>> stocks have been benefiting from this view that rates are going lower. >> there's a risk that continues in that space. >> we are not expecting a significant slowdown now we do think you are coming into a third-quarter lola. >> we think it's stronger than the people expect. >> the upside opportunity is tremendous. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> the trading day starts now. live from new york city good morning for audience worldwide your equity market the losses continue we are down one third

of 1% on the s&p 500, bit of risk aversion in the market. some mixed data in america and some escalation in the middle east. the biggest one-day loss on the s&p 500 in around about a month. we are down by three quarters of 1%. lisa: on one hand you have geopolitics really raising the specter of broader disruption and potentially a pop in oil prices that could challenge the soft landing nirvana. we also got some employment data that i thought was really interesting. the headline was good you look beneath the hood the puts rate was the lowest going back 2020, the hires rate similar when you got the ism manufacturer a similar trend when you look at the employment figure so on the margins just a little bit more of that weakening. >> this was from andrew, actions speak louder than openings. highest quits and layoffs clerestory of business is trying to reduce labor costs pulling back on hiring.

andrews looking for 70,000 on payrolls friday. lisa: this for me goes to the heart of the uncertainty around the data. some people saying every business wants to post as many job openings as i can flood the zone and see how they get. it doesn't actually represent how much demand. but if you look at people's moves, their feet look more than what the openings are posted. to me the real question is our people overly pessimistic about an economy that is still growing if you look at the atlanta fed gdp at a pretty fast rate and is this market not prepared for a downturn than it is for actually a no landing or upside surprise to economic data. jonathan: the edge of bullish. lisa: hold on. jonathan: almost there on the brink. lisa: don't put me in that box john. to me there's a question of how this market is positioned. i'm less interested in calling the longer term and saying it

seems like people are preparing for the fed to cut aggressively in the face of ongoing weakening. whether that happens if it does not happen could be a disruption. >> the difference within the bulls and bears are layoffs. layoffs are really subdued. neil. awaiting for layoffs to turn these the fed is willingly falling behind the curve. let's turn to another theme. crude right now, today winning streak. crude is waking up to it's happening in the middle east. brent up by 2%, wti up by a most three. annmarie: the president's national security advisor said the term fog of war was meant for mo -- moments like these pre-that's what the market was able to touch. you saw this immediate increase in oil prices 5% knee-jerk reaction. absolute recalibration from what we saw from iran to israel. it feels like there's a cap on these prices because of this capacity that's in the market whether you look to saudi arabia

or uae. the spare capacity is there and china is picking up the demand but we used to see. >> up by about 2.6% cross asset price action. looks like this on the s&p, equity futures down by one third of 1% in the bond market yields higher by three basis points. coming up this hour we will catch up with jim bianco in the no landing camp, normative csis says israel vows to retaliate and robert casey of cigna global advisors following last night showdown between jd vance and tim walz. we begin with the recent rally firmly on hold as the world awaits israel's next move. keeping one eye on the labor market data. jim bianco writing i've still in orlando meaning the economy is ok. -- still see a landing. i can debate whether we are seeing much cooling in the labor market. jim joins us now for more. >> thanks for having me. >> you look at what's happening

with the quits rate. quits rate is down for a look at what's happening behind israel. where do you not see that as a sign of a slowdown in the market. >> if you look at the bigger picture the numbers are down from july or june but the bigger picture over the last several years these are still numbers that are very constructive for the labor market right now. if you want to expand out from good jolts report to payrolls to the household survey, those numbers look pretty good. the one number that is week has been the rising unemployment rate but the fed likes to use the phrase increasing supply which is a euphemism for migration. we get more people coming into the country the growth of the population right now according to the cbo is pushing a 30 year high because of migration. a lot of those people coming in are employed and that's what's getting picked up in the unemployment rate which is why the number is rising. it's not necessarily assign people -- jonathan: does it scream no landing.

10-year at 376, what's your view on this bond market. >> i think at 360 and the 2-year note it is priced in pretty much the fed cutting rates all the way to three and a quarter. 2-year note shouldn't go anywhere else. wall street is reeling on this idea we will see a curve steepening. i guess i am as well. but at this point that's a bearish trade because we will stay at 360 and the way you steepen the curve is the 10 year yield started to rise from here. i don't see the 2-year note going under 3% unless you make the case the economy is really falling apart and the fed will cut rates well beyond 3% down around 2% or lower. lisa: i love when people say, no lander or soft lander. but they're sort of question here about what that means, going forward does that mean there's no recession or does it mean there is a re-acceleration from here of growth and inflation. >> i've criticized the soft landing camp that is this thing

without a definition so any year all define was correct. i think -- i think a no landing scenario is if you accept potential gdp what with the economy grow without being stimulated or restrained is around 2.5%. i think that's the no landing. is that we continue to grow in that camp. also if you wanted to throw inflation in there, i am in the sticky inflation camp that the long-run inflation rate is probably closer to a three handle if not a three handle then down 2.0% where the fed thinks it's going to be. so if you add in the two together with nominal gdp, 2.5 percent real growth, 3% inflation, about 5% -- 5% and that's where the low landing idea comes. >> how much does that being hinged on the idea that this dutch authorities are willing and able to come in and stepping in whether it's rate cuts or the bazooka we got from china or

potential fiscal stimulus in the united states despite the deficit that people care about but aren't necessarily pricing in. >> i think the no lander camp i defined it the way i do is it's all of those things get me worried that if we don't need the fed to cut rates, we don't need massive fiscal stimulus. what we are going to do is produce more inflation in the second half of 25 and that's the biggest concern is are we going to over stimulate because in the no landing camp we argue we don't need the simulation. but looks like we will get it anyway. >> you said you can it take the over on 150 k. do you immediately have to/60, 70,000 off of that because of the revisions we see. >> that's usually what happens pray 25 in the last 31 months the payroll beats wall street's estimate and the revisions come in and it's almost to the point now where people are more and more asking what's your guess on

revisions as opposed to your guess on the payroll report. revisions i think are getting overstated that usually when they run in cycles up until 22 the revisions were mostly upward and since 22 they've been mostly downward. so i don't see the revisions as being some kind of dark secret thing that tells us the economy is in trouble. i probably see the revisions will pull back on the members that we saw in july and august. but the headline number like i said most the time it seems to be. >> when we get the next payroll report when you look at what happened in october we will have hurricane helene's impact and the strike workers of the ports. how difficult will it be to extrapolate the labor data. >> don't forget the boeing strike as well. i heard mike mckee saying this the other day. there is a possibility negative payroll report coming up. the payroll survey week is the

13th. if the strikes keep going with disruptions into the 13th and we find gaining things back to normal after hurricane helene goes more than two weeks, we could see this start to impact jobs. rumor the way works, they have a company report if the company doesn't have doesn't report they put them down for zero this month. they will pick it up next month and revise it and you can see a big dive in the numbers. we saw that 2017 in september. we saw negative payroll report off of that when it hit houston. >> later this hour some numbers on this of the struggles more than two weeks we estimate the knock on effects could lower october payrolls through the first of november they think that's can lead the federal reserve to cut interest rates again by 50 basis points if those numbers materialize. where you on the feds's move november 7? >> that's good to be a difficult one because if we are able to see that, that's off of the port

strike we still have the hurricane and maybe disruption from the middle east coming as well with energy prices. it's muddy ink -- muddying the water for the fed. it will make it difficult for them to try and discern what is the economy doing. we know there is this port strike and depressed jobs but we also know it's temporary but the port strike will eventually end and things will return back to normal. it's good to be very difficult thing for them i think powell set up the case for 25 in a couple of days ago when he spoke in that that seems to be more of the program. especially since it's two days after the election and reasonable we won't know the outcome of the election by november 7 as well. >> jim of beyonca researcher touching on the middle east there. or on that in a moment. brent crude up by 2.8%. 7561 with an update on stories elsewhere. let schedule bloomberg brief and cross over to dani burger.

>> less than a month after its big event, apple is preparing for its next product launch. people familiar tell us they are preparing to announce the low-end phone early next year. possibly alongside upgraded ipads. the new iphone sc will become the new entry-level model. that will mark the first update to the sc since 2022 when apple added 5g capabilities to the device. >> bloomberg reporting kkr is considering a takeover bid for a smpte. people familiar tell us kkr has made a nonbinding pre-lim approach and it will take the hong kong listing from private. considerations are at an early stage. but may attract interest from other buyout firms. it posting the intraday -- biggest intraday gain on that news. lisa spoke to bridgewater's karen at the bloomberg volatility forum. >> the economy is basically

fine, there are some worries about it. but the fed is willing and able to make sure it does not get worse. that combination is usually a great backdrop of saying is it going to be a good time to take risk. that's a good time to take risk. >> she went on to add bonds are good growth protection and they are serving in a 60/40 portfolio. >> that's your brief. >>more from danny in 30 minutes. a bit of bridgewater rubbing off at the moment. yesterday afternoon. lisa: pause. every single person i talked to said the volatility conference everyone was looking for downside protection. no one was looking for upside protection. everyone is looking to put on the steepener trade. nobody was talking about the potential for a strong dollar. we start looking those crowded positions on a tactical basis i understand the argument from a contrarian perspective on the other might be -- >> just be very clear.

>> basically which side of the boat if everyone's on this site i want to go on the other. >> in line over at hsbc. up next on the program iran attacks israel. >> at my direction the united states military actively supported the defense of israel. and we are still assessing the impact. based on what we know it's >> defeated and ineffective. >>the latest news out of the region up next. good morning. ♪

jonathan: the slide continues. we are down on the s&p 500 and the rally in crude picks up on wti $72 a barrel. iran attacks israel.

>> at my direction the united states military actively supported the defense of israel. we are still assessing the impact but based on what we know now the attacks. to of been defeated and ineffective. and this is just military capability. we've also -- it's also a testament to intensive planning between the united states and israel to anticipate and defend against a brazen attack. >> israel promising retaliation after ron fired nearly 200 missiles of the country. israel sang most of the missiles were intercepted with the help of u.s. forces. the attacks killing one person. what is the latest this morning? joumanna: another round of escalation in the middle east.

nearly 200 of those ballistic missiles were fired from iran into israel triggering israel's air defense system. the idf said pretty much all of those missiles were intercepted causing limited damage. one person did lose their life that was on the back of exploding shrapnel. with iran iran state tv saying the strikes had targeted important security and military sites so that was being presented back home. of course from iran's perspective they had been warning for several weeks that a retaliation was forthcoming not only after the assassination of ismail haniyeh, but recently after the killing in beirut. alongside that airstrike, you saw the killing of a senior irgc commander bread so they've taken multiple blows to key figureheads within this access of resistance. and had to show that they were going to be doing something and

of course that response did come in the last 24 hours. it is, it does mark an escalation versus the first time iran launched a direct attack on israel and that was back in april. this time around the missiles they used were ballistic missiles, they were more precision guided and long-range. a bit more high tech and the sort of slower moving drones in april. and also crucially there was less of a heads up this time around versus the incident back in april. we just heard, you played some comments from the israeli prime minister benjamin netanyahu who said iran made a big mistake tonight and it will pay for it so today the question is what form of reprisal is going to come from israel. many within the israeli cabinet are pushing for a hawkish response, but the response could come in multiple forms paid it could be strikes and particular military assets like what happens in april.

but he could take the form of further assassinations even potentially striking energy infrastructure and if they want to go further this would be a severe escalation strike nuclear sites as well. >> thank you. joining us out of dubai this morning the former senior u.s. intelligence official joins us. the past few weeks discussing these events, israel has demonstrated superior defense, intelligence. they have done so repeatedly. a question i heard, why don't they stop now? why would they stop now? norman: good morning it's a limited capability shark closest to the boat, a variety of different issues. they are fighting an insurgency in gaza, they begun a what could be a long-term conflict in lebanon. operations against iran would require a tremendous amount of intelligence, very heavy strain on the logistics of the military and would require extremely close coordination with the

united states that is unwilling to reignite a conflict in the middle east so i don't think it's a question of stopping so much as a question of coming up with a goldilocks style attack. you want something that deters iran and demonstrates them their capability, sends a message to the regime but does not ignite the conflict that would require such significant u.s. support. >> we heard from secretary austin on twitter he put out a statement following his conversation with his israeli counterpart before the attack and he said we discussed the severe consequences for ron in the event iran chooses to launch a direct military attack against israel. iran did and it was twice the size in april. what is the list, what is the menu of consequences this administration is willing to take on tehran. >> that is unclear and likely something that is of some debate

within the administration. the secretary's comments were also reflected in the statement by the national security advisor jake sullivan who also used the very severe consequences from washington, the administration of the end of its tenure election underway, a process of unwillingness to involve itself in external conflicts, the idea of starting a war in the middle east is going to be at the bottom of their list. the question becomes what can be done involving sanctions and this is important because we saw things happen yesterday but we did not see two things. we did not see iran's other proxies pile in with the attack which would tell israel's generals this is an opportunity to perhaps spend more time on iran. but also importantly the u.s. military presence in the region which included a powerful offensive capability and deter iran. iran changed its tactics. it did something different from april to get around that but the offensive potential of that presence did not appear to play

a role in iran's decision-making and the administration will have some difficulty changing that absent a military strike. one comment on israel's possibilities are cyber options and a variety of options that could be undertaken but israel is unlikely to strike energy areas that will touch the global economy. there are parts of iran's energy structure that only impact iran. there are parts of the military that only talk about the external power projection. so there are a variety of different targets that israel could touch it would not impact the global economy. >> i'm looking at a map of the u.s. military presence as of the start of this month, october 2024. bases they've operated but also naval deployment sprayed what does our current force posture say about potentially what more we could expect from iran? >> we have about 30,000 distributed throughout the

middle east and all of those personnel, their bases will be potential targets for the iranian retaliation for u.s. involvement so u.s. policymakers should consider what would happen to those bases and what it would mean for the countries that host those bases if the u.s. did participate in an attack on iran. but naval presence is extraordinarily robust and also includes some of the most advanced aircraft in the history of the planet. f-22's, f-18's, f-16s. we rarely send such an array of air power to any spot in the world now. >> how much more power is israel have this point. is that a fiction? is that basically the theory that striving some of the potential attacks that you don't see as really accurate. >> israel has a significant amount of power that has not

been used, it has missile component, its air forces very impressive and very capable. again they've got the lebanese conflict. they sent additional ground forces into southern lebanon to root out hezbollah bases they are undertaking attacks with their air force on weapons caches and command-and-control sites throughout northern lebanon. they've got other duties besides iran. think about an attack on iran that's a distance issue and it's not just one strike. you're not just dashing east and dashing back. if you need repeated strikes that involves capability with complications with a airspace over iraq and jordan this is a serious operation to be undertaken. israel can do things but it requires a lot of planning and again coordination with the united states parallel. >> we always appreciate your insights. thank you. former ewart -- senior u.s. intelligence official.

one thing regarding the market, crude one of its worst months of the year so far waking up big time. two day rally wti up 3% because of the prospect. lisa: because of the prospect of what was mentioned that saudi arabia's assets could be targeted, that said and i think it was really good to hear their how much is israel willing to do that if it ends up creating a difficult situation for some >> of the allies. >>how insulated is this commodity market with oversupply. on the same day we saw those attacks. hsbc cutting the outlook for crude. equity futures negative one third of 1%. robert casey on the key takeaways from last nights debate. ♪

jonathan: equities trading softer to kick off q4, down 5.25% on the s&p. biggest day one loss on equities, on the nasdaq 100, down .25% lisa: lisa:. on the heels of what we saw after yesterday's jobs report, that was better than expected. albeit, still, and contraction for manufacturing. the fact that >> rate had fallen -- quit rate had fallen to the lowest since 2020. if you are in a job and feel

comfortable enough to leave, then the job market is doing pretty well. and if you don't, that is raising red flags for a lot of people. jonathan: i like the confidence you are seeing now in the hiring rate, at a level we have not seen since 2013. what we are not seeing our layoffs. that is where the big debate is in the labor market. there is the bond market story, two-year, 10-year, 30-year, the two year, 3.62, the 10-year, 3.76. lisa: that might be the most interesting aspect of yesterday, the fact it was risk off because of jobs data, and then you had what happened in the middle east and that continue to turbocharge. the fact that bonds were considered a safe haven was notable to a lot of people. at a time when that was not the case so long ago. that is actually something to watch. how much are bonds still the

equilibrium? jonathan: yesterday morning, the data dropped at the same time we got reports about de-escalation in the middle east after being asleep for the whole of september and we will leave that behind into the rally, up by more than 3% on wti, and hbc cutting its forecast by 8% to $70. this market is being very, very focused on that one issue of supply. lisa: that is because that has been the issue that has driven pricing. you bet on geopolitics and potential disruption, and you failed because that is not the direction things went in. you have the u.s. producing more barrels of oil than any other country in history with respect to the shale patch. you have a situation where demand is less because of the ev transition. where is that impetus going to

come from to fulfill all the supply, let alone questions around demand? annmarie: supply and demand is keeping a lid on oil prices, the fact that supply is not being hit when it comes to the escalation. goldman sachs yesterday also put out that demand slipped below for their expectations and that means you have to have a recalibration of where premium is in the market, but there will be a ceiling. jonathan: crude, $72.14. the second day of a strike, and auto shipments remain halted along the east and gulf coast, sending president biden to receive a letter from republicans, urging him to intervene. annmarie: they would like him to come out and either upset rank-and-file union workers or potentially not come out and this becomes an issue for the economy. i spoke with the congresswoman yesterday at the vp debate, and she would not say whether or not

he should invoke the authority he has to get union workers back for 80 days and said it was a crisis of their own making. so it certainly comes to the story head of an important election. lisa: donald trump was quoted saying he does not want automation and he would like for crews to get what they would like with the promise of who they would like. i would be curious to dig deeper into how much she is opposed to that, and you hear that you need to get people together and the workers to have power. at the same time, i was looking at what they are looking for. 50% of wage increase over 50 years, a boost of 40%, raising the base hourly wage from $69 and $39. do you know that more than half of the dockworkers earn more than $150,000 a year? so talking about what is required to get people in the door to do the jobs. jonathan: they have a lot of

leverage right now, and they have to use it. that's keep the news right here in america. the u.s. southeast facing a humanitarian, economic and ecological crisis in the aftermath of hurricane helene. the death rising to more than 150 across six states. vice president harris speaking in georgia this afternoon on federal emergency response efforts. elsewhere in the world of politics, vice presidential nominees tim walz and jd vance based off last night, taking aim at each other and clashing as the key topics. >> the only thing that joe biden did his he continued some of the trump tariffs that protected american manufacturing jobs. it is the one issue where karen -- kamala harris has run away from his record. >> if kamala harris has such great plans for how to address middle-class problems then she ought to do them now. >> how is it fair you are paying taxes every year and donald trump has not paid any the years?

>> over $100 billion has been received in unfrozen asset -- frozen assets. >> it is those who are closest to donald trump that understand how dangerous he is when the world is this dangerous. jonathan: joining us now is michael sheppard. most neutral observers believe senator vance won, doesn't it make a difference? michael: a great question on whether any of these debates have on people's minds when so many voters in this very divided nation already made up their minds. what they were really doing was trying to redirect as their running mates, and they wanted to make sure the focus was on donald trump from tim walz against trump, keenan dean up -- keeping up the line that he was unfit for another term, and jd

vance is trying to hang what he sees as failures on border and the foreign policy over the past year on harris' neck, so in his view, why does she deserve another four years as president if it has not been so great in the republican view with her as vice president? underway, they are reinforcing the message and try not to make too many mistakes. it was also a moment for vance to skate around the edges of what we have seen skate on social media we have seen this heart into the way of his favorability. tim walz, this was more of an introduction nationally to the public. he was a little bit nervous at times, and it is a sign that he may need to get out there a little bit more and do more interviews. jonathan: michael sheppard, appreciated. i think a lot of people felt that way. you can see that the weekend shows have been hitting for so long the last few weeks, he was

not used to that debate. annmarie: he came across as very nervous, especially in the beginning, his best performance was at the very end, and i also think he was nervous because of how much use all recently writing down -- because of how much he was writing down instead of keeping his head up to show his presence. jonathan: republican seven waiting to tie the vice president for this current administration. did senator vance do a good enough job? robert: i think you did. why is jd vance on the ticket customer he has not done -- ticket? he has not done very well. he's not great in those more informal interactions. he is really good on the debate stage. he is an ivy league lawyer, he was in private equity, venture capital, now he's a politician. he's a pretty smooth guy. annmarie: a well-known pollster rulings republican, he had a focus group were five

individuals were leaning toward trump, vance going into it, after the debate, ended at that -- and ended up 5 -- 12-2 in vance's favor, could this move any voters in the swing states? robert: i think so. maybe a presidential debate does, but a vice presidential debate, not so much. what we have seen in history is even some of the worst vice presidential candidates on the ticket was not much of a drag on it. jd vance is less popular, more unpopular than sarah palin was. he took a step, i think last night, and improving his standing and is more popular than yesterday morning, but i don't think he's convincing anybody to vote for donald trump because 90 minutes he held his own. annmarie: what was the most impactful woman that both sides were able to deliver? of course, they will spread this out on their social media channels. robert: what democrats will share most frequently the next few days is the fact jd vance was not willing to say donald

trump loss the 2020 election. i was surprised by that. i thought he would've had a better answer to that question. and for republicans, they are going to share the whole debate. jd vance made the case time and time again, he looked much more prepared than tim walz, much more at ease on the debate stage, and he was much more effective in the first presidential debate in trump was to tie vice president harris to the border, regardless of the question, the answer was about harris, the border, the economy, and how she's been vice president for 3.5 years and has not enacted what she is promising. lisa: we did not hear about people eating pets or the other accusations. it was like watching a set be atoned debate of the 1990's -- sepia toned debate of the 1990's. do you have a better understanding of what the policies were and the overtones of how they would be implemented for each of the candidates based on the debate?

robert: mike sheppard was right in saying neither candidate wanted to make mistakes, so they were not really willing to nail down into the policy that the presidential candidates are offering, but i'm not surprised that they were happy to talk about legislation. this was a policy debate but it felt like a throwback. it may be the most important contrast that came out of last night was how nice it was to have a debate when donald trump is on the stage, not necessarily between vance and tim walz, although i feel it is fair to say vance won last night's debate, but it is nice to be listening to politicians talk policy cordially. sometimes competitively, but it was nice not listen to donald trump. lisa: do you think donald trump like the debate? that is a big question with jd vance, how much he is catering to the running mate or how much he is actually presenting his own views. robert: i think he did like the debate. i did see commentary on twitter

that suggested jd vance was not doing enough to defend donald trump. her donald trump were at least people think --per donald trump. it was donald trump's decision to pick vance in the first place and last night was the reason why he's the right running mate. he is increasingly unpopular, he's had a pretty bad rollout, but he is a great messenger and spokesman for trump in general, and he is a pretty obvious inheritor of that brand when trump either wins and steps aside or subsided january. jonathan: was that the last debate? robert: yeah, i think so. i don't think either side would like to get back on the debate stage. it is weird that the final public national word is going to come from vice presidential candidates, but i think harris is happy with her first performance, and i think trump would rather be tweeting and on the truth account that all the stage. jonathan: thank you. in the fx market, dollar-yen

higher at 144.56. comments from the japanese minister, not the environment to raise interest rates again. not in the environment now to raise interest rates again. bear in mind that when he came on board, we were talking about normalization process over the boj. lisa: we heard something similar talking about we need to take our time, we heard that earlier today per he said he would like to -- the prime minister would like to cornet with the bike -- bank of japan on the economy and would like to make it strong with an economic package, avoiding deflation and the spiral japan was in key on their minds, but it raises the question because the move is not as big as i think. it makes me wonder how much we have worked through the leverage short yen positions that could get blown out and this is the market trying to calibrate how much should debate this. jonathan: dollar-yen, 144.60.

let's get you an update with your bloomberg brief. dani: mexico sworn in its new leader, the country's first female president in her inaugural address, pledging to continue the efforts and improve the lives of the country's poorest people. the former mexico city mayor spoke to the business sector, promising domestic and foreign investments in mexico will be safe during her investment. mw is urging germany to vote against higher tariffs on ev's, echoing the same language from other german automakers who do not want to risk a trade war. bmw warns that additional tariffs will harm local companies" could provoke a trade dispute from which no one gains." member states will vote on imposing tariffs as high as 45% on imported ev's made in china. pink floyd agreed to sell the rights to their music. the rock band will sell their

music catalog to sony for about $400 million, citing people familiar with the matter. it include pink floyd's recorded music and their likeness. the deal does not include their songwriting rights. that is your brief. jonathan: next on the program, half of u.s. trade a standstill. >> the first few days, the economy can handle, we think, there should be stocks of inventories that are at the dock, that are in retailer inventories. the big issue is you have any codes to the production process that you cannot substitute for? jonathan: we will put numbers on all of this. life from new york, you are watching bloombergtv. ♪

jonathan: looking at potentially

two day losses of s&p, volume higher by three. standout, crude up by 3.5%, bti, $72.26. over half of u.s. trade is at a standstill this morning. >> first few days, the economy can handle, we think, there should be stocks of inventories that are in retailers inventories. you have inputs to the production process that you really cannot substitute for? you could be a month from now you cannot produce and that is where retailers have to say we actually have to raise the price. we have a shortage of goods. jonathan: the strike at automakers on the east and gulf coast are triggering supply driven inflation. if the strike lasts more than two weeks, we estimate that it could lower october payrolls way as many as 80,000 jobs, which would boost the odds of a rate

cut at the november fomc meeting. thank you on behalf of the team because it was a fantastic read yesterday. some words that jump out at me, inventories. how well are we stocked up now versus several years ago? anna: when we looked at hotel inventories, we can see that cars, for example, our of the most effective categories has a higher inventory level two ratio in the past 20 years except for 2020 and 2009. so we are not in a situation right now or you have a supply shot in combination with strong demand. demand is not really there. it would be more muted than we had seen in 2021 to 2022. jonathan: the job call hinges on this lasting more than two weeks. what is importing about two weeks, the calendar? anna: it is about how payrolls

are measured. it is not counted in a payroll, he needs not receive a check in the entirety of the reference week, and that goes to october 1 to the day involving the 12, so you need the strike to last for at least two weeks because most are on the two weeks payroll, and all 45,000 people will not receive a check in the first two weeks to see these numbers showing up. beyond two weeks, you will have the supply chain, and the truck drivers basically will get paid, and we also see a lot of impact on food and beverage of people catering, and a lot of employment services and a lot of

hotel people start to be affected and that is how we got to 80,000. jonathan: anna wong of bloomberg economics, thank you. i could lower october payrolls by as much as 80,000 jobs, and we are joined now by ryan sweet of oxford economics. why wouldn't the fed just look through all of this and assume most jobs come back and things bounce back in the months ahead? ryan: most likely, they will. they are just laser focused on the labor market. and the strike is not the only noise we will hear in the background of the job summer. we have a boeing strike, so the october employment numbers are messy, and that kind of downplays that and it was just going to be too noisy based on the labor market with a single report. lisa: one thing people talked

about was the effects of this kind of strike or not that significant in the first week, but the longer it goes on, it has an especially higher impact on gdp, what is the trigger point and the timeframe that you start to see the ramifications becoming exponentially more significant? ryan: the officer to get really worried about week three or four because even though we do have a lot of inventories, retailers have preemptive buildup, the ports in the northeast on the gulf coast, they can get shipped in via truck through latin america and central america, but if it is the last three or four weeks, as you pointed out, and as you hear about it each passing week, there is a 10th of a percentage point off of q4

gdp, but if this drags on, the economic costs escalates weekly. lisa: you talk about 4.5 billion , 7.5 billion dollars of u.s. gdp be reduced for every week this continues, and you pointed out it would take about a month for every week to recover some of the backlog. the key question about why now, why the leverage right now? is it political or because workers generally have more leverage in their jobs, or is that on the wane and this is the last gasp of that? ryan: this is not the first strike we have seen over several years. i don't think this is the last gasp, but i'm not sure if this is political or if the contract negotiation time was running out, but from our perspective, looking at the economics, you are not seen the whole of it. that is key for us. this is poor timing. this is not the worst timing in the world.

a few years ago, there were other strikes that would have really undermined the economy. the economy is in pretty good shape. but we are still creating a number of jobs and the timing is ever great for a strike like this, but hopefully this last week or two, and there's another little blip on the economy's radar. annmarie: given the fact that shipments are now being redirected to the west coast, what kind of crunch and backlog are going to see on the west coast? ryan: a lot. the capacity, if you look at it, for example, when the bridge collapsed at the port of baltimore, some of that could be at the port of philadelphia, up to new york, and with the strike of this magnitude off the gulf coast, it could get rerouted to the west coast with capacity constraints, so this is going to

cause significant backlog, but we can work through this. it is going to take time. we are not going to be able to work through all the container backlog in a couple of days. it could take weeks and a month or two, but the good news is the impact on the labor market and gdp most likely will be temporary. we have also seen inflationary applications for this, unless this drags on for a month or two. we should be able to avoid any reflationary search. jonathan: what is your jobs number for friday? ryan: 165. the key number to watch for, what the fed is looking at, and that mostly will take up 3.4%. jonathan: i will not ask you what next months will be because that will be messy. 150 is the estimate for friday. lisa: one of the questions is how much are we looking at a market poised a downside surprise? in other words, which is more of

a disruptive number, 160 or 130? will it make a difference if you get to 4.3% in the unemployment rate? that is the difference we are looking for. jonathan: the s&p 500 slightly softer, down .10%. adp report at 850, tomorrow morning, jobless claims at 8:30, and the odds on friday are about 150 for payrolls friday. here's the lineup, weuku -- weili of blackrock, and we will catch up with javier blas and mark rowen of apollo. we have a very punchy target, projecting $10 million of earnings in five years. that is in the next hour of bloomberg surveillance. ♪

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>> may not be strong enough to keep the unemployment rate from rising. >> with the fed really wanting to be patient and not overreact, i think the likely go from 25 basis point cut. this is what they are trying to figure out to get us to have a soft landing. >> in terms of our own economy, i think it will be fine. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz,

and annmarie hordern. lisa: was i to bullish? is that what happened? jonathan ferro left at get that interview, interview marc will win. we continue, looking forward to that in half an hour time from new york city. welcome back. this is "bloomberg surveillance." annmarie hordern and lisa are -- lisa abramowicz. it is october, and really, front and focus, we are looking at the russell 2000 underperforming the most, down by .60% on the heels of data points yesterday, and that raises questions about how resilient and how much momentum there is underpinning the u.s. labor market. annmarie: and it fell to the lowest level since the pandemic, which is what think it was interesting today that more people are leaning into adp because they don't trust what is coming out, the data that is

coming out of it, so we will have jobs this week that are important. i would like to look to the jobs report because the next is more interesting read boeing -- interesting. boeing, and while that recalibrate the fed. lisa: this is why people are wondering how much credence to put in these. people are putting a greater emphasis. we are seeing in the oil space a second day of a significant rally on the heels of some of what we are seeing in the middle east or launching a direct ballistic missile attack on israel, about almost 200 missiles coming over. mostly shot down, but a real question about what kind of response there will be given the fact that israel pledges to retaliate. how much of people gotten use to or numbed to the idea that any kind of escalation and conflict is not going to have massive ramifications on the oil space? annmarie: that is because of two things.

one, we have not seen supply getting hit. if you're concerned about supply, look no further than riyadh or abu dhabi where they have capacity and on the demand side, china is not picking up goldman sachs hpc. so that is putting a lid on the actual prices, but that 5% we saw yesterday, the knee-jerk reaction for the second time this year sent over ballistic missiles to israel, 5% and the market is just carrying that through, so there is a risk premium when it comes to geopolitical risks, so what strikes -- geopolitical risks. lisa: so it strikes me as we will get adp at 8:15 eastern ahead of the jobs report on friday, and then you have this, the stimulus, the bazooka, looking like a bazooka from china that a lot of people are saying is a game changer, and people thought there would be a response, market response, that suddenly people are rethinking just how much they can avoid

going into china. listed on the hong kong index, a cayman with a 7% gain after a holiday, really highlighting how much the tone has shifted. you wonder what these effects will have the broader market. annmarie: i have a question on whether or not people are travelers or southerners when it comes to the chinese market because, yes, this is a bazooka and stimulus immediately to the equity markets, but also only in china. what about all those companies that are exposed to china like in europe? they are not doing well because they see that, secondly, long-term, is this actually going to address the fundamental issues on the chinese economy? in august, they had one of the highest youth unemployment rates. who is buying the products if people don't have jobs? lisa: does not matter if everyone is feeling really good right now? we will have that conversation with wei li of blackrock. bloomberg's javier blas saying

that strikes on israel syncrude soaring, and jonathan ferro noted that he did not storm out angry with us but sitting down with the policy eo marc rowen. we cannot wait to hear that conversation. we begin this hour with traders looking for opportunity thanks to the added stimulus out of china with stock surging in hong kong, with optimism growing for the world's second-largest economy, wei li of blackrock saying we see room to turn modesty overweight chinese stocks in the near term given their nearest record discounted dm shares. we singable and could change our view. are you a tourist or are you set down in these chinese assets? wei: for now i would like to say, tourist, and to your point about is it a game changer? i don't know, but it is creating near-term momentum, so to contextualize our china view change, are longer-term cautious view has not changed, but we are looking at a very attractive

valuation, which is around 50% discount, close to a record of the dm equity counterpart, and extremely light position when you look at global equity allocation to china. it is close to 10 year low at this point. of course, chief evaluation is never enough to turnaround market, but when you have valuation and catalyst, which is taking place in the form of hopes, you see this incredible momentum, but longer-term challenges, rate hikes state and remain, talking about an aging population and they need for a form on how long you can keep an issue government of lower rates, and that is a step to work on for the near term, but you do need to be infirmed to be more consistent -- informed to be more consistent. annmarie: are you surprised that companies deeply exposed to china are not moving higher on the stimulus package?

wei: i think it speaks to the fact that this is a near-term momentum story because if there is a huge amount of confidence that is really going to fix the chinese economy, a secondary beneficiary of that would not react, but european equities are not reacting that shows right now it is a momentum leaning story, which is advocating our advocate. lisa: there is a fascinating implication, which as you are looking for places to take advantage of risk and momentum to the upside. it erases this question, especially given how much fear there has been in markets throughout the bulk of the year and how much concern there is with the labor market falling off a cliff. are you structurally in a risk on boat looking for those opportunities to chase, whether it is the stimulus coming out of certain governments or whether it is rate cuts?

wei: am i always structurally risk on? because there always issues to be worried about, but at the current grubs rate, yes, we are and that is in despite of my seasonality is not supportive of risk on, talking about this time of the year and at this point in the election cycle. so seasonality's aside, we do see overall environment still supportive of taking risk doing ok in the u.s., tracking at 3% on an analyte -- annualized basis. the labor market is doing fine, tracking at a pace that is about pre-pandemic levels, and some consider it around the rise in unemployment rate has to do with the positive supply shock through immigration, which is different from laying off people, and then you have defense starting to cut, and

cutting quite quickly, as well. we do not disagree with market pricing that takes policy rates to below 3% by the end of next year, so we agree with they are cutting right now, but they were not cut as much as before, and the risk sentiment is what we are leaning into, and we are not as concentrated on the tech story. we have broadened out to the overall u.s. market because we see a ton of that ai story broadening out, and more broadening when markets get too worried about recession fear, meaning that requires a broad-based invitation strategy. lisa: you are talking about how they think may be much is priced in. i will let him know. i'm sure he is watching, larry, she agrees with you. there are discussions about how off-site the market would be.

in other words, what would be the biggest motor volatility, a downside surprised to the liver market or an upside surprise? wei: i think that has to do with the markets are focused on the growth story or if markets are focused on the inflation story. you look at current inflation trend. in europe, surprising to the downside. in the u.s., it is falling quite nicely, and that is another reason might central banks can cut, and the focus is if against that backdrop on payroll, which is surprised to the upside, and some of the recession fears, anyone could be supportive of markets, and the market narrative, frequently, this year, it is hard to say at this point it was wednesday and now payroll friday, but who knows?

there is a lot going on right now. there is the flareup in the middle east, jobless claims, and u.s. data releases. the focus shifts from inflation to growth, and that can shift right back as energies respond to the latest affair in the east, making, interestingly, treasury not as good in diversifying, which is what we saw yesterday and today. annmarie: as an jay powell told us that they only really care about the labor market right now? wei: they care about inflation, too. they can say with they would like to say, but at the end of the day, they are able to see that because inflation has been well behaving, and and that is what is driving inflation down. that is because inflation was coming down when it was unwinding, and there is more to play out, and it is also going to take inflation lower and the

labor market immigration story. take inflation and structurally, inflation is set to schedule ida level higher than the pre-pandemic levels because of the supply shocks coming from geopolitical fragmentation, coming from asian populations of time have all of that together, and it is impossible to say powell does not care about inflation. lisa: you said bonds are not as good as diversifier as the risks in the past and yesterday was a good example of that. we did see oil prices pop, but we also saw a flight to havens and bonds. wei: this is interesting and speaks to the new regime we are in right now, which is different from the old regime because will have supply shocks and play sherry pressure, so you see oil prices even reacting a little bit, and you see markets getting a little bit more worried about that, and what that means for bond yields and they have a safe

haven quality that was not embraced as much. i would also observe that even oil, right now, it is going higher, so you look at april oil price and how it reacted, someone asked a question, is it fundamentally different right now? i the last observation i would make when we are talking about diversification and what worked and did not quite work, gold has been behaving reasonably well given that the last two years had deal political flareup and market uncertainty, and i think that makes it an important consideration from that perspective. lisa: thank you for being here. wei li of blackrock joining us on set. let's get you an update on stories elsewhere our very own, straight from the ports, dani burger. . thank you -- dani: thank you.

the death toll from hurricane helene has topped 150 across six states and displaced countless others. the federal government reported 29 shelters that are open and they have more than 1000 occupants in biden will visit the region today, aching a helicopter trip over asheville. he will also visit a rescue command center in the state and then head to south carolina. kamala harris is headed for georgia, which was badly hit, as well. mckenzie is pumping the brakes on remote work. bloomberg reports that the company is considering upping the amount of days it expects staffers across northern america to spend in the office each week. it would also likely invite employees in between projects. the first round of the mlb postseason got underway yesterday. four games in the wild-card round. the tigers defeated the astros, and in the national league, the mets overtook the brewers on the

padres defeated the braves. all of yesterday's winnings teams looking to claims today to advance to the division series. today's action starts with the tigers and astros with first pitch scheduled at 2:00 p.m.. lisa: the mets are advancing, and that is on the docket. next, middle east tensions and plays for oil. >> it has been supremely underestimated for all out war in the middle east, and oil continues to trade on a headline. lisa: that is coming up next. this is bloomberg. ♪

lisa: halfway through the week with another day of losses. welcome back, we are seeing that s&p laid down by the russell 2000, underperforming and s&p futures down .25%. a bit of a lift in the euro after yesterday's punishing session, 1.1075, still remaining in that level, and crude very much keeping our focus, up another 3.5%, $72.26, traded on the nymex on the heels of, under surveillance, middle east tensions rippling through oil. >> we are looking at a market that has been supremely underestimated with all out war in the middle east. the world continues to trade on the pipeline, like we did today, but we are well off the highs, so traders are still taking a

look see that things will quickly resolve. keep in mind, you must see a disruption in the flow of oil, which we have yet to see. lisa: oil prices rising in the wake of iran's missile attack on israel and traders are bracing for further instructions as israel vows to retaliate. javier blas joins us now. what is currently being priced into markets and how much of a disruption could it be if this conflict is escalate? javier: well, the simple answer is we do not know what the escalation could be or israel will heed oil installations, or it will be a more point of response perhaps to april. i do believe if israel consults with allies, particularly the u.s., or if you listen to china, we have indicated there are two things they are out of limits for any retaliation, one, oil

infrastructure, and, two, their plans because their fears israel can attack those installations on saudi arabia and the united arab emirates. we do not really know the impact this could be. the market was very short going into the strikes, and now there is a significant movement with profit-taking from people who went short at $80, securing those profits, so it is a bit too early to say what will happen the next 24 hours. lisa: one thing i love about your reporting is that you are good at understanding the psychology behind certain decisions. i wonder whether israel is deciding to take out oil infrastructure in iran and they don't want to do so because it could affect their economies. and iran would not want to rock the strait of hormuz because it could anchor allies of its country, like, for example, china. how much is there a stalemate

that will protect oil assets versus putting these in the target zone? javier: the biggest problem is the unintended consequences, the more the conflict continues, the bigger the risk of something going wrong, that no one really intended to heed but there was an in -- unintended consequence, if things go more or less within the guardrails of the two players, i believe managed to keep oil out of it and oil prices go lower, but i do admit that the longer this goes, the rate of unintended consequences increases. annmarie: we see geopolitical risk back in the price, but the prices now closer to 50 when it comes to the reference value when it comes to 100. explain. javier: first, simple mathematics.

around $72 oil, while 72 is closer to 50 and you have asked me a year or two ago, 10 years ago, has israel taken the leader of hezbollah, and had to run -- tehran sent missiles into israel, what the price of oil would be, i would have said wti would have traded at $72. there is a second-story in the oil market, the story of geopolitical risk, the story of the oil and supply and demand balance in 2025 and what opec is going to do. at the moment, opec has plans to increase production and saudi arabia is not making it so bad

to where you need to rein in production, so the politics of opec and the politics between the middle east and iran, i think there is an unappreciated risk that we go nowhere from demanding 2025. annmarie: a few analysts poured cold water on a report, do you think the princes preparing to start owning market shares and ignoring the price of crude? javier: i don't think the saudi's would like to launch a price war because they know the consequences of that will be much lower prices. prices that could derail. let's not forget that if saudi arabia was to go ahead with something that looks like a full price war of going into production capacity, which is

12.5 million barrels a day compared to the current amount, prices will go lower because a lot of traders will see that through what we know, and the last price based on recent memory in 2020, let's not forget that it went to wti, and that is what we need to recall. i don't think the saudi's would like a price war, but they are making sure they are prepared to take steps to try to bring countries like iraq, russia, and you i.e. into line to comply with production limits, but we see that situation between israel and iran, and the potential risk occupation and that something goes wrong, that iraq is not reduce production and the saudis will compare readily, increases how long this goes, and let's be honest, a lot of opec countries have been cheating on production of its

for a very long time. annmarie: it is called fudging, not cheating. it is drill, baby, drill and the u.s., election season, but i have a question about shale breakeven. the former president continues to say he will bring oil prices down so low and open up the tax but what is the breakeven where he needs to make sure there are still higher prices so that shell companies are profitable? javier: i think current prices, everyone is still making money in the oil industry, not as much as they made prices close to $100, but something around $70 wti is very comfortable for everyone. we are not going to have a shale production at this level that will slow down, that if i have learned anything over the last 10 years looking at the shale industry, it is that bidding against against -- against american petroleum engineers is a losing proposition. they will drill faster, better,

so, yes, things will slow down with $70 and a lot more with $60 $50, but they may have a contraction even. shale has rebounded from a price war for every episode of low prices, stronger, better, leaner, faster. lisa: thank you for being with us. always a pleasure. do not miss jonathan ferro sitting down with marc rowing to talk about their ambitious profit target, as well as in general, how their role has changed in the market. from new york, this is bloomberg. ♪

lisa: the middle of the week and we have possibly a second day of losses. the s&p, russell, and nasdaq all lower on the day led by the russell 2000 on the heels of geopolitical turmoil but also what we are seeing with respect to jobs. the countdown to nonfarm payrolls seems to be starting yesterday with the jolts report. the jolts headline number came in ok. you see the quits rate at the lowest rate back to 2020. more questions about just how much resilience there is in a

market that has been hot for a very long time. annmarie: everyone is excited about the nonfarm payrolls. you take the over or the under? unless you are citi's andrew hollenhorst looking for 7000. it is the next job report will be interesting. how do we take into account the fed -- we have a strike at boeing and a strike at the docks and the effects of hurricane helene. lisa: in the bond market udc a rally. carrying through two today. it has flipped around with a lift across the board. two year yields, 3.61%. in the currency market, an interesting story with japanese prime minister saying the economy is not yet ready for further interest rate hikes, taking a more dovish tone similar to what we heard earlier from bank of japan governor. the question of just how much

are they going to normalize. you are seeing yen weakness, 144.80. in the dollar space you are seeing dollar softness. 1.1072. i want to head over to an interview we are all looking forward to. jonathan ferro just hightailed it out of here to head to apollo sitting down with marc rowan who is the ceo. take it away. jonathan: thank you. this was the deal. if the stock closed at an all-time high marc rowan would show up alongside me and he is a man of his word. marc: good to see you. technically you are here. jonathan: you planned it this way. a big target for 2029. rates are coming down, the economy is decent, let's call financial conditions easy. why are people coming to you instead of just issuing a bond in public markets? marc: they come to us when they

can issue a bond. it is that they want to do something the public markets will not allow. the public markets over the past decades have become very vanilla. if you want to do something unique, if you want to finance the next generation of infrastructure, you want to build a project, you want to build data centers and power, you want to special features, that is not available. you come to someone like us and increasingly private markets are offering compelling solutions to investment grade borrowers. annmarie: -- jonathan: let's talk about some of those deals. what is the common theme for you? marc: the common theme is excess return relative to the credit of the underlying borrower. the common theme for the issuer is they are achieving something they cannot otherwise achieve. when we did a $6 billion years ago our peer group, that was

interesting, that was one often covid, you another purdue and investment grade private deal. 100 million dollars later we are still doing investment grade private deals and i see nothing but a long line of interesting borrowers and interesting situations. think about what we are doing in the world. we are building infrastructure, we are changing energy transition. we are building next generation of data and power. everyone of those things as long dated. many are complex. some will go to the banking system, some will go to public markets. increasingly for the more complicated financings private market investment grade is where borrowers are coming. jonathan: there was a theme and investor day and you talk about this with me privately. global industrial renaissance. what are you talking about? marc: you can believe or not believe all of the figures that are out there. if you add up the amount of

money needed for energy transition, the amount of money needed to fix our infrastructure, the amount of money needed to build data centers and power to supply them , much less to connect and redo our power lines, you are talking about the amount of money being spent -- all within a backdrop of the u.s. government borrowing $2 trillion to finance itself on a current basis. this is not a question of will private markets grow. the question will be how much. public markets will continue to play a role. this notion of private investment grade has not been available to cfos or others arranging financing and increasingly it will be. jonathan: how labor-intensive is this for you. as you do more deals do you get a benefit from that that you're able to replicate things and use less people? marc: this is scars and experience. these are all labor-intensive.

the investment-grade bond market became so efficient and so low-cost that financial firm stopped allocating resources. there was not any money in doing that. the market is very available but it is very vanilla. no one has built what we have built. when you look at employment, the greatest group of employment, 4000 people, $8 billion over the past 15 years all goes to origination. not all of these originators are calling on investment grade borrowers. some are running other types of origination vehicles, aircraft finance, inventory finance, infrastructure finance. increasingly this is how america borrows. jonathan: introduced citi and a $5 billion partnership. is that an acknowledgment you have more cash than you know what to do with? marc: it is acknowledgment that

control of the product has value. some of that origination we will build ourselves. let's face it, the whole industry is short origination. the extent we can find a meeting of the minds with citi, that is fabulous. the bigger theme is the banking system. one of the big four banks is figuring out what we believe all along. we do not want what the bank wants. we do not want the banks customer. we want the asset. we cannot offer advice come m&a, derivatives, foreign-exchange, or any other service. the bank wants to offer those things. the bank sometimes wants the loan but more often than not does not. jonathan: was a jane fraser that annoyed asset managers or you that annoyed bankers? marc: from the comparing of notes last night it was jane. we definitely got a few calls.

jonathan: do you get the sense this is the beginning of something bigger? give me an idea of what this looks like further down the line. does it include other banks? marc: i think it does. it is difficult to serve lots of people with the same curves but the city partnership is focused on a certain type of borrower. i think you'll see investment-grade partnerships, infrastructure partnerships. i think we are becoming a partner in some ways to the banking system rather than how it is portrayed in the press which is a fierce competition over everything. jonathan: this conversation has been about how the financing of companies in this country is changing, how the company doing the financing is shifting, the emphasis on private markets. part of your vision is how investing is going to change. how's investing going to change? how do we think about public versus private now and how do you hope we will think about it in years to come? marc: for me this is your 40.

hard to believe i've been doing it this long. we grew up thinking private was risky in public was safe. years ago that was true. private was three products which can be risky which done the right way are excellent investments. public was 8000 public companies , diversified portfolios of stocks and bonds. that is not how the world is today. world we see private is safe and risky and public is safe and risky. if that is true everything we know about portfolio management, the way we construct portfolios is going to change. think of the typical investor. a three flavor ice cream portfolio. stocks, bonds, little bit of alternatives. why? when something is risky you put it in the small bucket called alternatives and you watch it carefully and you demand high returns. if private is just another form,

i think what you will see is the whole business of what i call replacement. fixed income, which today means investment-grade public credit, i think will be investment grade public and investment grade private. 18 months from now i do not believe investors will know the difference between investment public and investment private. the issuers come it will not be the size, it will not be the ratings. everything that exists in the public markets is coming to the private markets. jonathan: what is the total addressable market? marc: we are thinking about massive marketplace. when we look at the entirety of our industry, the entirety of our industry has been built out of the alternative bucket of institutional investors. the fixed income bucket is 50% larger than the alternative bucket and is mostly 100% private -- excuse me, public investment-grade. jonathan: equity, can you tell

me how that will be transformed and how some of the companies going public are going to stay private, whether we will see a big shift in capital markets over the next five years? marc: we are seeing it already. this is a two pronged answer. 8000 public companies is now 4000 public companies. there do not seem to be compelling reasons for companies to be public, particular with what has happened on the investing side. so much of our market today is indexed and correlated. think of passive 60% or 70% of the overall marketplace. active management has been a very difficult place to be, has failed to meet the index 90 plus percent of the time for 20 years. i think we will see an evolution in equity. it will happen more slowly. in fixed income we are going to see fixed income replacement, public and private come together

and the reason i know that is we are seeing it every day. in fixed income we have arbiters of credit quality, rating agencies who tell investors that something public and private is of the same quality. in equity we like those arbiters. i think investors are beginning to understand when 10 stocks are 35 to 40% of your portfolio and four stocks have determined all of your returns for the past four years and one stock has been 100% of your quarter, think of what we have done as a country. we have taken the largest full of savings in the world, 12 to $13 trillion from a group of people who need retirement savings more than ever. what are they own? they own daily liquid stock index funds, generally s&p, for 50 years. why? we have a mistaken belief that public is safe and private is risky. you look at the best retirement system in the western world in australia where they have

introduced superannuation 40 years ago. they give the equivalent of 401k investors the access to private markets the returns have been nothing short of spectacular. outcomes can be 50% to 60% better. jonathan: you hear public is transparent and private is opaque. how do you change that view? marc: it will happen in fixed income. when you get the daily pricing and daily liquidity and you can see a market, let's not for lower's, markets are different than we think they are. everything changed in 2008. we did not experience those changes because right after we change the rules we printed a trillion dollars and everything went up into the right. one of the most interesting things that changed, there is no liquidity in public fixed income. it takes five days to sell investment-grade corporate bond. when you see a quote come is that liquid?

we feel good because it is public and we can see it. i think we will end not caring in fixed income in the next 18 months as to whether something is public or private. the comfort people are developing in private markets will eventually extend to equity and we will see equity also adopt private side-by-side with public. as i sometimes joke investors will own equity that is private rather than private equity, the difference being the leverage. jonathan: the regulator see at the same way? marc: i think they do. the conversation with regulators is a fascinating one. change is scary but the typical conversation is every dollar of borrowing that moves outside of the banking system to the investment marketplace -- they're only two choices for regulators. money from an economy can come from investors or banks. any dollar that moves delivers

the banking system and makes it safer. people recoil in a shop and this is just math. the typical institutional investor is levered zero. the typical mutual fund levered zero. the typical retirement services company levered eight times. it is deleveraging. the second is disclosure. we think it is not transparent. the typical bank disclosure since loans to companies. you click on a website and you can see every security we own. then you talk about maturity transformation. maturity transformation is where the economy has suffered and financial markets have suffered. banks are in business to do maturity transformation. they land along in the form of loans. that is not a bad thing. in the investment marketplace you're talking about investors who are matched from immaturity point of view. the final thing i say with

regulators, what percentage of assets in the u.s. banking system or investment-grade? they don't know. we have a perception they are all investment-grade but the reality is about 60% of bank assets or investment-grade. you look at a balance sheet like ours, we are 90 plus percent investment-grade. it has changed but it is change making the system more robust and more diversified and we are the envy of the world. we in the u.s. are the envy of the world. in europe they are squeezing the banking system but they have not yet decided to allow investors to fill that gap and there are questions. wire we struggling with financial markets? you are squeezing the banking system and not allowing investors to fill the gap. jonathan: have you had this conversation with the senator from massachusetts? has that happened? marc: it hasn't but i welcome it. i've spent a lot of time speaking to regulators. we are in a really dynamic

phase. everything we think works the way it works has changed and we are experiencing the changes that were made in 2008 in response to the financial crisis. jonathan: speaking of changes, washington, d.c. is becoming increasingly interventionist. you compared the benefits of doing business in america and doing is this in europe. doing business in america is arguably not as easy as it used to be a make it harder. what is your view on where we are heading? marc: you may be right but it is relative. this is the single best market to be in at this point in time, bar none. jonathan: when we spoke at christmas and we talked about the choices on the menu for the election, you were not impressed. the menu has changed a little bit. marc: i will be under banishment if i give you a direct view. the way i frame this is you are more scared of four years of the status quo were more scared of four years of change.

you have to decide what you are more scared of. i am more scared of four years of the status quo. jonathan: what is wrong with the status quo? marc: i see a direction where the trend is not our friend. right now we are the single best place to do business in the world. we are the luckiest people in the world. can we screwed up? yes we can. the notion we are spending $2 trillion in excess of what we take in in peacetime with full employment does not bode well for the availability of capital to do what we need to do for the next generation. we are spending the next generations money. jonathan: you see anyone on the campaign trail willing to do anything about that? marc: on the campaign trail? no. jonathan: in reality? marc: let's hope. all we can hope for is better governance. jonathan: i have said america has the unique privilege of acting recklessly. are we losing that?

marc: we have a long way to go. we have lots of example of people who've acted recklessly for much longer time than we've been acting recklessly. we also have obligations others do not. right now we are the beneficiary of been the strongest economy, the strongest capital market, the strongest military, the best place to do business. if you take off the past years -- three years ago we decided to build infrastructure and allocated $2 trillion. that is all being built. two years ago we spent $52 billion to build semiconductors. but a single plant is opened. a year ago there inflation reduction act to encourage the manufacture of nobles. not a single plant has opened. we are the beneficiary and the

largest recipient of foreign direct investment three years in a low people are figuring out we are better here and something tells me we are ramping production. all of those things are fiscally stimulative and positive for employment. by the way we have immigration. that sets us up for a stronger economy which we are seeing. jonathan: the federal reserve is cutting interest rates. are you in torsten slok's camp? he believes the economy does not need rate cuts. you share that view? marc: i was unfortunate to be on tv an hour after the rate cut. i said this was a very expensive insurance policy. jonathan: what is expensive about it? marc: the notion we would cut rates. financing is available. real estate prices are going up. yet we are stimulating this and we are stimulating physical -- we are stimulate in fiscally. it is not clear we need more rate cuts.

growth is strong from the gdp. to the extent we accelerate the economy and have to go in the other direction, that would not be a good day. jonathan: you think the fed might have to start hiking interest rates in 2025? marc: i am not saying that what i'm saying i see no reason for the cutting of rates. mi in the torsten slok camp? absolutely. it is my privilege to have him down the hall. jonathan: i do too. this was a privilege. appreciate it. lisa, back to you in the studio. lisa: great work, fascinating interview, wide ranging from the political sphere to the change in markets. the idea people are talking about equity that is private and not private equity. a lot of interesting moments there. you picked out one in particular with respect to the deficit. he did not talk about which candidate he does support by name.

he did say you are scared of four more years of the status quo were former years of change. he has personally scared of the status quo because of how much the u.s. is spending versus what it is saving and preparing for the next generation. annmarie: from where he sits he is saying he is not seeing the benefits of that spending and he says the u.s., there is no governance when it comes to the fiscal spend and we are wasting our children's futures. he did not name names but he clearly was backing one camp when it came to the trump camp because you said your scared of the status quo or scared of four years of change. expensive insurance policy. the most expensive insurance policy when the fed cut 50 basis points. lisa: saying essentially this is not an economy that needs some sort of stimulative insurance cut given how much momentum there is in the labor market. this is highly disputed.

we heard neil dutta sing the fed should cut by 100 more basis points. the case is obvious. taking it back to markets, we are seeing a little bit of a weakening across the board led by small caps and the russell 2000 continuing to decline, deepening the losses, down .8% on the heels of labor market indications that were weaker than expected and the turmoil we are seeing overseas in the middle east. we are talking about the quits rate that came in from the jolts report at the lowest back to 2020, also weaker than expected trends in the ism manufacturing data. i wonder how much this is driving the bus when you look at the action in a question about whether you continue to see a broadening out in the equity rally if you do not have the same kind of strength continue in the day-to-day data? annmarie: what we saw on the

data was reflective of what we saw on the conference board and this is what oxford economics was talking about the quits rate falling to the lowest level since the pandemic. the decline is consistent with other data that shows workers view the labor market less favorably. we will get a better read on friday. you need to slice off 60,000 or 70,000 because the revisions. i think the next labor market report will be so much more interesting because of how difficult it will be for the fed to read because of all of the issues happening when it comes to bowing, when it comes to dockworkers, and the hurricane. lisa: what you are seeing in the bond market is lived in yields even though you are seeing a risk off tone. wei li was talking about this earlier, how it is an unpredictable diversifier. 10 year yields up three basis points. the two year up one basis point. a question about how much people compile into bonds given how

much we have rallied and given how much of a rate cutting cycle we have already been pricing in. that is a key question going forward, especially given the other side of the aisle, which is what a was talking about, this idea we are seeing a no landing. how many people are coming out and saying this is not an economy that is that week. at what point do you see the bond market hitting up against its limits? annmarie: they care a little bit more than the labor market. they do not want to see deterioration with jobs. there is concern from individuals in the market you could see a re-acceleration in inflation and the stories do not bode well for that scare when you think about the middle east and the fact we did see a jump in oil prices, even though there is some ceiling on our high they could go. potentially supply chain bottlenecks out of the east coast. lisa: meanwhile what you see in the currency spaces a confusing

picture although dominated by japan given the fact that the prime minister came out and tempered expectations for further rate hikes, sing the emphasis has to be on the strength of the economy. what you are sick as the dollar strengthening versus the ongoing yen week this. 144.74. it is not massive. it highlights a positioning equilibrium we did not see a couple of weeks ago. annmarie: brand-new prime minister, 24 hours, has to call the president of united states and make moves in the currency market. lisa: if you think of the several decades of disinflation you understand why they are so focused. we will pay the conversation forward. coming up, kristen bitterly of citigroup joining us. joe davis of vanguard, tony davis of nuveen as we count you down to nonfarm payrolls on

friday, leading off with adp in 15 minutes. this is bloomberg. ♪ i can't believe you corporate types

are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my 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.

>> stocks have been benefiting from this view that rates are going lower. >> there is a risk --

>> while we are not expecting a significant slowdown we think you're coming into a third quarter low. >> we think the economy is stronger than people expect. >> the upside opportunity is tremendous. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. lisa: good morning and welcome back to bloomberg surveillance. john is hanging out at the apollo foodcourt a little bit longer. still in the room is annmarie hordern along with dani burger. thank you both for being here. the market is still soggy. let's get into it. the question of how weak or strong is the labor market is the focus, possibly what is driving down russell futures given the fact that was the main message out of yesterday's report. dani: i am interested in what happens to yields. you put it so right that we retain this risk off except bond yields.

is it a feeling that so much is already priced in? what does that mean if we get weaker jobs data? does it lead to we rush and buy bonds and we say everything is in here that we can be? what will be the reaction? lisa: is there asymmetry in markets because we have bacon so much of a rally in bonds. flirting with the idea made we saw bonds as a stabilizer that they were the haven asset, not only with the weaker economic data but given the fact there was disruption in the middle east, esau oil prices two but you still saw a flight on the margins into the bonds. there is a question of how much this market is accounting or discounting some form of escalation. annmarie: there are three main stories that can affect the u.s. economy, the hurricane, the dockworkers commented geopolitical tension in the middle east.

we are still waiting on a response from israel. it is a big question on whether or not it ends or does it escalate. annmarie: lisa: at us certain point you start wondering about that. you're familiar with the dockworkers strike. you spent all day yesterday hanging out with the seagulls. dani: a terrifying amount of seagulls. there is a feeling the sides are moving close together and maybe something will happen that makes us forget this. august you start with bad news, risk of a hard landing, september it was inflation. at the end of both months you get this risk on rally. is this month the same where we start worrying about geopolitics the next thing you notice risk on yet again? annmarie: we heard from bloomberg economics saying this might mean 80,000 off the payrolls and that could boost the fed to go in with a 50 basis point cut. this could mean there is an implication. lisa: all i can say is you wait

two minutes and we will get another narrative. coming up, kristin bitterly of citi global wealth management. nike scraps guidance the men and ceo shakeup and joe davis of vanguard on the loss of momentum in the u.s. labor market. let's begin with stocks on hold as investors keep an eye on the middle east and awaiting payrolls data. kristin bitterly saying "geopolitics in elections are big concerns but not driving investment decisions. reinvestment risk is becoming more real. the 50 basis point cut mobilized a lot of capital. rolling t-bills is becoming a difficult strategy to compete with returns we have seen in equities. kristin joins us. is this an argument to people have 6.4 trillion dollars in money market funds to say really, are they actually moving? kristin: there is a lot of cash

on the sidelines and we have seen a substantial amount in portfolios. cash was a viable asset class and we did some movement from the fed to start analyzing the rebalancing decisions. what have we seen from investors? we have seen them coming into -- whether that is in duration or in preferred, but in a lot of our conversations people will talk about geopolitics, they will talk about elections, but then they take a step back and say earnings are at record highs, rates are coming down, inflation is coming down. i would add what china did last week. not saying we see retail investor flows going to the chinese market, but it is one more tail wind. lisa:. about 10 minutes away from the adp employment report. yesterday we got quits data underpinning the joel's information that people are not

feeling comfortable to quit their jobs at the same levels they were in 2020. does that give you pause? kristen: i think the labor market data we have seen thus far -- there is some slowing, but it is not contraction, it is not deterioration of the labor market. friday will be important. payrolls will be one data point everyone is watching because what the fed is telling us is the inflation battle has been won and now all eyes are on the labor market. there summary things that go into the data, whether that is what annmarie mentioned a little bit ago, whether it is the dockworkers strike, the impacts of the hurricane, various strikes. there is a lot of noise in that data and the question is does the market and the fed look through to that noise and understand the real picture. dani: what are you telling your clients? should they look at china and say go full on bullish?

kristen: i think there opportunities within fixed income as well as equities. everyone looks at october and we can discuss this ad nauseam. october tends to be a volatile month and tends to be a negative month. whether that is elections, geopolitics, we can debate that. we look at your plan for your portfolio there opportunities within fixed income markets, whether that is investment grade corporate, and finding opportunities and extending duration. within equities we've been playing the broadening out story but still leading into quality. an area of the market that has been left behind is dividend growers. strong balance sheets, strong cash flow generations, they have not been on either side of small-cap tech companies. for anyone looking to hang out and have equity exposure, that is a great place to be. annmarie: for every tailwind there seems to be a risk.

geopolitics in the middle east, election uncertainty, boeing, dockworkers, hurricane. where else do you think you can hide before what is potentially going to be a few long weeks or months when we could be questioning the outcome of the u.s. election? kristen: the u.s. election, we always say it is policy and not politics that will drive investment decisions. what we try to do for investors is say what is the playbook? you have three different outcomes, a democrat sweep, a republican sweep, or some type of divided government. then you look through to what are the changes they could actually happen. it is tariffs and taxes. for each one of those areas you could have slightly different positioning within our portfolio. what i mentioned in terms of what is a way to stay invested -- you are involved in this equity market you have seen but we are doing this with the balance to fixed income and you

have a bias to some of those areas that have been left behind and that is an effective way to hedge the position into the election. dani: in the aftermath of elections in europe we have seen one real trend, taxes. in france we understand they will announce additional taxes, trying to tackle the deficit. michel barnier called it the real sort of damocles. are you worried about the same thing happening to the u.s. after the election? kristen: the major conversation we are having, taxes and what happens when we get that expiration at the end of 2025 and what that could mean for personal taxes, corporate wealth taxes, dividend income taxes. one thing i think is a fascinating stat is you can worry about what those outcomes are, you can worry about what a

divided government would do. i look much more basically at the fact that only one out of three americans has a will. only one out of three americans has gone to a financial plan. when you think through what could be some of the biggest events in terms of impacting your overall wealth and the taxation of that, is not just what you were invested in, it is how you structure it. i would say focus more on the basics in your control, not this out, that we still don't know and it is still uncertain. be prepared for it by taking control of those things. lisa: a six like 60/40 or longer-term risk exposure, this is at the heart of the question. do you still go to the traditional 60/40 at a time when you do have the deficit as a concern, where you do have potential more volatility in inflation and potentially

geopolitical tensions. how much are you advising clients to diversify away from bonds as that ballast as we were just hearing from a number of people earlier this morning. kristen: everyone's situation is unique as to what is their starting point. if you look at different profiles of investors we see investors overweight cash. if rates will continue to go down cash is not a good performing asset class. that conversation will be one where you're trying to find opportunities within fixed income. somebody who has been overweight cash will not jump into the equity market or alternatives. you have to be realistic about what does it look like to get you to better financial outcomes over time. certainly for investors looking through the equity market we see a lot of balances where is 60-30-10. you're benefiting from the equities market.

another interesting thing is the perceived riskiness of adding things like alternatives. when you look to the fixed income market, once you get beyond those liquid instruments there is a lot of illiquidity within the bond market. you have to think about what will generate the returns i need to obtain my objectives and alternatives are important part of that. lisa: kristen bitterly, thank you so much for being with us. let's get you an update on stories elsewhere. here is your bloomberg brief. j.p. morgan is planning to open new branches across low income areas in the u.s.. the wall street journal reported in the bank is working to build around 100 new chase bank locations in america's inner cities and rural areas were the presence of banking has been shrinking. the push is being described as a way to offer a more stable alternative to hyphae services such as check cashers and payday lenders. less than a month after its glow

time event apple is preparing for its next product launch. according to people familiar, the couple is planning to announce a new low end phone next year alongside the ipad. the new iphone will become its new entry-level model. the release will mark the first update since 2022 when apple added 5g capability to the device. you could own a piece of goat history. tom brady will sell pieces from his sports memorabilia collection. the pieces will be sold in auction december 10 and outer expected to sell for $11 million. which of you decided to put that in the brief? dani: i love what tom brady says. i'm excited to give fans and collectors the opportunity to

own special pieces from my journey. >> because i am sure there are so many fans that can afford that. lisa: up next the morning calls. and nike begins it c-suite transition. that is coming up next. this is bloomberg. ♪

lisa: it is the moment you been waiting for. the adp report. with us is michael mckee to break it down. michael: better-than-expected. adp at 143,000. that is up from 103,000 revised for the month of august. most of that seems to have, in the service providing sectors as

one would expect. 101,000 jobs there. leisure and hospitality 34,000. education and health-care 24,000. leisure and hospitality is interesting given the seasonal aspects. construction 26,000 is still adding workers. there is still a lot of demand for construction workers. manufacturing added 2000. they have seen a lot of deterioration in manufacturing hiring but we have not seen that yet. the and index was up 4.7%. job changes a 6.6%. for whatever it is worth we look forward to, on friday, the payrolls report. only private-sector jobs in private sector payrolls forecast to go up 125,000. adp more optimistic than the

economists are about the nonfarm report. lisa: seeing in markets a little bit of a pop, project leon the front end in terms of yields. lower on price as people look at the potential for the fed to make a move with this outside surprise. not a big amount of drama. you are seeing a lot of fading quickly of this move. i wonder how much the newfound love for adp that somehow it is more closely correlated to what the revised numbers look like out of nonfarm payrolls than nonfarm payrolls. michael: it is like the meme of the guy with the two women and he is looking to the other one. adp was nothing and now all of a sudden because the fed says it is watching adp people are paying attention trying to get a bead on what might happen on nonfarm payrolls. the adp people tell you straight out of this is not a forecast, this is just our own number. dani: i thought the really

interesting part of powell's discussion was when he was talking about the tension between consumption and labor markets and he said we care more about the labor markets, they give more of a real-time indicator that something like gdp, which historically cannot call recessions very well. does that mean we need to pay more attention to adp? how should we approach all of these labor market data points? jonathan: most of them -- michael: most of them you can ignore. adp gets traded because it gets traded. it does not predict what will happen with nonfarm payrolls. even if it did, it is the nonfarm payrolls numbers that matter. unless there is a clear trend it is the payrolls report before the fed meeting and we get that november 1. as anne-marie was saying, that could be screwed up. that could be hard to read. i would look past this.

we will see what happens on friday and we may end up looking past that as well. lisa: michael mckee, always great to get your insights. you are seeing that selloff in the bond markets continue marginally on the heels of the adp report. time for the morning calls with one stop in focus. nike. cfra downgrading the company to hold. jp morgan lowering its price target to $77, keeping a neutral rating, saying turnaround plans are taking longer than expected. ubs raising its price target to $82 while maintaining a neutral rating, calling recent weak earnings unsurprising and sing the risk reward is balanced. joining us is aneesha sherman of bernstein sticking with an outperform rating, saying "while we remain positive long-term we expect the stock to state limited -- to stay limbo

short-term." explain. there are so many people who are so bearish on nike, especially at a time there withdrawing guidance in seeing another significant decline in their sales in the third quarter. how are you bullish? aneesha: nike is in a very different place than it typically is in the cycle as well as as a stock. sentiment is low, it is an extremely uncrowded long. it is the bottom decile of our crowning analysis. this stock is poised to rebound on any signs of good news. the stock has been up 20% over last couple of months on expectations of a ceo change in the actual announcement of the ceo change. any kind of incremental good news helps the stock. the problem is the cfo is wiping the straight clean ahead of the new ceo.

there is no investor day or the date has not been reset yet. there is no one in charge, there is no ceo on the earnings call last night. the message from management's we have to wait until there is somebody in charge again and then we will give you clarity on the upcoming catalyst. for now i think the stocks stay stuck at these levels but over the next six to 12 months there is nice upside as we start to get clarity on the numbers. annmarie: i wonder what you make of that strategy. it is almost as if we do not know what we are doing and we are waiting for a savior. is that the right approach for nike to be taking at this moment? aneesha: i agree. it was widely expected the investor day would be postponed and guidance would be cut. the investor day has now been postponed with no rescheduled date and the guidance has been pulled. instead of having expectations for the new ceo, we have no

expectations. it is more of a black box. i would like to see them cut the guided not just full of guide and i would like to see a date set for the investor day. annmarie: what if the next catalyst is deeper into the abyss and not the upside? aneesha: if you heard the commentary on the call it sounds like there's a lot of upcoming signs of positivity. they are getting better retailer feedback, they are getting better books for the spring than the fall, they are seeing their running products come back. they are seeing improvements. the problem is they're still doing a ton of clearance on jordan's, on air force one's, that is an overhang on the div that -- on the performance. still that clears away will not see underlying performance work. the market will look for signs of the underlying improvement

and as we see that the stocks will work before the sales performance does. lisa: there is a war among running shoe providers. right now it is being won by the likes of hoka and asics if you are me. i wonder how successful nike will be and who they will get market share back from if they are successful in getting back to the running sphere? aneesha: nike has lost a ton of share in running. they were close to 30% market share and now they are below 20%. the gators have been hoka and brooks and maybe a little bit of socket eight as well. they will recapture share in some channel. running specialty they are at 0% share. the losers will probably be brooks and to a lesser extent hoka because those are very

heavily penetrated in that channel. it is about consumer choice. the incremental sale may go to nike rather than a six. i do not think they will go back to 3% market share, but having lost 1000 points there is nice room for recapture in that segment. lisa: are jordan's still cool? aneesha: not as cool as they used to be. too many people bought jordan's. you're up against the success over the covid years and because they over distributed that franchise is not as cool and has as much scarcity value and that is what they are trying to recapture. they are trying to clean out some of the steel products within the jordan franchise and recapture some of the heat and scarcity value that makes jordan's cool again. jonathan: aneesha sherman -- lisa: aneesha sherman, thank you for being with us. humans are so predictable. annmarie: i still think jordan's article.

-- jordan's are cool. i am not a collector but their classic. you'll never get rid of the jordan brand. dani: unless there are too many of them and you can go to a discount store. they have become uncool. it is about short supply. lisa: all i can say is the resale market does show that. coming up next, joe davis of vanguard and 20 rodriguez of nuveen as we parse the jobs data we just got and looking ahead to jobless claims tomorrow as well as what we see on friday. right now about the same selloff in s&p futures. good morning. ♪

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lisa: heated discussion around shoes right now. one hour away from the start of the trading day. the weakness carrying through even though you did get better than expected adp numbers, you have the week discontinuing led by the russell 2000, still down about .8%. let's get morning movers. manus cranny sitting there. manus: will kick it off with oil. the product up 6% over the past two days and this is carrying into all of the big oils. chevron up 1.74%.

the calibration of the response from israel to iran. this is tit-for-tat. until they go for the oil infrastructure you will not see reverberation. big oil is up yesterday and rebid this morning. the saudi oil minister putting oil back on the mindset. alibaba, i put this up there because we have this foam of gripping this around the world in regards to china. chinese stocks are trading at a 30% discount on a price-to-book value relative in the conversations you had on surveillance yesterday which is about u.s. fully valued pickup opportunities in china. either way mortgage rates are lower in these big players are bid in the u.s.. i leave you with a look at humana. we look at the ratings for trains and cars. when you're over 65 you look up the rating on your health care plan.

the ratings drop on the humana medicare advantage product. so too to the numbers. 1.6 million customers is down 98.4%. ratings matter not just on the airways but on your health care package. lisa: i like how if you specify if you are over 65 and you're looking at ratings we will get there. adp out moments ago and investors there looking ahead to jobless claims. data from vanguard showing large u.s. employers are hiring at the slowest pace since june 2020. the team writing "we expect the softening of the labor market to dampen consumer confidence and real wage growth, resulting in below trend gdp growth in the first half of 2025." not necessarily calling for a bearish take. joining us is joe davis, chief economist at vanguard.

i want to start by talking about weakening but not week. how do you parse the difference? joe: that is also at the heart of the federal reserve response. we have clearly seen a slowdown in the labor market. part of that has been welcomed. we were out of bounds for the last two years and had rapid wage growth. we are approaching the levels were any further weakening or cooling would put bigger concerns on the table. the federal reserve has been weighing this information very importantly and explains some of their aggressive moves. the big tension in the market is are the jobs figures represented in the strength of the economy which is going to 3% and not having any signs of a slowdown.

he just had marc rowan speaking with her own jonathan ferro and he said the 50 basis point rate cut was an insurance policy and this is not an economy that needs it based on gdp and earnings. what makes you think the labor market data like the data that shows quits rates have gone down, what makes you think we should more heavily weights that? joe: i think the whole insurance phrasing is pretty appropriate. the economy is pretty resilient. we still have turbulence. our lead indicators still point to further weakness. i think what you're trying to do, the federal reserve is all in on soft landing expectations so i think they will be aggressive to try to increase the odds that that happens. there is risk in that strategy and it is the gdp numbers more

accurate or more representative, and six months willow crossroads . dani: powell tried to solve the tension by saying the labor market is a real-time indicator and gdp is bad at predicting a recession. does that mean we can completely discount the strength and what it tells us about inflation coming in and the likelihood unemployment moves in a more malicious manner? joe: i would not be too quick to completely discount gdp. underneath gdp's corporate earnings and corporate profits. business investment. policymakers, i think they are looking at a distillation, but there is no doubt the federal reserve is when the jobs market much more heavily than the gdp numbers.

the next months -- if they are right the federal reserve will look very prescient -- it is not a bearish crossroads, and is the equity market right and then we are following gdp, or will it be the latter will have gdp come from three to two. i wish i had more conviction on which it will be. policymakers are going that calculus. lisa: i love the way you are phrasing this because it is really accurate. it makes me feel that right now the labor market will dictate the bond market and the gdp numbers, atlanta fed gdp is what every analyst points to and says what slowdown? if they cut 50 basis points and do another 50 basis point cut in

november -- joe: i think the recent actions, there is some lag. the financial markets respond instantaneously and we are all trying to get ahead of the federal reserve. in terms of the labor market, the next three months are baked. i wish i knew with the numbers would be but our lead indicators say there are still choppiness but they will not go negative. i think it will come out the only risk to the analyst community is saying you do not need to be coming at all or not much for so if you to fight the narrative you have to explain why they believe there is so efficient and we have 70% gdp growth. that would be something for the

federal reserve's articulate where they will go the next six months. annmarie: how are you going to review the nonfarm payrolls report when you see all of these mismatches in the economy and people will be out of work because of what is going on with the number of strikes in boeing and the port. joe: you have to look at other things. you have to look at the new entrance coming in. one of the reasons we did not have a more material slowdown was the surgeon and gratian it is not so much what the headline is, is the breath of job creation. his industries always strong. it is the hours being worked outside the strikes. like anything in life, there will be noise in the report, -- companies are continuing to add to the jobs. dani: you also talk about

something in your research, a phrase that feels like it has been dropped by the wayside, that is the last mile of inflation. you expect inflation to remain stoppard and the second half of 2024. does that mean this whole idea that jay powell was doing a victory lap thing inflation has been conquered, that is not exactly right? joe: the federal reserve are one of the few institutions that can affect the outcome. when everyone believes inflation is in their control it tends to go their way. the housing market has been one of the areas that has really been stoppard. even fed -- have really been stubborn. even fed officials would acknowledge that. the fed said they could have a trade-off to bring down inflation without a material impact on the labor market. to counter they got a good lock in terms of the immigration

surge. i am not cheering against the soft landing. i am waiting to see where does that calculus, given aggressive cuts and will likely continue for a little bit of time, where are we six months from now. that is something we will focus on. lisa: how much are you expecting the jobs report to surprise to the upside or downside on friday? joe: i have been employed in 22 years in part because i've tried to avoid the questions. i would say there is monetary risk on the downside. if i was that accurate i would probably already be retired. lisa: joe davis of vanguard, thank you so much for being with us. in the studio joining us is tony rodriguez, head of fixed income strategy at nuveen. what you make of what we were just hearing about that the bond market is taking its cues from the potential weakening of the labor market whereas stocks are

looking much more at gdp and gdi? tony: that is accurate and when you're taking that to the fixed income context you are seeing the equity-like response in the credit markets. high yields doing well fundamentals are solid -- you are seeing the story and the fixed income market. the disconnect is in the treasury market you are seeing people hedging against their risk books. if you have an aggressive equity position, one of the only things that will work well, if in fact we get the hard landing, that is not the highest probability. treasuries will serve as a hedge. there is a lot of money and then market that is serving as a hedge to taking risk in the credit markets, taking risk in the equity markets.

lisa: that did not work because the risk was inflation. are you saying that increasingly bonds are a diversifier because inflation is off the table and that is no longer a concern in any investors mind you speak with? tony: essentially guess. we would not say inflation risk is off the table. we think inflation continues to come down. when you think of fixed income you want to get income out and liquidity and a hedge incivility. there was no income it, there was still potential for protection. treachery is probably the least attractive area to find it. coming off 3.5% to 4% levels. dani: yesterday we have a big

risk off type day, pretty textbook over geopolitical fears. pretty textbook accept credit markets. spreads barely move one basis point. is it a market immune to geopolitical risk or is it more calm investors? tony: i don't think it is immune. even oil prices do not spike as much as you expected. maybe it is the frog in the border water symbol and that all the geopolitical risks -- there's been escalating risk and all of them that maybe the markets have seen the movie and it will bh elizabeth event -- if it gets to the point -- for now i think the market is looking at it as this has been the ebb and flow of this continuing escalation we are seeing. we've not had a major disruption. it is a big risk in our minds. annmarie: if you are going to

take that risk on board and you were nervous this is a different movie than the one we have seen, what should you be doing? tony: a couple things. you do not want to be at the high end of your wrist budget. if you also look at valuations in the broader capital markets, fixed income, credit spreads, valuations, none of them considered historically cheap -- that tells you you want to have power try and be at the midpoint of your risk budget we are leaning more towards higher in quality and liquidity and making sure we have stronger fundamentals to make their way from economic weakness from the geopolitical event. lisa: there is a question -- we were talking about wei li that

may be the bond market has priced in too many rate cuts. at the same time people are talking about the potential for downside surprise. you think there's been an overstating of the fed reaction function, a more bullish position on the economy, or do you think people will be surprised by how much they will have to cut? tony: i think the markets are pricing in too many cuts. i think the probability of the soft landing increased quite a bit when the fed cut 50 rather than 25 and also when you saw what china has done over the last week and change where they are not game changing things out of china but there is stabilization adverse. all of that helps to reduce the risk of hard landing. for us, the treasury market, the fed funds futures market aggressively pricing is because of our flows of those barges that are hedging.

they are using that market to hedge. we think if you do get a hard landing a significant geopolitical escalation -- you will see a sub 2% funds rate. that is a very low probability in our minds. it will be an effective hedge to the decline of the equity market or the widening of spreads you might see in the credit market. dani: if that is low probability does that mean the base case for yields is higher? tony: i think base cases range bound. we think to and three quarters to 4% is a good -- we think that is a good long run level. you rarely get at that level and sit at that level but for now we think that is a fair value zone. it is the fed that needs to get down in terms of the funds rate.

patiently. . if that happens you can help the u.s. economy grow, may be sustained at 1.5% to 2%. lisa: what is your call in payrolls on friday? tony: we say the risk is to the downside but not materially. lisa: tony rodriguez of nuveen, thanks for being with us. let's get you a update on stories elsewhere. the death toll from hurricane helene has topped 150 across six states. the federal government reported 29 shelters were open with more than 1000 occupants. biden will visit the region making a trip over the city of asheville. we will also visit a rescue command center before heading to south carolina. tim walz and jd vance sparring over housing costs come

immigration, and abortion rights in their first unlikely last debate ahead of the elected. a ring of fire eclipse is on the horizon. an annual solar eclipse will occur when the moon obscures all but a sliver of the sun. this will take place over the pacific with parts of argentina, chile, and easter island across the path. for those looking to get a glimpse of the event, wear glasses because they block out light from the sun and otherwise you could go around. -- you're not supposed to look directly into the sun? lisa: think it is surprising. nobody looks at the sun. it is darker. dani: it is your natural inclination, something full is happening in the sky, let me

look up words. lisa: up next, sitting up for the day ahead. this is bloomberg. ♪

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lisa: here is what is coming up as we see another day of losses. more fed speak at 10:00. tomorrow we get another round of jobless claims. plus factory orders, durable goods, and ism services. friday is the main event, september payrolls. will you get 150,000, 140,000, will you not predict like chip

davis? maybe going to predict is bloomberg's michael mckee. what is your number? michael: i would put it in the 150 range but only because i do not have a better gas than consensus at this point. like i have said several times it may not matter because the real number that matters is the one we get before the next fed meeting. dani: that is going to be a complicated number because of strikes, because of hurricane impacts. how should we be looking at the figures without knowledge? will it be a choose your own adventure because you can assign any narrative to it. michael: we will see with the other numbers are but the fed has said they are watching the payrolls numbers. if we get a really bad number than people may just say it was a bad number. the unemployment rate is not affected by the strikes.

that probably will not go jumping, it might rise for other reasons. it will be hard to say how people and how the fed, how voters and everybody will react to something four days before the election. annmarie: you think the fed is concerned about what we are seeing in the middle east and the spike in oil prices? michael: obviously inflation is always a danger from energy but energy prices have come down a lot and they will have to go up a lot in a short time to have an impact on the cpi next month because we are already below where we were. it is not a real danger at this point. gasoline prices have reacted slowly to oil prices but they have been coming down on a retail basis very regularly. it is not clear americans would see a change at the pump that would cause their moods -- their confidence to spend or their desire to vote for somebody by the time the election comes around.

dani: we have heard fed speakers talking about the port strikes and the risk there. at what point does it stretch on long enough it becomes a macro issue for the american economy in the fed needs to pay attention and recalibrate? michael: after a couple of weeks you will see some segments of the economy started she -- start to see shortages which will drive up prices. we've joked about how bananas will get hit right away because 75% coming through the ports. it defends how much it affects people's jobs and inflation and inflation will probably be sticky and slow to rise. they do not want to make customers angry. the question is are we going to see companies relying on inputs to close down production because they cannot get the materials to keep making the stuff they are making. lisa: bananas are not a joke to be clear because they will rot.

michael: we have bananas upstairs. you can grab a handful. lisa: we do not want them rotting at your desk. we can discuss the freezing. michael mckee. tomorrow, jerk watered of bank of america, adam posen of the peterson institute, and lindsay piegza of steeple. we are parsing through a number of risks and possibilities. upfront people are wondering about the jobs data we got yesterday in terms of jolts and quits. we have the geopolitics. we have this overhang of what will happen with the election and how much could policy shift. dani, what you have your mind on other than the seagulls at the ports? dani: that is still on my mind. i come back to what we keep

experiencing over the past two months. every month starts not with this risk but some sort of risk and the ability of the market to rub through it. the fed is cutting -- to look through it. why not buy not just the u.s. but china, em, all the risk assets look so attractive in the market has been remarkable at looking through the headwinds. annmarie: it has to be the geopolitics. we are waiting for israel to respond. sony clouds overhanging this election. -- so many clouds hanging over this election. lisa: right now and markets you see a sock your field even with the better-than-expected adp report. s&p futures down .1%. dollar strength across the board and you are seeing yields higher on the long end. up seven or eight basis points. this was "bloomberg surveillance." ♪

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after yesterday's wipeout. 30 minutes until the start of trading. i'm katie greifeld. sonali: and i'm sonali basak. matt miller is off today. "bloomberg open interest" starts right now. katie: wait and see mode. investors say the escalating crisis in the middle east jobs report. nike's reset shares falling as the giant withdraws its