>> that bullishness in the top of the market starting to filter down. >> stocks and bonds are trading uncorrelated. >> investors are probably going to take another bite at the apple here. >> the health of the market will depend on earnings. >> i think the market can continue to broaden. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning, good morning, good morning. let's get your trading day started. s&p 500 positive by one third of 1% coming off the back of the biggest one-day drop in the s&p

500. equity futures look a little something like this. up on the nasdaq by 0.4%. the russell totally unchanged. two things to watch for in the last 24 hours, one in the bond market, the other, the commodity market. after breaching 4% and $80 a barrel on brent crude for the first time since august. we pulled back on brent. the 10 year yield, the 4 handle sticks. dani: the two are certainly connected. there was no clear catalyst. you had fed speak that basically argued for gradual cuts, gradually cutting into economic strength. you have to imagine is bullishness. it is the old habits die hard of equity markets yet again being frightened by higher yields. jonathan: as for crude, five days of gains going into the oil market. gains of more than 12%, gains we have not seen going all the way back to a time when russia invaded ukraine in 2022. annmarie: this is all about

political risk, the idea get wider regional conflict in the middle east. you had the director of the cia talking about how you could see the potential for inadvertent collisions, understandings, and actions that take on their own life. you have to not jesting about what israel could do in terms of iran but what iran does back. does that mean potentially hitting other gulf supplies, or cutting off the strait of hormuz? jonathan: there is a china effect in the commodity market. you see it in base metals as well. check out the chinese equity market. chinese stocks meeting gravity in a big way. we are talking about catch up here in the csi 300. the hang seng in hong kong, a big run over the last week, getting absently hammered this morning. dani: it is a mismatch of citations, that the ndcr would come out with some sort of added stimulus to they are not a government body that tends to do that. yet 25% for the hang seng, it is

an equity market are expected some sort of bazooka. it does not negate what they already released, but it is the market trading at almost as if it does. annmarie: the agency talking about this for confidence they can get to growth prospects, 5% here then you see the world bank coming out and actually cutting how china will grow into next year. i love this quote from the chief asia-pacific economist to the financial times -- this is what happens when you feed the monster. every day, you need to increase the amount of food, or it turns against you. the idea until they change the fundamentals, this is all a sugar high. jonathan: the hang seng getting hammered, brent crude and wti pulling back as well. coming up this hour, we catch up with jack caffrey of j.p. morgan , leland miller of china beige book, and bloomberg's saleha

mohsin. jack caffrey of j.p. morgan asset management is still bullish, writing, over the next 12 months, i would expect large-cap u.s. equity market to rick -- deliver a return most likely in the high single digit range. your gains are most likely to be supported by future earnings upside rather than additional value acquisition. what is the earnings optimism comes from the under pins that call? jack: we had an economy, a month ago, fearful of a hard landing, then, perhaps, a soft landing, and now we have the employment report -- it may not be landing at all, and actually seeing that plane turned back up. underpinning that, companies continue to do a good job with their costs, turning it into potentially high digit earnings growth on a forward looking basis. jonathan: are those companies concentrated in a particular

sector? jack: i think you are seeing broadening out from a tech dominated market to more capital spending broadly. you can see consumer names continuing to do fairly well, and that sets up some interesting disconnects between what people may have worried about a month or so ago with the hard landing fear to maybe not only muddle through but pullback up a little bit. dani: if we could get more into the consumer names, pepsico reporting stronger-than-expected, the fear last quarter was unevenness among the consumer. are you saying they will be less about this quarter? jack: with a lot of the consumer stocks, we were looking at companies that pressed hard on the pricing lever, and they were willing to give up a bit of volume. without having seen that pepsi numbers, i would rather understand how much that trade-off is playing through. to the extent you are seeing investors, last week on leaning aggressively into casinos, cruise lines, these are

relatively big-ticket purchases, not a house, not a car, but they are leaning into things where consumers are even borrowing a bit of money, to some extent, in order to not miss out on an experience. when you are potentially borrowing money at rates that could be 20%, when you look at where credit card interest rates are, in order to enjoy life, that speaks to a degree of confidence your job is stable and maybe we'll get a raise. dani: toledo bar for where it is the season, is that a bar we easily clear? jack: given we have pulled back over the last several days, it becomes much easier for companies to beat that. many companies went through the conferences and coming back from labor day, like, well, maybe things are not so fantastic. companies have been well-trained for 25 years under promise and over deliver. i would not be shocked. in the vix going from 12 to 20

suggests there is underpinning fear under that, that good enough. annmarie: you think picks, power, shovels are better than tech. do you think it -- jack: it looks -- it depends on -- they have been a reasonable inflation had having to pass on costs in the form of higher dividends, now you have utilities perhaps having to go on an aggressive cycle based on the fact that ai power will consume all power. annmarie: do you think, at some point, that ends? how much could this be in terms of growth? jack: ultimately, it will come down to how ai actually starts

translating into profitability for ai consumers rather than the ai investment angle today. right now, the story remains very much of the enthusiasm in order to hire chips or build the servers that make use of those chips. that is the somewhat trickier point, even with the enthusiasm around fundraising rounds for the model providers. i like analogies. if we go back 25 years ago, we sat there and looked through alterable search engines before we settled on a dominant search engine. why wouldn't that be a proxy for large leg was models? we will experiment and try and end up with one. since power is tricky, you need permits at the state level, the federal level, i would anticipate whatever you pencil in will take longer and cost more, ultimately. jonathan: this is something to think about over decades. let's think about some thing over the next several days.

make earnings. one bank was talking about interest rates weighing on profitability, another talking about at risk. what do you think will be the standout from that sector? jack: ultimately, it is a balancing act. we have seen credit measures get worse, particularly around auto lincoln sees, and that is interesting, because in the dfc, auto credit did great when housing credit was relatively weak. people are looking at auto as a canary. you need your car to get to work. that will be interesting to tease apart. at the same time, if the consumers is going on cruises and potentially doing a version of buy now, pay later to go on vacation, that speaks to confidence in there, even if they are looking at sticker shock. i am happy to look at how stocks land. jonathan: how rate sensitive is that sector?

jack: it winds up being -- i wish i could quote your growth correlation figure, but i would be making up, to be honest, and i try not to do that. ultimately, these are rate sensitive consumers. when you look through some of the weakness we have seen in the auto markets, it speaks to the fact that was a consumer cohort that went from 2%, 3% auto financing to 12.5%, 13% for a used vehicle, used vehicles, to some extent, being the only game in town, if you think back to 2021. unfortunately, we are also in hurricane season, which will probably result in a whole lot of losses when we think about where the direction of headlines and travel will be. that will end up supporting used car prices for that will feed its way into the market and have some interesting wrinkles for auto financing. dani: we are in a moment, just speaking of the hurricane and geopolitical event, where

outcomes are binary. there is potential devastation in the u.s., depending on the path of milton. there is concern about what retaliation looks like from israel. how, as an equity investor, should you approach that? again, risks tend to be quite binary. jack: the reality is we want to focus on the long term. the quote teacher for my comments basically try talking about what will happen over the next year, where i have greater confidence what will happen at 9:35 this morning. the reality is i have to survive to 10:00 this morning in order to get to the next year. a week and a half ago, we were sitting there thinking oil prices were effectively going to become a tax cut to the consumer and one that was showing up on a weekly basis, yet now we are talking about oil up 12% because of a shift in how small groups of people in various countries have responded or not responded. that moves into a layer of analysis i do not have the tools

to try to handicap. i would say generally it is better to be a buyer on those days. to the extent that we wind up getting some fear in the market over the next week or two, i am more inclined to be adding risk than reducing it. the reality is you do not buy flood insurance when there is a storm forecast, you do not buy fire insurance when your houses on fire. with the vix having spiked notably higher over the past week and half, markets are more fearful of the margin. there is no corporate bid, because we have not gone into earnings yet, so over a two week period, could there be a more dramatic drawdown? that is a higher ability event that any given day in the market, but give me 18, 24 months to come back to earnings, i think we wind up in a better place, mid to high single digits, may be low double digits, but after 30%, after two years of almost 30%, hard to bet

on something aggressively in the double digits absent a greater starting point. jonathan: jack caffrey of jpmorgan asset management. dani mentioned pepsico. the estimate to 30. full-year organic revenue, up in the low single digits. they had seen revenue up by around 4% for the year. this is what they are leaning on, and this is what jack alluded to, strong profit controls, the focus on tightly managing costs. dani: that was my take away. the fact they were able to beat how to do with cost cuts. not all these companies are treated equally by consumers, and ran names maybe cannot do the same, because there is price fatigue. the problem always tends to be it is so uneven. there are companies still doing ok and are still benefiting, but for every pepsico that report earnings, you get that fear creeping back in. jonathan: stock in the premarket down about 4.1%.

an update on stories elsewhere this morning. with your bloomberg brief, here is yahaira jacquez. yahaira: hurricane milton is barreling towards the florida peninsula with wind speeds up to 155 miles per hour. it is excited to make landfall tomorrow, bearing down on a region still struggling to recover from hurricane helene. it isn't clear exactly where in florida milton will make landfall. various models are at odds. the national hurricane center says errors of as much as 100 miles are possible. israel's multi-front conflict with iran-backed militants is entering its second year. the nation weighs its response to iran's ballistic missile attack last week. president biden urged israel not to target iran's oil infrastructure at a concert it might spark a wider war and

push-up energy prices. pepsico shares are lower in the premarket more than 1% after the food and beverage giant reported its third-quarter earnings per the company trims its growth outlook for the year amid slipping volumes of soft rings and snacks. the maker of lay's chips and l ipton teas is struggling to struggle the impact of higher prices, causing consumers to go for store branded offerings. jonathan: thank you. more from yahaira in about 30 minutes time. up next, chinese stocks meet cavity. >> it is difficult to understate the impact china has on the rest of the world. the chinese policymakers are very much willing to step up and deliver what is needed, but they will not deliver it at a measured pace. jonathan: leland miller of the china beige book up next. good morning. ♪

jonathan: check out shares of pepsi in the premarket. the stock is lower than a little more than 1.4%. core eps for the third quarter 2.31, the estimate, 2.30. estimate for holy organic revenue in the single digits. a lot of this will be on cost management in the orders to come. dani: it is what allowed them this quarter to still beat on eps. consumers will remain value conscious. it is a reminder, after strong economic data over the past month, there are still consumers not willing to pay up for ran names. jonathan: the broader markets still ok. equity futures bouncing back by about 0.4% on the s&p 500. under surveillance this morning, chinese stocks meet gravity. >> it is difficult to understate

the impact that china has on the rest of the world. they have learned a lot from the lessons of 2014, 2015 and do not want a repeat of that blowup in the stock market. the chinese policymakers are very much willing to step up and deliver what is needed, but they will deliver it at a measured pace. jonathan: china's stock euphoria cooling as untrue markets reopen with traders reassessing the nation's stimulus efforts. leland miller writing beijing's goal could only be to do whatever it takes to undo policy mistakes that weakened the economy getting back to early covid. welcome back to the show. tell us why you think that is the wrong take. leland: i think a lot of people look to what was happening and said, wow, this is a draghi moment, a whatever it takes moment, because the chinese economy is collapsing and xi jinping will finally come to his

senses, return the economy to higher levels of growth, provide more stimulus, respect investors more -- none of this was ever going to happen. there was a problem, and the problem was there was a loop in terms of confidence. consumer sentiment is falling, invest in -- investor sentiment is falling, everyone is getting gloomy. they wanted to step in with something that was bigger and louder than what they had been doing in previous months and years, so they did that. there was a big reaction in the stock market. by the implications of these stimulus announcements -- again, most of them have not been put in effect. they have just been giving guidance on what may be coming -- a lot of these are big or stocks, at least in the short-term, but they have very different implications for the macroeconomy. they are there to set a floor on growth, not to set a higher ceiling. from the very beginning, investors have been way too giddy about this. annmarie: how does the pboc or xi jinping, the officials at a

beijing, they sickly get out of this doom confidence loop you think they are -- basically get out of this doom confidence loop you think they are currently on? leland: they may not. what they have done for years is deflate the property bubble, but because they see it as a vulnerability to the economy, and thus to the party. you cannot take 25% of your party and just gear it down to mid single digits. you have to cull the herd, take out the weak firms, tighten credit, etc. but when you run into problems, you have to ventilate. the ventilation is provided more to her firm so the cash flow goes up. they have been doing this cycle for years now the problem is it has stopped doing much. each time they ventilate, they will have to do a little more to ensure to the markets that there is policy support. but their goal is not to bounce things back up, it is to manage a long-term slowdown in

property, a long-term slowdown in the economy, and set a floor on where things are going so xi jinping and the leadership can focus on national security priorities, which are the tier one thoughts in their mind right now. annmarie: how much do you think what china has done recently in terms of stimulus measures is to just get ahead of potentially more tariffs, more export controls when it comes to the next administration, whether it is trump or harris? leland: i do not think it is about that. i think they stepped in because they saw what we did in our september data. if economy is not in cataclysmic shape, but it was a weak economy. if you look at september data, we have the lowest interest rates -- the lowest rates we had seen in almost 15 years, in the history of china beige book yet borrowing matched the lowest level we had ever seen. pent-up demand, the lowest level we have ever seen. loan applications, the lowest level we had ever seen. things were really stopped up in the system. i do not think they are looking

forward yet to who is the president of the united states, although there will be issues to contend with next year depending who it is. dani: you are describing a lot of smoke in the economy, but is there fire? often the spiral risk is stated as fact is it fact in china that you need some thing like a bazooka of policy assistance in order to stop it? leland: the economy is not in broad deflation right now. there are some element of exporting deflation, and the risk in the future is exporting deflation, so that is definitely there. the reason so many people got this stimulus package wrong was they thought the economy was in freefall in september. like i said, there are plenty of things to be critical of. it was a weak economy, weaker than it was early in the year, across our data, but it was not collapsing. as weak as china's economy is now, it is not terrible.

they do not have to do whatever it takes in order to bail out the economy from some sort of collapse, they just wanted to step into stabilize it, because what they were doing before was not working very well. dani: it is often said china wants to avoid some of the stimulated measures they see in europe or the u.s., like direct stimulus to consumers. with that attitude in mind, do you think something like a 33% rally in the past month for chinese equities is something policymakers will want to avoid a repeat of? leland: they seem to be doing it quite a lot. then he loses steam, and they are back in apical before not too long -- act in a -- back in a pickle before not too long. if the government steps in and puts an implied put on a short-term asset market, you are going to short-term asset markets. that is just being a smart trader. it is totally different from excerpting big things in the chinese economy. if you look what they promised on the consumption side and what they have delivered so far and announced formally so far, it is very little.

they do not want to be doing as much as markets expect right now. you have to make sure you have one eye towards the stock market, there is a dynamic going on there. you ride it til it's done. in terms of the macroeconomy, they are not trying to do bigger things. this is not some sort of grand structural pivot, not a whatever it takes moment, so you have to have much more modest expectations of where things are going from here. jonathan: appreciate your insight. leland miller of the china beige book very skeptical of their latest efforts coming out from china. we have had a lot of people come out and call it a trade, not an investment. the hang seng overnight getting hammered my down by 9%. dani: just based on what leland says, it's an expectation mismatch, that so many viewed china as an economic disaster waiting to happen and something that needed a huge amount of policy to china purchase this and says we just want to get growth to 5% number just want to put a floor under things, and do

not want a huge takeoff in gdp, a huge takeoff in some thing that looks like the housing bubble. jonathan: china trying to close that gap overnight. the latest states already come equity features up by zero point 4% on the s&p 500. up next on this program, we take you live to tampa, florida, where residents are preparing for hurricane milton. that conversation just around the corner. live from new york city this morning, good morning. ♪

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jonathan: the full week rally hitting pause. a little bit of a down note on the s&p 500. here is your bounce. up by .4% on s&p futures. utilities having a tough time yesterday as yields pushed higher. check out the curve this morning. 10-year yields just about unchanged. 4.02%.

plenty of speculation as to what the. fed ecb first. the buddhist bank chief suggesting he's open to an interest rate cut. the euro south of 110.under surveillance this morning, chide na's stock rally losing steam. promising to further support growth. new york fed president john williams telling the financial times the central bank is well-positioned for a soft landing for the economy. the central bank should keep his focus on bringing inflation back to its 2% target with a balanced approach. hurricane milton barreling toward florida as a catastrophic category four storm with sustained winds of 155 miles per hour. expected make landfall sometime tomorrow. reena roy joins us now from tampa. thank you for joining us and what is a difficult time for the people of florida.

walk us through how unique this hurricane is. reena: absolutely a difficult time. a one-two punch in florida. officials are calling milton the storm of the century. they are urging people to take it seriously as it closes in. it does seem like a lot of people are taking it seriously. traffic was backed up for miles as thousands evacuated the tampa bay area here. milton is a category four storm and expected to weaken to a category three sometime wednesday night or thursday morning. the impacts of the storm are expected to be devastating, especially here in the tampa area. less than two weeks ago tampa avoided a direct hit from helene but it is right in the path of milton. some areas could see up to 18 inches of rain. storm surge could be anywhere from 10 to 15 feet, which is historic and life-threatening. we have seen people sandbagging

and stocking up on supplies to prepare as they still try to recover from helene. fema has 20 million meals and 40 million liters of water ready to be sent out. annmarie: governor ron desantis talked about how this is going to be an emergency 51 counties. what else are officials telling residents that are designated emergencies right now? reena: they are telling them they need to get out if there is a mandatory evacuation zones. if they don't, they can't promise first responders will be able to get to them because of how life lightning -- life-threatening storm surges. tampa bay has never seen storm surge of this caliber. we are talking 10 to 15 feet. during helene, we saw five to seven and that was catastrophic. you can only imagine how damaging this one will be. jonathan: stay safe.

rena roy of abc and tampa as hurricane milton barrels towards the people of florida. it is not a time where politics is top of mind but we have to talk about the election. henrietta treyz will join us later this morning. 17% of critical battleground state of north carolina is currently in a fema designated disaster zone. annmarie: it's incredible when you look at the counties hit the hardest by helene and also the counties that voted for the former president donald trump in 2020. he's a republican counties. she talked about how republican voters outnumbered democrats in the helene aftermath two to one which is what you have a lot of concern about making sure the people can go out and vote. how can they vote when you don't have power, clean water, barely can get your kids back to school? these are the questions had of november 5. jonathan: entire zip codes across three states, florida, georgia and north carolina which will include middle florida by

the end of this week are entirely without access to mail. mail-in ballots are not getting to those homes. a massive blow. that is how difficult things are now in this country. so, sing -- soleya, welcome to the program. how are the states getting what they need from the government? >> there's a lot of confusion because the white house is rolling out measures and promising support to match state and local support and on top of that have more cash and troops available to help in those situations. encouraging people to evacuate with clear messages if you don't, you will die. that urgency is trying to get people out of their homes, even if it doesn't look dire in the moment. donald trump, who is telling people at rallies there's a

paycheck coming to you and conflating a couple of different policies. i think it is going to be a little difficult to get through some of the misinformation that is traveling around. even as these people are trying to figure out how to get their kids to school and take showers. voting and trying to figure who's telling the truth about what federal and state aid is available is not top of mind. annmarie: looking at fema's briefing yesterday they said 9% of their personnel, which is just over 1200 people, were available to respond to the remainder hurricane disasters on the horizon. what is about to happen with milton. if you look at it historically, this is much less, even from 2017 when fema was strapped after harvey, irma and maria. what is fema doing and the fact they have these stressed resources now? what else can they do? where can i go to rely on new personnel to help these individuals in florida?

saleha: this is a stigma that's been plaguing u.s. resources since hurricane katrina brought a lot of this to light two decades ago. something that george w. bush and his reelection bid had to really face up to some of those problems. fema, like you said, they are completely stretched. they have multiple crises coming from multiple different fronts. i don't think they are prepared for these kinds of extreme weather events converging all at the same time and all eyes are on them as people try to figure out what to do next. dani: what seems to be the willingness of congress to approve more funds? speaker johnson said he will not recall them back to capitol hill. does there seem willingness to extend those funds to fema to make sure they don't have a cash crunch at a time when they desperately don't want that? saleha: this is once again partisanship at its worst.

republicans don't want to -- the ideological part of the party does not want to do anything that could possibly help biden and then have a domino effect to help kamala harris. biden is trying to get as much money across the border, lead some of the charge. harris is urging fema. we heard from harris last night kind of confirm ron desantis is not taking her phone calls. traditionally, this is a moment where we do see bipartisanship. where elected leaders, whether you're a governor or mayor or a lawmaker or the president or vice president, elected leaders ignore politics, rise above that and take each other's phone calls because you need to be constructive. we don't know what's going on between biden and ron desantis. right now we are seeing that in florida this has come down to party lines. jonathan: i have to bring this up. he is the governor of a state that's about to suffer an

unprecedented one to blow from hurricane after hurricane. why wouldn't he take a call from the vice president? clearly trying to play politics in the moment. saleha: that's an absolutely good point. there is a poll that came out from the new york times. it shows harris is a full 14 percentage points behind donald trump in florida. you are right. he should be taking calls from the president of the united states and key lawmakers. maybe it is not necessary for him to take calls from the vice president. dani: if i can bring it to voting. these places have more to worry about than voting. in a state like north carolina where there's already there's a culture of in-person voting, strict rules when it comes to voter id and time frames or when you can get your mail-in ballots back in, is awry conversation about relaxing some of those measures? saleha: i think it is too soon to say. a lot of the polling stations

and precincts have seen physical damage. a lot of the covid era -- in 2020, when people were worried about getting to the polls and being exposed to the latest wave of the virus, a lot of voters, a quarter of the voters roughly turned to mail-in ballots and early voting. we saw a lot more of that for democrats. twice as many democrats did early voting in mail-in ballots then republicans. this year we are seeing more republicans spend that's republican -- at the state level trying to encourage the voters to take advantage of these in swing states like north carolina and georgia. like we have been talking about, even if those facilities are available and the logistics are made easy, are people motivated to put their lives and their livelihoods and children on the back burner fill out their ballots? annmarie: i realize in florida there's also a contentious

incident race -- senate race. talk of the hurricane impact that race? saleha: the senate is a close call. the senate will be a really close call. if you talk to investors and market strategist, they are looking at the down ballot implications for policy. taxes -- tax policy is not valid necessarily at the white house. all this happens in congress. whether the senate goes republican or democrat, the house is able to flip or it is able to keep its current constellation of power it will have a huge and location for future policy. it is pretty interesting and kind of surprising that extreme weather events, even with so much contention around the reason behind the events will be something that is going to unravel the current state of the race. jonathan: important moment for

the country. we appreciate your time. let's get an update on stories elsewhere with your bloomberg brief. yahaira: nvidia has partnered with foxconn boost its server capacity as it sees crazy demand for its ai chips. the taiwanese company is building the world's largest assembly plant in mexico, which will be used for servers housing nvidia's most advanced black will chips. -- blackwell chips. it will have a capacity of 20,000 servers in 2025. china is weighing tariff hikes on goods from europe as tensions continue to escalate. the ministry of commerce said they could target gas powered cars and european brandy, which would face a duty of nearly 40%. of the comments come after eve officials began imposing -- eu

officials began imposing tariffs on chinese electric vehicles. some investors are hopeful an alternative to the tariff will be reached. an end of the dock worker strike has saved manufacturers from port disruption surcharges. it will drop upland extra fee for handling goods at u.s. ports after dockworkers and the container shipping industry group agreed on a tentative deal. the previous contact -- contract between the groups has been extended from january 15 of next year, but the union and the industry group will have to come to a long-term agreement before that date to avoid another strike. that is your bloomberg brief. jonathan: thank you. more in about 30 minutes time. of next, here come the upgrades. >> having stronger growth data is more important than pricing at a couple of -- we are positive on the marketeer. jonathan: the latest on goldman sachs. live from new york, you are watching bloomberg tv. ♪ ♪

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or call 1-800-sandals. jonathan: let's talk about pepsi. pepsico's down a little more than one full percentage point. out with earnings of few moments ago. dani and i were talking about this. the ceo, strong cost controls aided profitability. the outlook it's trimmed a little bit into your rent. dani: consumers are still value conscious. its reminder after strong economic data there are still consumers who are strained. you can see at the credit card information released by the fed. people are trying to pay off the debt they already have. there are consumers who are still struggling to keep up with higher prices despite the economy being strong. jonathan: more earnings to the week. we will hear from delta and the banks on friday. check out china.

and update it for joining us. you might be interested in what happened overnight and chinese markets as they reopened onshore for the first time after a weeklong holiday. they are playing catch-up. the csi closing higher by nearly 6%. the hang seng getting hammered, down by almost 10% of the close. dani: i'm interested in the idea it was a mismatch between with the markets expected and what policymakers actually wanted to achieve. the idea it is not economic catastrophe. instead, it is trying to put a floor under growth. they are not getting whatever it takes moments. the market was expecting that. jonathan: that is the latest out of china. equities firm or by one third of 1% on the s&p 500. 10-year yield clings to 4%. following a blowup payrolls report on friday. under surveillance, here come the upgrades. >> having stronger growth data

is much more important than pricing out a couple of cuts. we would still be relatively positive on the equity markets here. sort of in line with inflation on wednesday and the start of earnings season. you hope it looks cleaner. this is a growth story. jonathan: here is the latest. goldman sachs upgrading the s&p 500 target, protecting 6000 by year it. 6300 and 12 months time. --in 12 months time. "it is greater margin expansion. the macro backdrop remains conducive to modest margin expansion with prices charged up input cost growth." ben snider responsible for some of these calls. the pricing power. where does that come from right now? ben: you mentioned pepsi. the way we think about margins is price inflation minus input cost inflation. we have been so focused on price

inflation, it has slowed, but input cost inflation has slowed more. wages adjusted for productivity, that grew up basically 0% last quarter. jonathan: economists have been trying to figure out if layoffs come next. how do you think about that as a strategist? ben: it is great you raised that in context. i view profit margins as a leading indicator for layoffs and its intuitive. if you run a business in your margins are contracting, that will lead you to hire fewer employees or maybe even lay some off. the good news is today margins are expanding. that really confirms the strong labor market data we saw last week. dani: you write by 2026 -- hats off or having any idea for what that looks like -- but you start to have a limited ability to expand margins. what is happening to corporate america over the next years were that can't continue? ben: like the market we are trying to be forward-looking. we can get surprised.

our view is the growth by then will be close to trend. the labor market will have tightened a little bit as opposed to loosening like we have seen in the last couple of years. growth can still be very solid but typically it's harder for companies to expand margins. dani: how uneven is that going to be? you are talking about it on the headline level but we were talking about pepsi needing to cut costs. some volume difficulty. how even will the bloody to expand next year be? saleha: it is improving -- ben: it is improving, not more narrow. most of the viewers no it's been a pretty narrow rest market. technology stocks have been able to grow margins. everyone else has struggled. now with the economy in good shape it looks like more parts of the equity market are able to raise profits as well. annmarie: let's talk about the corporate tax rate. looking up 28% or 15%. the democrats took your note and ran away with it.

they ignored what it actually means for corporations' bottom line. what could we see with a 20% corporate tax rate? -- 28% corporate tax rate? ben: you could have a substantial impact on earnings as we saw under the tc j tax cuts. you mentioned 15% and 28%. those are nothing of the options. tax policy could follow the middle or just remain where it is with anyone percent. -- 21%. there is fiscal expansion, tariff policy, and of course the primary driver of earnings which is gdp growth. ultimately, there could be a change to the earnings outlook postelection. from our perspective the more important driver is the strength of the economy, the margin story we were talking about earlier. we folk comfortable about the path going forward. annmarie: if there is a 28% tax plan for the policy, you say that can cut s&p 500 earnings.

what with that due to your 2025 or looking to the future 2026 price targets? ben: it is a one-time shift to earnings. we are forecasting 11% earnings growth next year. if we were to subtract 5%, we get about 6% earnings growth which coincidentally is where the forecast was last week before we raised estimates. jonathan: the proposal is clean compared to trump's proposal. 50% with a condition, a manufacturing condition in the u.s. how are you considering that? hattie put that there any model? ben: 15% is relatively straightforward. i think the question is uncertainty. that is the key dynamic we have seen historically around elections. there's been discussion about tariffs and tax. if you look at every presidential election year, uncertainty is really the most important thing for stocks. it is this period before the election when uncertainty is highest and leads the higher

implied volatility, a little market weakness. the flipside is after the election the uncertainty moves lower and stocks usually rise higher. we expect the s&p to repeat that pattern. annmarie: what do you make on impacts to a company like deere? if they move production to mexico. how do you envision this coming into play if the former president is in the white house? ben: my read from all of this policy discussion is that it's much more going to be a story of rotation within the equity market then a dynamic that affects the level of the s&p in aggregate. if you look at correlations in the last few months, small caps tend to have performed better as you see republican authorizing. -- odds rising. i think that will change where we think within the market investors should invest, flight in aggregate i don't think it's really going to change much. jonathan: favorite place to be

within the equity market at the moment? ben: the key changes happening now is the actual fed cuts. the market is forward-looking. we have seen the long end of the yield curve decline in advance of this cuts. the actual cuts do seem to be having some impact on economic activity. mortgage applications have risen in the last couple of weeks. we have seen very little housing turnover in the last couple of years. you can imagine as the fed cuts we will see more housing turnover. if your broker, you sell furniture, there's a lot of potential earnings upside ahead. jonathan: appreciate it. let's do it again soon. ben snider from goldman sachs. of a call on the s&p 500. 6000 at year-end. 6300 and the next 12 months. dani: it's the idea of get back to basics. focus on earnings and expand margins. in the meantime it's the uncertainty ben was talking about. how much runway does the equity market when you have two different outcomes, some more

understood than others? annmarie: the corporate tax rates, all these provisions potentially are renegotiated in congress. right now kamala harris is running on a 28% corporate tax rate in the former president is on a 15% corporate tax rate with conditions which we don't understand about being made in america. you have a great point. ben talks about the fact it's a huge spread and potentially we end up with something in between. jonathan: corporations in america able to expand margins. they are not laying people off. we did not see much of that on friday. up next "bloomberg surveillance "bloomberg surveillance in the second hour of," week --up next in the second hour of "bloomberg surveillance," to catch up with mohamed el-erian. clete willems and kristina campmany on the other side. the second hour is up next. futures positive by .4% on the s&p 500. ♪

>> clear thinking the economy will perform quite well. >> almost 50 places points of cuts have been taken off the table. >> some people call it a bumpy landing. >> it is goldilocks with inflation close to 2%. >> i think this economy is slanted. it is time for someone to call it. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and

annmarie hordern. jonathan: programming. 930 eastern time -- 9:30 eastern time. jamie dimon of jp morgan sitting, bloomberg's lisa abramowicz -- sitting down with lisa. bouncing back across the board. nasdaq up by .4%. a headwind building in the yields market. that move sticks on the 10-year. dani: equities had the biggest a of selling in one month with higher yields. it's the idea that the bond market had to recalibrate. the fundamentals of this economy were stronger. maybe the equity market was already pricing that in. it needs to worry about the old hat of inflation. what is that mean for thursday's cpi report? will have to worry this can upset risk assets? it's a familiar and

uncomfortable position to be back in. jonathan: brent crude briefly reaching $80 a barrel. quite a five-day run, the biggest five-day rally going back to the spring of 2022. annmarie: the reason it's red is because people were expecting this draghi moment of a china beige book. this morning they are waking up to the demand that maybe is not coming back fully in china. the story is a geopolitical one. this week we will see the israeli defense minister. what is tehran given terms of that retaliation? does that impact the supply in the middle east? jonathan: the chinese story getting sold pretty hard. the hang seng down by more than 9% at the closing hong kong. playing catch-up with the mainland in china. the csi positive by about 6%.

coming up, we will catch up with mohamed el-erian on why the economy keeps surprising markets. clete willems on why you should take campaign promises with a grain of salt. we begin with stocks little changed following the biggest one-day drop in about a month ahead of inflation data this week. mohamed el-erian expecting more data surprises. "last friday's data surprise will not be the last one unless, must resist the 10 tatian to look through the shock. what is needed in the economy is to be more open-minded about why such surprises keep occurring and how best to frame the accompanying policy regimes." mohamed joins us again. welcome back to the program. why was at the volatility between reports that stood out for you and not just the strength in isolation? mohamed: thanks for having me. the volatility, the ping-pong narrative has been with us for a while. and there is a clash between the

mindset of analysts that tend to think the economy is in a structural equilibrium and the reality that we are going through a major transition, both economic and policy wise. if you're thinking one-way about the economy but it's operating in another paradigm, you will get these surprises. jonathan: the obvious question would be when you write how best to frame the accompanying policy regimes, what they should do with this information? mohamed: we are going through structural changes. luckily for us these changes are favorable, unlike what you see in europe and what you have seen in china. the second is it is not just about monetary policy. yes, the fed was the only game in town but that is no longer the case. fiscal policy is having an impact. structural reforms are having an impact. what is it mean for the fed?

continue in what i sense -- i hope i'm right -- i sense evolution and how they are approaching policy. you see this a little bit in john williams's interview with the financial times. the first is to be less excessively data dependent and have a more balanced backward and forward looking approach. the second one is to get away from this notion you can target a specific outcome and have much more of an insurance mindset. if these evolutions are correct and continue, it is good for the fed and good for the economy. dani: adriana kugler spoke yesterday and said she is monitoring both hurricane helene and geopolitical events, but then goes on to say the fear is they could have an impact on american employment, that risk escalates and uncertainty escalates and the foe would have to move towards neutral more quickly. when you look at the shocks is

it still a fed put? is it a fed that will not cut and maybe not as concerned about the inflationary risks, for example, targeting oil capability's by iran? mohamed: the hardest thing is when the external shock from oil prices or the supply disruption in the ports or coming from this awful hurricane down south, the hard thing is when it is s tagflationary. that is when the fed gets into a difficult situation. let's hope 90's potential external shocks -- none of these potential external shocks -- it's hard for the fed to decide what to do. i will have -- i have believed for a long time the economy is fun to mentally sound. they can absorb shocks but cannot absorb a policy mistake. annmarie: when it comes to potential policies and these

shocks that dani is talking about the big are known as the composition of washington next year. how should the fed be thinking about 2025 when we might have very different policies coming out of the white house and congress? mohamed: they have no choice but to do what they said they would do. weight. we will see what happens in the presidential election. we will see what happens to congress. we will see what happens to actual as opposed to stated policy approaches. then we will include this in our assessment. it is very difficult to move. if you are forced to move, you would be more cautious on the inflation side for both candidates. annmarie: is that what we got this potentially clear guidance from president williams and the financial times saying follow the dot plot and don't read into the 50 basis point cut that was the exception, not the rule? on november 7, they may meet

without knowing the results of the election. mohamed: i think they want to pivot away from the 50. if they knew then what what they know now they would not have done 50. they would have done 25 as many people proposed. they are trying to pivot away from the 50 and get the conversation forward looking. i think you see that in commentary over and over again coming out of the fed. dani: every fed speaker that talk yesterday backed 50. no one tried to walk away from it. they probably wouldn't make a mistake. what does that tell the about chair powell's hold on the committee and to direct monetary policy? mohamed: they had no choice but to defend the 50. it was only one dissenting vote. of course they had to defend the 50 saying what we knew then lead us to 50. jon called a draghi moment. the first time we have had a

draghi moment by chair powell. it was an important moment that he got done and was willing to tolerate one important dissent. i don't think it is going to play that card over and over again. jonathan: mohamed, i love your thoughts. deeper on what we got from colby smith and john williams. i will share the quote with you. "if inflation fell faster than inspected it would call for policy to normalize more quickly and call for interest rates to come down more slowly." there's a bias to reduce interest rates. there's a bias to reduce rates based on what happened with inflation, not with payrolls. i would love your thoughts on that. last week before we spoke and we have the data we had some guest point out maybe the inflation data did not matter anymore. do you think it is the inflation data that says the pace for interest rate reductions in the next few quarters or maybe not so much payrolls? mohamed: i think it is both. it will be inflation data and the employment numbers.

i think the bias you are sensing comes from where the neutral rate is, the midpoint. the range is really large. if you look at where the midpoint is, at least to this narrative that we are very restrictive. that is where the bias comes from. my neutral rate is higher than the average neutral rate. that comes because people compare were neutral is and say wow, we are still very far away from that. jonathan: we have made the argument things have changed and people on the fomc are yet to be convinced. what has changed in the last five years and led to a higher neutral rate in your mind? why are we in that regime for a long time to come? mohamed: you have heard from others like larry summers. there's also a hint of it in the williams interview that you mentioned earlier. it has to happen, what is

happening in investment and savings. the gap is getting bigger between investment and savings. let's not ignored happening on the fiscal side. the third thing is the fragmenting global system. the global system is structurally becoming more sensitive and more vulnerable to adverse shocks. you put these three things together and it suggests the neutral rate has migrated up, and not just by a bit but by a notable amount. dani: the language does continue to be gradual reductions. you think there is a sense on the fed they realize this might be the case and gradualism is necessary to end the right point? mohamed: gradualism means different things to different people. gradualism to most of us means take small steps, you're still in the dark. the image chair powell shared a few years ago, he is still

feeling around in the dark and not sure everything is. take it easy. that is one bit of gradualism and the bit that -- that is what i think 25 basis points starting in july was the right thing. let's not do anything big or bold. what it ends of doing his changes expectations. there's a much bigger point which is markets are all over the place. in the last 15 days the probability of a 50 basis point cut in november has gone from over 60% to zero. think about that. november is next month. that is how much uncertainty there has been in the market. this market lacks anchors when it comes to how it sees the interest rates. the whole profile of rate cuts has moved up, meaning fewer cuts by 50 basis points. these are massive moves based on data points. until we restore some sort of anchor you will have this

volatility that i worry at some point you may expose a structural weakness in the system. annmarie: how difficult is it to understand what the fed views as neutral? you mentioned williams and he hinted that in the financial times article. he said we are way above it. what is that mean? mohamed: they have to be careful with their words. that is it. i think there is going to be a lot written on what went wrong with fed communications starting in 2021. why is it that now fed communication amplifies volatility, which is not what it is supposed to do. the whole point of forward policy guidance is to lower the overall volatility of the path. what we are living in this strange regime where fed communication enhances volatility. that is something i suspect a lot of work will be done on as

to how not to repeat this mistake going forward. jonathan: we are lucky to speak one of the authors of the books yet to be written. appreciate it. mohamed el-erian on the latest situation from the federal reserve. for those following the hurricane, hurricane milton, 7:45 eastern time we will hear from the floor to governor ron desantis holding a briefing on the hurricane. lookout for headlines on that and about 30 minutes time. an update on stories with your bloomberg brief. yahaira: president joe biden is inspected to announce a plan to replace all the lead contaminated water pipes in the country over the next 10 years. the plan will include an additional 2.6 alien dollars from the environment till protection agency to improve drinking water with 49% of the funds going to disadvantaged communities. he will announce the today in wisconsin. warren buffett's berkshire has fell more than -- sold within

$10 billion of bank of america stock after berkshire unloaded $383 million in the course of three trading days. buffet starting selling shares in mid july, putting pressure on the stock. as of monday, berkshire's 10.1% stake is worth about $31.4 billion. i u.s. judge ruled alphabet must lift restrictions that prevent developers from setting up rival marketplaces and billing systems that compete with its google play store. it upends the search giant's dominant in the android app market and after the firm lost an antitrust case to epic games which accused google of abusing its power in the market. that is your bloomberg brief. jonathan: thank you. more in about 30 minutes. up next, bracing for hurricane milton. >> we have made a pre-landfall declaration request from fema for support. the federal government has approved a portion of our

request for pre-landfall items. jonathan: that conversation is up next. live from new york, good morning. ♪ ♪ at ameriprise financial our advice is personalized based on your goals, whatever they may be. all that planning has paid off. looks like you can make this work. we can make this work. and the feeling of confidence that comes from our advice... i can make this work. that seems to be universal. i can make this work. i can make this work. no wonder more than 9 out of 10 clients are likely to recommend us. because advice worth listening to is advice worth talking about. ameriprise financial. is it me... or is work not working?

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jonathan: live from new york city, welcome to the program. under surveillance, bracing for hurricane milton. >> all folks on the west coast of the photo peninsula should be prepared for potential major impacts. we have made a pre-landfall declaration request from fema for support. the federal government has approved a portion of our request for prevent full items and we spent the remaining parts of the request subsequent to

landfall for debris and individual assistance when the storm hits will also be improved -- approved. jonathan: hurricane milton approaching as a catastrophic category four storm bearing down on a region still struggling to recover from helene. entire zip codes across three states, authority, georgia and north carolina, which will likely expand to middle florida by the end of the week are entirely without access to mail. that means mail-in ballots, let alone returning fully filled out ballots from those homes just got dealt a massive blow. henrietta is with us around the table. good morning. politics for these individuals now not top of mind. our thoughts for the people of florida are top of mind. just to consider the potential fallout from this election, what could it mean? henrietta: the first thing i think of is not political warfare and who's getting money from fema or not getting money from fema, it is the logistics of how you actually go and vote.

having got the hurricanes myself, you evacuate in are gone for weeks. your kids may not have a school that they can go to during the day for you to get away to vote, let alone go to the school and vote which is where usually people are doing it. i will eat in georgia there are closed. you have to think entire swaths of florida from milton and let alone helene will be cut off as well. annmarie: when it comes to north carolina, republican voters outnumber democrats in the hard-hit areas to the one. -- two to one. does the trump campaign put people on the ground to shuttle people to the new polling place that will be because maybe the schools are still closed? henrietta: in a close election the ground game is everything. if you think of harris and the 380 million dollars the campaign has been able to raise, they have field offices, 12 in florida. those are boots on the ground able to get people to new

polling places, tell them where they need to go and get them to the polls on that day. that kind of ground game is what we saw turn georgia blue in 2020, not of the presidential level but with two senate seats, that kind of ground operation. annmarie: you think harris is running a better ground game in the states than donald trump? henrietta: i think republican operatives are telling you that's what's happening. annmarie: we have seen the former president go back to wisconsin a number of times in two weeks. is he potentially looking at chipping away the blue wall because he's nervous about the hurricane impact on places like north carolina? henrietta: florida and the new york times polling that came out it is plus 13 and the new survey for republicans right now. if your going to take out the middle part of florida plus the panhandle, you are leaving miami-dade county and operative all, the blue -- upper duvall, the blue pockets of florida. going to pennsylvania, sending

surrogates there, that is where you need to make sure you are running of the. -- up the tab. annmarie: which is going through the worst in terms of voter turnout for republicans? henrietta: by default to georgia because it has been done before. they just won georgia in 2020. the referendums on abortion are critically felt. georgia has a restrictive ban they just reinstalled yesterday. florida has a referendum on the ballot. this is a very critical top issue for democrats. they will turn out and vote. dani: what is the ability for some of the states to relax voting restrictions? to allow people to have the extra time to early vote and extend mail-in ballot limits and deadlines? henrietta: if you want to give voters more time to go to the polls, especially if they have

been entirely displaced -- ron desantis had a choice to extend the registration deadline. one of the things we heard from the emergency management teams in the aftermath of helene was they would extend early voting all the way up until tuesday, november 5 as opposed to cutting it off on sunday. what we have seen is no change out of florida. registration ended yesterday. if you were sandbagging, you cannot register to get on the ballot this year to vote. those contingencies are easy to do. the teams are prepared for this. it is not like this is a hurricane season. they know this is when the hurricanes hit. they have options. dani: on a national level a lot of coverage has been fear for the people in these places that they will not get help from the federal government. how does that impact the election as a whole? perhaps government agencies don't have the capabilities to do as much as somebody people

want them to. henrietta: the first thing is he physically cannot get their immediate the after a storm. in the immediate aftermath we are seeing president biden call for congress to return to d.c. and pass an emergency appropriations bill. i don't think they are going to do that. there is talk about a discharge petition to move forward. that is a nonstarter in d.c. i wouldn't expect anything before the election but after the election there will be opportunity for emergency declarations. they are fully funded with what they need and that is the message the white house is trying to send but getting it to individuals will be difficult and the disinformation campaign only complicates that further. jonathan: what is your base case now? henrietta: 60% odds that harris wins based on a declining advantage for donald trump in the electoral college. we have a full accounting of his supporters. i don't have the narrative anymore which i used two of two to three percentage points in the polls that you should be tacking on for trump because of

the silent trump voter. he's consistently polling in the 46%, his threshold in -- for kamala harris to lead in the latest new york times whole this morning suggest the national average is high enough for her to win the electoral college. annmarie: yesterday she sat for 60 minutes and bill whitaker talked about a number of people don't know her. is the campaign too late in doing this media blitz? it was probably to very friendly pundits. henrietta: carrie from the pundits and the strategy is to go after these niche podcasts and outlets that i think it's an interesting strategy but probably belies the close election. you need to exacerbate the gender gap. donald trump is going after young male voters, particularly latino voters. there has been movement in the black voter base that's gone well back to kamala harris in the 85% threshold.

you are seeing the gender divide be what is splitting everything. harris doing call her daddy was an indicator that, going on the view this morning and for trump pivoting to focusing on the young male audience on the internet with elon musk, etc. jonathan: thank you for being here. henrietta treyz. up next, clete willems on potential trump 2.0 tariff and trade policy. equity futures up by .3%. from new york, good morning. ♪ ♪

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jonathan: two hours away from the opening. futures on the s&p 500 up .4% and on the nasdaq is similar move. russell 2000 up .1. goldman sachs is a year indeed price target of 6000. goldman saying margins expanding is a good thing and they are hopeful this can continue. we are not seeing layoffs in the jobs report. annmarie: talking about how correlated the two are it might be the thing that needs to support for equity markets as we

start to get earnings in. pepsico cutting costs. we will get delta on thursday. that'll be interesting considering airlines reporting weakness. in this period of uncertainty with the election, can earnings carry this equity market through to new highs? jonathan: the credit piece after the bank season of a few weeks ago. we heard jp morgan flagging interest rates. what what that would mean for profit and net interest income. allied financial warning in the auto loan book. is the credit situation worsening and are we going to see any of that in the bank earnings over the next week? let's talk about the bond market. four handles across the curve yesterday. two-year 3.97. 10-year 4.0 25%. foreigners piling it u.s. assets

again. member the big conversation that rates were coming down. money coming to america would go back out? dani: it is part of the reason you also saw a curve flattening. long and yields look rich. the fear is if inflation yields are back on the table it does not stop at 4% and goes higher and the reinvestment risk turns into a risk you get hurt on your bond market position. it is all things to play for as we wait for cpi but the conversation has changed after friday. jonathan: euro-dollar breaking 1.10. 1.0 980. considering what the federal reserve may do on november 7 we have to go back to the fact there is an ecb meeting this month and the ecb is opened interest rate reduction and away they were not a month or so ago. euro-dollar 1.0 980. data out of europe not great. florida bracing for hurricane milton. the storm expected to make landfall wednesday evening.

governor ron desantis declaring emergency and 51 counties. officials encouraging anyone in the tampa bay area to evacuate. annmarie: i spoke to the desantis office and they were saying the governor is in the emergency room 24/7. they were viewing a hurricane like this to be the black swan event and it might be upon them. henrietta treyz went over the fact that fema has the money, especially in this moment in the clinical cycle where everyone is trying to throw darts at fema. fema spoke about the fact that when it when it comes to personnel they only have 9% left, that is about 1200 people. they will have to go to contractors or other parts of the government to make sure they can get personnel on the ground if they are looking down at this hurricane which is going to be absently devastating for florida. dani: is this a fema ready for the new normal of extreme weather?

not just hurricanes. earlier this year they had to contend with wildfires. they are already starting to feel the stress even before you get to helene. it is things like the small business administration. biden said on friday in a letter to congress that they will run out of funding in a few weeks. it feels like these government agencies are not set up in a way to continue to do with these natural disasters. jonathan: this was the ultimate fear, to get a one two punch. the second punch did not matter. things were so underwater that any storm would have been devastating. for that second punch to have the kind of power we are talking about from milton is just brutal. i don't know what other way to put it for the people in florida. annmarie: resources are so thinly stretched when it comes to the government response which is why president biden was saying to congress we might have to come back and speaker johnson

said i'm not calling anyone back in the election year. it looks like they will have the funding to get on the ground aid. i worry about the idea of personnel. once powerlines go down in broadband goes down, how do you call for help? how do you go out and vote, november 5. jonathan: following the latest throughout florida. there is a briefing from ron desantis in about 10 minutes. we will bring you the headlines. israel's defense minister is set to meet with u.s. defense secretary in washington. president biden has urged israel not to attack iran's nuclear facilities or energy infrastructure. we've been bracing for last week or so. annmarie: i think you can read into the situation right now, given we have the israeli defense minister coming to washington that they will rule -- they will wait on a response until he meet with the white house.

i am hearing we can expect measures out of the white house when it comes to punishment towards iran. this would likely mean sanctions. they will not do anything until they understand what israel does because the idea they would do this in conjunction with israel's response. a lot of things feel like they are on pause until the critical conversations happen. dani: how forthcoming will israel be with their plans? we are coming from a period when the white house was left in the dark by things happening in lebanon. the white house in a report by axios says they no longer trust the israelis to tell them what is going on. what is the ability of the white house to say do not attack iran's energy structure. the seems somewhat frayed. jonathan: crude breaching $80 for the first time since august yesterday. that is latest in the middle east. the latest out of the tech world. nvidia production partner hon

hai building the largest assembly plant for service in mexico, home to nvidia's most advanced grade chips. the demand is off the charts. dani: it is off the charts and if you miss you are punished. i was not only captivated by the story but also samsung. they issued an apology for better results because they do not have the capabilities to keep up with ai demand. they said they confessed to delays. while there is a big promise of ai, if you miss it hurts these companies and leads to someone literally issuing an apology. jonathan: this from google. "working with utilities in the u.s. and other countries to assess nuclear power as a possible energy source for its data centers." we saw this from microsoft recently as well. that is a much demand is

building in the system. annmarie: insatiable demand for the chips and for that you need a ton of power. the text deals are seemingly able to turn on power like nuclear power that you have seen progressives and even this administration try to do for the last three and a half years. jonathan: private solutions always. let's turn to the election. campaign pledges from donald trump and kamala harris on tariffs and government spending drawing a range of reactions. the deputy director of the national economic council under president trump saying this about potential trump 2.0 terrapin trade policy. "expect a higher tariff climate. you will see much more targeted action on specific countries and issues and expect a much greater potential for dealmaking. " clete joins us now. you are part of the last administration.

the argument presented made a lot of sense. there were tariffs put on america that we were not putting on others and we should ultimately say to them if you do not drop them we'll put them on you. that is what was happening. i wonder how the strategy has shifted? are we looking at a new approach from an incoming president with trump 2.0? clete: i appreciate that introduction because you nailed it. the reality is the united states has had much lower tariffs in place for a long time than the rest of the world and especially our largest competitors. that made sense in the wake of world war ii, we were trying to help europe rebuild and wanted to show leadership. over time we have not updated that system. right now our average tariff rate is 3.5%. china is around 7.5% and if you look at india they are up over 18%. what president trump was saying in 2017 and he is saying again

is we need better reciprocity. in terms of the strategy, does it differ from last time? i expect a lot of the same. we will get the return of the tariff man and there is going to be efforts to use tariffs to create greater reciprocity, to get deals, to promote investment in the united states. i also think you will have a lot of efforts to open up markets abroad, which is something we've not seen from the biden administration. you will see a lot of similar approach. the world has changed over the last couple of years and i think in some sense it will be more muscular than last time. annmarie: you think a 10% a 10% tariff ring around the united states and a 60% for chinese imports is reciprocity? clete: the idea on something like 10% or 60% is to make sure we can equalize international trade. we are hearing things he is

saying in the campaign and what a lot of the advisors will say and what i believe to be true is this is a work in progress. we will see how that is implemented. 10% may end up manifesting itself as 10% around the globe to start a negotiation. there may be instances where that goes into place. if we put 10% on india at we will still be lower than them. when it comes to china, i expect the trump administration should look at enforcing the phase one deal, put in place tariffs to make sure china is following through, and then maybe you have a potential for a deal over a longer time. annmarie: i am hearing that this is potentially opening salvo when it comes to trade if the president is back in the white house. how much can he do unilaterally versus how much does he need congressional support? clete: the courts have given the president a lot of leeway to

target individual countries, something we did before on china. the courts have also given him a lot of leeway to target individual products, something we did before using section 232 on steel and aluminum. where there is ambiguity and where this is untested is when you go to this across-the-board proposal. there is some precedent from 1971, where president nixon put in place a surtax, but that was temporary and did not apply to every product coming into the united states. we know the president could do something more on across-the-board basis. it is going to come down to does this apply to every product, it exempt fda partners, intermediate goods? those are the kind of things the court might look at and try to determine if the president can do this. i think a big part of the trump policy that has not been discussed is working with congress. trade has become a much more bipartisan issue and i think

there will be attempts to work with congress to give the president authority he does not have today. dani: there was a report by the committee for responsible budget earlier this week that says 32035 it expects the federal debt under president trump to swell by $7.5 trillion because of things like lower taxes. for harris they said $3.5 trillion over the same period. how much you pay attention to predictions? clete: i will take that with a grain of salt. this is looking at campaign pledges. a lot of these will require congress. i don't think either president can unilaterally impose the taxes or spending they want. i take a little bit of an exception with this. i think it makes some assumptions inconsistent with president trump track record. to give you one clear example, when we were enacting tax cuts in 2017 those were fully paid for.

this report assumes they would not be. the report also overlooks that in the past president trump was able to work with congress to rein in domestic discretionary spending and i expect that to happen. from a bigger picture, reports like this constantly underestimate the growth impact of these policies and the fact that when you enact competitive tax policy you cut regulations and have a better energy policy. things like that grow revenue overall. i'm not saying tax cuts pay for themselves but i am saying there is a feedback that is not captured in we saw that the last time the president cut taxes. dani: growth helps pay for some of it. where you see the rest of the revenue increase coming from? clete: i think both parties need to do a better job on fiscal discipline. i will not argue with you on that. that is not the kind of thing a lot of people are spending time on in the campaign. i think that will be part of the

equation. jonathan: inside mentioned is mexico -- one thing is mexico. what do you think will happen with mexico? what will be the approach? clete: there will be tension with mexico regardless of who wins the election. there was a novel review provision within the trade agreement where we have to decide in 2026 if we want this to move forward. that will create a negotiation with mexico and there are lots of concerns of what is going on starting with the judicial overhaul, which a lot of people think has undermined their judicial independence. they are also seen as the back door for a lot of chinese products that can come into the united states through mexico, and also issues on immigration. that will come together. i expect it will be a little bit combustible. i will tell you, i hear the folks in the harris orbit and

current biden people raising the same issues as trump. i think this will be contentious regardless of who wins. jonathan: appreciated catching up. clete willems on the latest situation. the situation to anticipate with countries like mexico. i think mexico is the one to watch. annmarie: it is interesting because he was talking about there is a provision in the usmca. the way trump is talking about mexico, talking about john deere with a 200% tariff, it seems like he is almost willing to rip up that trade negotiation he got to the table. clete is absolutely correct when it comes to ev's and mexico made by china. kamala harris and donald trump do not want those vehicles to enter the united states. jonathan: one to keep an eye on. let's get you a update on stories elsewhere. yahaira: japan has recorded the highest number of bankruptcies that a decade as companies were

increasingly hit by rising costs. nearly 5000 firms went bankrupt in the six months through september of this year, that is up nearly 19% from a year ago. construction, manufacturing, and retail were among the sectors that have the highest number of bankruptcies due to pleasure -- due to pressure from inflation. iron ore and top metals are following after china's top economic planner failed to announce new stimulus measures. investors were bracing but did not get one. iron ore futures are up from late september on optimism china's earlier moves to lift the economy could provide a boost for the struggling steel industry. the ai boom has big tech eyeing nuclear. google is in talk with utilities in the u.s. and abroad to assess nuclear power as a possible energy source. google is not alone. we have seen other tech titans

like microsoft and amazon betting on nuclear energy as a source of power to meet the surging electricity demand created by their data centers. jonathan: up next, bond yields back through 4%. >> we were advising clients that if you ever get an opportunity to buy the 10 year and that 4% to 4.5% his own again, do not miss it. take advantage. right now we are right at the bottom of that zone. jonathan: that conversation is up next.

jonathan: equities on the s&p 500 firmer .4%. bond yields back through 4%. >> when the tenure was pushing down a 3.60% and there were tons of rate cuts priced in it seemed

overdone. we were advising clients that if you get an opportunity to buy the 10 year and the 4% to 4.5% his own again, do not miss it. take advantage of it. right now we are right at the bottom of that zone. investors are probably going to take another bite of the apple. jonathan: treasury yields hitting 4% for the first time since august. invesco writing for percent yields lagardere interest but we expect to continue drift higher and rates towards four point 25% and possibly 4.50% as the market re-prices a higher terminal rate." christina joins us. you are not a buyer? kristina: the clearest opportunity in the market is the steeper curve.

there is a lot more clarity in the front end. i think you have to think about a soft landing means that terminal rates should be higher and we have to adjust for that. jonathan: a major wrinkle has been introduced. hurricane helene, hurricane milton. how are you thinking about the price pressure we could see in the months ahead? what could it mean for growth and jobs reports? kristina: we came into september with a market focused on the labor market and last week's stellar payroll report brings back into focused do we have to be concerned about cpi. i think there will be focus this week for sure. the hurricanes bring in such an element of noise because we missed the negative impact from the foreclosure. you have a stop of economic activity in the regions that are hit and then you have a pause and a rebuild effort. there is a stop and go.

there will definitely be noise to payrolls in the next couple of months as a result. dani: another shock we are bracing is oil and geopolitics. how tied are yields above 4% and brent crude at $80 a barrel are? kristina: they are connected. the big lists -- the big risks are this. middle east attention and oil impacts and the follow on inflationary risks. and of course the storm impacts. primarily the human impact and what is the follow economic impulse? those are things we are certainly keeping an eye on. they have this concern and they are reacting to all of this data. the market on the back of friday wants to say 50's are off the table. i think powell's language has been guarded. we want to keep all of the options in our pocket and we will respond when we are ready

and semi things can change between now and november 7. annmarie: what you make of the idea of no landing? the plane continues bigger but hotter. kristina: you have seen inflation coming down. you are seeing a return towards trend growth. i think this dynamic means we also have to have a higher terminal rate. if we have a midcycle adjustment where the fed needs to ease 150 basis points and take a pause and reassess and say what we need to do, the 2's 10's curve should not be at zero. jonathan: what are you buying? kristina: we think we have a backdrop for a broadly weaker dollar but there will be some challenges other central banks pickup. there will be diversions like the bank of japan or the bank of brazil that are on the contrary. within rates there is front end

paper offers value. corporate have been tight but continue to perform because you have a backdrop of solid growth. mortgage paper looks interesting as well. jonathan: appreciate it. kristina: thank you so much for having it. jonathan: kristina campmany of invesco. catching up we will catch up on what is happening in this oil market. tom porcelli of pgim joining us on the others and mark cabana of bank of america. a stellar hour. equity futures positive .4%. in the bond market still sticking with a 4% handle on the 10 year yield. breaking 4% yesterday but back below that level. we are down three basis points. crude backing off. a break of 80 yesterday for the first time since august.

back to 79.1 a four dollars. this is bloomberg -- -- $79. this is bloomberg. ♪

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>> the bullishness in the top of the market is starting to filter down. >> stocks and bonds are trading

uncorrelated like the pre-covid period. >> investors will take another bite of the apple. >> the health of the stock market will depend on earnings. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: your morning in the united states of america looks like this. the highlight at nine: 30 eastern on bloomberg tv and bloomberg radio -- jamie dimon of jp morgan sitting down with lisa abramowicz for 30 minutes. must watch tv. 9:30 eastern time. here is your week ahead. cbi on thursday. fed minutes tomorrow. on friday we can stop talking about the data at the federal reserve and talk about earnings. jp morgan and wells fargo just around the corner. equity futures bouncing back on the s&p, up .4%.

on the nasdaq up .5%, bouncing back from yesterday's losses. dani: one of the things about friday is it means the market is concentrating more than just on a recession risk, it is concentrating on inflation risk, concentrating on oil and geopolitics and an election. it is a time when the runway for the market is much more unlimited because of uncertainties. removing jobs will catalyze this market and are praying for another 50 basis point cut. having that off the table means there are more worries to contend with. jonathan: a major worry that could be with us for weeks and months. hurricane milton barreling down on florida, state already trying to recover from hurricane helene. things could be a lot worse. we need to work out what it means for growth and price pressure and jobs report, what it means for how the federal reserve will set policy. very difficult to do all of those things. annmarie: these will be

different moving inputs on how the hurricane will impact not just florida but these five states in the southeast of the u.s. very challenging when you look at the labor market and also we have to talk about what it means and how this good shape november 5 and what it means for some of these counties that normally would vote republican. jonathan: henrietta treyz was with us earlier this morning. go through some of the stats she laid out -- getting to vote in places like florida. annmarie: and places like you are in a hurricane and decide you have to evacuate. you might leave florida entirely and you might not be going back until after the election. what does that mean for mail-in ballots? some of these places your local school will not be open november 5. henrietta treyz was saying kamala harris is running a good ground game because they have the money to do so. jonathan: 17% of north carolina is currently in a fema designated disaster zone. more on that over the next 24

hours. the next 60 minutes we will catch up with ross mayfield as china stimulus fails to impress. and mark cabana of bank of america as they drop their call for another 50 basis point rate cut. stocks little changed following the biggest one-day loss on the s&p 500. inflation data going on this week. ross mayfield of baird saying "it is hard to describe the backdrop is anything but bullish. political and geopolitical tensions may cause volatility to remain elevated. china is a wildcard but a global growth tailwind." the biggest one-day loss on the s&p in about a month. we are bouncing back a little bit on equity futures. a big conversation is about how we will navigate the impact of the damage done by hurricane milton in the next 24 to 40 hours. what will your read be on that and things like growth and

inflation and policy? ross: one of the things that will be challenging is the job data the fed relies on. it is increasingly revised and there are questions about collection and the quality of the data and this introduces a major wildcard into things like claims data. it will provide a challenge for the fed at a time we were at a critical juncture. the direction of policy is laid out but the speed and the magnitude is not. these are critical states for economic growth. the south has been a huge driver in recent years. it presents a challenge. not just something we have to work through for milton but probably for years to come. it has spill over in insurance markets and property markets and things that need to buy -- that need to be digested not just for this year but for coming decades. jonathan: john williams was speaking to colby smith and the

financial times and said if inflation falls faster than expected that would call for policy to normalize more quickly. he went on to stay if inflation stalled that would call for interest rates to come down more slowly. what you make of that bias to reduce interest rates? ross: you have a rate that is well above what the fed uses. you have inflation that comes down to 2% or 3% by most measures. we got the nice report last week but that is a noisy data set. the general trend in the labor market is cooler. it makes sense to try to get back to neutral. i would do that quickly. i do not think we will get 50 in november but i do not see why you would not move quickly towards neutral and get flexibility for how 2025 and 2026 play out. dani: you have the certainty that the fed has a cutting bias but there are swaths of uncertainty beyond that. there is the hurricane, there is geopolitics.

as we navigate the volatility, how do you distinguish between dips you want to buy and dips you do not? ross: you have to look at the biggest broadest macro backdrop to get a set on whether it is viable. rates coming down for the right reason. you have the earnings backdrop which is still solid. we will get more data on earnings over the next couple of months. you have an economy growing pretty solidly. you have a consumer still spending based on the labor market that while it is cool it is still historically strong. you have interest rates coming down alongside inflation. it is a solid macro backdrop so when things like geopolitical volatility or domestic angst pop up, those are things they do not impact how we view the next two to four years so we would be buyers of weakness. the trend of the market is good from a technical perspective. you have a breadth narrative, not just big tech anymore but a

lot of other sectors. the overall backdrop look strong. any weakness that is political related we would be buyers of. dani: how do you understand how that will evolve towards the end of the year? do you see leadership shifting away from tech into something else? ross: it is a rates trade. you have interest rates coming down and a lot of confidence the fed will continue to deliver rate cuts, whether that is misplaced or not. you have things like cyclicals working. you have yield proxies. utilities have been a strong performer and that is a power play as well. the market is picking up the slack where big tech is taking a breather even though we are still believers in the secular growth themes of ai in the long term. other markets worldwide are working. the china impulse has been strong over last couple of weeks. that has spillover effects into

other countries that rely on china growth to stimulate local economies. the bread story is impressive. it is something we've been hoping to see for the last 18 months and now that is here we want to lean in. dani: china was a market today disappointed by the and drc. you had a reiteration of current stimulus and nothing giving to the market, nothing that looked like another bazooka. do share that disappointment? ross: a little bit but at a certain point if you will be a buyer of chinese equities there has to be more to it than stimulus. there has to be organic economic growth and a remedy to some of the debt and property issues they have been dealing with. i don't know that that is there near-term solution that can be leveled from a policy level. the move in the equity market signals investors believe this is real, there could be a real economic growth reversal here.

i am inclined to believe the market. it is under owned. people been talking about is china on investable? there is a lot of money out of chinese stocks and into other peripheral nations. japanese stocks have been a big beneficiary. it is under owned, under positioned. i think a lot of the policy levers that have been pulled will have an impact on growth over the next couple of years. we have to believe in the organic growth story if you want to be a long-termer folder in the names. jonathan: there is a long list of reasons not to buy china. a list of reasons to wait and wait for the issues to resolve themselves. what is your message to those individuals paralyzed by the risk on the horizon? the election, the hurricane, all of these issues? what is your advice? ross: our general message is the

world is an uncertain place and yet here we are right around all-time highs. particular with domestic political volatility, waiting until after the election, we can recall 2016 and 2020 big rallies after the election. all of the angst going in and big rallies after. 2016 election day marked a low, the market never reversed back there, the same with 2020. we would be leaning in and buying with all-time highs. if the bull market were to end today it would be historically short and historically weak in terms of total returns. we think there plenty of legs. things look more midcycle. there is plenty of drivers for the bull market. we would be leaning into any kind of volatility. volatility is the price we pay for access to the gains. jonathan: ross mayfield of baird on the latest. this phrase, "after the

election." when does the election end? when does it finish? annmarie: we don't know. when you see places like pennsylvania and georgia having to hand count ballots it will take a lot longer than that night unless there is a massive blowout. jonathan: it could be contested as well. annmarie: and how does the market trade on a contested election? have investors decided to think about that? investors say the market can only focus on the thing ahead of them. has anyone thought what that would look like to this market? jonathan: not good. up one third of 1% but i can imagine that is not where we would be on the back of that story. with an update on stories elsewhere, here is your bloomberg brief. yahaira: hurricane milton is approaching the florida peninsula with wind speeds up to 155 miles per hour. it is expected to make landfall tomorrow night with intense winds capable of collapsing

homes and triggering power outages that could last for weeks to months. the storm less than two weeks after the southeast was hit by hurricane helene. the wall street journal says honeywell is expected to unveil plans to spin off its advanced materials division. the new business could be worth more than $10 billion as a separate public company according to sources in the report. honeywell hopes the separation will give it more financial flexibility to pursue deals and other opportunities. pepsico sales are following in the premarket after the company trimmed its revenue outlook for the year as demand for its drinks and chips fell. the maker of glaze and lipton tease is struggling as consumers rein in spending and trade down to cheaper store brands. they see the pressure continuing, saying consumers will remain value conscious. pepsico still expecting earnings to grow 8% this year. jonathan: up next, the morning calls plus pierre and iran --

pierre andurand as brent snaps following a -- that story is just around the corner. ♪ so, what are you thinking?

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jonathan: equity futures firmer .4%. a conversation about crude coming up. down 2% on wti. time for morning calls. wolfe research upgrading wells fargo to outperform, expecting upside. up 1.5%. oppen hyder -- oppenheimer downgrading microsoft to perform setting optimistic growth

expectations. rbc capital raising its price target on tesla. expecting shares to benefit from the company robotaxi event thursday. plenty of coverage on that story later on in the week. turning to commodities, brent falling below $80 a barrel as china holds back more economic stimulus. metals including copper and iron ore slumping, wiping out most of their gain since beijing's initial announcement last month. joining us is pierre andurand. let's start with the oil market because it is confusing a lot of people. we have had some people say there is a threat of dropping to the 50's or 40's, other saying triple digit just on the horizon. how are you thinking about this and are you positioning blissfully? pierre: there is no medium term structural trade. the market is quite balanced. where we still have volatility is supply growth for the next

two years and demand growth slowing down. you give a bit of a bias to crude. against that we have the largest shot ever in terms of spec position in the market. none of the supply growth has disappointed relative to expectations. we are expecting 1.1 million barrels a day of supply growth this year and are getting 400,000 barrels a day. next year's supposed to be 1.5 million barrels. i would say overall the market does not need more opec oil for now. ringing oil back over the next few months, it put some pressure on the market. we have geopolitical risk. we are waiting for israel's response to the iranian attacks and the attacks on israel. that could impact the oil market significantly. jonathan: what is your overall

conclusion? would you say the risk is for higher prices? pierre: the short-term the risk is for higher prices. inventories are low. the market has been trading annexed years balances but it is hard to get much confidence on those. we have a lot of supply risk. annmarie: in 2023 you had a call on 140 barrels of oil. what could the geopolitical risk put it up for? pierre: if israel blows up the oil export facilities of iran we would lose 1.7 million barrels a day, which out of the 100 million barrels a day market is important but not too much of a game changer. the saudi's and uae and kuwait could increase production to make up for it over time. it would bring prices up. then the question is how would

iran react to that? they said they would blow up oil facilities in the region in saudi arabia and uae. annmarie: we about $80 or $120? pierre: i think $10 to $15 higher. i'm not calling for much higher oil prices but i think there is bias to the upside. the average price last year and this year has been $80 a barrel. we are just under that now so it would make sense to be a bit higher than the average. dani: you mentioned opec. do they need to keep cuts in place throughout 2025? pierre: i think they will only bring oil back if it is needed. the saudi's might threaten to do so to keep a few members in compliance but i do not believe they will go for a market share

and bring a lot of unneeded oil back. that is why i do not call for much lower oil prices were much higher. in the short-term we could go $10 to $15 higher. dani: when it comes to demand you have a strong american labor market, chinese stimulus, how do you understand the evolving picture of demand? pierre: you have to look in the long term. from 1986 to 2019 demand was going in a linear fashion by 1.2 million ballard's a year -- 1.2 million barrels a year. after covid we lost a lot of demand. we have recovered since. due to ev and biofuels demand should slow down. demand should reach a peak within the next five years and i think be relatively stable and then start declining slowly. demand should not put prices up too much.

the equation is the growth of supply versus the growth of demand. demand is ok for now. there is no issue with demand. dani: we will talking about the -- we were talking about the long-term five-year plan of ev's. it is a market upset it did not get more from china earlier today. assuming the stimulus is where we stand and there is no more added, how does that add to the demand? pierre: this year we grew 800,000 barrels a day demand relative to one million expectations. it was china much below expectations. the simile should bring us back to expectation or slightly higher but it is hard to put a number on it until we see the details. it sounds like we will have more details just after the u.s. election results in a november,

when they are supposed to speak about the fiscal stimulus and the market was expecting to trillion dollars to three join dollars in real stimulus. -- $2 trillion to $3 trillion in real stimulus. the market is inpatient on the lack of news. jonathan: equities in hong kong got hammered. copper is pulling back in london. we are 10% off the highs of the year on copper. are you still long? pierre: i am still long copper because it is a long-term story for copper. the structural story is clear. mining supplies are supposed to peek in the next two years. we get an acceleration of demand growth due to the electrification of the world and inventories are still low. we get a lot of issues on china. instruction on proper demand,

construction we present only 20% of copper demand in china, it is not 80%. there a lot of other parts of the copper demand going strongly in china. jonathan: we got chris to 11,000 in china in copper -- we got close to $11,000 in copper. what kind of numbers do think we are looking at? pierre: demand should not be very price-sensitive. sometimes it is price-sensitive in the short-term. it is not like the total level of demand. copper is a small market, it does not represent so many dollars in terms of the global economy. it is needed. you need copper to electrify the world. you cannot do without. the fact that it takes at least seven years to bring new minds means in the short term there is

no real -- you get some short-term fixes and you get more scrap but that is only for a few months. demand should be relatively -- that means in order to get the demand response you need to have much lower demand growth than what we need and much higher prices. copper prices could go up by a few multiples, by two or three times over a few years to 10,000 or 30,000 or 40,000 over the five-year horizon. annmarie: in june you exited some of the oil trades. sounds like you are more interested in oil now. what about coco? pierre: in coco we had a massive deficit this year, 10% of world demand. it is as if we had a shortfall of 10 million barrels a day in crude oil and believed things

would get better quickly. coco is a different market. every year you get new production. we had inventories at very low levels similar to the late 1970's. if you look at the inventories to demand ratio we are back to the late 1970's levels when copper -- when cocoa was between 15 to $28,000 in terms of today's dollars. it all depends if next year we will have a deficit or not and we will know more over the next few months. jonathan: it up this morning. it is good to see you. appreciate it. a world tour of commodities with pierre andurand. up next, we catch up with tom porcelli of pgim. ♪

jonathan: 60 minutes away from the opening bell. equity futures with a little bit of a lift. up .4%. dani: finally we are getting a little bit of a rebound but it is notable you had equity markets yesterday unable to continue gains. finally you're in an environment where higher yields upset markets. jonathan: yields on the 10 year up four basis points, 4.04. on the front end of the curve we have given it up. dani: maybe the long end

yesterday was attractive again. this time maybe not so. honeywell up nearly 2%. it is planning to spin off its advanced material division and have a separately listed business by early 2026. they want to simplify honeywell's business around three main segments. also higher is nvidia. it is worth noting that nvidia was one of that you -- was one of the few magnificent seven to gain. now the second largest company, overtaking microsoft. hon hai is building a new server for them and mexico because there is crazy demand for their blackwell ships. pepsico cut in their outlook, shares down .5%. the consumer is still value focused. there was next -- there was an

unexpected decline in summer sales. it is a cash-strapped consumer dealing with boycotts in the middle east and a major recall. jonathan: are we going to see another quarter of those kinds of headlines? a big emphasis on cost management. turning your focus to the economic data. cpi thursday followed by ppi friday. inflation data offering clues for the fed's rate path triggered fears of a no landing scenario. tom porcelli of pgim joins us now. good morning to you. tom: good to see you. jonathan: how high or low is the bar to hit pause at the federal reserve? tom: today it is relatively high but also lower than what it was before the payroll report. i think the fed will start to try to understand where we are from a neutral perspective, more so than what they do over recent months. we were saying before we came on, we said what a week and what

a year. i said what has been interesting about this year as we have gone through almost a series of mini cycles. when i think about the data we have been looking at. we have been in the soft landing camp for a while. i will hasten to add i hate the term soft landing. i think i literally set it on the show. the problem with soft landing is would suggest is have stopped. if you've landed and you stopped. if you want to keep it in aeronautical terms we should talk about altitude. we are operating at an outlet to the of 1.5% to 2%. if that report is to believed then you are in the upper end. jonathan: you said if that report is to believed. what you mean by that? tom: i loved it out like a big fat meatball for you. -- i lobbed it out there like

the big that meatball. the report itself was impressive but does not expunge all of the other data we've been getting -- not over the last several months but just over the last weeks. we know the quit rate is down. we know the labor differential is down. there is a host of other labor day that you cannot just erase. we have been thinking that things would hang in there just fine. i am not ready to say everything is ok. the unemployment rate is still up 600 basis points. there is still a long way to go. the chapter is not over. it is still ongoing and that is an important idea. dani: the irony is it is a world awash in data and you would think that would make the picture clearer but it is making it more complicated. jonathan: i totally agree -- tom: i totally agree. we could have an hour-long

session on this. i think post-covid the seasonal adjustment process for some of these data points are probably quirky right now. that is something we have to live with. i think about leisure and hospitality. leisure and hospitality jobs. you would normally see a massive decline in september. we saw a big decline, just not as big as normal. if you do not get as big a decline as normal, it flatters the outcome. that is not making excuses for the data. that is just being informed. we have to understand there's a lot of quirkiness that seems to be going on and back and forth on the data highlights that. annmarie: we will get one more jobs report before the fed meets. they have avoided one hit eight when it comes to the union workers, but how they look at the impact of the hurricane

about to hit florida? tom: i hate to say this, but this would be a great opportunity to use the word transitory. that has been stricken from the lexicon at the vent. you have to look -- the lexicon at the fed. some of these -- you have to look through some of this. some of these impacts will be temporary. the upcoming payroll report could be messy on the back of that but i that we have to look through that. jonathan: let's talk about cpi on thursday. if inflation fell faster than expected that would cause for policy to normalize more quickly , if inflation stall that would cause interest rates to go down more slowly. there is a bias to reduce interest rates regardless of what the inflation data looks like. what you take away from that? tom: i think that is fair. one thing jay powell said which

i totally agree with is cutting rates now is about extending the cycle. that is all they are trying to do. we have nothing but sympathy for that idea. in the context of polity calculated for meaningfully higher inflation, you can take back some of that aggressive tightening they have put in place. what this has done is it -- i still think you will get into the realm of neutral. you can probably do that in a more casual way. dani: this gets back to your point of cycles happening in days. before the friday report we were pricing in 20% odds they cut by 50. after that odds they do not cut at all. can -- when can i expect a world when you don't have these wild swings in fed market pricing? tom: think about it -- at the

beginning of the year the market was looking for eight cuts. then they scale that back. it has been a wild swing. i get it. we are all at the mercy of this data. the data have been noisy. consider this. what if next month payroll report, even excluding any of the hurricane impact in the strike impact, you print $50,000? by the way, that is not out of the realm of possibility when you consider the standard error. we are at the mercy of what has been very volatile data. jonathan: you said the realm of neutral. can we explore that? tom: i also said strucken but i should have said stricken. hopefully you can edit that out. i think the realm of neutral is 3% to 3.5%. it is very hard to know the number in real time. hopefully that is where this is a journey to.

jonathan: is it fair to say the next 100 basis points of decisions are the easy one? tom: i think it is fair to say. if all of a sudden you'll start printing 254,000 jobs month after month the easing cycle is coming to an end. some element of practical has to enter the equation. jonathan: my worry is in a few months we revise the numbers and people start to throw some accusations that they were put a certain way for political reasons, which we know is not how it works. that would be my worry in december. annmarie: when the revisions came out for the year it was down 800,000 and now everyone comes on and says does matter what the number is? you take out 60 or 70. in this report a lot of people are sending private messages about why i am not talking about the fact that government jobs was 30%. saying this was just a cook the books before the election. jonathan: where is that coming

from? tom: i love this question and it gets to the nuance of the last report. you think about leisure and hospitality jobs adding 80,000 in the prior month's adding 40,000. the delta was a massive swing. health care has been an engine. over the prior few months it was averaging 30 or 40,000 jobs and that it bounced up to 70,000 or 80,000 jobs. the biggest source of strength has been health care,. . it will continue to be a source of strength. when i think about outside of that one key point of strength, you've seen modest gains throughout over the course of the last few months. he will be health care. that is a long-term structural idea based on aging populations and i think i will be an engine for a while. jonathan: a big tailwind for hiring. tom porcelli of pgim on the

federal reserve and economic data in america. the opening bell about 50 minutes away. we are at .4%. yesterday's session the biggest one-day loss in a month on the s&p. the nasdaq 100 up .4%. the russell up .1%. the bond market getting a ton of attention. disco year higher by 40 basis points. yesterday we at -- the two year higher by 40 basis points. on the 10 year are up a basis point or two. with us is mark cabana of bank of america. good to see you. what has changed for you and your calls for the federal reserve based on friday? mark: we were in the 50 basis point camp for november. the data indicates that is no longer necessary. we now think they will go 25 and

deliver a string of 25 point rate cuts until march of next year than they will slow down to a portly pace of cuts until they get down to a trough of three to 3.25%. amongst our clients there is a lot of uncertainty. it does not seem like the data is giving us a clear narrative. we sense investors are shifting probabilities of what the most likely economic outcome is. there was a lot of belief we were headed for a soft landing with elevated risks of recession or increasing risks of recession. now soft landing is still the base case but the market is putting more weight on the possibility there is "no landing" scenario for maybe the fed does not need to cut much below 4% at all. the market, given that uncertainty, is just trying to be a bit defensive. rates clients do not want to

extend too far out the curve, especially given we are just about a month away from the election. as a result they are keeping things nimble and light and waiting for data to guide more. jonathan: we saw data pile into money market funds. what you think is behind that move? mark: rates are still high. just because the fed is cutting does not change your behavior as a depositor. what does your retail bank deposit pay you? if it pays you something close to t-bill yield you should tell me where you banked because i would be interested in knowing. for most retail depositors they offered something close to zero. t-bill rates are still well above that. we think there will be a lot of inflows into money market mutual funds even though the fed is counting. it is not about whether rates are rising or falling, is about the overall level of interest rates. the work we have done says you should not expect to see large

outflows for money funds unless the fed cuts to something at or below 2%. that seems very unlikely based on the data we have at hand what the market is thinking about the fit cutting cycle. dani: it is also a 10 year has been going higher even since before the fed cut 50 basis points and it has continued. how much of that is a factor of what you started talking about, that vulnerability and volatility adding a premium to the bond market? mark: i think it is a couple of things. rates investors believe that a more proactive fed today means a better economy tomorrow. think about on the date when we still had the fed cut 50. you saw long end yields rise and there was a sense the fed would be decisive and act quickly and do what it takes to support the economy and that should allow for better growth in the future. that is the biggest part of why the back end has been moving up a bit.

there is also supply demand concerns and the election is a big wildcard. certainly it does not seem like fiscal policy will be tightened in a big way after the election. we can debate how easy will fiscal policy get based upon the election outcome. investors are reluctant to extend the curve knowing you can get political outcomes that would result in much easier fiscal policy and more treasury supply. annmarie: is the candidate for less fiscal spending? mark: i do not want to get into the politics too much. jonathan: that is a good response. mark: i've been trained well by bank of america media people. [laughter] investors right now do not expect there is any party or any candidate that supports meaningful fiscal austerity. therefore it is a question of whether or not the fiscal

outlook gets a lot worse or a little worse. investors, knowing the election is very tight and knowing investors do not want to take a strong call on that right now are deciding to stay a little bit shorter duration. some of the flows work members of my team do sees there are very sizable inflows into fixed income funds, not too different from the money market mutual funds he referred to earlier. when those flows come in they are staying short on the curve and that is due to investors who do not have a lot of confidence in what the political or macro backdrop looks like in a month or so. as a result of that, these positions are de facto steepeners. when you get strong data like we had on friday, that does create a tension for investors who have moved further in on the curve. annmarie: jonathan and i were talking about the fact we might

not have a decision days or weeks out. this could drag on for months. this could be contested. what do flows on the short end look like then? mark: it a great question. i would respond by saying that over recent weeks and months we have certainly seen that treasuries have regained their flight to quality attributes. when inflation was high, rewind a year ago or so, we could have debated how much treasuries retained the flight to quality benefit. if there is acute uncertainty whether due to u.s. politics or geopolitics, we think treasuries will still retain the flight to quality attribute and we should expect to see cash move into treasury securities mostly at the front or belly of the curve and those types of scenarios. certainly from the asset class overall we think it will retain those risk off were flight to quality benefits we have seen.

jonathan: we have talked about the front end. we have talked about the money and money market funds could be sticky. could we talk about the long end? what are you looking for? we had a guest from pgim yesterday saying we are in the buy zone and if you get a second opportunity take it. what is your advice? mark: we wrote that we think using the 10-year as a proxy between 4% to 4.20 5% is a good place to begin scaling in. here is the framework we have used in a number of popes and our team have recently written about this in slightly different ways -- and a number of people on our team have recently written about this in different ways. the fed will cut to 4% regardless of the data. in 2025 all of the dots except one are below 4%. that seems to be the recalibration zone and that is consistent with no landing.

if the economy performs well for percent is where they will end up. in a soft landing scenario there will probably end up closer to 3%. that is our economists view as well. if there is a recession or a sharp slowdown you can envision a 2% or lower outcome. the question is how do you assign probabilities to those various outcomes? our base case is the soft landing. that is well and good. if you look at 10-year ois around 360 at the moment, if that gets up to 375 or higher, clearly the market is overweighting the 4% how trump, the no landing out jump -- the 4% outcome, the no landing out jump. we think that is very optimistic. the world is a very uncertain place. the rest of the world is not as robust as the u.s. to think we could slip into a soft landing is not unreasonable.

u.s. rates and fixed income provide a hedge against those outcomes and we think of the 10 year ois gets to 375, the 10 year close to 415, 425, we think it is a reasonable opportunity to begin to scale in and trusted should perform or that your downside is limited if you're investing around those levels. jonathan: appreciate it. good to see you. let's get an update on stories elsewhere with your bloomberg brief. yahaira: billionaire lululemon founder chip williams vancouver home was vandalized covered with graffiti messages attacking him just days after a sign was erected outside his house calling the british premier new democratic party communist amid a polarized election campaign with british columbia residents voting october 19 two elect a new provincial government. samsung issued a rare apology to

investors after disappointing results on revenue and profit. the korean tech giant admitted it is struggling with delays. it also warned about inventory adjustments as well as increasing competition. the head of the semiconductor division went as far as pledging it will review its organizational culture and processes. in sports the yankees and royals are tied at one game apiece after a 4-2 kansas city win in the bronx. detroit tigers also getting the equalizer against cleveland with that series tied at 1-1. in football the kansas city chiefs joined the minnesota vikings as last remaining undefeated teams after taking down the saints on monday night football. jonathan: up next, we set you up for the day ahead and catch up with lisa abramowicz ahead of her exclusive conversation with jamie dimon. ♪

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jonathan: counting you down to the opening bell. today we hear fed speak from bostick, collins, and jefferson. wednesday fed minutes, thursday cpi. on friday cpi and university of michigan sentiment. coming up in about 30 minutes, jp morgan boss jamie dimon sitting down with lisa who joins us now for preview. good morning. lisa: good morning. i am in london which occasionally is sunny and occasionally is pouring. you're just talking with mohamed el-erian earlier in the show and he was saying this is a market that lacks anchors. there is no one better to speak to than the cheaper the world's biggest bank to understand what are his anchors? how are his risk allocation at a

time that is uncertain from a tech perspective -- this is a tech conference with the number of tech startups looking to ipo -- and of course the geopolitical backdrop with politics front and center. will address all of that as i sit at the bart at the novo hotel -- as i sit at the bar at the novo hotel. jonathan: no drinking. lisa's interview at 9:30. coming up tomorrow, we catch up with andrew sheets of morgan stanley, cameron dawson of new edge and amanda lynem of blackrock and highlights from lisa's conversation later this morning. equity futures just about positive by one third of 1% on the s&p 500 and the 10 year, we add some weight to that yield. up a basis point. thank you for choosing bloomberg tv. this was "bloomberg surveillance." ♪

it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

matt: is volatility really back for october? 30 millions -- 30 minutes until the start of trading. sally bass take is on a silent -- assignment. bloomberg interest starts right now. matt: coming up, wall street is set to open stronger as the china bull run loses steam after a weeklong holiday. principals free economy and investing.