>> the fed is going to be cutting into a pretty good economy, and we don't have a lot of marks for what that looks like. >> the market realizes it is a hard landing or a growth scare. >> we are not in a position where we can absorb bad news easily. >> data has not been sufficiently week to convince them of a 50 basis point rate cut. >> at the end of the day what matters is where we are at the end of the year. >> this is "bloomberg surveillance." it's jonathan: let's get your trading day started.

live from new york city, good morning. for our audience worldwide, the longest climb on a daily basis going back to the middle of august. just short of all-time highs on the s&p 500. at all-time highs on the s&p. on the nasdaq 100, up .5%. on the small caps, up .3%. the fed's meeting begins today and concludes tomorrow. we have 8:30 eastern time the most important retail sales print in the history of financial markets. [laughter] the difference between 25 or 50 for a few of you on wall street. lisa: i was thinking, i have never heard of a retail sales print that was this important because this is going to make the difference between 25 or 50. i was looking at a couple of notes. maybe that is too cute. there is this feeling that the fed is disproportionately weighted to a bigger move. it is the retail sales that were

given a nice patina or negative tina for what this means for risk assets. jonathan: there are some democrats who would like an even bigger rate cut. dear chairman powell, we right to cut the federal funds rate by 75 basis points, sincerely senator warren and company. annmarie: is this any surprise? the market is debating 25 or 50 and elizabeth warren basically is saying we have been asking you to cut and now we actually today want a bigger cut. it is clearly the time for the fed to cut rates. in fact, it may be too late. your delays have left the fed behind the curve. lisa: how much is this the kid in the class was in the back of the room going like this, sort of saying, i'm part of this conversation too? just because they are already going to cut rates and potentially by more than people think is warranted, to come out and say 75 basis points? what is this doing other than saying, i'm here? annmarie: she has been nagging

the fed to rates for a while now, but you bring up a really good point. you know they are going to cut rates, so why make this political when you know the republicans are going to use it and say potentially it is political to cut before an election? we have seen in june donald say they should not be cutting before november 5. jonathan: some of you might be thinking that gives the federal reserve cover to go 50 because the democrats were asking for 75 may be you avoid the political nonsense. don't send the letter at all to begin with. going into a massive decision. lisa: i don't know how many people are saying this gives them cover because it does make it political. do your point, he raises this question, is there any argument for setting this out other than getting your voice in the mix? all this does is heighten the attention on the wrong things at a time when a lot of people are saying the fed should be cutting at least 25 basis points to get

rates closer to neutral. jonathan: let's focus on the right thing. i saw this in research yesterday. the data is really important. not just because of whether the fed goes 25 or 50. this from michael wilson. if the labor market data weakens markets can trade with a risk off tone regardless of whether the first move is 25 or 50. that is where the data really matters. jobless claims on thursday. lisa: that is what i'm getting from a lot of the commentary as well. if we get bad retail sales today it is not necessarily the 50 basis points it solidifies, it is the risk-off tone. if there is a positive retail sales print we might get is even still a 50 basis point rate cut and a risk market rally. what you are seeing is, is this market overly complacent about the soft landing and positive type of scenario out of that kind of outcome? jonathan: we could be close to

all-time highs on the s&p 500 going into this fed decision tomorrow afternoon. in the bond market your bond yields look like this. on a 10 year, down by not even a basis point. in foreign exchange, just about unchanged on euro-dollar. we will catch up with jeff you -- geoffrey yu. and ian lyngen on the risk of a 50 basis point fed rate cut. we begin with our top story. waiting for retail sales. the laskey data point before the fed's good decision. geoffrey yu writing, jobs data did not make the case for 50 basis points. the august payrolls report confirms a 25 basis point cut. alka pricing is still aggressive, indicative of a recession forecast. we don't agree. welcome to new york. let's get to the base case. 25. what does the rest of the picture look like tomorrow? geoff: still a soft landing, and

i think they should confirm that. one narrative from the other side of the pond, i guess, there is a concern that if it is 50 financial conditions will loosen. but will that spark a panic as well? we have had a panic in august. amazingly the whole curve shifted globally because where the u.s. leads, the rest of the world will follow. if you look at it globally this week, you have brazil think the about hiking rates. the u.s. is for the first time in modern monetary policy history going by itself right now. but if there is panic then will the rest of the world converge and we get more comprehensive risk off? a very delicate balancing act. jonathan: markets have rallied going into this decision. yields have dropped. out of those three things, equities, bonds, and foreign

exchange, is there a move given some of this is too aggressive? geoff: in terms of bonds, it depends on the curve you want to look at. if you look at the pricing for a hard landing, it seems to still be there, or at least the tail risk adding into next year. it looks like marcus wants to push things through to 3%. it is affecting the entire curve and not looking at the fiscal situation in the u.s.. in that context are we going to be looking at something further down the line? i think asset allocation globally is not as strong. there is actually value elsewhere and you can take dollar valuations as well. there may be positives elsewhere, underappreciated. lisa: there is a lot to unpack

there. i want to go to the point you are making where it seems like bond markets are pricing in recession tail risk. the fund manager said 40% of people said that the biggest tail risk was u.s. recession. are you saying that is an overpriced estimate and should be smaller at a time where soft landing is looking likely? geoff: maybe slightly smaller. i know it is not equivalent, but that is not the base case for the u.s.. probably want to see it a bit lower at that point, but the trajectory right now, the degree to which in august they are pricing in emergency rate cuts. it seems it is either or, it is binary. i think some nuance is needed and i think that is a communication strategy overall. if you look at the curve further down the line, the lack of spending restraint all parts of economic agents, i think that is

where the mispricing perhaps needs to be looked at. lisa: i love that you are bringing up fiscal. i support that wholeheartedly. there is a 20 year option today i will be watching. when you raise this concern you say, i'm concerned about the deficit. they say, why aren't you concerned about germany? guess what? it is the cleanest shirt in a dirty laundry bin. how can you lean into this story at a time when german investor confidence is falling off a cliff? geoff: unfortunately an $8 billion auction recently attracted $130 billion in bids. that was a record guilt auction as well. on a base case it can get to 650 or something. pick a number. the only country right now within developed markets which is actually doing proper fiscal restraint and acknowledged by

the central bank is new zealand. like that is going to move the dial, right? ultimately if everyone is doing it in at least in fx markets on a regular basis you cannot see too much of a difference. let's turn the -- let's turn that around and say, is -- if there is the will, then markets will reward that. you find clean laundry and then that is where you benefit. annmarie: no one in the united states is talking about fiscal responsibility. geoff: indeed. to be frank, no one in europe is talking about it either. there seems to be a delicate balance between trying to raise public sector weight -- public sector wages and warning about tax cuts across the board and the need for credibility. in fairness if you look at en, during a pandemic there were fears they would start pumping

fiscal guns. look for asset rotation out of the u.s.. brazil, for example, they have not started their easing cycle and are now worried about inflation. they have a nice real rate offer. but they are pushing forward. why is the market actually rewarding that? they be in terms of evaluations and equities and fx, especially for u.s. investors, take advantage of strong dollar purchasing power. annmarie: who is going to benefit the most when the fed cut rates? geoff: i think there are two categories outside of equities. so, the carry trade, is that going to start to recover ever so slightly? actually, once the u.s. is fully priced want to see the dollar strengthened about compared to europe.

you knew my euro call. it is not going to happen in terms of parity. perhaps given all the negativity what in august stood out to me is we saw the ecb pricing move toward the dovish side. 75 basis points or so. the euro strengthened. i can only attribute that to saying, dollar positions, that asset allocation, much stronger compared to where we were. the dollar was penalized by that. now at least in the euro$the dollar could benefit as well. jonathan: we had these early investor conference is money. that was dovish too. a lot of people set up here thinking, lisa: -- lisa:biggest economy just came out with investor confidence that was the lowest going back about a year. you take a look at prospects for auto manufacturers or u.s. chip

plants that are going to be manufactured in germany, where is the engine going to be? jonathan: is it well priced? geoff: the longer it gets the euro seems to be more resilient. i think on a backward-looking basis, hindsight is always perfect, you find out how big that short euro was. you listen to madame lagarde last week, i think they are hoping that this is going to be a short-term look. you read the pmi's and they are coming from the s&p. competition on the china side. it is structural. you have an opportunity right now for the ecb to help. i'm not saying they're going to help structural reform, but they can ease the pain. but if that is not going to happen they could miss the point on easing. jonathan: the contrast between

the ecb and federal reserve is remarkable. we are looking for this dovish guidance from the ecb -- from the fed tomorrow. when the data we have seen out of the u.s. is better than the european economy. geoff: there is a 50-50 chance, if not more. madame lagarde last week was grilled on, did you foresee the week data in germany? she said, yes, it was baked into staff ejections. she highlighted, if there is downside risk they will reassess. there is enough evidence on the downside risk on the policy side, but that is not in the price of the euro and people have been burned by pricing in a dovish ecb. but i think that could be quite a bargain. jonathan: what is this about, jeff? geoff: they don't have a dual mandate. that is one of the things they will point to. and the fundamental issue is public spending is strong. wage growth on the services side. if you look at the germans, the

only side that expanded was the public sector. that's going to drive wage growth. jonathan: it is good to see you. come to new york. enjoy your time. geoff yu on global markets. sisson -- session highs on the s&p 500. with your bloomberg brief, here is your yahaira jacquez. >> microsoft shares are up in the premarket. the software giant unveiled a new $60 billion stock buyback program and boosted its dividend by 10%. the new payout will be $.83 per share, eight cents more than the prior dividend. the new shareholder cash return replaces microsoft's previous buyback program announced in 2021. amazon ceo andy jassy is cutting management layers and ordering staff back to the office five days a week. the changes are part of efforts to streamline the company as complaints mount that it has become harder to get things done at amazon. andy -- -- andy jassy announced

that shakeup yesterday, saying he wants amazon to "operate like the world's largest startup." candidates prime minister, justin trudeau, suffering a major setback. the liberal party losing a special election in a mantra on district that had been considered safe. the decision raising pressure on the leader to step aside before the next election, scheduled for october of next year. trudeau showing no signs he plans to step aside, despite polling showing he has further behind the country's conservative party. jonathan: the key word here is scheduled. let's see if he can hold on. lisa: this is an auspicious for him. he is failing to hold onto an area that previously had politically supported him. jonathan: we will get you more updates on that story today on bloomberg tv. , secret service under scrutiny. >> our folks are rising to this moment, that it requires all of

us to be able to have good conversations and make sure that we are getting the secret service where it needs to be. and i'm confident we will achieve that. jonathan: that conversation up next on this retail sales tuesday. [laughter] i no, seriously. lisa: you can't even do that. ♪ ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools,

like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: lisa mentioned the global fund manager survey. we will be catching up with bfa in about an hour. eight out of 10 investors forecast a soft landing. they call them nervous bulls in the survey. the overweight sun utilities is the highest since 2008. and the allocation to commodities at a seven-year low. so many allocations here speak to some very interesting stories. lisa: especially when we have

person after person give us 15 reasons to overweight some of the utility sectors from the bond-like areas. person after person yesterday we were talking to saying basically, maybe energy is too [indiscernible] jonathan: what are the utilities traits about? defensive, a i? what is the dominant concern here? lisa: is the idea of a bond proxy, but also the idea of, you need to build out your infrastructure in order to get some sort of ai platform. also you have dividends. we want income. let's go. jonathan: gasoline on that story over the last month, equity futures positive by a third of 1 -- .3% on the s&p. under surveillance this morning, secret service under scrutiny. >> our folks are rising to this moment. it requires all of us to be able to have good conversations and make sure we are getting the

secret service where it needs to be. i'm confident we will achieve that. because we don't have an alternative. success? have to have it everyday. you cannot have failures. in order to do that we are going to have some hard conversations with congress. jonathan: the secret service and fbi continue to investigate an apparent assassination attempt on former president donald trump. suspect charged with federal gun violations. president biden telling reporters the secret service needs more help, and congress should respond. mike sheppard joins us now. let's start with that line from the president of the united states. how is congress responding? michael: we heard from chuck schumer, the democratic majority leader, who indicated that there might be a favorable environment for adding some resources on the fly to the agency. it is pretty clear that it is spread thin. this is the second attempt on

trump's life in a little more than two months, and it has exposed some shortcomings in their ability to meet the needs of people they are watching out for. they have more than 40 people who now require secret service protection. current and former presidents, as well as other dignitaries. then there are also visiting foreign leaders who require secret service cover when they are in the u.s. all of that is straining the agency. annmarie: why is the secret service potentially going to be adding to the peril on donald trump's second assassination attempt? why did this not happen after pennsylvania? mike: things move slowly in washington. our sense is that it is unclear the scope of the needs following the first incident. the second episode seemed to focus more on what happened in the immediate aftermath. was the agency prepared? what sorts of protective

measures were they taking and putting into place during his rallies? we will see tomorrow in new york and today in michigan that when he speaks he will be surrounded by bulletproof glass. when the former president is on his own, as he was on sunday, what are they doing then? a snap visit to his golf course, in west palm beach. how are they prepared for that? apparently they did not search the perimeter before this man was caught, and the suspect was able to linger in the woods there for almost 12 hours. before he was discovered and later apprehended. annmarie: how is this changing the course of the race? i did listen to donald trump talk in a crypto town hall. that he is leaning into this now. mike: he really is, and it is changing the narrative very quickly from what we had in our hands a little less than a week ago, following his shaky debate

performance against kamala harris. our memories from philadelphia a week ago were about him talking about some widely-the wrong conspiracy theory about haitian migrants eating neighbors' pets. we also had him hours before this attempt on his life posting on true social "i hate taylor swift," taking aim at one of the biggest endorsements of the campaign so far. what we see is the narrative completely shifting. now trump is able to present himself as undaunted by threats to his life, and it will give him new energy in fundraising, and also play to the narrative that works with his base that i am being persecuted. lisa: yesterday donald trump was speaking to fox news and said that the perpetrator, the alleged perpetrator said he

believed the rhetoric of biden and harrison i'm a he acted on it. there rhetoric is causing me to be shot at one i'm the one that is going to save the country. do we have any understanding of the motivation of the alleged perpetrator? mike: that is a great question. we don't have any picture into the motivations of this man, who was arrested on sunday. nor into the shooter that actually fired shots at trump during a rally in july. they are still trying to piece that together. investigators are checking his phone and social media records. they have gone to the companies for more data on that. trump has offered no evidence of how this rhetoric that he cited is affecting the minds of people like these two shooters. he is trying to blame harris for this, but offering no evidence. in fact, both vice president

kamala harris and president joe biden were quick to condemn this violence we have seen in the past couple of months. jonathan: appreciate the up date there. michael shepard down in washington, d.c. kind of stunning, the lack of detail we have on some fronts. lisa: in the serial number on this gun was scratched out, so they could not track with a gun had been purchased. he was not eligible to be purchasing said gun. lots of questions here. jonathan: many questions and very few answers. up next, sheila kahyaoglu as jeffries fuses -- freezes hiring with workers on strike. ♪

the moment i met him i knew he was my soulmate.

"soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

jonathan: six-day winning streak on the s&p and looking to make it a seven. equities up 5.3%. similar move elsewhere, up by .6 on the nasdaq. headwind yesterday, some concerns about iphone preorders and those numbers for this phone being below the numbers for last year's phone. lisa: which is the reason why apple dropped almost 3% of the past two sessions, really dragged down the nasdaq. the mag seven down versus the russell 2000, which was up 8%. it highlights how susceptible

some of the more tech-heavy indexes are to feelings and deliveries and some of the rhetoric that might come out of this. jonathan: who you talking about? lisa: jen-hsun huang. i'm still talking about the rockstar, godfather, whatever you want to call it. people want to understand where the deliveries are. i understand that. jonathan: supplies getting emotional? that is a big issue. we bounce back just a little bit on the nasdaq. the bond market, big focus on a 2-year yield. earlier this spring we had a five handle on a two-year. anticipation builds. is it 25 or 50? this market is leaning toward 50 going into retail sales at 8:30 eastern. lisa: is he going to be a good 50 or bad 50? even though this is the most important retail sales print we have ever gotten, it may not determine 50 versus 25. a lot of people are going to be

looking tomorrow for the long term neutral rate is. do they give any guidance as to where the destination is? if 3.5 percent is the destination next year, what does that do for markets given the fact that a lot of people agree, maybe this is fully value? jonathan: we keep saying this, not all 50's are created equally. tomorrow is a three-part act. we have to look at the forecast and wait for the news conference as well. and listen to the kind of guidance chairman powell offers you. because chairman powell for the best part of 12 months has been very devilish relative to where the market has been. why do i say that? because every single meeting for the last seven going into this one, the two-year has rallied and yields have fallen. lisa: how can he out-dove market expectations? markets have gotten so conditioned by dove howell that there is this feeling, how do you meet all of that and then some? you need the data to cooperate, which is why the mike wilsons of

the world say this does not align with the god coming down to drop the tablets of interest rates, but it has to do with the data that comes out. jonathan: goldman saying basically the same thing. let's turn to foreign exchange. yields come in tuesday at or near the lows of the year on a two year and 10 year. if you look at the fx market that has unlocked even more dollar weakness. this is happening even with the data out of europe. not just the one off. every single week we get data it is weaker than expected. lisa: and every forward-looking telegraph from germany is that it is only going to be weak i think jeff you nailed it. he basically said, what this shows is not that europe is doing so well. it is not that the u.s. is doing poorly. it is about positioning and how much of a structural underweight people had in the euro. this alone was enough to say, might throw some chips in. how long can that be sustained?

even if you have a federal reserve cutting more? arguably the ecb needs to be cutting more. jonathan: under surveillance this morning, some news for you. intel landing amazon web services as a customer. intentionally bringing wind to new plants under construction. its factory expansion remains on track even as it postpones factories in germany and poland. some negative news for europeans. annmarie: it is a huge win for the united states. especially places like ohio. but as you said, a blow to germany, postponing factories there. this idea of near shoring and the u.s. wanting to win when it comes to chips, wanting to get ahead of the fact that the biggest companies, chips coming from taiwan, massive wind -- massive win. also a grant to make sure they secure those chips for the military. intentionally very profitable for the future. jonathan: $3 billion sounds like

a lot of money. but then you hear $60 billion and what that means to the microsoft stock is very little. microsoft unveiling a $60 billion share buyback program. shareholders will receive a dividend of $.83 per share. the repurchase agreement replaces a buyback program announced in 2021 that was also $60 billion. the stock is up 2% this morning. lisa: what is the dividend yield on microsoft? i'm thinking about how this is a yield play. it is .7%. even though they are adding to this it is a drop in the bucket when you take a look at the overall market capitalization. it highlights how these numbers are distorted with companies that are this big. it also raises the question, is it because they don't know where to put this money? although i guess this is sort of bobcats for them. jonathan: you can only buy so

many chips. exert tense between customers because they can only supply so many. let's turn to billing and talk about real tension. boeing prepared for a long strike by workers at its main hub near seattle. the playmaker planning cost-cutting measures, including the hiring freeze and temporary furloughs. negotiators are set to resume talks later today. sheila kahyaoglu of jeffries saying word on the ground is the union is unhappy with the wage increase and lack of bonus. our view is this should be short-lived. sheila, good morning. let's talk about what they want and what boeing is willing to provide and why you believe this can be dealt with in six weeks. sheila: i think six weeks is the breakeven point for workers and boeing. in terms of why i don't think they are so far apart is the wage increase is anywhere from 25% to 30%.

have seen other unions come close to that. although i do realize that the boeing workers have not had a wage increase since 2014. but that is similar to airlines. air canada is getting something approved as well. i think it is a gap between 25% to 40% most and a potential ratification bonus of 3000 to $5,000. jonathan: how close our way to a capital raise for this company? sheila: they ended q2 with $6 billion of cash after burning $8 billion in the first half. we think prior to the strike they are going to burn $3 billion. that puts them at the $9 billion mark. they have historically said $10 billion is the capital they need to sustain their business. we think the strike runs about a dollars of cash a month. that puts you in a territory where you could raise from a position of weakness rather than strength. we were looking to an equity raise to take some of that down,

but now this could be because you need to necessarily sustain your business operations. which is why the furloughs are happening. lisa: finch and moody's are looking at downgrading it to below investment grade. they are on the cusp of being below investment grade and there is a pretty big delta in terms of funding costs for being investment-grade versus high-yield. at what point does it become overly punitive? did they get into the spiral if they get downgraded? sheila: thank goodness we are in the equity markets. finch and moody's have been adamant they were not going to downgrade it, that i think it is more than just losing a few hundred points of interest expense. what this 57 billion dollars due to the high-yield market? is that as deep as the investment-grade market? and you stay in high-yield for a few years. it is not a quick move and you get up rated once again. i think the agencies are thinking of these things. i think the breakeven point comes in six weeks.

even a 40% wage increase rates even on an annualized basis. once you are on strike you receive a stipend. you are not getting paid for the first three weeks. lisa: it is important to keep remembering this is not tupperware. tupperware just filed for bankruptcy. a lot of the planes we fly in every day. this is a company that has been a national champion when it comes to aerospace. how does this get better at a time where in some ways this company is too big to fail? sheila: i think the management team is trying to do all they can. we have heard that management teams don't get on the floor, but the new ceo has been known to do that. he is listening to factory workers and seeing what they want. that is a good first step. so, as is obviously a positive first step.

the deliveries in august, june, and july were in a similar sequence. there was some positive momentum obviously this race is that and we are back to square one. how do we get better from here? we might need some sort of race to sustain the cash flow, but also take on the debt once we are in a normalized position. annmarie: how much of a burning daily on this? sheila: that is a great question. it is hard to know, but we estimate you receive about 60% of a payment of an aircraft when you deliver it. about $30 million per aircraft that they are not delivering. we just took a rough estimate we put $1.3 billion out there. annmarie: boeing is so important to the industrial base of the united states. the election is in seven weeks. you see the government putting pressure on both sides?

sheila: there is a federal mediator today to work them, but when we look at other unions we have not had to do that. all of the other airlines came to agreements. we have not necessarily have to to take the steps. this gives more momentum for other unions that are potentially set to strike. textron has never had a workforce strike. that is another one we are watching. jonathan: if we have a capital raise of $10 billion what do we price that capital right at? sheila: these are tough questions. i think it depends when they raise, how long the strike lasts. this is a global duopoly. but right now secondaries have never been so large. we do not see $20 billion secondaries. every $5 billion is 1% diluted. jonathan: this was the set up

for the next question. you have a price target of 270. how hard is it to achieve when we have not seen the capital raise yet? we don't know how large it is going to be either. sheila: it keeps getting pushed out. as those delivery numbers get pushed out we have cut our delivery estimates since january. they continue to miss and those get pushed. you cannot manufacture 700 maxes a year. i think the cap as around 550 maxes a year, just on where the is. jonathan: it is good to see you there. sheila kahyaoglu there with jeffries. going in a tough spot. lisa: what a mess. this is a time you have to be investing in forward-looking technology. how did they get those investments even if you are just trying to plug the holes of the cash burn that keeps going? jonathan: they have to hope it ends in six weeks. they have to hope and prayer. lisa: someone can push them

together. jonathan: equities just about firm or by .3%. let's get you an update on stories elsewhere this morning. yahaira: secretary of state antony blinken plans to make his 10th trip to the middle east since the israel-hamas war began almost a year ago. state department spokesman said blinken will fly to kyler to discuss negotiations for a cease-fire in gaza. as well as for talks with egyptian officials. the statement only missed -- tensions one-stop in egypt and does not say blinken will travel to israel on this visit. hip-hop mogul sean combs was arrested by federal agents in manhattan last night. while the indictment is sealed and charges have not been announced, comes' lawyer says he thinks the wrapper faces allegations of sex trafficking. the attorney's office in manhattan says it will unseal the indictment this morning. the pga tour and saudi-backed liv golf have reached an impasse

amid the blockbuster deal. it all comes down to pay. pga players want live golfers to return the millions they received for moving to the new league, and they are pointing at jon romm, who signed a 300 million dollars contract last year. jon romm and other golfers have refused to agree to any terms that would penalize them for taking a risk and leaving the pga tour. that is your bloomberg brief. jonathan: i think jon romm got an $18 million bonus this weekend. that is not bad. lisa: i feel for him. jonathan: do you want to know how much liv golf i have watched this year? zero. some great personalities. i wish they could get it together so we could have all of these guys on the same tour. i have not watched a single thing. i don't even know where to watch it or find it. lisa: but you watch pga? jonathan: all the time. jim nance. that is what i'm therefore. cbs. up next, getting ahead of the

curve. >> you want to look ahead to where inflation is going to be in a year's time, where the labor market is going to be. i think they should catch up. jonathan: that conversation up next. this is bloomberg. ♪

what does a good investment opportunity look like? at t. rowe price we let curiosity light the way. asking smart questions about opportunities like clean water. and what promising new treatment advances can make a new tomorrow possible. better questions. better outcomes. so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants?

wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: live from new york city, later on this morning in washington, d.c. chairman powell will get together with the committee for a two day meeting. that meeting could be influenced by what happens at 8:30 eastern time. the retail sales is the most important print ever in the history of financial markets. equity futures look like this. on the s&p 500, firm or by .3%. on the bond market, unchanged on a 10 year.

under surveillance this morning, getting ahead of the curve. gregory: the main issue is the communication issue. we have seen a lack of communication as to a couple of things. one, the destination. where the funds rate is. and how to get there. want to look ahead to where inflation is going to be, where the labor market is going to be, and where income is going to be. i think they should do 50. i think they should catch up. jonathan: the fed decision just one day away with traders divided on when the fomc will cut by 25 or 50. bmo writing that the primary risk of a 50 racist -- 50 point cut is the market translates the move into a series of 50 point reductions. that brings the fed funds rate back to neutral, potentially stoking reflation. ian joins us now for more. thanks for joining us. i want to start with your quote from yesterday and pick out another quote. can we expect a notably quick

pace of cuts? will the fed simply mark to market the dot plot or our investors and for a surprise? ian: i think they should go 25, but i suspect if we go to be event priced with a higher than 80% probability of 50 that there is a good chance they move 50 simply to frontload the process. this becomes tricky for the fed from a communications perspective, because recall what happened in june. we went into the june fomc decision, they had already submitted their dots. if it is a gametime decision we are walking in, we are going to get 50, but it is going to be hawkish. jonathan: let's talk about retail sales and how that jonathan: jonathan: might influence things. are you saying it is not that they are data point dependent, but that could shift market expectations so close to 50 they might not want to disappoint them? ian: only if it is really weak. if it comes in stronger it is

not going to be part of the analysis. we know the consumer remains on strong footing. if we see and negative print that probably tips the scale to 50. lisa: what we pricing in in the rights market? we have some people saying it is accurately pressing in about a 40% chance of recession, which is the baseline for bank of america. other people saying it prices in a much bigger tear risk of something that is negative. what is your take? ian: when i look at the futures market what i see is the market expects the fed to get back to neutral, but not cutting into the one handle territory. that implies that at least from a monetary policy perspective we are still in a soft landing narrative. ken yields close to 350 suggest we are in for some economic downside the next two or three years? i do think that the soft landing narrative can probably survive this year, particularly if the

fed is a bit proactive and even if we see a little bit of week is toward the end of the year the market will stink -- will still think it is alive. lisa: do you by the argument that they are not increasing restrictiveness? does that hold less weight for you when you don't have clarity over what they believe the neutral rate to be? ian: one thing we know is as realized inflation decreases on a year-over-year basis that means real policy rates are more restrictive given where we are they need to cut rates just to keep the prevailing level of real rates as high as they are. annmarie: if we get a softer retail sales print hand the market starts pricing in 50, the fed comes out and does 25, what happens to the market? ian: i think it depends on how powell spins it and what the dot plot tells us. in june the 2024. was 5.1.

2021 was 4.1. if we look at what is pressed into the market we have to get to 3%. if the fed says we are going to neutral back gets us to 3%. i think the market does not selloff as much as it would otherwise. jonathan: you mentioned the risk of stoking reflation. bill dudley yesterday wrote in bloomberg opinion he thinks they should go big, they will go big. the downside risks to employment out -- outweigh risks to inflation? ian: they certainly did the bulk of the cycle. now we are at the point where we have seen the unemployment rate increase off of the cycle low, the conversation about whether we are overdue for a spike higher, and unemployment remains very valid. in effect with the fed is doing is, they are changing monetary policy for the second half of next year. it is the trajectory of the prevailing data.

it might make sense to go big early with the expectations that they can solve that problem. jonathan: he keeps saying the fed, but we are talking about a group of individual policymakers who apparently have some different views on where we are at the moment. i wonder tomorrow when that decision drops and we talk about the decision 25 versus 50 and go for the forecast will be just be talking about medians? will that mask a great divide on this fomc? ian: it might, and we also might see a dissent. there is nothing to suggest everyone needs to vote 25 or 50. that may be a way to communicate to the market that was a knife-edge decision and it it is -- and it is uncertain going for. lisa: do you think there is a chance of a 75 basis point cut because of elizabeth warren? ian: that has not been top of mine recently. lisa: i wonder sort of whether people actually dismissed this,

whether it is harmful to the functioning of the federal reserve, or basically just noise with people trying to get their voices heard? ian: i think the latter point. i think they are trying to be part of the conversation and it is not going to be particularly influential for the fomc. jonathan: i love that you got lisa to say noise for you. i think this gets more interesting november 7. the next federal reserve decision after this one will operate a conversation about what the politics in washington, d.c. looks like. they will get away with the fact that don't have to put out a new forecast in november. but even when we get to december i don't know what the makeup of congress will look like. they will not be able to make projections based on the policy decisions we expect in 2025. this is where things start to get tougher. lisa: we are on the same page. at this meeting they are dealing with economic data that we are all grappling with and there is a question of whether the balance of risks are.

on november 7 they are going to be grappling with who is going to be the next president, do we know the composition of congress, and what -- and what those policies are, and how they reflect that in their projections at a time where anything they do will be viewed as highly political. it is a very difficult moment. annmarie: they will likely be walking into that meeting not knowing who won the white house. in the state everyone is focused on, pennsylvania, is not able to start counting these mail-in ballots until election day. potentially the fed is going to have a meeting with uncertainty clouding the judgment. jonathan: i believe that division is on a thursday as well. lisa: that is ridiculous. i cannot alter my schedule. jonathan: they are not political so why would they shift it back? lisa: if it is a wednesday, it is a wednesday. you start on tuesday. that is how it goes. jonathan: i believe it is going to be on thursday, november 7. a little bit of a lift in this

equity market on a six-day winning streak. it is quite a run. higher by more than 4% on the s&p 500. in the bond market, the 10-year, 3.6194. this fomc meeting commences down in washington, d.c., and the dollar near the weakest level of the year. dollar-yen still around 1.40. coming up next, we will catch up with matt ms. can -- matt miskin, jessica taylor, and elyas galou of bank of america. lisa: this is going to be an interesting conversation. jonathan: live from new york city this morning, the second hour of "bloomberg surveillance" is up next. ♪

♪ ♪ with so much great entertainment out there... wouldn't it be easier if you could find what you want, all in one place? my favorites. get xfinity streamsaver with netflix, apple tv+, and peacock included, for only $15 a month.

>> i think generative ai is a big transformation story for financial services. >> the reality is that valuations are full. >> we think credit spreads will widen. >> i think the upside in buying longer bonds does not exist. >> it has been a complicated market for everybody over the past four years. announcer: this is "bloomberg surveillance." jonathan: we are looking for a

seventh day of gains on the s&p 500. from new york city this morning, good morning. the second hour of bloomberg surveillance starts now. at the futures up .25% on the s&p 500. on the russell, the small caps, up .1%. let's take a look at the week ahead. later on this morning, 8:30, andrew hallman horse, this will come down to committee dynamics and tuesday's retail sales report. retail sales report drops this money. lisa: we have been joking about how it is the most important in financial markets, that there is truth to that even this has suddenly become the make it or break it point for how the fed decides and how they direct to communication tomorrow about what they decide to cut my. jonathan: it is problematic given they talk about the totality of the data and we are talking about one single data

point. ian lyngen made the argument that the fed did not want to disappoint expectations and that if you get a week print but you have this scenario where markets start to fully price a 50 basis point cut, that is something this fomc will not be willing to disappoint. lisa: especially given the fact that in that scenario you would get some sort of selloff in risk assets. that is the key. what are the conditions for this cut to perfectly perform in line with markets that are set up for a 50 basis point rate cut? the right kind of good economic data. and it federal reserve willing to get ahead of any weakening to prevent it from ever happening at all? annmarie: what is going to matter almost as much as whether they go 25 or 50 -- as he says, no one is talking about 75 sides some senators -- is the dot plot and communication. how does powell spin this? especially if there is a dissent. jonathan: if we are doing 50's

now don't joke about senator warren. it will not be long until we talk about 75. if you get weaker data in the labor market that conversation will switch quickly to 75. i remember in 2022 people were talking about 75 basis point hike. there were laughing about a string of them. lisa: especially if you are behind the curve on the way up for the way down. i think jeff nailed it when he said, if you go below neutral that requires weakening that goes beyond what we are seeing currently. the ongoing question i keep having is, what would you rather? no the number of basis points federal reserve is going to cut by, or how the market responds to it? it has to be messaged as a good hike for the right reasons or bad hike for the wrong reasons. i keep calling it hikes. jonathan: it is confusing.

lisa: they are cuts. jonathan: ultimately, i just want to know the unemployment rate 12 months out. then you have a decent guess at what prices are in the equity market. lisa: the university of michigan sentiment survey. jonathan: that is what chairman powell would like as well, based on experience. the s&p 500 pushing higher. yields higher, but not even a basis point. we are pretty stable. in foreign exchange, you euro going nowhere either. coming up on this program, matt miskin of john hancock as markets remained split over a 25 or 50 basis point rate cut. jessica taylor of the cook political report on the prospects of a divided government in washington. and elyas galou. we begin with our top story.

matt miskin of john hancock investment management writing, if you are not easing, you are tightening. the bond market has already priced in 2.5% in rate cuts over the next 12 to 16 months. if the fed chooses less than that in essence they will be tightening monetary policy. matt, welcome to the program. when was the last time you saw a decision this finely balanced 24 hours out? matt: i don't remember one. i think 2015 was the last one i have heard of recalling this, but it is leading to a lot of uncertainty. i think the fed would like to have more prepared communication around us, and, you know, what we are looking at is not to overemphasize one data point. i know retail sales are going to be excited in just about an hour, but at the end of the day we are starting a cutting cycle. we know that inflation has come down a lot and the unemployment rate is rising. keep it simple as it relates to

that. the fed is going to be cutting. we can end this cutting cycle with the to handle on the 10 year, and frankly a to handle on the fed funds rate. that is with just inflation coming down. we think low twos on the 10 year. jonathan: two handles on tens, two handles on tens, to handles on fed funds. tell me where the s&p is? matt: that would be assuming a soft landing, which to us means more chop. the problem with wanting more out of the s&p 500 is that evaluations are already at the upper end of the range. we are at about 21 times the tv on the s&p, and then we are baking in 15% earnings. we need earnings growth from here to drive equities. frankly, there is already baked in massive growth. it is going to be hard to get much more out of that. you could make the argument for rotations.

right now we are in mid-cap for cheaper ideas across the equity market. we are looking at some high-quality cyclicals. but at the end of the day what we are seeing is the bond markets might have an 8% total return over the next 12 months. we think that is going to be really competitive. it lisa: is a lisa: radical thought, the idea of the two handle on 10 year notes when some people are saying it is a neutral rate akin to 3.5%. why do you reject the market's expectations of where the fed's neutral rate will end up? matt: starting out with a neutral rate, being around this industry 10 years now for has always been almos a mysterious -- almost a mysterious number that can never be quantified or found out. at the end of the day it is a cycle. soft landing is not a destination.

we are already changing. i wish we could stay in place, but that is not how it works. if the unemployment rate is shifting like a pendulum to a higher unemployment rate, if inflation is shifting to us that means lower rates. one of the things we are anchoring on as investors is the covid-era monetary policy, fiscal policy, disruptions to the global economy as the new normal. and it is not. that was a massive outlier that likely will not happen again in our lifetime. therefore if we are back to the way we were pre-covid, why wouldn't we be back to a lower rate regime? that is good for stocks and bonds. it means lower inflation. but it means bonds have more catch up after equities have done well of late. lisa: it sounds like you are overweight bonds relative to stocks. what could make you flip that, given the fact that this is a pretty benign set up for stocks?

we spent years talking about how low rates boosted valuations among equities. matt: strategically stocks have done better than bonds longer-term. so, we are just immodest underweight to stocks versus bonds, but the biggest change we made was overweighting a quality parts of the market. on the equity side we are overweight higher quality markets. technology, u.s. equities versus smaller cap. then the bond market, investment-grade corporate's, about as much credit risk as we want to overweight. investment-grade corporate sent things we like, we were doing 5% to 6% in yield, and now we are doing 4% to 5%. we think that is really competitive versus stocks. jonathan: do you find it uncomfortable that what you are saying is what everyone has been telling us for the past month? matt: i hear that a lot. nowadays we are hearing that

everyone is bullish on bonds, right? utilities, as you said, on the fund manager survey, the sensitive sectors, i look at the pricing of the market. i look at the guts of the market and cross-asset performance. we have gold to goo -- doing great. those are all defensive. then you get high yield spreads at supertight levels. the s&p multiple is really high and small caps are starting to do well. so, it does not add up. that is part of the consensus i don't get. if you want to say everyone is more bearish or suggesting rate cuts, there is the other part of the market that is contrary to that. i think you need to be careful of that. when you look at what is priced in it is a lot of good news on the risk front. that needs to be shaken out here. the fed cannot do everything. they cannot cut and meet these

expectations and then support everything that has happened here. we just want to take a more managed approach, more conservative approach. we are not underweight. we are not underinvested. that income is a key component and that is going to pay off over time. jonathan: love your thoughts on how we are priced going into tomorrow and how you might respond to any decision. do you think it is efficient or does this market matt: need more? matt:i think that is key to your point. they could say 25 or 50, but how did they stay on top of what we are going to do through the end of the year? that has to come down to some degree or the market is going to be -- it is not going to be happy unless they stay on top of this cut.

hey, we are suggesting cuts to come, because if they are not easing they are tightening. if they want to push back on the bond market, if they want to push back on the easing that is baked in that is fine, but they have to know that is what they are doing, and it is a precarious time to put more tightening into this market. we would follow the bond market if you want to create a soft landing. any tight credit spreads and initial jobless claims to stay low. if you get those three things you can keep a soft landing. if not, you're probably looking at more risk to come. lisa: just underscore one point you made about the stock market generally being pretty ticked off, there is a question about whether this federal reserve cares. it didn't really care on the way up. it seems to care in the way down. is that the litmus test we are working with? matt: there is a wealth of factors to these things. consumer wealth hit all-time high.

ridiculous trillion dollars amount. but that is probably helping the economy. that is probably helping consumer confidence. the markets are very fickle and volatile and it is very difficult for the fed to over-extrapolate thanks because he can change on a dime. at the end of the day we need to be cautious of being too dovish because if the wealth effect becomes even bigger, if housing the gums higher, that is going to lift inflation, and if stock markets continue to go up we could be cautious because of more bubble territories. we have had histories, lessons of not overstimulating with ultra-low interest rates because it can create apples. for us right now we want to protect on the downside. i think they need to focus more unemployment than inflation. that is what we have to look at. they always have to be watching for too much speculative nature

in markets, and we are coming off some pretty significant speculation, but it is still not relieved from market yet. jonathan: just a reminder, we curse in "surveillance" after hours. cigarettes. everyone. lisa: that is you. completely. jonathan: matt miskin of john hancock. plenty of cursing coming to a podcast near you. that would work, wouldn't it? "surveillance" after hours? attract all sorts. here is your bloomberg brief. yahaira: intel's shells -- intel shares are rising after the chipmaker announced a new partnership with amazon's aws. intel and aws will invest in a custom semiconductor for a fabric chip in a multibillion-dollar collaboration. the news was part of a flurry of

announcements that followed a pivotal board meeting last week. intel also saying it is postponing new factories in germany and poland, but remains committed to its u.s. expansion. tupperware brands is preparing to file for bankruptcy as soon as this week. the home goods brand which has defined food storage for much of the century is planning to enter protection after it reached at the terms of its debt and enlisted legal and financial advisors. starbucks is creating a new leadership role focused on the company brand as its new ceo tries to boost sales and bring back its cozy coffeehouse vibe. in nichols's first major move the company will create a new role, which will oversee things like product, marketing, and store concepts. the news comes as ceo michael conway announced he will retire in november and his role will not be filled. that is your bloomberg brief. jonathan: more in 30 minutes

time. up next, wall street looking for a divided government. >> i think the best case for most investors is a divided government scenario where having a democratic president, potentially divided congress, means we have status quo. not a whole lot of new policy. jonathan: that conversation up next. live from new york city this morning, good morning. ♪ ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: live from new york, welcome to the program. equity futures positive by .25 percent. at 8:30, an important data point. it is u.s. retail sales. this from andrew hallman horse. a softer than expected reading

could further increase pricing of a 50 basis point cut, which would make fed officials are reluctant to not deliver what the market expects. echoing the argument 30 minutes ago. lisa: we are narrative hunting. that has been the exercise of this market for the past two years. and now the narrative hunt goes to any sign of weak is that will disproportionately be weighted both in stocks and bonds. the key will be in stocks. much do you see a rate market that does not shift as much as risk assets that might not be as attenuated to downside risk? jonathan: in the bond market, yields close to the lows of the year after -- year. under surveillance this morning, wall street looking for a divided government. meghan: the best case for most investors is a divided government scenario, where, you know, having a democratic president, potentially divided congress means we have status quo. in a trump scenario a lot of

folks generally assume that is going to be more pro-market, but in our view to could be macro headwinds should we see a potential trade war. a lot of policy you don't need a unified government ticket. that is irrespective of what happens with congress. jonathan: just under two months until election day. investors preparing for a split congress, with democrats in danger of losing their slim senate majority. the cook political report expecting increased chances of a gop-led chamber regardless of who wins the top ticket. jessica taylor with cook political report joins us now. let's lead with your base case, the republicans flip the senate. what is it about the map that underpins this view? why is this difficult for democrats to hold on? jessica: the third of the senate that is up this year is difficult for democrats. they are defending 23 seats versus just 11 for republicans. a lot of those are in very red territory.

because joe manchin of west virginia is retiring, that seat is virtually guaranteed to flip to republican. so, we are at 50-50. you still have the montana seat in a state that trump won by 17 points. last week we shifted our montana race to say that jon tester is now the underdog. we now rate that race as lean republican. that his challenger is the slight favorite now. if they lose that race than they have lost the senate majority, essentially. annmarie: many will say, don't bet against tester. senator tester has had this seat since 2006. he has faced tough competition in the past. what about this race change is that? jessica: he has, and he won in 2012 and 2018, but those were against some weaker challenges -- challengers.

in 2012 romney won that state i eight points and he managed to out-run obama by seven points. i think it is a good chance that trump is going to win that state. in 2016 we saw every single senate race go the same way as the presidential race in that state. in 2020 only susan college -- susan collins managed to win. she out-ran trump. tester is looking to out run the top of the ticket by double digits. i think it just comes down to people partisanship. we are in an increased partisanship since 2012. in 2018, that was a favorable midterm year for democrats. if this were a midterm year this could be a different scenario for tester. with harris at the top of the ticket, he has not endorsed harris. his favorability is now underwater for the first time in his career.

he started out with very high favorables, and i think that their relentless republican attacks have taken him down. his opponent has questions about his business background, you know, but he has managed to run positive ads about his military service. i don't count jon tester completely out that at this point we have to view him as the underdog. annmarie: if he is the underdog and he does lose, democrats, how could they combat this? is there any hope in texas or florida for the democrats? jessica: they have to look to make one of those states more of an offensive opportunity. in talking with strategists i think texas is slightly more doable than florida. they are incredibly expensive states. in texas you have very good recruit for democrats. you have ted cruz, which has weak favorable ratings.

he faced a tough reelection in 2018 against beto o'rourke. in florida you do have an abortion amendment that could help democrats. rick scott there, a former governor running -- running against a former congressman. she has not had impressive fundraising. and rick scott is a billionaire who can write himself a check. democrats are looking at which they to go all in on. texas might be a better investment. i think you kind of have to pick one of the other. annmarie: the fact we have had a flip at the top of the ticket for democrats, how much has that help to them in some of these states where potentially they would need if they need to maintain the hold of the senate? jessica: i think it has helped them that harris is at the top of the ticket. i was hearing a lot of concerns after that disastrous debate with president biden that democrats were still out running where biden was, but the fear was that the bottom was going to

drop out. now you do have democrats leading in other swing states, presidential swing states. we rate all of those as lean democrat, but i think that certainly the switch at the top of the ticket helps them in that regard for sure. jonathan: appreciate your input this morning. jessica taylor of the cook political report. we have talked about this a few times. the advantage that kamala harris has given that she has not gone through a tough primary has not been pinned down on very unpopular issues. that is an advantage as well. for democrats in tight races. annmarie: it is an advantage, but when it comes to the senate they have so many seats to defend. it looks like it is coming down to montana. even if you have harris in the white house, republicans in the senate, people on wall street think it is going to be gridlock

in washington. jonathan: will we get something different outside of consensus? when we come to that first week in november? lisa: i don't know. maybe we will. i think about this idea of not being tested and whether that brings people out. there was an article in businessweek talking about, a lot of democrats don't know what they are going to get with kamala harris. i just wonder, does it bring more people out to vote? jonathan: we are looking for a big divide between how you campaign and govern. we could see some surprises on that front too. have seen some surprises in the u.k., but save that for another day. up next, allies kilo -- es galou. this is bloomberg. ♪

♪ ♪

with so much great entertainment out there... wouldn't it be easier if you could find what you want, all in one place? my favorites. get xfinity streamsaver with netflix, apple tv+, and peacock included, for only $15 a month.

jonathan: stocks are positive once again on the s&p 500. pulled back yesterday but what -- by what was happening with apple, 35 minutes away. so cap for that conversation in a moment. small caps are up by point 25%. lisa: all-time highs on the equal weight. it is notable to me how much this has been driven by the ongoing rotation trade and aspects of the market most

benefited by the incoming rate cuts really has been the russell 2000, up almost 3% in two trading sessions. jonathan: the two year yield up a single basis point. bonds have been -- yields have been falling. yields are at or close to the lows of 2024 going into this federal reserve decision, looking for potentially a 50 basis point reduction. lisa: how much is that going to color not only what the fed decides to do but how the market responds? have been talking about whether this is buy the rumor, sell the news event given that the market has priced in 100 basis points of rate cuts this year, 250 through the end of next year, and a positive read through to risk assets. jonathan: you are on the money as always.

rate cuts with what economic backdrop? not all rate cuts are created equally. it feels like this bond market is price for a return to neutral over the next 18 months, potentially 200 basis points of interest rate reductions. anymore price beyond here, you talk about a price beyond neutral two, date of -- to accommodative. can you argue we are going beyond neutral and growth still holds up? that is where things get interesting. can you price additional easing with this equity market carrying on rallying at the same time? lisa: which is the reason people cannot agree with the bond market is pricing in now. some say it is already pricing in a recession. we do not know what neutral is and we heard talk about how it is some kind of hocus-pocus

number you can never understand or see. this goes to the idea of are we in a new regime in terms of inflation or are we not. that is the tension underpinning interpretations of what the bond market is pricing in. jonathan: you will love this quote from morgan stanley. bonds have rallied aggressively, suggesting recession and intimating the fed is behind the curve. essentially saying if earnings get hit it will create headwinds for evaluations, so it is lose-lose in the equity market. lisa: that is the key question. do you end up with so much price to perfection activity in markets that there is a downside risk not because the economy is about to fall out of bed because -- but because people are full of hopium? jonathan: that move and bonds has unlocked another leg of

dollar weakness. the euro just a little firmer here. i know we do not pay much attention to investor expectations out of germany, but they are kind of rock-bottom at the moment. are we saying the bar is so low now it is easy to beat? lisa: dollar positioning was so aggressive that anything that signified europe was not falling off the map means it is positive, but there are signs that structurally there are aspects of the european economy falling off the map and that german z ew survey that came out highlights how the headline data and structural headwinds are pointing to weakness. jonathan: zew. under surveillance this morning, the secret service acting director saying agents did not search the perimeter of donald

trump's former -- florida golf club before the former president began his round. the gunman spent almost 12 hours near the course. annmarie: this is the question everyone is talking about. was the secret service aware that donald trump was going golfing that day or was this last-minute? you have the secret service acting director saying the president was not supposed to go there, so was there enough time to make sure they did a proper sweep of the perimeter? this is going to be not even a fight in washington. everyone is lining up. they think the secret service needs more money fast because we are seven weeks today from the u.s. election. lisa: we need to understand how to surveilled and understand what motivations are. are they part of something else? we do not have a sense of any of that. how can that be after months -- two months after the first attempt? how can we not have that

information at a time where sensibly we have a better data collection unit than ever before in terms of being able to mine data to get clues? jonathan: just absolutely shocking. amazon's ceo telling staff to expect to return to the office five days a week at the beginning of next year. the company planning to have fewer managers to remove layers and flatten organizations. five days a week at amazon for next year. lisa: we have seen a lot companies do this. they have a hotline that people can call to report inefficient processes that they have to go through to weed out managerial oversight and extra layers that have come into play. there is frustration with size we have seen repeatedly with a number of companies. interesting to see how they evolve wi and where they

are targeting, whether this is the cloud or more broadly. jonathan: it is interesting how they use the return to office policy. that policy is almost a filter to self select ahead of the end of the your conversations about who is going to stick around for another 12 months. i have felt that way about tech firms for the last couple years. that has been the push. you select who is going to stay and who is going to go. lisa: this points to the idea that maybe there is this feeling of a desire to shed some workers. you have seen this and other places, but there is not the same leverage of the employees that we saw for a long time. that is an interesting take away. jonathan: gone are the days of a powerpoint presentation about being stressed at work and the banks are saying 150 for you,

please stick around. lisa: my powerpoint was really good about how stressed i was. jonathan: why aren't we working from home? did you fail? your powerpoint presentation no good? annmarie: he asked for perdiem for lunch. lisa: let's turn to this. bank of america showing investor sentiment rising for the first time since june. participants seeing a 79 percent chance of a soft landing but bulls are showing caution with risk asset falling to an 11 month low. welcome to the program. it is good to catch up with you. let's start with this phrase. what speaks to you in this survey that tells you they are nervous? >> good morning. it is great to be back here.

it was palpable across key metrics we look at every month. take the risk appetite, about net 23% of investors said they were taking lower than normal risk levels at the moment. we also have the financial markets stability risk indicator, which is a blended measure of risk indicators which rose to an eight month high. you also look at the desire for greater payouts. this rose to the highest level since 2013 and look at the extent of the rotation out of cyclicals and commodities into defensive's. this was one of the most fertile rotations in the 25 years of the survey, so there is nervousness and the best illustration of this is positioning on commodities.

fms investors/exposure to commodities and are the most underweight since 2016 and that is why we say investors are nervous. jonathan: that commodity position speaks into why we have this biggest underweight on energy since december 2020. overweight utilities by the most since december 2008. the biggest overweight on banks since february 2023. the most overweight on staples since september 2023. can you walk me through what is defensive in those sectors? utilities are defensive by some but by others they are more offensive even the tie up with ai. i do not know if banks are meant to trade higher on higher rates or lower rates and then you have staples which are typically defensive. what does that tell you? elyas: you're right.

we decided in this survey we will consider utilities staples as the classic defensive sectors . these are perceived by our investors space as the defensive sectors. these are global sectors and not just u.s. focused. when you consider the average net overweight on utilities and staples on one side and on the other what you can easily perceive as cyclical materials and industrials, is one of the most rapid month over month shifts into defensive's, led by utilities. as you said, the most overweight utility stocks since december 2008. on the other hand, the shift of cyclicals was driven by commodity sensitives, but if you consider tech, fms investors have cut allocation to tech stocks to only net 3% overweight, which is the lowest

since april 2023, when we first started to record that long magnificent seven. lisa: how do people normally look at the bank of america fund manager survey? is it a leading indicator of where investors are putting cash? elyas: it depends on the category of investors but most view it as a contrarian survey because the global fund manager survey is great at doing a narrative and sentiment and positioning and seeing how the consensus has evolved. today, there has been a defensive tilt in positioning through the summer. this is how investors have weathered the summer events in july and august. they have shifted into utilities but also into bond sensitives related to big expectation

regarding rate cuts and we just recorded the biggest share of investors expecting lower short-term rates in the last -- next months. 93% of them expect lower short-term rates by this time next year. on the other hand, it is great for developing a contrarian view. if you are a contrarian today, you would be adding to commodities, to anything that is china sensitive, but also cyclicals, so that is how we form the contrary view. lisa: next level contrarian. another aspect in terms of if you feel bold, 90% of recipients expect yield curve to steepen, the most on record. this comes at a time everyone is expecting short-term yields to go lower. how many people are pushing back expecting a flattening yield curve? is that something people are

thinking about or does this hint at the concern that maybe there is too much complacency priced in about what the fed is willing and able to do with rate cuts? elyas: of course. if you are bullish on a global economic soft landing, you are bullish that inflation will slow and central banks will deliver swift easing cycle and rate cuts and that is how we position in favor of a steeper yield curve, but the big steepening has happened already. you discussed that before. the bond market is pricing between 200 and 250 cuts in the next 12 to 15 months. you see why we considered this survey as nervous optimistic because it is so reliant on fed cuts and the big risk is if the fed does not deliver in terms of

expectation. that is where the big risk lies as of today. annmarie: you mentioned china. how concerned are investors about the macro economic outlook out of beijing? elyas: we are talking about the world's second-largest economy and macro sentiment on china just had the lowest level in the past two years. since we started asking about china growth expectation. so china has been one of the major factor in sentiment this month, but the bullishness on the fed and on the soft landing have been able to out wait the pessimism on china and that is why the overall sentiment rose for the first time in three months and the optimism on the other end allowed for lower cash allocation and investors started to deploy cash for the first time in four months.

we think that is a contrarian positive. jonathan: always great to catch up with you. elyas galou of bank of america. global research on the global fund manager survey. the title of this month, the contrarian play, commodities. commodities is not where the money is now. lisa: you so allocation is dropped to the lowest since 2007 as people look to what we have seen, which is weakness even in the face of a resilient economy. this is weakness the comes with a transition to electric vehicles as well as weakness in china that few people are willing to get ahead of. jonathan: let's get you an update on stories elsewhere. >> goldman sachs predicting gold could face a minor, near-term setback if the fed decides to cut rates by 25 basis points tomorrow, but the analysts see it rally into a record as money flows back to etf's.

goldman expected to surge to $2700 an ounce by next year. the harris campaign is gearing up for a rare high-profile fundraising event in manhattan. it is being billed as the final chance to see harris in new york before the election. tickets go from $500 to $1 million the top buyers given access to additional exclusive events. harris has built a large cash lead over donald trump, raising 361 million dollars in august, nearly three times with the republican nominee reported. stanford university talked just topped the bloomberg businessweek rankings for the best business school, marking the sixth straight year stanford takes the top spot among full-time mba programs. it maintains strong scores in four of the areas we indexed, including learning networking

and entrepreneurship. that is your bloomberg brief. jonathan: next on the program, waiting on the cut. >> we will see what the market does. it will be three cuts of 25 and what matters is where we are at the end of the year. jonathan: from new york, this is bloomberg. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. >> new lows for the year on a 10 year yield in today's session. going into this federal reserve decision without a single basis point, the 10 year 3.60.

>> we will see what the market does. it may be that it does not make much of a difference and what matters is where we are at the end of the year. i think it will have been very much on the sideline and this money will -- how faster means to be seen. jonathan: treasuries holding steady with traders awaiting u.s. data. it is all eyes on tomorrow's fed decision, with rate cuts all but certain. fixed income markets have already priced in cuts through the end of the year. the yield curve steepening and the question is not cuts. it is what happens after cuts. that's get to the first question we have for you. are you still long this bond market? >> yes. bond markets have been one of the biggest themes recently and

one of the best traits this month. what is interesting about that is where positions defensively outside of equities. which has me thinking. lisa: has you thinking about what? what is the shift in momentum you are looking for? katy: when you look in across asset themes you see long fixed income, short the u.s. dollar, and that is defensive, which is why i am focus on cuts. once we have cuts, are cuts motivated by inflation going down or could cuts be slightly motivated as well by economic weakness that we see recently? as we move into cuts in a period where we are not in a recession, what does that mean for markets after cuts occur? if cuts occur and stimulate the economy, we could have to start talking about inflation again and that becomes the risk we are

worried about. lisa: what are you looking for in terms of a trigger? reasons to get more bullish on risk assets if you do get some sort of cuts proactively or could you see a reversal what we have seen, which is everything going down because bonds are losing value on inflation risks and stocks happen overpriced with rate cuts? yahaira: exactly. -- katy: exactly. the challenge is if we have aggressive cuts and we see we have a pullback then we are going to see a repricing in the fixed income curve, which would be the idea, that it will take longer to get to lower rates than people would expect, so that would be a repricing. i am concerned about the commodity sector, which has been a strong short signal since this summer. if you see economic activity tick up again, that could be at risk for bottoming out and starting to rear accelerate. right now, given we are

defensive in positioning, that will be positive for equities but there are new risks that will have to be examined as soon as we move into a new cycle. annmarie: doesn't the fact that china is slowing down -- we just had the ink of america representative talking about the fact that the contrarian trade is in commodities because they are doing poorly. doesn't that quell concerns about really -- inflation re-accelerating? katy: it does in the short-term, but the challenge is the timing on that. if we see the economy rear accelerate, we will go back to that inflation narrative we were worried about. right now, cuts seemed justified. it is a positive thing if cuts are coming because inflation has disappeared. if there's any semblance cuts are coming because of economic weakness, that is where the defense of story makes sense. jonathan: can we finish on a point of potential tension?

10 and 30 year yield or -- are at or close to the lowest of the year and gold is close to all-time highs. is there tension that needs to be resolved? katy: of course. gold has been a play on the potential concerns of inflation through the year. the fact that gold continues to be strong means longer-term expectations of inflation is what might be more unclear. shorter-term looks better given what is going on in china, but if you look at the 10 year yield and long-term bonds, if we start cutting rates and seeing potential for inflation again, we could see if further steepening of the yield curve would create repricing for those who have locked in rates at the long end of the curve. jonathan: potentially steepening led by the long end trailing off. if this fed out doves the market

tomorrow, does that long end sell off? katy: it is possible. when you think about inflation, if inflation expectations change because of an aggressive fed cut, what you're going to see is that repricing of long-term inflation expectations. we are still above target and cutting rates, so if we cut rates aggressively and inflation expectations tick up, longer-term bonds will have more and we will see different correlation between stocks and bonds. jonathan: super thoughtful stuff, katy kaminski of alphasimplex. we will catch up with keith lerner and ashok bhatia. retail sales 34 minutes away. ♪

i can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah.

>> the fed is going to be cutting into a pretty good economy and we do not have a lot

of benchmarks for what that looks like. >> the market realizes it is a hard landing board is a growth scare. >> we are not in a position where we can absorb any bad news. >> the data has not been sufficiently weak to convince them of a 50 basis point cut. >> it'll will be three cuts of 25 and what matters is where we are at the end of the year. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: talk about how we are set up. equity futures advancing .4%. a seven-day winning streak on the s&p 500. on the nasdaq advancing .6%. on the russell up .6%. bond yields near the lows of the year. we are down to basis point on the 10 year, down two on 30. all of this going into this at

8:30. u.s. retail sales. taking on extra emphasis as this two day fed meeting kicks off. lisa: this highlights the volatility we have seen after almost every data point. the key question will be what will respond more? the bond market or the stock market considering the fact that a lot of people are singing 50 basis point rate cut is bacon regardless of what retail sales show. jonathan: do find it odd that we have been told good news is good news and bad news is bad and to get a basis points tomorrow we need about retail sales report? lisa: the fact that you are asking this question highlights the uncertainty of the fed reaction function and what is on the line when it comes to 50 versus 25. there was uncertainty introduced into the market by a series of article in the wall street journal that some people thought

of as indications this was a federal reserve that was more inclined to cut by 50 basis points than 25. annmarie: that's what andrew hollenhorst is saying. he is eight markets pricing out 25 or 50 amid no clear guidance. the ambiguity was addressed because of the wall street journal and the ft. now is just are there you about that one more print for the totality of data and because it is an proximity of day the fed will be heather admits it so important. jonathan: we have to be careful with the language. no clear guidance. we have had guidance. they did not clearly guide us to a 50 basis point cut. there is a bigger debate about the size. lisa: we do not have a sense of the destination. they talk about understanding the path to the destination and the destination with respect to where rates will end up. we do not understand how much their mandate has shifted.

we did hear a different tone from jay powell talk about hunger for their week it would be updated. at what point is that lower the bar to such a degree they might as well get these gates closer to -- the rates closer to neutral as quickly as possible. jonathan: remember we said it would be settled after payrolls? it wasn't. it will be settled after retail sales. lisa: they will be bang in line. jonathan: how problematic will that be? lisa: -- jonathan: equity futures look like this, seven days of gains on the s&p 500. in the bond market yields down a basis point. coming up this hour we will catch up with keith lerner of truest as investors await data. p airfare do as apple shales slump and -- stocks sire ahead

of retail sales. the final data point that could dictate the size of the rate cut. keith lerner saying "our base case is the bull market case remains intact. the chop your waters we've been writing about our center continue." let's begin with a: 30. what are you looking for in retail sales? keith: great to be with you. it is unbelievable that this is the most important retail sales ever. i do not know that will be that much different than expectations. as we look at this morning, the fed funds futures is praising a 67% chance of a fair rate cut. they are giving the fed the opportunity to take it. if the serum is is far away that it is today and as chairman

powell has focused their still 5.25 to 5.50. we think we should take what the markets are giving them. jonathan: let's talk about positioning. we are close to all-time highs. around the lows of the year on yields for 2024. if the fed validates the dot plot, validates market pricing, if that is all they do, how vulnerable is market pricing in stocks and bonds? keith: you look at the s&p 500 we are within 1% of an all-time high. above that you could have technical traders in. it is important is not only the cut, the dot plot, but also what jay powell says we are all at a

critical short-term point based on the charts allowed. lisa: when you talk about inflection you were talking about the overall index. there is also inflection that has fueled the recent gates and fueled equal weight s&p 500 reaching its all-time high. how much is that is what at stake, whether the fed will support that with an outsized cost? keith: the s&p equal weight index just hit an all-time high. that index is less than 10% above where it was in 2022. it has not been way ahead of itself. now there's a rotation trade that shows industrials make a new high, financials are close to a new high, then we had the advance decline line for the s&p also an all-time high. if they are less dovish than he would see money move out of there. either way we still like tech. i know tech has been struggling

more recently. we upgraded it during the august pullback. if we have a cooling economy we are seeing earning trends still stronger with the money eventually moves back in the fourth quarter. at this point the rotation trade will likely see participation. if you have a less dovish press conference you would see that stall out. lisa: i love that you try to do scenario analysis. we are having a fun game of 25 or 50. there is the issue of at what point you just by tech and that is what you're going into? how much of that is because of moves like we saw with microsoft increasing his dividend to a low level? in some ways this is the new income play? keith: maybe it is an income play but i think you are thinking about an economy that has cooled.

some people are saying recession is not our base case. in a cooling environment you'll see gators -- you will see investigators pay a premium where there is growth and things can be done on the balance sheet. tech has a little bit of both entering the correction intact we had not seen weakness in the technology earning side which would make us more nervous. for context, over the last three years tech is up around 50% to 60%. during the technology bubble into the technology peak it was up over 350% on a three year basis. we have an uncertain environment in a nonviolent environment. the paris of the companies are generating cash flows and have strong balance sheets. i think the ai story is relatively early. jonathan: you've touched on the part of the story people are having typically with.

as rates go down that would present an argument to go to some of those tech firms you've just described. at the moment we are having a conversation about slower growth and lower rates and going to places associated with better growth and higher rates. banks. can you walk me through the kind of beneficiaries in this equity market. who benefits? who struggles with lower interest rates in the 18 months ahead of us. keith: part of what we are seeing is a reflection of what position was. in july tech got over extended positioned got overdone. financials had lagged is to revisit this -- is to reposition it. i think defensive areas continue to work.

what areas get hurt by rates, do not know many people get hurt, i think it is who gets benefits more will our position as are still longer-term -- you need to see that growth accelerate. an interesting discussion, we talked about scenario analysis. it is not our base case but no one is talking about the potential of re-acceleration in the economy. the majority of folks are not. that would be the case received is areas pop, not a base case but something to think about. lisa: at what point do you get underweight longer-term bonds at a time a lot of people are seeing very little upside gain going forward based on the fact we hit the lowest going back a year? keith: we were excited about

bonds when they were around 4.50 or 4.60. we cut that as a move below four in a dovish scenario may be we go down to 3.25 in the 10 year. we look historically after the first rate cut, -- on a short-term basis yields have moved so much that i do not think the risk reward is that compelling after this move. jonathan: good to get your thoughts. keith lerner of truest going to a federal reserve decision tomorrow afternoon. last time we had this kind of tension was maybe spring last year when we had the bank stress and were wondering whether they would blow away and they still hike interest rates that is a

sign of how convicted the fed must be over the decision they have to make. lisa: on the others, to cut rates. will have to see how stocks respond. jonathan: the most important retail sales print ever in the history of financial markets at 8:30. let's get you update with stories elsewhere. yahaira: iraq's prime minister tony bloomberg u.s. troops are no longer needed in his country, singly have largely succeeded in are vanquishing isis and are moving along from war. 2500 american soldiers are still based in the country is part of a coalition formed in 2019. iraq has said it once a full u.s. withdrawal by 90 days six and 1987. parts of central europe are bracing for further damage amidst the region's worst

flooding in disco decades. heavy rains continue and oils on the river danube rise further. australia is turned to melting snow and. at least 17 people have died across several countries. in donald trump is putting the spotlight on the crypto sector. the republican presidential nominee -- in search of donations and votes amid a tight race for the white house. a livestream trump pointed to competition from china, saying the u.s. could fall behind in the race to become the world's crypto hub. the event was light on details but when mike your life. that is your bloomberg brief. jonathan: how many times do have conversations about policy from democrats and republicans and

then sat here and said light on details and specifics. lisa: this has been the theme for 2024. it is not unusual but it seems as if it is on steroids. annmarie: light on detail about when this liberty financial token would come to light and it -- and doesn't have anything to do with how the former president feels about crypto that his sons will launch this token. jonathan: that phrase dividing the campaign. coming up, week iphone 16 demand puts pressure on apple. your retail sales print is 15 minutes away with equities just off session highs. ♪

(♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

jonathan: looking at going into the fed decision at all-time highs on the s&p 500 and potentially yields at the lows of the year for 2024 as this meeting begins at the fomc. they are waiting for one more data point. retail sales just around the corner. your 10 year yield is 3.61. equity market positive. redbird atlantic upgrading shopify to buy. expected to benefit from a social e-commerce boom. bank of america upgrading hp enterprise to buy. that stock up 3.7%. jp morgan lowering its price target to two-point 10 expecting -- to 210 on apple. let's stick to apple. shares slumping on iphone 16 demand worries. pierre ferragu saying there is no game changing hardware.

a product cycle is unlikely. apple claims iphone 16 is built from the ground up but the reality is the 16 improvement over a 17 is more incremental than a researcher. joyce is now for more. they welcome -- welcome her as always. we wrote a product cycle is the -- pierre: i think if you look back , in june apple announced -- the potential of generative ai revolutionizing the user experience on the iphone is high. you need to look at the product side with hardware evolving every year.

apple has been improving its hardware to enable ai for quite a few years and we are on the very inner trajectory on that. the iphone 16 is not like a sitting and your complete for a while. the benefits of ai are going to be software defined. it will be about apple releasing software and getting them into the hands of users and over time you will see these features maturing to great use cases could beat up product cycle or fight new ways to energize users. to the moment ai is a trial and error process. apple had already released a lot of the software and the software is completely fine and operating

on the iphone 15 pro and we already have feedback from users. the feedback is lukewarm. people appreciate the new futures but there is no revolutionizing use case that up we need to give it time for apple to figure out -- the user experience with apple intelligence and this will not have any effect on the near term demand of the iphone 16. the reason we see people are sick of seeing demand coming through may be the wait and see line. lisa: there are two things here. a question of whether you should give apple time to get it right or whether they are losing market competitiveness because others are getting in on the game in a more aggressive pace. is this just people pricing and

the upgrade cycle too soon or it is not going to come because of the competition. pierre: it is a very good question. it is the former. we have the same in the pc market. everybody is getting excited about ai and you not have use cases that would justify product cycle driven by that and the search for markets we see a similar situation. apple is not lagging behind on hardware, they are still at the forefront. there hardware is good on down. when you get very fast -- you see that with openai on x.

for the moment ai is making progress alongside hardware companies. that is one thing you want to keep an eye on. is apple going to strongly differentiate its ai experience? there innovating faster on the software front been on the service front. annmarie: what do you make of a better cycle for the iphone 17 where you would get this marriage of the ai software and new hardware? pierre:, especially with the iphone 16 disappointing.

investors are quick to take that for ability. we are in a very fast, involving -- the iphone 16 sky tao plan. we could have much less exciting to be excited about. apple has always had fairly good rebound years after week cycles. jonathan: excitement postponed. thank you. pierre ferragu on the latest iphone. real concerns in last 24 hours about what preorders look like and what the first quarter will look like. lisa: signs it is a good 10% to

15% lower than this time last year, even right before the holiday season. this is when they have to be getting that robust sales kick to make the same sort of profit targets things are looking for a fake story we've been waiting for for a number of years -- it has not materialized. lisa: that is coming at a time where they have been slightly behind when it comes to the ai technology and also the folding prowess that some have managed to now hone. jonathan: not buying that? lisa: i think until you get good screws that can make the connections work. if it starts to break apart -- the more complicated a phone is mechanically the more things can go wrong. jonathan: you're not ready to

buy the folding phone? lisa: i like the idea of the bigger screen, do not like the idea of some calling using wait a second. jonathan: up next, retail sales. lasky did a before the federal reserve decision. it is exciting stuff. we'll catch up with clarida ritchie of ashford price. michael mckee here to break the number. for many of you, the difference between 25 and 50 settle that debate if humans -- and settle that debate. ♪ hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana

...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. the moment i met him i knew he was my soulmate.

the answer is "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

jonathan: here it is. retail sales 24 seconds away. on the s&p 500 we are positive .4%. on the nasdaq up .6%. russell and small caps adding weight to the recent rally, up one third of 1%. yields near the lows of the year. on the 30 year we are down to scope basis points. here is michael mckee. michael: u.s. economy appears to be doing a little bit better than people anticipated as we get a .1% rise in retail sales

overall. the forecast was 4.2% decline given the low number of automobile sales. -- the forecast was 0.2% decline given the low number of automobile sales. the retail sales control group matches the last couple of months would say -- with a .3% rise. all of this with the exception of the headline is what is anticipated in the markets and it will probably not answer the question you posed just before the break of whether this pushes them to do 50 or 25. jonathan: it settles apsley nothing. we set remember going into payrolls we said this would settle the debate and it did not, this was the one that would settle the debate and it has not. yields are still up for five basis points. we are down just go to 390 at the 10 year. i will show you how the equity market is responding. equity future shipping of as

follows. the nasdaq basically as you were -- dollar-yen basically unchanged on the session. this has settled absolutely nothing about 25 versus 50. lisa: kid that was the most important retail sales in the history of financial market. this is the point we have. everyone is looking for clarity at a time there is not that to be had. whether the fed uses this as a reason to cut 50, not likely? will it dissuade them from going 50? i don't know. michael mckee -- jonathan: michael mckee, walk me through what you are looking for in this committee conversation that starts today. michael: the committee will make its decision on whether it thinks the economy needs the extra stimulus, that we are too

far above neutral and too tight number model does or underlying figures -- food and beverage stores, grocery stores -- some people thought everyone was cutting back and everything else to spend on food and grocery stores but they are down .6% and .7%. clothing stores are down and hallowing is supposed to be a back-to-school month -- the internet improved the most. up 1.4%. it looks like at this point americans are still hanging in there but they are being a little bit pickier about what they are buying. lisa: this confirms what we have heard from a lot of companies. does this remove any indication of any reacceleration in the economy or a risk that that is something that should be a

preeminent concern for the fed? does this do anything to dissuade people who are already wanted to cut by 50 basis points from doing so. michael: they can make the argument there were a number of categories that did see negative results over the month. when you take out the controlled numbers of gasoline and automobiles and building sector, you still see enough strength that the economy can continue along. the atlanta fed gdp is 2.5%. it is still hard to make the case the economy is in need of a cot. the only question is whatever they do tomorrow will not hit the economy until maybe february or march of next year. they have to be looking not at what we just saw for august but what they think the economy will be like next year or early next year.

that is harder to game out. jonathan: mike mckee, stay close. .3% on the control group, that is the data point that goes into u.s. gdp. in line with expectations at 0.3. remember 25 or 50. what people were looking for it was a weaker retail print to submit -- to cement a 50 basis point rate cut. this settles nothing. look at the equity market. equity futures up one third of 1%. the nasdaq is up .6%. lisa: if there is any conclusion it confirms what we've been hearing that you have picky consumers but they are not falling off a cliff and it confirms this is still a market pricing and a good chance of a

50 basis point rate cut by the federal reserve. if that happens it would be the right kind of cut sewing for mush -- additional stimulus could potentially give zones and gains we've seen in equities. jonathan: which speaks to the rally in the equity market. equity futures going into the opening. we continue the conversation now. let's get to the data. it seems to have settled nothing about whether we go 25 or 50 tomorrow afternoon. what is your base case now? >> i would say that what we discussed in the past is still valid. the fed's data dependent, not data point dependent. i hope they will take a look the economy over what with few months. before the quiet period they did not have a indication they want

to cycle -- perhaps we do not have as good a sense on how the fed is interpreting the labor market data as we should. the decision is essentially a coin flip and i do not disagree with market expectations may be the fed is looking at the recent uptick in unemployment rate and labor market differential from the consumer side of the data in the single labor market is slowing down -- i think it is possible we get a 50 basis point cut tomorrow and i think the summary of economic projections will probably show the dot plot has 100 basis points worth of cut for the year as a whole. i think if you consider how the market deals with uncertainty,

perhaps from the fomc perspective it makes communication easier. they start with 50 basis points the market for expect the meeting. jonathan: the summary of economic projections was last published on june 12 and that is super stale. we will see some major revisions. you mentioned how the median. would come down and show 100 basis points of cuts for this year. can you walk me through 2025? where is the median.? >> you're absolutely right. we will get a much more dovish dot plot than we had in june. in june we had only one cut this year. the fomc has change their assessment of the economy and the cutting cycle. for next year i do not expect changes. i think they will still have four cuts. it would be a very dovish

surprise if they fully embrace market pricing and show four cuts this year and six cuts next year. i do think that shifting to eight cuts would be the worst possible thing to do. it is already a very dovish move from the side of the fed. you consider where they had interest rates -- they are not changing their view of the destination and the long run it rate, they're just bringing those cuts forward because the cooling in inflation is happening faster than they expected in june. lisa: there is a feeling that later this year it will get that much more difficult for the federal reserve to project a path with different this for bank proposals that could come to the fore and very much affect inflation. you expect that has been discussed by the federal reserve

-- >> i do expect the fomc and jay powell during the press conference will be asked this question. i think they will stick with the mantra that they take fiscal policy has given. i think they are for sure assessing risks around their outlook. it is a one off shop to the price level with tariffs. we have not had sustained high inflation at these levels for some decades. what will it do to inflation expectations if you have another shot to prices? i think this will be part of the deliberation. i think when they get asked directly about it they will not comment. for me even setting aside fiscal policy uncertainty, i do have

more of a benign or optimistic interpretation of french -- of data, both from the labor market . the fed front roads -- the fed frontload scott's and it is saying the up to propel -- i think this will put forward judges to them bringing inflation down to 2%. annmarie: is there any chance this is a risk that this could set up the economy to potentially wreak seller inflation? >> i think this is the key risk people are not talking about anymore. i think there too much certainty priced in the market that the fed is going to bring inflation down to 2%. when i look at the progress we've made so far on goods disinflation, a lot of that has been driven by dollar strength,

by week import price improving supply chains. i do not expect the impulse to help the fed quite as much. the idea that global and commodity prices are soft because we are china slowdown but because we have signs of: culture. i think that is a precursor to commodity prices but if you not 50's -- the market is pricing more aggressive cuts from the fed than the ecb. i think that will lead to dollar weakness as well. i am not very optimistic that the disinflation goods can be sustained two much uncertainty in my view is first with regards to bringing inflation down to 2%. jonathan: we appreciate your insight going into the federal reserve decision tomorrow. let's set the stage for you.

we had retail sales a moment ago, basically in line with the control group and slightly on a headline number. yields up four basis points. declining for three consecutive sessions. we will give you some back as the meeting begins in washington. lisa: on the margins, may be giving up the hopes of three consecutive 50 basis point rate cuts. these are not massive moves. it shows a degree this been settled -- for anyone who feels like this is a clear picture is not equity futures still positive. i want your thoughts on the data and what it means for the

federal reserve tomorrow. take it away. ashok: it is just another data point that indicates the u.s. economy is slowing. inflation on track to be in the lotos posed by next year and we are moving towards the softer side of a soft landing and i think that is another data point consistent with that. for the fed tomorrow, it is a close call. we lean that it will be a 50 basis point cut. the rationale for that is there was movement or some members that wanted to go 25 in july. inflation data has gotten better since then -- then there is no meeting until postelection. i think the main thing for the bond market, whether it is 25 or 50. the policy rate is five in three it's and of the bond market is priced for the fed to take it

down to 2.80 over the coming year and a half. there is a ton priced into the bond market. it will be hard for the fed to deliver all of that based on what we know now. jonathan: that raises the obvious question. you are basically saying 2.80 which is where the long thought was in the june projections. if we are priced for that and that is the destination, the cuts are going to be deeper. how much value is left in the bond market rally -- what kind of numbers are you thinking about? ashok: the bond market after the big rally we have seen, we think it is unlikely we are going back to the yields we have seen over the last 12 to 18 months. maybe the 10 year can get back to 4%. the market will be more stable because the easing cycle will

begin. it is more the potential backup of the 30 to 40 basis points in yield rather than for protean. whether they go 50 or 25, it matters for the two year maturity. for a lot of other maturity points it is about where this ends and it is an easing cycle that will probably end around 3%. that is pretty consistent with what the fed is the -- lisa: the long term influenced by the short-term. two guest saying nobody is talking about inflation. people seem to have dismissed it. if the fed cuts by 50 basis points will we be talking more about inflation and the ramifications? ashok: i think for the fed, the

fed's big message that is likely coming as they will try to get the market to get off this 50 close -- we will get to neutral around 3.5% -- the bigger issue we think is coming is fiscal policy. you are speaking about this. the trump tax cuts are set to expire at the end of next year if nothing happens. the long end has been worked up about fiscal spending. there is a decent chance the next 12 months we are talking about the degree of fiscal retrenchment and that is going to be a bigger issue for the bond market than inflation, which is pretty clearly on a trajectory down to the low two's

by the mid to the end of next year. lisa: are you saying to by the long end aggressively because we are going back to a more restraining backdrop with you fiscal? which is not been seen for years and years. ashok: would not go that far but i would just say some of the pricing we have seen earlier this year around term premium and fear of fiscal spinal tap. -- that is likely to change. more of a message of the long end we will fight more stability than not. jonathan: it is such a cheat code for this show that you can say you were talking about fiscal policy. to not even have to watch the show to know we were probably talking about fiscal policy. lisa: [laughter] he was watching. ashok: i wanted to talk about shogun.

jonathan: i hope you finished watching season one because i know bramo totally ruined that. i want to bring up credit. at the start of august i remember you saying after the shakeout we had seen in financial markets that you are looking at increasing credit exposure. i assume you did that. where are you now on that front? ashok: we did. i would describe us as a platform that we have taken off three quarters of what we added into that backup. in the grand scheme of things it was a small backup. high-yield yield spreads her back to the lows. the main message on credit is a way to stay pretty range bound. volatility about the economy is going to be more interest rates and the fed then credit. if we see a backup of credit we will likely be adding but here is back to more neutral.

jonathan: all bases covered. thank you. equity futures on the s&p just about positive .3%. let's get you update on stories elsewhere. yahaira: recapping that print, u.s. retail's unexpectedly rose in august, pointing to healthy consumer demand. sales rose .1% month over month. economists were expecting a drop of .2%. excluding autos sales advance for a fourth straight month. a new morning poll shows kamala harris with a six point lead over donald trump among likely voters she leads trump 51% to 45%, a record in tracking. the survey reflects daily data collected from september 13 to september 15 after the candidates debate a week ago.

elon musk super pac is said to spend more than $2 million to fund republican congressional races in battleground districts across the country. latest federal firing is the pertinent first step to influence events outside the u.s. presidential race. the group is supporting candidates in the new york westchester suburbs and incumbents in california. that is your bloomberg brief. jonathan: up next, we set you up for the rest of the week. the trading diary is just around the corner. ♪

jonathan: these are the stores -- these are the scores. stocks still positive.

bond yields close to the lows of the year so far. pushing higher by single basis point. no big disappointment in retail sales. as we carry down to the opening, this is the trading diary. the fed meeting kicks off later this morning ahead of tomorrow's decision followed by a chairman powell news conference. on thursday another round of jobless claims and then we talk about other central banks. the bank of england on thursday and the boj on friday. for final thoughts, michael mckee is back with us in washington. we have all of the data. what will the discussion look like later today and what will it sound like tomorrow afternoon? michael: it will be a very interesting discussion and i think going into it jay powell had an inkling that some members of the committee or with him on the idea of a 50 basis point cut but there has certainly not been any data over the last several days that would push one way or

the other. he will to talk people into it -- we have not seen much movement in fed fund futures since retail sales numbers came out. the markets have decided we will sit here with eight goods odds on 50 basis point -- with good odds on 50 basis points but still pricing and the likelihood of 25. lisa: are we going to get dissent? michael: that is a really interesting question. we were talking about it here in washington. there is a theory that if you got dissent, if they went 25 and you had dissent of somebody wanting 50, then you've always been on the crazy 25 and that will -- it might be a communications benefit. if they went 50 and got a

dissent it would suggest that the inflation needs does were worried about that -- the inflationistas were worried about that. there could be communication aspects to a dissent we have not seen a long time. it is been almost three years since anybody dissented. it does not look like that is a likely prospect. jonathan: almost 20 years. i find that bonkers. michael mckee. looking forward to the coverage tomorrow afternoon to break down the fed decision. lisa: can you imagine if an alien heard our conversation about what the balance of risk is? people parsing here is to try to get an advantage at a time of people uncertainty in the economy in fed policy. jonathan: i think they would be confused about what interest rates are and what they are used for. what are they talking about. i think they would be confused about everything. coming up, we have julian emanuel of evercore, alicia

levine, and earl davis of bmo. your fed decision is coming up tomorrow. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

matt: futures indicate another high. dan bloombergtechtv open interest startsi right now. in: matt: retail sales unexpectedly rose providing the final slice of data before the fed decides on rates tomorrow. and what the fed