>> inflation is not all the way there. >> by cutting rates we might get an accelerated decline in inflation. >> we think inflation is selling at a 2.5% or 3% range. >> fed officials are focusing on with their policy will do the economy without putting it in the context of the overall economy. >> my concern is we are making a pit stop in this balanced level on our way to weak. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good

morning. bloomberg surveillance starts right now. coming into tuesday all-time highs on the s&p 500 and looking to add some weight to the rally. equity futures shifting higher .1%. on the nasdaq up .25%. china unleashing his stimulus package overnight with something for everyone. cutting interest rates and reducing reserve requirements, lowering borrowing costs on mortgages and studying setting up a market stabilization funding. equities having their best day since 2020. lisa: this is protection patrol coming up and saying we have something for you if you own a house or one to buy a house. is this a bazooka or the bid opening salvos of something people will hope will be the beginning of something more? how do you spur demand for people who do not have confidence about jobs or about the value of their home to borrow money if they do not want to buy and that is the problem. annmarie: consumers are not

spending when layoffs are looming. capital economics comes out with a note saying this is the right direction but insufficient unless there will be the fiscal firehose out of beijing. we are talking that maybe beijing is waiting to use the fiscal stimulus they have because they want to know what direction the u.s. is going in terms of the election. jonathan: what is the opposite of a toxic brew? a bullish group. unleashing the killer doves at the federal reserve yesterday. fed president goolsby things we might be hundreds of points above neutral. saying over the next 12 months we have a long way down to get the interest rate to something like neutral to hold the conditions where they are, opening the door to another big cut. lisa: on a soft landing we cannot be behind the curve. thank you austan goolsbee, it is soft landing nirvana. it is the soft landing nirvana

and a lot of fed officials would like to see that continue. annmarie: what you hear is inflation is one of yesteryears. they keep talking about they want to lead into the labor market and ensure they no longer see any more weakness when it comes to the labor market economy. it feels like a one mandate fit. jonathan: -- a one mandate fed. jonathan: some coverage on one single name, john deere. donald trump going after the company big time. annmarie: saying if they move any manufacturing to mexico he will have tariffs on them upwards of 200%. you're starting to see the former president fill in some of the gaps of the direction of travel. he said at the economic club of new york that you will only get that 15% corporate tax rate if you produce in the united states and now he is saying not only will you get that carrot approach, but the stick will be if you decide to move outside the united states you will get

hit with tariffs. lisa: park and think about is we will get economic speech from donald trump. will it be like deere, i have an issue with you, we have a question about where our coal is, question about this company, will it be like that, there are no more taxes? there are questions people will have. annmarie: the point was made that maybe the pullback in hiring this down to the election and i wonder how many companies like john deere are reluctant to make big decisions including decisions like this one because they worry there could be a change in the white house and they know there will be consequences. lisa: at the same time they are finding overhead costs too onerous. that is why they wanted to build a plant in mexico. it is a complicated story so why make a bold move and complicate it further given the potential changes? jonathan: no one wants to be a football on the campaign trail and that is what john deere is right now. lisa: maybe steel wants to be a

political football? i find it interesting deals are getting through which makes me wonder if there is a nod to business from this administration on the twilight of his campaign. jonathan: john deere just about unchanged in the premarket. equities positive .2% on the s&p 500. in the bond market yields up four basis points on the 10 year , 3.7925. 10 year yield climbing the sixth consecutive session. his slow grind higher over the past week. lisa: rest in peace all of those yield curve in because they are all gone. this comes as you see the u.s. yields climbing higher. is this a note of confidence or is this just a hint of something else that may be if the fed is in super dove mode you end up with longer-term inflation that ends up getting expressed in potentially higher and longer-term yields? annmarie: the two-year --

jonathan: the two-year tenure spread approaching 20 basis points. we will catch up with brian levitt of invesco, julie norman on the risks of a war in lebanon, and goldman sachs on china's stimulus package. we begin with stocks returning to record highs on bets the fed will deliver another big rate cut. brian levitt saying the u.s. stock market has historically posted strong returns after the start of an easing cycle. if the economy did not fall into a recession over the next 12 months or if it was already in a recession. brian joins us for more. how bullish are you? what is not to like? brian: soft landing nirvana. that is one of my favorite early 90's cover bands on grunge music. there is a lot to like. this comes down to the resiliency of the economy. if you say it is a one issue fit that is because inflation is passe. when i say that to most

americans they think i'm talking about the high cost of living. i am not. i am talking about the change in the rate of change. the economy has been slowing. leading indicators are pointing to a slow down and you needed the fed to step forward and they are. as long as we continue to see relative resiliency into the economy is bullish for markets. jonathan: stocks will do well of the economy holds up. that is your general message. our layoffs not inevitable once jobs growth starts to slow to the extent it has over the last several months? brian: it is a bit of a race between the fed and the unemployment rate for the stock market. every payroll number becomes increasingly more important. the good news about this cycle, usually when you're coming towards the end of the cycle you have a lot of leverage and a lot of excess in the economy. that is not the case this time. we do not have enough inventory, we have not built enough homes.

it is not a classic story of excess. it is a bizarre environment where we got inflation early because there was too much money in people's pockets at the moment businesses cut inventory and slashed workers. you had a bizarre inflation environment. the higher rates of not hurt most americans because most of us have fixed rate mortgages. if we were heading into a recession i would think corporate bond spreads would be blowing out, the bankers would be tightening lending standards significantly. that is not what we are seeing. we are getting rate cuts and a resilient economic environment which is good for stocks. lisa: we should've put a trigger warning on your last comment. jonathan: some tension around this table. brian: present company somewhat excluded. lisa: you talk about the situation where you could get ongoing melt up, fomo.

is that what you are leading into or is there a sense around the edges that valuations have gotten so elevated you have to be careful? brian: valuations have never been great timing tools. valuations give you more information about the next five or 10 years than the short-term. i would not consider valuations to be a detractor. as we know markets have gotten concentrated so the higher valuations were concentrated at the top. the average s&p 500 stock or equal weighted index are not particularly overvalued. you lower the discount rate. it is supportive for valuations. the markets, if you look historically, the reality is none of us want a recession. 80 to 81 is your hard landing but if you invested when inflation peaked you are happy over the next three to five years, he just had to deal with

recession in the short-term. we would all prefer 1994-1995 where you do not have to deal with a recession. i think those scenarios are very applicable in that either way, once you've got to peek inflation, peak tightening, you are positive in stocks over the subsequent years. the big difference is you have to go down 20% and have people lose jobs in the interim and that is a bad outcome. the base case does not call for that. i would be optimistic on stocks over the next intermediate period. jonathan: probably -- lisa: probably because of the fed put. jonathan: don't fight the fed -- brian: don't fight the fed. lisa: one of the most interesting aspects of this cycle is whether long bonds will perform given the election and long-term inflation. you say bonds about performed when you start to see interest rates go down, particular on the

long end. is this time different? brian: i think the long end has had a lot of its performance. you go from 5% to 3.75 or wherever we are today, that is a lot of performance. the 10 year should reflect the nominal growth potential of the country. 3.75%, 4% seems reasonable. when austin goolsby is talking about the neutral rate, the neutral rate is probably somewhere around there. if you have to ease beyond that if the economy gets weaker than you would expect short rates to go further. the 10 year has done a good job of reflecting the nominal growth potential of the country at this point. the question is how much lower to short rates have to go? 5.25 was way too tight given the inflation backdrop and the rolling over of leading economic indicators. i was happy with 50 basis points.

i have been telling clients i'm calling the fed and telling them they are too tight, no one is answering my phone calls. they finally answered. it only took six months. annmarie: are you expecting 25 for another 50? brian: we will see. i don't know if it matters for markets. i am focusing on the resilience of the economy. i believe we will be at 3.5% on the funds rate in 2025 and if the economy weakens beyond that then lower. annmarie: what you think and make the economy weaker? is there concern about inflation or could it be a policy error on the fiscal side? brian: i do not think it is inflation. sometimes people get upset with me when they say what did that glass of wine cost you? $20. it also cost me $20 last year. the rate of change. i do not think this is an inflation problem.

there are a lot of structural forces against inflation. it is a consumer that has shown themselves a pretty good time and is slowing down. louis vuitton is talking about it, dollar tree is talking about it. the consumer is moderating. this is what we were hoping for when inflation was 10%. sometimes you have to be careful what you wish for. most people with fixed rate loans have not been impacted by it. credit card loans have gone up, auto loans. this slow down the economy. what is your soft landing scenario? consumer net worth at an all-time high. i do not think it is cratering. it is slow down and lower rate should help to reinvigorate that. jonathan: next stop, payrolls and jobs report two fridays away. what makes you uncomfortable? brian: what would make me uncomfortable is if it is weaker

given how long policy has been tight. i do not think we are at a spot where we will have a blowout number and we will be focusing on inflation again. i asked to look at the breakevens. breakevens one and three are historically low, the bond market expectation for inflation. i do not think it is an inflation story. we are laser focused on growth. perhaps i'm a one-man -- person. jonathan: we will see how growth holds up. brian levitt of invesco. equity futures up .2%. with an update on stories elsewhere, your bloomberg brief. yahaira: boeing is offering striking workers a 30% pay bump. the company said the terms are valid until friday, ratcheting up pressure on workers to accept. the union president saying his team was blindsided by the offer and the union has no intention of putting it before members.

the proposal is an improvement over the initial 25% increase workers turned down earlier this month but less than the 40% sought by the union. open ai's largest rival has started talking to investors about raising capital in a deal that could value the start at $40 billion. sources say this would double its valuation from a funding round that closed earlier this year. talks are ongoing and it is not clear whether investors would agree to such a high valuation. anthropic declined to comment. elon musk's pac is hiring doorknocker is to help get donald trump elected. it is in the heart of battlegrounds and in districts with competitive congressional races including grand rapids, michigan, and poughkeepsie, new york. elon musk's super pac has spent -- in its effort to return

donald trump to the white house. jonathan: up next, john deer in the headlights. >> they announced a few days ago they will move their manufacturing business to mexico. i'm just notifying john deere right now that if you do that we will put a 200% tariff on everything you want to sell into the united states. jonathan: that conversation just round the corner. live from new york city, good morning. ♪

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♪♪ sandals jamaica sale is now on, visit sandals.com or call 1-800-sandals jonathan: a big dave gains in china, the biggest day back to 2020. csi up more than 4%. the spillover into the united states, futures up .2% and

yields higher four basis points on the 10 year. rate cuts from the fed in stimulus from china. the euro showing signs of life. a big rally and base metals. jonathan: a hope -- lisa: a hope this is the opening salvo before china releases more spending. they are concerned about hitting the 5% growth target in the are taken steps to get there. jonathan: how do you think people react to this later today? lisa: i was thinking a lot about this this morning. this highlights the limits of monetary policy. you can cut rates all you want. you can bring a horse to water but can you make it drink? people do not have confidence in the economy so why would they buy homes? that is why you see the longest streak of deflation in china. jonathan: the classic elements of a balance sheet recession which we discussed on this program yesterday.

john deere in the headlights. >> i love the company but as you know they have announced a few days ago they will move a lot of their manufacturing business to mexico. i am just notifying john deere right now, if you do that we will put a 200% tariff on everything you want to sell into the united states. they think they will make the product cheaper in mexico and sell it for the same price they did before and make a lot of money by getting rid of our labor and our jobs. jonathan: donald trump caution in the world's top farm machinery maker against outsourcing manufacturing following reports john deere is buying land in mexico to shift production there. sources telling us at bloomberg trump will outline more incentives for u.s. jobs at an event in georgia later today. bloomberg's michael sheppard joins us from the nation's capital. walk us through how washington reacted to those words from the former president? brian: anyway -- michael: in a

way it is the trump playbook and even john deere, iconic manufacturer of tractors, they are not immune to trump on this front. it is also straight out of trump's playbook. tariffs are the answer to everything when it comes to economic policy. it was a big fixture during his time in office. tariffs lead to a bigger part of the economic plan and division he is presenting to the american public as a reason to bring him back to option -- back to office. needs to establish the u.s. for economic production and exports. later today we will be hearing from him in georgia a vision of ways to lure foreign companies here. it will include incentives like lower corporate tax rates and easier regulations. it will also, with a stick in

addition to those carrots. the threat of tariffs to companies who do not play ball. annmarie: when it comes to the idea of these tariffs trump says he does not need congress but they will improvement. -- they will approve it. he has the right to impose tariffs unilaterally. what does he mean by this? he can impose tariffs on day one. what does he mean when he says i would rather get congressional support? michael: i think he wants cover from congress politically to do this. what we know about economic policy is it is not the countries of origin playing the price of these tariffs. it is businesses here that pay the difference. that is something they have glossed over in terms of presenting this to the american public. it is something kamala harris, his opponent, is seizing on and pointing to the tariff plans as attacks on the american public.

he is trying to indicate he wants congressional support for that and for a lot of the tax proposals he has on the table, he will need congressional buy-in and he has a whole bunch of things on the table. it is unclear congress would go for the full slate of them. annmarie: kamala harris continues to talk about her campaign, about the idea of tariffs as a sales tax but they do not use the word tariffs. is that because this administration cap to the trump era tariffs when it comes to places like china? mike: in part, but i also think it is a way of painting trump into a corner on this. they are also offering their own vision on tax policy and it would include preserving the trump era tax cuts on individuals making less than $400,000 a year. it would also include raising the corporate tax rate to 28% for the current 21%.

that is still less than what the biden administration has called for in previous budget request. it is more than what trump has called for in terms of texan corporations. he is proposed -- in terms of taxing corporations. he has proposed a 15% rate. she is trying to draw the distinction and get ended tax policy and not get into the tariff debate. they've made use of tariffs by preserving the trump era levees on chinese goods. lisa: i keep thinking about when mom and dad are angry, especially when they're a great another sibling you go into another room and hide. you try not to make waves. it feels like, why wouldn't any company do the same? why they make any big moves ahead of understanding everything has calmed down? is that the tone you are hearing? mike: during the trump administration we did see him single out companies over corporate policies he did not

like and he would also single out companies that made a move that he thought was favorable. he had a different kind of relationship with corporate america than the biden administration does. his little bit more arm's-length. with that proximity, there is some risk. they do not want to get caught in the headlights of trump the wrong way. they do not want to be seen as running afoul of him before the election because that creates the prospect of a target being painted on their back at the moment they least want it. jonathan: nobody wants to be that person. michael sheppard of bloomberg. we talked about friend shoring. the former president does not consider mexico to be a friend based on that. lisa: who is a friend? it is a legitimate questions when you talk about companies trying to redo the supply chain to create more security.

how do you cut costs to face off with inflationary headwinds? it raises the question that you raised earlier. how many companies are holding off on hiring plans, not to mention m&a to get more certainty on the applicable landscape. jonathan: i think it would be full if to make any announcements ahead of november. borderline reckless. lisa: are you calling someone reckless? jonathan: absolutely not. coming up, julie norman on the risk of absolute war in the middle east. that conversation is coming up next. from new york, this is bloomberg. ♪ we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

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jonathan: all-time highs on the s&p 500. good morning to you all. the nasdaq up .3%. the russell up by .4%. what are we calling this? lisa: soft landing of anna. -- nirvana. jonathan: high yields on the 10-year up by four basis points. in the commodity market we start to rally. crude up by 2.7%. iron ore off the floor.

lisa: that's a good way of putting it. we are seeing a bit of a pop, although more so in copper and oil. in china, potential for stimulus in addition to rate cuts coming down the pike, a recognition of them trying to get to 5% growth. that will be a challenge. you wonder how to strip out some of the commodity issues with what we see in the middle east. rbc saying this market is not price for any kind of escalation. that seems like a likely case as we see the conflict percolating. jonathan: the market has been ignoring it for so long. i'm reminded of something. with the likely more aggressive pace of the fed and global rate cuts in china, there could be a risk of a growth pickup and threat to disinflationary progress. is that the brand-new risk? lisa: it is the underpriced

risk. that is what people are gauging. it is underpriced but for a reason. bank of america derivative strategist. the 50 basis point cut communicating confidence. at a certain point you can see how stocks could rally even if it falls russell with underpricing growth longer-term. jonathan: let's get details out of china. china unleashing a stimulus package, cutting short-term interest rates and existing mortgage rates while slashing minimal down payments for housing. they threw everything at this overnight. lisa: plunge protection patrol. if you're talking about support, i believe the stock market is down 40% since the all-time high. you were looking at a market

very much flat on its back. new home prices. they have the biggest decline last month versus the prior period of 2014. outright deflation in the way we have not seen since the 1990's. the economy is struggling with consumer confidence. what can rate cuts do? that is why people are saying this is the opening salvo to something bigger. annmarie: they are also projecting more to come. the central bank is saying, if we need to we will cut again. people are not borrowing money. they are nervous they will not have the sales to repeat the loans. jonathan: classic balance sheet recession. you need to boost elsewhere. lisa: be kind to me with this one. i'm going to get some heat. jonathan: from who? lisa: the people. there's a feeling that this is

the reason why the fed is being so aggressive. to the austan goolsbee haters out there, there's a question about whether this is what the fed is trying to devoid, a deflationary spiral. this is a fiscal issue as much as it is a monetary policy issue. the conflict with creating monetary solutions to fiscal and policy questions. jonathan: citing the wrong central banker. governor waller in the last week worried about undershooting the inflation target. don't you feel that way? lisa: the most extreme version of the federal reserve. i'm not saying he's making the best argument. that is what he's afraid of more than seeing something else. jonathan: president goolsby of the chicago fed. donald trump threatening a 200% tariff on john deere products if

the company was production to mexico. the company saying it's committed to domestic manufacturing. you can file their reaction under things you never have to say. you don't to get into this game with the former president. they are not in a good spot right now. annmarie: i'm not sure why businesses are talking about potential future plans with every thing is highly politicized. the issue facing john deere, this is high costs they are dealing with. they want more efficiencies across the supply chain. they say they can do that better in mexico. what happened to the usmca? donald trump said this is now the greatest trade deal. mexico was part of that. lisa: i can't get over how much i would be hiding in a closet. you were spot on when you say why would you make big moves of any type? what if you don't like where people are being hired from or

people with certain types of visas? you know what that. jonathan: no short leadership speeches. just back away. let's regroup in the near. we can have some happy talk. the ftc set to close chevron's takeover and what could be one of the largest oil deals in recent years. they plan to merge 11 what's ago. the decision could come as soon as this week. annmarie: this might annoy said democrats who were sounding the alarm they didn't want to see a megamerger in oil and gas. the deal is not done yet until chevron wins an arbitration case. they want access to this deal in guyana. if they don't get that they won't want the deal to go through. they have to when the arbitration case. -- win the arbitration case.

lisa: you are becoming kind of a campaign issue for businesses. lighten up a little around the edges. this is an oil patch deal. in a previous iteration of the biden campaign, now the harris campaign, you imagine this would have been a problem. that is not really the tone now. i wonder how much people are saying -- annmarie: this is a global market. prices are made every day. how much could colluding there really be? jonathan: the lack of clarity in this country on what kind of deal is allowed and what kind is not allowed is incredibly difficult to figure out. there should be some degree of consistency on that front and i'm not sure there is. lisa: the handbags really got you. coach? really? jonathan: she was on 60 minutes recently and said something that inhalers and make good points.

then it comes to luxury handbags, you've lost me. what is that about? what is the objective? lisa: there is an important conversation that needs to be had about which competition is healthy and which is unhealthy and the standards the companies can look to to be used as a template going forward. that would be wise. a lot of people would welcome that. jonathan: what business wants is consistency. they want to understand the laws of the world and the country. i'm not sure there's a deeper understanding of that. chevron up by 20%. -- .8%. israel lodging airstrikes and one of the deadliest days of fighting in nearly two decades. nearly 500 debt and more than 1600 wounded. can you walk us to the latest on the degree of escalation we have

seen in the past few days? >> the most important thing to note is in the past week we have seen a serious change of calculus and how the border is being treated. up until a week ago they were conducting with sam's -- themselves within the rules of engagement. things have dramatically stepped up in the last week from this telecommunication device explosions culminating in the airstrikes across lebanon and beirut and close to the syrian border. the israeli military has said they targeted more than 1300 targets yesterday including rocket launchers and munition depots. the ministry put up the death toll of more than 500 people being killed during these deadly airstrikes.

58 women, 35 children included in the total number. 1600 people wounded. lots of concern in lebanon about the rising number of civilian casualties. earlier in the day, the idf did send warnings to lebanese residents to move away from their homes and evacuate as soon as they could in anticipation of these airstrikes. for many that was not a possibility. what you did see was hours long traffic jams for families try to evacuate their homes and move to safer parts of the country. hezbollah, in an act of defiance and even though they have been subject to multiple blows in the last week, many commanders have been taken out, they also launched rocket fire into northern israel yesterday. sirens went off in haifa. most were intercepted but the point is even though the iran-backed group received heavy

blows over the past week, they are showing and displaying a lot of defiance by continuing to fire rockets into northern israel. you have to take this back to comments the defense minister made a week ago. the center of gravity shifted to the north. there's a new war objective for israel. what they want to do is ensure the safety of the border around the north so residents can return to their homes. as long as there is a change of rocket fire that objective will not be achieved, hence this continued round of escalation. jonathan: a big shift in the past few weeks. julie norman joins us now. i want to talk about whether this is a war are not and how relevant the question is at this point. we hear this all the time, the brink of all-out war. that looks like work to me. what is it -- war to me. what is it? julie: it cannot be described in

other terms when you look at casualty numbers, over 500. thousands displaced and whatnot. where some of the concern is around language and on the ground is to what degree this is going to escalate. there are a couple of different ways to think about that. this is going to extend beyond airstrikes to some kind of ground invasion. israel seems to be preferring the airstrikes in the hip have done that in the past and gotten bogged down. that is option one. the second is drawing and other regional actors. if iran gets involved or other groups get involved. third, the u.s. and other actors need to get involved. the pentagon is sending additional military personnel to the region in small numbers now, mainly for deterrence purposes. this is what everything is on

the edge of the knife. the idf of if it becomes a regional war that everyone is concerned about and the dynamics in lebanon and israel. annmarie: click, to the ground invasion, beneficial -- when it comes to the ground invasion, beneficial said it's important to take israel seriously on the preparations. the question we have been asking when the pages were blowing up, was this escalation to escalate or de-escalate? can you draw the conclusion this was escalation to escalate? julie: anyone who has spent time in israel since october 7 has known from israel's point of view they want to push has below back -- has below -- has -- if diplomacy was not to work israel was going to take

action to take action in their own hands. you can read these current actions in two ways. one is trying to for some kind of capitulation from has below -- they have been defined with a lack of the cease-fire in gaza. an escalation which israel is prepared for. israel is prepared to go either way. they felt the status quo is unsustainable. lisa: how long before iran gets involved? julie: of all actors i would say iran is the one who does not want a regional war. back channels have affirmed that throughout. most notably when a hamas official was assassinated in iran. iran has not retaliated and taken action back from that. we have seen elements of restraint. with that said, hezbollah is the

most important proxy actor for iran. it is their strongest asset in the region. if hezbollah is on the brink of defeat or getting hit hard, it is hard for iran to sit this one out and just let their main force in the region take that big of a hit. the pressure will be on them as well. jonathan: julie, appreciate your time is always. julie norman. if you came down from mars, to the middle east you would call it a regional war, whitney? -- wouldn't you? lisa: it is a war. i don't know what people are looking at for escalation and what kind is likely. what would bring getting out of control? where are the notes of leverage right now? it doesn't seem like the u.s. has much and i don't know how much iran has leverage right now over hezbollah leverage right now over. they have a lot of leverage but

how much they are directing them versus trying to manage a conflict that they clearly don't want to escalate. jonathan: the white house has struggled to influence issues on the ground. an update on stories elsewhere. yahaira: the italian government officials are growing frustrated at germany's opposition to a takeover of commerzbank by unicredit. they have privately criticized while berlin advocates for european integration, they came out against the potential takeover of one european bank by another. those familiar say some in rome expressed frustration that unicredit's ceo is overly aggressive in his bid for commerzbank. 45,000 dockworkers at every major portal on the u.s. eastern and gulf coast are threatening to strike next month just weeks ahead of the presidential election. they work stoppage could lead to

supply-chain disruptions not seen since the pandemic. one estimate says the strike could cost the economy $7.5 billion. talks have been at a stalemate since june. shares a visa falling. bloomberg reporting the u.s. justice department is planning to file a lawsuit against the company as early as today. sources say the doj antitrust division will allege visa illegally enough alleged the debit card market by taking steps to keep rivals from challenging its dominance. the government's allegations include visa made occlusive agreements to hinder the expansion of competing networks and thwarted efforts why tech companies to enter the market. that is your bloomberg green. jonathan: thank you. up next, china unleashing a stimulus blitz. >> it might not be that hard. don't forget, we could have

further fiscal stimulus. jonathan: we will get the view from goldman sachs up next. ♪ ♪ where ya headed?

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jonathan: dare i say and inflation return today? the curves are steeper, yields are higher. up three basis points on the 10-year. it might be a stretch. it is kind of happening on the screen, just at the moment. lisa: check out gold at all-time highs on a nominal basis. i agree but on a relative basis. we are talking a little bit of an increase. jonathan: china unleashing a stimulus blitz. >> i think to deliver the growth target, today's policy

announcement and we could have further fiscal stimulus. we still have more than one trillion left to be used up this year. there's a possibility the ministry of finance can't issue more -- can issue more. jonathan: sending stocks to the best day in china since 2020. including a cut the short-term interest rates and a reduction in requirements for banks. setting up a market stabilization fund. kamakshya trivedi writing, "our china economics team just revised their gdp growth forecast down. we spent the chinese currency to underperform." you wrote that before this stimulus package. is this enough to change your mind? kamakshya: i think the stimulus

is more than we expected a few days ago. i think that matters. it seems they are putting a floor under the equity market rather than necessarily the currency. we had a little bit of currency strength today. more in the last month and a half, although that's more to do with dollar weakness than china specific strength. the jewelry is out -- jury is out. i'm not surprised to see stocks react positively to the announcement. i don't think a stronger currency is the best way to express a view on the development side overnight. lisa: there's a question if the fed is opening the door to stimulus and further easing around the world and whether it creates a race to the bottom but it gives us a bit of a backdrop that could limit how much dollar weakness there could be. is that your view of things? kamakshya: i think that's very

much in line with our thinking. the fed is a big deal. the fact they are cutting rates against a backdrop that is not recessionary. they are getting ahead of the curve and support and secure that soft landing. that really does allow central banks and global central banks across the world to join in the easing trade. easing is coming soon to essential bank close to you and that will limit the extent of the dollar weakness you have seen. ultimately we expect the economy to continue to expand and grow with solid momentum. some of the activity data in europe, and china are not that strong. china stimulus is different than the u.s.'s stimulus. the u.s. cuts came to secure a soft landing. china announcements came in response to some really poor set of data. we have to see how much traction they have and the economy is supported. i don't think we are in his own

where we should argue for aggressive dollars depreciation. lisa: you are listening to a 1960 soundtrack when you wrote this piece. is the first cut the deepest? simon and garfunkel. when you say is the first cut the deepest, which set me off on a humming sphere, do you think that is the case or is the dollar cannot get much more week predicated on the idea you could see ongoing 50 basis point rate cuts in the next six months? kamakshya: we put a lot of effort into our titles. i'm glad you enjoy those. yes. coming to the limit of how much the dollar can weaken by the fed easing. a lot of easing is in the price of the fed curve. the baton is going to be passed to other central banks. ultimately, look, we're in a

world where global growth is ok. the fed is cutting aggressively and equity markets hold up, that's a generally dollar weakening environment. we have always maintained the dollar's high valuation is ultimately a feature of the strong growth in the u.s. and the rate of the rate of returns you getting u.s. assets. we don't think that's going to change anytime soon and we think the dollar's high valuation will erode very gradually. annmarie: you say key event risk. which is the most vulnerable to trump tariffs? kamakshya: if we have a set of tariffs, if we have trade disruptions, that's never good for any emerging-market market or any market really which is plugged into the global trading cycle. a lot of em's have that exposure to global trade. i think of open economies like the korean won in neighboring economies like the mexican peso. those are the kinds of currencies that could be affected. china is another one where there

are lots of talk of tariffs and we saw this implement did in 2018 and 2019. there was an impact. there's the open economies of asia that are plugged into the global trade cycle. also perhaps mexico is one that features at the top of the list given its exposure to the u.s. trade. jonathan: we will talk about that next time. kamakshya trivedi of goldman sachs on the latest out of china and the u.s. i think the chinese story is well understood at this point for the former president. what is less understood is what happens with mexico. i'm fascinated to see what happens in that part of the world. lisa: who is a friend? how reliable is that friendship? there are real questions that need to be answered. annmarie: does this mean we are potentially entering a trump 2.0 saying goodbye to the usmca that he negotiated? jonathan: it does feel that way. coming up, stuart kaiser, ed

mills, lord john browne. this is bloomberg. ♪ s are still calling each other rock stars. you're a rock star. we're all rock stars. oooo lmy data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one.

>> the economy is really in a pretty good spot. therefore, the stock market should be in pretty good spot. >> we see momentum in terms of growth and expectations. >> at some point the market will go back to a world where good news is bad news. >> i'm still in the rowing 2020's camp. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz at annmarie hordern. jonathan: the death of lisa's knowledge. not ron stewart. cat stevens wrote it. lisa: 1967. the same year the other song was released. i went down a real rabbit hole. 1967. checking the bond yield perspective -- carry-on. jonathan: yesterday, 14th all-time high close of the year. a little bit of weight on the s&p. on the nasdaq up by .2%. a little bit of outperformance on the russell. the news overnight out of china cutting interest rates, reducing reserve requirements. setting up a market stabilization fund and a lot more. sending chinese equities up by more than 4%. lisa: this is the beginning and people agree this is a first

step. we do see deflation in china and have a question about how you get consumers to spend more, how you get the labor market to improve. is being treated as a -- is this really the opening salvo or is this it? annmarie: our economist says this is the day to remember for china's monetary policy. the issue is, of course, can this lift consumers if not spending? they are not spending as potential layoffs down the road. jonathan: that's coming almost a week after the federal reserve decided to cut interest rates by 50 basis point. there was an easing worldwide. there is one central banker to look out for, responsible for the first governor to dissent on the fomc and almost 20 years. governor mickey bowman later on. lisa: how concerned is she about

inflation? is it just on the margins? she sees it as a dual mandate fed we have to watch some of the price pressures out there. how much was this orchestrated? this is kind of conspiracy theory stuff. it's perfect. it's a perfect way of signaling this is not necessarily all holds barred to slash to zero. the first cut is the deepest. jonathan: you would like to be at the fomc meeting on wednesday? lisa: i would be available. jonathan: they did cover to go 50? lisa: it's a signaling device. the first time since 2005 you have a dissent from a fed governor, this is different. we are having a robust conversation. we are not sure with the right path to go is but we made a mistake and should have cut in july. we are adding another 25 basis points and here we are. a signaling device more than my goodness we all hate each other. this will be violent next time. jonathan: dissent on the fomc.

just about turning over to unchanged on the s&p 500. in the bond market, yields are higher on a 10-year by three or four basis points. approaching 378.30. lisa: $44 billion. it actually is significant. do you start to get a bigger push up and yields? what is the correlation between bond yields and stock valuations? i don't know we have a clear sense of how correlated they are right now. jonathan: the good news starts to become bad news again? lisa: let's park that. jonathan: you kind of went there. you are suggesting that might be bad news. lisa: on the edge of inflationary. on the edge of risk premium increasing. jonathan: we will come back to that story in a moment. coming up, stuart kaiser.

the fed officials leave the door open for another large rate cut. lord john browne on a i energy demands. and why jill carey hall is cautious. officials say additional interest rate cuts might be on the table. stuart kaiser writing the following. "we think the equity response to rate cuts will be largely -- will largely depend on labor market data. rate cuts will not be enough to offset recession risks and equities will move lower." good morning to you. stuart: good morning. . jonathan: did we settle anything at all? stuart: the fact they are starting to cut rates. they were clear about dual mandate conversation. they started that migration back last december. what they are telling you know is the dual mandate probably is tilted towards the growth side of things. they don't want to fall behind.

the market is taking their word for that. this is not a preemptive cut but an insurance cut to get themselves back to neutral in case they see a deceleration in growth. our view is if you get the deceleration and growth, it will not be enough to help. jonathan: if we get more big interest rate cuts is a harder to be bullish? stuart: 100%. if you get payrolls stabilized, extremely good for markets. if you get payrolls falling and they are under pressure to catch up, that's negative for risk-reward. lisa: are lower yields better for stocks or probably worse for stocks because that means there's bigger problems? how do you parse that at a time when we don't know what neutral is and what rate we are heading to? stuart: the shift is actually important. that tells you the relationship

between bonds and equities can be undergoing a shift right now. if you start with the supposition an inverted curve is a recession signal, which is what we had, you want lower yields and the curve steepen a. once you normalize the yield curve, we think you are going to want higher yields at the 10-year point. that is more growth sensitive. it is early stages. we have broken the inversion but it shouldn't go -- we shouldn't ignore the fact that shift in the yield curve is meaningful and the correlation between bonds and equities can be in a paradigm shift right now. lisa: is the bar for good news higher for stocks given where valuations are and they will not necessarily boost lower yields? -- not necessarily get a boost from lower yields? stuart: if you printed 160,000 jobs, that's positive and the market would respond. if you have a fed cutting rates about slowing growth, that

lowers the bar for good news. the market is going to take positive news on ism, on claims, on payrolls more positively than it otherwise would have. if i told you we printed 150,000 in june, you would've thought it was negative. next week, that's not so bad. they are doing insurance cuts. i think the bar is lower right now. jonathan: does the policy justify making the shift the small caps? stuart: the small-cap trait is very tactical. it is hard to be buying a rate sensitive growth sensitive asset in the early stages of the deceleration in growth. you can be long small-cap ahead of catalyst we have confidence you will get good news. that's a hard trade to hold in your portfolio for three to six months. jonathan: utilities. phenomenal the performance so far year-to-date. difficult to work out if that's a bond proxy or something else linked to ai.

what is it? stuart: the bond market is helping but a lot has to do with reopening three mile island. in my lifetime you would i have expected to hear that. the lower yields help put it back in the spotlight. what is driving the exhilaration -- jonathan: hi yields don't hurt it? -- high yields don't hurt it? i'm wondering if that's facing a headwind. stuart: they probably don't hurt it as much as normal conditions. it's incrementally positive for utilities. it hits a nice ai hashtag and that help. annmarie: there are questions regarding the election. have any events shifted you when we are another? stuart: the polling has shifted. our view is it is 50-50. you have to go into it that it's

basically a 50-50 tossup and trade that way. do you think democrats need to poll 3% to 5% above gop nationally to be confident? rockets are asking the question -- markets are asking the question about a harris win . annmarie: it doesn't really matter if it's one in a swing state. -- won in a swing state. stuart: argue it's a very nero vote margin. it's hard to have conviction about which party is going to win. lisa: there was a quote i saw this morning from bank of america derivative strategists. with the 50 point cut, the fed put us back with the strike price as high as is been since covid. are you ratcheting up expectations for how far the s&p can rally on a base case? the bar is lower for good news for equity markets to do well.

stuart: the case for this year has been you avoid a recession and you get cuts. that is now a plausible scenario. do you get that solid labor market holding? i think equity markets can go significantly higher. lisa: joining me significant higher? stuart: 5% to 10% higher year-end? it's just a scenario. you're cutting 125 basis points before the end of the year, equities will rally and the small-cap will have a huge push behind it. our view is risk-reward is tough because is depended on month-to-month, the payrolls number. yes, i get it. if you're in a situation where you are printing recessionary labor market data, we can blow through a fed put no problem. we get quoted the idea of the early 1990's, equity markets did

well. you printed negative table for 11 consecutive months averaging 145,000 and lost 1.5 million jobs. the fed will not protect you if you get that kind of data. jonathan: what is the number one trait for clients right now? -- trade for clients right now? stuart: higher quality, safer balance sheet stocks. you own call options on the iw and to hedge -- iwm to hedge the short beta risk. the risk reward is challenging. we don't think it's a good time to stick your neck out. if you're worried about it running away with volatility collapsing the way it has, you can layer that on top. jonathan: priced to perfection. i make a series of notes of what guest tell us everyday. if i put in priced to perfection, it comes up. are you nervous when people keep

saying the same thing in the market keeps going higher? stuart: there have been skeptics about this rally for 18 months. there's been a recessionary bear case and in equity bear case. yields were higher last week. two-year was higher week on week. equities still moved. is that priced perfection? i don't know. the bond archivist telling you this is an as expected outcome. you got some rotation into cyclicals. valuations are high, no doubt about that. look at s&p equal weight, extremely positive performance because the earnings growth is starting to broaden out. i don't know about priced for perfection. you talk to client and there are people worried about the bear cases. it doesn't feel like everyone is all in on the trade. the plurality is soft landing and that is what people are talking about. lisa: that is where i was going to go.

put a bow on all of this. what would you have to see to go all in on small caps? stuart: just payrolls. if you are printing 175,000 payrolls for a couple of months in a row, small caps will do well. the biggest take away out of last quarter's earnings is the 493 positive on growth. the idea was to broaden outperformance you need to broaden out earnings. we are finally in the second or third quarter seeing a brining out. that should be positive for small-cap equities. it is labor market data. i'm a broken record. jonathan: you are consistent. we appreciate that. stuart kaiser on the latest. an update on stories. yahaira: elon musk is offering high praise. -- high praise for giorgia meloni. speaking last night, he called

italy's right-wing leader authentic, honest and truthful, adding that can't always be said about politicians. the remark showing the close relationship between them. she has refrained from backing trump and says she will work closely with whoever occupies the white house. the ceo of novo nordisk will be grilled about the price of its weight loss drugs. the company is facing increasing pressure to make the medicines more affordable. in written testimony, the ceo claims mittleman -- the company retains only a fraction of prices and the rest are paid to companies that manage pharmacy benefits, insurers and employers. the phillies clinch their first division title in 13 years in a big win over the chicago cubs in front of a sellout crowd in south philadelphia. home runs from kyle torbert -- schwarber and jt realmuto help

secure the victory. it secure a first-round bye. jonathan: where did the story come from? is there a phillies fan in the control room? lisa: i know the mets are very much watched at home. the mets are doing really well. they are crushing it. jonathan: talk of next, opposing policy plans. >> we will tax capital gains at a rate that rewards investment in america's innovators, founders and small businesses. >> we will end all taxes on overtime. jonathan: that conversation just around the corner. live from new york city, good morning. ♪ ♪ ere 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: stocks are positive, just turning a little lower on the s&p. one thing that is sticking, the shift higher in bond yields. just short of 380. under surveillance this morning opposing policy plans. >> we will pass a middle-class tax cut that will benefit more than 100 million americans. >> what i'm going to do something nobody ever thought about doing. no tax on tips. >> we will tax capital gains at a rate that awards investment in america's innovators, founders and small businesses. >> i want to cut taxes on americas while putting tariffs on china and forward countries. >> my plans to give a $50,000

tax deduction to start up small businesses. >> we will end all taxes on overtime. jonathan: here is the latest this morning. donald trump and kamala harris at the well at new details of their new economic policies during sweeps -- weeps take campaign events. trump will offer incentives to foreign companies with harris announcing policy changes in pittsburgh. "if harris can keep her momentum, she wins. if trump has a late surge, he wins." ed joins us for more. where with the late surge for donald trump come from? ed: is base coming home. when you look at 2020, donald trump had 10 million more american voters in 2020 than 2016. he increased his vote share by 15%. if you have a surge in terms of voter turnout towards him, that

is where things are so close in sun belt states. he has multiple paths to the electoral college votes. that is why we don't call the election just yet and either direction. annmarie: as the base left him? isn't this the moment where he needs to be catering to the center? stuart: -- ed: i don't see the base having left him. i see polls that asked the question on a scale of zero to 10 how likely you are to vote for the other candidate. it was exactly the same. zero prevent -- 0% for buying and now 0% for harris. there's a large group of americans who have made their mind they are not going to vote for the other candidate. we add up the zeros for trump and harris. it's 86% of americans have already decided. they could never vote for the other candidate. annmarie: when it comes to the

rest of the campaign trail, trump is almost everywhere every day. this week it is going to it georgia-alabama game. when you have harris doing specific events, they are judicious in their time. are both of these working for each candidate? ed: i think it's a little too early to tell. one thing that has been striking is that when you look at the fundraising numbers, you look at the spending numbers, donald trump is being outspent by the harris campaign by about $5 million a day. when you're being outspent by $5 million a day, you need to earn media. you will need to say things that get you onto the nightly news, gets you into the conversation. with the 40 odd days we have left i fully expect the earned media efforts of donald trump to ramp up and the conversations getting more and more interesting in the last 40 days. lisa: if i'm going to sum up

both their plans for the economy, for trump it is nobody pays taxes. for kamala harris, everyone get something. both seem to like crypto. what is sticking with potential voters? ed: who says there is no policy plans out there? we saw a pretty robust discussion. what is so fascinating is that trying out policy plan after policy plan to see what actually sticks, what gets traction on no tax on tips. trump said it first and harris was asked about it in, sure, let's do that. there is a state of nevada who wants to tax individual tips and trying to win over the 1% or 2% that can decide this election. what is interesting is that we joke about how loosey-goosey some policy details are, we have a tax deadline next year. something has to happen next year on taxes.

it is a serious conversation that is going to occur in washington, d.c. next year. $5 trillion to $10 trillion in one way or another depending on who wins. we are almost in a choose your own adventure mode from the candidates as they announce what plans they have trying to see if they can win over that 14% they have not made up their minds. lisa: is an important point ahead of december when people are wondering whether to sell and get ahead of some increases on capital gains taxes next year. how much when you talk to clients are they watching the polls? deciding whether or not to sell for the tax loss purposes? ed: not yet. this minute conversation. it's unusual after the first debate we clearly saw, the trump trade getting put on after the second debate we have the harris

trade put on. a debate with clients is do you want to get ahead of that this november 5? beyond that, if you have a harris victory on k and three individuals above $1 million she's proposed a 20% level -- 28% level. that could have some tax prevention harvesting in december if she were to win and there was a democratic sweep. probably the only way that happens is a democratic sweep. if it is a split congress, there's no aspect asian. if it is a republican sweep, we will not see increases on capital gains but probably not all the tax cuts donald trump proposed. he's trying to move the goalpost to having the extension of what he did in 2017 as a compromise victory in the base case. jonathan: we have to leave it there. ed mills of raymond james. for those outside of the united

states, it doesn't get much better in sec football then alabama-georgia. the tv ratings are through the roof. a lot of eyeballs on that event on saturday. annmarie: harris is outspending trump $5 million a day. he's oversaturated right now, she's underexposed but he needs that free media. jonathan: coming up on this program, imagine restarting a nuclear plant and basically selling on the output to microsoft. that is what is happening. lord john browne as ai drives increased energy demand. this is bloomberg. ♪ ♪ the best ai assistant isn't one that knows the whole world. it's one that knows your world. a custom assistant, built on watsonx with ibm's granite models, can leverage your trusted data, be easily trained on your workflows

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jonathan: two hours away from the opening bell. equity futures are just about positive. of by .05. small caps are up by .2%. if you are just joining us, changes out of china. they have cut interest rates and reduced of the reserve requirements for banks. market stabilization fund to set up as well. there are other things in the mix, the kinds of things we have been talking about for quite a while. lisa: two-year yield's in china defaulting overnight in response.

you are not seeing a massive readthrough in terms of a global equity rally. what you do see is that maybe the fed rate cuts are paving the way for further easing and other economies that might need this stimulus a bit more. jonathan: the csi has had its best day since 2020, about 4%. no big follow-through, as indicated by lisa. turn the page, we will get to the bond story on the front end. on the long end, the 10 year, the yield is shifting up by four basis points, getting closer and closer to 380. lisa: pricing faster growth if the fed tries to get ahead of potential weakening, you would have to imagine that on the flipside you might see maybe, i don't know, inflationary light on the others coming to the fore. hard to put too much into it. jonathan: the euro, just a little bit stronger this morning, not great. we weren't looking for it to be great but it was even worse.

german business confidence is just part of the broader story. a soft spot looking for positive catalysts. lisa: some are now saying that they will be cutting rates more aggressively. does that help the euro or hurt the euro? at what point are we talking about growth differentials more than interest rate differentials? i think that is the next leg of the story. jonathan: it's been a big part of the conversation with federal reserve interest rates normalizing. can the growth differentials rebalance? china should be a big part of that puzzle and if they can get traction in that, it should go downstream to places like europe. lisa: which is why you can talk more about what happened in china on euro business strength as opposed to germany. jonathan: euro-dollar right now, charts showing what lisa just described. israel carrying out its deadliest airstrikes since 2006. lebanese officials saying 500

people were killed in the attacks. annmarie: it's getting difficult by the hour, more difficult by the hour in the middle east. one israeli official said they wanted to degrade the military capability in the air but the question remains could we potentially see a ground invasion on top of that? we will be hearing from president biden today at the u.n. general assembly. it strikes me how different his tone will be today when it comes to the middle east. dod preparing to send more u.s. men and women to the region, but this time last year when i was with him at the u.n., he was talking about a new, integrated middle east. very different story today. lisa: based on the headlines in the imagery that we see, it's surprising that the market is in trading more in response to it. increasingly that should be a christian as we look at escalation potential outcomes. jonathan: brent crude, up by 2.4%.

let's talk about boeing, making an offer to striking union workers, including a 30% pay bump, looking to shut down the strike that shut down their factories for over a week. union members are still pushing for a 40% pay increase. lisa: union leaders saying they won't bring it to their members until it is more in line with what they would like and what they have been asking for. the real question here is about what it will get for boeing. the situation gets worse, where they get the money on this? annmarie: boeing put this out on their website, calling it best and final. the union saying they won't vote for it. how much more down to the wire can this go? 25% to 30%, the union saying they want 40. jonathan: and a final story for you, the boj hitting visa with a lawsuit, saying that they illegally monopolized the debit card market, accusing visa of

preventing competition through exclusive agreements to make competing payment networks weaker. lisa: reading the details, it's really fascinating, the tokenization of everybody's credit card numbers to prevent theft and have certain security and protect identities. basically, visa charges a lower rate to vendors who use this tokenization, but then they have to only use visa, locking out other potential competitors. it sort of becomes a real issue because visa can say look, it makes our business more streamlined and cheaper, but on the flip side it really sort of raises the barrier to entry for others. annmarie: last year the ftc reached an agreement with mastercard and i imagine that lays the groundwork of what we could see happening with visa. jonathan: getting to our big story over the last few days, the rise of artificial intelligence fueling energy demand across the power grid. constellation start raking a grid with microsoft to restart

the three mile island nuclear power plant by 2028. beyond that zero is responsible for the general atlantic climate growth equity strategy. fantastic to see you. >> a good to be here. jonathan: it's amazing to see a nuclear plant reactivated, restarted, supplying energy to a tech firm. how big is the strangle for energy in this country? >> very big. electricity powering data centers that are being built at the rate of one per day, they are big ones. very big data centers nowadays that can absorb one nuclear core with a 600 to 800 megawatt, it's imperative to restart and reuse a nuclear power station rather than build a new one, but we will have to build new ones until there is a reaction. the reaction is -- how do you reduce the power consumption of ai?

i think the answer lies in the fact that there are two different things going on here. one, training, which takes a lot of power. i know that from some of our companies, very expensive. and then inference, what you do to use it taking much less power. people are working on different ships, different data centers. so, one day this will probably flatten out a bit, but right now it's a lot. jonathan: do you think it undermines the climate goals of this country? lord john: not necessarily. we have to think about not just of this country, but the world, so contributions to this country, there will be offsetting in ways of getting renewables into data centers. so, it is a mix of things. there is no one solution. lisa: i had been looking for some optimism. with climate change you often hear gloom and doom. you said that 80% of the

technology that we need to reach net zero is already developed and that the issue is capital investment. can you explain? lord john: costs and capital investment still hand-in-hand. the more that you do something, the cheaper it becomes. to get started, you've got to figure out how to get a form of incentive to get early technologies applied. i'm very -- i remain very optimistic. i do think that our biggest problem is we have spent a quarter century discussing the problem in doing little about it. there's an argument about whether there is a problem at all. we've got about a quarter of a century of time to make up. so, we have got to speed up, meaning we need much more money going into growing the things that we know will work. and that requires us to have the right incentives in place, such as a price for carbon. lisa: ok, what are the right

things that could work? we know telling people -- be better about throwing out fewer items, don't use plastic bottles, some of these lifestyle changes are not working, not resting with people and causing people to reject it. what are the things that are actually working? lord john: the very big thing that has to work and isn't quite yet, how do you take carbon out of hydrocarbons? we can use hydrocarbons for a long time. capturing carbon dioxide, storing it away in different ways, not just the old ways that people are thinking, like big refineries, but more sophisticated ways. that's the big thing to crack. the second thing to crack is how do you actually use energy? a part of that is energy efficiency. part of that is the secular economy and what you do with the old tires, for example, but on a very big scale. doing big things.

finally, it's creating new energy. i was in india just a few days ago where we were overseeing a huge rollout of, you know, solar and wind plants, up to 500 gigawatts. a huge amount will be in place in 20 years. it's moving today. moving today. annmarie: do you think that policy intervention works? annmarie: it has to. the entire energy scene is fine -- founded on good policy. there's nothing natural about it. the government about -- the government has to both inspire and avoid the use of energy. taxes are important. the key is getting them stable and keeping them in place all the time. in the end, you know, if we would stop people putting carbon in the atmosphere, if we can't do that, we have to charge them for doing it. this stuff about carbon border

adjustment mechanisms, all of these things, they are designed to do just that. annmarie: looking at the ira, some people say it works, but public charging stations, two dozens they are spending billion on. should this not be left to capital markets? lord john: absolutely. there are things that misfire and all policy. i think that one has to be very careful in all of these areas a big change, the transition. the odd phrase, don't make perfection the energy of the good. we have got to get on with these things, like carbon markets that don't work. but they never work until you start them. so, you have got to do a bit and then correct. it was the same when i was in the bull markets, 40, 50 years ago. they didn't really work properly, but they work today. i'm optimistic, as we just keep pushing ahead and don't allow

ourselves to be blindsided by the small. look at the big picture. that is we have got to get rid of carbon dioxide. very simple, got to do it quickly. jonathan: jumping and quickly, we had a guest on the program who said they managed to reduce reliance on opec and china when it comes to renewables. when you were the ceo of bp, producing like 6 billion barrels of oil per day in this country, it's now 13. we are doing the same thing with china as we did with lord john: opec and fossil fuels. lord john:of course. coming back to my experience in india a few days ago, 100% of that was built and sourced in india. it wasn't imported from somewhere. if it can be done in one place, it can be done in another. trade barriers used to be regarded as somewhat economically inefficient, but they are what they are and you can get things done. jonathan: what are you investing in with regards to that effort

right now? annmarie: -- lord john: a lot of energy efficient economies. how do you measure things to get them more efficient in the supply chain or, you know, whether it is how people think about their own carbon reduction goals. things like that, we are investing in sub-saharan africa, india, a variety of things like that. lisa: one difficult part about this is seeing the investment make a lot of money when you are reliant on incentives to make something work. how much is that a part of the calculus, you know? that you have to sort of suspend or just have faith that there will be the right policy mix to make some of these companies viable? lord john: i regard all taxation policy as incentives, all of them. we don't rely on things that are exceptional, we just don't. but we believe very firmly once

again in sustainable investment that needs to beat the rest of the investment back. so, for example, we invest in a 25% irr, which is what we get. you can do it. you have to be selective him go to places where you know that the incentive structure is stable and makes sense. again, i have been in plenty of areas in the past where i remember being, like in spain, where they overdid the incentives and everyone knew it and everyone was surprised they changed them. now, you can be contradictory if you want to be, but you have to be careful about that. jonathan: always a clinic, john, appreciate your time, good to see you. lord john brown of beyond net zero there. now, with your bloomberg brief. >> joe biden delivering his final address before world

leaders today at the un's general assembly, reportedly speaking to the importance of international alliances to address emerging concerns from climate change to a i am calling for the expansion and strengthening of institutions, including the un security council, speaking to the ongoing wars in ukraine and the middle east. meanwhile, hurricane john made landfall as a category three storm on the pacific coast of mexico last night and the national hurricane center issued an advisory warning of a significant flooding and a life-threatening storm surge. plus the state could see as much as 30 inches of rain through thursday, coming just days before the president elect set to take office, raising the stakes for the current administration to manage the crisis on her first day in office. tiktok is discontinuing its music streaming service. in a website post they said the music division will go off-line november 28 and customer data

deleted. this ends their years long effort to capitalize on their app popularity with music fans and compete with spotify and apple. that is your bloomberg brief. jonathan: up next, small caps are betting big on the big cut. >> small caps starting to rally, you need to see that stick for a few days. the old rotation, starting a new one. jonathan: bank of america, the view from there, up next. you are watching bloomberg. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: equities, just about higher, .9% on the s&p 500. the nasdaq slightly higher across the board, yields are up by four basis points, getting closer to 380. under surveillance, small caps

are betting big on the fed big cut. >> i love that he small caps are starting to rally but we need to see it stick for a few days. i'm optimistic now that they might be at the end of this big rotation with an old rotation starting and a brief amount of time where ok news is ok for the markets. jonathan: here's the latest, after that rate cut, joe kerry at bank of america saying that they are still near-term cautious with no evidence of improving fundamentals, but that for investors with a longer time horizon there's a better long-term return potential. so, let's split up the time horizons, near-term and then long-term. near-term are we saying that the relief rally on the back of rate cuts is in the knee -- the rearview mirror? >> it is challenging but the fed is a positive, that was one of the reasons small caps saw that rally in july. more recently, as well. mitigating the concerns around

refinancing risk. you know, obviously around growth more generally. i think that the earnings impact, when you look at it with small caps, based on refinancing risk and factoring in what economists are expecting, that's basically half of what it would be relative to the fed not cutting it all. definitely better for small cap earnings, but near-term, when you think about the potential for volatility to stay elevated ahead of the election, thinking about seasonality, october is usually the worst month of the year for small caps relative to large. the prophet backdrop, we haven't seen that improvement in fundamentals that we started to see four large caps and the prophets recovery keeps getting pushed out. you have seen some of that macro data weakening, calling into question whether all the hope baked in for the fourth quarter, seeing profits growth turning positive for small caps, if it could still come to fruition. jonathan: do you believe that

the relative story improves looking out? why would it change? jill: one of the biggest drivers has been valuation. the valuation story hasn't changed that much. small caps are less cheap than they were or year or two ago, but relative to large gaps they are near historic lows and that tends to matter for what indexes do over the long run. small caps based on a simple valuation framework suggest that they could see a 9% idealized return over the next decade versus low single-digit returns for large caps. i think there is a lot of positive multiyear of thematica,

machinery, some of your traditional sectors that we have started to see happening. jonathan: you and the team did something different with your paper/playbook. there is no playbook, every cycle is different. can you look back on a cycle over the last 50 years when maybe it was relevant to the situation we are in at the moment? jill: i think that what we have to look at the environment of

lower rates and large cap equities, dividend payout ratios have been very low. profits are now recovering for the rest of the market, for big cap, tech, magnificent seven, you're starting to see a slowdown, picking up for the rest of the market. that should be hazarding value stocks with a shift from shorter duration assets into equity income benefiting dividend stocks. we should see a recovery in dividend growth. we think that is an important factor in how that will play out based on the fed cuts within large caps. within small caps, i see mid-caps as potentially a better way, better beneficiary and a hedge near-term, they will be less exposed to the volatility in the market, but they have tended to outperform pretty consistently when the fed cuts, as well as when we are within these slowdown regimes. we have an indicator moving into

the downturn phase. that is an environment where you want to tilt up the market cap where it's faired better. lisa: as your phone just been off the hook? they have been leaving them for dead. now people are saying -- ok, what do i buy? jill: in general these things run in cycles, so looking at the secular, it can last for a decade. 2014 until now, small caps had been underperforming. like i said, there is a positive case to be made that for the next decade it could be an outperformance cycle. near-term selective, it makes sense to stick with higher quality stocks and equity income benefits during the fed cuts. but i think there are a lot of opportunities within small caps right now where investors were underweight this asset class after a decade of performance. jonathan: jill wasn't doing

anything for 10 years? lisa: i would never accuse her of saying that. [laughter] when you are were working on something for a long time and then suddenly someone revises and they call you and your like -- really, now? jonathan: tell us how you feel every time the bond market sells off? [laughter] lisa: [laughter] watch the options. jill, thank you. [laughter] coming up, we catch up with emily rowland, david welsh. we will speak to the former fed governor. and at invesco we've got deficits, bond auctions, and higher values. we can do it anyway? it makes sense. futures on the s&p are up by .1%. from new york city this morning, good morning. ♪

>> inflation is not all the way there. >> we might actually get an

accelerated decline in inflation. >> we think inflation is selling at 2.5% range. >> beneficial's are focusing on what their policy will due to the economy before putting it into the context of the overall economy. >> my concern is that we are met -- we are making a pit stop on the way to the level. >> this is bloomberg surveillance. jonathan: we will stay with this package out of china, reducing reserve requirements and easing draws to buy homes and all things to go out -- coming out of there. they did more than stabilize the equity market overnight and that equity market ripped. the csi 300 up more than 4%, the best day in gains since 2020. the follow-through is muted stateside. equity futures are up not even .1%. the nasdaq up by 0.14.

lisa: this is a beginning and we have been talking about this all morning. the key question is less for the u.s. and more for europe is that for economic growth. the u.s. it is interesting. the federal reserve has cut rates and it has opened up the path for other countries to potentially provide some sort of accommodation for their economies that are having more difficulties. annmarie: capital economics saying it is a step in the right direction but where does it end. if you talk to economists they are talking about the fact that this has to end with fiscal policy because offering up cheap money will not work. if you look at the survey data people are shunning restaurants and luxury goods. they are not binding and spending. jonathan: but the last one he for hours or week together. we heard from austan goolsbee that there might be hundreds of points of basis cuts -- of rate cuts to go. even before we get to neutral. i suggest that it is not that

lonely. put it together with stimulus efforts. you heard that ed made the point that there was a melt in global equities. i wonder how real the risk is. lisa: are we facing off with a melt up or trying to cut too late at a time of entrenched weakness. the reason we do not understand that is because we are grappling with post-pandemic mentality. there is the idea of where are we headed? do not see an increase in unemployment rates without a continuation of that. you just keep talking about bifurcated outcomes and you can get two people making cases on either side and i will buy what they say and it is not clear right now. jonathan: all roads lead to the u.s. equity market, difficult -- the difference between being bullish and bearish. 133 is the estimate and stewart

made the point around 150, good to go. 100 k you worry about that slow down becoming worse. lisa: that is the gap to understand if we are on the precipice of a greater weakening which is his concern, or are you looking at the issue of some sort of acceleration is inflation which what the bond market or gold is sniffing out. annmarie: they have a soft landing. but when you talk about this 50 k spread and then you look at the revisions and prior months we would already be there. lisa: this comes from-- jonathan: this comes from seth comp under said -- carpenter who said the strike at boeing, 30 k. but if we get a number closer to 100 k not due to strike affects that number will be brought to the floor. we need to take 30 k off of going and then you need to subtract the overall number we

subscribe -- we subtract every single month which is about 60 and if we are close to a hundred that is a problem. jonathan: you have to figure out -- lisa: you have to figure out if companies are not hiring because of taking plans ahead of the election and then all other lack of responses to surveys. this is messy data and a lot to unpack and a reason why revision might be the most important indicator in terms of his speech and why he has confidence that this is the right move. jonathan: according to lisa and echoed by chairman powell. lisa: i appreciate that. you know, i will let them take it. just invite me to your meeting. jonathan: that is all i ask for. annmarie just asked for you to cite her at the opera tax code campaign. annmarie: terry haynes has but no one else. jonathan: we will talk to emily roland and we look for better or

debt -- better deliveries from tesla and then betty -- betsy duke as other officials look for another door. we come off a 45 hi as optimism builds in rate cuts and stimulus measures in china. emily roland says while it is tempting to leverage up into we should be mindful that this is pricing into difficult assets. more good news, stimulus measures out of china. is there a reason to buy equities? emily: one of the basic -- biggest risks being underway china and emerging markets is that policymakers can come through with the big packages. this needs to be followed up by more on the physical side. this is creating a risk on rotation and prompting -- prompting it to continue. i think you guys have been making great points about is is actually getting the chinese

consumer off of the sideline and that remains to be seen. this is adding to the momentum and sentiment that is permeating markets and that is everything is pretty great. jonathan: when you look at the u.s. versus the rest of the world, does it change the story and is it enough? emily: it does. you wake up and see this terrible data out of germany. germany manufacturing pmi is at 40, recessionary territory. the dax is up 1%. markets are really reacting to the fed pivot and the cut and the stimulus out of china. we want to be fully invested but we want to be mindful of going over our skis and taking a risk in a market you have been shaming everybody saying price for perfection, but it is in the price with the s&p 500 reaching new all-time highs. underneath the surface just to

just being mindful of taking too much risk. lisa: it is not shaming. we think it is a valid phrase which is the reason why john and myself write it down which is frequently. i am curious about how difficult it is to remain cautious at a time where you see so much risk on appetite and a fed that is behind part of it, at least. emily: it is tough. we are fully invested and buying high-quality stocks and bonds. the trickiest time in any economic cycle to be bearish is at the very beginning and very and. that is what is happening now. we feel like the music is getting turned up. at the end of every cycle the music gets turned up as inflation comes down. the challenges that it gets loud until you see initial jobless claims being picked up and then things change quickly and they go quiet very fast. initial claims are sitting in the low 200,000 range and the

idle bond spreads are 200 basis points and are dipping below after the move last week. the music that is still playing, you want to be invested and you see market see momentum. it is just about making sure that bonds are playing a role in your portfolio and leading to higher quality stocks. and finding quality at a reasonable price to stay invested and be involved as bc this market melt up. lisa: spoke investment put up this statistic, the 10-year yield is up since the fed cut rates rising 15 basis points. how do you had conviction in the long end of the yield curve at a time where this market seems to be suggesting and flirting on the edges with this idea that potentially the more the fed cuts now the more that inflation could be stinky and pick up later? emily: i do not think it is surprising to see this back up.

the fed is supporting the economy with a larger cut is bullish and it is risk on and another part of the puzzle. i think the biggest risk is not necessarily inflation, but more of a melt up in markets which could create more leverage in the financial system if you continue to see equity markets surging. you see momentum stocks and bitcoin and low quality companies participating in the rally. eventually we think that an economic contraction plays out. but when you lean into higher-quality bonds paying over 4% and get paid to wait. i do not think that the bond market is fully sniffing out this environment and is likely to see some type of contraction and unemployment rate. it can happen so quickly. i have talked to many investors who are waiting to get -- to

take advantage of higher bond yields. investors sit in cash for way too long. they sit there until bond yields are at basement levels and then they move out on the curve and invent -- and in brace core bonds. do not want to wait too long to do that. getting cash on the sidelines and getting it invested in a high quality part of the bond market and intermediate part of the curve makes sense. jonathan: do you think the difference between the two and 10 year of 20 basis points makes a difference? emily: i do not think anybody is paying much attention to the bond market in general given the risk on environment. i do think it is enough to start to lean into higher yield in bonds. we could continue to see volatility in rates. the fed just cut in an environment where the economic data was good. you look at retail sales and regional fed surveys. i think we could continue to see

some chop as the data suggest that we are chugging along. the u.s. economy is doing ok. it reminds me of my son's grades. they are ok but not great. he is still on the football team kind of thing. we are doing all right. he might have to wait for duration to kick in as the tailwind but the income is there as you embrace that patience. jonathan: is he watching this morning? emily: i hope not, i hope he is in math class. jonathan: i am just going to share a quote from earlier this year. "we are price for perfection. and you disinflationary forces and resilient growth there -- against a backdrop of growth." i will not name or shame anyone because that reflected how people felt at the start of the year. continuing to beat expectations, do you think we can continue to do that in the u.s. labor market?

it feels like that holds the key. emily: the labor market is a tough one and i will punt on that because you mentioned that the revisions were critical. we need to take those headline numbers with a grain of salt and focus on revisions. there is a lot of expectations going into this but valuations are never a catalyst for a shift in market leadership. you have to see something else change in the earnings background change and the macro regime seeing a shift. there is more great news, analysts are penciling in 4% year-over-year and earnings are growing. the bar is low and it gets higher. in terms of beating expectations, i think we can do it. let's enjoy it while we can. jonathan: emily rowland of john hancock. appreciate you. i hope young roland is not watching. lisa: he is in math class. honestly ok is ok, and he is

still on the football team. jonathan: you cannot do much better than ok. don't work too hard in your youth. lisa: i am a big inherent of do enough parent leap -- do enough parenting. jonathan: much better the videogames. let us get an update on stories elsewhere. here is your bloomberg brief. >> boeing is offering striking workers a 30% pay prompt. the terms are final and all -- only valid until the end of friday, ratcheting up the pressure on the workers. the union president said that his team was blindsided and the union has no intention on putting it before rank-and-file members. it is an improvement over the 25% increase that workers turned down earlier but less than the 40% initially sought. snap will begin using gemini ai

the power chatbot on snapchat. the company has been ramping up investments in artificial intelligence alongside meta-. snap launched the ai chatbot singh generative ai models from openai. the switch to gemini comes due to an instability to process video, audio and text simultaneously which is essential to snapchat. former ftx executive and sam bankman-fried's former girlfriend is heading for a sentencing hearing today. she faces the possibility of years in prison for her role in the following crypto empire scheme. she pled guilty to fraud two years ago and testified against sam bankman-fried who was found guilty and sentenced to 25 years in prison. prosecutors said that she deserves leniency for her extraordinary cooperation as they investigated the company. that is your bloomberg brief. jonathan: up next we will get

morning calls plus david welch says that tesla analysts expect strong third-quarter delivery so the stock is up 1.7%. the morning calls up next. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride?

swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: the opening bell is one hour and 12 minutes away. we are just about positive by .1% on the s&p 500. bond yields are little bit higher and a trend is emerging, six consecutive days of 10-year yields climbing higher. up by four basis points. .378 -- 3.7887. lisa: the implication on the margins is that you would see

potentially stickier inflation because a flood is -- the fed is looking to be accommodative. jonathan: i am told by someone in the know, $69 billion in two-year notes. the day after that 44 billion of seven-year notes. what is it about the seven year maturity that spooked the market? lisa: it is not as liquid. when you have a greater value of bonds of a certain denomination it has more receptivity because there is a bucket in people's portfolios developed -- devoted to that. the seven-year is out there and the 20 years like that. jonathan: even mnuchin said that we should retire the 20 year. lisa: i think we should make the twenty-year grade again. i will try to do that. jonathan: the seven-year auction two days away. jeffries is cutting starbucks to underperform and setting a new

street low. the company's many issues will take time to fix. next up, oppenheimer raising lows to outperform. and moderate interest rates tend to mean a stronger market for home improvement projects. piper sandler upgrading salesforce to overweight siding risk reward to double by 2029. the stock is up by 1.9%. tesla, barclays is looking at delivery estimates to common higher. that has sent the stock to its highest level. this could keep sentiment positive heading into robotaxi day. david welch joins us in with more. we can start with deliveries and then robotaxi day. what gives them the upper -- the optimism that deliveries might pick up. david: we are seeing in subvariants registrations that down to the week before tesla

had healthier than expected sales in china. the narrative has been that byd and other car companies are eating everyone's lunch and tesla has shown resilience and we are seeing an uptick in the ev sales and that is the preliminary data. a lot of that is discounting and we have not seen big price cuts. but when all other ev makers start discounting, maybe they look at tesla and get a little bit of a knock on effect. may be than expected in china and a little bit of a bounce in ev growth in the u.s. and tesla could have a decent quarter and that is what they are weighing in on. jonathan: europe, the ev numbers has not been great simply, not the numbers i have seen. for tesla specifically. any indication that they are doing ok? david: tough to say, europe has

been sluggish for a while now. if tesla will show us a prius it will be on the strength of what we might see in china and the u.s.. lisa: why is it robotaxi day? is it like prime day or one of these other days? what is a. david: tesla was supposed to do it back in august and they delayed it. elon is supposed to show us his plans for his voice self driving vehicle. they used to call it. driving and autopilot and they had all the names. this one is supposed to be a true robotaxi and it will drive itself. people who own a car can actually have other people getting rides and it and a whole fleet of the thomas vehicles driving around. and everybody is really on edge to see what tesla has. unlike google and cruise and the

others who have been testing vehicles and offering rides at certain points we have not seen tesla fully autonomous vehicles driving around. they have been testing them privately. and we do not know what they have because there are other technologies that we have seen sold for partial self-driving. so that is the question. can tesla show us a completely autonomous vehicle. and then once we see that or hear what they had to say, what is the business case. that is something we have not seen materialize, how does everyone make money. these cars are expensive and tough to service. it is a huge growth engine for the company. lisa: let's say they can build it but will it be allowed to be sold especially at a time when supply chain issues are a big concern. how much has this become a security issue? david: well, tesla is developing

their own hardware and internal software. i doubt that they have any chinese or russian software or software embedded hardware. they will be able to do it. the question is what does the vehicle actually do? and can they get a lot of them on the road and what will it cost. a lot of questions but elon musk is good with keeping a narrative and i hope going because there is growth. barclays is seeing ev growth, but the ev business is stabilizing for tesla. there is room for them to grow. but as you and i have talked about for many months now, business is not -- the business is not meteoric. you need the narrative that this is a new business and everyone is wondering what he has. annmarie: what is the permitting like because it is state-by-state whether self driving are actually legal. david: it is a patchwork quilt a

very permissive states like arizona and texas where cruise and waymo are doing business and then you have restrictive states like california and new york and it is very tough to run av's there. the federal government is willing to let this happen if you have an actual steering wheel and gas pedals and all of that. all of that to operate the car. they have to work. you can have this other software and you can run the self-driving vehicles but if you have problems they would very quickly ground them. can run of these -- run these things in some of the states. tesla in texas will be able to run them until there is a problem. cruise was in austin and they had problems in california and other problems in austin and they shut down. they are not going back to austin. so he could do that in some of the sun belt states where they

are pretty permissive, but it is going to have to be flawless in its execution to stay on the road. jonathan: we appreciate the update. tesla is up by 1.6% after closing a two month high. next, check in with betsy duke and rob of invesco. the equity market is just about positive on the s&p 500. the yields are shifting higher close to .380 up by five basis points. this is bloomberg. ♪

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

jonathan: 60 minutes away from the opening bell and equity futures by pause -- positive almost by 10%. a lift on the russell and the small caps up by .2%. with the cash open 60 minutes away let us get you some more movers. manus: good morning. a $53 bill -- bid from chevron for hess will clear at the ftc. it has taken 11 months to get this deal according to sources that we understand it is about to clear. this is about diversification. i want to give you some idea

about what they have managed to do. conocophillips, $22 billion. oil and gas deals have done ok despite what everybody says about the ftc. visa, if you use your visa or debit card there is a mini micro fee on top of that. the justice department is talking about an illegal monopolizing dominant position in the debit card. they are halting competition and stymieing big tech from entering. just a little bit of a smack on this exclusive. how does china stay with us, wash up on our show? alibaba. we have rate cuts and liquidity and marshaling in the national team coming through. alibaba because of course another $70 billion have been advocated for buying chinese stocks. they have a lot of chinese

companies that are pumping it higher. jonathan: it is up more than 5%. important because we have someone coming to talk on that. coming to the stimulus measures in china. he said this is about the equity market stabilizing things for stocks rather than stabilizing things in the real economy. lisa: for the real economy to stimulate demand that will not do it. you might stimulate it for the stock market which may be could add to some of the confidence, but stocks are still 40% off their highs. this is a suppressed market. jonathan: it is a pretty brutal downturn. the csi 500, the best day for that equity index since 2020. markets returning to all-time highs as fed officials leave the door open for further cuts. the fed spake -- speak talk continuing. joining us now is the former fed

government -- governor betsy duke. first of all we love your first reaction to the decision from last week. what did you make of a? betsy: i was surprised, i was expecting 25. when i looked at the sep, they were about evenly divided between 25 and 50. i think the arguments for the 50 with a communication that chairman powell was saying to manage, i think mid 50 was perfectly reasonable. jonathan: goolsby came out swinging and made a lot of noise saying that we are hundreds of basis points above l. if the fed's offside relative to neutral, what is your best case of neutral? betsy: i think neutral is north of 3% and i think there might be a range between three and four and one of the things about having been in banking for so long is that for most of my banking career neutral was

closer to 4.5. and it was only in the last since the financial process is crisis that neutral got as low as it did. i think the superlow rates will not become a form of neutral. lisa: can you elaborate what current fed officials certainly believe neutral to be now, which is below 3%. you believe it to be north of 3%. how much do you think that could be a potential liability for fed policy going forward? betsy: it is the biggest conversation they will have to have next year. this year is well set. you can expect two quarter-point drops this year. if they get closer to the inflation rate that they are looking for and unemployment stays where it is we would tell you to go to neutral. the question is where is neutral. and there is not a reason to

slam up against neutral. if you look at what has happened with the increase of rates they have done this cycle it did not seem to have that much effect on unemployment because this was a supply-side driven cycle. and that is what makes this one really tough to predict for the models. lisa: this is an important point and you have been in the banking business for a long time and been north of 4% neutral rates. is this what the longer end of the yield curve is sniffing out? that the fed will err on the dovish side and allow inflation to be more entrenched than it usually would be? betsy: i cannot begin to guess on what is going on in investors' minds. i do not know how much of it is based on what the debt is and we will continue to keep rates higher and i do not know how much of it is expectations, i do not know. annmarie: when it comes to you

and the fed saying if they take rates below 3%, is that because you have a? about -- a question mark about the fiscal trajectory of the united states? betsy: that will be tricky. you have the trump tax cuts that will expire at the end of 2025, so there will be a change in tax and fiscal policy even if congress does nothing. you have that coming up to look at. and the debt that the u.s. has is unsustainable. annmarie: what about when it comes to fiscal policy a potential policy coming out of the white house, this potential idea of tariffs, much higher, 10% or 60%. if it is former president trump getting back into the white house, how concerned do you think the fed is about inflation in 2025? betsy: they will pay attention but what they are looking at

more than any in the campaign promises is real estate. that is the last piece of taming inflation. and the problem in real estate is that you have had not enough housing for over a decade. when i was at the fed in 2012 we estimated that it would take five years of 2 million starts to make up the shortfall at that point. and we have not had anything close to that in the last 10 to 12 years. lisa: every single person just keeps repeating a lot of what determines next will be the labor market at a time when the labor market data has been messy. we heard from jay powell that he is watching the revisions to understand how to understand the data we have gotten. when you are on the fed, do you understand the data to be this messy or is it unique? betsy: if you look at the number

of jobs created that is the worst indicator. i am a little bit better about it because as everybody knows i was very concerned about qe3 and very reluctant to get on board with it. and we had a jobs grant that just pretty much demanded it. but when we got to the point where all of the revisions had come in the job number that we ended up with that month would not have supported the arguments for qe3. and when you look at the models that are built they are generally built with revised data. you have to be careful about a number that can be revised up and down 100,000 or more. so, i do not pay attention as much to that number. the second thing is that chairman powell alluded to this news his press conference. you have to pay attention to how me workers are in the workforce. the u.s. workforce is growing by

$65,000 -- 65,000 a month. anything above 100,000 is really a lot of jobs for not so many workers. the supply-side has come into play because we have had more immigration. politically i am not sure where immigration will go and you have to have enough workers to keep the economy growing. annmarie: in this framework it seems like the federal reserve is putting an emphasis on the labor market. should they put more emphasis on inflation? betsy: i do not read it that they are putting all of the emphasis on the labor market because the labor market is not far from where they would like it to be. i think it is more that it is balanced now. the focus has not moved entirely on inflation but it is more balance. jonathan: betsy duke, we appreciate your perspective. the perspective on the federal

reserve seems to be some daylight between the fed in the market. the market participants believe that the federal reserve is a single mandate fed, focused on the labor market. lisa: it is the reason why person after person says that the jobs numbers will dictate if they believe in a soft landing. that could be muddied with a whole host of revisions. this really is daylight between members themselves because some of them think that and some of them do not. jonathan: 50 minutes away from the dust from the opening bell. i want to check in on the bond market. for six sessions the bonds have been climbing to the longest since march of last year. we are up 20 basis points, something like 18. we have reclaimed 3.80. up five basis points. rob joins us for more. your line at 3.75, five basis points alico -- ago you were

short on the 10 year. why this position? rob: you have to look at what the market is pricing to for the fed. the market is -- there are two potential risks. one, the fed is policy quickly, much more quickly than expected. as a result you would expect to see the yield curve steepening with easier policy bringing the curve down. but it does not do anything about containing the long end. we are getting this twist and steepening. the other thing we need to take into consideration is that the market has bought into the story that inflation is dead, the labor market is weak. and the fed can get to 3.5 -- and is on a route to 3.5. there is certainly risks to the narrative and we have seen the market narrative get proven

wrong over and over again over the last couple of years. one risk -- most of the risks are to the upside. another bad cpi piece of data or we get some very strong labor market data or something in that vein which will move the overall level of rates back up because this narrative has fully bought in to the fed view. lisa: i agree with you about inflation. about the labor market in general. there seems to be a discrepancy between people who say the bond market is pricing looks at the inflation levels and the fact that the fed is normalizing and calibrating to be close to that. if you look at equity markets they are embracing a soft landing in the fed will make sure that they are not. are you saying both are being baked into bonds and where yields are now implies some sort of recession. rob: i am also saying that the

bond market is baked into the soft landing right where the pressure is coming on. in the economy rates will slowly move down and the overall level has come down. i think one of the key things that has driven the bond market neatly over the last 18 months has been the fed view. the biggest driver of yields as we have come down has been the fed expectations. i think it could also happen in the reverse which as we unma rk expectations rates will go up. we would not get a steepener but a flatten or what you would have the overall level going up. lisa: how short are you and what are you expecting? rob: it is a tactical short. bond guys, the value proposition is great and as good as it has been. and they yields that you get in the bond market are quite attractive in the base case. what i am saying is that

tactically you should look for slightly higher levels to add new money, so the new money question because the market has uniquely bought into this narrative that the fed has put to us. jonathan: it is all relative to market pricing so if we were to reframe this and take a step bac biggest risk is the fed being too tight too long or easy to soon? are you suggesting it might be the latter and not the former? rob: yes. i am suggesting that they have gone a long way to reduce uniform. the former is not the big risk. we are night private -- we are not priced to be something that is neutral by the end of the first quarter of next year. that is not too tight for too long. several months ago i would have said that that is a risk. they are not getting out in front of it. but they clearly sent the message that they are getting

out in front of us. jonathan: where would that leave the call on credit? rob: it is good for credit. a soft landing and continued growth. we think that inflation is not a problem. that is not to say that it could not crop up into fears again. we think we are in a disinflationary period. decent growth and easier policy, i cannot think of a better environment for credit overall. the fundamentals are good and the liquidity is good. the only problem is valuations. and you will still realize maturing -- returns but not as much if they were cheap valuations. lisa: it sounds like you see this as an incredible positive and maybe you get a selloff to deploy more money to basically go into bonds. is this a moment you are telling investors ok, take the cash,

wait longer and put it all in? rob: yes, i think you characterize that right. the basic fundamentals are positive but not us -- but let's not forget that the market narrative has moved a lot because we are trying to interpret where the fed is going next. we have been very data dependent so market is subject to variability. and i am highlighting that the skew for the change in narratives would probably be for yields to be higher. but nonetheless the medium-term view is very constructive. jonathan: that is a story over the last week. we appreciate your input, up another five basis points. that is about as good as it gets from credit. lisa: a lot of people would agree except for valuations. if you look at all in yields you could make an argument. but if the fed gets there soft landing a lot of things look good and then you have to think

how do i, and original span because everybody is saying the same thing and it is to write. jonathan: up and so you see -- up until you see a messy jobs report. lisa: and that is what i think is driving the uncertainty and anxiety. although rob was saying that maybe it is on the other side maybe we get a hot cpi print and all of a sudden people are worrying about inflation. that feels difficult because nobody really seems to buy into this massive rerun. jonathan: the difference between weakening and week? layoffs. we have not seen layoffs a salary and we have not seen -- accelerate and jobless claims breakout. the estimate for this thursday is 225. the danger for the ones who think we are going into the deep labor market is around 260. lisa: you do not normally see strikes or pay increases start

to inflect upwards on the precipice on a massive job market deterioration. that is what people are looking at. you are also talking about structural changes. we were just hearing jill talk about that. but those ideas together and that is why people are cautiously leaning into consensus. jonathan: how do you view the strikes at boeing or the east coast ports, do you think we are still in that moment for labor and labor leverage? lisa: it is unique with the boeing scolari because boeing is and are -- story and they are under the crosshairs considering how me years they did not get a raise. and labor might be part of the issue. i do not know. i cannot say that this is a wholesale view of leverage with the labor market because we used to see that. it is not being seen quite as much. jonathan: idiosyncratic applies? equities just about unchanged as

we count you down. let us get you an update on the stories elsewhere. this is your bloomberg brief. yahaira: about 45,000 talk workers at every major port along the u.s. eastern and gulf coast are threatening to strike weeks ahead of the presidential election. it could lead to supply chain disruptions not seen since the pandemic. one estimate says a weeklong strike could cost the economy $7.5 billion. talks have been at a stalemate since june. grandma early has brought on a news -- grammarly has brought on a new ceo and see -- cfo and cto. earlier this year the company's ceo shook up the business to focus more on ai. it is valued at $13 billion. the votes are in for the best colleges in the country. u.s. news and world reports that

annual rankings are out in princeton took the number one spot for the second year in a row followed by m.i.t. and harvard. stanford was tied for third last year and fell for fourth while williams college reclaimed at spot for the best liberal arts college in spelman was voted the top historically black school. jonathan: up next we will set you up for the day and week ahead and get you some teach on what is on the breakfast menu at the plaza hotel. this is bloomberg. ♪

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 is 38 minutes away and the equity futures up .80 percent following a massive rally. the biggest one-day gain since 2020.

u.s. equities yesterday closing at a fresh all-time high. the 40th record high close on the s&p 500 so far in 2024. in the bond market yield by five basis points. just short of 3.80. lisa: sniffing out if people have written out the risk. etsy do talking about that may be feeling is neutral is lower than what it might be. jonathan: the day ahead calendar looks like this. speak from michelle burning. the consumer confidence at 10:00 a.m. eastern time. tomorrow, micron earnings out. thursday, another round of jobless claims. friday, pce and you mitch consumer -- umich consumer sentiment. over at the plaza it is like cocktail services. joining us is tom keene and

david. what is on the menu? tom: we are having croissant. china -- this was the same as breakfast at claridge's. we are doing the earth shot prize. why don't you explain while i finish the beast. >> it is dusted with pistachio. tom: it is. david: we have numbers from the price speaking today. we are talking with henry fernandez and dovetailing the conversation about sustainable investment in climate and some vital conversations. tom: the best conversation that i had, really and i think of coventry when you were reeling all the steel and manufacturing is cleaning up the big factories of the world. we spoke to someone from franch leading the charge. they have a long way to go. david: it was the fast lane

conversation. jonathan: we will leave it there. tom keene and david on the not just eating breakfast and sipping cocktails but covering something important later. lisa: sipping cocktails it is 8:58 eastern. it does not go with pistachio encrusted croissant. this is an interesting moment where every four years we end up with some real discussion in a really politically fraught moment on many levels. that is the reason why it is of interest. annmarie: a foreign diplomat said that the united states every four years goes from zero to hero which is how much the general assembly discussed the future of climate especially the u.s. part until we know the outcome. jonathan: that feels like a lifetime away. the federal reserve decision two years later. we are waiting for a payrolls report earnings season to start. lisa: everyone is searching new

to say as i wait for something new to come out. it is a difficult understanding of how to be counter consensus when everyone is operating in the same lockbox. i think lord brown was interesting when he is discussing where he is investing for 25%. it is an interesting way that people are trying to play. jonathan: quite a week with a lot of stimulus from china and federal reserve rate cuts and more to come. lisa: it is only tuesday, we have more. we have bond auctions and consumer sentiment. jonathan: love those bond auctions. coming up tomorrow. lara of fs investment. sarah of sachsen woods and victoria fernandez. are you joining them for breakfast? lisa: yes. they have jonathan: jonathan: pistachio dusted croissants. and drinks apparently. lisa: momo set. jonathan: this was bloomberg

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matt: we -- we are looking at another s&p record in the making. i'm matt miller. sonali: i'm sonali basak. katie: and i'm katie greifeld. bloomberg "open interest" starts right now. sonali: coming up, a stimulus blitz. china henri -- unleashes support measures to revive the world's second-largest economy. matt: a flurry of corporate news in the u.s.. from a rare sell call on starbucks to jon malone's latest powerplay. katie: