>> the market is underestimating the strength of the u.s. consumer. >> the consumers is as strong as it's been. >> as long as a consumer is spending we will have a strong economy. >> the evidence suggests it's an economy that's resilient. >> it's really the u.s. driving the world economy. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> let's get your trading day started a live from new york city, good morning for audience worldwide bloomberg surveillance starts now. snapping it today winning streak on the s&p 500 pulling back from

all-time highs in yesterday's session looking for a firmer footing going into morgan stanley now, futures barely positive. the single name we are talking about asml. the complete makes your chips. down again by 4%. earnings released on accident and those earnings an accident waiting to happen. a major downside surprise. lisa: they booked about half the orders analysts expected. a real question here about why. is is a differential between everything ai related and every thing else. you see the intel, is this have to do with china which accounts for most half of all of asml sales. >> let's go to china. lvmh absolutely dreadful. check out this move over in paris trading we are down by 4%, sales are down as well. fashion and other good sales dropping for the first time since the pandemic.

take a listen to this parade at a time when everyone is getting bowled up about prospects from china consumer confidence is back in line with the all-time low reached during covid. >> it goes to at citigroup put out and they sent individuals to china and they came back saying there's no increment of luxury consumption after the macro policy pivot. not just bad in china when it comes to lvmh and 75 brands across clothing, jewelry, hotels but also in japan they are not seeing because of the higher yen. they're not seeing them spend as much there. the u.s. and europe so luxury is not doing well right now. >> just to point out this the first decline for lvmh's sales. how much is it that china's economy is doing worse than people think or how much is it that china's economy has gotten that much more isolated from the rest of the world where their benefit and their gain and appetite doesn't go to china

goods and material. >> yes both. it's got to be both and that's a big problem even if we do get that stimulus package of the chinese officials. perhaps not by much. lisa: it's not difficult to understand the possibility. this idea that they might be barred from selling to china at the same time china will tell its own companies and individuals don't buy from them. so there is an institutional structural fisher at the same time the companies are saying what am i going to do. >> the asml cfo was honest about what they see in china. they're calling it a more normalized percentage. basically they are saying they are to cover about 20% of total revenue. in june they talked about it it was 49% of its sales. so these hard cold numbers show you that is still not the avenue it once was for a lot of these major companies. >> european flayer -- players and focus. looking at the morgan stanley

numbers then looking ahead to retail sales tomorrow. that's the big data point of the week. equity futures on the s&p 500 barely positive on the s&p in the bond market a bit of a rally yields are down just about holding onto 4% on the 10 year and even bigger rally over in the u.k. speaking of downside surprise is the cpi and the united kingdom. softer than expected. >> another example in europe of why not cut. we've already said that with the ecb tomorrow which is in a cut by 25 basis points. but now the bank of england also seeing the potential for why not cut given the fact that cpi came in below expectations and they are facing off with the potential of growth also coming in soft. jonathan: waiting for that budget for the british prime minister in the labor government. november 7 bank of england rate decision the same day as the federal reserve. coming up, julian emanuel with stocks coming off of all-time highs. and stephen trent ofciti --

trent of citi. julian emanuel staying long big tech and writing the following we remain fully invested in sectors and themes which have proven with us in the rate cutting cycle including information technology. julian good morning. i know we cannot do single names with you what about one single name. what do you think it means for the broader sector for chipmakers and tech stocks more broadly. >> again you go back to this entire bull market cycle has been led by semiconductors in one way or another obviously the ai theme is the primary driver. but it is a question that opens up opens up an issue about why china did what it did several weeks ago and what the efficacy is ultimately going to be and i think it also calls into the

fact that this is one of these times where you are seeing the weakness in china, you are seeing the ecb is going to cut again this week, europe is not going gangbusters in the u.s.. really it is again the isolated island of global growth right now. and that's not really healthy on balance. >> it raises a question of how we should process upcoming information in the next month or so. how would you process that incoming information? julian: the equity price reaction in china over the last several weeks tells you that there is at least the belief that something may change it also tells you how incredibly underweight global fund managers are to the china theme and look, this is -- the government has set a bar and an expectation and

the other question will be what the election outcome is in the united states and if you get a trump presidency which is clearly going to be at least incrementally if not greater than incrementally more difficult for china, what is the policy response to that? >> you see a lot of potential volatility down the pike. you see the scenario for 6700. depending on a lot of different outcomes. we talk about the bank of america fund manager survey and we will speak with them and just a bit. there are three prongs to the incredible bullishness that has been really in the market right now. one of them is the belief in a soft landing globally. one is the anticipation of fed rate cuts. one of them is the china policy stimulus. which of the 3d you think is most fragile. >> i would say on balance the china policy. again because we have heard what they said they might do.

we saw the reaction in shares. but at the end of the day you can argue the structural problems in china are structural and take multiple years to work themselves out. in a lot of ways it's almost the negativity you saw in 1982 in the u.s. when you came off of a decade of really subdued investor confidence, a very cautious consumer, and incredibly hard shareprice reactions. >> is that could be enough to take us to the 52 -- 5200 projection. julian: to be clear, our price target is 6000 because of the difference in what could be contested versus uncontested election result here, united versus divided government, investors very clearly prefer the divided government outcome. but you think about it and an

uncontested outcome in this environment where we've already seen the start of the year-end performance because the fed cream let that on -- fed green lighted that. that's your path to what we would determine the outcome. but conversely if you get the kind of contested election outcome you got in the hanging trap -- hanging chad's era where the yankees and the mets last met in the world series. history rhymes but it doesn't always repeat. annmarie: let's go to your gaming the game of thrones. what does this mean for the stock market. you say uncontested does it matter who the president is or just the fact. jonathan: again -- julian: again this preference for divided

government given the acrimony in the sharp policy difference in the idea investors in either candidate's policies. it's really the most important thing long term. it's a question of we do not go -- want to go through this questioning the freeness and fairness in that process again. that does need to be turned. >> is this all must a self-fulfilling prophecy. investors come on constantly. gridlock, that's goldilocks. isn't that what they want that's good for the market but looking at the polling data. >> i think there is an element of hope in this. let's get serious. essentially a week after paris became the nominee this thing

has been a tossup. it is a tossup all over the map and in fact if you look at the odds right now, the concept of both chambers of congress flipping in the other direction regardless of who the president is is literally unprecedented in history. jonathan: can we finish up with a guide for where sentiment is right now. i will read two different quotes. hsbc sentiment positioning is still neutral. talking about poking the bears. jonathan had this to say. fear of downside has left the building, fear of missing the upside is front and center. where is sentiment question mark how can we have two different views on positioning and sentiment from two completely different banks? julian: both arboles and the bears are holding their desk. what we would say is coming into september we all know september

has a history of being a negative month. the first week or so you have the flush out and you had position, but as i said after that 50 basis point cut, you have read growth. i would say sentiment is not overly enthusiastic but certainly bordering their and if we were to see despite all this negative news out of the traditional semi manufacturers. if you saw the ai theme move further upside, sentiment could get enthusiastic very quickly. jonathan: a conversation without talking abut the federal reserve so let's talk about it. is it the easiest job in washington dc to be the fed chair and would it be better if we flipped a coin to make a decision? julian: we are very much in the camp that the fed should be an independent entity. it is not the easiest job. if you think about fighting the

pandemic, then fighting inflation that nobody saw coming and here we are arguably the world's strongest economy in the recession people have been looking for for two years that has no signs of occurring pre-that's not an easy job and it's been done well put jonathan: good to see you. julian emanuel of evercore. just remember morgan stanley earnings coming out later this morning. retail sales out tomorrow morning. the schedule and update on stories elsewhere with your bloomberg green. dani: u.k. inflation slipped below the 2% target for the first time in 3.5 years. consumer prices rose 1.7% in september compared with the year earlier. traders are betting on back to back rate cuts at the november and december decisions having previously favored only one to -- reduction.

shares of lvmh slumping. the luxury goods retailer reported an unexpected drop in third-quarter sales, warned of an uncertain economic and geopolitical environment. it was the first decline in skate -- sales since the covid-19 pandemic driven by slumping chinese demand. a shareholder of 7-eleven parent company is urging the company to return to the negotiating table. their recent announcement that it was restructuring the company was designed to thwart the acquisition. so far, shares remain below the proposed price suggesting market skepticism over a possible deal. that's your brief. jonathan: more from dani in 30 minutes time. the tariff man on tour. >> to me the most beautiful word in the dictionary is tariff. it's my favorite word. we are going to have thousands of companies coming into this country.

we will protect those companies with strong tariffs because i'm a believer in tariffs. jonathan: a lively debate in chicago. some of the details up next. good morning. ♪

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jonathan: just a little bit of calm after the storm from the chipmakers yesterday. equity futures unchanged. a bit of change over ubs. midyear and target for 2425. 6400 year-end next year. justin nagy higher for the team at ubs. yields are lower down two or three basis points. under surveillance this morning the tariff man on tour. >> to me the most beautiful word in the dictionary is tariff.

and it's my favorite word. we are good have thousands of companies coming into this country. we're going to protect those companies with strong tariffs because i am a believer in tariffs. 2000% tariff, the highest in history. we are going to put tariffs on them. i put tariffs on china. i put tariffs on south korea. the threat of tariffs. there can a pay 100% tariff. jonathan: here's the latest from this morning, donald trump defending his plan three series of steep tariff hikes getting more direct influence over the federal reserve. their public and nominee dismissing the notion the policies could have a negative impact on the economy and for u.s. consumers. kailey leinz joins us from the nation's capital. just how popular is that position. kailey: if you are talking to most economists the prevailing wisdom is this would be inflationary policy. if you're talking to blue-collar voters and some of the swing

states, this is a little bit more of a popular idea. these notions of populism protecting american manufacturers and making more things in america is something that resonates with many of these individuals. hua found themselves supportive of donald trump's policies. many going back to 2016. when donald trump was pushed on this idea this could lead to costs for some of these same voters talking about going higher he said all you have to do is make your products in america and there will not be a tariff. to quote him directly he said you make the tariffs so high, so horrible so up noxious that they will come right away suggesting companies will, start making goods in the u.s.. we all know supply chains don't necessarily reorient themselves that quickly. factories do not build themselves overnight yet that is what he seems to be suggesting. but he will force companies to come here in the u.s. through these policies. annmarie: maybe not as

aggressive as the former president but the biden administration has kept tariffs on the trump first introduced. is that working for them or not in terms of the campaign? >> it is an excellent point and donald trump pointed that out that many tariffs in fact on most all of them he put into place during his first administration have been left intact and perhaps even expanded under this current administration. most people i speak with would say the differentiation is you are likely to see protectionist policy and export controls into place when it comes to china to try and limit their ability to develop critical technologies. the difference is the targeting. would donald trump suggesting his blanket tariffs across the board versus things that could be more deliberate in the areas in which they are implemented and that seems to be one key differentiation. we haven't heard as much about tariffs from kamala harris as we heard from donald trump. annmarie: the former president

also said he will be watching on election night what he finds decisive is number one pennsylvania and that's where kamala harris is today. she will be speaking to republicans. kailey: she is going to be doing an interview on fox with bret baier as part of a strategy on her part in terms of media to reach out to voters that are not yet with her but she would like to see more support from including republicans. we've seen her try to create this permission structure for republicans to cast a vote for her instead of trump trade it is not just about reaching out to republicans as well it's what trying to shore up parts of what have traditionally been the democratic base. she was on with charlamagne tha god trying to amp up support among black voters. showing yes she has improved her standing among black voters

compared to where biden was when he left the race. she is still not yet at the levels of black voters support we saw from biden in 2020 when he garnered 90% of the black vote in what was a tight election. and in an election that seems to be getting tighter with margins that seem to be very small that 10% differential she has about 80% could make a big difference. lisa: how much is this just a turnout game for some enthusiasm in certain groups? >> the basket of people yet to make up their mind is small and probably shrinking every day as i would remind everyone we are less than three weeks out now from the election on november 5 but the election day is one thing. the election is underway. voting has started in a number of states include key battlegrounds like georgia which began early voting yesterday and sent a record vote out for turnout. it is going to be about the game driving people out to vote and

that's why money still matters at this stage in the race. most of the advisor in but having access to a larger war chest to pay people to knock on doors and do that driving force of getting people to the polls is what will be key. it was also raised as we consider donald trump's remarks in chicago may be more oriented towards the donor class in some instances the money will matter after the election as we've seen so much litigation leading up to it potentially we could see a very litigious activity in the aftermath of these results are contested and it will take money to fight those fights as well. both for turnout and the decision-making if you will around what the actual vote turns out to be money could be a big factor. lisa: you also mentioned the early voting sink signs are he is capturing a significant majority of those votes. what kind of visibility do we have into that? kailey: donald trump has had mixed messaging on early voting frankly. we've seen this over the past

two election cycles at one point in the same speech he was encouraging people to go out and vote early and then called it stupid. we've seen the phenomenon and especially in states like pennsylvania. could ultimately be the deciding factor in this with its 19 electoral votes. they cannot begin counting those until the morning of election day. if it is skewed more democratically those were mailing in versus those given the rhetoric we've heard and those close to him we could see early in the count a skewed result. ultimately the final tally will be. it's certainly a factor but you are seeing a more concerted effort to drive people to the polls early on. that goes for down ballot as well. kari lake, who was very against early voting has already cast a vote early for herself and is now pushing it. there's been a lot of changing narratives around this. >> appreciate the update as always. you can catch her alongside a

12:00 eastern time on balance of power. these are risks the harris campaign may not have even thought about. wouldn't have touched a month ago. bret baier, he is the real deal when it comes to conversations like this. this is a risk they wouldn't have taken even a few weeks back. >> he's talked about this interview and the lead up to it. he things is enough time to really push her on some answers he think the electorate is looking for. they get half the eyeballs in the united states and if you want to win those that are potentially still undecided you have to go there and what harris is doing today. she will have a pitstop where george washington crossed the delaware river during the revolutionary war. she is going after republicans who potentially don't like the former president and that's why she's sitting down with bret baier. >> when she first entered the race which was not that long ago she was the anti-trump and the candidate who was not going to be trump. it's gotten to the point where

every candidate who is gone against trump has to realize they have to do more than that which is why a lot of these interviews are taking place. >> the biggest challenge for her is not just explain the difference between her and trump. at this point it's pretty obvious. it's explaining the difference between her and joe biden. the president of the united states played when asked on the campaign trail they still not come up with a good answer for this. i imagine fox will repeat that question a little bit later. >> they struggle with it and it's difficult because trump and cast her as the incumbent and the top two issues of this campaign still remain in his favor. the economy and immigration. >> we will talk about the economy and financial markets. a bullish survey, that's next and this is bloomberg. ♪

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jonathan: bullishness hitting a bit of a wallet yesterday's session. equities on the s&p totally unchanged. snapped a two day winning streak. financials have been steady. look out for morgan stanley later. thank you asml and thank you oil. with that move in oil we have a big move back into this bond market. the 10 year treasury just about holding onto 4%. the tenure this morning down two basis points. lisa: it has to do with

disinflation across the board and not necessarily pressure from the oil patch. people talk about the u.s. being truly exceptional. how much the u.s. is divorced from what is going on in the u.k. and the euro region where almost deflation is a renewed concern for the first time since pre-pandemic. jonathan: we talk about the u.k.. the pound against the u.s. dollar, 1.3027. weaker one third of 1%. inflation beneath the target of the bank of england and beneath estimates. core is a different picture but headline inflation is starting to improve, opening the door for interest rate reduction from the bank of england november 7 and may be from the ecb this week as well. lisa: the likelihood of a 25 basis point is very likely in markets. the key question is how does that diverge from what we are seeing in the u.s.

consumer prices rose 1.7% in september, below the 2% goal. how much are we seeing a return to the old trend. that is something a lot of people are grappling with. remember when central banks were trying to encourage inflation? trying to generate it to prevent a lost decade of kin to what we saw in japan. jonathan: that was a different time. yields lower at the front end of the curve. under surveillance, asml shares plunging the most in 26 years after disappointing q3 earnings. the chipmaker booking only half the orders analysts had expected and lowering guidance for 2025. tsmc is expected to report tomorrow. if they had not released these and you got the accompanying commentary and the nice call afterwards to explain this big plunge orders relative to expectations, do you think we

would've had the move we saw yesterday? lisa: we will have to know after the call. there was some speculation this was deliberate, get it out there and see what happens. there are some any questions about this. how much is this the fisher between ai and intel with respect to automotive and iphones. those chips are having more problems than nvidia which continue to be dominate. the china question is so difficult. how do you deal with the country that is so deeply political in terms of the policies around it as well as lack of visibility whether consumers can buy in china? annmarie: the geopolitics is very challenging for some of these companies when you look at export controls and even what the dutch government wants to do signing up with united states. the direction of travel is getting worse. even if it is donald trump potentially vice president kamala harris. if it was deliberate or not,

clearly disappointing. jonathan: two different issues. you have the cyclical weakness in china's economy, we will talk about that in just a moment, and then you have the policy issues in washington. speaking to that story is this one. sources telling us that qualcomm will likely wait until after the u.s. presidential election to decide whether to pursue and offer to buy intel. the company looking for clarity on the antitrust landscape and america's relationship with china. annmarie: i am not surprised. why would you make a massive move in a company where the direction of travel may be the same but more nuanced when it comes to antitrust and how you view china? after the election may help qualcomm. intel reports third-quarter earnings later this month. if they are so bad and the share price falls maybe they can get a better deal. lisa: you think this is a pure

financial thing that their shares will tank and then they will be the white knight income in? annmarie: i think it will help them and then they can use the election as an excuse. lisa: why would anyone make a big move before the election with a major industrial company. annmarie: julian emanuel said bulls and bears are holding onto the desk. you have to imagine executives are doing the same. jonathan: you think the environment will shift that much under trump versus harris? annmarie: it depends if donors can get in these individuals had and we can ask harold let nick about that. jonathan: the market environment could shift markedly if it is harris versus trump. if it is trump and it is china, in the immediate aftermath perception will matter. you have to imagine china get sold pretty hard. lisa: which raises the question of whether people are lining up to buy on the cheap. what is a threat and what is something that is going to go

into effect? we do not understand this. are you bidding on sentiment shift or reality shift. jonathan: lvmh shares dropping in paris after shales of fashion and leather goods fell for the first time since the pandemic. the company citing slowing demand in china. the commentary from leadership is pretty awful. annmarie: the commentary was most of our markets face economic challenges, including mainland china. they go on to say consumer confidence in china is back in line with all-time low during covid, when no one was going out and spending on luxury goods. that is how bad china is, even after we just had the stimulus measures from chinese officials. jonathan: zeus why we had up -- which is why we had a very specific measures when it came to materials. just a little bit, not enough. lisa: in terms of domestic or

international, are we underestimating the weakness chinese authorities saw in their economy that prompted this type of response? jonathan: lvmh down for percent. here's an update on the bank of america global fund manager survey that captures a shift in investment sentiment, showing the biggest jump in investor sentiment since 2020. joining us is elias of bank of america. this is bullish. is it too bullish? >> this was a global fund manager survey for the books. one of the biggest rises ever in global growth expectations. this is a series that goes back to 1994 and we saw the fifth-largest monthly jump in growth expectation in the past

30 years. definitely a bullish survey and for the first time in the past three years positioning is also equally bullish. i would say that the bulls are very much in control and have clearly lead the charge in the past month. lisa: john pointed to this idea that max kettner at hsbc sees neutral positioning and you're talking about bullish positioning. which is it? elyas: you just need to look at a few different metrics across the global fund manager survey to see bullishness is very much spread across the different asset classes. the most important is the cash level, a series that goes back to the late 20th century. that cash level dropped below 4% to 3.9% for the first time since june 2021. we use it as a contrarian indicator when investors are

underinvested in the market, hence the cash level above%. we think that you should buy the market. when it drops below 4% we think you should sell the market. at this stage our cash flow says at this juncture positioning is becoming a headwind. you also look at the cross asset allocation. equities allocation rose to net 31% and that is the largest one-month jump in equity exposure since november 2020. on the other hand we saw a big decline in bond allocation. the largest one-month decline in bond allocation that we ever recorded, and the velocity of the rotation was quite exceptional across markets. em equities were the big winners with a 20 point rise in exposure to em stock allocation. that is related to the china stimulus. lisa: is it really just the

china stimulus that ignited this unleashing of purely bullish spirits or is it a combination of things? elyas: it is definitely the china stimulus but it is the combination of three factors. number one is the conviction regarding global soft lnng remains intact. 76% of investors still believe the global economy will experience a soft landing. note that the balance of risk has shifted to the upside because now the alternative scenario is no more hard landing, it is no landing. the second big reason is related to a big fed cut expectations. investors expect 160 basis point cuts from the federal reserve in the next 12 months. that is in lt market expectation. lastly, the china stimulus, which is seen as a game changer because when you and i met a

month ago china growth expectation had hit a three year low. fast forward to today. they are the highest they've been since april. annmarie: if you are one of the contrarians taking on a hard landing or no landing scenario, what does that mean for trades the investors want to put on? elyas: who are the contrarians today that believe a hard landing is their main scenario and those that would expect no landing to happen in 2025. if you are a hard landing believer then definitely you should go along 30 year treasury. you should give into defensive's, you should pivot into cash and you should cash -- you should cut allocation to equities and risk assets in general. annmarie: what are investors nervous about? elyas: we always ask the main tail risk according to investors. this month it was geopolitical

conflict. they are still worried about inflation but definitely less worried about a u.s. economic hard landing. geopolitical conflict. on the other hand, what would really scare investors is if central banks do not deliver the big easing they are expecting. a month ago we said investors were nervous bulls. now they have just become bulls. it could definitely still be about geopolitics and inflation. jonathan: you can see the bullish shift in the fund manager survey. elyas galou on the big global shift in the fund manager survey. stellantis to halt production and some italian plans in november. this is an ongoing saga in italy where they've already suspended production of the electric in turn. i have some stats for production

in italian plans for the first nine months of the year. down 41% from last year. that is below the depths in 2020. if you pick out current -- if you pick out turin, there slumping 68%. holding production after seeing numbers like that is hardly surprising. lisa: given the fact there is still this overcapacity they are trying to counter and a lot of cost-cutting they may have to do. this highlights how we are talking about extreme bullishness in their pockets of weakness that are structural and cyclical like the auto sector which is a reason why a lot of people are looking cyclically. jonathan: we crunched the numbers at bloomberg. we talk about a third of the plant of the big automakers in europe reducing at have capacity. how much longer can you keep doing this? at some point you have to make a decision about how much capacity you require. lisa: which is a reason a lot of

urgency is being sounded by these executives who are saying we need framework in terms of how much support we will get from the government to continue to figure out a plan that is viable for the longer-term. jonathan: stellantis down 1.4%. let's get you an update on stories elsewhere. here is dani burger. dani: sources say barclays and ubs have been picked as book runners for the online fashion retailers ipo. bloomberg has learned the listing could happen as soon as next year of valuing the company at $65 billion. qualcomm is likely to wait until after the u.s. election before pursuing an offer to buy intel. sources say qualcomm wants greater clarity on what types of policies the next administration may bring on. qualcomm made a preliminary approach to intel on a possible takeover in september. deliberations are ongoing and there is no guarantee qualcomm will decide to pursue and offer.

there is a new man for the top job in english football. former chelsea manager will take the reins of the england national team starting in january. the announcement follows a month-long search after the departure of garrett south gate. the 51-year-old has 111 major honors including the tory 21 champions league with chelsea. -- including the 2021 champions league with chelsea. jonathan: i don't like it and i will tell you why. i think international football everyone should be from the same country. england has done this a few times. italian manager before, swedish manager. i do not think it is the right approach to international football. don't you want the manager of your team singing the national anthem with you? lisa: if they win do you think people care that much? if they really win you can get around. jonathan: you have to win. let's see if he can win. up next, united airlines taking

off. >> one of my takeaways of the industry is there very interdependent. united is pulling a good quarter because other airlines cut back capacity as well. jonathan: the latest on the airline industry, up next. ♪

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jonathan: this just in from oxford economics. "in the event of a donald trump victory the upside risk to the baseline gdp forecast during the next presidential term is twice as great as before because of the tax cuts the former president recently proposed." as for the tax cuts, there are many of them. lisa: which ones?

the tax cuts for chips, the tax cuts if you have a house, if you have a child come if you breathe oxygen? which tax cuts are we talking about. annmarie: the oprah winfrey election, everyone gets a tax cut. what oxford economics is talking about is 50% corporate tax. the issue is donald trump says will only get a 15% corporate tax rate if your company is based in the united states and your products are made in the united states. i've questions about what that means a view of input from other countries. what is the threshold of making something in the usa? jonathan: is all congress dependent. united airlines taking off. >> one of my takeaways of the industry as they are very interdependent. united is pulling a good quarter because other airlines cut back capacity as well as united. as long as they are following a similar script and following

similar market signals it will work out. they are all benefiting from slightly lower fuel costs which allows them to lower oil prices without eating into profits. jonathan: united airlines authorizing a 1.5 billion dollars share buyback after reporting a beat on third-quarter results, signaling the company is recovering from steep ticket discounts that squeeze many carriers. citi writing in light of the near-term interplay, the industry's capacity growth moderation is likely not finished. this moderation continued positive demand and lower interest rates points to a good entry set up in q4. stephen is with us around the table. let's focus on the q4 set up. from a capacity standpoint, how much has happened over the last few months? stephen: you have had a lot of capacity coming out, primarily from the discount airlines.

post-pandemic there has been a big structural adjustment, a big wallet shift towards the network airlines, delta and united and one or two others. when we think about the capacity coming out, some of the discount carrier should be flat or even down in q4. the set up looks very good for next year if you are on the network side. jonathan: can you explain why the beneficiaries are united at delta? stephen: on one level, if you look at what is happened post-pandemic, a lot of consumers are no longer five days a week in the office. that has changed the way consumers behave, including the way consumers purchase tickets. a lot more blended travel than there used to be. at the same time that has occurred we do not have the air traffic control capability. you have aerospace supply chain delays.

we do not have the equipment. given the dearth of new equipment, long-term basis we have learned things about how this will affect capacity and unit revenue if you are a network airline, that is good news. you can put in a price. if you're a discount airline used to getting high volumes and high utilization, that no longer exists. jonathan: blended travel. i cannot let that go. his blended travel people expensing vacations? is that what is happening? stephen: i may be don't want to put it that way. jonathan: they are going on a work trip paid for by their business and they are turning it into a vacation on the back end? stephen: you go to a conference monday through wednesday, thursday through friday you of something else to do. you are already there and you are not necessarily in the office five days a week. it is conceivable your employer

or your customers at least partially paying for that trip. if that is the case, nobody wants the cheap seat. we want a nice seat. lisa: eric resnick called it bl eisure. jon, i am sure you'll will be doing a lot of that or else you will be resentful. jonathan: i am certainly resentful. annmarie: he is talking about staying in davos. lisa: is united's gain all of our pain? are ticket prices going up? stephen: i think over a long-term basis the global aerospace supply chain issue is far from resolved. are we going to have enough new equipment as we had pre-pandemic, which allowed for a lot of cheap seating. i think partially that, and

possibly folks from lower socioeconomic strata travel less than they used to. annmarie: are airlines just blaming weak demand with the election like other companies are saying we will wait to see the outcome of the election, or will they show up in the data? people do not want to travel during election period? stephen: we are hearing that this is already showing up in the curve. i can say personally, i postponed an international trip because i wanted to be here. a lot of people want to vote and then they want to snuggle in front of their favorite cable news to see what happens. people do not want to be out of town for this. that does seem plausible to me. jonathan: you think that is event risk that clears regardless of who wins or is it outcome dependent? stephen: i don't think it is so much outcome dependent. i think regardless of who wins and heaven knows how quickly we will know who wins, i think

people get back to business relatively quickly and we get back to the pace of travel. jonathan: back to blended business. stephen trent of citi, of that. did not know that was a thing. lisa: bleisure. jonathan: how have i missed this? lisa: you just go for a couple of days. annmarie: you've not tapped on a day on a nice trip? jonathan: people do that at this company? lisa: are you going to troll us all day? jonathan: what have you started stephen? stephen: i love it. jonathan: the next hour bloomberg surveillance, these two might not be here anymore. coming up, truest will blend t business this morning. gerard of rbc will join us and the outlook for fixed income. all of that and more coming up next. ♪

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>> it continues to be a supportive environment for nominal growth and that is an environment that is supportive for equities. >> i do not think there is anything you would absently want to stay away from. >> financials have done very well. >> i think the banks will send us to a more positive 2025. >> this is "bloomberg surveillance" with jonathan ferro,

lisa abramowicz, and annmarie hordern. jonathan: lisa would like management to know that blended travel is better for the environment. combining work trips with vacations. lisa: you reduce emissions. jonathan: i will not argue with you. equity futures on the s&p 500 look like this. just about positive after snapping a two day winning streak. we will get to the chipmakers in just a moment. the week ahead looks like this. 7:30 eastern, we round out the numbers on wallsteet and get morgan stanley. lisa: so far the read across wall street has been positive. we have seen beats across the board. investment banking we saw huge beats at goldman sachs in part because of the competition and working in tandem with private market companies. at the same time it is wealth management. how much are they capitalizing on the behemoth platform? jonathan: banks have been ok in the last when he four hours with

maybe the exception of citigroup over the last -- with maybe the exception -- over the last 24 hours with maybe the exception of citigroup. asml got hammered in the last session. they came out with earnings yesterday on accident and the numbers were not good. big downside surprise. lisa: it came along with borders -- with orders coming down about half of what people in the market expected. much of this is a lack of demand for industrial and auto chips? how much of this is because of exposure to china, especially in light of geopolitical tensions. annmarie: the cfo comes on the call and says we see china normalizing and that will be 20% next year. this is when you look at the analyst calls were looking to china. coming out and saying there is uncertainty, we have to look at clarification that china demand is expected to normalize and how much more difficult as the china demand get depending on what

happens november 5? jonathan: this story took down the video yesterday, down more than 4%. that is a $160 billion move on nvidia. this morning up .6%. lisa: i'm glad you put it that way. $160 billion and people shrugging off. what led to this level of surges and plunges in some of the biggest names, you have to wonder how much that volatility could spur a larger move. we've been asking that question repeatedly. jonathan: tried to find a little bit of stability this morning. equity futures unchanged. in the bond market, four weeks of yields climbing on the tenure. this week we are pulling back just a touch. 4.01%. coming up we catch up with keith lerner of truest. charles merce of sigmund trouble -- global advisors and gerard cassidy of rbc. we begin with stocks looking for

a firmer footing as earnings from asml spooked tech investors. the manufacture of the world's most advanced machines booking only half the orders analysts expected and cutting guidance for the year ahead. joining us to discuss is keith lerner of truest. this market was spooked yesterday by the one damon by those earnings. how spooked were you? keith: i don't know that i am spooked. it was a bad print as far as earnings. the market keeps changing narratives. you look at the broader market. one month we are too slow and headed to recession from the year. the next month we are too strong. with the chips it is similar. two weeks ago we were talking about macron talking about how much demand there is for memory and up in the forecast and the stocks jumping. context wise, nvidia since early september, after that selloff was up over 30%.

semiconductors up over 20% and then you have this print and we know now asml biggest customer is china. i do not want to be complacent about it but i am also trying to put it in context. especially on the ai side there is still a lot of demand. one more comment is a couple weeks ago we were talking about elon musk and larry ellison fighting over nvidia chips. just some context. jonathan: you are right. nvidia have talked about massive demand and you are right to identify china. lvmh earnings, a big downside surprise. sales not great in china. as people get excited about investing in the rest of the world, when you think about where your bias is, and i'm going over details of your position, you maintain a bias to large caps, are those in america? keith: we have been team usa for several years now. we are still there.

on the margin emerging markets -- we moved out of emerging markets completely over the last couple years and that has been the right move. the upgraded emerging markets recently. still not overweight. if you look at the rhetoric out of china, i think they will continue to support that stock market. it got overheated. you went up 50%, now you are down 15%. i think we will get more news and i think they will support that market. they could picture we are still team usa. i'm just making a reference to a subtle change. lisa: we were talking about the bank of america fund manager surveys and the three pillars supporting the bullishness that has seeped into the market. one of those was the china stimulus and yet there is a really concrete question about how much any stimulus will even trickle into the global market

versus staying in china. how much can that be a pillar of optimism for u.s. stocks? keith: we do not need the growth for the u.s. markets to be in the grateful market. i think the reason stimulus is the defense moved by the government. it is the most massive stimulus we have seen since the pandemic. i think people are looking for shifts already. the stimulus acts with the lag. i do not think it will be a big global stimulus -- i think it will be much more focused on stabilizing the local economy, helping the local stock market. when people think about the stimulus, i do not think it is the stimulus we are accustomed to in the last two decades. lisa: in the meantime we were talking about the swings we have seen overnight, not just in asml but also nvidia and the fact you are seeing a $160 billion move on any given day, not

necessarily on anything related to that business gives a sense of how jumpy specific names have been. how do you play that, specifically if you have a bullish take? at what point is it -- at what point is it concerning? at what point is it a buying opportunity? keith: we were overweight tech most of the year. we downgraded in june. in august we added back. we are still positive on tech. we do not think we are in an ai bubble. with semiconductors, they had a big move in a short time. we are staying with that trend which we think is up. we focused a lot on the forward earning estimates for the quarter and also the industry. so far they are stronger than the overall market. where we would change our tune is if we see that rollover. we have not seen it at that point and i do not think asml is enough to change it. jonathan: this bullishness hit a bit of a wall in the last 24

hours. i've identified a lot of bullishness from some of the guests we've been speaking to. you hear from jonathan golub at ubs. it is a move to the upside in terms of their price targets. this is from the bank of america fund manager survey. the biggest jump in investor optimism since june 2020 on fed cuts, the biggest jump on a global growth expectations since may 2020, the biggest jump since june 2020. this came from jonathan at btig. fear of downside has left the building and fear of missing upside is front and center and yet we think now's the time to look at downside risk. i notice a very short time horizon. going into the end of the month and november, how are you thinking about how to position? keith: i think time frames matter. i agree that sentiment is a bit of a risk short-term. markets are all about how things

come in relative to expectations. expectations have increased. you are seeing that in the put to call ratios which are the lowest level since july. i will not mention the global fund survey. june 2020 was not a bad time to invest. on a short-term you had a 4% to 5% pullback on that period. that was the early stages of a bull market. the way i would think about it is on a short-term basis, may a little bit extended, maybe hiccups around the election, but i would think that would be contained in the 5% to 10% side and keep the focused on the underlying trend which is positive. this is the strongest election year we have seen for the stock market since the 1950's. normally if you've been up more than 10% heading into the fourth quarter you've been up every time. small sample. i would say stick with the primary trend. if we get some hiccups i would use that as an opportunity to add. lisa: how much does the gain in

stocks, the pain of bonds when there is an inflionary question mark underpinning all of this. how much are you betting on that in terms of the allocation to stocks is because bonds look less appealing? keith: bonds have acted pretty well this year. they've been acting more like a diversifier. for the stock market to do well bonds can be stable. our work suggested fair values are right around where we are in the 10 year treasury right now. i think there are still value in bonds from a diverse of a patient standpoint, there is still decent income. where we would get more concerned is if we see yields move back up above 4.50, credit spreads moving out, that would be the concern. where they are today is not a major problem and we still see relative value in the equity market because of the economy stays more resilient that should

lead to corporate profits moving up. that has been the most stable thing in the market. the earning transfer corporate america have been the most stable part of this market. lisa: there has been a lot of bullishness around this table and it has been growing. this from barry bannister to give contrarian thought, saying the s&p could gain another 10% this year but then will plunge by 40% by next year because, as he said, there is a cost to so much winning. as you take a look at valuations they are starting to look pretty heady. at what point do you get concerned by valuations in and of themselves? keith: barry is a tremendous analyst. we are not in that camp. when we look at tenure rolling returns or five-year rolling returns, not extreme. valuations are a tough thing. valuations have changed over

time because the tech sector is now 30% of the market. if you look back at 1990, the s&p tech sector was about 6% and that is where the valuations have expanded. on the same token that is where the profit margins are. as long as the economy continues to move forward and we can sustain higher valuations -- the way to think about valuations is it likely caps the upside. some of our long-term work, we think long-term returns are below average. on a short-term basis it difficult to use valuations to say were the market is going to be. jonathan: would love a final word on the banks and the financials going into morgan stanley in about 20 minutes. what is your take on the earnings season so far? keith: you will make me look bad in front of the morgan stanley print? i am just joking. i like the financials, credit seems like is doing well. they just broke out from a technical level.

we like financials as well as technology and utilities. jonathan: appreciate it. keith lerner of truest. i've no knowledge of what those numbers will look like so you may or may not look bad. with your bloomberg brief, here is dani burger. dani: vice president kamala harris is leading in political donations but former president trump has picked up some big-name support. elon musk has poured $75 million into the super pac he created earlier this year. billionaire marion adelson added 95 million dollars to her super pac supporting trump and venture capitalists each donated 2.5 million dollars to pro donald trump super pac according to the latest filings from the federal election commission. qualcomm is likely to wait until after the u.s. election before pursuing an offer to buy intel. sources say qualcomm once greater clarity on what type of policies the next administration may bring on in terms of antitrust and china relations.

qualcomm made a preliminary approach to intel on a possible takeover in september. deliberations are ongoing and there is no guarantee qualcomm will decide to pursue and offer. the nfl and jay-z are extending their partnership. roger goodell said of the leak will continue to work with jay-z's entertainment company to produce the super bowl halftime show. they struck a deal in 2019 to spearhead and advise on the selection of artists for the nfl's temple performances. rock nation also helps the leak with its inspired challenge program, the leak social justice program has given out $75 million in grants. jonathan: up next, economic media blitz. >> black families are 40% less likely to be homeowners than white. and homeownership is one of the surest ways to build intergenerational wealth. jonathan: more that conversation up next on the program. live from new york city, good

morning. ♪

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the answer is j.p. morgan wealth management. jonathan: from to the program. equities firm or almost .1%. under surveillance, economic media blitz. >> it should be the most -- to me the most beautiful world in the dictionary is tariff. it is my favorite word. it means public relations -- is the most beautiful word. thousands of companies coming into this country. we will grow it like it has never grown before and we will protect them when they come in because we will not have somebody undercut it. jonathan: donald trump defending tariffs on the campaign trail.

meanwhile vice president kamala harris wrapping up outreach to black male voters. >> my agenda is about tapping into the ambitions and aspirations knowing folks want to have an opportunity if they want -- they should have a meaningful opportunity to build wealth, including intergenerational wealth. black families are 40% less likely to be homeowners and homeownership is one of the surest ways to build intergenerational wealth. jonathan: tonight harris sitting down for her first formal interview with fox news. kailey leinz joins us for more. let's talk about that key demographic for democrats. what can she do to regain some of the support they've lost over the last few decades to be honest, going all the way back to barack obama? kailey: it is an excellent question and you are seeing it borne out in the data that this is a problem area for democrats. kamala harris has the support of roughly eight in 10 black voters, up from the 74% joe biden had when he left the race.

in 2020 joe biden got 90% of that vote. there is still a big gap in the terms of turnout for a democrat versus the sentiment around a democrat. black men are a big part of that. we h seen more successful outreach done by the republican party that key demographic. i was speaking with quinton james who runs the collective pack focused on electing lack leaders to office. she says this is an economic problem. black men want to be told how the economy will become better for them. that is how you are seeing harris target her course correction around issues of the economy. in that show charlamagne tha god yesterday she talked about reparations that could be paid to back people -- to black people also need to be studies. she is also put out policy proposals for small business loans. also crypto deregulation and federal lysing -- legalizing

marijuana on the federal level, all component of this reach out she is doing to this very key group. annmarie: we also see her tonight with bret baier. she is going after those more moderate or leading to the right. how much is the gender gap also impacting the decisions kamala harris and donald trump are making in terms of what interviews they decide to do and who they decide to sit down with? kailey: the gender gap is wide in this election. women are far more likely to be supportive of harris and men more likely to be supportive of donald trump. you see that in the media strategies, including both candidates. kamala harris interview not just yesterday but howard stern show last week, trying to expand her outreach to men. donald trump did an all woman town hall that taped in georgia yesterday and will air fully at 11:00 a.m. eastern times were he

did have to feel questions about reproductive rights and where he sees some states are being too tough on abortion restrictions. in some states those restrictions would need to be redone. that is part of a softening in the stands we've seen from the republican ticket as a whole, not just donald trump but his running mate jd vance who said republicans need to gain back trust on that issue. it was during that debate that donald trump posted on truth social to say he would veto a federal abortion ban. that is how he's tried to pull more women back into his corner. annmarie: is there any justification in data that shows that is working, this nuanced and potentially moderated tone the former president is taking when it comes to reproductive rights? kailey: voters are still overwhelmingly saying it is harris they trust more with reproductive rights and therefore more likely to say they trust donald trump on the economy and immigration. those have not budged much

although we are seeing some movement on the margin. we have seen harris getting material ground from where joe biden was. there are some specific issues like helping the middle class where she is been able to outpace donald trump including in her own polling with bloomberg. when you look at polling as a whole, not just on the issues but where this race stands, we have seen a material tightening in recent weeks, including a national level polling which shows this is still an can grace as we knew it would be but we are well within the margin of error and it is getting very close and the key states that ultimately could decide this. lisa: we have talked about this extensively. i don't feel like i've gotten a clear answer. we have seen a momentum shift and prediction markets and there is a tightening in the polls. can you point to anything, a particular issue or region that seems to be leading that? kailey: i don't know that there is a particular issue. something i've been discussing with strategists is there have

not been many clear catalysts. if we consider kamala harris's campaign which launched like a rocketship once joe biden left the race in terms of fundraising and how immediately she was able to jump where joe biden was in the polls. her candidacy large followed shortly by the selection of her vice presidency and shortly after that the democratic national convention in chicago and after that a debate against donald trump. that was in september. since then there has not been any catalyzing event against that. that should be a factor as we are not likely to see a debate between the candidates until they are forced to ground their own media attention. that is why we see them picking up the pace of interviews on a variety of idioms over recent weeks. lisa: you mentioned with donald trump a question around reproductive rights and his appeal to women. what issues are you expecting to hear from kamala harris tonight in her interview on fox?

kailey: i am sure she will impressed on her weaknesses, immigration and the border. she could face questions around what we have seen from republicans, why have these issues not been fixed as she has been vice president. it'll be interesting how she tries to center herself in this interview, operating under the understanding she is appearing on fox for reason. she is trying to reach out to nikki haley voters and people like liz cheney who identify as republicans but do not want to support donald trump. in many of these ideas she will have to moderate herself. those are the difficulty she will face in this questioning as she has not appeared on fox in this election cycle and this is an audience not as friendly to her as some of the other number she has appeared of late. jonathan: appreciate the update. down in washington, d.c., as kamala harris the vice president tries to do something about the blackmail vote which has been weakening since 2008 -- about

the black male boat weakening since 2008, which makes the comments from former president obama who made it sound like the problem was misogyny. i'm sure you can find examples of that. overwhelmingly, the biggest push back to that is that by some measures hillary clinton got more of that vote then joe biden. annmarie: it is unfair to blame it on kamala harris being a woman because it is the democratic party losing black men since 2008. jonathan: it has been a problem building for a while for that party. coming up, join cassidy of rbc. that stocks is up 1%. ♪

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jonathan: equity futures just a little bit higher. a moment and focus, morgan stanley. morgan stanley up in the free market by 3%. this is what looks like. third-quarter wealth management revenue, $7.27 billion. equity trading, beach. investment banking, the. trying to make it easy. when did they at morgan stanley?

>> it is only a little bit of a miss. not only is it a clean read, it is a soaring read. this is a real sweet spot for morgan stanley. wealth management revenue coming in not only above expectations, but those pretax margins handily beating. you also have equities trading coming in well above expectations, fixed income trading as well. even though the number beat expectations, it came in a little lighter than goldman sachs. that competition has been for the stunning to watch on wall street and it will be interesting to see what the ceo says about how competitive they want to get because it is a matter of how much risk they want to take on in these markets at record highs. very little to look down on here. the expense efficiency ratio is better than expected and better than it was a year ago, so they are making more by keeping a handle on cost as well. >> they are talking about having more assets under management, more revenue as well.

one interesting theme that we've seen from all the banks is the increase in provisions for credit losses being viewed as a bullish thing. that they actually want to take on more risk. that they are ready -- anticipating an increasing number of the lincoln season defaults. >> it means the people want to be extending credit at this part of the cycle. you can see it for the corporate clients year, for all the big banks. debt underwriting, just stunning at everyone one of these banks. but you have to wonder if that sentiment about not worrying about provisions will last through the regional banking cycle as well because these clients tend to be wealthier. we talk about the scores of bank of america. even at citigroup they are generally above 660. once you start to get into the players and the riskier parts of the market, that is when the sentiment starts to be questioned a little more. >> we will just say pnc and u.s. bank core have both reported

earnings and beat expectations across the board. some of the smaller banks, those are the top tier of the smaller banks have also been estimates. take a step back. can we still say that morgan stanley and goldman sachs are truly an end in the way that they used to be, or are they different banks with different profiles and different goals? >> i think the market is telling you they are different banks. before we head into the sort -- for earnings, morgan stanley was trading at a higher price jp morgan. what is going on there? people really love morgan stanley aphis part of the cycle and i think it is you saw about a year ago they finished integrating the rest of their wealth businesses. they headed down for the staff when you think about the wealthy clients they've taken on, and what can they do? what i'm understanding is they can lean into that wealth management business to also drive more investment banking revenue. if they can catch up goldman sachs, game on. jonathan: stop down by almost 3%

this morning after rallying 20% through yesterday. is he putting his stamp on this company now, on this fate? is he getting out of the shadow of james gorman? >> it took a couple months, but that is kind of nothing after james gorman's legacy. you do see these numbers coming in superstrong. some questions i have are around how sustainable this is. these are really good numbers and at the end of the day, we are looking at hedge funds sitting at near record leverage. can they keep doing that to drive the market higher? jonathan: looking forward to this conversation a little later. doing this now, gerard cassidy of rbc. that wraps up the earnings on wall street. let's sit on morgan stanley for a few beats. a number of beats. a few upside surprises. what do you make of what is behind these gains from the likes of morgan stanley, are they durable? do you expect tailwinds to stay with these companies into 2025? >> i think so because when you

take a look at some of the lines of these companies in particular, the ecm business as well as the advisory business, as david solomon from goldman sachs pointed out, we are still below the 10 year averages, so particularly in ipos. if the fed is truly going to continue to ease between now and the end of next year, we are in the soft landing, as i think you know. this sense of very well for the investment banking business, especially on the ipo business and possibly in the mergers and acquisitions, higher rates have really put a little cold towel on that as well as regulatory concerns out of washington. lower rates should help mergers and acquisition market in 2025. >> what do you make of the increase in revenue that we see from trading as well as banking at a time when a lot of people said that is an area that needs to reignite? you were talking about the regulatory regime in particular, some of the dampened ipo activity.

how can we understand the incredible beef that we've seen across the board? >> part of it is that when you take a look at the trendlines, the trendlines for 2020 and 2021 have been generally lower, as you know, particularly in 2023, and things are starting to come back. on top of that, big amount of liquidity in the markets is phenomenal. when you think back to what the fed did during the pandemic, they took their balance sheet and $9 trillion. they've grown it down now to just over $7 trillion, but that is well above where we were pre-pandemic, around $3 trillion to $4 trillion. there's plenty of liquidity out there, asset values are going up, and you are seeing it in the numbers both in fixed income and equities. the investment banks pointed out that after the fed funds rate cut, they really started to pick up in dcm activity, which then led to probably better fit activity as well. >> this is the big banks, but

not necessarily the smaller regional banks, and i do wonder how much we are also seeing the outperformance and smaller banks, in regionals. from your perspective, are you seeing better-than-expected performance the likes of pnc and u.s. banks as really highlighting what a different scenario we are in right now? >> we did see better-than-expected numbers for both those banks as you pointed out, and a slew of regional bank report over the next two or three days and into next week. we do expect to see a continued better-than-expected performance, and the real key is going to come at the fed continues to lower short-term interest rates. as you know, funding costs are going to come down. funding costs went up meaningfully as rates went from zero to 25 basis oyster over 500 basis from the beginning of 2022 through the middle of 2023. asset yields will come down, but

not as fast as funding costs, so the regional banks which rely on that interest income to a greater extent than the diversified banks should do quite well in this environment over the next 12 months. jonathan: shouldn't that also benefit bank of america, and i'm going to raise a very dangerous question. what is warren buffett actually up to in an environment that the stock should do well in? >> it's an interesting comment because profit has made an enormous amount of money when you think about when he put that first investment in back in 2011. so when you think about how much he's made from then to where we are today, if you look out over the next two or three years, will he make that kind of return? probably not because he got in on such a low cost basis back in 2011. so i just wonder if it is good old-fashioned profit-taking. obviously we don't have a call to him, they don't disclose why they sell stocks, but you have to wonder if that is the reason

for the sales. >> yesterday we heard ceo's talk about strength when it comes to u.s. banks. the first adjective these using is strong. but there any weakness that you were seeing in any of these big banks? >> the short answer is no. there is still the concern of commercial real estate office, so we should not overlook that. when you think about that area in particular, from the end of the pandemic to today, the deterioration has been meaningful and noticeable. the good news is that the urban office markets, the banks don't have overexposure, particularly the smaller regional banks. we are not out of the woods in that area. so that would be the one area that we would continue to monitor and watch the banks. many of them has reserves to those office commercial real estate portfolios that exceed 10% in credit losses, which is very meaningful. that would be the area where the

early innings of working that problem out but last another two or three years. but again, we think it's very manageable. >> i have to say there's always a spectrum, fear as well as three. with the increase in credit provisions, you have to think at this moment based on some of the commentary around that credit provision builds, this is more -- i don't want to say greed, but the desire for bigger returns, the desire to lend. how much is this a signal that credit is going to listen dramatically? that is going to trickle into consumer loans and a whole host of other types of lending activities. >> i think you're onto something because two things have happened. first, if you look at the senior loan officer survey, back in 2022 and the rates were moving up very rapidly, everybody was expecting recession in 2023 and the banks tightened up their lending standards. they build up their loan loss reserves in anticipation of a

recession which i would never showed up. but also, you might remember basel three endgame, that proposal came out in july of 2023. that was going to require banks to carry much more capital. you might remember the expression asset diets that even jp morgan talked about last year and the second half of 2023. so now with the new endgame that hopefully will get the numbers by the end of this year, the expectation is a much lower capital increase. so the banks at plenty of room to lend. they see the economy looking better. i think the surprise next year, to your point, is that we could see better lending particularly in commercial and industrial lending as companies start to build out inventory, take on capital expenditures and the commercial banks will be beneficiaries of this. jonathan: appreciate your contribution as always. they banks on wall street as morgan stanley wraps things up. that stock is up in the premarket by 1.6%.

the u.s. has a new for israel. biden administration saying it may withhold weapons to the country if the humanitarian situation in gaza does not improve. a letter to israel's defense minister calling for a minimum of 350 trucks of aid into the gaza strip. >> what is interesting about this as we heard from one pentagon spokesperson who said we didn't mean for this letter to get out. so clearly they didn't want the world to know about what was going on in terms of basically this idea that potentially but they are insinuating is they may withhold some weapons if israel doesn't get the age through. also they said they have 30 days. that brings us to after the u.s. election. my view on what this administration has been doing in terms of how they have this carrot on a stick approach for israel and other foreign policy issues as it feels like they are just treading water to get over november 5. >> which really is the reason why, expression of how perilous

an couple of months will be from a geopolitical standpoint. there is this perceived vacuum of leadership in between the election and whoever takes office in january. >> we still really don't know how israel is going to respond to what has been an unprecedented attack. not long ago these were red lines, this was a big deal. still a big deal. >> this past year's told me is that constantly, red lines have evaporated. not just one iranian attack on israel, a bombardment of missiles. but april, most recently a few weeks ago, also that has never happened before. so we are really in almost a whole new fragmented geopolitical world just in the middle east itself. >> that region has changed a lot in the last 12 months. here's the latest from the airline business. united airlines beating wall street profit expectations for the third quarter, authorizing a new $1.5 billion share buyback. more airline earnings ahead this

month including american southwest and jetblue. some of these airlines, not these are lines, have produced a lot of capacity, and these are going to be the ones that ultimately win out because of it. dark out and to me, the lines. prices are going up again. airplane prices are going to go up the people who can't afford to fly, and those who can probably aren't going to fly and that is where you are going to see lower income airlines that you so well. the glut and the pressure from competition have been alleviated, which basically means you should expect to pay more. >> i thought it was just an excuse that airlines are going to lose some demand because of the presidential election, people want to stay home. but even air the analyst is telling us i am forgoing an international trip because they want to be in the u.s. to vote and snuggle up to the news and the press. >> less blended vacations, apparently. blended trips. >> what is your aversion to it, honestly?

>> i just wasn't aware it was a thing and then you both told me you been doing it for so long. i didn't know about this. if you want to talk about chips, we should talk about chips. chips and trips. global chip stocks under pressure. a tepid outlook spiking a sector wide route of the company cut its outlook on areas beyond ai. market shares extended to nvidia shares. they fell nearly 5% tuesday after reaching a record close just earlier this week. i think you broke down buddy well. there is something happening beyond ai that may not touch the likes of nvidia. and got this big piece of the puzzle, it's china. >> it's very difficult for people to parse through this. intel, they are more exposed to the industrial and automotive sectors fed by chips, and you haven't seen a real revival in that sector. on the flipside, if you have a company with such a dominant market share coming from china, how much are they going to be permanently and structurally

challenged as a result of issues between china's tech world and everything else and the rest of the world? >> for the stock is down, recovering just a little bit. let's get you an update on stories elsewhere this morning. >> airbus plans to cut as many as 2500 jobs at its defense and space division. sources tell bluebird the playmakers attempted to streamline a business that has been racking of charges and suffering from competition. people familiar say that airbus is still evaluating options on how to downsize that business and is in discussions with unions about the job cuts. adidas has raised its profit targets for the third consecutive quarter thanks to a boom in demand for its retro sneakers. it now expects operating profits of $1.3 billion but as you can see, shares remain low by about 3%. investors effected the company to raise guidance after the receipt outperformance especially when compared with nike. shares are up nearly 27%

year-to-date. tom brady has been approved by the nfl to buy his stake in the las vegas raiders. they are buying a 10% stake in the team. the former star quarterback is the only broadcaster who is a part owner of an nfl club. he isn't permitted to attend in person or online production meetings, he can have access to team facilities, places or coaches. he also can't criticize officials or other clubs. jonathan: apart from that, he can do what he wants. what is that about? >> basically a money thing, influence thing. jonathan: up next on the program, staying vigilant. >> we have to merely focus on fully delivering on 2% inflation while ensuring the labor market remains in line. jonathan: that conversation up

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♪ jonathan: no drama this morning. not much of anything. equities going nowhere on the s&p. fx pre-much unchanged. a bit of a bid in the bond market. encouraged by that move in crude over the last few days as well. the 10 year just about holding on to 4%. staying vigilant. >> new progress toward our goals is not guaranteed. so we must stay vigilant. what does that look like? it means continually assessing the economy and balancing both of our mandated objectives. we have to be really focused on fully delivering on 2% inflation while ensuring that the labor market remains in line. jonathan: san francisco fed president mary daly speaking to for ammo looking to insulate the

labor market, investors looking ahead for more clues about the fed path forward. goldman sachs has management writing in their fixed income outlook while the likelihood of a no landing requiring continue monetary tightening is decreased, a sawfish landing has emerged with a new plausible scenario. we got to go there. explain the difference between hard, soft, and sawfish. >> great to be with you. i would say that the scenarios are highly sterilized. is much more nuanced and complex the economy. but one of the things that we did is to analyze all of the potential scenarios, and what are the risks around that. i think relative to the third quarter when we were doing the same exercise, the prospect of a no landing we still have firm inflation requiring central banks to continue hiking has clearly abated. we've gone from talking about easing cycles for now being in one.

that puts fixed income, and then we think about the other scenarios, you do see microsoft landing we look at some of the data today. jobs data has been strong recently, consumers are still spending, financial balance sheet still looking good. but there are uncertainties around the labor market, political uncertainties, geopolitical uncertainty. a soft landing would entail growth slightly above trend and a healthy labor market, a softish landing is growth not a silly recessionary. >> this might be a dumb question, but why is the possibility of a reignition of rope something a positive upside surprise that is more of a no landing the challenges the fed to potentially adjust interest

rates higher, why is that off the table? >> first of all, there is no such thing as a dumb question. that's not off the table. the scenario we still have and what we discussed is a plausible rear exhilaration of the economy, and that could be a function of the fact that the fed is clearly looking to sponsor an ongoing expansion. you have policies coming out of china, easing into the world's largest economies is supporting a potential the acceleration. revive employment, revive growth. the key area where we may differ is the potential inflationary risk. relative to the pandemic shock and energy shock, inflation pressures have become less broad-based. inflation expectations are back and check when we look at our underlying inflation indicator, which tries to strip out a lot of the noise. things are starting -- still looking like they are on track, and we think even in that scenario, you could still see

central-bank styling fact from restrictive toward neutral, and fixed income could still benefit in that environment. of course, we are always attentive to upside risk. it is not limited completely, we just think the potential scenarios are acceleration of hard landing at the tail risk and soft landing at the core scenario. >> i'm also struck by the differentials right now. how much are looking at an ecb that could potentially lower rates much more than people expect and a fed that might have a higher floor for how low they can cut rates? >> that is an excellent point. one of the things we emphasize is that seeing more macro divergence, we need to anticipate that the ecb is going to deliver a 25 basis point rate cut tomorrow. that would be the third in its cycle, and we do think they are going to be on a path of consecutive cuts because you are seeing more evidence of slowing in the economy. we have a current activity indicator which tries to give us a more timely read on growth and

gdp data. that stands at 3% today for the u.s., in line with the annualized growth that we second quarter. clearer deceleration in growth. in what we saw in europe this summer, there was divergence. european countries were boosted by tourism, sporting events, where is he see an ongoing weakness in germany, and i think things are looking much weaker in europe than they are in the u.s.. we do think you're going to see that divergence, something that macro investors are fishing 4, 1 of the reasons we are overweight european rate relative to japan where the central bank is actually going in the opposite direction. jonathan: appreciate the update on the outlook. up next on the program, julie of macro policy perspectives and --

of lafayette college. from new york, this is bloomberg. ♪

♪ >> of the market is underestimating the strength of the u.s. consumer. >> i think the consumer is as

strong as it has been. >> as long as the consumer spending we will continue to have a strong economy. >> it is truly the u.s. that is driving the world economy right now. announcer: this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the third hour of bloomberg surveillance starts right now. good morning, good morning. for the audience worldwide, equity futures here nicely positive, up 1/10 of 1% on the s&p 500 a figure on the rustle up by 8/10 of 1% on the morning so far. vague earnings, so far so good including morgan stanley about three minutes ago. later on this week, that they focus will be on one thing, retail sales tomorrow morning at 8:30 eastern time. the next big check ofe u.s. how this economy is set up going into election month make. you sat down with the san francisco fed president mary

daly just yesterday area >> exactly to that point. when i asked her about payrolls and how messy they could be next month, what she had to say was she doesn't ever place the full emphasis on payrolls, and that there is a broader suite of data including her conversations with people in their districts about what they are seeing on the ground, how difficult it is for them to hire people, whether firing clients have many closer to the desk. in the question about how much of a disagreement there actually was on the fomc, saying there is quite in benefits agreement that might not be reflect simply because people to think strongly enough to really make a point with some sort of tone or dissent. >> she said it was about recalibration and i feel like we all keep using this word. it feels like the new transitory of this fed right now. we calibrate to get to neutral. when it comes to jobs, new report ahead of tomorrow's jobless claims, it'll probably take at least next to reports to shift the narrative back toward risk of a downturn.

weekly jobless claims data which showed layoff in ohio and michigan remain in focus in the near term. jonathan: we are getting a read on the chinese economy the last 24 hours. five-day losing streak in paris trading. down another 4% or 5% just this morning. down by almost 16% and down again on the day. >> there are two points about this. just how connected are some of these particular european countries and the european companies to what is going on in china. taking a step back, it's also highlighting potential depths of how much of a downturn there wasn't china going into the stimulus and just how much that is going to help support companies around the world. jonathan: coming at this hour, we will catch up with sam as chipmakers slam the brakes on the recent stock rally. we will speak to howard on a trump 2.0 economic policies, and

the fed data predicament. we begin this hour with start looking to recover following a shakeout in the tech sector is much weaker than expected earnings from europe weighs on investor sentiment and triggers a selloff in chipmakers around the world. sam, give us your thoughts. is that the asml problem, or a broader tech problem? >> i think right now the expectation is it is more of asml problem. certainly when the expectations have been as robust regarding the semiconductor chip area as well as the area, with the bar being set fairly high for these groups, i think there is the likelihood that there can be some disappointments along the way. yet we still believe that 12 months down the road, technology in general, semiconductors in particular are likely to be market outperformance. jonathan: i can think of one specific example. it doesn't take a lot to spook

nvidia. yesterday was no different, start down by almost 5%. that they $106 billion new. that's not nothing. when you look at that name, close to an all-time high still, we had an analyst on the program said yesterday yes the start is at record high evaluations are the key one to stay with the winners? >> i want to stay with the winners, i want to stay with nvidia. we have a fine recommendation, we have a strong recommendation. our belief is that we are going to be seeing some pretty good growth. 38% is what is expected to be shown in this third quarter the semiconductor group within the s&p 500. this year, 52% growth. next year 42% growth. so a lot of the analysts are looking to 2025 and 2026 earnings, which is going to be an additional 20% growth in this area.

certainly the rate of change is slowing as i just indicated. but our belief is that we are still very early in the endings of the sector. >> based on that, can we use these terrible words that people tend to try to avoid? this time is different given the fact that you pointed out that typically when you have a two year bull market, and you do wish the two year bull market happy birthday, the three following years really come with some pretty tepid upside gains. do you think the site is just to summarize what you were introducing we had 11 bull markets since world war ii that celebrated their second birthday. on average the third year market has been up and anemic 2% with three of these 11 falling into new bear markets. two of those 11 posting declines but not enough to be called bear markets, and three more showing gains that are 6.6% or less.

so pretty weak returns. only three times to be have something worth writing home about, and what is consistent this time with those three that did well is earnings growth expectations. 13% plus is the expectation for the coming four quarters, meaning through september of 2025. we are looking at double-digit growth in earnings whereas we are seeing more earnings growth about half of that in the average third year since world war ii. >> i'm struck by not only the tech earnings, people are expecting going forward, potentially expanding some of their lending books, expanding risk as they try to capture on the upside potential there.

>> if they are willing to capture more risk, what it means is that they are opening up the floodgates and little bit more for the middle and the small-cap stocks so that they can borrow and expand their operations because right now, mid-caps are creating a 28% relative discount over their long-term average. small caps trading at 32% relative discount. certainly with us now likely to be avoiding a hard landing, maybe even aborting a soft landing to know landing, that would be beneficial to the mid-and small-cap stocks, especially if they're lenders are more willing to do so. jonathan: this narrative seems to change every other week. appreciate the update. some outperformance on the small caps this morning. the large caps the s&p 500, firm or by just about 1/10 of 1%. this crossover to dani burger. >> morgan stanley shares of three and one third percent in

the premarket. revenue for the bank trading wolf management and investment bank divisions all topping expectations. interest income coming in at 2.2 billion dollars, well above estimates. morgan stanley also reported total client assets have now surpassed $7.5 trillion. vice president harris and former president trump remain in the latest poll. a nationwide survey conducted by mark at, karen sleeps trump 48% to 47% among likely voters. there is a 4.7% margin air. election day is 19 days away. and stargazers are in for a treat this week and this holiday season. halloween season, rather. the supermoon will be one of the closest this year. the supermoon will be 222,000 55 miles away tonight, and reach its full moon her face tomorrow. in addition to have looking bigger and brighter than

previous ones, it will be accompanied by a comment, causing a rare stargazing activity an opportunity for spectators. and that is your brief. >> more in about 30 minutes. next, morning calls, plus howard on trump 2.0 economic policy. must watch. this is bloomberg.

>> equities on the s&p 500 get a little bit firmer, close to 1/10 of 1%. the bond market rally continues. this week they're pulling back, down about 10 basis points, with get morning calls. first up, removing asml from its european focus list saying the 2025 sales outlook now looks to hide. next up, cutting the price

target, setting it's disappointing organic sales declined as stock is down by close to 5%. and finally, barclays raising its price target on united airlines to 75, noting better-than-expected earnings, but morning the u.s. election may hurt demand. sticking with the election, donald trump, the former president defending his economic proposals including control of the federal reserve. trump: i think it's the greatest job in government. you show up to the office once a month and you say let's see. flip a coin. and everybody talked about you like you are a god. i think if you are a very good president with good sense, you should be able to at least talk to them. i wouldn't say make the decision at all. >> from sidestepping what he would replace jay powell before his term expires in 2026. joining us now is the counter fitzgerald ceo, howard let nick also serving as cochair of the

trump transition team. this is a big job and i don't think people outside the united states realize how think this job actually is, so let's start there. walk us through how to take this position is and how busy you might be. dark out the u.s. gets to put 4009 hundred 50 political appointees into the government. 3700 and take the field on january 20, and 1200 go through the senate confirmation process, which takes a long time. dark out so you've got to start thinking about people yesterday, so let's talk about that. last time the president was in the white house he attracted a lot of talent and we can think of several names. in bathroom lighthizer came up in a conversation yesterday. gary cohn is another. some of the nominations for the federal reserve. how do we get one and attract the talent but avoid the churning at the same time? i was the approach going to

different this time around? >> remember, last time he was a freshman. and so he acts a certain way. now, complete experience, complete knowledge. knows exactly what he wants and how he wants to do it. so what will happen in you will see the greatest set of talent ever walk on the field on january 20. you never seen anything like it. i've talked to probably the top 150 businesspeople across the u.s., probably the top 50 political people, and they analyzed everybody. i call it genealogy. it's 200 people, they then recommend and that's for everybody. you have to bounce for them and say i know them, i've worked with them, and then they vouch for it and it like that. so we have 5000 people already that we know who have been vouched for by the greatest people. you got ross perot in energy,

chuck schwab doing finance. and everybody, they are helping, building and creating for donald trump the greatest group of people who will ever walk on the field for ministration. i spent sunday, two hours with elon musk. i mean, i put out a tweet talking about what we did. you know, i'm a social media star, of course. 43 million views talking about how we are going to pay for everything the donald trump talks about. he is going to take $1 trillion out of the budget deficit a year because we waste. we have a $6.5 trillion budget deficit. $6.5 trillion budget. can we get back to the experts, to they have to agree with everything the former president says? >> if you think of it like a ceo of the company, if the ceo of

the united states of america. let's call it united states incorporated. you can argue all you want, but when the boss says this is what we are going to do, do you have a problem doing with the boss is you're going to do? you can quit or you can execute the plan. this concept of doing what you want to do because i don't think he is right, you get fired in america, you get fired at every company. the fact that all these people be fired in the first term saying i don't like him anymore, it's a famous disgruntled employee. let's call all the disgruntled employees and what are you going to get from them? i don't like him anymore. >> you said we are going to give people the role based on their capacity and their fidelity and loyalty to the policy as well as to the man. is that hate you run your company? people have to be loyalty you? >> absolutely. imagine working at fitzgerald and saying i am better.

how about all of you look at the screen and say to heck with mike bloomberg, let's see how that goes. >> can they disagree with you? >> you must disagree, but that is called challenging conversation. that is with the oval office is all about. donald trump loves conversation. he loves to get all sides of the idea. but then you make a choice and you go with the elected president of the united states of america, killer mike bloomberg goes. you go over have a lot wanted to go. anybody who says otherwise, i don't even know what they're talking about. you follow the man, and you follow after the conversation, but you have to remember this. jonathan: let's talk about it just a little bit more. he talked about how many people you had discussions with. how many of them will come from private industry, and that going to be a big emphasis for you and the team? >> it is.

obviously everything i do, i'm just sort of the mission for the man. let's go get the people who understand business, understand the math of $6.5 trillion, coupled with partners with people who deeply understand government, good, deep insiders of government and together create a team to go take a field together. imagine you spent $6.5 trillion, and we have $1 trillion of waste. elon musk and i, $1 trillion of waste and that hundreds of billions of money we could make. you heard donald trump talking about tariffs. $500 billion of revenue. >> $1 trillion of waste. what will be cut? >> but will be cut? if you have monopoly providers. for 50 years we buy the same product from the same company.

for 50 years in a row. just imagine nasa for a second. $8 billion human budget. just paying people. jonathan: howard. howard, the obvious follow-up is the follow-up 11 ask. the obvious follow-up that i would have if the same one that i would have for anyone who came from the harris campaign. you had for years. why didn't you do it than? why is there that much more to come now, why didn't this happen in the first four years? >> i don't think he understood the scale and scope of the rot. he started calling at the swamp. we all call it the swamp right now, why? because he called it the swamp. the problem is these employees of the government are part of the business of spending. if i spend, the most we are

going to make in the government is $183,000. i purchased eight and getting this project a $20 billion, $10 billion to these three companies, and they work here for five years, i go to one of those three companies. so they all become lobbyists. all these people. defense department spends $1 trillion and they don't make the stuff. they buy it from other people. >> you said that it's important to have them out of people who are in business come into the administration. a lot of people in business think the plans are going to increase the deficit dramatically. they don't see how this decreases expenses, especially the tariff that could potentially slow international trade, but also the prospect of a lot of tax cuts. what are they all getting wrong? >> the tax cuts are already in the current world. it's just going to make

permanent the 20 tax cuts. so that's number one. number two, he's going to encourage people to build here and pay taxes. let's go over what is happening right now. they make the parts in china. they put the parts together in taiwan, then they wave their magic wand and it floats over ireland. of course it floats over ireland because that's where apple does its parts, and then he comes to america and they make something like 3% profit in america. the corporate tax on 3% profit in america. and ireland announces a massive surplus for their 5 million people. ha-ha. it's just not true. have them pay their taxes in america and that is how you fix america. you make it fair, you make it right, and you build -- jonathan: so no exceptions for apple, no carves out for apple? >> i spoke to elon musk in i

said if we do this correctly, tesla is going to have to pay more tax. utility said? >> if everybody is the same, that sounds great. i can't do it differently at tesla at other companies are doing it but if we are all the same and we are all paying a fair tax, then i am all for it. i think everybody is all for it. you've got to get rid of the arbitrage. why is ireland announcing a surplus? give me a break. >> 50% is the corporate tax rate if you build here. 100%. any inputs from other countries? what is the nuance? >> i spoke to a manufacturer says he does 50%, 25%. how do we do it? the chinese backed companies that cover the tariff, he will be at a disadvantage. and we came up with this idea. if you build it here within two years, you can have a tax credit for any tariff you pay, as long

as you move your plans within two years to america. you can have your money back, but building here. american workers just haven't gotten a fair shake. american worker life expectancy is seven years less if you don't have a college degree then if you have a college degree. how is that possible? if you gut the factories and take jobs away, it is despair. it is despair. it's not the air, it's not the food. it is despair. finally donald trump a saying i'm going to take care of the american worker and anyone who comes up with this nonsense that it doesn't work is just not actually seeing it. >> one thing that a lot of business leaders are concerned about is they need stability. they need a sense of what the policy is, of what the legal system is going to be for them to operate their business. one of their biggest fears right now with donald trump as they are not going to have that certainty with things being used as potential carrots or sticks to try to reduce certain

policies any lack of understanding of what the structure is. how do you counter that? >> i counter it with basically straightforward but protect the american workers. let's build in america, let's make it fair so the arbitrage were apple doesn't run other profits through ireland. pay american the money. i think america can increase its revenue $250 billion a year by paying attention to the nonsense that corporate world does on global protection -- production. it's nonsense that ireland makes money. it's nonsense that you build cars in mexico. it's nonsense. when the nonsense ends, you will be shocked by how great america is. you take $1 trillion in waste out and you focus on the country fairly. you're going to have the possibility of balancing the budget of the united states of

america. no nonsense. i'm not making up baloney. elon musk and i, if you don't respect the two of us, good luck to you. it can happen because he's focused on not wasting the vast waste that is our budget. >> that would be a big hole to fill in quite the accomplishment. we could talk about this all morning. good to see you. spirited conversation as always. up next on the program, and look ahead to retail sales. from new york city, good morning. morning. no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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♪ >> ramping up earnings on wall street and basically no drama across the board completing things this morning. equity features on the s&p 500. one hour out from the opening bell, firm or buy 10th of 1%. also doing quite nicely this morning, small caps up by 910 of 1%. 60 minutes until the cash open, let's cross to dani burger. >> let me show you exactly with morgan stanley is doing this morning. beats across the board, investment banking, trading, vic reynolds rule. wealth management also coming in strong. over $7 billion in revenue.

$7.5 trillion in assets for morgan stanley. another strong result from the bank. also tracking this morning, intel to the downside, down nearly 1.5%. back in september qualcomm made luminary approach about a takeover of intel with all of its struggles. qualcomm now according to sources says it wants to put a hold on this until after the american presidential election. if unsure about antitrust, about relations of china. so the way is "on hold until down. finally, the biotech company, a huge decline for them. one of the biggest, 15% or so. they had a clinical application in for a combination fluent covid vaccine that is now being put on hold by the fda because someone suffered what was called a serious adverse event related to a motor neurological issue. the chief medical officer of novavax says he doesn't see any causality between the trial and that serious adverse event and

is going to expedite getting the fda the information to that trial back up again. jonathan: appreciate it, thank you. this time tomorrow we will be looking at one thing. one is retail sales, the other is jobless claims. looking for clues on the health of the u.s. economy and the fed's path ahead. that speaker since the better-than-expected september employment report have expressed no regrets on the initial rate cut, expressing the need for recalibration. the fed's right to recalibrate when times are good rather than wait for mass layoffs. welcome back to the program. it's been far too long. how much lower do you think the bar needs to be reset going into november? >> i feel like a 25 basis point rate cut by the fed in november

is pretty much -- i don't want to say lock, but the bar is very high to deviate from that. the data is going to be messy. we all know that it's going to look weaker than it actually is and it's going to take some time to sort out. i think the fed has seen enough in the backward looking data that the economy is solid enough that they don't need to worry about falling off a cliff. but nor is it overheating in a way that they need to maybe consider a pause. we're still 100 basis points are many concept of neutral. you don't need to be in a hurry, but normally they need to be overly cautious or reactive 20 inflation print. jonathan: are you a similar ballpark with you and the team? is that what you're looking for? >> it's hard to calibrate right now. we're still gauging from jobless claims and other words about how

much disruption there's going to be. this very limited ability to see that in advance. it's going to take some time, but certainly given the quality strike which we can calibrate, that sounds about right. somewhere in that ballpark. could be bigger, could be smaller, and then it will wash back in the november jobs report. so we are just going to have to see how that sort of nets out over time >> julia, what are you looking for in retail sales tomorrow after bank earnings that demonstrate just how solid consumers are and the ability that they have to actually continue to lever up? >> lever up is an interesting term. consumers aren't really borrowing excessively. debt to income went down. this is not a consumer that is necessarily the line on that finance spending. i think what we have is a dual consumer, sort of increasing divide in the consumer sector

where you got people that maybe didn't get as big a raise this year. it got a tailwind from inflation but they are very budget conscious. we hear that from retailers, so they are spending very cautiously. and then we got the upper end of consumers feeling really good because network is very high, financial condition by using and there may be spending a little bit more, but they also have the means to do so. on balance you got a median consumer that is probably a little bit more stretched than a year ago. maybe a bit more cautious, but on the other hand, got high-end consumers doing just fine, thank you very much, and that's enough to power the economy forward. so we had a string of very solid retail sales reports. there's is no signs that we are in some sort of imminent collapse. i think expectation for the holiday season tar that it will be fine, not a blowout, not a disaster. so i think the economy is kinder than a good, solid zone.

>> which is certainly what we are hearing reflected by a number of fed members who want to keep cutting rates in tandem with inflation coming down, which really brings me to the question of why do you think that people are so confident about the path of disinflation now versus a month ago? what has changed to make the prospects of inflation remaining at this level for actually to go higher? why is that now off the table? >> i wouldn't say it's off the table, just for the chances of that keep coming down. the composition of inflation, that a president daily noted this yesterday. one area that has really improved this year's super core inflation, particularly in the preferred pce measure the lee has kind of come off at stickiness. it was in a sticky zone, it wasn't clear how quickly that would moderate. we are seeing progress there. we are seeing progress gradually in the shelter component and housing inflation. suggest the composition of inflation looks, better, a lot

healthier, a lot more like it did before the pandemic. and so the risks of it getting stuck to higher just going down. and then if you think about things like commodity prices, look at how many global shots we arms orbiting. one after another. and yet commodity prices, it is the dog that has embarked this year. it has gone up and down, but we are still in the same zone on energy prices we have been all year. yes, there's always risks, but i think a cooling china has really taken the edge off of what we might have otherwise seen in terms of input cost coming through from those global shots. >> we are about three weeks away from the u.s. election, and the big question is the u.s. is on solid footing, but how different are the scenarios in terms of the policy frameworks after november 5? what are you looking for, how different for these two economic

scenarios be according to your models? >> it's a unusual divide. most presidential elections is a little bit around the edges, a little bit more tax cuts. we are talking about a very different scenario in a trump 2.0. some 2.0 would not look like trump 1.0 read the staffing wouldn't be the same, the blueprint for policy is certainly a lot more extreme than what he was able to do in his first term. i see it as a pretty disruptive scenario. his plan is to invoke a global trade war from the get-go, and to turn off that flow of immigration that has been quite a tailwind for the macroeconomy. not only turn off the flow of new immigrants, but even mass deportation of current immigrants, and that really has been the saving grace of the u.s. labor market so under harris administration i think we keep rolling along. it's pretty much status quo.

the composition of congress is going to matter a law either scenario, but i they say trump 2.0 scenario is a much more uncertain scenario, much more disruptive not just for the u.s., but for the global economy. >> appreciate your view, good to catch up. looking ahead to the economic data tomorrow morning, jobless claims at u.s. retail sales with us around the table. good morning to you. you think the fed has got itself in a tough spot. wide? >> they keep talking about data dependency. rates are not 3%, they are close to 5%. inflation is meaningful and not trending lower. worst case it is stable. in that scenario they have plenty of room, so talking about data dependency for the second cut gets themselves in a position that they have no reason to be in. jonathan: we brought of the prospect of this job number being a whole lot weaker and pointed to the fact that the job

number drops in the quiet period. that has been a bit of a problem for this federal reserve. even basically alluded to it that he hopes other people will pick up the mental and explain why the job number is so much weaker than it may well have been. i'm wondering whether he got a problem here and if the problem with the length of the quiet for if they are data point defendant, we need to explain what is actually happening. which one is it? >> this series of data is going to be so messy that they are deriving any information out of it is going to be tough. anyone who comes up for the next lunation is basically trying to come up with something to fit their prize. as how it will play out for them. five think after cutting 50 basis points in the last go around and having laid out a path as to what they are going to do, doing something very different based on this data set i think we'll probably show their muddled thinking more than anything else. >> at this point, does it

matter? is that basically going to support this bidding to equities because ultimately it will show that this is a federal reserve that has a bias toward cutting rates, wants to see a durable, landed economy, and frankly sees a lot of room to cut? >> none of that is wrong. this is a fed which is hell-bent on cutting rates because rates are too high. things are going their way, and they want a soft landing. so if that is how they execute, i don't think you can hold that, hold that against the fed because it is the right policy move in the current context. >> so where is the uncertainty for stock investors? the lack of clarity around the path of travel and where they are going that would make certain data points more than others for people who are bullish? >> the path of the fed over the next few quarters is pretty well determined, given where rates are and where inflation is. what would be uncertain, it

probably is far more uncertain for bond investors than it is for equity investors. i think equities as long as growth is decent, profitability is good in the fed is inclined to cut rates rather than raise rates, i think that path is predefined. if the bond investors we have to worry about, is 4% the right level for bombs in the current context of inflation picks up slightly because of slightly better road and slightly better employment levels? doesn't change the equity outlook, that changes the bond out with meaningfully. jonathan: do you think about it in the context of the u.s. or the global economy? >> julia was making a really good point, the u.s. economy is able to kind of or the markets can drive itself off the u.s. economy because the global shocks are very well contained. that is, there's nothing to be happening in europe, nothing happening in china that is meaningfully different than the trend that we've seen. i think from that standpoint, our markets we can figure out

where they are going based on the u.s. economy. jonathan: the u.s. economy can basically operate as a bit of an island. we are talking about global fixed income market and what happens in europe and china has consequences for where the 10 year yield trades, surely. >> absolutely. if china was going into a deflationary cycle and they weren't doing anything. the path of deflation is much slower than i think we have imagined over the last years. they are not doing much to revive it, for they are doing something. in that context, thinking of the savings glut and taking rates to 2%, i don't think that is in the cards anytime soon. >> doesn't make you very confident being bullish on the dollar? whether that is an increasing focus for people. >> if the u.s. dollar is going to remain strong, it will be because the u.s. economy continues to do well.

i sincerely believe that, because the difference between the u.s. economy and every other large economy in the world is so substantial that in that context, unless we screw it up boiling from a policy standpoint, and the new administration, with respect to the fed, i think the dollar has enough support from the economic picture that we are seeing unfold in front of us. for we are doing is basically nothing. and there is a reason for that. the way you don't do anything exactly expressing a view, which is along with not doing anything, you are not rebalancing. >> are you just holding onto the desk? waiting for it to fall over? >> looking at this free and feeling really good about what the equity market is doing. jonathan: you are allowing the equity portion of the portfolio to take on a bigger role in the overall portfolio.

why are you so much more comfortable with that? >> growth. yesterday when somebody asked moynihan whether a soft and or board landing, i think he was basically saying the same thing for both scenarios, which is i don't think people can view soft landing and no landing. it's the same scenario. as long as they continues to unfold i think we are in good shape. jonathan: we typically talk about 60-40. equestrian what treasuries can provide? ? i think howard answer that question for you when he was here. the planes that they have, if those unfold, the uncertainty with respect to bombs is quite substantial. and i think counting on bonds to provide a significant level of counterweight your equity portfolio, i think cash does much better than bonds in this context. >> for you saying that the re-inflation risk is the biggest

potential risk right now, that potentially is a difficult one to hedge against, other than just going again into stocks? >> i think for bond investors, the reinflation risk is basically non-hedge of the moment. from a short-term perspective, you can probably put on some hedges, but that's not going to solve your long-term political problem that you're facing. jonathan: i'm pleased the surface, and i will tell you why. referred a lot of boilerplate nonsense around the election. a lot of people saying make much difference, stocks go up to the right. i think this is very different. what is on offer here, and i'm not going to say which one is the better one, but there are two very different visions of policy in america for the next 12 months, surely. >> julia was addressing a particular issue. the two policy path a very different. they have the same outlook for equities. they sure as hell are not going

to have the same outlook for bonds. >> with look at kamala harris for the bond market. >> i think kamala harris for bond market is probably not as bad as some for the bond market. if the current set of policies that are on offer get implemented. >> good to see you, useful stuff. with an update on stories elsewhere this morning, here's your bloomberg brief. >> shares of lvmh slumping more than 4.8% in the paris trade. it reported on expect the drop in third or sales and board of an uncertain economic and geopolitical environment. driven by slumping chinese demand. vice president harris is leading in political donations, but former president trump has picked up some big support. elon musk poured 75 million dollars into the super pac he created earlier this year. billionaire million ellison at $85 million into her super pac

supporting trump-pence venture capitalist mark andries and ben horovitz each donated $2.5 million to a pro-trump super pac according to the latest filings with the federal election commission. instead of november can griffin has found a buyer for chicago penthouse at the deal will come at a loss. he selling his 7500 square-foot 384 property for $11 million. he bought the unit back in 2017 for around $21 million. he spent nearly $60 million on the penthouse along with three of the units in the building and what became chicago's largest real estate deal in its history. we will set you up for the day halt -- the day. you are watching bloomberg tv. ♪

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♪ jonathan: 39 minutes out from the opening bell, equity futures shaping up as follows on the s&p 500. just a little bit firmer. yields are lower, 10-year down by about one basis point. down by close to seven basis points in yesterday's session. the move yesterday encouraged by what was happening not just in the equity market, but also developments in the commodity market. monday we were down more than two. >> the real question about what any kind of retaliation would be from israel toward iran and how that would affect the oil patch. and a lot of back-and-forth about is this going to be supply-disruption driven or is this going to be demand-driven? >> at the moment israel is willing to not go after these oil facilities in iran that

immediately pulled the price down, but what did steven put thomas yesterday? basically said you have to wait. there's no basic ending to this potentially, and that could still be another letter the target. jonathan: israel has been going its own way and it hasn't really mattered on many occasions what the united states says about it. the events to look for tonight, this evening, harris sitting down with fox news for the first time ever for a formal interview. must watch tv tomorrow. ecb rate decision, retail sales and weekly jobless claims. and netflix and tsmc earnings, look out for them. friday housing starts and building permits plus more fed speak. next tuesday, gm earnings. wednesday, tesla. we're still digesting results from morgan stanley. sonali basak sitting down with ceo ted pick a 10:30 eastern time.

what are you going to be talking to ted pick about this morning? >> i think about a conversation i had within a year ago and he says he wants to be number one in trading and investment banking and that he's going to be the next cycle. they are telling analysts now the expected capital markets are going to have a multiyear cycle. what could gone up that cycle? how long before you see the richest start flowing from morgan stanley? jonathan: how do you draw a distinction between peer execution in market that seems to be in a better place for companies like morgan stanley and goldman sachs? >> you look at the margins. using their returns coming in higher than goldman sachs, wealth management business getting better. but if you look at the breakdown it is just stunning. in your revenue terms you have jp morgan and goldman sachs coming in about every other bank in every major business line, and the lead is also stunning. so if ted pick wants to be number one, at what cost? the catch-up game could pay some

cost the margin line. >> size might be a piece of it, acquisitions and the timeline. >> perhaps. something we sing a lot morgan stanley already do. they've digested a lot of those acquisitions. you can't imagine them doing another major one and is because goldman, you see how the story plays out. do you want to acquire people or do you want to acquire talent, at this point we are looking at an investment banking cycle. >> we wrapped up the big earnings season. what is the big takeaway? >> there's a lot less fear on the surface but you have jp morgan and morgan stanley. the morgans are coming home, they are both trading at two times. is it bad that it is not even 9:00 a.m. and i'm wondering what the morgan stanley tartare party looks like tonight? that's how well they are doing. jonathan: you're skipping the interview and going straight to the cocktails. >> it's been a long 24 hours per

they have to be celebrating over there. these are standout numbers by any metric. if you are not one of the biggest banks, you are seeing that bifurcation continue on even more. >> good to see you, looking forward to the program. ted pick at 10:30 eastern time. coming up tomorrow on this pogrom will catch up with roscoe strick of black rock, mohamed el-erian, david leibowitz and dana peterson of the confluence board. the conference board, the data coming out of that really important. the labor differential. jobs hard to get vs. jobs plentiful, data moving in the wrong direction over there. we will get thoughts on that tomorrow morning. equity futures on the s&p 500 just about unchanged and the bond market yields just a touch lower. 4.02% on the 10 year. that does it for us. thank you for choosing bloomberg tv. this was "bloomberg

serveillance." where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management it's our son, he is always up in our business.

whenit's the verizon 5g with 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.

>> after a drop yesterday, let's see if we can rally. 30 minutes until the start of trading. caroline: bloomberg open interests starts right now. >> coming up, across the board for morgan stanley in the third quarter. manus: and shift indigestion, intel gets hit with a double dose of bad news and a tepid outlook from asml starts a global rout in the sector. katie: and