After a threeyear closure, the Washington Monument is reopening to the public. The Stone Building closed in september 2016 so the elevator could be replaced and a Security System can be upgraded. The monument averages 500,000 visitors per year. Air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Im shery ahn. Im amanda lang. Welcome to Bloomberg Markets. Here are the top stories we are following. President trump ordering new sanctions on iran following the attack over the weekend on saudi oil facilities. Mike pompeo is now on the ground. Expectations, 25 basis point cut is seen as a done deal and is something investors are watching with jay powell said to andront donald trump ineffective monetary policies. Of a 576 billion bond market is at risk. We will take what credit cards have to do with it. Lets look at the major averages. Ahead of the anticipated cut from the fed, the s p 500 is in the tightest range and about six months. We have utilities moving higher. Everything else is weak. Energy is leading us lower. We are seeing financials right behind it. Techs are providing much support and that is as we are seeing bonds rally globally. For the u. S. 10 year which we have been following, there is huge volatility and the jump in the yield last week, were getting back half of the increase. That a look at this, we have been talking about technical difficulties in the retail market. The fed has intervened. We expect to hear more about this from the fed today. The effective rate is above the upper range and this paints the picture of why the fed needed to act. It raises the question of whether they did so quickly enough. Perhaps they are behind the curve but the fed has a lot on its plate not just the turmoil and money markets but essentially a slowly Global Economy and trade tensions between the u. S. And china. The fed has no control over that. Company that is perhaps reflecting those challenges, fedex just had two their profit outlook. The stock tumbling the most in four years. Down more than 13 . We saw their fiscal year 2020 to 13 earnings of 11 for shares which is well below estimates. Lets look at this chart because it has to do with the Global Economy. And demand for deliveries we are seeing the fedex stock has trailed previous cyclical highs when it comes to those global trade environments. Hass interesting that preceded before the stock plunge. That has preceded to past recessions. They are slashing their your today gains. Something as we have been watching is the tension in the middle east. The u. S. Ishas said working with International Allies on a coalition to deter iran. This is after saudi arabia pointed the finger at iran. Has denied republic any part of the attack. Is not a clear resolution. Saudi arabia saying it will produce evidence that this is the iranian sponsored. Where do we go from here . The unitedtion is states wants to restore deterrence. We have President Trump speaking in california lets listen. Money soent spent any thats good. If you do the money thing all of a sudden, it will double and triple and quadruple and you say whats going on. Robert has been fantastic we know each other well. Thank you. It is a privilege to serve with the president. I look forward to another year and a half. We have tremendous foreignpolicy successes under President Trumps leadership. I expect this to continue. We have a number of challenges but there is a great team in place with mike pompeo and secretary mnuchin and others. I look forward to working with them and the president to keep america safe and continue to rebuild our military and get us back to a peaceful posture that will keep the American People safe from the big challenges around the world. What advice do you have for the president about the situation in saudi arabia . At those looking issues now and getting briefed. Secretary pompeo is in saudi arabia. Any advice i give the president will be something i give him confidentially but we are monitoring the situation closely. Mr. President , any update on your [indiscernible] i have nothing to report we have nothing to say now. It hasnt changed very much. My thinking pretty much remains the same and we have not learned much that we did not know. There is a guarantee factor. We know very much what happened. [indiscernible] we will see what happens. You will see. [indiscernible] i really dont know. Thats up to him. Its not up to me its up to him. We are going to see what happens. I would let them come. If it was up to me i would let them come. I always felt the United Nations is very important. It has potential. It is never lived up to the potential it has. I would certainly not want to keep people out if they want to come. That would be up to them. [indiscernible] i think it is a sign of strength. We have the Strongest Military in the world now. Strengthreat sign of if you ask them how to network out. We have a disagreement on that and there is time to do dastardly things it is easy to start and we will see what happens. We have a lot of good capital. If we have to do something we will do it without hesitation. [indiscernible] pres. Trump he just came out with a statement he spoke to me a little while ago and we will have an announcement. What you looking for that maybe you didnt get for mr. Bolton . ses. Trump mr. Obrien highly respected. He was highly respected by so many people that i did not even know new him. He did a tremendous job on hostage negotiation. Really tremendous like unparalleled. Successhad tremendous in that regard. It brought how many people. Through hostage negotiation, i got to know him very well myself. Also, a lot of people that i respect rated him as the absolute number one choice. Good chemistry a together and we are going to have a great relationship. He is a very talented man. Reporter did you raise more sanctions on iran today . Pres. Trump yes we will be adding significant sanctions on to iran. We will announce that over the next 48 hours. Reporter are you looking at a military strike on iran . Pres. Trump we will see what happens. Reporter what options are you considering . Pres. Trump there are many options. Ande is the ultimate option there are options a lot less than that and we will see. We are in a very powerful position. What is the ultimate option . Pres. Trump the ultimate option is war. Im not talking about that ultimate option no. Reporter [indiscernible] pres. Trump i think its an important role. It is a role that if the president respects the person that is the advisor it plays an important role. Thank you. We are going to the border later. Are you all with me . Were going to show you a lot of wall. We building a a lot of wall. We will talk to you later on. Have you spoken to mr. Netanyahu . Have not. P i at the results are coming in and its very close. It you have any updates . You people usually should know before i do. Reporter [indiscernible] pres. Trump no im not. Its going to be very close to read our relationship is with israel we will see what happens. Thank you. Have been listening to President Trump speaking next to his Incoming National security advisor. His he is thinking thinking on the saudi attacks has not changed. He is increasing sanctions on iran and those should come with in the next 48 hours. He is not thinking of the ultimate option against iran which would be going to war. Easy President Trump at the moment with his Incoming National security advisor in california. Lets discuss the latest comments from President Trump. He said earlier that diplomacy with iran has not been exhausted. What can we expect next . Mentionedpresident and secretary of state pompeo, what they want to do is restore credible deterrence. The u. S. Has accused iran of a series of attacks shooting down u. S. Drones, seizing oil tankers. Now this latest escalation. They believe there needs to be some sort of significant response that tells iran you cannot do these things without suffering a cost. You have to balance that against the president s desire not to get involved in these entanglements. What you will see here is some sort of collaboration, some work that secretary pompeo will do with the saudis. Where you would see potentially or aential saudi Response Coalition that pompeo is trying to form. President trump does not want to act alone because he doesnt want to make it look like saudi arabia is dictating foreign policy. One element of this is the war on yemen. Do you think there is a way to negotiate around that . There has been an effort over the last several weeks to engage with the that the rebels. Then when President Trump came into office the administration set those talks aside. Indications that the administration and the state department chiefly the u. S. Ambassador to yemen will be looking to reopen those talks directly with the who the rebels to see if there is some sort of accommodation that can be done. That represents a significant shift of his administration which i had said we are going to be this up to the saudis and to the uae to sort this out. You are seeing this administration start to press for some diplomatic opening purer leaving it in the hands of saudi arabia and focusing on iran. Great to have your thoughts. This is bloomberg. Policymakers are expected to cut Interest Rates for a second straight meeting. Reluctant to forecast for the cuts. Great to have you with us. People were saying perhaps the money market terminal could outshine given this rate cut that is widely expected. What do you expect . What the expectations of a rate cut are baked in. When that a year ago everybody would have had expectations that rates would go higher not lower. There is a wonderful expression of most important function Economic Forecasting is to make astrology look respectable. The forecasts have changed dramatically in a year. It is likely a year from now they will be dramatically different. In the near term we can expect low. Years from rates now, there is a futility to those types of forecasts. We see amazing volatility in the treasury market in the last couple of weeks. In terms of the forecast getting it wrong, i think the number is 64 of the time the direction is it accurately forecast, where does that leave you with some financials . Thate real difference is where people often perceived risk is where they are safest in investing. Its where they feel there is a sure thing that they are often taking danger. What is happening now with the banks is people have these memories of the financial crisis so pounded into them that around every corner, they expect big problems. From low Interest Rates, the recession. Banks have never had higher capital ratios than i have today. They are in strong competitive conditions, terrific credit quality. With rates being lower, it still doesnt change the fact that they are generating an enormous amount of capital each year. I think you have a decade of steadily rising dividends ahead of you. Given the low valuations you are starting with, the risk years our way overblown. This month we have seen the rotation from growth to value. That is altering right now. As a trendthat trend that could have legs . It depends on what you mean by value. The value moniker gets put on all sorts of categories some of which may participate in a slowmoving economy. Others are in a secular decline. We are picture is that moving into a stock pickers market. We have been in a decade of momentum. Im not saying today is the end of that but we know at some point foolishly buying the same assets at higher prices and expecting a higher return because you are paying higher prices that is the fundamental tenet of momentum investing. We know that will break down. Onple will become focused prices what you pay value is what you get. You will have to be specific within sectors and within companies we would expect a much narrower set of winners and a much more complex and delicate world we are moving into. Youot a lot of time but are looking for those winners primarily in the United States . The Financial Sector in the u. S. Is the primary arrieta focus. The u. S. Has so dramatically outperformed other markets that gulfe seeing too big of a between the valuations here and the valuations of a select Companies Overseas in select markets. We look at highgrade financials in scandinavia or singapore. Where weook at markets are particularly interested in china that is so dramatically underperformed in this world. Great to have thoughts from you. That was chris davis. Fed,a reminder for more tune into live coverage of the fed decision and chairman pals News Conference that starts at 2 00 p. M. Eastern right here. This is bloomberg. This is Bloomberg Markets im amanda lang in toronto. Im shery ahn in new york. Were only if you minutes away from the Federal Reserve decision. It seems a rate cut is already in. Tell us what is important in this meeting. Its going to be the sideshow focus on what is happening in overnight lending markets and totnot and how the fed plans patch the problem in the short run and a longterm fix as well. I dont think we will get that in statement but it will definitely be a hot topic during the press conference and his prepared remarks. Issue beforeortant everything this week is the signaling of how much further the fed will go. They have been talking about Downside Risks to the Growth Outlook based on geopolitics none of those factors have improved since the last meeting or his remarks at the fed conference in jackson hole. The fed is going to have to show a bias toward easing but they will hold the cards close to their best on how much more is warranted because they do need to see how these trade talks pan out. One thing we are focusing on here is the fact that the fed had been shrinking its Balance Sheet and now we expect to get a signal that it will stop doing that and maybe increase it. What do you expect the Market Reaction to be . I think some point later this year the fed will have to start expanding its allergy. We are not there yet. We will see temporary patches but in place to address the problem at hand. This is a signal that the Balance Sheet contraction had gone too far earlier this year read it has stabilized more recently. As the economy grows, Bank Reserves and the fed Balance Sheet are going to have to expand as well. It looks like we are close to that tipping point. Maybe with just technical factors earlier this week, we are still trying to determine exactly what was the catalyst of all of those locations. Nonetheless the fed will have to start growing that Balance Sheet but we have to be careful not to construe this as qe4. This is prudent reserve management not quantitative easing. The markets. We are just manipulating the Balance Sheet a little bit for technical reasons. Thank you so much. To the feding decision in just a few minutes. Lets look at the markets. Weve seen a little bit of Downside Pressure with u. S. Stocks struggling. The dow falling for a second consecutive session. The 10 year yield is also falling for the 175. This iser the fed bloomberg. I am scarlet filly here with tom keene, the fomc is expected to lower Interest Rates, and after that chairman powell will take the podium and hosts News Conference, where everything will be scrutinized for how the federal did the Federal Reserve will determine its next move. And it has to play the role of a plumber today because of the difficulties. Where we wereted on the repo market, i Read EverythingJeff Rosenberg has written, we have a lot of guests here, we are two minutes away, i want to get quickly to our 51, thise downright is not telling us much. The next screen please. We have a twoyear yield, the yields are in over the last six hours, the Dollar Strength is fractional, not much, down at the bottom, we only do this for Jeff Rosenberg. 2. 12 on the repo rate. Back to normal. Scarlet it was very abnormal earlier this week. Lets bring in our guest, in addition to Jeff Rosenberg, we also have scott miner of guggenheim. Let me start with you. Is this a distraction . Dealing with the repo market . Its just its a distraction for investors. We spent so much time talking about it and we will be talking about it during the press conference. For the average investor watching the show, im not so sure they are going to take away the correct message from all the cacophony going on. This is a shrine a sign of shrinking pains. This is what happens when the fed shrinks in balance to demand liquidity. Because they dont know what that means. Scarlet 2 theres 14 tom theres 14 hours of coverage. And this goes back to what the fed used to do, providing the Balance Sheet not for crisis reasons. Tom alan moser would say this is what the fed is supposed to do, is this what we have seen . The role of the fed is to be the lender of last resort, when you have run out of enough liquidity in the market, the interesting thing is they ran out of liquidity. And this is something we have been talking about. There is this imbalance of reserves, the fed continues to focus on the aggregate amount, not looking at the dispersion by the banks and the people in the market. Is in the twoyear yield breaking down a new weakness, one point scarlet 1. 66 7 . Equities have been holding to these levels, which is a modest decline. We will hear a lot of that word, modest. You have energy and industrials leading the way, prices are higher, yields are coming down. There is little change right now, not giving back more than half of the spike on monday. Lets get to Michael Mckee at the fed. A very divided fed cuts its benchmark range to one and threequarter to 2 , a quarter percentage point cut and it appears to go on hold. Three voters to send for the first time in three years, bullard who wanted a halfpoint cut, and georgia rosengrant who wanted no cut at all. And the newest forecast for rates, shows no cuts, no more reductions through the end of 2020. However seven of the 17 members still think another cut is needed this year while five think no cut should have been made at all. The new