one direction they will go which

is to cut rates. if there is a lot of urgency, he is telling you he is worried about the growth outlook fever i don't think that is a message he wants to send to the market. jonathan: this market is not only worried about the growth outlook. we have had a series of all-time highs on the s&p 500 this week. small caps have started to reestablish leadership as well. it feels like this market is priced for a soft landing. at the same time he wants rate cut typically associated with a hard landing. is that disconnection something that needs to be resolved? stuart: it is a disconnect. it is bad for equities in my view. if it is 25 basis points, the data dependency is on the payrolls report from september 6. to get 50, you need payrolls report. -- to get 50, you need a weak payrolls report. the markets want to have their

cake and eat it too. that is why small caps have been so popular. if you get 150 to 200,000 jobs at the beginning of september and then they cut 25, our view has been that is the case for market. the market would love it. -- the markets would love it. if i'm an equity investor, i am willing to give up 25 basis points to keep the market working. jonathan: the program back to august 2. -- let's turn the program back to august 2. are we exactly where we were three weeks ago just before we got the payrolls report? stuart: i think the risk reward is a lot worse now. when you get down to that 100 k payrolls number, you are on the

borderline. i think the risk reward is worse. the data we have gotten since then kind of makes the payrolls print look like the outlier rather than the trend. if the data keeps, then equity markets will respond well. you spent six to 12 months in a higher for longer environment. strong growth pushing out rate growths. i think the markets transition now to a slow growth environment so now we had to trade slowing growth and decide whether it is hard land or soft land. jonathan: there are a few risk events on the calendar. chairman powell this morning. the payrolls print of september 6. the read of what happened the month of august. do you think underpricing that is a risk at the moment? stuart: 100%. that is the single most data point in the next four to six weeks. it determines the fomc outcome as well. there needs to be more risk

priced into that. the first part is this is august and the second part is you have a holiday weekend in between. that is the number one day need to make sure you are in the office. jonathan: what do you think a bad data point would be? 1.14 was the last print. the last time i looked, we have been looking at about 155 based on four accidents -- estimates. what is bad for you? what would bid news actually be? stuart: sub 150 will get peoples attention. the markets are still fairly aggressive on that. we think 150 is the mason-dixon line. we can debate that. sub 150 will get peoples attention. july is typically a weaker month historically. that number, some are blaming that on seasonality.

you don't have the same challenge in august. if you get a weak print and you stack them up, 150 or 125. jonathan: you mentioned august 2 is sounding like an outlier. how does the data stack up between what we have heard and corporations? the guidance from consumer facing companies is highly contradictory at the moment. you have a series of companies, williams and sonoma yesterday. did you have other stores doing ok -- then you have other stores doing ok like walmart and target. what explains all of that? stuart: a good question. it seems like you are getting some trade down. so walmart or target, it seems like the consumer is finding their way into those stories. it has not just been claims data. last week it was argued that the thursday data, walmart claims and retail sales was the more important group of data than cpi. then you are back up with walmart and target. you are getting at least some

message that the lower end consumer is not under intense pressure. it is a mixed story, i agree. a mixed story is better than what people worried about after the august payrolls print, right? jonathan: ladies and gentlemen, welcome to a growth scare. in that moment, that is exactly what it was. it has faded over the last three weeks. what are you advocating for? what are you suggesting people do between now and september 6? stuart: you want to run long risk between now and september 6. it is a tight window but you are in a low-volume market. the trend has been set which is an upward trend in that period and i think we will perform well and will get a frilly message with chair powell today as well -- a friendly message from chair powell today as well. the main takeaway from the board of institutional investors is even if i want to add risk, i am in a low-volume part of the year. i also have this mask of --

massive risk event when i come back from vacation. it is hard to add a lot of core risk. the one benefit would be systematic funds will be probably buying stocks for the next week or two. jonathan: is the trend for leadership set as well? stuart: that is a good question. i don't think so. leadership is still flux. that payrolls print will at least set the tone, hard landing versus soft landing for the month of september. those two trades are diametrically opposed. it is a little hard to know what to own. small cap has caught a bid. equal weight has caught a bid. that is earnings related. actually produced year on year growth this quarter. there is an underpinning to that trend. it is hard for me to get fully behind a small cap trade just given the risk reward around hard landings. jonathan: the s&p reports next week.

stuart will stick with us. welcome to the program. equity futures firmer by 0.5%. a stacked morning for you in jackson hole. lisa is there ahead of the speech from jay powell. anne-marie in chicago, we will speak to her in five minutes. look forward to that conversation. let's get you an update on stories with your bloomberg bleak -- bloomberg brief. >> mike lynch and morgan stanley international chair jonathan blumer were amount the victims -- among the victims found dead. sources confirmed lynch's death while blumer's wife recovered. he was able to restore his reputation over his software company. bloomberg was 70. they were celebrating on charges

related to the sale. the boj is sticking with its hawkish stance. speaking earlier today, the bank of japan governors that policymakers can add to hikes they need in march and july if the economy is in line with expectations. the result, yen is strengthening against the dollar. shares of ross stores are rising. the discount chain beating expectations and raising is 2024 profit outlook as it saw more demand for its discounts in apparel. the company's results aligning with other retailers like target and walmart. that is your bloomberg brief. jonathan: thank you. more from her in 30 minutes. heavy on vibes. light on policy. >> we will create what i call an opportunity economy where everyone has the chance to

compete and a chance to succeed. >> we are going to do this, we will do that, we will do everything but she did not do any of it. jonathan: we will talk about why she did not do any of it next on the program. this is bloomberg.

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jonathan: the whole program anticipating the words of one man, chairman powell at 10:00 a.m. equity futures going into it, look something like this. firmer by 0.5%. yields just about unchanged on the 10 year. the words of mohamed el-erian on this program yesterday, it is problematic in my mind that the market is pricing so many right now. the market is overdoing it. we will get a range of views on that point this morning.

heavy on vibes, light on policy. >> as president, i will bring together labor and workers and small business owners. we will create what i call an opportunity economy, an opportunity economy where everyone has the chance to compete and a chance to succeed. >> the biggest reaction is why did she do the things that she is complaining about? all of these things that you talked about. we will do this, we will do that, but she did not do any of it. jonathan: kamala harris formally accepting the democratic nomination, prioritizing the fight for the middle class. donald trump zeroing in on immigration as his counter program threatening large tariffs on countries that do not accept deported migrants. joining us is anne-marie. let's get straight to it. the question for the former president -- from the former

president come why didn't you do the things that she is complaining about? annmarie: she gave this speech last night. it was heavy on vibes and rhetoric and short on policy. that is normal for acceptance speeches. what donald is going to do now, he is going to want to define her and tether her to biden. biden was not polling well not only because of things like inflation and his age, but also other things not happening under the surface. broader in the economy and immigration. donald trump and his campaign has been trying to nail kamala harris on those specific policies. yesterday was her introducing herself to the american people at the top of the ticket not just as the vp ticket, vp slot. when you look at the broad parts of policy whether it is the economy, foreign policy,

immigration and reproductive rights, it felt like a continuation or at least she was cherry picking parts of the biden menu that she would carry through to her administration. not a lot of details but broadly in line with what we have seen from president joe biden. maybe she spent more time on reproductive rights, something that she talked about when she was vice president and joe biden stayed away from. most of it felt like a continuation and donald trump will try to tether her to joe biden because he polls well when it comes to the economy and immigration and joe biden and kamala harris did not. jonathan: can we talk about in more specific policy, large tariffs on countries that do not accept deported migrants. what has been the reaction to that? annmarie: when it comes to the democratic reaction to migration, immigration, kamala harris said yesterday this would be her policy position which is to bring back the bipartisan

immigration agreement that was struck between a number of senators, senator lankford of oklahoma and connecticut senator chris murphy. democrats have been hammering that the reason that deal did not go through was because the president said i want the deal killed because i want the issue. that is their current plan which is more support for border security, the ability for the president to have executive power to shut it down. when it comes to tariffs broadly, at the entire dnc they have been talking about the fact that this is a sales tax. they don't want to say the word tariffs because remember, this administration kept tariffs from the trump era under joe biden's watch. some of those chinese tariffs. but they are calling it a sales tax. jonathan: we appreciate the input. we will catch up with you in one hour. speaking of the menu, btig with this to say, "the harris

campaign has treated bidenomics like a buffet while leaving the most politically palatable provisions behind. " what is on the menu? >> it is whatever plays well with the vibes. all that we have learned over the last few days is that they have a triangulation play called here to do their best to blunt the attacks that vice president harris is too liberal and b, to meaningfully separate vice president harris from some of the more contentious biden issues and portray her as a change agent. that is why you saw trump trying to attack her as the incumbent. that is what the next days will be about is vice president harris as a representation of the current administration or is she seen as an agent of change. jonathan: when you sit down with

clients when you catch up with them and they ask you which candidate is the pro-market candidate. do you have strong ideas about that yet? isaac: what we try to focus on is acute market seems. -- themes. we feel strongly that trump is good for m&a. when clients ask who is good for the market broadly, that is a little tougher because when you look at trump's policies we are talking about tariffs, we are talking about uncertainty in the global economic regime. i don't think folks are getting their arms around it especially since we will not have the sugar high of tax cuts that come along with that. that is the distinction we have made. the point i'm trying to make to clients and the one we need to start understanding is no matter who is in the white house, we are going to have buckets of deficit spending coming through

the tax reform effort next year. stuart: in terms of more detail on kamala harris policies, do you think it is when or if? you think she will go as long as possible without providing detail or is she being strategic about it? isaac: i have been surprised of how open democrats at the convention have been in their belief and their hope that she will not offer much policy details. i found it interesting that a number of top democrats have said do you remember elizabeth warren when she ran in 2020 she had a white paper for every policy. 20 pages well vetted by academics and market experts for each policy and she did not win so why would harris? this will be something that they ride the vibes, which jon has outlined, for as long as they can. the date i have circled, september 10, the first and only

debate between these two. for me that is the moment where to happen the rubber could meet the road in terms of these policy specifics that we are yearning for. jonathan: we could not agree more. what is striking is how much room, how much space progressives have given the vice president kamala harris. they are not tying her to unpopular themes. if you think about kamala harris in 2019, 2020, if you were running in the primary, had to commit to things that would not be popular with the country. do they continue to get for that kind of space? isaac: i think they do until election day. there are two points to make. number one is the one unifying issue for democrats is that they are against trump. as long as they can keep the race about trump, they will remain together. the second point and the one that we should examine over time is i truly think that if democrats are in power, you will start to see those fissures

reemerge. the immigration bill that failed had the chance to become law this year in large part because of the election. if democrats win the white house and congress, i am not sure that same immigration bill will pass. at that point you have seen the progressive voices rise and become louder. that is something we think about that chasm between rhetoric and reality that warrants consideration. jonathan: when it comes to blue sweep, red sweep, what is your base case? isaac: at the moment, we are going through the presidential election, there are seven states that matter. you have to look at the issues that animate those loaders. the top ones are the economy and immigration. trump's does better on average in this rain states as long as that maintains, i viewed trump as a slight favorite. on the senate, i remain

committed that the senate will flip to republican control. that is something that investors should more themselves to is we will have a small republican margin in the senate that can give us some sort of framework for thinking about what next year will look like. jonathan: interesting. thank you. appreciate the update. isaac boltansky of btig. most of the market things that harris wants, she needs congress to do. most of the things that trump wants, he can do himself. that is what it feels like in the markets at the moment. stuart: it feels like a debate. do you want taxes are tariffs? from an economic perspective, that is the debate. people talk about red sweep and blue sweep but there was a period during trump presidency where they controlled both houses of congress. there was a period during biden's presidency where he controlled both houses of congress.

the margins were so narrow. the sweep matters for political reasons but policy wise they were not able to follow through as much as expected. jonathan: we are expecting small margins are the way. stuart will stick with us. coming up, the latest on labor dispute with brooke sutherland. welcome to the program. futures doing ok. up 0.4% on the s&p 500. the bond market is stable. the two-year year at 4%. the 10 year year at 3.85.

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or visit leaffilter.com >> the s&p 500 looking to close out the week for a second week of gains on the s&p 500, yesterday's move the biggest one-day loss in two weeks. trimming that gain through the close on thursday. this friday morning we are positive on the s&p 500. on the nasdaq up by 7/10. on the rustle up by 0.4. payrolls report just around the corner need to talk about nvidia as well. we will catch up with mandeep singh of bloomberg intelligence. that's the main event for that nasdaq 100. let's turn to the bond market, yields yesterday much higher off the back of a decent jobless claims number with back to back reads on jobless claims.

they contain some of that fear about imminent break down in the u.s. labor market. the tenure set up at 385. going into chairman powell three hours and 30 minutes away. let's finish on foreign exchange. five weeks of dollar weakness, the longest weekly losing streak so far this year. dollar-yen in focus because of the boj and governor rueda. essentially the doors wide open to hike interest rates again at the bank of japan dependent on that is the price action but stuart keiser's thoughts and just a moment. counting down and fed chair powell's remarks investors looking for clue on the timing and pace of rate cuts. we are from three fed officials. this came from the boston fed president, preserving that healthy labor market while we bring inflation down is what's

most important. we are can a spend some time on this but i want to get back to august of 2022. the speech from the chairman of pain, a single issue, federal reserve it was about one side of the mandate and inflation. the office take away two years later the balance has shifted to both sides of the mandate. >> i think that started in december pray that got down to a level where the fed did not want to create an unnecessary recession if they could avoid it and we've seen over the last six to eight months the fed has been moving in that direction. that one inflation scare around march and that force them to be more cautious but otherwise they are of the view right now that inflation is at a level at which they can risk manage both sides of the mandate. jonathan: if you think about where we've been, that pain speech, unemployment run 3.8%. inflation up around eight. they fought to get from eight

down towards two. you have to see the plummet rate to be a lot higher. cpi has come down from eight to around three. that move from 3.8 to 4.3. how smooth do you think they will be by that. how spooked do you think they will be by that? stuart: i think they are concerned by it. they are going to be aware of that. it's not necessarily the 50 basis point move i think it's the speed at which it happened and they are little bit worried this is kind of accelerating not away from them but accelerating away that suggests a sharper slowdown rather than the gradual boost that they were trying to accomplish. they are definitely focused on it but there's a rate of change of that rather than the actual change that's occurred. jonathan: we will see if we get a repeat in early september for august. the tenure at about 385. the latest on the politics part kamala harris formally accepting the democratic nomination for president. prioritizing the fight for the

middle class and arguing she is best position to tackle the u.s. economy. both harris and donald trump led the campaign trail for the next two weeks for the first debate on september 10. on the politics of all of this. your conversation with clients, are they there yet are they focused on this. stuart: i think they are. in late july we saw the production trade happening which most intriguing to me was i was surprised how convinced people got in early july this was good to be a gop win. our view is this will be a 50-50 shot right up to election day and if it's a 50-50 shot it's hard to put on high conviction trades paid especially when you have to trade the macro data in the interim and then you have this debate in september as well. there's a lot of thanks about it. i don't know if there is a lot of core election trades put on it directly. jonathan: is that because they don't know what those trades should be. if you go back a year i think a lot of people had formed pretty

strong ideas of who was the progress candidate and who wasn't. and they decided donald trump was not the progress candidate at all. they change their mind on election day morning. do we have a decent idea this time around? stuart: scott honored equity strategy team has said both platforms are bad for equities. i may be not as skeptical about it but i think the trump platform at least the deregulatory aspect of it in the lower tax part of it i think the investment community wants to embrace that combination because it worked the last time around. the tariffs spooked people quite a bit but there's probably some risk adjustment going around to that and to what degree. on the harris side we don't have enough data. we are approaching the harris campaign at this point to say using the playbook for the biden campaign and transposing that forward until she gives us more

data. the market is probably viewing trump is a little bit more equity positive but again to your point there's a lot of guesswork going on. >> september 10, look out for that. we will turn to the latest from the boj. a move on dollar-yen. governor rueda cutting rate hike spring sing the central bank will raise rates again if the economy stays in line is expected. also the contribution of the boj's july hike to this months global market citing concerns over the state of the u.s. economy is the key catalyst. the contribution of the movements in dollar-yen to what we saw in the start of august. >> i do think it was probably a little overstated but i'm also not smart enough to understand exactly what's happening. if you look at some of the price charts whether space so or aussie you've a lot of really large moves and u.s. higher yields in the currencies and was

that a direct path one equity markets. i'm a little circumspect about that. was there spill over from the volatility shock in equities that came in over the weekend in the low-volume market. that was pretty open and it was not necessarily very tradable. i think there was some indirect residual effect in equities from that perspective and you also have a broader base value. >> we saw quickly the shorts and the japanese yen all over the charts and shaws were dropping to the floor. do you think we reset that? where are we now compared to where we were going into that morning. stuart: i saw a lot of headlines about the yen trade was unwound. i think this to trade that was accumulate over multiple years. do your point the stuff moved fast but we will unwind to the five-year positioning. that seems sort of less likely

to me. we had the same conversation on u.s. tech. we are back to neutral on tech. no we are not. this buildup in two years you didn't fix it into or three days. i think that positioning risk is still out there. if you look at the volatility of the vix that is still well above 100 and a hint this positioning story is not resolved. jonathan: we heard a lot of economists freaking out. some saying we need an emergency rate cut. i didn't get that sense from market participants. i did not sense any real fear at all. what's your take away from that? stuart: the idea of emergency cuts didn't make any sense. putting more risk into the system rather than that by doing emergency cuts. saying we know something about the data you don't or think this is a financial system functioning issue you are not aware of. and the economic side of it is

if the market want to go down 5% the market was open you to hold trade day for that to happen. so clearly something else happened over the weekend but there's much more positioning driven then was necessarily the market on the hard landing. jonathan: just about unchanged. let's turn to this story. canada's two largest railways prepared to restart after a labor dispute halted work across the country. the canadian government intervening in the attempt to end the labor dispute. this could cost billions of dollars of losses every day. brooke joins us for more. talk to us about what happened in the state of play currently this morning. where are we? brooke: i think we are in limbo to your point. they stepped in and is trying to force these railroads and their workers to get back to work and there's a bit of a process here. we are kind of in limbo until that process resolves itself. the reason why you see them

acting with such urgency is to your point to shut down railroads in canada at the same time having massive ripple effects not just for the canadian economy also the u.s.. it is not all that rare actually that the canadian railroads would have more stoppages for labor disputes but it is extremely unusual to see both of them shut down at the same time so historically they've been able to play one off of the other and now you really do not have that option. there might be some inspiration from what happened with the uaw targeting the big three detroit automakers at the same time to be able to really force their hand to get the benefits and the wage increases they were looking for. jonathan: on this side of the border there's a feeling i think that they may be leaving behind some of these issues as a labor market starts to soften up and we can just a touch. how do we get here and did we get here and did we anticipate this labor market action in

months and years to come. brooke: i think it would be a mistake to think we are moving beyond the power that labor is willing to use to your point we have seen some uptick in unemployment and a little bit of an easing in the labor shortage that the manufacturing industry in particular was complaining about but i think when you look at the impact shutting down these railroads had shows you the employees that man the supply chain have a lot of power and they are sharing -- they willing to use it. you've the uaw president speaking of the democratic national convention using that opportunity to pressure stellantis over commitments to a plant they had committed to keep open as part of those union negotiations. boeing is also facing the prospect of a strike with its workers there and taking the procedural step to move forward if they can reach a deal with boeing over the end of september.

these pressures are still very much alive and well. stuart: for the undereducated, how far the two sides here. how far are we getting from a resolution or a temporary kind of restart. brooke: i think the sticking point is over quality-of-life concerns that the rail workers want to make sure that their needs are met as far as scheduling and rest requirements and there's a little but of a balancing act because the railroads are concerned about maintaining safety, making sure they maintain a smooth flowing run of goods so that's where the tension is at this point and i do think if the railroads have said if they're into force arbitration in order to go back to work by the labour relations board will do so so it looks like we are talking about maybe at most days rather than weeks and what economist would say the longer this goes on the more painful it is so you're really

looking at a week or two to see those catastrophic economic effect we are talking about. jonathan: brooke sutherland there of bloomberg on the latest out of canada. updating stories elsewhere with your bloomberg brief. yahaira: shares of workday are rising in the free market -- premarket as the company signals a new focus on boosting profits. it expects the adjusted operating margin of 30% in the next three years. the company would provide software on hr and other business operations announcing a $1 billion share buyback. wall street is still fuming after the bureau of labor statistics botched its wednesday release of critical jobs data, annual jobs revisions were expected at 10:00 a.m. eastern but the data was not publicly released on time causing chaos and confusion across markets. the numbers were released around 10:30.

a bls spokesperson telling bloomberg the inspector general will investigate wednesday's incident is just the latest mishap and made -- when cpi data was mistakenly published early. southwest airlines is looking for customers potential changes. the company is serving passengers about hypothetical scenarios involving fees for lower-cost fares. bloomberg attained a copy of the questionnaire where customers are asked about their booking preferences and travel habits paid southwest telling bloomberg the survey does not single and imminent shift but comes as the airline is changing its free-for-all feeding policy as a result of pressure from elliott management. that's your bloomberg brief. >> in my experience and yours as well when you get on a plane these days they can get people to check their luggage. it's always the same problem.

shouldn't they start paying us to check the luggage never mind giving it to us for free. stuart: i like the idea. jonathan: you see it all the time. up next on the program, showing up late to the game. >> i don't think this committee wants to admit in a way that they were late to the game again. i don't think that's what they are interested in communicating. they also don't want us talking about a recession. >> live from new york city this morning, good morning. you are watching bloomberg tv. ♪

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things look calm now but they might not be later. 10:00 a.m. eastern time. addressing the federal reserve symposium and in many ways addressing global markets. under surveillance showing up late to the game. >> i do not think this committee wants to admit in a way that they relate late to the game again. i don't think that's what they're interested in communicating. they haven't wanted us talking about inflation for 18 months. they certainly don't want us talking about a recession today. jonathan: that's the focus of the address at 10:00 a.m. eastern. at 39955. macroeconomics writing the following. i'm never going to be sick of saying this, monetary policy works they should have eased back in march. ian, let's turn to that. is that should've gone in march.

why should they have gone in march. >> the softening in the labor market we are seeing now with the rising unemployment rate they did not expect is a consequence of the typhoon that began in march of 2022. which is what i meant by very long legs. bearing in mind the first year still a very low level turned on negative real terms, the real timing is the story of the last 12 to 18 months and that probably hasn't been fully work through. as it works through and pushes unemployment and pushes inflation below their forecast they need to be anticipating that and failed to anticipate because if they had they would risk in march. >> was the strongest evidence of that right now. we have them saying he's not seeing much for slowdown paid what would you .2. >> the fact the unemployment rate is rising steadily. big aggression to payrolls. from the data since then.

we are at the point now outside the health care and education government sectors is possibly quite close to zero and that's not a healthy situation for the economy to be in with real interest rates. as inflation falls. so they really need to get a move on and they wish they had started earlier but the case for delaying now any further for more data i find that deeply unconvincing. they really need to get going. stuart: what you think they need to cut or said another way where do you think neutral is. how far they get to get this out of the restricted position? >> there at 2.8 for neutral, i think it's more like 3.5. of course we will suffer sluggish growth for a while and inflation potentially hitting next year may be low the target then you can probably make the

argument they need to be below neutral. not immediately but some point over the course of 2025. i think they need to do quite a lot and will probably start in september with 25 but i really hope they are in the 50's after that because the rate cuts the implement now won't affect the economy in any way until possibly early 2026. so for that mindset it's a very difficult thing to grasp. sing the economy must roll over in february and it just doesn't work like that. policymakers suffer a little bit from this fallacy of rabid policy effectiveness. it does not work in that way. go relatively quickly, go quite aggressively and bearing in mind the small business sectors are really squealing now under great pressure from tight monetary policy and 9% for working companies. this is a very tight environment even if it's not screaming at

the current rate, the danger in six months time it will be possibly approaching 5% which we do not need. jonathan: these are a list of wants. now we need to get expectations. ian: he's good at tell us they will cut in september. i think he's going to push back against the 50 and there's a significant minority opinion in markets that's pushing for 50. i think you will be reluctant to go down that road. by the time we get to the november december meeting we will have a lot more inflation data. inflation is already on a run rate basis well below what they are expecting in the forecast and the unemployment rate which their expected is clearly rising . they need to change the forecast and i think on the back of that they will start moving by 50's. 45, 20 times so 125 this year and then more next year as far as i'm concerned the more and the faster maybe that's because

am totally obsessed with policy and a kind of think the market and the fed aren't obsessed enough. stuart: do you think that sort of 25 versus 50 gap is driven by market data from the fed's perspective i.e. they need to be forced to go to 50 by what they are seeing in the economy. ian: that is right. if the august payroll print is -50, that i think that first easing in september is more likely to be 50 basis points so they are content on the latest data. it doesn't really make a lot of sense. looking at a very short runs of historic data as a basis for driving a policy tool really doesn't make any sense at all. but that's what they did in the spring when they panicked on the back of the first quarter inflation data where they should've said we can ignore that because look at the pipeline. so there's also this question of in june we dropped it down to one. for 2024. so three months later to go

straight to 50 is a huge ambition of the era of the forecast. i would like to think they would be big enough to take the hint and say we need to do the 50 but more realistically and given chair powell's pretty cautious approach to everything the 25 is more likely. we wake up on that first friday in september with a terrible payroll number the market will tell them they have to release that. >> from my perspective i do have got a lot of people that i know always saying the same thing. the external members of the mpc of the bank of england seem to assent far more often than we do with the federal reserve. how important is unanimity and do we expect dissent in any way shape or form. >> not if they do 205i don't thing there'll be a formal dissent. it's really quite substantial support now for the first 25.

if they push through 50 and get some resistance. let's say he pushes through an the payroll isn't -50 that i think that would cause some dissent more likely in the speeches in the weeks after the first. but i think unanimity over committee moving is important to them. it's important to markets as well. they'll also be sooner or later if you have some reluctant people who are still hanging on focusing on this backward looking data. then you have to just move past it and i hope they would do that. jonathan: we get a rare opportunity to talk about football later and a rare opportunity to say the following. newcastle, top of the league. ian: i think we finish fifth which would be frustrating because we would like to finish fourth. but there's really strong teams. a stronger chelsea in the latter

part of the season i think makes it difficult for us to get to fourth but we started ok with the win. i think without european competition this season we are playing a lot fewer games hopefully will have a lot fewer injuries. and i think we've got the interest of really great side braid at least four other good ones. my big news is i've emigrated to france. >> ian, thank you sir. not sure what i make a big move. up next on the program, tobin marcus of wolf research. ryan of zelman and stewart kaiser. all of that more still to come, this is bloomberg. ♪

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>> we are still on the path for a soft landing. >> closer to 4% is probably where we should be trending. >> we are thinking one and a quarter for eight quarters. >> the fed in my opinion is going to go very slowly. >> the running well ahead coming up to jackson hole. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: how much scope is there for disappointment today. a big focus on chairman powell speech. this coming from muhammad ali and on the program.

it's problematic the market is pricing in some any rate cuts the market is overdoing it. a conversation this hour, equity futures on the s&p 500 firmer on the nasdaq 100 punching up by 0.9 on the russell the small caps up by 0.6. the only event on the calendar going into the weekend is the most important event arguably of the week so far. chairman powell from jackson hole how upside are we? how dovish can they be relative to market pricing. it striking the outlook is quickly dipped to the point of once again pricing in more than a hundred basis points by year end in the absence of a tangible breakdown in the labor market. stuart, what you make of that. >> may be a touch but i think the market is pricing in a range of outcomes and not -- i think the market is pricing 50 to 75

basis points at year-end with the chance that the labor market comes under pressure and they need to cut more aggressively. i still think the market frankly is a little bit in a soft landing camp but they are seeing payrolls where they are, so they have to add some risk into its priced into the curve for rate cuts. >> a repeat of august 2. stuart: i can go into september with 50 basis points if i'm worried about that so this is happened in the past, it, and in 2023 as well. folks were expecting recession, it did not materialize and they got priced out. did they get priced out are the odds of recession, down an emergency cut pricing resolved itself. >> we were talking about six or seven rate cuts and that quickly disappeared after q1 inflation data. at the end the august august

about 4% 399 with 10-year down about a basis point. trading at about 3.84. dollar weaker again. euro-dollar 11121. we catch up of? , tobin marcus as harris except the democratic nomination and ryan mckevitt any on the state of the u.s. housing market. we begin with our top story. traders await fed chair jay powell remarks spread the global economic expansion remains intact and would benefit from rate cutting expectations. equity valuation remains at risk especially of growth continues to decelerate and the fed does not show urgency. bob joins us now for more. a gap, a spread between fed funds in the two-year print you've noticed it's the widest going back to 2008 and when they

say 2008 they get worried, concerned. bob: the jury is out, of the economy is slowing i don't think we can dispute that anymore. we don't know if it will be a hot -- soft landing or hard landing. that is in my view out of the fed's control. the fed what it does in the next few meetings will impact the economy so it's already cooked and we don't know. if you want to be fearful, pretend it will be hard landing, not a hard question. you see it all over the place, we just don't know how slow they will get. >> let's take that spread, you are funds appear in the two-year. how do you expect that to close. is it the fed funds coming down to meet each other, what is that look like? bob: the fed is going to lower rates, the chairman will make that clear today but is was talked about earlier, we don't know the pace of the decline,

january 1, six cuts this year. now it's good to be seven. and so i think it will be slow with delivery and the language will be launched very carefully. inflation is a sticking point. they have to have their one eye on that as they begin to fight this emerging economic slowdown. jonathan: we've noted the equal weight s&p 500 printed a couple of all-time high so far this week. we see the leadership from the small caps once again. with that in mind or we at risk of this data coming in weaker all over again on september 6? bob: that is the question mark and the risk. if things slow down faster than the market is expecting, there's a little bit of whatever ails us, the fed will have the cutting power to find that.

what they do today doesn't affect the economy for some time. so it is how fast does this things slow. >> how sensitive do you think the fed is to financial conditions. with a sharp pullback in equities on market data. bob: i think you bring up a good point and that is things that might be out of our control. we had that a month ago with the japanese yen carry trade and as the market was following those -- falling those three days we have some clues saying it was a fear about the economy falling apart that's causing this decline. maybe that's what started but we know what aggravated. to your point the financial system doesn't necessarily operate smoothly every day as well. not predicting that but we always dissed continuity in the system. stuart: would you have the view

that the market kind of need some rate cuts given the level of valuation here or do you think it will weaken -- it will skirt through. bob: valuation is demanding a good environment. may a perfect environment and therefore the fed better do exactly what they need to do and earnings better come along and we better not have any more consumer weakness, a lot of good news in this market into the 20's. we do need to justify these valuations reasonably good economic moves and assistance. >> what would you advocate into the second half. wanting to sit in cash and take 5% and waited out. what are you telling them to do? bob: this momentum driven bull market. funding that kind of market is a fool's game so you have to be

invested, be careful what you own. earnings predictability, earnings persistent and cash flow. so it should get into the environment those kind of stocks will selloff less but will do just fine on the upside. bob: a lot of those -- stuart: a lot of the stocks are what people have owned. is that a steady as she goes or you worried about positioning being som long of those kind of stocks. this is debate we feel like we are having on tech all the time. is it safe or not. >> i would broaden the list, valuations have to come in relative to the earnings persistence list that i put together there. i don't just owned high pe stocks. they have some vulnerability should things not go all that well. would jonathan said the market is broadening and to those of us who are cautious, that is a good

sign that we are getting some money. it couldn't get much narrower. stuart: that's a question we get on the broadening theme. i feel like that's a big trade-off people struggle with and do you have a view there? bob: yes, be careful how much broadening you do. it tends not to do well in the economic slowdown environment. and so i think it is don't be zero in those areas as many people are but don't overdo it. we've lost two thirds of the small caps valley we saw in july relative to big cap. that's a lot of deterioration. jonathan: another way of asking the same question. financials into the back end of this year? >> absolutely preyed a lot of lending took place outside the

system. that's why bank balance sheets are on average in better shape today than at this point in the economic cycle and they are pretty cheap. jonathan: big bounce off the low. thank you. september 6 the million times, august 28, nvidia given where leadership is would you say september 6 is more important? stuart: to me the payrolls number is more important for the overall market but nvidia is a huge stock and a big part of performance. you have this feedback loop with large cap tech and stocks buying from one another. microsoft going through to nvidia. there were some others if you were to get a disappointing result from nvidia does that spill out more broadly. >> nvidia right now at the premarket. the nasdaq up by something like

8/10 of 1%. futures up by 0.6. let's get an update on stories elsewhere with your bloomberg brief. >> freight trains in canada could be running again days after the government stepped in to resolve a labor dispute that halted work. the intervention is aimed at averting a crisis across canada and the u.s.. commodities like coal, wheat and lumber all depending on the railways. canadian pacific and national the railways in the middle of dispute issued statement saying they were preparing to risk their operations. alibaba shareholders have approved plans to update a listing the primary status. its movement is expected to attract billions of dollars from mainland china. they sing the underperformed those of tencent this year as china's weak retail sales have hurt alibaba's key commerce business. shares of ross stores are rising in the premarket up more than

5%. and raising its 2024 product outlook as it saw more demand for its discounted apparel while free costs also eased. they align with other retailers like walmart and target which have shown consumers across the board are searching for bargains. jonathan: more in about 30 minutes, let's pick up on our story. home depot, target ok. lows and home depot williams-sonoma, terrible likes of target, walmart ok. compare and contrast what's happening there. sort of home-improvement versus consumer staples. stuart: it sounds like that a little bit. the comments from home depot and lows pushing out the decisions to make these bigger ones weather as they are comfortable with a one-off smaller purchase for the rest of the day.

they probably have a vibe i appreciate. jonathan: stocks up by little more than 5%. up next on the program harris making it official. >> i promise to be a president for all americans, you can always trust me. to put country above party and self. jonathan: that conversation up next. ♪

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with godaddy. jonathan: stocks on the s&p up a half of 1% and the bond market yields lower by a single basis point. under surveillance this morning, harris making it official. >> i promise to be a president for all americans, you can

always trust me to put country above party and self. to hold sacred america's fundamental principles from the rule of law to free and fair elections, to the peaceful transfer of power. jonathan: kamala harris acceptance speech closing out the last night of the dnc. the vice president pitching herself as the dust is focused on lowering cost for americans. noting the following, the hairs campaigns approach the policy is driven by strategic ambiguity, broadly sticking to her values on the issue she will prioritize aim to connect with swing voters using populist economic rhetoric but avoid getting a pin down on the details of policies that will be problematic to implement. amh, over to you. annmarie: we are from harris

last night. this idea, tobin thank you for joining us of strategic ambiguity. at what point did she need to get to the details of what she stands for in her policies? >> she will have to subject yourself at some point. she will have to answer questions sooner later but frankly it is a question for voters and i don't know policy details are what people are hungry for preyed the contrast between candidates is start. we look at with the directional choice is maybe this continues floating above these preyed -- above these. annmarie: the former president tried to push her last night and this morning. tobin: he is trying to pin her down. he also is a mixed relationship with how much detail he provides on policy and how much you need to spell out your plans. they will be in the debates before too long. that will be a key moment for the campaigns but i don't think

voters will be assessing that on did you explain, they will be going toe to towing show toughness and readiness for leadership. annmarie: you also talk about the fact she disavowed a lot of policy positions she took running in the primary of 2019. fracking, medicare, defunding the police. who does she lose by those flip-flops? is it progressives are potentially centrist letter questioning why she changing her mind? tobin: if she was going to lose a lot of support from the progressives this is the week we would've seen it. the fact we had big names on the left wing of the democratic party out there cheering and lending their support shows they are prepared to take her triangulation in stride and live to fight another day. the question will be when you're talking to swing voters can you give us an account of what

happened. people find it incredible for you to say i just no longer support of fracking band. annmarie: what states to that potentially hurt her in. tobin: i think fracking in pennsylvania to some extent potentially michigan and the rest of the upper midwest but rely on cheap industrial imports, those are ones you probably worry about the most. seem to be the shifts on the border across the sun belt. >> trump was at the border yesterday, he will be in maricopa county yesterday, so is rfk junior and there's so much speculation. in maricopa county is swing district. couldn't rfk junior endorsement push maricopa county to the red column? >> conceivably but his support has been trending down.

i think he clearly helps trump to have rfk drop out and endorse him. the support has been trending down and there's a question about how much of that support can he deliver. are the 45% still supporting rfk voters loyalist or just people taking a sort of general purpose protest vote release valve and in that case he may not be able to turn on a dime and say here's where you should go now. tobin: -- annmarie: trump will also be in las vegas before heading to arizona. he's talking about tax on tips. he is leaning into the economy and immigration, the top two issues. how did she combat him on these issues where he pulls better? tobin: on the economy we've seen her dramatically narrow the gap in terms of ratings on trust on the economy. harris versus trump looks a lot closer than biden versus trump. i don't know she needs to get ahead of them, she just not

needs to have a gaping wound like biden did. this broad message of charting a new way forward is an effort to separate herself from biden just as much as trump. tobin: she is part of -- annmarie: she is part of the biden harris ticket, administration. i want to get this perspective from you. why do voters not consider her as part of the past 3.5 years? tobin: i don't think it's a settled question yet whether they will look at it that way, certainly the trump campaign will try to characterize her as part of the past. we sell really mixed relationship with the biden harris administration over the course when it came to things they want to present as accomplishments in the administration or signs of her readiness and then characterizing her as part of this effort when it comes to things like the economy, that was the other guy's problem. annmarie: it seems like she cherry picked what she liked from biden in the speech and avoided things she didn't like. were you shocked by anything

that was omitted? tobin: not particularly. they made smart decisions about where to aggressively at attacks of the center, where to proudly defend the positions of the biden harris administration and where to park this middleground in the economy. the question is whether or not voters will buy those pivots and train -- triangulation and except those as authentic representations of what she can do going forward rather than these positions. annmarie: last night was different in terms of the feeling on the convention floor benefit was joe biden there. just a month it was pretty drastic outcome. what is it mean for down ballot races? >> the polling we've been seeing and democratic senate races, they made a very intentional effort to trot out democratic senate candidates. it seems pretty clear that sort of unifying the party general

enthusiasm, the feud influence of money down the ballot because resources at the house and senate level. so getting this massive boom that eventually converts to doorknocking, organizing. that really helps up and down the ballot. >> some policy proposal she needs a democratic house and senate to get through. when you're talking to clients what you suggesting to have a look at the composition of congress? tobin: i think the house will go the same way as a presidency, certainly if she wins, strong expectation that the democrats carry the house. i think despite the polling we see, republicans are quite strong to take back the senate. they are pretty substantially favored in montana and ohio. in all likelihood even if harris wins she will deal with divided government. annmarie: dishy of strong republican relationships in the senate? tobin: she has a few at the committee level, a working

relationship with but frankly the things she was most distinguished for in congress were fairly adversarial things. some of the grilling's she did of witnesses and so forth. viral moments as a senator. you know i think she will be leaning in part on other democratic senators, on folks she brings to the white house to build that for negotiations. annmarie: thank you for joining us. that was tobin marcus of wolf research on two hours of sleep given how late last night went. strategic ambiguity when it comes to policy. you can expect a lot more of that from the harris campaign. jonathan: get some sleep. thank you from the dnc in chicago. this is what this sounds like, we read the harris campaign's approach driven by strategic ambiguity in which she will try to broadly signal her values on the issues she will prioritize and connect with swing voters

using populist economic rhetoric , but avoid getting pinned down on the details of policies that would be unpopular or problematic to implement. the benefit of this candidate not going through a primary again and being tied down to progressive positions it would be unpopular on the national stage, the benefit of that is massive. i don't think you can overstate it. if she had to repeat some of the things she was saying in 2019, can you imagine where these poles would be? stuart: strategic ambiguity as the way to go. most politicians wish they could be having that going on. it is tricky though. you wonder can i just assume the biden policies moving forward or do i need to adjust to a reality where the policy base might differ? and to your point earlier. jonathan: superhard, how will they govern? coming up on the program nvidia preparing to report earnings. mandeep joins us ahead of that

key event risk trade equity futures positive by 0.5%. in the bond market, your yield, the two year and around 4%. that address from chairman powell a few hours away. ♪ if your business needs a new application then developers will have to write code. a lot of code. if an application needs to be modernized then you'll need time, resources... and caffeine. if this sounds daunting then use watsonx code assistant ai designed to multiply developer productivity so you can generate code quickly. let's create a more modern foundation for business, with watsonx code assistant.

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jonathan: two hours away from the opening bell. equities up by 0.5% on the s&p 500. 0.8 on the nasdaq 100 p with next stop is chairman powell at 10:00 eastern time. after that, earnings from nvidia next week. i wish they would report earlier given their importance to the market. another conversation for mandeep singh, who will try to answer the question for us. your two-year, 3.9955. 4.1158 on 30's. yields higher yesterday following better-than-expected jobless claims. three weeks are pretty subdued jobless claims data calling the

environment going into this address from chairman powell. let's get to foreign-exchange, euro unchanged at 1.1112. this came from the boj governor earlier. if we are able to confirm a rising certainty that the economy and prices will stay in line with forecast, there is no change to our stance that we will continue to adjust and degree of easing. sounded like a guy willing to hike interest rates again over at the boj, shrugging off any contribution to things earlier this month. stuart: basically saying if things follow the forecast, we will keep tightening financial conditions. jonathan: no problems for stocks here? stuart: we have seen global central bankers are very sensitive if stocks selloff. jonathan: if they are sensitive to the story -- stuart: probably more sensitive to the yen than the nikkei i

would guess. jonathan: dollar-yen, negative on the session by 0.1%. both saying in jackson that it's appropriate to begin lowering interest rates soon, adding the pace of cutting should be gradual and methodical. their comments coming ahead of chairman powell's speech at 10:00 eastern time. if you reflect on what we heard, there is no urgency whatsoever. when i hear that, i don't hear these guys drifting toward 50. it sounds a lot like 25. stuart: they also want to send a message to gradual slowing the labor market. there is no benefit for them to start getting stressed in their commentary. it just leads to more problems. they have a base forecast, they will try to stay loyal to that, but try to leave the market to that. jonathan: chairman powell will talk about how effective monetary policy is.

if we were doing this a year ago, would we be talking about monetary policy that was not tight enough? what are we basing that on at the moment? stuart: you mentioned earlier, the jackson hole commentary was very aggressively negative. by december, they were starting about they may need to start using policy. the posture of these comments can change pretty quick. let's just focus on the meeting we have before us. jonathan: december 2023 meeting was strange, started to cut about interest rates, and then dan williams says we are not cutting interest rates. what do you make of the communication we have had out of this federal reserve? the end of july, the daylight seemingly between the chairman and what we saw in the minutes. is the chairman doing a poor job of reflecting minutes on the committee, or is it divorced from what we heard a few weeks back? stuart: you asked about this

earlier. powell seems intent on not having to send -- dissents, but when you get out of the room, people will say what they want. if you are more machiavellian about it, you could say that they are testing narratives, reading and reacting that way. but i think it is a fed that wants to show unanimity after maybe being too late to start hiking. people have their personalities. they get out in the world and they say what they feel. jonathan: focusing on chairman powell in about two hours away. uber will start offering self driving cars to customers next year. the partnership as the cruise, owned by general motors, has been trying to gain traction. your next away from nvidia, earnings on wednesday. bloomberg intelligence expecting

them to beat expectations and raise guidance for the third quarter. we have mandeep singh from bloomberg intelligence. expectations for next week. how high is the bar for nvidia this time? mandate: -- mandeep: the magnitude of the beat will get smaller now because their revenue base is much larger. the data center revenue expectations are $100 billion for this year. 2 billion per quarter doesn't seem that high in there and it did four quarters back when the revenue run rate was half of that. clearly, no matter what they do, the numbers will not look as big as they used to. i think the tail is behind their back. but we have heard from hyper scalers this morning is they are expecting 30% capex increases

going into next year. that is positive for nvidia because their revenue comes from those hyper scaler's. stuart: there's been question, the black rock rolled out, people may wait for that ship to be introduced. what do you expect that discussion to be? mandeep: the market is still constrained right now. whatever chips nvidia is making, they get bought because of the supply constraints. whether it is blackwell or another earlier version of the chip, every company wants to pilot something with a generative ai, and the only name in the game is nvidia. i don't think there's any problem with their market share. we know intel is struggling. to me, it's really about 2027. i hate to say i'm looking that far ahead but that is what you have to do. consensus is extrapolating these growth rates three years out. if the market is assuming they

went to $100 billion in free cash flow, what is embedded in that? gross margin of 70%. can they keep not going? that is how high the expectations have come. that is where i think there is some risk. you cannot assume a chip company having a record revenue run rate the way the market is pricing now. it is a software company at the end of the day. stuart: where is the supply chain these days? is it as long as 12 months ago or have they in no way added? mandeep: tsmc told us last month, their revenue grew 45%. clearly they are expanding capacity, seeing that demand, and a lot of that is helping nvidia. no matter how many chips they make, they get sold. again, i hate to look at 2027, but that is where you will have to look at where the prices will settle.

right now the supply constraint is really what is driving the nvidia growth rate, and it will continue for at least the next few quarters. jonathan: we need to explore things further downstream. we know where the demand is coming from, we know which companies. investor need to keep on making the investment they are making without the use case being demonstrated in a major way. how much patience is left for investors, the big customers out there? mandeep: this quarter, every company that raised their capex was cheered, even meta. for now, investors are ok because they see some proof points, but that is a risk, whether investors will cheer that for 2026 and beyond. right now it is too premature to think these companies will continue to raise 30% capex because that hurts their free cash flow. all the spend and that is going

will hurt their free cash flow of these companies, hyper scalers, and it is translating into nvidia revenue. jonathan: people have drawn revenues from where we are and that investment we have made in the cloud business. you see the same parallels? i can sense in the earnings calls the ceos themselves are starting to sound more defensive about the investment they are making. alphabet, they had to sternly say, the biggest risk is under investing. you want to overinvest if anything. are there parallels now from 15 years ago? mandeep: absolutely. this is the hottest growth segment right now in tech. that is why everyone feels it is ok to overinvest. one of sundar pichai's point is we can allocate these chips for another use. it is not as if you are over

investing now, if the use case doesn't translate, the chips go to waste. you can keep using the infrastructure for something else. that is what mark zuckerberg highlighted as well. also the size of the models keep getting bigger. the question is how big does the next model get? 10 times or two times bigger? if it is two times bigger, you don't need as much chip capacity. but if it is 10 times bigger, we have a long runway here and nvidia will continue to reap the benefits. stuart: you mentioned tsm. is this an nvidia event or will others be caught up in the story as well? mandeep: right now, if you would like the dominant player continues to have the lead, and that is why intel or amd is struggling to catch up.

tsmc has a distant lead and everyone else is in a distant second or third. once you establish a lead, you have a long runway. we saw that with intel back in the day. the question is, how much transfer is happening from legacy spend to gen ai? nvidia seems to be benefiting from the transfer in addition to the incremental dollars. now they are increasing there by 30%. they were not in the last 30 months. jonathan: they are a clear and obvious winner. we will catch up with morgan stanley in about 30 minutes. they have drawn a distinction between ai enablers and a i a. there is. nvidia is the winner of the ai enablers. of the adopters, can you identify who is winning? mandeep: microsoft. jonathan: what have they done? mandeep: the cloud ramp-up, what they did deploying openai on the

cloud, copilot revenue, they have shown in every earnings growing triple digits for them. they are in that very early fades. think of nvidia six quarters back, that is where micro soft is. jonathan: apple likes to be late and better. do you think they can be late and better? mandeep: the fact that they don't have their own large language model gives me pause. apple's strategy, we have the distribution, we will deploy everyone's large language models on our phone, but not owning the ip -- what apple has done well, vertically integrated. they own everything in the phone. clearly, they have demonstrated they can come back and show a winning strategy. jonathan: mandeep will be on tv a lot next week. good to see you. let's get you an update on

stories elsewhere this morning with your bloomberg brief. here is yahaira jacquez. >> w a sticking with its hawkish stance of ultra easy policy. bank of japan's governor said policymakers can add it to hikes they made in march and july if the economy and prices are in line with expectations. as a result, you are seeing the yen strengthened against the dollar. former president donald trump is threatening large tariffs on countries that don't accept deported migrants. immigration remains a cornerstone of his reelection pitch. while imposing tariffs on allies and adversaries is a key part of his policy. trump visited the u.s. mexico border yesterday as he intensified his attacks on kamala harris and her handling of illegal immigration, all part of his effort to reclaim arizona. in the latest twist of the paramount saga, scoggins media is accusing paramount of

breaching the deal by continuing to engage with another suitor. they say paramount didn't provide written notice of the go shop period and says the extension is not valid because the other proposal is not superior to the sky dance opera. jonathan: i know it shouldn't be this way but there are certain story they give you headaches. that is one of them. are you following this story? stuart: i am aborting it. you should never date two people. that is the takeaway. jonathan: up next on the program, the frozen housing market. >> even if rates were to stay at current levels, at some poin t transactions will pick up, and we need that to happen. the existing home market is essentially frozen. jonathan: unlocking that frozen market,. next.

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jonathan: this just came from bank of america. weaker main street, fragile wall street, all of that equals treasuries are the best hedge for q4. priya misra coming up later. she will have thoughts on that. your bond market, 3.8463 on 10's. crude participating, rally by 1.8%. wti, 74.32. under surveillance this morning, unlocking a frozen housing market. >> even at current levels, at some point, folks will adjust and transactions will pick up. and we need that to happen. the existing home market is essentially frozen. under 4 million units. that should be closer to 5.5

million units. at the other end of an existing home sale, there is typically a home purchase, and that can be a new home purchase. jonathan: u.s. mortgage rates dropping to a new low this year as potential homebuyers await fed rate cuts. small but still weak existing home sale gains. new home sales coming out later this morning. ryan mckeveny saying the market is currently coping, chopping along with the bottom with some of the weakest home sales since the great financial crisis, but we expect to see improvement later this year and more so in 25-26. ryan is with us now for more. one is funding the purchases that we see at the moment? do you have any stats on the amount of cash buyers in the market? earlier this week, mortgage application dropped off a cliff. how much of this is just very wealthy people with access to cash? ryan: that is definitely a

component to things. the latest data suggests coming up on 30% of all transactions are cash buyers. that is up from a year ago, at the highest level since 2014. you let into this with the overall weakness in existing home sales which is true, but there is a bit of a dichotomy. sales above a million dollars, that cash buyer who has the ability to forgo a mortgage with a high mortgage rate, they are active in the market. the people that are being pinched unfortunately on the lower end consumer who is really struggling with affordability. jonathan: are there cyclical signals in the housing market or are these structural issues over the last several years? ryan: i would say mostly cyclical. the impact of rates tends to be the biggest factor to that affordability dynamic. that homebuyer attempting to leave a rental to get into homeownership, payments have gone up meaningfully. it is not just that interest

rates are 2x what they were years ago, home prices have gone up meaningfully. cyclical aspect really ties to mortgage rates. the good news with that is we have seen some reprieve recently. now around 6.5% on a 30-year fixed mortgage down from close to 72 months ago. moving in the right direction. to the extent we continue to see improvement in mortgage rates, you can expect some cyclical improvement in the housing market and home sales. stuart: what do you see from lenders in terms of innovation, different ways of packaging up the product to get people involved? folks were embedding free re-fi s. what are you seeing on that side of things? ryan: that has been a play from some lenders. we know it is a high rate but we will cut the rates lower. there has also been some lower down payment requirements for some buyers. there are challenges with those

because often times a subset that are able to qualify might be at an income level where it is still very aspirational, not at the point to be able to get into that home and afford the monthly payment. there is some innovation, more on the margin, but there are lenders attempting to help solve the affordability problem to the extent they can. where there has been a meaningful change, homebuilders, new home sales have been offering mortgage rate items. i wouldn't call that an innovative product, but it has moved the needle, and there have been some gains in the new home market because they can make it more affordable for the consumer. jonathan: the focus on wall street is on a speed from the federal reserve chairman at 10:00 eastern time, a big focus on whether he cuts by 25 basis points in september or 50. we want to get a decent idea of

what 25 or 50, what a difference it would make, and if you could talk about the lock in effect we are seeing in the housing market. the effective mortgage rate, the average rate for outstanding mortgages is around 4%. the market rate is south of seven, so we have a big spread, no real incentive for people to sell a home, particularly those that have a two handle. how many rate cuts to we need from the federal reserve? what would change that story and get some inventory back on the market? ryan: great question. a couple components to that. in terms of the fed actually cutting, a lot of that seem to be priced into the bond market already. we do think the fed starting to cut is a positive for mortgage rates but we think it is a modest positive. the 10 year treasury yield is unlikely to change much, at least that is what the bond

market is telling us. the spread between short-term and long-term rates could compress. generally compression is a d e-inversion, steepening of the yield curve tends to be beneficial for mortgage spreads. if we think about a 30-year fixed mortgage, right now it is a 2.5 basis point differential. we are close to 100 basis points wider than normal on that mortgage spread. as the fed begins cutting, whether it is 25 or 50, how quickly this goes is anyone's guess. but we would expect mortgages to compress, and that is where the benefit comes, as opposed to banking on some big change in the 10 year treasury yield. jonathan: the trillion dollar question, i want to understand what it does to prices. is this going to stimulate supply more than demand, and what do prices do? ryan: that ties in greatly with

your question on the lock in effect. in 2024, even as mortgage rates have stayed high, you have seen that lock in effect lesson. the number of new listings coming to market is up from a year ago. the amount and it inventory on the market is up 20% nationally. there are market where it is up 70, 90%. even with high rates, you see the lock in effect ease. as a rates lower, more supply probably comes to the market, probably does unlock demand. our view is home prices do continue to move higher but the rate of growth is below average going forward. home prices went up 15% to 20% back to back years at the beginning of covid. last year they were up 6%, that is about average. typically they are up about four in a given year. we think home prices will rise

to percent, 3% over the next couple years. it will be a supply coming back to the market but also an unlock of demand if we have lower mortgage rates. jonathan: we have to do this again soon. the big question for the federal reserve as well, is this inflationary or disinflationary if they start cutting interest rates? stuart: their view is it is inflationary. if high rates get inflation down -- jonathan: housing has been a unique beast. stuart: it is because we have those longer dated fixed rate mortgages. other parts of the world, higher rates have actually eaten into demand, other goods as well. because we have that low effect mortgage rate locked in, it has not affected us the same way. jonathan: this was fun. two hours flies by. good to see you, sir. coming up on the program, we will catch up with priya misra, mike wilson of morgan stanley,

sarah house from wells fargo. going into a big address from chairman powell at jackson hole, wyoming. we will catch up with lisa abramovitz and tk to give you a preview of that address. we have heard from three officials already and there is no urgency to reduce interest rates. you get the sense, this is a committee getting closer to an interest rate cut in september, but the conversation on wall street is talking about 100 basis points cuts in 2024, maybe even 50 on september 18. the calendar, payrolls on the sixth, cpi on the 11th. a lot of work to do between now and then. the next hour of "bloomberg surveillance" is next. ♪

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>> we are still on the path first soft landing. >> we think about rate cuts, we think one a quarter for eight quarters. >> the fed, in my opinion, is

going to go slowly. >> bond markets are well ahead of what the fed missed going into jackson hole. jonathan: let's go back to chairman powell august 22, 2022. we are sitting there and i have lisa and tk and we think it is going to go 20 minutes and it lasts eight minutes and there is one big takeaway and the word is pain. and it went like this. higher interest rates, slower growth and conditions will bring down inflation they will also bring pain to households and businesses. he went on to say these are the unfortunate costs of reducing inflation but pain. think about where we work two years ago. cpi at 8%, unemployment at 3.8%.

this federal reserve, central bank was a single issue central bank. in that moment it felt like a single mandate. two years later, cpi has come down from eight to around three and unemployment has gone from p .8 to 4.3. that change means the view from the central bank is more balanced, full employment with the price target of 2%. it is that balance that a lot of people anticipate from the chairman when he takes. good morning, good morning. the third hour of the bloomberg surveillance starts now. equity futures up by 0.6%. the nasdaq up by .8%. the russell up .5%. the main event from jackson home wyoming two hours away, the federal reserve chairman addressing the annual get together for the federal reserve and addressing markets worldwide. 10:00 a.m. eastern, 3:00 p.m. in

london. let's talk about price action. the 10 year, 3.85. jobless claims came in ok for a third consecutive week. the fx market, 1.1120. the lineup for the next 60 minutes or so, coming up, we will talk with priya misra as investors prepare for the comments from jackson hole. we will speak to mike wilson on a data-dependent market and sarah house of wells fargo on the shifting of labor. we begin with the big issues, traders placing bets ahead of the comments from federal chair powell from jackson hole. what are you looking for? mike: we are not looking for eight minutes. that is for sure. we are looking for a standard speech from the shed -- fed

chair that doesn't break new ground. he is probably is going to essentially repeat what he has been saying for some time is that we are seeing progress on inflation and enough to give us some confidence that inflation will get to the 2% target so we can soon begin to adjust interest rates. i don't think he will get done -- and give us any magnitude because they have data coming in september. if it comes in september, probably 25% -- basis points but leave it open for 50 if we get bad numbers of the labor market. manus: do you sense this -- jonathan: do since this federal reserve is in a different place. they didn't give any indication it was in the urgency to reduce rates. mike: there is not a feeling here that that needs to be an emergency priority. the feeling is the economy is

strong and could withstand interest rates where they are. they may not be appropriate for where they are but as inflation goes down, real rates go up and they have to look at some point but they don't have to do it in an emergency wait. there is a sort of feeling they have gotten the soft landing although they won't use that term but unemployment is still low even though it has gone up and inflation is falling and growth is stronger than expected. when you look at futures, you get a lot of people who are betting just in case and may be hedging the idea of a 50 basis point cut. the fed i talked to doesn't think the markets are way out of line, the equity or bonds. jonathan: did tk make it out of bed? has he made it to the set? jonathan: he did and he is drinking coffee behind me and he will be here along with the mountains. they will show up.

the sun is going to come up. it is a beautiful view. priya misra is joining us for the hour. she wrote, i will be watching closely if powell provides context around cuts. is the fed cutting due to the normalization of inflation or is there an element of risk management due to the's lowering labor market. any mention of the latter will be the possibility of a 50 basis cut alive. good to have you. priya: thanks for having me. jonathan: you don't think 100 basis points cuts is overdoing it. can you walk us through your framework and whether the chairman will validate that? priya: the market ultimately prices in essentially a distribution of outcomes. if we stay in a soft landing than they are going 75 basis points.

what if the slowdown we have seen, there is no question growth is slowing and the labor market is slowing. if we go below trend, they are telling us if the economy slows we will cut faster and more. the market is pricing in i would say a 20% chance of a recession. i think 100 basis points is risk management from the market. does the fed tell us that, there are some elements you can see in the minutes. we always think about what we hope the fed will do and what the chairman will tell us. but jackson hole is about transmission and effectiveness of monetary policy. the one thing we have learned through the hiking cycle as they are long and variable and effectiveness is unclear. there are supply issues. as they start thinking about

risk management, that is where i think hundred is it. and over time, maybe the policy is restrictive and maybe they should cut more aggressive initially and get to some level of neutral and then finesse it. i don't know if we will hear that but i think that is what the market is hoping. jonathan: you said they are extremely restrictive. what are you looking at with those starting to bite into the economy? where from the data set, what stands out to you? priya: you are seeing inflation come down and unemployment rate go up. the big debate is is it due to supply? i think it is to some point. supply chains have improved. when i look at job hiring intentions, there are elements that the labor market is

slowing. i think the debate for the market is are we slowing to trend, do we continue to slow and we know monetary policy works with the latter. the issue is a lot of macro people like me is we look at aggregate data in the aggregate data has been ok. i would say the economy is bifurcated. you look at low income consumers and i would even argue middle income consumers, they are trading down. small businesses, there is some element of slowdown. it is restrictive. you look at the housing market, i think it is restricted their. you need a lot of cards for the housing market to unfreeze and i don't think 50 or 25 is going to do it. you need to hundred or 300. -- 200 or 300. jonathan: some respected economists said they need to go

50 immediately. three weeks later everything has changed. in july, powell pointed to the strength of the market as a reason to have patience and the strength in the labor market give them time to get this right . the comments he delivered in early july, can he deliver later on? can you point to labor market strength and tell everybody he has time and that is the reason to be patient to get this right? priya: the fed is saying they are not data point dependent. and you could argue that you shouldn't change his view but i struggle with that because chair powell told us labor market is back to where we work and he 2019 in they needed more confidence on inflation. look at where it monetary policy is in 2019 versus today. real rates 150 basis points higher. nominal rate is 5.5. i struggled when i heard him,

why is it not pricing in the cuts and why are they not cutting? this is the argument of start early and maybe start aggressively. i could see them go 50. what is the bar for 50? i don't know if we will hear it but is it that high when policy is that restrictive? jonathan: let's get to the bond market. i will share a quote, the short-term rates market is pricing in a recession with 125 basis points of cuts by january. we expect a cutting cycle as there is the balance between inflation and unemployment. they go on to say this, treasury bonds performed admirably as portfolios diversified during the recent selloff in equities but we see limited sustained release from here. what would you say? priya: i don't agree. in a soft landing the 10-year should be three and a half or

three and a quarter. but what happens in a hard landing? what happens if the economy doesn't slow down? these labs take a while and that point in the fed will go into restrictive. i would say hedging property of property has worked. if risk assets struggle, the only game will be treasuries because the fed will be cutting aggressively and dearly say 75. they could cut aggressively. beyond the 25 or 50, let's look at the end point. i struggle with the market pricing in a high chance of a recession. where is the endpoint? it is a little above 3%. we could argue may be the neutral rate is not two .5% but three or three and a quarter. we are pricing that in. when the market prices in 2%, then i will tell you the recession is in the market and

we are far from there. jonathan: the two-year around 4%. the 10 year at 3.85. let's get the bloomberg brief. yahaira: vice president kamala harris formally accepted the democratic nomination thursday night, bowing in her acceptance speech to prioritize the fight for the middle class and reproductive rights capping the democratic national committee should. the democratic party looking to seize on recent momentum created after president joe biden dropped out of the race, an unprecedented move in modern politics. wall street fuming after a botched win state release of critical jobs at data. annual jobs revisions expected at 10:00 a.m. eastern but the data was not publicly released on time, causing chaos and confusing across market. they were finally released at 10:30 a.m., but some got a hold of the data earlier by picking up the phone and calling the

agency. a spokesperson telling bloomberg the inspector general will investigate but wednesday's incident is just the latest mishap and may cpi did it was inadvertently published 30 minutes early. southwest airlines looking for customer feedback on potential changes to its pre-checked bag policy. the customer is surveying customers about hypothetical situations. the customers are asked about booking preferences and travel habits. southwest telling bloomberg it doesn't mean a intimate -- imminent shift but has result from an activist investor. jonathan: next, morning calls and mike wilson of morgan stanley on the equity market going into the address from fed chair jay powell. from new york city, good morning. this is bloomberg. ♪

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jonathan: the opening bell one hour and 14 minutes away. equity futures on the s&p 500 of by 0.5%. yields basically unchanged. upgrading roku by guggenheim and emphasizing sales growth. stock up by four point 7%. the second call from rbc lowering price target on williams-sonoma and adopting a more cautious topline outlook. the stock is higher by 1.5% this morning after a difficult day in yesterday's session. and raising the price target on nvidia.

stan ives says next week will be the most important week for the stock market this year and potentially in years. i don't know if you think that is hyperbolic but that is stan ives for you. the stock is up by 1.3%. doug wilson of morgan stanley joins us. i am not sure if you would agree with that. what is more important for you, the address from chairman powell later or the payrolls print on september 7? mike: in my mind it is about the payroll number. it is about the labor data period. that is what will dictate what the fed does. they've have said that. that is what the market will trade off of it. if you go back a month ago that is when we had the correction and it kicked off with a weaker nonfarm payroll number. that has been somewhat refuted by claims and also feel that

jobs and then we get the revision. the data is mixed in my view. the markets under the surface is still trading very defensively. it doesn't know. i think it comes down to the payroll number, the fed reaction and we will see how the market goes. my general view is if they kept 25 that would be fine. if they kept 50, historically that has been a bad a signal for the equity markets. jonathan: you said they traded defensively. in some places we start to see the improve. small caps starting to perform, record highs through this week so far. do you think we are just as vulnerable at the start of the month but we were or this time around? mike: i think we are more vulnerable to another negative data point from the market. it was a warning sign and we don't know the result but if we get a negative payroll number, i think the market could react just as bad at the index level.

let's talk about that under the surface. you mentioned as small caps did better but they did better when the money rotated away from the magnificent seven and some of the quality growth leaders and went into defenses are defenses, utilities, health care, staples and real estate, though sectors have led on a five day basis, one month and three month basis. they have been very consistent and that is about the time we pivoted back in may to a more defensive book. i don't see any reason to deviate from that. if we get a strong payroll number, that will revert sharply back to the cyclical parts of the market. it is going to be very messy and a don't anticipate the labor data to improve dramatically. i don't know if it will deteriorate further but given the signal from the stock market and bond market, the markets are paying attention to this and this is a big number. priya: what probability of a

recession do you think the market is essentially pricing in? you can look at breath or aggregate. how do you see margins evolving? if prices are going to be more stable, it is going to come down to the sales numbers. mike: i think you are dead right on, what the micro data has been -- and this goes to the core thesis that we have a policy mix for fiscal policy being the dominant level last couple of years. that is what led to the inflation break out in my view and there were some supply constraints but too much aggregate demand from fiscal stimulus. and now that has somewhat prevented the fed from being more proactive with rate policy and in effect it has crowded out

the middle class and lower class for sure and even some of the wealthier investors being crowded out. that is why all caps has underperformed so much for that is intact. that policy mix has been unusual and it has also extended the cycle longer than what it probably would have been which cap the fed of doing their job of keeping the rates higher for longer and now it is working and starting to bite any interest sensitive parts of the market like housing and autos. at the s&p level, it is not pricing a recession at all. i would say at the stock level it is probably similar to where the bond market is. that is why small caps have been persistently underperforming and probably in the 20% range or so. that is what always happens. until it is definitive, the stock market doesn't want to go there because he needs the hard

data. priya: that makes a lot of sense to me. we all see the same data in this notion that the bond market might be pricing something different, we are all listening to the fed. you said 50 basis points might be viewed negatively. i see the point. but if we hear from fed child -- fed chair powell and i don't know if we will hear it, if it is restrictive they're just trying to reduce the restrictiveness, do you think the equity market might like that they could be more aggressive initially so they are not behind the curve? do you think you can finesse that message and keep it in the normalization of a 50 basis cut? mike: anything is possible but historically speaking when they have kicked up with a 50 basis point cut in is usually led to not a great outcome.

that basically we were on the down swing in the cycle. the cycle has been unique. they probably got higher than they initially plan so maybe that sort of situation does not apply this time. i'm open minded to anything. all i'm saying is that the fed were to do 50, that means the data heavily deteriorated more and that is where that comes from and that would suggest that the labor market in particularly deteriorated more. that is how the bond market is pricing right now, basically saying a 25% chance of a 50 basis point cut. that is much less than it wasn't two weeks ago. jonathan: i know you're not a big fan of consumer discretionary. industrials, how do they fit in and why do you like that part of the market so much? mike: we don't love industrials here. we are saying in the cyclical bucket, you have to own something. you can't just be totally naked on cyclical exposure. if there is one group we will

gravitate towards, it would be the industrial sector the cyclical preferences there. within technology, which is a cyclical group, we would skew more toward software versus semiconductors or hardware, simply because they aren't more defensive. those would be the two groups we would like in conjunction with our defensive, which is utilities, health care, staples and real estate. jonathan: mike wilson, always great to catch up with you. september 6, the payrolls report for the month of august. do you share that view as well? priya: all we are going to get today is the reaction function and risks around the outlook. i am going to watch what paul says. the fed's assessment or his assessment and the reaction function is all we will get today. then we will look for the

all-important payroll report. within payrolls, it is not just the headline number. the unemployment rate might be more important because as we saw with the revisions, you have to take that payrolls with a grain of salt. jonathan: coming up next, we will catch up with sarah house from wells fargo ahead of jay powell in the view on the labor market. from new york city, you are watching "bloomberg surveillance." ♪

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jonathan: we are 19 minutes away from hearing from chairman powell in jackson hole, wyoming. it is about us, wall street, the financial markets. equity futures on the s&p of my .75%. the rustles of my .40%. the scores in the bond market look like this, in and around 4%. 3.8463. the 30 year about 4.12. closing 4% on a two-year. these days, jobless claims, in-line is good when it comes to the jobs market. let's turn the page against

foreign-exchange, leaving the door open for an interest rate hike. stimulating a little more yen strength. dollar-yen down to 146.12, -5.12%. here are top stories under surveillance, vice president harris officially accepted the role as, craddock presidential nominee. president donald trump will d have a rally later in arizona today. the boj rate hike last month sent shockwaves across global markets, and they are pointing to the u.s. economy. dollar-yen about 146.12. the amount of cash in money markets surging according to data, more than 100 billion has been stashed away this month. investors are looking to take advantage of higher rates before the federal reserve uses policy.

what would it take to unlock that money and that cash? >> i think the fed has to start cutting and it is a series of cuts, we are procuring this from that officials. it suggests that the market pricing of rate cuts is not aggressive and they will cut to some estimate of perhaps more, but i think you need to see the few cuts coming, and if i've been sitting calmly, and they see, actually, that is five, it is going down, and then i did about risks, if i go down to 3%. well, can i lock in a higher level of rates? and look at bonds. i hear a lot of clients saying, well we wish we had bought at 5% on the 10 year. but look at where you are getting all investment grade high-quality securitized, you are getting 5%, 7%. it isn't too late.

you are getting higher money market rates. and interest rates are falling. it will take a while. i think in a recession, if things slow down, i think that money stays on the front-end. in a soft landing, which is our base case, i think you will start to see the moment the dead starts to cut and signal more cuts. and then in september, that money starts to move up. jonathan: others conversations are changing, and are they stubbornly saying they will wait? priya: two weeks ago, it felt like the world was coming to an end, only joking a little bit here, but i think at that point, bonds were ahead, interest rates fell. a lot of people who thought interest rates would have been a hedge your ago were disappointed. we had a small preview of what happens if the economy slows down. interest rates fall, more cuts get priced in, and the spreads

widened. fixed income came down, so correlations were alive and kicking in front of you, and it is not a hope trade, the fed needs confidence in your getting it, so the fed will start to cut. the conversation is, we would like to put money out of cash, were to revive? jonathan: things are slowly starting to change. it did not feel like the world was going and unless you were positioned on the wrong end of the dollar-yen. lee county down to the federal reserve address at 11:00 a.m. eastern -- 10:00 a.m. eastern time. sarah house writes, "we expect them to stop short of offering any clues as to the size of a potential rate adjustment." sarah joins us for more. welcome to the program. we have heard from jay powell a few times over the summer. we had a meeting at the end of

july, what is the next logical step in the communication from the top of the federal reserve? sarah: i think it is going to be the increasing emphasis on the softening that we have seen in the labor market and how the risks are more balanced is what the fed has been saying, but i think we will be listening for, are the risks balanced? are they tilted towards the labor market rather than inflation? i think it is the ongoing transition and looking at the balance trust between the fed's two mandates. jonathan: we had a conversation about the difficulty of the last mile, everyone is focused on getting from four to two. we have not yet completed that last mile, have we given up on it? sarah: i think there has been a little of an implicit giving up, to use your phrase, where i think in our projections, we only have inflation getting down

to 2.25% and i think the fed can live with that if it is weighed against potential downturn, so when you look at how far they have come on inflation from over 7% to 2.5%, that last quarter point or so, i don't think it will be a dealbreaker if it means preserving the other side of their mandate. priya: in terms of the unemployment rate, how much of that increase has been about supply versus the fact that the economy may be slowing? i think that is the key as we parse through it, and we are all focused on the september 6-member. how much do think it is about labor supply and demand? sarah: we are thinking about it in a somber like perspective were how much of that increase has been driven by new entrants or reentries to the labor force

versus those who are actually losing jobs? about half of it is due to the increase in entrants, so that is much more than what we would typically see than if the economy was on the brink of a recession. that said, that means you have seen a noticeable rise from job users, so i don't think we can brush the rise of unemployment rate aside based on the labor supply story. and i think you can see with the weakening and demand indicators that we see, whether you look at job openings, the fact that temporary employment is now below where it was 2018, even as we have a bigger workforce, yes, but there has also been weakening demand for workers, as well. priya: do you think we will hear this from chair powell? this idea that maybe we don't have to keep the level of restrictiveness the same but reduce it, where if they're worried about the demand side of the labor market, they

have to reduce the level of restrictiveness, but are they there yet or are you there? sarah: i think we are getting there. i think the fed is getting there. the job market is back to where the fed would like it to stay. it is not so much to absolute state of the labor market that is a concern, and it is the direction of travel that is concerning. i think when you look at the direction of travel and the overall state of the jobs market, we do see it to where it is back before the pandemic. if the fed would like to keep it there, they need to start dialing back there restrictiveness. i think the fed needs to think about its current setting and why adjustments are warranted if they would like to keep the labor market in good shape overall. jonathan: does normalization

come up? is that with this is about? we have talked about reducing restrictiveness and going back to something in the threes versus going toward accommodation because of weaker economic data. how do seafaring things today? sarah: whether he uses normalization or not, that's the right idea. we have certainly seen a normalization in the jobs market, so the policy-setting has to normalize, as well, especially if we think that inflation is a lagging indicator. the softening of labor conditions will help squeeze out a little more inflation and get it closer to the fed target. i agree this is not about stimulating the economy but taking the foot off the brake and making sure we don't overshoot our destination. jonathan: sarah house of wells fargo, appreciated. what is normal? if that were comes up -- word

comes up. priya: powell is going to say they don't know when they are data-dependent. i would say that president williams has said it has not really changed. if the supply side of the economy kick in, which it did, and one of the reasons we have and in this distillation is the supply side. i could say normally neutral, close to 3%, and the market is pricing that in. that is what i struggle with the idea that the bond market is pricing in and that the fed continues soft landing, and soft landing cuts are rare. the fed has really been able to engineer soft landing, but we have gotten it so far. we are in a soft landing. if they cut any signal and they don't push back against the bond market and they allow the

economy to get to the normal level of rates, the soft lining my continue. he would go down as the best fed chair. jonathan: to complete the conversation, our colleague continues to conversation. it is unlikely that we will hear him say mission is complete. what do you expect to hear from him? >> i think he is going to signal they are ready to ease but they will be cautious. i think that priya is right that he will not pre-commit, and he might talk a little bit about the developments of communication and that could be interesting because with all the forward guidance that they are giving him with the dot plot and the forecast and the speakers coming out, there is a lot of noise and not as much signal as the markets would like. and you see every time you have a fed speaker in the market, you see some volatility and

discussion from what that one speaker is saying. i think we have lost the narrative of the entire committee. hopefully jay powell is able to say that the committee thinks this, and here our reaction functions, but at the same time, the economy is slowing meaningfully enough that it cuts to the foreground conclusion that it winds up being how aggressively do they go? the market has priced for quite a few cuts over the next 18 months. jonathan: you mentioned how the committee comes together and it makes me think of draghi back in the day. he would fully the governing council to make decisions he wanted to make and basically go and offer his opinion and back everybody into a corner. he would get them to her he wanted them to be. chairman powell, how different a beast is see? is he speaking for himself or reflecting the committee? whose voice is this?

ira: postmeeting press conference, he speaking for the whole committee. in a speech like this, he can stray from that little bit, but i think he will be mindful of not precommit a and outputting words into the committee's mouth, so i think you will be speaking a little more from the committee's perspective as opposed to his own, but we had the minutes on wednesday. i doubt he will stray from what the tone of the minutes was, the tone of the minutes, when you look at our sentiment indicator, which we run on the minutes, and powell's speech and a few other items that the fed puts out over the course of the month, it showed that they are in cutting territory and their sentiment is dovish, and they would like to be cutting at some point in the future, not necessarily aggressively, but that is a little different from what the market is pricing. but the tone of the minutes is

dovish. priya: you talk about volatility, i wanted to pick your brains on how do you see interest-rate volatility into the easing cycle? assuming the fed starts. they are talking gradual, does that mean that agency mortgages will do great? i feel like we've only talked about the fed, and then there is the selection, does that keep interest-rate volume high into the year beyond? ira: i think so, and we have done this a long time, so we understand that liquidity is not exactly what it used to be and you have a lot of product to go through relatively small pipes sometimes, and you don't have the balance sheet capacity that you use to the size of the market, so i think volatility will remain much higher than it had been, and say in the 2007

timeframe, but nevertheless, typically speaking you wind up with interest rates realized and rates starting to go down and you do get sellers of volatility where people take advantage of the carry that some of all structures offer, so i suspect volatility will come down and will go -- and what i say it goes to 2014 or 2015 because we wanted to switch jobs? it will not be that bad, but, nonetheless, i think you'll get a decline in volatility but maybe not until they actually cut. that is an important point, and data will continue to have realized volatility maintaining that it for applied of all -- applied volume. priya: we are moving to more sensitive price buyers. every option will be supplied by the market, but if you think about the range, so maybe we

have a daily realizable, but in terms of the range, where would you see the 10 year? between now and the election, where would you see the 10 year range? ira: i don't think the tens can go back up above 4%. we have been in the camp that we were going to see the 10 year yield somewhere around the mid-3% range by the end of the year. we probably are going to see that again, especially as the fed gets into its easing cycle. we always focus, and this is one of the issues we have with the information we get, we are focused on will the fed hike in september and will that be 25 or 50? as you know, that is not what is important to the 10 year, it is where we end up 2.5 years from now, and that pricing continues to be relatively volatile. when you go out and look at what

happened to see five futures -- z5 futures, so as we get further and further, it will be clear that the fed would like to cut and they will down to 3% and may be lower over the next 18 months, and that will shift the whole curve. but the front-end, two year winds up rallying significantly rather on the bond half of lower short-term interest rates which means you get a steepening of the yield curve. that is a hard trait to stay in, but nonetheless, if you are a cash investor, you probably would want to look more at the short end of the curve budget instead of the value at the long end. jonathan: this was awesome, ira jersey on the bond market. i would like to pick up what you pointed out on legacy. when it comes to public officials and the business of

risk management and legacy, i think they're worried more about who they do not want to be than they are worried about who they would like to be. with the central bank chiefs, they allowed inflation to get away from that. i wonder if it has shifted where now they worry about bank chiefs allowed unemployment to climb too much and cause a recession, do you think the fear has changed the last two years? priya: i think it has changed the last six months. when inflation is that high and far from that 2%, you cannot look at anything else. i think globally, as inflation comes within the tolerance, they are not that far from target, and the other side of the mandate has started to move. they have been saying that they have becoming better and balance, but the unemployment rate never increases gradually. you often have a lower increase in the unemployment rate. they have to be concerned and

that is evident in the minutes. they are getting more concerned on downside risk in the labor market, but i don't know if we hear that in the press conference in september, but they have to be worried about that site. jonathan: it has changed a lot in three weeks. let's get an update with your bloomberg brief. yahaira: let's get you single stock burners, starting with workday, surging up more than 15% as they signal a new focus on profits. it expects to reach an adjusted operating margin of 30% the next three years. the company provides software around hr and also announcing a $1 billion share buyback program. shares of ross stores are rising in the premarket, up nearly 6%. beating wall street expectations amazing the 2024 profit outlook as it saw more demand for discounted apparel and free costs eased. it aligned with other retailers

like walmart and target, which have shown consumers across the board are searching for bargains. and another stock mean higher, cava shares rising more than 7%, raising its full-year outlook after posting second-quarter results that expectations. many other restaurant companies reported declines as they pulled back. they state sales at the restaurants grew more than 14%, really double what wall street expected. jonathan: thank you. next, setting you up for the day ahead in the week ahead, anticipating a big one, fed chair powell just around the corner. ♪

jonathan: live from new york city, 38 minute away from the opening bell, equity futures up

by 0.60%. your calendar for the week ahead, in one hour, we get remarks from chair powell at 10:00 a.m. eastern and then one hour later, patrick harker will speak with bloomberg, followed by austan goolsbee at 2:15, wednesday, results from nvidia, thursday, jobless claims, friday, core pce and consumer sentiment data. chair powell speaking in over one hour from now. bloomberg's tom keene and lisa abramowicz join us. it looks as beautiful as ever, is t.k. behaving? lisa: always behaving. maybe. tom: i tried to be on good behavior. very importantly, there were only three spiders in my cabin last night. lisa: we are good to go. tom: i looked under the bed for snakes. lisa: today will be about defining gradual, it does not

mean 50 basis points or 25 basis point , but forest fires are making it a little less clear maybe that is a signal of the lack of clarity on the soft landing. tom: we have got to get to september 6 and the jobs report because there's no way chairman powell will front run and be embarrassed by the september 6 report because they were somewhat embarrassed or adjusted by 800,000 jobs revision, so i look forward for pretty much a straight arrow speech and not surprises. lisa: we shall see, and we will see if we see dissent because it has been the second-longest time in history where we have not seen dissent on the federal reserve. talking with a lot of fed presidents, i'm excited for the next couple of hours. jonathan: remember with the bears, just have to be faster

than the next guy. thank you. it looks beautiful, guys. "to the coverage. thank you -- thank you for the coverage. what is the final word from you coming into the address from the federal reserve chair? priya: i will be looking for framework and context. we know the are likely to cut rates. i think the 2550 is not that important. it is about how are they thinking about the rate cuts? soft landing rate cuts are rare, so provide us a sense of his this normalization? are we going to reduce restrictiveness? how does the fed chair think about risk to outlook? we have to read between the lines. i don't think it will be an eight minute speech. he might also talk about the framework review next year. as he said it up? this is the perfect face to talk about framework and context. jonathan: you do not want to get out in front of the committee,

and there is a lot of work still to do before we get to september 18, the next the reserve decision. the 11th is cpi. this was great, thank you. coming up on monday, line-up, some reactions to chairman powell and the address later. here's the reaction on monday, former fed governor betsy duke, we catch up with liz and, and michael collins. thank you for choosing bloombergtv. we are 34 minutes away from the opening bell and one hour five minutes from chair powell at jackson hole. this was "bloomberg surveillance." ♪

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>> chair powell could give a clear signal that they will cut in september. >> we are going to hear that he's comfortable with the inflation backdrop, this is environment where the fed can remove policy restrictiveness. >> is going to say the fed continues to