>> you have lower interest rates which the fed will deliver. the question is how much. >> we are looking for a 20 five basis point cut. >> they have no problem with the fed going 50 either. >> there is a good chance that they move 50 to frontload the process. >> they need to be cautious of being too dovish because we are coming off of significant speculation but it is not relief from the market yet. announcer: this is "bloomberg

surveillance" with jonathan ferro, annmarie hordern and lisa abramowicz. jonathan: it is the most important day of the year. it is lisa's birthday. happy birthday bramo. lisa: i heard there was a meeting. jonathan: chair powell organized it. from new york city, on this fed decision day, close to all-time highs on the s&p 500 and just about holding onto a 7-day winning streak. equity futures from her by 0.1%. on the nasdaq, up by two. lisa: a key question of whether we continue with this rotation trade or of whether the fed can cut rates significantly and that could be good for risk assets on the table. jeff says it is 50. jamie dimon says everyone calm down. it is going to be ok. that will be all we will be talking about. jonathan: this is a low conviction meeting. we have not seen one like this for a longtime. given we do not have much

conviction. why would the fed? if the fed is not certain of the size of the first cut, it is unlikely to have confidence in the magnitude of the full campaign. are we expecting too much from the federal reserve? lisa: clarity? yes. i don't think we will get the same kind of clarity that people have been dreaming of. you do get a better sense over the balance of risks, they need to get a descent, maybe even from a potential governor. for the first time in 20 years we are looking at a fed that is has consensus for so many years that now suddenly that can be used as a tool to give more uncertainty around the edges that we can dissect for the next couple of months. jonathan: at 2:00 p.m. eastern time we have the fed decision. 20 minutes that after we have gone through the statement, we have a news conference with chairman powell. after this one, you have to wait until november 7. two days after the general election in this country and dance could be different by the time we get to november. on the campaign trail it has been promise after promise.

annmarie, trump will bring back a tax break for the people of new york. harris, spend, spend, spend. katie: this is the oprah winfrey when it comes to taxes. everyone is getting a cut. it is a you tone from -- you turn from his own legislation that he is out there on the trail where they cap sold at $10,000. you could think this is a play at the top of the ticket but down ballot, he will be speaking in long island for a very swing different -- swing district. this is republican d'esposito. trump is trying to shore up house votes. but again, how will he pay for it? jonathan: this comes from the committee for the federal budget. check out this number.

we estimate this would extend the cost of extending the tax cuts and jobs act by 1.2 trillion u.s. dollars over the next decade. lisa: it is a point that you made yesterday that i thought was a really important one which is as much as people say divided congress that cannot get through, is that the case when you have enough tax cuts that potentially are bipartisan where you are potentially catering to the other side that could potentially pass the tax cuts? it raises the prospect of more spending, less revenue without an offset that has not been recognized in the debt markets which going back to the november 7 meeting, what do you do, fed? what do you do with this? why not frontload it now and say we will deal with it then. katie: that is why which a bow -- that is why what jay powell says today is important. this is going to be used by republicans saying that they are only cutting 50 because what do they know that we don't know. it will be used by the democrats as clearly inflation is no longer a concern and now as it

was said at the council of foreign relations, we need to secure labor market gains. jonathan: good morning. equity futures on the s&p firm or by 0.1%. in the bond market yields up by one basis point or two. euro-dollar, stronger euro. weaker dollar. 1.1138. lisa: you have a dollar on the dxy index that is 3% weaker. this is this big didn't bet that the fed will cut not by 50 or 25 basis points. but we care and there is a question going forward a whether they will cut by 200 basis points are the end of next year and that we might get some signal about today. jonathan: an interesting set up. stocks near all-time highs. bond yields near the lows of the year. the dollar near the weakest level of the year. an interesting set up going into this one. lisa: how offsides could traders be? maybe jamie dimon had a point.

everyone calm down. it is going to be ok. it does not matter the pace. jonathan: did he give us a winter forecast -- winter forecast? storms, clouds. lisa: the clouds are gathering over the geopolitical framework. jonathan: like something out of an action movie. coming up this hour, we will catch up with julian emanuel of evercore with stuxnet record highs. more tax promises on the campaign trail with kailey leinz. and torsten slok on why it doesn't seem very restrictive for him. with investors invited on the central bank and whether they will cut rates by 25 or basis points -- 25 or 50 basis points. julian emanuel is still bullish. here is what he will say. "the unique intersection of monetary and political volatility reinforces that this

is the most difficult bull market we have ever seen but by no means derails the path to 6000 that year end." are we overstating the importance of the first move of the federal reserve? julian: not this time. when you think about it, the backdrop is probably as unique as we could have ever imagined. i think a lot of people are surprised that that is the context with stocks at all-time highs. the fact is that we have seen the economy start to weaken around the edges. it is normal that the economy should slow. that is what we wanted all along. but confidence is a very fragile thing, particularly when the economy is starting to slow and you are getting signals from the labor market. in that respect, the fed's job is to make sure that it sends a message, and we do think they will do 50 today, that it is on the case if there is a

deterioration in the data in and around the election in an election that will be more divisive than. we can imagine at this. point jonathan: evercore has already sent a message. ed hyman throwing in the towel on a hard landing call. a whole host of reasons for that. can you share a few of them? why more constructive now? julian: look, the labor market data is slowing but by no means -- by all rights, you are still under their move in terms of where the labor market is. the weekly high-frequency data, the confidence has been subdued but it has not really mattered. as we saw this, the consumer continues to spend. there is a concern that the savings rate has dropped as low as it is and i think that is something we will be watching carefully. so far, it does appear as if the

deceleration is only that and not a downturn. lisa: how much does this hinge on just what the fed does and how much they cut this year and signal for next year? julian: well, there has been a lot of sturm and drum around the concept of data dependency. when you are at the turning point like this, it's important to at least acknowledge the importance of data dependency. i go back to my idea that confidence around the election could be very fragile. from that perspective, the fed needs to indicate that even with 50, we are still in a reasonably restrictive territory and we will figure out what we have to do as we go along. but that yes, this is the beginning of a cycle and not a one-off. lisa: some people wonder how could we get to 6000 especially by the end of this year if we

have already seen such high valuations in the tech sector after we have seen the rally already in the small caps. there are probably other sectors that have been challenged. and you say watch the buybacks. it is all about the buybacks. if they can buy back their shares cheaply, it does not matter. how much is this underpinning this whole call that if you get lower rates that it will de facto support stock valuations in a new kind of way? julian: when we think of the entirety of this year, it is proper, it is right to be a little bit uncomfortable of where valuations are. that is part of this while the worry that has supported higher prices -- wall of worry that has supported higher prices. the uniqueness continues to support markets. when you think back to six months ago, everyone was absolutely obsessed by the fact that the other 400 93 stocks on the s&p 500 were not growing

their earnings. we find out in the second quarter that those 493 are back to five point 5% earnings growth and the picture looks good, if not better back to the earnings of 2025 and that to us along with the fact that the fed will be supportive is sufficient to get to 6000. katie: you keep mentioning this political uncertainty. in 2020 the election was on the third. november 7 is when networks started saying who actually won. the fed might be going into the next meeting not knowing who was president of the united states. how does that affect their decision? julian: it most certainly does affect. the first thing they will want to do is see how the data evolves between now and then but also see how the asset markets evolve. i think this is part of the narrative of our generation, to disentangle stocks from the

economy. people say they want to do it. you cannot do it. the wealth effect is a real concept. they will really have to monitor the situation, particularly with regard to the ability of the election to be contested. i think our analysis is probably less like 2020 in terms of the risk and may be more like your 2000 where you did not know who the president was for an entire month afterwards. katie: what did the fed do in 2000 that we should look back and consider this year? julian: the economy was slowing in 2000. we had very high valuations as we do now. there are a lot of similarities. and the fed just kind of sat on its hands and did not cut rates until january of 2001 when frankly, the mood had soured,

financial markets had soured and it was already too late. the recession of 2001 was in front of us and we think that jay powell and the fed understands that history and will not allow that to repeat. jonathan: why do we have so much confidence in the fed when we really don't know whether they will get 25 or 50 at this meeting? julian: again, because if you think about it in terms of where the fed is and their legacy and they have been through an awful lot. you can talk about the fed in various ways. but the most effective thing they have done is five problems -- fight problems. the response was incredible. the unanticipated response to inflation. let's get serious. 525 basis points worth of tightening and we have not had a recession and the yield curve has been inverted, until recently. now we are all freaked out that the yield curve is on inverted.

when you think about what the politicians are planning to spend next year, you know why. it has been an remarkable time. jonathan: before you go, super short time horizon. if they don't validate today, is this market in trouble? what kind of dance are you thinking about? julian: you could good in a multi-day timeframe 3% to 4%. we buy that. the statistic we find relevant is in presidential election years where you are up double-digit on labor day like this year. six out of six times you have finished higher on december 31 than where you were on labor day. that is our bullish thesis. jonathan: thank you. julian emanuel of evercore kicking off rfid day coverage were futures are positive on the s&p. here is dani burger.

dani: a legal victory for google. it won a court fight with a $1.7 billion fine. back in 2019 the european commission concluded that google illegally prevented rivals from placing ads on third-party websites. judges at the top court said regulators made a mistake in that probe. last week the court ruled against google's attempt to avoid a nearly $2.7 billion antitrust penalty for favoring its own product results on search. tupperware has filed for bankruptcy. the popular company has struggled with declining sales and growing competition for years. liabilities up to $10 million. tupperware had dominated the food world of storage for decades but began in 2020 with doubts it would be able to stay in business. steve cohen has stopped trading.

he will remain the co-chief investment officer but he is no longer investing in client capital. the firm says he will instead focus on driving growth and mentoring and developing talent. cohen who also owns the new york mets has in one of the dominant forces in the industry for more than three decades. . jonathan: thank you. more updates in 30 minutes. up next, more promises on the campaign trail. >> i want people to pay their taxes but she will be raising your taxes to 50%, 60%, 70% and it is not sustainable. >> my plan is that no working family should pay more than 7% of their income on childcare. jonathan: good morning.

jonathan: squeezing out a seventh day of gains on the s&p 500. this morning adding more weight to the rally. up another 0.1%. yields higher by a single basis point in the bond market. under surveillance, more big promises on the campaign trail. >> those jobs that we created and i want people to pay for their taxes and all of that but she will be raising your taxes to 60%, 70% and it is not sustainable. >> my plan is that no working family should pay more than 7% of their income on childcare. allowing people to pursue their dreams in terms of how they want to work and where they want to work, it benefits us all and stirring things the economy -- and strengthens the economy. jonathan: vice president kamala harris and trump with more promises before november. trump with tax cuts in new york

and harris with childcare cost cuts. these campaign promises are getting more expensive by the week, aren't they? kailey: four dollars trump, he posted ahead of a rally that will take place later today that he will bring back salt, the cap that he put in place that capped the state and local tax deduction at $10,000. apparently that will be a reversal. he needs congress to support that. it could be aimed at securing or keeping the majority in the house of representatives, as some of those vulnerable republicans are in swing districts with high taxes like california and new york and long island, for example. those are the kinds of members who have been advocating for a lift to the salt cap and might be helped by this policy. it is also no tax on tips, no

tax on overtime hours, no tax on social security, a lower corporate tax rate if you make products in the u.s.. if you tally a look this up, it is $1.2 trillion over the next 10 years if the salt cap goes away in addition to what could be more than $10 trillion if all of the tax promises he has made including the permits of the 2017 tax cuts actually come to fruition. that is more than all of the nondefense discretionary spending that is projected in this country over the next 10 years. donald trump argues that the target will be growth that is stimulated by these tax cuts and tariffs that will raise more revenue for the united states. most economists will tell you the math does not work fully on that. katie: you mentioned anthony d'esposito, this is the district trump will be speaking in. he has welcomed this proposal on twitter. a lot of republicans want to penalize blue states like new

york and california so trump is saying this but could he get the entire republican party behind lifting the salt cap? kailey: it will probably be easier among house republicans. many of them are in districts that want in 2020 like michael lawler who have been advocating for a higher salt cap. the senate gets a little trickier. most senate republicans do not like the idea of giving gifts in terms of being able to have higher tax elections for people who live there but even senate leadership or those who would like to become the next senate majority leader they hope express some openness to the idea that if it is something that donald trump is advocating for, what donald trump says he supports is something that most republicans on capitol hill have gone along with, so it will be a question of whether or not republicans have the majority in the house and senate. that will be required for either candidate to get their tax policy or to have control of

both chambers. that is going for kamala harris as well who is making these promises on a childcare cap, 7% of income. that was part of president biden's build back better agenda. they have already done that to a certain extent but she is promising that in other subsidies, more widely. lisa: given the fact that there is basically a promise every day that they speak and you start running out of promises that you can make, there will be overlap on some of these promises. is there a greater chance that regardless of who gets into office, they could have policies that could get through that might be discounted in this gridlock washington, d.c. that people talk about. in other words, is there more policy implications that some people give credence to even with a mixed government? kailey: that is an excellent point. there is this fin diagram of donald trump and kamala harris's policies and where they overlap.

we have seen them adopt this policy that there should not be taxed on tip income for service workers, restaurant workers, that kind of thing. jd vance and kamala harris have talked about raising the child tax credit to higher than it is now. those are some areas where there does seem to be support from both tickets, which would make the assumption that no matter who seeks the oval office, policies in that regard could be put forward no matter what. arguably the same could be said for some protectionists when it comes to tariffs and this administration that kamala harris has been part of has kept intact the donald trump era tariffs on china. arguably they will not be as high as what donald is proposing. kamala harris has not suggested that. but you could see some overlap in these policies. jonathan: what is the buzz like around the federal reserve in congress? we have seen democratic senators asking for a 75 basis point reduction.

do you think the drafts are ready to go to be published by the republicans later this afternoon? kailey: they very well may be. we have seen consistent messaging around the fed from democrats. elizabeth warren has co-authored a letter like that for every meeting since january, she has been pushing for a cut. you have seen some change in the republican rhetoric as we have seen softening in the data. i spoke with members of the senate banking and house financial services committee, bill haggerty, who says the fed needs to follow the data. this should not be political which is a change of tone from what we have heard from republicans on capitol hill, arguing that it could be seen as political. allies of donald trump including senator josh hawley and john kennedy says the fed needs to cut rates because the economic data is suggesting so and they are becoming more worried about the health of the consumer. jonathan: kailey leinz, thank you, down in washington, d.c.

we will see some interesting posts later. lisa: there will be a truth post later when the fed cuts because donald trump is already set in an article in businessweek that the fed should not be cutting before an election. he will use this, based on conversations that i have had, i imagine the tone will be the is cutting, why? what do they know that we don't know? are we heading toward a recession? that will be the trump line following this fed decision. jonathan: stay tuned for clinical fallout immediately after the decision later this afternoon. equity futures right now positive by 0.1%. next, stunning scenes yesterday after the middle east and crude market that hardly blinked. more on that conversation up next.

jonathan: 7-day winning streak the s&p 500. close to all-time highs. going into fed decision day, equity futures positive by 0.1% on the s&p 500 appeared i noticed this yesterday, lisa. at the close yesterday, on the s&p, we closed exactly where we closed the same day jay powell delivered his speech at jackson hole. this has been a choppy road to nowhere. lisa: it has been a choppy road to nowhere on the headlight level.

on the surface, this has been a dramatic move. you are right. we are exactly treading water. under the hood, since then you have seen absolute shattering outperformance of small caps, of equal weight versus the large caps, versus some of the other technological names. this raises the question, can it be sustained given what the fed could or could not deliver today. jonathan: speaking to the move beneath the surface, equities futures on the s&p 500 might not have done much since the end of august. if you look at the front end of the yield curve, we have had 30 basis points. on a two year maturity, a 10 year, the 30 year as well. upon 30's by almost two. this whole yield curve shifting higher. the bond market cheapening just a little bit after a big run over the past few months. lisa: a lot of people have put their debts heavily into this

rate cutting story. just to give you insight into this lab meeting -- last meeting, just to give you a sense of the scope of that move over the course of fear within two months. there is this question about how burned people could be if the fed does not deliver not only 50 basis points but guidance that leans into the idea of 200 basis points of cuts at least by the end of next year. jonathan: this market stretched across equities and bonds. looking for validation from the fed. later this afternoon they might not be able to give it. let's go to the foreign exchange. dollar-yen on a five day dive. smaller japanese yen. we snapped that streak. we did the best since the middle of august. 14156 going into this one. lisa: with this market, interesting to see the flip that we have seen into positioning when it comes to the japanese yen, betting that the strike

will be sustained after a potential hike by the bank of japan. but there is this question of whether we can see this divergence accelerate or whether we have already overpriced everything in and hopes and dreams will be dampened. jonathan: dollar-yen negative by 0.6%. top stories, jp morgan ceo jamie dimon saying the fed decision today will not be earth shattering. whether the fed cuts rates by 25 or 50 is a minor thing because underneath there is a real economy and apparently some real risk. . he listed china as a big issue. katie: china, ukraine and the middle east. he is more concerned about what is going on in the geopolitical sphere. clearly he is nervous about geopolitics when it comes to the interest rate decision, he says people overly focused on what we have a hard landing. most of us have been through all of that stuff. it does not matter. i think it matters though.

it matters to the trajectory of its economy and people who want to enter the housing market. lisa: i am sympathetic to the idea of listening to the conversation every single day about 25 or 50 and saying really, do we have to hear this again? we have talked about it. do we have to have this conversation again? jonathan: i feel the same on that front. lisa: it is tedious after a while. there is a larger question of whether the market is not caring more about geopolitical issues and the fact that we have seen a number of u.s. companies that are still expanding in china. it is with these areas at a time that is still very much a concern. i would raise the prospect of why have we not see more in terms of a response from the corporations, from markets to some of the geopolitical events because it is a decent point. this is very much an overhang. katie: jamie dimon took a dig at financial networks saying if you will keep gapping on tv about it, when you come to bloomberg, we talk about the fed and

jupiter concerns. jonathan: well said. people with them -- familiar with the matter are saying that nippon steel is getting an extension, keeping the proposal alive and likely pushing a decision past the election. katie: basically they have 90 days now which means we will not get a decision most likely ahead of the election. that is the politics given the fact that joe biden, kamala harris and donald trump all said they want to block the steel and u.s. steel should remain in control of american hands. that is the politics in pennsylvania. the reporting is that the agencies do not agree. the dod and state department do not agree on whether or not this is a national security concern. until there is consensus, you will likely not see them want to put that on joe biden's desk. jonathan: i want to talk about the bigger story. pause.

imagine you received this movie script and you saw this movie at the theater. . i don't think you would believe it. you would think it was a stretch. what took place in lebanon in the last 24 hours, thousands of pages in lebanon exploding simultaneously at the same time, killing several people and leaving almost 3000 wounded across the country including hundreds of members of the hezbollah militant group, a cruising israel of orchestrating the attack. israel is declining to comment. this looks like an action movie out of hollywood. this is real life. what do we know happened? joumanna: at 3:30 a.m. yesterday, these pages exploded simultaneously. the health minister put out a statement saying 2800 people were injured. 12 people were killed including two children and many are in

serious condition. there are 200 to 300 serious cases. the iranian ambassador was also harmed in this attack and hezbollah and the lebanese government were quick to blame israel, saying this is an attack on lebanon sovereignty. israel has declined to comment and they have not said anything about the institute. it is an embarrassing security breach for hezbollah. a lot of people were saying what were the operatives doing walking around with pagers. we have to go back to the speech that the commander of chief -- commander-in-chief of hezbollah gave in february, he warned officers do not use their cell phones and he thought that maybe if they used low-tech device, it would be safer but fast forward to today and what you see is a massive intelligence and security breach and now hezbollah is on the defensive.

katie: is this a case of escalation to deescalate and do you think that israel wants to escalate to escalate? what happens next? joumanna: i think we are seeing a whole new level of warfare. what we have seen since october 7, daily exchange of gunfire on that border. we are moving toward a new type of warfare and this is cyber warfare. a lot more question marks. a lot different operators behind the scene. if we looked at the cybersecurity conference yesterday, it is still not clear but what has emerged is this feeling that these devices have been tampered with and potentially in a different country. therefore the shipments that came through just a week ago, according to a news agency that is closely associated to hezbollah, they were all contaminated with these

explosive devices. it does raise questions about this new type of warfare and certainly lebanon is on a high state of alert. even if you were going back, netanyahu was saying they have a new war objective now and that is ensuring that the border is taking care of so that people can start returning back to their homes because since october 7, there has been a daily exchange of crossfire and people have been forced to evacuate. they want to resume some normalcy and the question is unless there is a diplomatic solution, was this open the door to a larger scale operation. jonathan: shocking skills -- shocking scenes yesterday. thank you. crude lower. listen to this forecast that comes from max layton, thinking prices will be lower over the next 26 months and averaged $60 per barrel in 2025. we have plenty to talk about and

lots of commodities to discuss. let's start with crude. why is it is in your outlook -- why isn't this a bigger factor in your outlook? max: we see a lot of risk in the oil market. we have an average price of $75 for brent for the fourth quarter of this year. there is risk from what is going on in the middle east in terms of potential risk premium in the market. russia-ukraine, hurricane risk, libya's outages ongoing. the market may continue to get a boost from the fed cutting cycle. the broader dynamic that we should be highlighting -- that we have been highlighting since january of this year's status slower demand growth -- by january of this year is that slower demand growth is being met by capacity that they have been cutting for two years.

lisa: there is a question about whether oil will be lisa: lisa: increasingly divorced from the economic cycle in terms of an indicator. it makes it increasingly confusing as well as the transformation of a lot of the energy ecosystems to electric vehicle and other types of renewable energy sources. how much do you attribute that transformation or transition as part of that decline in demand? max: we think that is a big part of the story. there is a structural part of it being led by china which is investing in the energy transition. in response to shocks china will probably double down on that transition and specifically will accelerate the adoption of electric vehicles. retail adoption was around 54% last month of electric vehicles which is up 20% over the last 12 months.

china is basically solving all the problems we talk about in the west with respect to electric vehicles. we talk about range anxiety, price anxiety, charging anxiety, weather anxiety, latest vehicles, the latest batteries. some of them have not been mass-produced yet. they're are all these problems and there is evidence in the data. there is a cyclical element as well which is why the fed is most likely going to be starting a pretty abrasive -- aggressive cutting cycle this week. lisa: oil used to be a geopolitical temperature taker or at least an economic temperature taker. now it seems to be shifting to precious medals. you expect precious medals will get the biggest boost from some of the rate cuts. can you explain why that is and maybe that is the better macroeconomic indicator? max: we are really excited about

precious metals. i spoke about how oil is negatively exposed to china's energy transition. so for is positively exposed. china has a bifurcated economy where the transition sectors are strong and the cyclical, the housing, the private sector, the prices of property, wealth impacts our super negative, sentiment is negative in china. silver is a list exposed to that. the retail buying of silver just wanted to pick up in the last couple of months. you are seeing the first imports of silver into china's than we have seen for years. silver is uniquely exposed in a bullish way to the bearish part of china and the bullish part of china. it will solve problems on the energy side in particular as well as ev's. both gold and silver are super exposed to lower real rates in the u.s., weakening the u.s. growth.

we will probably get a big shift into gold and silver from u.s. and global investors. katie: do you continuously see central banks buying gold to diversify away from the u.s. dollar? max: continuously, certainly we see it for the next 12 to 18 months. it is tough to forecast beyond that horizon. that is a long enough horizon for me. there is enough treasury holdings left to sell to by much more gold. jonathan: we have to do more of this. appreciate the clarity. max layton of citi. he likes precious metals. i think he gets excited about precious metals. lisa: a lot of people are getting excited about precious metals. especially with his point that they are exposed to the good sides and the bedsides of economic -- of china's economic cycle. jonathan: let's get an update elsewhere. dani: senior u.s. and chinese

economic officials will meet this week in beijing. the biden administration is seeking to confront china over alleged industrial capacity. the allegation includes officials from the treasury and federal reserve board. it will be led by the treasury undersecretary for international affairs. blackrock and microsoft are teaming up in what will be one of the largest efforts to build ai infrastructure. the companies will seek $30 billion of private equity capital to build warehouses and energy sources. they will be mostly u.s.-based but a portion will go to u.s. partner countries. it adds to microsoft's already large ai ambitions with $13 million invested in openai and larger plans to overhaul their product line. novo nordisk says ozempic is expected to be one of the targets for a price cut in bargaining with the u.s. medicare program. the inflation reduction act allows the u.s. to directly negotiate with manufacturers for the first time. the 15 drugs targeted for the

next round will be announced early next year. ozempic has a listed price of just under $970 per month. that is your brief. jonathan: ridiculous. thank you. more in 13 minutes. up next, struggling to find consensus. >> it's not just that we don't know the destination. we don't know what the journey is. we have the fomc and the market and what seems to be the consensus on the fed. jonathan: special coverage later on the federal reserve decision. mohamed el-erian going into this decision on the other side. and following the news conference. up next, torsten slok of apollo.

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jonathan: good morning. positive by 0.1% on the s&p.

pushing higher in yields also, 3.6624. struggling to find consensus. >> it is not just that we don't know the destination. we don't know what the journey is. there is disagreement as to how quickly will it go to forward leaning. we have disagreement within the fomc and the market and what seems to be the consensus on the fed. for me it is fascinating. jonathan: most of us are confused. investors bracing for the fed's first interest rate cut in four years and looking for answers to big questions. torsten slok saying despite surveys showing that the consensus expect soft landing, rates are pricing in a full-blown concession -- recession. it would mean a fed funds rate at 3% but maybe this estimate is

wrong. torsten joins us for more. we have a lot to work through. if they continue the conversation and ask themselves what is the biggest risk upside risk to inflation or downside risk to growth, what do they come up with? torsten: it is correct that inflation was 9.1 in the summer of 2022 and now it is 9.5. we have come a long way when it comes to inflation. the other side with the dual mandate on full employment, all economic activity indicators, real indicators for everything ross gdp, -- across gdp, retail, industrial, remains quite strong. they put a lot of weight because of labor supply. they also put more weight on all the other economy indicators. i think they would do it

from the perspective of seeing what is the dual mandate saying and where are we on the various indicators. jonathan: do you take issue with the conversation of the returning back to 3% quickly? torsten: i think it is the returning to 3% that is problematic because the 3% number is a terminal estimate that they put out in the dot plot that they literally have on the new york fed homepage is 3%. if this were the case, monetary policy would be much more restrictive and the incoming data when you look at it, 3% yesterday, that is not restrictive. if you look at industrial production yesterday, that is not restrictive. if you look at a wide range of indicators, it does not look restrictive. most in private credit, known default rates are going down. if we had a decision, the rates would not be going down. they would be going up. given the vast majority of indicators, it is still telling

you that it is problematic to sit there with high conviction and say that monetary policy is restrictive. lisa: we are in a kumbaya kind of mood. it does not reduce the need for a 50 basis point rate cut today. you are saying longer-term and they should push back against him of the expectations -- some of the expectations for 200 basis points or to quickly get down to that level that may be neutral. is that correct? torsten: if we think that it is three and it is actually 4.5, then you are not in a rush to cut 50. then you can cut 25. there is no need to hurry to lower interest rates if we don't need to get quickly down to three but 4.5. it does get quite important whether it is 25 or 50 because

it signals whether we are in a hurry to do something or whether we still have time to look at the incoming data that still continues to be strong. lisa: what in the data makes you concerned about a reacceleration of inflation which would mean the other side of the mandate that could potentially be negative? torsten: one obvious area is housing. housing has a weight of 35% in the cpi basket. we could lower rates dramatically as we have seen over the last three to four weeks that will give a boost to housing. some of the indicators have started to turn around and with a low supply of houses, inventory being low by historical standards, you could have at least if you take the chart, it does look like we could get a rebound over the next several months in the housing components of the cpi. katie: if the fed cuts 25 basis points but jay powell has dovish language, would that be almost equal to a 50 basis point cut?

torsten: the complication around what they do today, i think they will go 25. if they go 50, how they talk about this will be extremely important. that is why the dot plot coming around today with the statement is critical for rates expectations. markets are tried -- pricing 10 cuts which is based on the idea that we have to get down to neutral and 3% as quickly as possible. if the dot plot tells you maybe we are not getting 10 cuts. maybe we are only getting six or seven cuts. maybe the markets will say maybe we are overpricing this and too hooked on the model in the fed's basement rather than going into the living room and looking at the incoming data. katie: i want to ask you a question on fiscal. the u.s. government pays billions when we pay our interest. with the fed cutting, how much less money will government pay on our interest? torsten: we cat lady that if the fed cuts one percentage point,

the interest payments on a daily basis would decline from $3 billion to $2.5 billion. that is a significant number relative to where we have been historically. lowering interest rates helps in service of debt servicing costs but we still have debt levels continuing to rise. that is creating challenges for the fiscal situation. maybe in the near term there may be released but down the road, this problem is not going away. jonathan: is john williams in the basement? torsten: the focus here on what it is, think carefully about what the ecb is saying, the bank of england. they are not framing their decisions on monetary policy according to some filter. they are framing their debate on the incoming data. i think having that goes into it -- everything that goes into it, it is very interesting. i am just telling you that if you think about the incoming data, then putting it up on the scale, the incoming data should get more weight.

jonathan: get out of the basement and get in the living room and look out the window. lisa: nobody puts john williams in the basement. there is the feeling that maybe we are placing too much emphasis on certain measures that are fuzzy. jonathan: there is a great divide going into this decision between market pricing and economist. more than 100 economists surveyed, not even 10% think a 50 basis point cut will happen today. that is something disparate is between professional economists and market participants. lisa: how do you make a move that is outsized at a time where you are only able to see a lagging indicator and the data itself is contradictory? we are seeing different signals in the mortgage market versus automobile delinquencies. jonathan: torsten slok, thank you. torsten slok of apollo. up next, alicia levine, michael

sheppard and gregory peters. the second hour of bloomberg surveillance just around the corner.

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>> is a good economy. >> given how the fed is behaving so slowly. >> the soft landing narrative can probably survive if the fed is a bit proactive. >> the rate cuts may matter more than how they do it. for me, it is a fascinating time and also a confusing time.

>> this is bloomberg surveillance. jonathan: the second hour of bloomberg surveillance starts now, live from new york city this morning. for audience worldwide, that fed decision is just around the corner. equities very close to all-time highs. equity futures up .1% on the s&p. lisa: this is a market that has gained on the idea that the fed is squarely focused on the labor market and preventing further weakening. that signal was the call to go into risk because the fed wanted to get ahead of any downturn. jonathan: this could go either way, 25 or 50. it is finally balanced. how may times have you heard that over the last few weeks? the overwhelming majority is looking for 25 here and not 50.

it is a different conversation on wall street. >> take a look at the atlanta fed gdp now forecast, which rose yesterday in the latest reading. that compares to well below that in the last fed meeting, so it raises this question, if you have gdp forecasts accelerating and other measures improving, including retail sales components, that is where you get the real debate that you are having now. >> the market felt like it was leaning toward 25 basis points until we got those articles. it is a nice edge. torsten slok, 25 basis points. then greg peters said it is the should or could debate. jonathan: the title of his piece yesterday, disappointment guaranteed. is disappointment all but guaranteed this afternoon?

lisa: if they go by 50, it is baked in. there is a question now about whether this market is priced to perfection either way. we will have to see. maybe jay powell will come through once more. >> the yield has dropped for the best part of 12 months. five or 10 minutes ago, we had a conversation with torsten slok of apollo. he brought up the point on the ecb versus the federal reserve and the way they talk about reducing interest rates. in united states, we are looking for guidance and conviction around the return from 3% to neutral. we are talking a few months time. it is a different conversation over there. lisa: you have made the point that if the fed were to talk like that, watch out. this is how much this market has

conviction, that the fed is leaning heavily into the dual mandate. this is now a one mandate fed, with a labor market that has shown signs of cracks. there is a lot of disagreement among luminaries. one said they might be too late. you have ray dalio saying 25 on the margins, you do not really need it. you have torsten slok saying the same thing. this is a heated debate at a moment when it seems it does not have the same inflationary pressure. jonathan: i love it when you do voices. why does jeff sound like tom? lisa: i read to my kids a lot when they were younger, so i cannot help it. i do different voices that i do not want to be offensive. and actually create true impressions. jonathan: equity futures positive by a 10th of 1%.

bonds a little lower and yields a bit higher, up by a basis point or two. coming up, the ultimate soft landing and bets that rate cuts will boost regional banks and expecting the fed to go big. we begin with stocks close to all-time highs for the fed easing cycle. we think the fed could cut 50 basis points. there are some areas of concern, including softness in the labor market and stress for the consumer. alicia joins us now for more. let's member the question -- remember the question we started with. is disappointment guaranteed? >> the short answer is yes because of the pricing in the markets. you are guaranteed one side or the other of the decision will

be offsides because bets are being made on it. what is unusual about the meeting today and the press conference is there is a lack of conviction in the market itself, so you are guaranteed to have disappointment. we think the fed probably should go 50. if you are really looking at the labor market, and downward revisions show the labor market normalized early in the year. when we thought the labor market was hot, actually it was normalized, so if you are looking for that inflection point this would be a good time to cut rates. because the market is offsides on this, the fed has not had time to signal to the market, so i think they are going to go 25 but i think data suggests they

are in a tough spot to do 50 because it has not been fully discussed in the market. jonathan: we heard that in the previous conversation as well. i want your understanding of where the conviction is at the federal reserve. i am pleased you brought up that word. this feels like a low conviction moment for markets. >> i think to some extent. the data have been all over the place, the retail sales data. labor force data is turning to show cracks, but not on the new claims, just all over the place. i think there is low conviction for today, but the path is convicted, meaning we are embarking on a rate cutting cycle that will last the next 18 months at least, so i think you will get conviction on the path, which is why today can be low

conviction, because the path is clear were. -- clearer. so the conversation that it does not matter whether they do 25 or 50 is the right way to frame this for markets. last week, the s&p was up 4%. the nasdaq was up 6% as the market started pricing in that 50 basis points of cuts into the end of the week. so as you started getting that conversation, monday was only 12% chance of 50 basis points. by friday, we were 50, 50 1%. the equity market rallied right into that. could you see a selloff? maybe. lisa: which is a reason why disappointment is almost guaranteed. can they be dovish enough to confirm the rest of the path everybody has priced in? is the market wrong and pricing in some any rate cuts through next year?

mortgage applications are up. there is a sense of mission accomplished. >> there are about 240 basis points of cuts priced into 2025. we think that is a lot because we still see the u.s. economy being in good shape and it seems the credit sensitive areas, they want contracting in the last year or so, are the ones before the fed starts, so i do not think the fed needs to cut 2.5% for the fed funds rate to be at usual. i think they can cut less, so i thing it is a lot. we have seen the market gets overexcited on rate cuts in the future 12 to 18 months and then takes it back as the economy comes in better than expected. i think you will see the story of the same going forward. in the end, the fed should cut 100 basis points.

they will do 75 for the year. i do not think either are that different from where the markets are. >> we treat the market as though we are reading a story and different narratives. there is this question about whether -- because at this point they are hinging on that 240 basis rate cutting projection and ongoing strength. that potentially could negate that need. alicia: for the stock market and earnings, the strength of the economy is much more important than where interest rates are, so we need growth and earnings growth. that is what gets a higher stock market, so i will take the strength in the economy any day over a lower fed funds rate.

so i do not think the market is in trouble here. i think the market ends higher with some volatility around elections. this one is close so far. if it becomes less close, may be the market could get out of volatility range but we do not think stocks are at risk because we think earnings are coming and margins are better than expected. jonathan: we have not even seen a rate cut yet and we have seen big changes. mortgage applications index rose 14.2% in the week ending september 13 after rising the previous week. listen to these numbers. purchases up by 5.4% after rising in the prior week. if you want to extend the cycle, is this how we are going to

extend the cycle? lisa: this is the issue we were hinting at. you are already seeing the relief pointing to a re-acceleration in activity in certain areas of the market that have not really seen this incredible amount of pain. it raises the question whether they need to go that far. jonathan: your thoughts on those numbers? >> it is great. it is not surprising. we are very close to that. we are getting close to five and unlocking the mortgage market here and seeing existing homeowners move on. jonathan: we are having a conversation about taking fed funds back to three. i wonder if we get close. >> there is so much demand out there for housing and mortgages. rates are now 150 basis points

lower than they were a year ago on mortgages. they are moving and we can always refinance if they go lower. so this is a great first move. the rate move here, despite the fact that overall the u.s. economy was relatively immune to the rate hiking cycle but you're seeing is areas that were susceptible and froze up because of the tightness of credit are loosening now, so i do not think the fed needs to cut 250 basis points. >> if they signal a rate cutting cycle, do you buy gold? alicia: gold does not have a yield. you get some risk off trades. but that is not an allocation we do for our clients. there are other ways of doing that. munis are still cheap compared

to bonds, but we are convicted in the path, meaning whatever the fed does today rates are going down. that is good for risk assets and bonds. the other thing is there is still 6.3 trillion dollars of cash out there and a lot of discussion when that is going to move. after the global financial crisis, it did not move. you do not see this drop even when markets recover. in this case, as refinancing risk gets higher and the fed fund rate moves lower, you will see that move into bonds as an alternative to cash. jonathan: equity futures just about positive on the s&p. with your bloomberg brief, >> here is dani burger. >>citadel securities shelved its plan to join the ranks of bond dealers.

for nearly -- people familiar say citadel has cemented its status as a key market maker and no longer sees the need to become a primary dealer with the fed. the ceo of italian beverage company campari is stepping down after just five months on the job. his resignation follows a slump in shares, a 15% drop while on the job. his predecessor served as the ceo for 17 years and expanded the maker through acquisitions. the merger between hawaiian and alaska air is closer to becoming reality. the u.s. department of transportation gave the green light to the merger after the carriers agreed to new consumer protections. alaska and hawaii and must protect the value of program

rewards, maintain existing services, and preserve support for rural services. jonathan: next on the program, biden's big bet on ships. >> our chips and science act. private companies are now investing tens of billions of dollars to build a new chip factories in america. jonathan: good morning. ♪

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jonathan: equity futures positive by .1% on the s&p. the dollar near the weakest level of the year so far. under surveillance this morning,

biden's big bet on ships. >> after years of importing 90% of our semi conductor chips from abroad, which america invented those chips, our chips and science act led to private copies from around the world now investing tens of billions of dollars to build new chip factories in america. >> intel confirming its eligibility for $3 billion in federal funding, the government big on the company to boost domestic production to reduce reliance on asia. walk us through the latest developments on this front. >> there has been a lot happening with respect to intel. we have chronicled over the years all of the company struggles and they have reached an inflection point. we saw that rougher earnings outlook that they gave toward

the end of august that sent company shares sliding by the most in decades and since then everybody has been wondering where they go from here. the company decided to cut more than 15,000 jobs and trim $10 billion in spending, but now we are getting other bits of good news. one of them is this news from the company that intel is eligible for up to $3 billion for military chip production. this accompanies $20 billion in loans and grants that intel is due to receive for commercial production under the chips and science act. the company also announced a partnership with amazon world services to produce a multibillion-dollar initiative to produce semi conductors for artificial intelligence for amazon's cloud computing arm.

this is potentially more significant than the military chip we were talking about because it shows intel is developing a commercial customer base that could feed some of the new plants and support new plants that biden was talking about and hoping to see built. >> this is not just about building manufacturing bases. this is a national security concern. why is the administration touting this but looking to block an extension when it comes to steal, a japanese company and their 14 billion takeover of u.s. steel? >> on the steel front, it is a politically charged question because the attempt to buy u.s. steel there is such symbolism and it is so freighted with u.s. steel being an iconic company for the u.s. and especially for president joe biden, who hails

from pennsylvania, so the resistance politically to the proposal is not surprising. we have to separate the national security front on ships because that is a core and consequential technology that, if the u.s. loses ground to china on this front, it would be a potential risk militarily in the pacific basin. >> do you know what the natural secured concerns are? -- national >> security concerns are? one is that it does a fair amount of business in china and would u.s. steel production be vulnerable to shifts once a coming takes over if the transaction were improved -- approved? it is not looking terribly favorable. with that production be shifted over there? if u.s. steel made advances

domestically and perfected techniques, would those get transferred somehow to production in china? they are worried about the nexus of u.s. production with chinese production, should it somehow pull off a completion of this deal. lisa: when i saw it was pushed back until after the election, this particular decision, i thought dozens that make it -- doesn't that make a good meaning for politicians? they can say they are lately against it and approve it later when it seems there is no better option for u.s. steel. is that the right way to read this? >> i will share your cynicism. it did look like a convenient move to push it after the election and remove it as an issue if the decision were made

before november 5. that would expose the current democratic nominee and presidential candidate kamala harris to accusations that, no matter which way it goes, it would somehow be harming u.s. industry. if they decided to approve it, it would hurt party standing with union workers, whose votes and support they need come november 5. jonathan: i think nippon steel underlines one of the issues participants have with the election, the difference between how people campaign and might govern and how much daylight there is in between. because there is so much daylight, it is hard to predict what it will look like in 2025 and beyond. >> the reason i'm complete lee shocked every time there is a move is because there are still people wagering money on these decisions. there's always a gap between

campaign promises and what happens later. i do not know that we have ever had such a big vacuum of an idea of what could transpire depending on who wins and what the congressional makeup is. that is one reason people are ignoring it. annmarie: this finned diagram when you look at things like taxes -- how many times have they ended up in the middle to comes to no tax on tips and child tax credits and now donald trump is for lifting and expanding the cap on salt, something that schumer told me for sure if he maintains his job he is going to make sure they get rid of that cap, so there is this idea that maybe when it comes to tax policy there will be some bipartisan effort. jonathan: i agree. there's almost a bias, some kind of reflexive attitude to all of this. i think you have proposals now

where you could get some kind of agreement on the democratic side if you end up with a trump white house all over again and the salt reduction is one of those issues. lisa: the interesting thing about the issues where there is bipartisan support, none of them really increased revenues for the government. jonathan: that deficit is getting a little bit bigger. next, expectations rate cuts could boost regional banks. you are watching bloomberg tv. ♪

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♪ >> two hours away from the opening bell, equity futures up by 1/10 of 1%, adding just a little bit more weight to the recent rally. let's switch up the board covered. the page and get into the bond market story. adding another basis point or two to the front-end of the yield curve. going into the today meeting. as it concludes we get the feeling people want to give just a little bit back in the bond market after a big rally over the past month. lisa: basically take some chips

off the field, that is what this feels like. are people down for disappointment either way? just patent how much this market has already moved ahead of the fed meeting. jonathan: some of that continues elsewhere. we get to the foreign exchange market, dollar-yen re-imposing a little bit of strength on the market. is this turning out to be no longer the big trait to watching foreign exchange as we go into this decision a little bit later? this time from the other direction. lisa: this is the big question, have we shifted too quickly to belong from the short position on the japanese yen and is this sort of not this is fairly the same disruptor that it was back then? have we gotten to more of an equilibrium? we shall see. i think that there is more to a risk now simply to the positioning isn't as lopsided into people aren't watching it as much. maybe the bank of japan can take

the night off. jonathan: 140, 173. good evening, tokyo, we know you're watching. israel planted explosive materials in five thousands of pagers that targeted hezbollah in lebanon. several people were killed and nearly 3000 were wounded. stunning pictures coming out of the country. annmarie: this really erodes trust within hezbollah because you had the head of the organization telling individuals not to use smartphones. go to things like pagers because we want to make sure that israelis can't infiltrate our network. the u.s. coming out and saying antony blinken right now speaking in cairo, he's telling reporters that the u.s. did not know about the synthetics and that broad-based eking the u.s. has been clear about the importance of all parties aborting steps that could further escalate the conflict. with this escalation to deescalate or to potentially see

broader escalation? lisa: that's what i think a lot of people in markets have been watching. there are a lot of humanitarian and other issues at play before market perspective. this is a central question overhanging some of the complacency that we see. the question of our be accurately pricing the risk of that kind of escalation that israel has said that it wants, and hezbollah, they have been lobbing missiles at each other for roy a while. that is a key question when cease-fire negotiations have sent blinken back to the region for the 10th time. jonathan: the message they are sending from israel is pretty clear. will find you and we don't even have to come into the country to do so. we saw this in iran about a month or two ago. we don't have to be there to get you. lisa: especially with a low-tech instrument that was used to avoid surveillance earlier which really raises the action of disrupting some of the communication among operatives right now what are they going to

use to communicate, passing notes? at what point can ud industrialize yourself at a time and that is the main method of asian? >> it is a complete breakdown of their operations right now and a complete erosion of trust. how do they communicate and do they trust the devices they were told to downgrade less technological devices. use smartphones, youth pagers. israelis are saying no matter what you use, we are going to find you. jonathan: the latest from bloomberg, with share some of that with you. japan's nippon steel has been granted an extension to refile takeover land of westfield lightly pushing the decision until after the presidential election. becoming a hot button campaign issue over the last several months. >> obviously the politics of this have to do everything with pennsylvania. harris, trump, byron all saying that they want to make sure that u.s. steel remains on american soil and they would lock this

agreement. so they have this grace. of coming out, saying whatever they want knowing the deal so growth room after the election when it actually comes to city us, clearly there is no consensus. there is no consensus according to the reporting when it comes to the dod and the state department about if this is an actual national security concern. jonathan: a few stories from pennsylvania so much so that we had to debate how they would be talk about it. thoughts? annmarie: missed opportunity. >> the questioners? lisa: from pennsylvania steelworkers and for markets and for foreign companies that want to know what it's going to be like to be business in the u.s. in the future. and what is considered national security concern, especially when you consider japan as an ally. lisa: i was wanting some clip from the debate and other interviews and taking notes at how to avoid answering questions.

jonathan: taking notes on how not to conduct interviews. lisa: i'm not going to go there. you can asking a question, 25 or 50? and people who are suffering out there, we are going to help by cutting any tax. jonathan: i grew up middle-class. with turning to the patent and get this story. jp morgan is in discussions with apple about taking over his credit card program. there is among several potential seniors after goldman sachs opted to ditch the partnership last year. this is teeing up a larger conversation about the future of banking, especially over goldman. i'm really looking forward to earnings season about a month away. i think he kicks off on october 11. lisa: the question of whether lower rates are good or bad for banks, whether net interest margin is going to come down significantly and on the other side, for creditworthiness of a time with those of the their was

the economy they could be offset by some of these rate cuts, but not yet. is it the ally of the world or is it both, just depending on which sector of the banking universe you look at? jonathan: jp morgan up by 23%. the talk about the regionals. regional bank shares rallying as treasurer's countdown to the bank decision. small and midsized hundred posed to see much-needed relief with borrowing cost expected often first time in four years. hermann, welcome to the program. ideal rate cuts, what is an important channel to alleviate some of the pain these lenders have been going through? >> appears three arraignment -- mean recent the market is enthusiastic. number one, deposit cost will come down and as you can recall, deposit cost have been a hindrance for banks over the past year or so after the failure. number two, we get the potentially better credit

quality, lower borrowing costs for customers, silicate help lower the net charge offs for the banks. number three, we haven't seen a lot of loan growth given elevated interest rates. lower rates could potentially spur some improvement on that front. jonathan: the word i'm interested to hear his relief. are we seeing the regional banks on the index up by something like 50% so far this quarter? we've seen the relief rally. do you see a sustainable tailwind into 2025? >> i would agree that it is a relief rally, but you have to step back to levels of margin 2023. we are just back to were restarted. i would also say that the banks are talking about improvement in 2025. there is still some potential tailwind from repricing of fixed-rate assets, margin could stabilize deposit costs. that is all helpful for banks going forward. lisa: so are higher rates good

for them, or low rates? >> stability is good for them. the expectation is we have a right cycle that is more predictable than what we had last time. that is what banks would like to see, stability, a positive sloping yield and potential for loan growth to return. that would be the goal. >> then the whole question about whether we understand the impulse that lower rates will have some of the market that have been the most stagnant. i'm thinking of commercial real estate. i'm thinking of real estate work generally. anything having to do with property in these banks are highly expoed oaluations that may be have been fully reset because there's been no activity. at what point can you the ongoing resetting of prices that can be harmful to the bottom lines going forward with lower rates? >> that is a risk, something the banking industry will still have to work through. i would point to the fact that

the pnc cl recently noted that we are still relief only in the first inning of a shakeout in the office commercial real estate market. there is more to come. jonathan: so help us understand. seemingly ensuing to lift all boats. >> capably depend. you will have to dig deep, but overall, banks have hedged a lot the potential downsides for lowest interest rates. jonathan: this will sound somewhat snarky then. we need to identify the banks that really mismanage their interest rate risks, and they are the ones that benefit the most. >> you could point to banks like american comity corporate. packet pickup that value that they lost during the rising rate environment. lisa: i love that. i don't mean to sound snarky, but. jonathan: relief rally or long-term?

given how badly they mismanage the interest rate risk on the way up. >> you can say that there is some unlocking of the laggards during the past year that will now be the beneficiaries of lower interest rates. >> at this point, what is the right time to get into regional banks? i know you're not going to recommend, but how much do you see people interested now vs. two months ago? >> there is still some optimism that they are really over the hump. over the past couple of quarters or so, there is still some potential for margins to really stagnate. but the banks are actually, we've hit the bottom of margins and now there's potential for that to continue in 2025. there's some positive sentiment out there, but on the other hand, there is still an unknown to where the economy is going. are we actually going to hit a

recession? i would point to that as well. jonathan: thank you, sir. the latest going into an important federal reserve decision later on this afternoon with an update on stories elsewhere with your bloomberg brief. dani: chevron boss mike werth attacked the biden and oil and gas policy, when you get on pushing up prices and undermining energy six. . he spoke in houston at the gas tech conference. he said the moratorium on new export permits but politics over progress and would hurt climate efforts. the industry as a whole has pushed back on the policy as it struggles with a surplus of natural gas. there won't be any frills for passengers on the new airbus jets. the aircraft will fly a route from london to saudi next year at a lower cost. they are stripping away converts like seat screens and reclining seats, and food will only be available at a cost. private equity investors reportedly discussing a takeover

of red star. red started spotify miami-based 777 in 2022, something that fans heavily protested at the time, and even because a game to be abandoned in one instance. he already co-owns the boston celtics and the italian football club at atlanta. that is your brief. jonathan: what a life. give us a hint in the last conversation. a few conversations ago. lisa: he said of any active conversations? there might be. jonathan: making dinner reservations and feet of looking at for four clubs to buy. lisa: i want just a window into his life, how many games he goes to puryear, how he gets there. bruising defeat yesterday. jonathan: pretty brutal to watch. i was hoping to escape that conversation.

you watch that, didn't you? it was a good two minutes. it went downhill after that quite quickly. >> dislike mohamed el-erian vs. jonathan ferro. jonathan: could you make this any more painful for me? up next, that the fed moment. >>'s to maintain for the bond market is whether it is 25 or 50, there's a ton priced the bond market and it is going to be hard, we think, for the fed to deliver all of that. jonathan: that conversation up next. you're watching bloomberg tv. you're watching bloomberg tv. where ya headed?

susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management ♪ jonathan: things are calm, steady waters right now. yields a bit higher by two basis points. nudging up a little bit.

going into the fed decision a little bit later on this afternoon, the bond market continues to cheapen across the curve. under surveillance this morning, it's the fed's big moment. >> main thing for the bond market is whether it is 25 or 50, there is a ton priced into the bond market and it's going to be hard, we think, for the fed to deliver all of that based on what we know now. that's kind of a recipe for a little bit of a backup and yields for here. we think it very unlikely we are going back to some of the yields we've seen over the last 12 to 18 months. jonathan: treasury yields are climbing and chairman pels press conference 30 minutes later. we believe the fed should cut by 50, considering the urgency to start and easing cycle that culminates in a neutral rate, although it would be atypical which is also why it might make sense at this point. great, let's pick up on that, and welcome back to the show as always. 50 basis points is what you

think they should do or what you think they will do at 2:00 p.m. eastern? >> what they should do doesn't matter. it is what they will do, and quite frankly it is unsure. this is rare, jonathan. normally, you have a pretty good expectation of what the fed is going to do. this is highly unusual. the fact that we are having this raging debate whether it is 25 or 50 just speaks to how poor the communication process has been. but i do believe there is a high probability of a 50. i also pushback on disappointment. not everyone will be disappointed. disappointment is not equally distributed, and i think 25 would be far more disappointing to the market and 50. jonathan: walk me through what would be disappointing about the federal reserve coming out today and think it is 25 basis points, we think the economy is doing

ok, if it gets worse we are ready to act. >> expectations. what is being priced in the market. ultimately the markets are forward discounting mechanism and really what the markets are looking for is where is neutral, how close are they going to get to neutral, how close are they going to get to being accommodative? and the idea behind a 25 suggests that they are in no rush to get there, and the markets want to get there sooner rather than later in order to justify this soft landing thesis. >> is there a scenario where you could see jay powell out-dubbing this market already? >> that is really hard to do. the market is push and push and push. at every turn there is so much being priced in. but the only way to do that is really coming over and above 50 which i think is an extremely low probability. but also keep in mind that we

have the dot plot coming out and trying to square that circle, so to speak, in 2025 is what investors are going to look at. so what we need to see is kind of what is the idea of neutral rate next year, what does inflation look like, what is growth, and i think the expectation will be to see the median. move down which matters a lot less, but more so in 2025 and 2026. >> senator warren will be disappointed with the disappointment because you just indicated a 75 basis point rate cut is not in the cards today. there is this question going forward of whether this market cannot be on the right side given how much they have priced in without any sign of weakness and with what we saw earlier this morning with mortgage applications taking back out and actually mortgage rates already falling to the lowest in two years before the fed does anything.

>> i think that is quite right. the market that put this in such a meaningful way. i know i mentioned markets are a forward discounting mechanism, but this is that in extremist. i do think the markets will be poised for disappointment at some point. i look at kind of the front end, belly of the curve. this too much being priced in. all those lead to kind of 280 in forward space. a lot has to happen from now to then, and honestly you look at across markets, the bond market is essentially telling you that a recession is a high probability events, but you have risk markets still trading as if it is a go-go type of economy. i think that has to be reconciled here over the next six months or so. because right now, there is a huge disconnect. >> when it comes to at least it was just talking about, that

we've already seen mortgage applications, they are already pricing in the fed cut. what is the risk now for the acceleration of inflation as the fed brings down rates? >> i think that is one of the biggest risks that we face heading into 2025. it is the firm belief that inflation is no longer an issue, but if you start stimulating, if you move into an accommodative stage, the economy is actually still pretty decent, and i think that risk is on the rise. i don't think investors are properly focused on that is a potential tail risk here. lisa: are you moving away from longer-term bonds? >> the 20 years always problematic. the way we are thinking about it is more being realized in the

front-end. i don't think the fixed income in the treasury space is in the tens, 20's, or even 30's. i think it is more tens. if you look at what is being priced over the next two years, three years, and you can look at one year, two year, whatever your choice forward is, it is all pointing to the same place, the same direction of 270. and that seems overly aggressive to us. so i think the trade is more in the front-end, leaned against those forwards. jonathan: i'm just working through some issues in my own head about how this is going to work. let's say for disappointment don't validate market expectations today. i wonder how that works out the longer end of the curve. do you look at the 10 year after that and do you priced out rate cuts, or do you start the price in a policy ever in a fed that is not moving quick enough, and it does the long end actually rally?

>> atan excellent question. the duration five of the fixed income, all roads lead to lower yields. i do believe that if you don't see rate cuts come through at the pace that is being priced in, that has to manifest itself into at least ceasing the rally in the back end and maybe even pushing rates higher. rates seem fully valued to us, and the way we were really thinking about it, in order for fixed income to realize where the forwards are to justify the current backend, you have to see rate cuts come through the system, probably even faster than what is being priced in the front-end. lisa: i would think that if the fed were to disappointment lick cut by 25 basis points, people would buy the backend aggressively and vice versa. if they cut by 50, it actually

increases the chance of inflation picking up more at the other end. why is that not the trade? >> that could be the trade. that is a plausible scenario. the debate that we are having just highlights what a tricky environment we are investing around. the tricky environment that that that is contending with. it's normally much more straightforward, but it is less straightforward today. so i have a lot of sympathy for your arguments. i just really think it is an open road here. jonathan: thank you, sir, appreciate the clarity. for the lack thereof, the honesty. the investor committee in my own head sort of throwing things at each other and trying to work out how this works out today. lisa: a very aggressive and intense life. there is this point that is more

aggressive, does not lead to the inflation potentially creeping higher over the long-term, where is that relevant at this point? jonathan: the labor market may be in trouble and we need to get ahead of it. i got a similar message. split the baby, why not. we are not sure, so we are going to cut by 0.41%. jonathan: i'm not sure that's how it works. then again, who knows? >> they could just trap work on the bloomberg terminal and just track that. jonathan: it's almost over. after that, we can sort of lick our wounds and work out what happened. lisa: and everything will be the

opposite of what we expected. jonathan: from new york, this is bloomberg.

♪ >> you have lower interest rates which the fed is going to

deliver. >> for them to really signal they are going through a sequence of cuts here. >> they'd have no problem with the fed going 50 either. >> there is a really good chains that they move 50 simply the front of the process. >> we need to be conscious of being to dub it because we are coming off some pretty significant speculation but it is still not relieved from the market yet. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: got a message just moments ago, just flip a coin. is that what they are doing on the committee right now, flipping coins? lisa: is it 25 or 50? we want to know. we will find out. jonathan:jonathan: we set a million times, what comes with it, that decision later on this afternoon. your equity market very close to

all-time highs on the s&p 500. this morning up by 0.05% on the s&p. the nasdaq up by 0.1. lisa: the question of how this marketing to further boosted after 240 basis points of rate cuts have already been baked into the market or the end of next year, does fed chair jay powell out-dubbed himself in the market at a time in the stake separate he high? what data are they looking at the justify a new that a lot of economists are saying eh, really? it is still looking ok. >> greg peters, 25 more disappointing than 50. if they cut 25, what does powell need to say to shore up those disappointed market persistence? jonathan: the conversation we just had with greg peters was an important one about the long end of the curve. if the fed does not validate market pricing today, doesn't committed i getting back to 3%

anytime soon in a timely manner and we get that so-called disappointment, do we get a rally at the long end because we started priced and a policy ever, or do we get a selloff because we are pricing out rate cuts after pricing and in so much over the last few months? lisa: we have no clue and when i was listening to his response which was refreshingly honest, that you can present a fantastic logical argument one way or the other, it doesn't mean the markets is going to respond that way, it just shows you that this is the market were logic runs to die. we have no concept of what the analysis is for the market, the federal reserve. we don't understand with economic data is. this is why you see people going against the status quo to any given time on the margins because how wealthy you have conviction? jonathan: is that the from the bears, the market were logic comes to die? lisa: mi i the embodiment of the bears? i went out to jackson hole, i dressed up. jonathan: it's absolutely brilliant.

equities just about positive. if you are just joining us, welcome to the program. on the 10 year, we look like this. 306 or 7.50 six. the euro, a little stronger. dollar, a little weaker. coming up, your catch up with dan with stocks near record highs ahead of the fed. bloomberg intelligence e-commerce boost u.s. retail sales and bnp on why the fnp will start small. the stockmarket rally on hold. traders still split over the expected magnitude of today's anticipated rate cut. dan suzuki saying the question really isn't whether the fed cuts 25 or 50, but whether you are actually going to get the nearly 200 basis points of cuts that are priced over the next six months. good morning to you, sir. >> good morning. >> to achieve a degree of rate cut that, do we need a slowdown

that this equity market is ultimately not going to like? . >> that's exactly right. you have to see further declines in inflation beyond the 2% level and further declines in gdp and economic earth. you're just not seeing those. even unemployment where i do agree that the employment market has softened since the last meeting. jobless claims had spiked, they've come back down. give nymex a prices are up. employment diffusion is up. i'm not trying to say that everything is rainbows and went that things aren't falling off and they never do fall off as fast as the market ask them to. jonathan: let's say we do get decent growth and this continues and jobless claims stay in this range for the time being. can you stay with traits like small caps with cyclicals like banks? >> i think that is a great time to be invested because you are painting a picture of environment and an economy where

growth is pretty good, profits are likely going to accelerate off of the recession we are coming out of, in the fed is still cutting rates, just not as aggressively. as a great, nation of factors. lisa: do we need rainbows and unicorns at a time when everything seems to want to go up? i'm looking at mortgage applications and mortgage rates. this idea that you actually see mortgage rates now at the lowest levels in two years. we also are seeing mortgage applications picking up quite considerably at a time when we are expecting something from the federal reserve. how likely is it that every acceleration of the economy will actually be fantastic for stocks? either way it's going to be good. >> i think it depends on your time horizon. it's going to feel great for a little bit but then you are going to bring back those inflationary pressures.

when your starting point on inflation is north of 2% and you get the growth acceleration, that means inflationary pressures are back on the table and at some point the market is going to go back to a world where good news is bad news. we are not there now, we are taking a little vacation from that story, but we will get back there when inflation comes back in the picture. lisa: my head is spinning. you hear all the scenario analysis, you hear all these logical scenarios that are lovely and that might absolutely fail. how do you position? >> keep it simple. i think what you should do is just understand that the market has probably gotten too aggressive in overpricing the trajectory of fed cuts over the next six months, so you want to lighten up on that duration story a little bit. at the same time, this is a pretty supportive environment for the next six months for these cheap cyclicals. ultimately it comes down to profits. what is going to try the earnings acceleration from here?

what accelerating and what is improving? that baton is being passed and it is broadening out. you see this new start happen in the market but if you look at a five-year chart, it is a tiny little glitch. lisa: are you saying is independent of what the fed does? that right now even if the fed cuts, this rotation will continue? >> on a one-week basis, probably not. of the next six months, it comes down to fundamentals. and i think fundamentals are really about earnings and net earnings story is broadening out. people over-emphasize the importance of the fed, particularly at this point in the cycle. annmarie: whether or not it is the rotation or we get those 200 basis points of cuts, how much of the politics going to affect that? potentially the composition of congress could change what kind of environment we will have for inflation in 2025.

start cap me literally put out a piece yesterday that that fades the election. even if you know with perfect foresight who's going to win the election and whether their policies are going to be, i would contend just look at the last four administrations. for the opposite and you make a boatload of money. that's going to be the story this time, and i don't think you should be investing based on politics. should vote based on politics, but not invest based on them. even if we get some sort of sweet and huge spending bill, there's going to be a lot of times and uncertainty between now and when that happens. >> but 2025 is critical for the market. things like tariff that could be unilaterally changed by the white house, and then we have the sunset of the trump era tax cuts. we are talking about potentially a 28% corporate tax rate or a 15% corporate tax rate. how do you fade that? >> between now and then, is going to be a lot of noise around her. especially in this market, which

i characterize as a shoot first, ask questions later market that operates in three-month narratives you're going to have a narrative where we are getting massive tariffs in the next three months and then you are going to have a narrative for we are going through a recession where you don't have to worry about inflation. all the stories are probably going to play out and you have to fit can starts. to try to trade that is out of my periphery. jonathan: so where does the conviction come from that this continues? this is been a theme for you and the team for a while, that this would move away from mega cap tent and go elsewhere. >> i think the pillars right now i that it is happening. just look at growth numbers for the magnificent seven, for the other sectors. you're actually starting to see that brett. jonathan: why isn't this just another three-month narrative? >> it very well could be. get this acceleration growth receiving broadening out, he can rollover. but remember how easy the comparisons are coming off with this incredibly low base. while the s&p level is six or

seven quarters in, the rest of the s&p, their earnings have been declining. they are in a massively depressed earnings. i think that you're going to have another downgrade like from there into an environment where economic growth is pretty good? i think that is a bit of a stretch. jonathan: can you afford not to own names like nvidia, these big ai themes with real money coming off the other side? >> italy depends on your time horizon. as we've seen, these environments can last for a long time. they are driven by momentum and sentiment. until you see liquidity roll over or until you go into some sort of major slowdown, which again, i don't think is happening, there's no reason to expect they are going to crash. if you want to own some of them, i think that is reasonable. in a world where this is the most concentrated and most expensive market that you'd seen any long time, that is a market that begs for diversification in

a portfolio. you are not going to do that. jonathan: some people have thought more utilities. it is a saint and we keep coming back to, up by more than 20%. a massive run. what is it to you? >> you have to remember is up by more than 20% because it got completely demolished and the prior six months. and i think a lot of that was of regulatory concerns around pricing and whatnot. i think when you step back from it, people have to realize that utilities and the rest of the defensive sectors of one of the best performing sectors of all time. when you go back over a long time, they have some of the most competitive returns. so if you get a point where sentiment goes away from them, which they typically do during most of the bull market where they are lagging, that is where you want to build positions. so if you start to worry about the economy here and growth, the more you should be thinking about adding utilities to your portfolio because there's also a rate plan as well. jonathan: good to see you come

appreciate the update. counting down to that federal reserve decision in a bit of news elsewhere with your bloomberg brief. >> general mills shares are lower by one and one third this morning. even though he did report earnings that fecund matched estimates. the smaller than expected drop in sales with thanks to higher prices for certain snacks. ultimately 25 forecast noted an uncertain macro backdrop for customers. first margins also failed driven by input cost inflation. jp morgan is in talks of apple about taking over its credit portfolio. the card as part of their effort to solidify its attempt at consumer banking, which has since abandoned. jp morgan is among a slew of card issuers looking into the apple card. people familiar with the matter tell bloomberg that nippon steel has been given more time to try and take over u.s. steel. the japanese company has been granted permission by u.s. security panel to refile

purchase plans. the extension restart for clock on the review and is likely to put the ultimate decision on the takeover past the u.s. elections in november. president biden, harris and trump all say they oppose the acquisition. as your brief. jonathan: more in about 30 minutes. up next, morning calls plus bloomberg intelligence. online shopping boosts u.s. retail sales. that's next. this is bloomberg.

jonathan: start here. where this conversation about a

50 basis point reduction actually come from? a july payrolls report in early august event expected. on top of jobless claims, reaching out to 200 50 and beyond on top of the manufacturing coming out of the pretty dreadful number as well, and the conversation quickly moved on. given some of the price action as well, some people starting to talk about 50 basis point productions to the federal reserve. should be still be talking about 50 basis point productions in the federal reserve, given the jobless claims are back to 230? so we did a round-trip in the market and had a speech at jackson hole from the chairman, fed chair. this is what he had to say. we did not seek or welcome further labor market conditions. starting to sound like 50 basis point rate cut might be on the cards for september 18. so we waited for jobs report. and we waited for a retail sales report that would settle this whole debate, it didn't. so we are still here.

finally bounce between 25 and 50 repeatedly. i think the big takeaway for me for the fed speak over the last month is not that they told us they would cut by 50 basis points, it's that they didn't come out and said he wouldn't, and that didn't put the story to bed because it is alive and welcoming into this afternoon. >> he didn't used the word measured pace. he didn't talk about a methodical cutting cycle or going slow. he didn't talk about all the things that people were expecting to say to signal that they were going to go 25 basis points. a key aspect to me of this whole situation is a lot of payment investors and thinkers really disagree. the fact that you are probably saying we are already in a recession and 50 should be the right call, you are hearing that from neil as well, 50 basis points. also from bill dudley. the right thing is 25. the right thing is 25 because when you look at economic data for retail sales to home

mortgage applications, it doesn't look so bad. jonathan: i think we need to park. dan was just on from richard bernstein. he made a point that's not the important part of the story, if the other 200. why do we have this confidence that it is a one-way trip regardless of whether it is 25 or 50? where does that come from and how different is that will be here from other central banks including the ecb? >> we were talking about shaking off earnings. i want to talk about something else that is there, this long and variable lag tag better sticking out of the corner of one of the old bicycles in the corner. there is a feeling that there are long invariable lags, and that the rate hikes really still have to trickle into the economy and will see some of that pain come through early next year. there is that belief that it is out there and that it will be a long invariable lag for the other side of the rate cuts to really start to affect the economy in a material way. that is what i would stock that

up to. jonathan: investors and traders will tell you this is a very finely balanced incision. even more interesting given the fact we are near all-time highs on the s&p 500. equity features just about positive on the s&p. the nasdaq up by 0.06%. if you switch of the board of equities closed to all-time highs, we've got bond yields near the lowest of the year. we continue that trend this morning. at three on a 10 year. that is the price action. let's get you some morning cause. william blair initiated coverage on nvidia. highlighting the company leadership position within gaining an artificial intelligence. the second call from guggenheim upgrading sirius xm holdings. straightening subscriber trends and stabilizing free cash flow. at stock is up by more than 2%. and finally, the analysts noting

significant improvements under the retailers new ceo. at stock is up by every more than 3%. let's stick with the consumer. august retail sales getting a boost, signaling brazilian household demand. but the report doing little to have settled the debate over the magnitude of today's expected rate cut. joining us now is bloomberg intelligence senior analyst for u.s. retail. i'm not going to ask you whether it is 25 or 50 i want your read on where the u.s. consumer is currently. >> the consumer is making choices and they are clearly making the choice to shop online. i think the consumer still wants value. they are looking for value, they are strapped but they are willing to spend. they are traveling a little less which are big-ticket expenses so they can afford to buy more things, and that is really what we've been seeing over the last few months. >> i'm laughing because the idea that we are talking about retail sales and the only reason people care about retail sales was 25

or 50 basis points. that'll areas to me. ultimately it is talking about the strength of the consumer. whether people actually have the ability to keep going out and buying when we saw a big gripe -- decline in grocery store sales. for the actual takeaway, if this a consumer that is accelerating? is it one that is holding in orbiter signs of true weakness under the hood? >> is definitely not a sign that the consumer is accelerating. we are hearing from everyone that the consumer is making choices, and i will go back to last year and the year before. spending thousands of dollars to travel because that is what you wanted to do. now that you are not doing that so much, that money is in part going to savings because they are trying to build back those savings accounts, paying off debt, and also spending a little, but making choices. are you buying electronics? not really. you buying clothing? maybe a little for back-to-school, but really you

are shopping for things that you need or you are shopping on impulse, and online if the best place to buy on impulse because it is influenced by slow show interactions on social media. >> is impulse buying a sign of strength or weakness? the fact that that is where the strength has been, does that signal the american way of i want that, or is this something where people have the ability to say i want that? >> i think it is both. you want that so you get it, but later you realize that i overspend and i need to pull back to mark we are going to see a lot of that over the next few months where people will gravitate toward buying on impulse, but they will realize that maybe i spent too much and i need to pull back a little. so they will be making more steep choices, and demand will be fickle. people will be making choices. we are heading into the holiday season. you're going to see more sales that are going to entice people to spend earlier and earlier in the season. >> and horse just publishing now, talking about declining restaurant spending made them

more concerned about the developing economic slowdown. when you look at choices, do you still see consumers moving to services over goods? >> i don't. i actually see them pulling back and moving more toward goods, because they enjoy the services for the past 2.5 years, and they probably splurged in that area. so now they are back to the basics, where there is convenience, where there is stuff that they want to buy that maybe haven't bought in the last few years because they've been enjoying themselves with experiences. that said, people will still go to the spa and they will still travel, just not excessively like the last few years. jonathan: interesting, we've got to leave it there. we got some data a little bit earlier this morning that i want to repeat and share with you. this came from mdm mortgage applications. index rose 14.2%. after rising 1.4% in the previous week. michael mckee sent over more details on this.

mortgage applications rose for a fourth consecutive week. purchases of 5.4%. 24 point 2% after rising 0.9% in the prior week, and we did this with a 30 year fixed mortgage rate of about 6.15%. just down to the low 60's and that is already what you are unlocking. >> a tot -- it comes at a time when it is enough of a decline, the fact that people see this as a time to get in because guess what, rates are only going lower from here. this is really the key question. if you have conviction of the path of where rates are going, why not buy now and ask questions later? as alicia was pointing out, you can always refinance later. why not get in now? jonathan: home improvement, we've see net repeatedly across several names. that trait doing just a little bit better by something like 4%. decent quarter so far as well. if the market already there thinking about this as he's housing market marketed more? >> that is the ultimate question

because it is already there. this market get ahead of whatever the fed does. there is a key question about how much you start to see in the acceleration of inflation, and re-acceleration of growth that goes against it. it is sort of like the heisenberg theory, that you can't do an experiment on something without having an effect on it. and there is this issue, this sort of challenge that the fed have to deal with right now with respect to communication, and why it could potentially be a liability to be dovish. jonathan: welcome back to the show, good to see you. >> you have to understand that when you connect retail sales so directly, this is what happens. 25 or 50. jonathan: what a month. a few more hours to go. happy birthday.

♪ jonathan: the fed decision special a little bit later on this afternoon, 1:30 eastern time. this is what ck has got to do, he's got to sing how deep is your doubt by deutsche bank? >> would you like to start doing that? jonathan: i'm not going to, but ck will. equity theater look like this, just about positive. after closing yesterday, just about positive territory. a seven-day winning streak, very close to all-time highs going

into the fed decision. up 1/10 of one person on the s&p. 0.14. one hour away from the cash open, here's dani burger. >> just about an hour or so ago we got earnings from general mills and even though they be on most metrics, shares are down 2% in the free market trade. margins deteriorated because they are still suffering with cost input inflation. volume sales were down 2%, that same story of american shoppers being more picky at the first restore, especially for private labels. google, a rare win in the courts for them especially considering last year they lost one of their battles. this was over a 2019 fine of 1.5 billion euros that they illegally prevented their bibles from placing ads on third-party websites. thing mistakes were made, so shares slightly higher on that news. finally, rounding things off with the story this morning, u.s. steel up 3.8%, a securities panel in the u.s. giving nippon

steel a chance three file their intention to take over u.s. steel, basically resetting the clock. it means we will get a decision until after the election. there's no sign fed biden, let alone fun or harassed or changed their opposition to the takeover. the union down plated, but it keeps the dream alive. jonathan: thank you, until after the election. what if we started now? thomas rhett, rod stir. i didn't think of that one. >> especially tom, given his age. you think that is more appropriate in the bee gees? >> i think so. >> this is quite a promo, isn't it? it depends 25 or 50, which song you get. thomas going to sing after the news conference. looking ahead to all of this a little bit later, head of the actual decision and the news conference and forecast, mike mckee down in washington to give you a little bit of a preview.

before we talk about the decision, the news conference and all the central bank decisions that follow, can you share with us what you saw in the mortgage application data this morning that tells you it is important? >> well, what we didn't see is a continuation. this was a change, a big change in mortgage applications. in the last few minutes we had housing starts come out, up 9.6%. they fell almost 7% the month prior and the expectation was for about a 6% rebound, so housing starts way out and building permits way up, 4.9%. all of this seems to suggest that maybe if the fed cut interest rates and we've already seen the market price, that in and mortgage markets pick that up, that you could unlock something here. the past two quarters, residential investment has been a drag on gdp. maybe that turns around. >> there's this question about whether the market is running away with itself in terms of yet another narrative.

we start talking about mortgage applications as well as housing starts, it can seem like every acceleration, timmy put some perspective on this just to get a sense of how stagnant, how broken this market has actually been and how much of a game is actually is? >> real estate has been a drag in recent quarters on the gdp, and the real estate market has been all but frozen because people don't want to move. they don't want to trade in their lower mortgages for higher mortgages, something like 60% of people have mortgages below 5%. so the fact that mortgages are turning to come down, mortgage rates are starting to come down, catching create more activity. does that mean prices go up because there's more demand, or doesn't mean supply outpaces prices? we see prices stabilize. either way it is good news for housing and housing is a big part of the overall economy. jonathan: could be a big part of the conversation today as well.

walk us through what i don't think many people understand. the insight of a federal reserve meeting across two days, the buildup to it and the actual process, what things typically look like and how different this meeting might have been. >> normally, the committee members go into a meeting already having talk among themselves quite regularly, and jay powell touches base with all of them the week prior, so he has a pretty good idea of where everyone is, which is why the news stories last week were so interesting, but the fed seemed to be letting people know that you shouldn't discount the 50 basis points they get their presentations on the markets, their presentations on what is happening in the economy from staff to see if they're going to do anything about the balance sheet at this meeting. in on wednesday morning, they

come in and each one speaks, they present their views and then they vote. and the question now is does jay powell have something going here? did he want a 50 basis point cut, did he leak that to the newspapers so the markets would be paired if that happens or can you convince people to do it? this is one of the most interesting meetings in a very long time. it was september of 2016 -- 2015, rather, the last time we did not know going into a meeting for the policy decision is going to be. jonathan: amazing, remember it well. delaney, good morning. i don't want to kick it off with a conspiracy theory but i'm going to kick it off any conspiracy theory. market pressing toward 50 basis points. leave them no choice on the committee but to go with 50

basis points. >> i think there is something to that and obviously the lack of pushback from the fed through perceived backdoor channels suggests that probably that was the making of the chair, because after all at the jackson hole meeting, he was double. so we were so spoiled. we have been so spoiled. here is the data and here is the decision that you're going to expect. before the decision itself. and we were getting into that, just feeling exactly that. then it was pretty clear that we should be expecting to 25 basis point cut. we did take some signal from the communication that followed, but we still think that 25 is probably the right thing to do. we will not be surprised if it

is 50. if it is 50, we think the message from the chair will be met in is not a panic, we are just doing a catch up. so big picture, it doesn't really change it. it is still a good economy going into a soft landing. jonathan: we said that recently on this program, it is the full package. we get some forecast. that sep right now, june is a lifetime ago. a lot has changed since then. how different is that dot plot going to look? >> i think we are going to get a significant move down but i don't think the markets will get what they are thinking for 2025, end of year. i think the fed will probably go to 3.6 the median year, this is the part of the message. they are not panicking, not

expecting a recession. the economy, the economic data are telling us that the economy is doing great. >> that message has been what is been supporting the equities including this expectation that the fed will not allow this employment market fall off a cliff. they have to revise up for the end of the year if they want to just catch up to where it is currently. how much is that going to be an ongoing, benign signal when they have to increase the unemployment rate to some degree going out? >> i think that the governor already alluded to that in the speech brady fo the blackout periods. a lot of it is supply driven and probably that is what it is. they will raise a forecast for the unemployment rate. we are at 4.4% for the end of the year ourselves, but a lot of it is driven by precipitation, by the desire of people to join the labor market. and that is not such a bad

thing. >> how difficult is it going to be to be in a 25 or 50 at the next fed meeting, depending on what they do today? >> the markets will complicate it. if we get 50, the markets will immediately want them to go further. that is a problem because this is what happened this time. i think the tricky part for the chair will be to explain why it is not the case, and is still a meeting by meeting decision. and i think he will do that in the case of 50 basis point cuts. >> does a variable lag still exists? people believed in them with rates high, saying don't worry, the pain is going to, or do worry, the payments going to,. now people are saying the fed needs to cut now so the actual implication for the market, the ramifications can come to the floor by early next year. do you believe that, or is it a much faster transition mechanism given market expectations and given some of these other factors?

>> i think it is still long. the reason is that given the level of fed funding rates right now, if we look at the mortgage markets, it's not as restrictive. policy is not as restrictive as it should be. and that is probably one of the reasons that the fed should not rush and do their thing. but also at the same time, you really want to be ahead of the curve, you really want to act to make sure that you don't end up in a hard landing scenario. jonathan: that shifted the unemployment rate has made some people nervous. clearly it has declined somewhat, that is pretty evident. what is behind it is more interesting, you think we are confusing the election calendar and maybe some election difficulties with cyclical weakness? >> thank you for bringing it up because i think there's a lot of uncertainty that we see, not just the data, but if you read

it, if you read a lot of other things, the sense that there is uncertainty on the part of the companies. why act now, why hire more people now, why invest at this moment if after a couple of months you will find out who the winner is? you adjust your decisions based on what we had at the time. jonathan: if you are on the fomc today and you bring this up, are you lonely or have you got company? will they agree with you that some of this is the election? >> they wouldn't tell you obviously but i think that they do read the same stuff. they look at the surveys, they look at the beige book and a lot of them are talking about uncertainty. so maybe we just wait it out. the economy allows you to wait it out and make really crucial decisions next year. jonathan: good to catch up with you, always is. joining us now to continue the

conversation, earl davis. welcome back to the program, sir. i want to finish this morning were restarted. are we overstating the importance of the first move from this federal reserve? >> and the great scheme of things, no. if it is 25 basis points, it will be a dovish 25. the next one is going to be 50 without a doubt. i would say no. i would say it has been a bit overstated, but where it not being overstated as we are going to increase the volatility no matter what happens today. given that we are 50% of the market anticipating 50, and 50% anticipates 25. it means 50% of the market is going to be wrong. in the grand scheme of things, no, it doesn't make a difference. >> there's a question about how some of the longer-term expectations are going to be reset as well. we had person after person saying longer-term seems like the bond market is being overly

aggressive with how many cuts are being priced in. are used in prophetic to that, are we going to end up getting some sort of rejiggering longer-term expectations that could potentially be more significant than the 25 or 50? >> yes, but this is where you have to break down bonds into nominal bonds and tips. we are better buyers of tips, real rates. we think that is where all the rally is going to happen, not nominal rates. so this is the important thing about being a bond manager and looking at the real rate. the reason why that is, the real rate actually has a very high correlation with fed policy. and that correlation increases once the central bank starts making their move either higher or lower. and that's why we are overweight duration almost to our max log, and it is all in real rates.

>> this is a fascinating point. basically saying that you have strong belief that the fed is going to cut aggressively but not a strong belief in what other scenario there could be, i.e. fiscal, that could potentially push up yield premiums and longer-term treasuries all in. >> yes, that is correct, but it is not a market concern right now. we think that would be a 2025 story. and that is why if we do get volatility in risk assets selloff or credit spreads widen, we will be better buyers of risk assets, because we think lower policy rates combined with a fiscal stimulus will end up being a very good economy in 2025. so we think that is supportive of risk assets. having said that, we do expect to see a repricing just given the volatility we will get from the balance of 2024. jonathan: thank you for the

update as always. one of the sharpest and fixed income. the yield hired by two basis points. we are up by three or four basis points going to the fed decision. with an update on stories elsewhere this morning, here's dani burger. >> vice president harris looking to play cap the cost of childcare. in an interview with the national association of black journalists, she said no working family should pay more than 7% of their income for child care. it's the first time harris has publicly spoken about the initiative in her campaign. the 7% camp was first proposed by president biden in the 2021 back better package. donald trump says he will revive the state and local tax deduction that he capped during his first term if he is reelected. capping the so-called salt deduction had a disproportionate impact on regions of higher taxes and property values those are typically dominated by democrats. the announcement came ahead of the rally in new york today were kamala harris is leading the

polls. blackrock and microsoft are teaming up in one of the largest efforts to build of ai infrastructure today. the companies will seek $30 billion of private equity capital to build warehouses and energy sources. the project will primarily be u.s.-based. a portion of the funding will be deployed in u.s. partner countries. that is your bloomberg green. jonathan: thank, thanks for this morning. up next, we set you up for the day ahead and catch up with david rubenstein. that conversation just around the corner. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

♪ jonathan: the opening bell 41 minutes away on a seven-day winning streak on the s&p 500. equity futures posited by 0.1%.

your day ahead. the rest of the week had looked like this. that that decision coming at 2:00 p.m. eastern time followed by a chairman hell news conference. tomorrow, another round of jobless claims plus a rate decision from the bank of england. also coming up later on today, the premier of the 10th season of the david rubenstein show, peer-to-peer conversations. you can watch david's interview tonight at 9:00 p.m. eastern time on bloomberg tv. david rubenstein joins us now for more. first of all, congratulations on the 10th season. i know how much work goes into this behind the scenes. i want to start with this conversation we will see little bit later on this evening on bloomberg tv. what stood out for you? >> for those unfamiliar with striped, it is a startup that was started more than 10 years ago now by two young brothers. one dropped out of harvard, one drop out of mip. they came together to start a company which facilitates payments by internet companies.

want to buy something from a young internet company, you get process that payment or strike. it then expanded to more mature companies, but now has a market value, private market value somewhere between $65 billion and $70 billion. at one point, it had an internal market value of about $100 billion. while it's not quite worth 100 billion dollars today, it's worth a lot of money and may be the most valuable privately held company in the u.s. lisa: people are definitely curious that many would just say it is fed day. is it 25 or 50? in all seriousness, how much does the innovation of a company like this, does the upstarts that drop out of brand name colleges to go to interesting things really depend on where benchmark rates are? >> a company like this really requires an enormous amount, a good environment for this kind of startups. these two young brothers are from ireland, they came to the u.s. and they also the company

here. clearly this is a place where you can start these kind of companies and i think thrive and become significant companies. at some point the company will probably go public. they haven't really needed cash, but at some point i suspect they will go public, i don't know exactly when. it's going to be one of the most anticipated ipos of the next decade or so when this company does go public. lisa: there was one belief that companies were permitting private a lot longer in part because of the interest rate environment and the shift into private credit where you saw a lot of availability. can that be the new norm, because that is we have been seeing. people have recognize there is enough private capital out there to keep a company going any private setting even though it

normally would've gone public. this plenty of capital out there. i think at some point, the founders of striped, i can't speak for them, but i suspect that they will go public at some point within five years or so, that would be my guess, but there are advantages to being public or some disadvantages. i think there point of view probably at some point going public would make sense. >> david, you are also the cofounder of carlisle. the question of the day, 25 or 50. i know you been answering this for 50. do you care? is this something you are actually watching? >> everybody in the world is watching what happens to the market today. i don't know for certain, i suspect that 50 basis points with the market was assuming, so something left and 50 would probably be a bit of a disappointment, probably the market makers down. 50 is probably what the markets around the world are probably expecting today given where the economy is. but we will see at 2:30.

jonathan: thanks of the promo, appreciate it. david rubenstein of the carlyle group. you can watch the premiere of the 10th season of david's show tonight at 9:00 p.m. eastern time on bloomberg television. for you trying to find out if he was 25 or 50? >> this is what we are doing today, connecting everything the 25 or 50. jonathan: it's a ridiculous conversation, isn't it? because way beyond just 25 or 50. lisa: and yet this is what the debate is. but beyond this. case, like export affiliation. it's like the super bowl. >> we have david rubenstein doing the warm-up act, definitely doesn't want to talk about sports today. but david rubenstein said it does matter to markets around the world. very different than jamie dimon is an initiative budget people on tv and it is not going to be earth shattering. but what happens this afternoon

it is important for the markets and the election cycle. this is going to be politicized on both sides. >> this is the easy decision, the harder one to be november 7. >> yelled latest point that you highlight was really interesting. a month and some of the data that we are getting muddied by the fact that companies and frankly consumers, but companies more so don't have the same conviction to hire or make big moves ahead of an election that could potentially shipped policy quite a bit. this is the level of uncertainty that we have no limit the economic cycle, but the data itself and exactly what is reflecting. for companies, are you seeing a 15% corporate tax rate? 28%? are you going to have higher tariffs when it comes to input cost? when it comes to consumers, if you live in a blue state you are dealing with the salt cap. maybe now the republicans, you are turning on that entire idea that they've been touting that it was a legislative win for

them. you just don't know, so why make big calls. >> coming up at one: 30 eastern, a federal reserve decision special, a bloomberg surveillance special, the fed decides. we will be joined by mohamed el-erian of queen comments cambridge. deutsche bank, and former new york fed president william dudley together with many others. tomorrow morning, we will catch up with peter cheer, former fed president esther george, republican senator thom tillis of north carolina and that does it for us this morning. we will see you this afternoon for the big one. 25 or 50 with an equity market close to all-time highs and bond yields very close to the lows of 2024. from new york, this was "bloomberg serveillance." ♪

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> we are getting ready. the day is finally here. >> katie greifeld is off today and bloomberg open interest starts right now. matt: it is actually fed today. the debate has been reaching for weeks and today we will get the answer whether the cut will be 25 or 50. plus, citadel securities shelved plans to t