Transcripts For BLOOMBERG Bloomberg 20240704

Abramowicz some Jonathan Ferro your equity market on the s p 500 slightly negative this morning fantastic lineup looking ahead retail sales just around the corner. Earnings from home depot dropping across the bloomberg tomorrow. Numbers from target results from walmart on thursday. But once again this morning, we have to begin in china. Rate cuts bramo and the data not great at all. The biggest rate cuts going back to 2020. The data coming weaker across the board. Whether it has to do with retail sales, whether it has to do with industrial production. They scrapped their youth unemployment metric, which is not exactly encouraging. And now the question is, are they preparing a big enough stimulus to really stave off weakness that is much deeper than people expected . This is the right signal. The big question, youve alluded to it, whats next . Heres the commentary this morning from standard chartered. The cut has been aggressive from sogdian. This is unlikely to be the last measure. So, lisa, that tees up the question, whats next . Although citigroup analysts have come out and said they are not seeing any real policy reforms that could avoid some sort of japanification of china, some slowdown, dramatic slowdown in growth. And honestly, thats a lot of the commentary that ive been reading this morning. This is no bazooka. Its clear that they havent really prepared something more comprehensive. So where is the appetite, right, to do something that could really salvage the economy from really decelerating massively . You mentioned youth unemployment. Would you like the official reason for that . Its ridiculous. National bureau of statistics over in china, they said the labor statistics need, quote, further optimization and more Research Needs to be done on, quote, whether students looking for a job before graduation should be counted in the labor statistics. So no youth unemployment statistic, but we know what kind of level that was at it was pretty elevated. It was incredibly elevated. I believe north of 20 at one point. And for them to say, okay, we need to reassess exactly how were going to massage the numbers to basically display them in a better way gives nobody confidence and frankly, probably has a counter productive type of result. That said, what it highlights is they are losing control of the message. Theyre trying to say, look, this needs to be something that isnt viewed as negative. Well, suddenly people are reassessing much deeper weakness. Chinas one story. The other story for us this morning is on the us consumer numbers from home depot just dropping across the bloomberg. Ill give you a sneak peek of some of those numbers. Second quarter comp sales, just less bad, less bad than expected, down by 2 . The estimate negative four point 1 . And in the mix as well here, lisa, a 15 billion buyback, too. Were up here by 0. 6 . And weve seen this across the board that even if someone even if a company is showing a bit of a deceleration in, they deliver a buyback. Some sort of shareholder friendly action. The shares up a little bit. Not great that said, home depot, separate story from the rest of the earnings that were expecting to get, whether its target tomorrow or walmart on thursday. As you mentioned, because thats really less about the Housing Market, which is really a big question mark and more about what the retailer is doing when they go to the store. So i think that the housing side, the home depot, the home repair is kind of a separate story in some consumers held up so well over the last year. Lisa last year was all about Pricing Power, increasing prices. Inflation has that changed some commentary from the ceo over at home depot, continued pressure in big ticket categories. Can we read too much into that . This is the same story that weve been seeing. People brought forward all of their purchases of washing machines and dishwashers during the pandemic, and now all of a sudden they have a greater number than they have to sell. Im just wondering whether in about two hours time, 2. 5 hours time, were just going to be talking about amazons prime day and basically how to distill crushed it. This to me, its like amazons world. Were living in it. I mean, thats basically what were going to be talking about in you know, 2. 5 hours. Thats been the last decade, hasnt it . Retail sales just around the corner, home depot results behind us in front of us. Target tomorrow, then on to walmart on thursday. Its the price action for you. We pull back on the s p 500 down by 0. 5 . Yields are higher on a ten year by three basis points. This wasnt even on our radar this morning because theres so much going on. But it should be the dominant story of the last week or so. In fact, lisa, id say the last month were through 420 on a ten year. This to me again, im so glad you said that not only are ten year yields at the highest level of the year, but real yields, did you see this real yields, inflation adjusted, ten year yields at the highest levels going back to 2009, which raises a question of at what point the pressure on equities really starts to gain steam in a material way . When does this start to bite in the economy and does the fed have to back away . Now were seeing some restriction and that, i think, is the story that weve been hearing on the margins that suddenly now things are getting restrictive. 8 30 a. M. Us retail sales come out. As weve been mentioning, we also get empire manufacture hiring, which could be interesting because its the first read on august manufacturing that people look at. We are seeing home depot is the first of the earners on the Retail Sector ahead of target and walmart again on how distorted are some of the retailers that are tied to the Housing Market. At 10 a. M. , we get the latest read on the Housing Market. Nahb Housing Market index with Homebuilder Sentiment coming out at a time where 30 year Mortgage Rates, 7. 5 , the highest going back more than a decade. And you have to wonder how long people can keep buying homes at a time when it is prohibitively expensive to do so and understand that homebuilders feel good because there are no other homes available for sale. But at what point does this actually bite . Can you imagine . You take out that mortgage, you buy a house for almost exactly the same price. The guy next door bought it for. And your mortgage is 7. 5 and the guy next door is at like three. The reality of this and ive actually done the calculations not because, you know, were trying to have schadenfreude or anything, but but my point was that, you know, you can see a material like 4,000 difference, 3,000 difference in like a nice, tidy mercedes and youre sitting there just struggling to get around on a bike. Whats it called again . Brutal Interest Rate interest, mortgage envy, mortgage envy at 11 a. M. , 11 a. M. , minneapolis fed president Neel Kashkari is also speaking. So hopefully well get some sense of where so much mortgage envy we blame him for keeping rates so low for so long. Well, now hes a super hawk, so hes trying to make up for it, you know. Sure. Hes the reason rates are so high for so long and so low for all kashkaris fault. Feeney joins us now, Portfolio Manager and partner at Advisors Capital management. Joann, two stories for us this morning. Chinas one, the us consumers another. Lets start with the us consumer. Are you expecting to see further signs of resilience in numbers from home depot this morning . Already out target later this week, walmart after that. Yeah, its no mystery, john, that the consumer is strong. You know, you look at the data on real disposable income and you see its actually been rising for the last several months. That is adjusted for inflation. And its because there are more people employed. Its because wages have kept growing while inflation has slowed down. And so theres more money in household pockets in real purchasing power. And thats why were continuing to see pretty strong numbers. You know, clearly retail sales growth has slowed dramatically and, you know, its likely to continue to slow. Its just barely above zero in terms of year over year growth. But, you know, that tells us something about how the consumers are, you know, are likely to proceed through the rest of this period of of the adjustment to the high inflation that were seeing out of the fed. Even with high Interest Rates. You guys just been talking about, even with high Mortgage Rates, the Housing Market remains strong. Its somewhere weve been investing for a while. We think its going to continue to be strong for for for years to come, given the shortages that are out there. So, joanne, would you expect this three month rolling recession forecast just to get keep pushed out, just get pushed out every single month . Yeah, we keep doing it ourselves, obviously. And our forecast and weve always looked at the resilience of the consumer as the reason why its going to continue to get pushed out unless something dramatic breaks like, you know, commercial real estate having a contagion effect as that, you know, continues to face low occupancy and high Interest Rates and restructuring, you know, unless something breaks that strength in the consumer, there continued strength in in the real income that they have to work with really does sustain this us economy for quite a while now. China could be a problem. Well, thats exactly what i was going to say. Is china seeing a real slowdown in growth, something breaking . Its its not as dramatic think its not dramatic enough, lisa, for it to break the us economy . You know, clearly its important for some sectors and thats why you want to be really judicious about where you invest materials, for example, is going to suffer more with china slowing down. Were seeing the china consumer also like in the us switch to to travel and leisure switch to services and away from goods. Were also seeing the governments local and, you know, federal level in china struggling with their budgets. Now having overspent earlier. And so really pulling back on some of the infrastructure investments, the real estate problem there much more severe than here. So its really where in the economy are the vulnerable is and how that needs to guide investments at this point. There also is a question about the role of of china on inflation and if chinas slowdown actually exacerbates some of the inflation problems or prolongs them. I think its notable that even during a time of concern around chinas growth, youre seeing a continued sell off in treasuries. What is the signal from that . Yeah, i think the sell off in treasuries has a couple of other drivers as opposed to china think its one the treasury needing to restock its coffers after for you know, the political debacle of raising the debt ceiling. And its also the recognition finally in the market that Interest Rates are going to stay higher for longer in order for the fed really to nail reduction in inflation down to that 2 target, the tail of that goal is, i think, going to be a long one. I think the markets finally coming to realize that. Its amazing to me how few people have actually changed their opinion on the treasury market. This from steve major of hsbc. On the sell off recently. And just to be clear, for our audience at home, steve major is a bond bull. This is the quote. Ten year yields are at the top of a range propelled there, this time by a narrative that includes a surge in bond supply, a credit downgrade, and the tweet to the bojs sec. None of this shakes our bullish conviction. What would shake the conviction around this bond market . There are so few people out there who believe we can sustain life above 4 for that long. And hes not alone. Right. We see this from jp morgan. Weve seen this from western Asset Management saying the exact same thing. Its a great question. And how much is that baked into a market and then whos on the other side . Whos pushing against them . Whos causing yields to rise to the highest levels in decades . And that really is one of the questions, joanne. Can we sustain life above 4 on a ten year . Why has that proven so difficult to do . Well, you know, people i think, are recognizing a little bit of a new reality. Weve been here before, right . Weve seen higher real Interest Rates in the past, just not in the past, you know, 20 years. So what is it about this reality that could cause Interest Rates to remain above 4 at the ten year horizon and it could just be simply higher government deficits, not just in the us, but around the world in the wake of the cost it took to get through the pandemic, all of the government outlays right drove up government spending. And now in the us, for example, the need for rebuilding our infrastructure right, which had been neglected for decades. So these pressures on on the government budget plus all those entitlement programs with an aging population so higher deficits could lead to higher real Interest Rates persistently and even then you layer on a 2 inflation. Once we get back there, you still have, you know, the ten year at three and a half, 4 . So were going to have to live with that. Joanne, the bank of america fund Manager Research just came out and it shows that people are the least bearish going back to february of 2022 with cash allocations plunging from 5. 3 to 4. 8 . Are you in that bucket . Have you actually deployed cash and said, you know what, this is the new normal and the economy sustaining it . Lets go into homebuilders. Lets go into other sectors that you like and get out of cash. Well, weve generally been mostly fully invested. If we have a little bit of cash, its because we want to be able to be opportunistic pick in terms of the mix of equities and fixed, which i think is more generally your question. We havent changed our allocation here. We do think, though, for certain clients, certain types of clients, weve been able to take advantage of those high Interest Rates on the fixed income side to really sort of shore up the stability of their portfolios. And and yeah, lisa, i mean, the the market multiple is telling you that investors have become in some sense more optimistic and perhaps because you know, a little bit of a fear of missing out as the as the market has gone up so much over the last several months. But at this point in time, we do see the market, as you know. Its certainly trading above its historical average at, you know, 20 times. We think at this point you have to be very selective. There are still opportunities out there. There are still really attractive stocks trading below 15 times that you can add to client portfolios to generate income, perhaps to act as a buffer. If the market pulls back, at least you get that dividend income. So we think its a time to be very careful about where to go and thats why we tend to be a little bit more value tilted, particularly for clients that are sort of living on their portfolios and retirement. Hey, joanne. Thank you, Joanne Feeney there of Advisors Capital management. Quite a day so far. Lets recap. Home depot just quickly. That stock is barely positive in the premarket by 0. 2 . Remember, back in may, they cut their guidance, so theyve beaten a pretty low bar this morning. Lisa, heres the quote from the ceo. While there was strength in categories associated with smaller projects, we did see continued pressure in certain big ticket discretionary categories. How much is this just a supply and demand . They boosted supply in response to the pandemic and now demand falling off just a little bit. Home depot pretty much unchanged. The latest on china coming up next from new york city. Good morning. Some things are better left to a professional in hindsight, probably shouldnt have tried to remove my own appendix like when it comes to finding Financial Advisors. So take the free quiz. Then youll be matched with up to three vetted fiduciary Financial Advisors at smartasset dot com. This tiny payment thing is a giant pain. Hi ladies. Alex from us bank. Can she help . How about a comprehensive point of sale system that can track inventory, manage schedules and customize orders . Thats what us Bank Business essentials is for. What about a new oven . Can us bank help us there . 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We dont want to be enemies, we can be friends and we love to see china can enjoy democracy and freedom just like us. As long as there is parity and dignity, our door is always open. We are willing to cooperate with china like qingdao. There, the Vice President of taiwan speaking with tensions with the Mainland China in a series of exclusive interviews with Bloomberg Business week. More on that a little bit later. We need to talk about the Economic Data out of china. Dreadful. The response to it so far incremental overnight Chinas Central Bank unexpectedly reduced the key Interest Rate by the most since 2020. The scores off the back of it look like this stateside equities still negative on the s p 500. Were down by about 0. 5 . This session. Lows in the bond market. The treasury sell off continues. Lisa yields are higher by four basis points. Its 423 on a ten year. This is a new high for 2023 and getting closer to the cycle, high through 430. That was back in october. Its important to me that youre seeing bonds sell off at a time of risk aversion, and its global risk aversion. And what does this mean about the response function, the 60 over 40 kind of inverse relationship of bonds and stocks at a time where people are concerned about a slowdown in growth . It means people are still worried about inflation and bonds are not the haven right now that they have been traditionally. This decision came right before the data. So no surprise, the data was terrible. The National Bureau of statistics said domestic demand remains insufficient. The economys Recovery Foundation still needs to be strengthened. Can i just stress again, weve done this repeatedly all year. This is not where we thought we were going to be at the start of the year. China was meant to be the bright spot of the Global Economy reopening. Remember the china trade . The reopening trade lasted about five minutes at the back end of last year. Here we are at the end of summer talking about rate cuts and the prospect of more stimulus. Well, the rub was that when it reopened, the economy was not in a form to surge back and that there are some structural problems that theyre not addressing or are not able to address in a way to keep growth at the high levels that people had previously expected. And it seems like there isnt the willingness to do that. And i think thats what people are saying with disappointing policy projections, just simply because there isnt something to deal with both leverage and also stimulate growth. Lets start the conversation on china this morning with michael hirschhorn, the head of China Research at 22 research. Michael, wonderful to have you on the program with us. Lets just start with that rate cut big by chinas standards. Was it big enough . I think no, theres deflation in china. So real rates have gone up. This is this rate cut was an effort, i think, to partially offset that. But i think were going to need to see consider more across different areas of policy for china in order to really give this recovery firm footing. Well need to see more coming on fiscal given an absence of demand coming from other parts of the economy, i think well need to see more measures to stabilize property given the latest warning signs there. And well need to see more follow through on these initial efforts to boost longer term confidence for the private sector and for the Foreign Business Community in china. Michael, weve had plenty of moments similar to this one over the last decade. And often people that come on this program will give china and the policymaker in china the benefit of the doubt, and that view has been proven to be the right one. Time and time again, theyve got the levers to respond to it. They can sort things out in an orderly manner. Michael, do you sense in any way, shape or form that this moment is different . I think its different just in the sense that there is such an accumulation of different problems and challenges facing chinas economy. Its not just one thing right now. Youve got the continued fallout of a very deep, painful restructure of the property sector thats going to continue for a long time and really deprives the economy of a critical driver of demand. Youve got the onset of a lot of structural challenges, including including demographics, which are going to slow the countrys growth rate. And then youve got this interesting political overlay in terms of how secure the private sector is feeling in todays china. And the backdrop of geopolitical tensions and decoupling, which i think is also undermining to some degree the confidence of the private sector in china. So its really that confluence of pressures set aside, set against policy setting that remains quite conservative, where many people in china are making the case. I think its a persuasive case that policy needs to be considerably bolder at this point in time. Michael, i want to just build on the last point that you made about the decoupling. How much is that not just simply from a confidence level, but from a business level of business and manufacturing moving out of Mainland China behind some of the weakness that has been unexpected for a lot of analysts. Its hard to say. I think it is. It is a factor. It is showing up. I dont think that it is the key macro factor right now. I think for exports, really the story more is slowing growth in the Global Economy and the advanced economies. So i dont think decoupling is having a real bite yet at the export sector, but its there. And i think its in some ways the longer term trend that is and the prospect of further decoupling that is hitting at private sector confidence. And you see it show up in fairly weak manufacturing investment in china. So i think its the outlook that that is probably more of a concern at this point than the present impact on the data. The other policies that you mentioned, are they a direct sort of counterbalance to what xi jinping and his administration wants to do in terms of re balancing the economy, having a new vision . Is it sort of the policy measures that he would have to take to to spur growth would go against some of the theories that hes been espousing . I think that there is thats a good point. I think that there is a fundamental tension between a lot of these policy goals. I think the the leadership would like to see a very rapid transition out of what they consider old Growth Drivers, like property into new Growth Drivers like electric vehicles and advanced manufacturing. But unless you have the set of policies there that would support sources of demand, in particular consumption, its really hard to see how this all fits together in terms of the demand thats necessary to keep growth coming, particularly with external demand, with exports sliding. So i think that is perhaps the biggest disconnect is where the sources of demand are going to come from right now. And youve got also a lot of tensions between president xis political agenda, which is, you know, continued emphasis on on the the dominant role of the party and a fairly assertive Foreign Policy and what that means in terms of the steps that are going to be necessary to reassure the private sector that they have a place in chinas economy and also that geopolitical tensions are not going to derail this growth story. Michael, just a final word, if you can. Never mind the geopolitics. Lets talk about the social tensions domestically, youth unemployment, just because you stopped reporting it, does it mean the problem goes away . Michael . What are they going to do to address it . Well, i think that they are taking steps, including having local government officials do their best to find opportunities for for for College Graduates and other youth. I think theyre treating it mainly as a structural problem, which is not certainly not completely wrong. But i think its its really a reflection also of just how weak demand is. This is not an economy thats running hot enough right now to create those jobs. And i think thats thats a problem. And its its its one thats going to take considerably more policy efforts in order to to get that moving. President biden would have loved that trick last year, wouldnt he, just to spend reports well suspend them and then ask all of his local officials to say, you know, go out there, find a job for your, you know, for your neighbor and your neighbors neighbor. You need to optimize the cpi report. Yeah, that wouldnt youre not going to see it for a while. Michael, thank you. Michael hirsh in there of 22 on the latest data out of china, youth unemployment is a big problem. Its a big, big problem. It doesnt go away just because you stop reporting it, especially if youre trying to build up a whole team of people who can really compete on a global level when it comes to technology, when it comes to artificial intelligence, it becomes a real problem. If you dont feel like youve got that mobility in the nation. So again, this goes to the sort of contradiction within some of the goals. How do you move away from the old into the new without the jobs to support the young people who want to have some sort of ambition . Thats the latest on china. Heres the latest on the market equity session. Lows on the s p 500 breaking down just a little bit more on the s p were negative by 0. 6 in the bond market. The sell off continues at the long end. The ten year is higher by four basis points for 23 on a ten year. And the dollar has been a whole lot stronger recently, a bit weaker against the euro this morning at 109 38, but certainly going against the grain, lisa, in the market. And what this has to do with is people expecting that rate cuts might not happen next year as quickly as they previously thought. Jordan rochester has changed his call on the euro. Jordan, rochester of nomura on the Foreign Exchange market. Joining us next from new york, this is bloomberg. 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A beat, a beat of a very low bar. The stock is positive by about 0. 3 . Buy back in the mix as well. Still some challenges out there for big ticket items. We hear from target tomorrow and walmart on thursday. If you switch out the board and get to the bond market, heres the move for you. Ten consecutive sessions of ten year yields closing above 4 . Looks like we might do that today. It depends what we get on retail sales in about two hours. But for 23, 46 would take a major move. A major breakdown for that to change yields higher. This morning, lisa, by another four basis points on a ten year. Theres been a shift over the past week and think that its really notable that not only are people not pricing in substantially higher rates in the us, but they are pricing out rate cuts. So they are buying into this idea of higher for longer. Thats got to change the conversation in terms of valuations, to me this is actually a bigger deal than saying that the feds going to raise rates to a place where its definitely going to break things and then somethings going to collapse and theyre going to theyre going to cut rates dramatically. This is basically saying that rates are going to stay at around 5 by july next year. That is a new normal that people have not fully reassessed. The two years screaming. It is very close to five. We talked lots about the tens because thats where the bigger move has been over the last month. But a two year yields very close to 5 all over again. So you have to wonder why we havent seen a bigger reset or whether we have seen the reset and how long markets can continue to shrug off a concern about longer high rates in the us. China for not having a good time of it right now and concerns just globally about what happens with further rate hikes over in europe. Again, i just say you put this together, you start to wonder, you know, is this going to be a tumultuous couple of months . Tumultuous. Thats what its been so far. Yes, exactly. Putting the squeeze on dollar bears. Check out the market. A bit of a change today or a break for them. The euro just a touch stronger, sterling a touch stronger as well. 120 708 on cable. Thats the pound against the us dollar, record wage growth. So just when you think theyre done, they might have to come back in over at the bank of england and hike all over again. 7. 8 wage growth. Thats without bonuses. It was expected to be 7. 4 . Again, we were talking about the end of the cycle. We were asking people questions. The last bank of england meeting. Okay, so are they done . And people are like, yeah, they should be. They should hike one more time just for cosmetic reasons. But other than that, they dont need to really. Right. At what point does this really start to bite . Think about the mortgage pain in the uk and weve covered this several times. The difference in the structure of the Mortgage Market in the uk say compared to the United States, you can lock them in here stateside for 30 years, 2 . Lucky you wont go into that. Now in the united kingdom, in the united kingdom, theres going to be a lot of people that have to come into this market in the next year or so. And and eat some of this. And its going to hurt. Its going to really hurt. Which raises a question to me, and im thinking a lot about this, if we have seen the rate hikes that weve seen so far and they have not made a material difference, does that mean they dont work . Does it mean that the long and variable lags are just not really going to bring down inflation in the correct way because its not going to materially affect wages . So what other tools do some of these Central Banks have to deploy in order to really rein in inflation dependent on region . Different answer, but stateside, bill dudley, the former president of the new york fed, wrote a great piece on this in the last couple of weeks, maybe weve just seen the impact already. There was super short. Theyve worked their way through the system and its done. So thats the dudley question. No doubt of renmark think would have some sympathy with that view. Others just believe. Hold on, patience. Perhaps theyre just longer and wait, especially again in the us weve got 30 year Mortgage Rates, although in the uk where there is a much more direct bleed through, the fact that youre still seeing wage growth at such an elevated level raises some questions about whether these rate hikes have really had the impact that people were expecting them to have. Sterling a touch stronger this morning. The pound against the us dollar, about 127 under surveillance this morning. Chinas central bank unexpectedly cutting the rate on its one year loans by the most since 2020 as Economic Activity in the country continues to weaken. We actually heard from the treasury secretary, janet yellen on china, calling the slowdown a, quote, risk factor for the us economy. How big a risk factor is it bramow for the us economy . Honestly, everyone who we talk to keeps saying its not that big of a risk factor. Joanne feeney she said thats not really dramatic enough, right . So at what point do we start to say, okay, these economies have more have decoupled more than people previously expected . That said, there are some corporate actions that have a lot of sales in china. Im thinking, you know, tesla, apple, apple. Im thinking others. And what that could do could be substantial. Is this dramatic enough . Donald trump indicted in atlanta over efforts to overturn his 2020 election defeat in georgia. Its the fourth criminal case brought against the former president. In a statement, trumps lawyers calling the indictment, quote, shocking and absurd. Lisa, weve got new york. Weve got florida, weve got washington. And now weve got georgia. And arguably people are going to be paying attention more to this one, not only because of some of the phone calls and the allegations and the number of people who are roped up into it. Its donald trump as well as 18 of his associates, but also its going to be televised. So you can just imagine, is that going to be a circus . Is there actually going to be televised, believed to be televised previous ones have been televised in this court. They allow things to be televised for Public Interest. So people are expecting it to be televised. So at what point do we say, okay, all press is good press . Is it mean in a courtroom if you have the airtime, is that going to be a good thing, a positive thing for donald trump or i dont know. Well, lets just say theres a lot of Public Interest in that. And this to hawaiian electrics future in doubt, with a sell off wiping more than 1 billion from the companys value, the supplier of power to roughly 95 of the States Residents under increasing scrutiny over the course of the deadly maui wildfire. No official cause has been found, but the scrutiny that this stock, this company is under at the moment is painful. They start getting hammered over the last couple of days. Why would any utility owner stock owner want to own this when they dont understand the liability . And thats really the commentary that weve been hearing, because if they are found liable, the likelihood that they will go bankrupt. People were just saying pretty high. Right, because whats the liability be considering that it was a massive amount of damage . Did you see how much damage estimates were . Oh, its heartbreaking. Heartbreaking. Heartbreaking. Much more on that a little bit later in the program. Jordan rochester joins us now, g10 strategist over at nomura. Jordan, great to catch up with you, buddy. Lets just start in the uk at the bank of england. Record wage growth. Are we bringing them back in for more rate hikes to come . John, i think that wage number will definitely make the bank of england absolutely think about raising rates the next meeting. We think therell be two more rate hikes this year. So we already thought there was enough data to tell them you should probably keep hiking more. I do think the risks are that we get a weaker services cpi, perhaps not this month, maybe next month, and that the risks are actually tilted to just one hike rather than two. The idea of having two, maybe three, would require a reacceleration in that services cpi. So i always, john, think that the labor market is the most lagged indicator to track as a central banker. Rewind back two years ago the ecb the bank of england, all these other Central Banks that were pointing at weak wages as a reason not to raise rates was actually a ridiculous thing to look at because you missed all of the energy and commodities inflation that was coming. And its why we are where we are today with Central Banks having to make up for lost time with all these rate hikes quite late on in that cycle. John. So strong wages, fantastic for those workers, pretty difficult for the bank of england to turn dovish with those numbers. Sterling positive or sterling negative if they have to hike more . Well, look at the reaction today. Youre at sterling is the way to look at it. Sterling tried to rally and then it came back off and euro sterling is pretty much flat on the day. If the bank of england raise rates at 25 basis points like we expect, it wouldnt really move the needle for sterling. I think what will be really interesting is if we get some more negative news on growth, were starting to see that in china, for example. But were also having pretty dismal surveys out of the uk as well. When it comes to price pressures, theyre all turning lower. Maybe at the next meeting well get a better sense of whether that we will get the extra 50, so to 25 in a row. How much is that weakness that were seeing in china bleeding through not only to the uk but europe and the euro . I think what you were saying earlier, lisa, is spot on. There has been a little bit of decoupling. You look at the likes of risk on in the us market, the move in us yields. Yet if you were to use the usual frameworks when china slows down like this, usually its risk off and very dovish and it leads to dollar strength. And this is kind of what were seeing in dollar c and h, so thats a clear trade. We think dollar yen gets to 750, perhaps thats the sort of move were looking for. Were doing it in a basket format, but its not leading to massive euro dollar weakness, which is very odd and its similar for sterling as well. It used to be if a move like this, you would absolutely have to be short euro. And the reason for that is because of this decoupling equity is are rallying in the us more broadly over the past few months and thats held up euro. Can it last and noticed that you actually abandoned your strong euro call recently and you said you know what, i actually see it being a bit weaker from here. What triggers that, if not the bad data out of china . And this concern around the inability to stimulate the hardest part about lisa is theres three pillars to consider. One is whats going on with equities, two, whats going on with rates, and three, whats going on with commodities. And for quite some time was leaning on that equity pillar. The the the sort of rally wed had in equities over the past few months was one of the reasons we had that euro dollar call were looking for topside. We still are by year end but in the short term i see the other two pillars really dominating, which is the rates market says euro dollar should be towards 105. Thats not a good thing where we are at current levels and of course weve commodities, weve weve had a much higher in oil prices and natural gas, one of the biggest imports for the euro area Energy Supply crisis that has perked up recently of late. So its made me more nervous watching dollar yen move the way it is. Default risks building up in china. Low credit demand. We saw new loans collapse that in the short term given weve got not very little data now until we get the next cpi and nfp reports and weve got jackson hole. But i think in the short term theyre not catalysts enough to boost euro. Im surprised euro wasnt on an 111 handle after that cpi report. So a few disappointments with the reactions in the market and Going Forward over the next two weeks. Only jackson hole to really talk about thats not a reason to be long euro dollar but we are long euro versus norway and we are long euro versus sterling. So there are still euro upside bias in our view. Jordan, what you just described smells like euro zone stagflation is that what it is . Well well, inflation is going to come down, john. Its going to come down quite quickly according to the sort of ppi and surveys. So the stagflation concerns i think were more last years story. But the growth numbers, this morning were pretty disappointing. I thought maybe we start to see positive momentum in European Data surprises. They were so weak that maybe they improved. But ultimately, the survey suggests that its gonna be a pretty weak outlook for european growth. And my problem on that side is im not sure where the next stimulus is going to come from. The feds not cutting rates until march next year. The ecbs not going to be talking about cutting rates until later next year, october, november time. Chinas not doing a big fiscal stimulus. So far. So it is a combination that makes it really hard for me to see why surveys and growth surveys should really pick up. So, yes, in answer to your question, its still a bit like stagflation, but hopefully that inflation component comes down. So, jordan, just quickly, you think lagarde is done . We do. We do think the ecb is done because we think that the data over the next few months will develop in such a way that will justify no more rate hikes. I think the ecb and the fed have both introduced the skip concept and hopefully by the time we get a few more data reports that will then say we dont maybe need to hike at all. The bank of england in a weird place where they dont give that sort of strong Forward Guidance about skipping or not. Hopefully we start to see that build up as a narrative for the uk as well in the next few months to ive got a birthday present for you. Were not going to talk about aston villa, okay . Just going to let you go. We wont talk about the score over the weekend. Jordan happy birthday. So cheers, guys. Rochester, nomura, jordan. Thank you. Has he gone . Hes gone. Five one. They got absolutely battered. Hes still there. No, hes the kindness. The kindness got absolutely crushed. Is that really a birthday present for crushed your birthday present . Really cold. Hes going to go home feeling just so warm and fuzzy. The euro, nothing warm and fuzzy about whats happening in the euro zone right now. Theyve got an inflation problem rates. Theyve been hiked aggressively much more so than we thought they would be. 18 months ago. And now theyve got to slow down with their biggest trading partner, china and china clearly cant respond to it in the way that the euro boards would like them to. This question that jordans asked, i think is super, super important. Where does the Circuit Breaker come from . On the policy side, chinas cut rates today, people would call it aggressive. Thats a big move for them. Its not enough. Its insufficient. Heard a lot of that from the south side. Where does it come from . Who else . What next . The us maybe. I mean, this is something that people are looking at, which is the reason why citigroup analysts talked about the loss decade for china and the read through for europe is pretty, pretty stark considering how connected those economies are. If thats the case, why is it priced in more . If thats the case, why to to the point that weaker right from kit jukess point, why isnt the euro weaker and why are people still seeing strength there . To me, again, i dont understand the market moves today completely because people are seeing ongoing inflation weakness in europe, but ongoing strength in the us and treasuries are selling off. Exactly. Weve done this a few times over the last couple of days. Typically years and years ago when you used to wake up to these headlines, remember 2014, 15, 16, the china slowdown concerns were really prominent over that period. Youd wake up on mornings like this and treasuries would rally really hard. And thats just not happening right now. The story of decoupling is a very big one thats underpinned this feeling that this is going to be inflationary for the us, not disinflation. Honoree the ten year yield this morning higher by four basis points. Your ten year for 23. Your equity markets slightly negative live from new york this is bloomberg. Theres an easier way with thumbtack download the app today and care for your home from top to bottom. Some things are better left to a professional in hindsight, probably shouldnt have tried to remove my own appendix like when it comes to finding Financial Advisors. What was i thinking . So leave it to smartasset to find them for you. Take the free quiz at smartasset dot com. Then youll be matched with up to three vetted fiduciary Financial Advisors to get started. Take the advisor match quiz now at smart sitcom was this close . This close. We are all horrified by whats happening in ukraine. The images alone of civilians affected by war are heartbreaking. I saw this firsthand on my last field visit to warsaw, poland. Im ashley park and im a global ambassador for International Medical corps. Our teams have been in ukraine since 2014, when conflict first arose in crimea and now weve expanded relief efforts throughout the country to make sure that people have have access to health care and medicine, safe refuge and clean water, even in the midst of war. The needs are immense. And you can help. Please visit International Medical corps. Org to find out how it really makes a difference. Housing should be repricing. The fact that its not is not a sign of health. Its a sign of dysfunction. And i think that thats something that could come back to bite us in terms of, you know, we begin to generate some momentum in the economy and all of a sudden people need to move for for work or when theyve retired, they want to sell their house and switch to a different house. You know, there are no trade downs happening anymore. The Housing Market in america is looking more and more frozen by the day. Drew matus, chief Market Strategist over at metlife just dead on the story so far, no one wants to sell their house if theyve got a 2 mortgage. No one wants to buy a house. If they have to take on an 8 mortgage. And lisa, why would you and why is that going to change anytime soon, which is why youve seen homebuilders absolutely skyrocket this year. Warren buffett revealing that hes actually going all in on the homebuilders as well, because they build homes because there are none available. And then they extend financing. That is lower than a 7. 5 Mortgage Rate. And it has offset some of the lack of inventory. I mean, of course, not to be catastrophic, but my mind immediately goes to, okay, what does this mean about supply later on . You know, down the line, i immediately go there. Does that mean were going to be oversupplied when you unfreeze the market, when rates go back down, go back down, not quite to zero, but you know what im saying . That thats sort of the headline we should write, though, is not despite high Interest Rates, its because of high Interest Rates. The weird thing. Right. So how does this develop . Does this basically mean that the market sells off when they cut rates . Mean is that basically where were heading right now . Its kind of bizarre, isnt it . Your equity market on the s p 500 right now, equity futures negative by 0. 6 . The data out of china overnight, terrible. Shortly before it dropped, china cut Interest Rates by the most since 2020. In the bond market, if youre concerned about slow down Global Growth concerns, usually youd see yields lower. Were not seeing that whatsoever in the treasury market over the last month or so, ten year yields are aggressively higher over the previous three weeks. By 30 basis points. This week we had some, again, up by four basis points this morning on a ten year at 423, 26. I want to turn to home depot and look at how that stock is performing. Its a relative upside surprise relative to pretty downbeat expectations. There is a Share Buyback scheme in the mix as well, lisa, the stock is lower by 0. 3 . Back in may, youll remember, they cut their outlook. Things havent been great for this name over the last few months. Have you ever done a do it yourself project . No. This is my shocked face. Have you been in a home depot . Of course, yes. Ive been to a home depot. So you like the Christmas Trees from home depot . Thats it. You dont even hang your own pictures. Come on. You totally do a lot of things to say about home depot. Yeah, great store. Yeah. Okay. Great logistics to fantastic delivery. Is that what you have . Lots of things to say. Thats what ive got to say. If you want to ask me about drilling and hanging things up. Im not that guy. I have a lot of friends and they are making their homes better because theyre not moving around. And that is basically the idea is that because they did lock in a mortgage, just saying at 3. 5 , not that you have any account at jp morgan said the same thing. This was the dynamic that he was going to look for. Yeah. And theyre basically saying thats going to continue, even though the big ticket items, the, you know, dishwashers and such. Are you saying because dont hang up pictures, dont associate with people who do is that what youre saying, that you have friends that do it but wouldnt have friends that you associate with me take my own pictures . No. People were not just hanging their own pictures. Theyre like, you know, renovating, you know, doing things like that. Youve got friends. Ive got friends who hang up pictures. Cool. Drew redding joins us now, homebuilders analyst for bloomberg intelligence. Drew, can we start with home depot . What have you learned from the numbers this morning . Yeah, so home depot had a modest beat, same store sales down 2 . Expectations were for a decline of about 4 . I mean, this was pretty much in line with what we were expecting. Theres been some noise quarter to quarter with lumber and weather. The key takeaway is that they reaffirmed their full year guidance, calling for a decline of 2 to 5 , which includes a backdrop of the broader Home Improvement market, falling 5 to 10 . So you know, they reaffirmed this back at their investor day a couple of months ago. So not a whole lot of new news from this release. They did confirm that theres still caution among consumers and that big ticket discretionary projects are still under a little bit of pressure. Forget big tech, one of the stories of the year in the equity market has been this rip roaring rally in the homebuilders drew. Lisa, when were just talking about how frozen this Housing Market is in america, drew, can you put some numbers on that . Just how frozen are things at the moment . Yeah. So if you look at the existing home market, sales are down more than 30 from their peak. I looked at the 30 year Mortgage Rate before i came on this morning and were at 7. 25 . So, i mean, thats kind of startling. And just to give you some perspective of how out of whack rates and prices seem, home prices would have to fall somewhere around 35 in order for Monthly Payments relative to incomes to fall back to trend levels. Now, we dont think thats going to happen, and the main reason is because the market is frozen. Theres no inventory in the existing home market and thats really whats put the builders in a unique situation. Theyve been able to bring new product to market. Theyve been able to help customers make their Monthly Payments work by offering rate buy downs. So theyve kind of been in the sweet spot with higher rates, which is something we, you know, we and others didnt really expect coming into this year. Bear with me, drew, but immediately start thinking, does this mean that when the fed cuts rates or if they cut rates, maybe theyre going to hold rates here for a very long time . Most people expect them. Rates to go down. The homebuilders will sell off that. That will actually reduce some of the proposition that they offer at a time where you start to see a little bit more loosening in the Housing Market. So its an interesting question. And the reason said that theyre uniquely positioned is because we think they could benefit in the current environment where rates are around seven and theyre buying them down to five and a half. But if rates fall back to 5. 5 , naturally youve expanded the buyer pool, so it increases mobility. So we think even in that environment builders can still do well. I think the biggest risk and its not something were seeing now is that you get more stress in the labor market and unemployment starts to spike. Thats where you would start to see pressures on home prices and more supply coming to market because theres forced selling activity. Thats just something we havent had to this point. Home builders have also been in a sweet spot because youve seen lumber prices come in and from home depots earnings thats been actually a headwind for them. Thats been a problem. Theyve actually seen margins come in with some of their supplies and their sales increase, not able to be passed along as much. How much is that kind of one of the variables that can back up a home builder or not . If you start to see lumber prices go back up . Yeah. So right now, profitability for the builders in terms of gross margin has benefited from the fall in lumber prices. We expect that to continue over the near term, but they have started to take back higher and that, you know, that could add some pressure to margins alongside and the increased use of sales incentives. So its certainly something to watch because obviously, as you would expect, lumber is the biggest component of a house. When drew, do you expect Mortgage Rates, as you mentioned, seven and a quarter, 7. 5 . If you look at bank rate, when will that actually trickle out into valuations in a more material way . Are we just basically saying that because of the term structure, its not going to have the ramifications that anyone expected it to have . Yeah, its certainly an interesting dynamic. Thats thats taking shape. And i think the reason that higher rates arent having an impact on on home prices and the valuation of houses is because theres no supply in order for price to to see a dramatic decline, youd have to have that forced selling activity which would be associated with an economic recession and rising unemployment. Weve got very wellheeled borrowers out there. We havent seen those exotic loans this cycle. So we have good borrowers that are locked into low fixed rates. So theres really no reason for them to be forced to sell absent a broader economic recession. Drew, can you give me that number again for those that missed it, what do housing prices need to fall by to go back to trend repayment levels . So in the existing home market, home prices would have to fall about 35 in order to for that Monthly Payment relative to income to kind of fall back to those trend levels. We talked about 35 . Drew, thank you. Drew. Running there of bloomberg intelligence. Thank you very much. The drews point recession is what unlocks this recession ultimately, because you get the forced selling one and two, you get the Federal Reserve that arguably is going to reduce Interest Rates. Right. Until then, it looks like were locked up and frozen for a while, which means that people are less mobile, which means that people are also not able to afford homes for the first time, which means that people are moving back in with their parents just saying. But all of these kinds of things just im trying to wrap my head around this idea that we were expecting that 35 drop and it didnt happen at all. And youre seeing prices increase dramatically because of lack of supply. Im just trying to wrap my head around what that means about the efficacy of Monetary Policy. Well, for sure. What does it mean . Do they have to stay here for longer or go even further . Thats the reason why i said i think that staying here for longer is actually an arguably more destructive to the economy in a certain way than raising so high that something breaks and then having to cut. Right . I mean, this idea that if you start to keep rates at 5 for a longer period of time at some point youre going to have to refinance. Theyre certainly more destructive for the companies. Theyve got to refinance in the next 12 months or so, particularly in high yield. Great lineup this morning, dan greenhouse of solus alternative Asset Management joining us shortly. Look out for that conversation in about five minutes time. Tons to talk about the equity market the bond market to Foreign Exchange as well in the equity market right now, were negative by 0. 6 on the s p. If you are just joining us, rate cuts in china, an awful Economic Data. So bad that theyre not going to report whats happening with youth unemployment. The official reason for that is we need to optimize the the report. What does that mean . I think theyre worried about people leaving or just about to graduate, being registered as being unemployed or Something Like that. Optimize, though that word. I was thinking to myself, this is just the most optimal for who . Yeah. Well. Well, thats exactly it. Im just thinking, you know. Okay, is this just speak for just leave us alone. The white house needs to optimize cpi just needs to be like, i need to optimize my Balance Sheet. It needs to be lower. This is bloomberg. It seems more and more high stakes decisions are ending up in my hands while some of the challenge are worry, some decisions might not get the attention they deserve. Working with aon means ive got their whole team in my corner with advanced analytics and expert insights that put things in the right context. Its the gut check. I need to stay on top of it all. Better decisions aon he snores like an angry rhino. 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Com for imprint for certain. Theres still this widespread concern that the euro area is going to outperform the us and cyclically that doesnt seem to add up. The us consumer still remains extremely resilient. I think the Deflationary Forces are still out there. If think of the risk to inflation, its not to the downside, its to the upside. And in order for the Global Economy to be doing well, all the boats have got to be moving in the same direction. This is bloomberg surveillance with tom keene, Jonathan Ferro and lisa abramowitz. Its just one of those moments in the Global Economy. You wake up every single morning asking one question. What happened in china . From new york city this morning. Good morning. Good morning. For our audience worldwide. And this is bloomberg surveillance on tv and radio alongside lisa abramowicz. Im Jonathan Ferro. Your equity market negative by 0. 6 . To answer the question, what happened in china . Rate cuts happened in china. Thought you were going to say another one of those mornings you wake up and you wonder what is happening because the markets actually pricing it in. What were looking at in china is a rate cut, the deepest rate cut since 2020, right before releasing data that was worse than expected, showing a real deceleration and lack of growth in the worlds second biggest economy. Now, the question goes to what can they do to really revive growth and everyone keeps saying, were not sure that they have the will or the power to do that. We went through some of the commentary already in the previous hour. Ill share it with you again. Standard chartered, the cut has been aggressive. Silk jen, this is unlikely to be the last measure. What does it mean for the equity market over there . Mislav matejka at jp morgan in the Investment Bank has just held the line on this repeatedly. We stay unexcited, excited by china exposure despite periodic bounces on the back of stimulus hopes and news continue fading. This that was published earlier this week. Does it still hold . He was absolutely right because the reaction to this even though there was stimulus and usually that would be a catalyst for risk on move you saw the hang seng down 1 . Right. So you still saw that sell off, reassert itself in china at a time when its clear that finally the government is willing to do some stimulus. The implication here is it is not going to be enough. And there are some fundamental dissonances between their goals from the communist party and trying to generate some real meaningful growth. Two big stories this morning. Then one is china, the other is the us retail story. Retail sales coming out a little bit later. Big focus on the consumer, lots of retail earnings as well. Youre going to hear from target and walmart in the next 48 hours. Weve already heard from home depot the backdrop, though, in the market as we await some of this data a little bit later this morning. Treasuries are selling off again. The ten year yield is higher by another 3 or 4 basis points. Lisa, the ten year yield now at 423. Were talking about new highs for 2023. And when you strip out the yield and you look just at the inflation adjusted rate that youre getting on the ten year, it is the highest going back to 2009 retail sales plays into this. The consumer keeps spending. Americans going to spend. Thats what they do. And so here comes the question how long can they keep doing it . Is this just the prime the amazon prime effect . You know, honestly, how many times are we going to hear that, oh, this is just amazon. Everyone went out there and bought things and at what point is they did mean so . They did. They did, but they have the money to buy it and they keep having the money despite people saying that they would have run out of money from their savings by earlier this year. Lets turn to the price action. Equities a bit softer than negative by 0. 6 on the s p. Ive mentioned a bond market move yields higher by three basis points for 2247 against the high yield story, the dollar has been a little bit stronger later this morning, weaker against the euro, 109 32. Interesting to see especially in light of what we saw over in china, 8 30 a. M. Is that us retail sales number, the expectation is for a reacceleration month over month of retail sales, everyones going to be talking about amazon prime, home depot came out, their shares basically bouncing around in premarket after basically delivering in line with expectations at 10 a. M. Its related to home depot, actually, the Housing Market index Homebuilder Sentiment again how long can they remain in the sweet spot at a time where Mortgage Rates are 7. 5 . Right. I mean, this is basically been the story that keeps on giving. And the Biggest Surprise or one of them this year thats been full of surprises this year. Thats all i can say. Upside surprises stateside. Exactly. And then everywhere else, maybe not so much. 11 a. M. , minneapolis fed president Neel Kashkari is going to speak about why Jonathan Ferro didnt lock in an Interest Rate at 3. 5 . No, he about why hes to blame, honestly. Im curious to see whether he gives any tea leaves for jackson hole in terms of how their paradigm is going to really shift. In other words, are they going to be looking at holding rates higher for longer as that thought of as more effective than going further a neil in the diner next week . I know you will. Im going to be there. He kept rates too low for too long. The Mortgage Market is frozen now because of it. Its keeping rates too high for too long. Youre going to be the man who yells at a cloud. Not whenever. Whenever i see him, im nice to know. Dan greenhouse joins us now, chief strategist at solar alternative Asset Management. Dan, good morning to you. Good morning, guys. How are we china for a moment and just focus on whats happening in this bond market for 23 on a ten year. What do you believe is the dominant factor underpinning this move over the last month . Yeah, listen, i dont know that i can disaggregate whats the dominant factor, but its what we all know. Its the supply. Its the stickiness of presumed stickiness of the fed funds rate. It its the idea that inflation is not going immediately back to 2 . I think all of it plays into if had a gun to the head, if i had a bad analogy. But but if i had to pick one dominant factor right now would probably be the supply story. Its another example of when when a a dominant theme in my investing life has been whenever you think somethings priced in, its not priced in. And we knew this deluge of issuance was coming. We know the budget deficit is, for lack of a better phrase, out of control, blah, blah, blah. Out comes this headline on the refunding auctions going up in size and everybody suddenly wakes up to that, which has been a reality for many of us for a long time. Not all for 20 threes are created equally. The reason i ask the question whats behind it . Whats behind it . Should matter for how we invest after that. If its about better Economic Data, then you can make the argument that maybe risk assets are going to be okay in certain places as if its about supply. What does it mean for what happens in equities . What happens with credit . What happens with Risk Appetite more broadly . I think the problem with this discussion is for many of us and certainly people older than than all three of us, theyve been wrestling with the fiscal issue since the Boskin Commission 20 years ago. Weve been told repeatedly that that were at the edge of a fiscal cliff. Et cetera. Et cetera. Et cetera. And so theres a white noise ish characteristic to this discussion. And the truth is, its still the case. Its very hard to invest, whether its home depot or or fortinet or pick your stock here with any idea to that, that investors are going to wake up and deem the us, greece to use the analogy of the day, its very hard to assume thats going to happen anytime in the immediate in the immediate time frame. But at the same time, if it happened tomorrow, so everybody would go, oh, obviously. And thats the dichotomy that you wrestle with on these big macro issues, whether its whether its the deficit or its Social Security or unfunded liabilities. How long do you think its going to be before someone comes on and says the us is the new greece . She takes powers job. Maybe. By the way, if youre on twitter for more than 30s, the us has been greece for 20 years. But thats not saying that much. Which raises this question about the white noise more broadly. This complacency about whats priced in. You said what was the adage . The adage that, you know, whenever you think its priced in, its not. This morning we woke up to china and this belief in easing and more easing down the pike. And a very counterintuitive reaction in markets with people basically shrugging it off, seeming to say this time is different, that they wont be able to stimulate their way out of this. Do you think that thats the accurate pricing . Um, well, listen, we it is true. We have known for quite some time now that chinas weak. The macro data has corroborated that the company is that invest particularly large amounts in china, whether its starbucks or caterpillar, etcetera, have certainly corroborated the idea that china has been weak for some time. And i think its correct to view todays announcement as a as a symptom rather than a cause, if you will. Its its the inevitable effect of the weak rebound from the covid recovery. And you you mentioned in the tease sort of maybe they dont have enough wherewithal or ability to to rescue the economy this time. And i think this is ultimately what what a lot of people have believed for many years, which is ultimately state controlled, centralized, planned economies over time, just simply dont perform as well as free market economies do. And as such, you dont have quite the ability to self regulate and self improve, if you will, along the likes of, say, United States or western europe. Can the us keep doing well if china does not . I think for sure its the same. Its a corollary to the can the market go up if apple goes down type argument, which which has been a debate for 1520 years and is no less no less false today than its been the entire time. Listen, i think china is certainly a Large Consumer. We are certainly a Large Consumer of their goods. Theyve been an exporter of deflation and all of that big macro story that that we all know so well is in the process of shifting. But at the end of the day, the us has never gone into recession. To simplify it, the us has never gone into a recession because of something thats happened exogenously so to dovetail this into where we started the conversation with yields and were seeing yields move higher in the us, even with this concern, that should be a risk off kind of feel, which traditionally would take yields lower. What does that do to some of the real estate, to some of the other kind of term structures that have avoided the true pain related to higher rates that might feel a little bit more the longer this grinds out . Yeah, we talked about this last time i was on and its been a central animating theme of mine for some time. Theres a bloomberg story this morning, i think, that says fed officials are shifting from how high to how long. This is something weve been talking about for for 6 or 9 months now. Whether you got to five and a half or five, 75 or whatever it might be, is far less consequential than how long you leave rates at that higher level. Because if you listen, first of all, from my standpoint in the equity and credit markets, the longer you leave rates up there, the more refinancing risk that you introduce to the bond market. So we all know the high yield market is yielding, call it eight and a half, but the coupon in the high yield bond market is like six and a half. So theres theres 200 basis points of spread there as those bonds start to mature over the next two years and theres roughly 2 trillion worth of high yield and loans coming due over the next two years, that are set to reset at presumably not loans, but in in and high yield. So so the longer you leave rates up there, the more refinancing risk you introduce for, lets say, the equity and the credit markets. And if you listen to someone like, lets say Barry Sternlicht or anyone in the real estate market, theyd echo a similar theme from a different viewpoint, which is from the real estate market. The longer you leave rates up there, the more difficult it is to get all these deals done. And we know that obviously offices in in real or certain parts of offices in real trouble. And again i cant emphasize this enough. I imagine many viewers know it six months from now, if rates are still five plus percent, were going to be having a much different conversation than we are now. Im shocked that real estate moguls dont want rates up here. Shocked, although theyre all raising money. Distressed real estate. Every time i see those headlines. Dan, lets finish there. You mentioned it for someone like you, when do you start to worry about that . We understand the maturity profiles of Certain Companies and when that maturity wall is going to hit, lets say it is out there, end of 24, start of 25, when do you start to back away from some of those credits out ahead of that . Yeah. The problem you wrestle with as a as an asset manager, as a fund manager here is, is when i advise our ceo and cio and say this is what we should do or this is what we should think, theres a catalyst component to it. And otherwise its just to borrow a phrase from earlier in the discussion, white noise and in terms of when you get real, think to oversimplify this conversation, to touch on something about the consumer that you mentioned earlier. At the end of the day, this is all about the labor market. And if the labor if the Unemployment Rate stays in the mid threes and wages are doing fine and prices continue to fall, then the economy should, on balance, do well. Now obviously thats separate from the rate conversation, but its hard to make the case that things are going to get meaningfully worse if the labor market stays where it is. And right now, is it 3. 5 , dan, its good to see you. Thank you, sir. Thanks, guys. Thanks for being here. Dan greenhouse of solus alternative Asset Management on china, us retail. This bond market and this bond market is getting trickier and trickier by the day for treasuries. And just keep thinking about what dan just said, which is its all white noise until it isnt right. Its all white noise until the labor market cracks. And thats what i think were looking at. When does it crack and when does it become something more pretty depressing stuff. Brammer well, you know, on brand, youre just tuning in. Welcome to the show on the s p 500. Were negative here by 0. 6 . Coming up a little bit later on this morning. Looking forward to catching up with bob dole of crossmark. Well catch up with bob in about 48 minutes from now. Lisa, as we look ahead to retail sales in about one hour and 20 minutes. And so some people are saying, well, just wait. Retail sales will start falling off a cliff. Theyve been saying that for a while, right. And theyre going to reaccelerate and now people are saying its amazon prime day. So everyone went out and bought all the deals. So at what point do we just sort of throw in the towel and realize that consumers are just going to keep on buying on the domestic front, you have seen some subtle signs, small ones from earnings. Jetblue, southwest, some of the domestic focused airlines flagging softening demand and dropping fares, were told, havent witnessed that yet. But apparently fares, fares are coming down domestically. Okay. That said, how much is it just this great bowling ball of money thats going from one area to another . It went away from goods. It went to services. Now people are sick of flying around everywhere. And now its going to go back into another part of the economy next, i dont know, maybe back to school supplies. I dont know. Just theoretically, i will say this. People are waiting for the student loan repayments to crimp some of the dynamism that the us consumer has. But do you know that 45 of borrowers say that theyre not going to repay, that theyre going to actually just be in default for the first year and they dont have to get repaid anyway . I mean, this is according to a recent this is credit karma. I wish we had more time on the clock because dan green has had a corner of my eye and now hes got things to say and hes not got time to say them equity futures on the s p 500 negative here by 0. 6 . Live from new york city this morning, good morning. Taking an active approach to investing means looking at Asset Management through a different lens, one with a clear focus on our clients throughout market cycles. 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In a statement, trumps attorneys calling the charges, quote, shocking and absurd. Lisa, were losing count the amount of cases here, arent we . 1 to 4 . Yeah, this is under four. And a lot of people are looking at this one in particular because it is a state case. So even if trump does become president , he cannot absolve himself from this. He cant pardon himself. And thats one thing people are looking at. I personally am watching to see whether its going to be televised and whether thats a good thing or a bad thing for the former president s confidential aspirations. His campaign. His campaign. Yes. Will it be on the stage next week . Asked that every single day . Is he going to be on the stage next week . People dont know. We hear from Chris Christie saying, yeah, he will. Hell come. Hell come because thats what he wants. But we shall see. His advisers, im sure, are saying dont go. Forgot who said it yesterday. There was a 2 chance and one point if that was his ego and that one percentage point was kind of important and thats kind of 80 of everything that he does. So there you go. So there we go. If you are just tuning in, thats one big story for us. Another is china. So allow me to go through some of the price action. Just get you up to speed on whats happening elsewhere. Equities are lower by 0. 6 on the s p 500 as you were in the treasury market. And if youve been following the treasury market as you were, means one thing yields up, treasuries down. Four 2287 yields higher by four basis points. Lots of concerns about whats happening over in china. The data wasnt great. Weve had the biggest rate cut, lisa, going back to 2020 and a strong suggestion, there needs to be a whole lot more than that. And the strong suggestion bearing out in equity markets where you see chinese equities selling off despite the move for support. This again points to this feeling that they need to do more and its theyre unwilling to do that, at least in any measures that theyve laid out so far. It is not a bazooka. As one commentator said, its quite telling that markets havent responded to this positively. You might expect maybe a rally in the equity market, a rally in treasuries yields drop, maybe even copper base metals picking up. Im not seeing that they have some fundamental problems with people, just not going out and buying. How do you deal with that if people dont feel optimistic enough to go out there and spend . And that is what youve seen in the behavior of the reopening of china. And it does go to the youth Unemployment Rate. It does go to the fact that they dont see where theyre going to get jobs, although we dont know because they didnt release. You wont see it anymore because its going to be optimized. Theyre optimizing it. You want the full quote on the optimization, please. The National Bureau of statistics, according to a spokesperson, they said they wont be publishing youth unemployment anymore for the time being because they need, quote, further optimization and more Research Needs to be done. And heres the quote. This is the official line where the students are looking for a job before graduation should be counted in the labor statistics. Okay, heres my issue with all of this. Does anyone actually read this and say, oh, okay, well, this is good news, then we wont trade on this and well just assume the best . Or is it basically just theyre trying to figure out how to get their messaging correctly for the next read. I mean, basically, what does this do to the credibility that they dont really necessarily have developed in markets with respect to the integrity of their data . It just sort of doesnt really necessarily affect things that much. Its not for us, its for domestic consumption, right . Youd have to imagine thats what its about. And i wonder how much the domestic consumption is, you know, nods along versus its like, okay, heres another thing that were going to have to stab in the dark with. Lets head down to dc and catch up with bloombergs. Bloombergs Wendy Benjaminson over in washington dc. Wendy wonderful to catch up with you. Weve talked about the former president , some of the legal issues he faces in new york, washington, dc, in florida. Talk to me about georgia and whats different about this case. Well, first, as lisa said, it is very important because were he to be reelected, he could not pardon himself. Fani willis, the prosecutor in atlanta, does not answer to donald trump, nor do nor do the people of georgia necessarily. But the other thing thats really different about this case is the size and scope. It was i mean, just by the numbers, its a 98 page indictment with 41 criminal counts against 99 people. This isnt just donald trump and a bunch of unindicted coconspirators, as we saw with the last election, interference case from dc. This is rudy giuliani, a host of his other lawyers, mark meadows, the former white house chief of staff, is ensnared in this. And i think whats really important to remember is that we know they did all these things. They were playing out in real time. We were doing daily stories about their attempts to overturn the election. The big question now for all these prosecutors is to convince a jury that these were crimes. When will this actually start to matter in terms of the popularity ratings of donald trump . I mean, this basically has been a boost to his popularity. If anything, will it continue to be . Well, its well have to see how this plays out once its passed. The prosecute was accusing him of crimes. I think once we get into the discovery, once we start seeing the evidence pile up, once juries start reacting to it and once its on trial, i think maybe there may be some some diminution of his popular anti. And there already has been among moderate republicans in dependent voters. And of course, every democrat. But theres you know but i think perhaps and ive been saying things like this since 2015, so who knows if im right at some point people will see donald trump for who he is. Theres a question Going Forward about what the candidates the other candidates to become the republican nominee are going to say about these cases. Originally, they rallied behind the former president. Are they still. Yeah. Yes. And thats i just dont understand the campaign strategy, let alone the, you know, authority or the whether theyre right or wrong on this. Its Vivek Ramaswamy came out, i think it was overnight and said, yeah, i would write the amicus brief myself telling them to overturn this. And ron desantis and the others are talking about the weaponization of the quote unquote, Biden Justice department and all of that. And then theres the what about hunter biden reaction . And i dont understand how you run against someone. Why while youre defending them, its an odd strategy, but maybe thats the way they think they will become more popular with primary voters. But its not happening. And itll be really interesting to watch the debate. Even if he doesnt show up, if it becomes a isnt a donald trump great . We all agree debate. Well, we know not everyones going to say that the former Vice President , mike pence, is one another would be the former new jersey governor, governor christie, wendy, is that helping them or hurting them . Well, combined, they have about 8 or 9 of the republican primary support. So i dont know. Theyve become much more popular with independent and suburban and democratic voters for, you know, standing up to what they believe were crimes happening. But its not helping them with republican primary voters. I mean, right now, the biggest competitors to donald trump are and by this with a they are distant seconds and thirds are ron desantis and Vivek Ramaswamy and they are defending him. Wendy, thank you. Wendy benjaminson down in washington, d. C. , a week away from that first debate for republicans, hosted, of course, by fox news. Lisa, how do you beat the former president if at the same time you are defending him, as wendy put it, this has been the question and no one really has an answer quite clearly, because nobodys really effectively really taking a stance one way or another. The people who do go against him are losing popularity. The people who do who dont go against him are forced into a position where theyre basically backing him and hes their opponent. So how do you navigate this has been a real quagmire for them. I heard from Vivek Ramaswamy over the weekend talking about that he would take counsel from the former president if he got into the white house. Theyre trying to walk this very, very tight line, arent they . Basically saying that we support him, but at the same time, im a better candidate than him from a broader perspective, how have we priced this in . I dont mean to just go back to markets because its easier than talking about i dont know how you price any of this in, but but how do you sort of figure out where this is going when you have legally fraught candidates facing an election cycle at a time where were worried about the debt, were worried about geopolitical tensions, how do you then price in the potential for real unrest . I mean, honestly, im just thinking through what the ramifications could be going down or is it all just white noise, as dan greenhow says, until theres a catalyst park the hyperbole. Lets go through the points that were made by fitch in the last couple of weeks with the downgrade. One of them was a governance issue. If youve got worries about governance and institutional credibility in washington, d. C. , then there is a reason also to be concerned about the treasury market as well, especially at a time where there does seem to be a lot of political potential turmoil that people are starting to game out a little bit. We heard that from Lori Calvasina trying to cut through. The signal in the noise is almost impossible at times in washington. And right now is one of those times. Equity futures right now on the s p 500, negin the veggie day. This is actually a photo from my wedding. Im adam weiss, founder and ceo of keepsake. The mobile app that makes it easy to have your photos printed, framed and shipped to your doorstep. You just choose a photo that you love. 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What we really need in order for some of the slowdown to materialize is to see Monetary Policy. Thats somewhat a little more restrictive. This is bloomberg surveillance with tom keene, Jonathan Ferro and lisa abramowicz. Retail sales in america 30 minutes away. Live from new york city this morning. Good morning. Good morning. For our audience worldwide, this is bloomberg surveillance on tv and radio alongside lisa abramowicz. Some Jonathan Ferro. Your equity market on the s p 500 right now session lows down by 0. 7 . More weak data out of china. A rate cut from the Chinese Central Bank in the mix insufficient to put a floor under risk. Sentiment Risk Appetite worldwide at the moment. There is a real concern about whats developing. Lisa, in the worlds second largest economy and an inability maybe for the chinese policymaker at this point to do anything about it. Inability or unwillingness. Right. And thats sort of the key question that a lot of people have. The fact that there hasnt been a greater noise or a greater move to date or move that would actually comprehend fully target the source of the weakness, which is consumers arent spending and the Housing Market needs to be corrected and has left people thinking that maybe its just not going to come this time. Equity session lows, bond yields near session highs. Stateside, our focus shifts 29 minutes away from retail sales in america. Its all about the us consumer. This week, and this is against the backdrop where treasuries are selling off. Yields are higher. The Federal Reserve is engaging in this happy talk about a soft landing and maybe even rate cuts next year. And here we are with a long end of the treasury Market Selling off over the last month, the highest of the year, going back potentially to before the pandemic, before the financial crisis. If you take a look just a couple more basis points away from the high in this particular cycle, were looking at a time where people are resetting and saying the feds going to hold rates longer, higher for longer, because there has been this resilience and that subtle shift of not cutting rates next year as quickly as they previously thought is a game changer for investment thesis thats just starting to work its way out in terms of what were seeing in the prices. Lets go through the calendar together. So today, retail sales in about 28 minutes tomorrow. Earnings from target. Then on to thursday, numbers from walmart and lisa in between. We get the Federal Reserve minutes. The fed minutes. Is that a platform for the hawks, for the doves . Whats the balance of risks around doing too much . Doing too little . Thats clearly shifted in the last 12 months since the last jackson hole meeting. Couldnt agree more. Theres a feeling of leaning into the hope of a soft landing, not wanting to disrupt it of the hold and why not hold rates and just wait . What are they waiting for . And this is really the question that we have to ask, which is how long do they have before they miss the boat in terms of being sufficiently restrictive or easing . Right. Where is the balance of risks in terms of where inflation goes, if it accelerates or if its going to come down really dramatically . In other words, is there a window to deal with this before it becomes embedded . Do you have to tackle with it more quickly . Said, well, im just trying to build on it. And im thinking at the same time as im saying it, im thinking of the uk because wage growth in the uk today just phenomenal record wage growth. What was it, a seven handle, 7. 8 . Yeah, its amazing. Were talking about the bank of england back in a way, and theyve got wage growth of seven plus percent in the united kingdom. But its well said about embedded and the sort of odd confluence of things. Yesterday the new york fed put out their Inflation Expectations survey and it actually showed them coming down. So on one hand, you saw in the university of Michigan Sentiment survey as well, Inflation Expectations are contained for now. But if people keep getting wage increases, if they keep spending, if they keep seeing the strength, at what point does it normalize some of the price instability that weve gotten used to . Thats how the university of michigan all about it. And youll see it in their survey. You could do if you got called to if you get the call. I want the call equities right now on the s p deeply negative by three quarters of 1 . Were near session lows here on the s p 500. In the bond market, yields are higher by four basis points talked a lot about that 423 level crude back in a way against the grain of the last month or so, though, lisa. Crude still above 80 8139. Were down here by a little more than 1 . And a risk factor considering the fact that that was one of the tailwinds for certainly the european region, but also the us is there the ammunition to fight it . Crude to me is one of the big stories, especially because how many people have come on and said thats the story. Theyre leaning into their buying energy stocks. Thats the sector thats going to do well. Can it continue to do well with china in the situation that it is . And then what does that mean for inflation . It creates in the 80s, were talking about a growth slowdown and rate cuts in china. And how much is this just supply the fact that saudi arabia is cutting versus everyones still flying around. Everyones still you know, going around their hummer. The hummer, the hummer, you know, maybe its electric, but, you know, theyre very expensive. They are, yeah. Have you looked into one . No. The ev version of it is expensive. It costs a lot of money. Well, so does the non ev. Well, they cost a lot of money to run. I know all of it with us now, whats the talk about markets . Cio of crossmark global investments. Bob good morning to you. Same. Lets talk about retail sales 25 minutes away. Are we going to see that resilience in this us economy, this us consumer in the data were set to see in this hour . You just put a lot of good things, the two of you, on the table. A soft landing is like putting a thread into the needle and the eye of that needle is shrinking. Its getting tougher and tougher. The consumer eventually will come to their knees. We always see at the low end, we all we see it with credit extension. We see it wage growth is strong. How long will it stay strong and that is just fueled the consumer and its fueled our economy. And this thing is kept on going despite all the things in the background that you just put on the table, including the lagged effects of the fed going from 0 to 5 and a quarter, we have not felt all of that yet. Lets unpack that. It will happen eventually. We are we seeing signs of it now . You mentioned credit. You can see it through credit. Maybe one way. Another way might be to see it in the official data. Well see that at the bottom of the hour, 830. Another way might be the earnings across those three things right now, credit data earnings, are you seeing a slowdown . Not really. Its all lead indicators. Is the coincident indicators are are positive. Some of them are getting a little mixed. Its going to take some more time to go there. Weve in since the first of the year saying recession starts sometime between labor day and the end of the year. Still sticking with that, think its a mild recession as many do, although recessions left most peoples vocabulary, as you know. But where does that recession come from . If you do see the strength in consumers and a lot of people have pointed to the student loan issue and i was reading this article, the survey by credit karma, and it was showing that 45 of student loan borrowers say that they are not going to repay. Theyre basically going to be delinquent for 12 months because theyre not going to get penalized for being delinquent for 12 months. So arent we basically getting a stealth stimulus ongoing that will remain in place for a while . Well, its its been the story and its lasted a little longer than many people thought. And its still not finished. But eventually consumer matters will come to the realization that things are a lot more expensive. Inflation is still a problem. They have no savings at the lower end of the consumer bracket, and thats a problem. And theyre going to have to retrench some or find a second job. And theyve already done that. Whats the hedge . Whats the defensive play at a time when a lot of the Strongest Companies have incredibly high multiples and youre looking at bond yields that are not giving a consistent message . Yeah, i think that within the equity market, you try to focus on companies that have high earnings predictability, high earnings persistence and are not selling at crazy prices. Thats not a whole lot of places like the hmos, for example. Ive not given up on tech, but i want to be careful what im paying for my tech. So some of the semiconductor stocks, some of the software stocks, theyre not so cheap. Visa, mastercard to names i still like. Theyve gotten more expensive. So you have to pick your spots and come back to earnings persistence and cash flow generation. Lets talk about the retailers then. Im deep. Im out this morning. Walmart later this week, thursday, target tomorrow. Have they still got that Pricing Power . Can they keep margins pretty steady or do those margins get eaten away at eventually . And i think well see some of that like now those margins get eaten away because you see companies can only raise prices so far and youre already seeing consumers begin to make noise and balk and stop buying some things. It wont it wont be everything. But slowly but surely you take the edge off. We have to operate on eight cylinders to keep the thing where it is now. And even we back off to six. Thats going to disappoint a lot of people with stock selling where they are. Well, lets highlight the winners. Forget tech cruise lines, airline seats. Are we at that point where weve reached Consumer Price intolerance, they just dont want to pay it anymore . Well, as you said a minute ago, people are flying around on an airplane and, you know, every seats taken. So were not there yet, but well get there. Okay. So whats going to get us there . Because everyones been saying this, that the consumer eventually will push back and then they havent. And then you go out to eat and it costs twice what it used to. I mean, honestly, this is the kind of increases that youre seeing. Yeah. So subtle. We had 15 months in a row of better than expected Monthly Employment numbers. The last two months have been below expectations. So there are cracks beginning to develop. Dont want to come across as the economy is tanking and and you dont want to be a bear overall. Im just cautious and add to it. I said, all right, ill say it again. If the were 14 different story. But you know, at the peak a couple of weeks ago, i looked at my screen on trailing earnings 23 times earnings. When you talk about being cautious, whats the ballast . If you talked about your equities, is it cash . Is it going into duration . I think having some cash in your portfolio yields 5 is not a stupid idea. Have you been increasing it in in the balanced accounts where we can in the equity market, neutral portfolios, weve been bringing our exposure down and therefore our cash exposure up . Yes. Bonds, you own some bonds. Im not sure that weve seen the high in yields yet, but id rather begin to nibble at, you know, four and a quarter than three and a half where we were not that long ago. You think start to go out along the curve, start locking some of this stuff in slowly but surely. Yes. Heard the same thing from lisa shalett over at Morgan Stanley. You think we face that reinvestment risk rate cuts on the horizon . That will happen at some point. So dont want all my eggs in the short term 5 basket. Look, a year ago, 18 months ago, 1. 5 , ten year treasury. That was a bad deal. Four and a quarter. I think ill think about it. Its unthinkable, isnt it . It wasnt that long ago. No, it wasnt that it happened fast. No, it really did, bob. Its happening fast now. Bob, its good to see you. Thank you, sir. Thank you. Bob dole of crossmark global investments. This selloffs happened quickly the last month in the treasury market. We thought wed seen the highs back in october. That was it for 30. I think there was a feeling wed seen the post failure highs of 420 and here we are doing it all over again in the last month. You know, it makes me a little sad. Whats that . That you cant buy the actual bond and get the certificate and then, you know, show your kids and say like, this is a bond. And when it comes to you, you get this amount. Its that what youd like to do . Well, i kind of think its i think i dont know. My grandfather did that. And i remember when they came due and we kind of have gotten away from that and the kids learning about about bonds already. Theyre doing fixed income. Theyve been learning about it since, you know, kindergarten, since theyre like eight. Oh, yeah. Oh, yeah. Before that, we had lots of discussions, really. We have really fun, you know . Oh, it sounds, sounds so fun. So fun if youre just tuning in. Welcome on the s p 500 right now. Negative 0. 7 . Some are at casa bravo. Can you imagine . Can you imagine . Okay. True story. My son is actually taking a finance class this week. Well, he wants to invest, right . Yeah, hes really interested in that. Are you letting him invest . Well, its very tricky because i dont want there to be a conflict of interest, so i want him to do it virtually. Well, you dont. He doesnt have to tell you what hes investing in. He can talk about broad asset classes, but hes actually really he said to me last night, hes like, mom, you know, im learning about this. And i think the fed should just hold. And im like, oh, no, im not to at home. And how how olds this one . Well, hes hes 1414 with a view on the fed. Well, he was he was he thought it was really interesting. It is interesting. I mean, this is what everybodys talking. Did you tell him . Hes very consensus. Did you tell him that . Yes, he might be upset about that. I told him i said, you know, the extremes on either side, you know, and i was starting to explain it. And then i went to sleep instead. All right. And you can teach him about qe and why they killed capitalism and all of that at a later date. Basically, you dont want to be my child. Thats essentially what youre learning today. And that my household is incredibly nerdy. That sounds great. 830. So 17 minutes away. Retail sales data in america. Lindsey piegza of stifel is going to join us to break down some of that data going into jackson hole next week. Its only a week or so away. Most people expecting chairman powell to Say Something about something. We just dont know what that something is. Were expecting him to talk bramo guess were expecting him to talk. And a lot of people are saying that the that the best Case Scenario for him is just to say, as little as possible. I agree. I agree. Im so on that page. I mean, what are entertaining rate cuts . Because you want to keep real rates steady and you dont want policy to get too restrictive. You send a signal doing that. That sends a signal. If he leans into the Market Action saying the market has it about right, that were not going to cut rates, that could actually have an impact on risk assets. Okay. Jackson hole, were a week away, so well be there. Terry haynes of pangea up next. Its every Municipal Bond investors dream. A bright, shining city on a hill, a place where there wont be any economic, financial or political problems. So you never worry about getting your principal and interest paid on time. But what if the city youve chosen doesnt live up to that dream . Thats why investors turn to assured guarantee. We have a long history, a proven track record and a wealth of financial resources. So if something does go wrong, well make it right. A sure guarantee a stronger bond. And using r does afford for a kind of subversive kind of conversation. And that to me is its real power. The term emerging technologies can be vague, subjective and misleading. I agree with that. 100 . We dont always think about the entire picture and the ways in which all of these things are interconnected. Can they motor connecting art and technology. Oh, booking. Com. Somewhere, anywhere. I just want to lie motionless in a chair. Booking. Com booking dot. Yeah. Theres an easier way with thumbtack download the app today and care for your home from top to bottom. The first time you made a sale on line with godaddy was also the first time you heard of a town named dinosaur, colorado. Just got an order from the dinosaur colorado start an easy to build powerful website for free with a partner that always puts you first. Start for free at godaddy. Com as your advisor created a portfolio based only on your age and risk tolerance. Thats simply not good enough. It creative planning. Our private Wealth Managers learn about you first. Dont settle for a standard portfolio. K yree meeting today at creative planning. Com. The indictment alleged is that rather than by abide by georgias Legal Process for election challenge, is the defendants engaged in a criminal racketeering enterprise to overturn an georgias president ial election result . I am giving the defendants the opportunity to voluntarily surrender no later than noon on friday, the 25th day of august 2023. Its about a week away, ten days away. That was fani willis there, the District Attorney of Fulton County, georgia, laying out the indictment against the former President Donald Trump and 18 others over efforts to overturn the results of the 2020 president ial election in the state. In a statement, trumps attorneys calling the charges both shocking and absurd. Lisa making number four. Yeah, and at a time when people are wondering how this will play into the election, just a note, this could be the first trial to be televised. And thats important at a time when televised events have benefited donald trump in the polls. Typically weve been talking about how press is often good in terms of facial recognition and whether that will continue will be an interesting question. I think we can all agree on one thing. Its in the Public Interest to see some of this and in georgia, they have a rule allowing television on television of some of these court cases. So people are speculating this may be the first to really be aired in real time. Watch this space. Watch this space. Weve had some great guests this morning already. Bob dole of crossmark, just moments ago on the way out, the studio, he said this. He left us with this and he said could share it with you. So he said 4200 before 4600 on the s p 540. 200 before 4600. Right now, equities are weaker. Lets whip through the price action together. Were about 12 minutes away from retail sales in america. Equity futures are negative by 0. 65 , just about off session lows. A lot of attention on the bond market for good reason. The sell off continues. Treasuries down, yields higher by four basis points. Lisa, its 4. 23 on a ten year. This to me is the story of the past few weeks, the grind higher. And whats behind it. And you ask five people, youll get five different answers. But the bottom line is, for all the people who say theyre leaning into duration when it isnt affecting the duration in terms of price and yield, lock it in. Bob talked about locking it in. I saw the same in a note from lisa shalett over at Morgan Stanley as well. The reinvestment risk of sure that one year tbill, whatever it might be, feels good right now. But what if that matures and theyre cutting rates and youve missed the opportunity to to lock some of this in . Weve heard that from Morgan Stanley. Weve heard that from jp morgan. Weve heard that from western Asset Management. Weve heard that from a whole host of others, including hsbc. This morning. Again, we hear this. Where are the bass buyers . You know, when they step in, then yields will come in. Not yet. Retail sales 11 minutes away. Joining us now on washington and the latest developments down in georgia, terry haynes, founder of panjshir policy. Terry, wonderful to catch up with you, sir. Always thoughtful. Our conversations together. We mentioned this in the last couple of hours, and i think its the appropriate place to start. Weve got cases now in new york, in washington, d. C. , in florida, in georgia. Terry, how do you rank those just in terms of importance . Oh, importance. I think its far too early to tell for one reason that you and lisa were just talking about, which is the timing of the cases. You know, theres a whole theres a lot of different ways you can slice these things, federal versus state racketeering versus conspirators, all kinds of things. Id rank them in order of how theyre actually going to come to trial and to some extent excuse me, and to some extent it matters greatly. You know, frankly, i think whether theyre televised or not, as you say, i mean, the closer people see whats actually going on and why theyre going to have more of an opportunity to make up their minds on it. Terry, can you elaborate a little bit . Why is the televised ation of this important . You said to make up their minds, but what do you think the outcome will be of having it very much in the public eye . I think theres just an immediacy to to television, frankly, and, you know, i think weve seen that over the past eight, 60, 70 years, just in terms of how people perceive candidates and People Choose candidates. So that, you know, very broadly theres that. But secondly, there is a a debate more than a debate in the country about whether this is politicized prosecution or whether theres something here. So theres going to be an awful lot of pressure on the Fulton County da to show that these charges are real and theyre not the kind of standard splash that prosecutors do. You know, prosecutors tend to go, you know, go in front of grand juries, particularly you go big, you go broad, you get the maximum you can from the grand jury in this case, its going to be, you know, did she overstep . Does she actually have evidence . And, you know, and of course, the other side has a great deal to say about how to interpret the evidence. So, you know, this is going to be on a pretty big stage and even more so if its the first one. Terry, theres a real question around the different poles of the political sphere right now and how people are going to respond to court cases that most of america or many of americans have already decided about, regardless of whats happened yet. What do you think the outcome will be to some sort of conclusion of the trial . If there is some sort of conviction . I mean, im just trying to play out the political risks here on a social level. Well, i think firstly, ive said this to you all before. Your think there is greater uncertainty around the 2024 president ial election because you have increased risk for uncertainty about trump and about biden. On on trump specifically. I think what youve got is a situation where you know, if theres a conviction, my instinct is what happens is that it accelerates. Its this death by a thousand paper cuts process where people say, you know what, regardless of trump policies, regardless of whatever, you know, movements, you know, kind of anti Establishment Movement think exists here, its id be better off with another candidate. So i tend to think the more the prosecutions start landing home, the more that the republican electorate turns elsewhere. Right now, terry, as you game out that political risk, can you talk to different clients . What are you telling them to prepare for . What is the way that it will manifest itself if were not focused as much on, say, Debt Reduction or some of the tangibles, nuts and bolts of fiscal governance as well, say a couple of things. One is that the the the first action in the president ial primary process, this is five months, i think, from today mean you know iowa i think is five months from today. So um you know thats a very long time in politics and there are examples all over the board about how how you know, somebody that was leading in the polls today, you know, didnt win a different primary challenges. So, you know, number one, theres that number to keep your eye on, the panoply of things that are going on in washington. You know, not just the trump matter or the biden matter. Youve got just in the next few months, youve got a, i think, a shutdown likelihood, a Government Shutdown likelihood at 60 . Youve got probably no meaningful action on debt and fiscal, which markets are increasingly interested in. Youve got everything from the China Economy to the ukraine, russia matter to to think about, you know, bank capital standards and all the way down to johns favorite topic, ufos. So, you know, what weve got is a situation here where theres an awful lot of risk coming out of washington on a variety of fronts all at once. And it behooves investors to Pay Attention to all of it, not just this particular bread and circus. Terry, how did you know that . How did you know that, terry . How real is this down in dc when you watch these hearings . How real is it . Which part . The ufo part is obviously terry, you know, the the cheap and easy line is to say anybody that watches washington with regularity, you know, does believe in you know, that theres something out there that, you know, is affecting things that isnt us. Um, you know, i think theres an awful lot of circumstantial evidence on the ufo matter, as there always has been. And, you know, theyre going to need to get to the next step to start convincing people. Terry thank you, sir. Terry haynes of panjshir policy down in washington. Its fascinating to watch. Everybody knows that you love ufo, probably said it, probably said it on air. Did you see that, paul krugman . Love is strong. Love is strong, but you care about them and increasingly aware and interested in. Well, ill just say this an odd lots of bloomberg. Paul krugman was on there talking about ufos. What did he say . He said that alien invasions are inflationary. Okay. So so we can expect them to be deflationary, right . Wow, thats harsh. Isnt that what we do . Thought that was the game. Krugman says. And, you know, actually just wrote a column about how he, you know, is talking about how hes gotten things wrong. Look, all i can say is, you know, the fact that were talking about ufos more than Debt Reduction. Well, were not. We just did just, you know, indulge me. We just did 60s, you know, and actually, people do see unidentified flying objects a lot. Yeah. No, but do you actually think theyre like little green creatures inside being like, ooh, no one said anything about that. Okay. Did make noises . No. Didnt retail sales five minutes away from new york this is bloomberg. Pick up. Gotta go. Come on, lets go, lets go, lets go. Come on. Oh, god. Here we go. Go, go. My favorite color is boom, boom, boom. Because its like a family thing. And. Boom, leave running behind behind the new turbocharged volkswagen atlas does life beautifully. I want a future where sustainability and inclusion are not just ideas. The future of technology is always for people want to save environment, for my children, for their children, and for their childrens aidyl hi, im aidyl, and i lost 90 pounds on golo. I struggled with weight loss and weight gain my entire life. 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All documents are state specific, legally valid, and start at just 159. Thats not a find the plan. Thats right for you at trust and willkomm. Us retail sales that data seconds away. Going into it the scores look like this on the s p 500 equity futures is near session lows and down about 0. 6 in the bond market. 10s ahead of the data treasuries selling off once again. Yields are higher on a ten year by 3 or 4 basis points for 23 is the yield on a us ten year. At the moment were at a new high for 2023. The Economic Data in america just about to drop across the bloomberg. Well do this three different ways. Lets start with the headline number. Retail sales upside surprise across the board here. 0. 7 against an estimate of 0. 4. You can strip out autos, you can strip out gas. The numbers look like this, positive 1 . The survey positive 0. 4. If you look at the control group, that number, of course, goes into gdp. That is an upside surprise as well. At 1 , the estimate there 0. 5. So its an upside surprise across the board here for us. Retail sales in the bond market. Guess what is happening . Yields are up here by seven basis points on a ten year to 426 getting very close to a cycle high for a ten year yield in the equity market, breaking down towards session lows. Were down by 0. 7 . Lisa, thats an upside surprise. Again, at a time when people were expecting there to be a little bit of bite with people not necessarily having the savings. Were looking right now, im just watching that two year yield climb past 5 . Were now gaming for how long . And thats really what i think chair powell is going to focus on. Its not necessarily how high, because it seems as if the committee is of one mind that were nearing that terminal level, whether its one, two, maybe even three additional rate hikes. Were up near that that sufficiently restrictive level. But how long will the fed need to raise rates or keep rates . Excuse me, at that elevated level, i also think hes going to talk about the context of inflation against Monetary Policy. How does the fed respond if we see a reversal in inflationary pressures . Is that even a scenario that the fed is considering and how does the Committee Balance the risk between raising rates even higher than previously and expected, slowing the economy against the risks of of wanting to obtain that 2 inflation target . So theres a lot of questions that investors are going to be listening for that im going to be listening for in terms of how to gauge the feds mindset on these broader, broader themes for inflation and Monetary Policy. Lindsey piegza of stifel. And as were speaking right now, you are seeing that two year yield just bump up against that 5 level, trying to see how long it can hold on. Just to take a look at the market reaction, it is, as you would expect, just trying to game out how high the fed has to hike rates. But more importantly for how long. And that does seem to be the tone across the board, watching the dollar space, because that has been one of the big surprises, that there was dollar weakness versus the euro, even in light of what we saw over in china, we now see that reassert itself. It actually has reversed after the knee jerk response where now its 109 17, a little bit of euro strength versus the dollar. We should all just also just mention in the slew of data that came out, we got Empire Manufacturing data for the month of august to read on manufacturing, and it came in with a downside surprise of 19. So there is this question around whether were seeing a sort of bifurcated read and not a clear one in terms of real time activity. If you are just joining in, we are seeing a decline in the equity market thats deepening after that retail sales surprise to the upside down about 6 10 of a percent for the s p 44, 77. Were also discussing what the ramifications are with respect to china given the fact that we heard from janet yellen, treasury secretary, that there was some implication for the us economy. Still with us is Lindsey Piegza of stifel. Lindsey, whats your view on that . How interconnected are the two economies . Well, i think theyre very interconnected and certainly we have to keep an eye on whats happening on the International Stage as we see our one of our largest trading partners now suffer a significant weakness in terms of the economy. Now, will this necessarily translate into further deflationary pressures . It certainly could help alleviate or help compound some of the disinflationary pressures that weve been seeing on the producer side. But again, for the us economy and more importantly for Monetary Policy, what were struggling with is the demand side of the inflation equation and thats what the fed is going to be focused on. Thats what their focus is in terms of containing inflation. Lindsey piegza of stifel, thank you so much for being with us. Janet yellen speaking about about the different programs that President Biden has put out there, but also saying that chinas slowdown is a, quote, risk factor for the us economy. Other people talking about some sort of decoupling and whether its going to have an economic read through market read through what thats going to look like, how thats factoring into yields coming up, shifting gears a little bit. William cohen joining us, author of money and power how Goldman Sachs came to rule the world. After a bit of controversy over the ceo and growing dissent that is percolating into the news pages. From new york, this is bloomberg. This thing thats making me get an ice bath again. What do you mean . You straps are mind blowing. They collect hundreds of data points like in rem sleep. So you know all you need for recovery and you are. 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When i talk to investors, investors arent saying oh, get rid of david colvin. Theyre really asking the questions. Youre asking, hey, does the media impact their performance . Id say no so far. Having said that, David Solomon has to earn his job every day. And so i can come back in three months or six months and he doesnt get the job done. Ill be on the other side. That was mike mayo, wells fargo, head of us Large Cap Bank research at wells fargo, talking after a new York Magazine article titled as David Solomon too big a jerk to run Goldman Sachs inside a banking mutiny. The discussion here as people wonder what the path is forward. There have been a number of departures. Some people say its within normal range. Some people saying that theres a real question mark at a time of tumult for the larger banking sector. Joining us now to discuss is sonali basak, bloomberg wall street correspondent. Sonali, just to get started, what is the latest in terms of how goldman is responding to this and how theyre sort of setting it up, given clear internal dissent . This idea here that mike mayo had brought up that performance has not been impacted. Listen, this years a tough year for goldman. The roe has been the worst its been in years. And we are splat dab today in the center of the third quarter. This is a pretty Pivotal Moment in terms of what goldman would post at the end of this quarter. They have to finish their consumer strategy exits. They have green sky, they have Balance Sheet reductions to get through. And so this idea about performance being impacted by a lot of the distraction happening at goldman, this is when its being put to test most. Why are people so fascinated with Goldman Sachs in particular . Theyre the biggest when it comes to the high flying world of Investment Banking. Goldman sachs has changed a lot. This was this closely Held Partnership and when David Solomon came in, part of the promise was to open this up, more shareholder friendly. We were doing investor days now, but what happened was with the personality traits that he has had, there has been a lot of friction between david versus the employees versus the media. And so that tension is now coming into the spotlight in a much bigger way, especially after the series of articles over the weekend. Now, the question is, are those another set of just articles . Because we have seen kind of a lot of discontent over the years, or is it something where the rubber hits the road and starts to impact goldmans performance moving forward and this year is a big year to really set that mark where is growth going to come from if its not going to come from the Consumer Banking . And if its a time of difficulty for certainly getting deals done and other types of Investment Banking activities, a few things theyre putting their money on asset and wealth management. But heres a couple of things about that business that is where some of the Balance Sheet reduction is also happening now. So you saw things like a massive write down on real estate when they had to sell assets and really exit some positions and take some markdowns. You also see them still fighting pretty hard in trading. I will note, on a really positive note for goldman, they have been beating Morgan Stanley and Equities Trading a couple quarters in a row there. So they have made strides in mergers and acquisition. Again, another pivotal year. For the first time in five years, theyre still lagging behind jp morgan on our own league tables. They are up in Investment Grade bond underwriting or high yield bond underwriting, but they are down in Investment Grade. So its choppy if you hear what im saying. And thats why this year is such a pivotal year for goldman, because its David Solomons year to show whether this is just a lot of noise or whether its impacting the core business lines that theyre trying to prove or the future of the bank as mike mayo said, his performance has held up until now. When that changes, perhaps his mind will change. But as of now, not so much. Sonali basak, thank you so much for being with us. Someone who has written about Goldman Sachs and all finance for many, many years, William Cohen, author of money and power how Goldman Sachs came to rule the world, cofounder of puck, joining us now. William, i just want to start with whats your take on the article in new York Magazine . But more broadly, some of the articles percolating out that really challenged David Solomons leadership . Well, the new York Magazine, an article, lisa, was particular, highly personal and pointed out, you know, having written a book about Goldman Sachs, ive read many, many, many articles over the years about goldman. And of course, goldman is always a focal point of the medias attention. Its become increasingly more of a focal point under David Solomons leadership in part, honestly, because he is disengaged from the media, which is a strategy i dont really recommend that he do. But, you know, he he seems to be doing it. And i think some of the reason that youre getting these negative articles is because he you can do this when you energy does not engage with the media, which you know, i think would he that you can do this cassette be better off doing . But the new York Magazine article in particular was very set. Come on connect with skilled pointed, very personal, very mean spirited, and and, you professionals to get all your Home Projects done. Know, obviously, goldman is well, get started. Today at angi. Com and you back. Pushing back very hard against it, almost like makes the new these bills are crazy. York times article which came we she has no idea shes sitting out the same day, you know, an on a gold mine. Afterthought, even though it did well she doesnt know that if contain that bit of news that she owns a Life Insurance policy of 100,000 or more, she can supposedly Lloyd Blankfein called up. David solomon, the previous ceo, sell all or part of it to coventry for cash. Even a term policy, even a term and asked him if he could be helpful, that he had, quote policy. Even a term policy. Unquote, lost 50 million on his Goldman Sachs stock and, you she find out if youre sitting know, was willing to return if on a gold mine, call coventry david would be willing to have direct today at 800 383 9200 or him, which, of course, he said no, that said, at what point visit coventry direct. Com does the increase in bad publicity and these public bloomberg covers the world with concerns, public airing of unmatched reach and resources grievances that might be from more than 120 countries. Percolating up in the internal ranks, really create a challenge the moment news breaks 24 hours to running a firm, right . A day,the code now and ask about i mean, at what point does executive leadership have to have the room or does he lose the room and still keep his job . Yeah, i mean, sonali is right and mike mayo is right. I mean, as as long as the stock holds up, which it has, basically its you know, its off its 52 week highs all time highs, but its basically held up pretty well all you know, its up to the board at this point. I mean, the board has been incredibly silent, which is shocking to me. I think at some point, you know, the board needs to come out in support of David Solomon. Hes in a bit of a limbo now between all the complaining, all the griping and these negative media articles. And it would be smart, i think, for the board to come out in support of david if, in fact, they do support him. I mean, now hes in this kind of weird limbo. Now, i know from my internal conversations with people at goldman that the board is not rattled by this. Maybe thats a good thing or a bad thing, but they have not come out with any kind of public support, which frankly, would be smart to do. What is the response internally when you have some of these conversations . Is it surprise wise . Is it this was a Long Time Coming . Is it agreement . Whats the sort of feeling that you get . I think that theres some basic level of understanding that david has become a bit of a lightning rod and is somewhat of a controversial figure and is sort of a hard driving, you the bosley guarantee at granger weir for the ones who pay know, ceo, take no prisoners type, which frankly, you know, attention to every little is sort of what Goldman Sachs is detail, the ones who fuss, tinker and sweat, the small all about. So on the one hand, i think stuff because, you know, the theyre very supportive of david tiniest thing can make the biggest difference when it comes to keeping business moving. We get it. At the highest levels, as you would expect them to be. Were the same way offering on the other hand, i think they access to Product Experts to understand that, especially help you quickly and easily find because of the bonuses in 2022, what you need. So whatever your industry, you the losses in the consumer know, youre always getting sector that theyre trying to professional grade products. Call, click granger. Com or just put behind them. I mean, its really all about stop by granger for the ones who the bonuses that were down in 2022. But you need to really look at get it done. It over a two year period. Some things are better left to a 21 was a huge year for bonuses, professional. In hindsight. Probably shouldnt have tried to 22 not so great. So you put them together and remove my own appendix like when people are still making an awful it comes to finding financial lot of money. Advisors. But i would say that they are so take the free quiz then youll be matched with up to defensive and supportive. They know theyre kind of in a three vetted fiduciary fal battle. And thats why i say that the advisors. Board should really put an end at smartasset. Com. To this by coming out and, you know, either saying they support david or that they dont. 60 minutes away from us retail William Cohen, thank you so much sales data coming into that for being with us. Information equities right now William Cohen there, author of a book on Goldman Sachs, longtime on the s p 500 negative were down across the board down by financial correspondent and one half of 1 on the s p on the writer in many capacities. Nasdaq, were lower by 0. 49 . His right now, if you are just tuning in, we are seeing markets on the move following an upside yesterday, the best day for the nasdaq, 100 of the month so far. Surprise to retail sales coming so we snapped back. In. The control group which goes we snapped back down this morning off the back of concerns into gdp, up 1 versus the all over again over in china and high yields in the mix as well. Expected 0. 5 . Weve seen that decline pretty lets turn to the bond market, the ten year yield is higher much hold about 7 10 of a once again by three basis points decline. Now actually deepened for s p futures. For 2267, lets call it four for yields higher. And this has been whats been 23. For those of you who dont gaining everyones attention. Ten year yields, 4. 23 percent. Follow this market too closely, this is a new high for 2023. Real yields on the ten year the highs at a cycle go back to treasury at the highest levels october there, about 430 ish, going back to 2009. Just north of 430 intraday. Were also seeing right now the euro continue to gain against but, lisa, were getting closer and closer on a ten year. The dollar, which is sort of and i would say id flag the two year to dont ignore whats ironic considering some of the concerns over in china and this happening at the front end. All this soft landing hopes and feeling that especially with dreams and rate cuts early next better than expected data in the year. Your two year i think we can us, you should get the stronger dollar, the euro stronger call that 5 4. 97 56. Actually we now. Theres a story underpinning 109 24 after briefly dropping this, which is that the fed is going to keep rates higher for below the 109 handle and we are seeing right now just more longer, as seen in the two year yield going up and staying at a broadly this feeling that even higher level and that its not if china does slow, you can see going to bring inflation down meaningfully to get those yields ongoing divergence oil prices in or at least the term premium which had climbed and stayed is going to be higher going above 80 a barrel, still forward for some other reasons. Slightly lower on the heels of so you put that together and what we heard over in china what does that do to the rest of coming up tomorrow on bloomberg the risk complex . I dont know that people have surveillance, nikolai tangent, fully appreciated that. The Norges Bank Investment but again, maybe its all white management ceo on how to arrange noise. We need to identify the dominant factor behind it, which right now is really difficult to do. In a world where for investing i know is that the yield curve in the index could be fraught confusion over at the boj, is it when there is this sort of the additional supply . Feeling that perhaps yes, you cant divorce yourself from a is it something happening with the Economic Data . Sense of higher rates and slower take your pick. Is it the downgrade . I think most people shrug their shoulders at the downgrade, but growth. We also are looking forward to target tomorrow and walmart on ultimately theres a ton going on at the same time and its thursday, the latest read in hard to identify what is quite behind that move. And you add to that this idea consumers that seem to still have firepower. That you have the likes of jp from new york, this is morgan of western asset bloomberg. Management and of hsbc reconfirming the by duration kind of call that yields will come back down. So where are they if there are so many buyers out there, why havent you seen the institution step in in a material way, especially in light of slowing Global Growth, especially in light of what we saw out of china . Consensus view right now . Without a doubt, on the treasury market, its difficult to sustain life above 4 . On a ten year well see right now at 423 and weve had ten i need a cooler night. Consecutive days of closing are you trying to ice me out of above 4 on a ten year yield. The bed . Maybe only on game nights. Lets turn to the market. The euro at the moment just a you know youre retired, right . Am i . Little stronger against the yeah. Say 50 of the sleep number dollar at 109 34, jordan, limited edition, smart bed plus free home delivery. Rochester of nomura was on the program with us in the last when you add a base shop. Now only at sleep number. Hour. Jordan was talking at 116 by if youre trying to get a view year end on the euro. Of the whole organizational hes thrown the towel in on that, lisa. Financial health and youre hes talking up the potential of trying to do that through maybe a drop to 105 on this multiple systems that makes it disappointing data out of china very, very cumbersome. And plenty of reasons why the ecb have to do more, but also equally plenty of reasons why its not just tech, its not the ecb has to do less. A rock and a hard place for just people. Its how they Work Together for president. Lagarde kit jukes actually put to provide that experience to it really well. Why isnt the euro lower . The customer. Right . The fact that were seeing euro as a finance organization, strength on a day like today thats what you want to when the european economy is that much more linked to china is a head scratcher and there is wow, you get to watch all your favorite stuff. A real question of whether the ecb is going to be able to hold its to die for. Rates where they are sooner or and its all right here. Streaming was never this easy, you know. Simply because there isnt the same kind of growth in inflation this is the way. Coming from china. You really went all out didnt you . Its your top story today under um, its called commitment. Surveillance. This morning, Chinas Central Bank unexpectedly cutting the rate on its one year loans by could you turn down the volume . The most since 2020. Here, you can try. Economic activity in the country not great. The us treasury secretary janet get way more into what your into yellen, calling chinas slowdown when you stream on the xfinity 10g network. A, quote, risk factor for the us economy. I actually think that comment right there, lisa, is quite interesting how much of a risk factor is it . Dan solis was on the program with us just a moment. Dan greenhouse of solus alternative Asset Management, who love that new name. Dan solis. Dan greenhouse is with us. Just moments ago, dan said well be okay, but perhaps even my words, not his, but im paraphrasing here. The us economy can decouple in a way that things get dicey in china. Does it mean things are bad here in the us . Markets agree with him and a lot of other people have come on also agree with him, considering the fact that stocks have held in. Weve known this for a while. No matter what youre up against, this isnt new news. Its just the depth of how much we have your back. The economy there is we are united way. Decelerating is perhaps a little we are neighbors helping neighbors bit deeper than people had in communities around the expected. But we knew this and the fact when disaster strikes that yields are still higher in the us suggests that its not we get you back on your feet. Going to materially diminish the we help children build brighter. Inflation or growth projections weve been here for over 135 s that the us has. So again, are we dealing with decoupling and is that part of but now our work is more. Whats underpinning some of the join us. Distortion that people are join your neighbors. Trying to explain in markets . Thats the top story in the join united way. Global economy. Id argue this is the top story, dan, in washington at the moment. Donald trump indicted in atlanta today also available at walmart over efforts to overturn his 2020 election defeat in georgia. For the ones finding new ways to its the fourth criminal case ensure the job always gets done brought against the former for the ones wearing many hats president. In a statement, trumps lawyers calling the indictment, quote, for the ones who are hands on shocking and absurd. And this is just going to even from far away and the ones dominate things, not just for the next year, but particularly keeping business moving forward. The next week. We are granger offering lisa, going into that first debate for republicans. Professional grade industrial and it is going to be highly supplies plus real time product politicized and its a very difficult one to talk about availability and access to experts. Because there are people on both ready to answer your toughest questions, call granger. Com or sides who either think that, you just stop by granger for the know, this is either a Long Time Coming or this is just another ones who get it done. Evidence of the witch hunt that donald trump talks about. Heres your parachute. So you have both of those polls and theyre not getting closer certain its okay. To each other. Are you foreign prince . And so how does this really shake out heading into a certain certainty matters. Contentious election at a time where donald trump still is the so congratulate coworkers or say thank you with promotional frontrunner, still is the one who dominates really all of the products from four imprint. Com races . Lets finish on the earnings for imprint for certain yields this morning. Home depot beating estimates up stocks down live from new this morning, giving insight into the us consumer. York city this morning good the company maintaining its fiscal 23 guidance, expecting morning. Good morning. Your equity market on the s p comparable sales to decline as 500 negative here. The countdown to the open starts much as 5 . Thats the story for them. Right now. The stock is down by about 0. 2 . Youll hear from target everything you need to get set tomorrow, walmart on thursday, for the start of u. S trading. And in about 55 minutes from now. This is bloomberg, the open with lisa, well get that retail sales print for america. Jonathan ferro. How much are we going to learn from it . Are people going to look past it . How many times have we gotten an Economic Data print and people say, okay, but its distorted because this, this and this. But i still believe that x is going to happen. Havent we seen that . Its data dependency with an live from new york. Asterisk, but were dependent on data that we havent gotten yet. And i just feel like were going coming up, the latest retail sales data coming in hot. To have that kind of discussion china cutting Interest Rates by after this one too. Last big data point had a the most since 2020. Jackson hole. As yellen says, the slowdown yeah, next week. This is kind of it for chairman powell. Is he delivering a speech we have that confirmed . Yeah, i mean, i have not seen confirmation, but were expecting him to deliver a speech. And what i want to understand is that where they see the neutral right now, where they see them going down to, i think the question now is not when they cut rates, is not whether theyre going to raise rates another 25 basis points, but is are they going to see a 3 to 3. 5 kind of terminal fed funds rate and how that really changes the equation . Taken a bit of a break this morning to gear up for jackson hole coverage. Live from wyoming about a week away. Joining us now, florine ritchie, chief economist at rowe price blerina. Wonderful to catch up with you. Lets just talk about this, just how resilient is this us consumer . Well, i think were going to see some confirmation in the data. As you said, in 55 minutes with the retail sales telling us how well did the consumer do during amazon prime day . How strong is Consumer Spending on goods, which really has been the very surprise resilience of this year. We all expected goods consumption to decelerate and services to take over. What happened was that both services and goods has been strong, and i think thats related to the fact that the labor market in the us has held up pretty well, even though in the last couple of reports weve seen employment growth slowing the Unemployment Rate is really very low. Aggregate incomes are growing and we have inflation slowing, which is helping with real household disposable incomes as well. So when im looking at the next 3 to 6 months, i see some headwinds for the us consumer for sure. Some of that is the fact that the excess savings buffer that was built during the pandemic is likely going to be depleted by year end. Some of it is to do with the resumption of student debt repayments later this year. But nevertheless, i think there is enough support from the labor market to prevent the us consumer from completely rolling over. We also know that the dow, that part of the us consumer, their Balance Sheet is fairly healthy and even though credit card balances have increased in recent months, theyre increasing from low levels. And we know that the us consumer still has some room to leverage in order to smooth consumption over the coming months. We were talking earlier, blerina, about sort of a rolling ball of money and this weird behavior after the pandemic where everyone just rushed out and how do you only live once kind of moment they traveled. It was experiences and then there was a question, okay, when will they be enough . Theyll say, enough with the airplanes, enough with traveling, and then they move somewhere else. Are we starting to see that . What else already are they starting to shift that allocation of their discretion as Discretionary Spending to another area . I think if you were to if you wanted to look for signs of some softness in the travel and hospitality sector, you could point to the recent softness or weakening in airfare prices. That could be a signal that demand there is not as strong as it used to be. But at this point in the business cycle, i dont think that there are many other areas where the consumer could go back and spend in force, especially because on big ticket items such as electronics and household items, they did spend already a lot during the pandemic. And we know we have a Housing Market that even though its stabilized recently, its weaker and were not seeing the same volume of homes being built and houses being sold. So that means that the pipeline of purchases of big ticket items and electronics should be lower as well. Okay. So in other words, if you sort of put this all together, it sounds like the consumer is hanging in. There isnt going to necessarily stop spending. There might be a little bit less than the immediate sort of gangbuster spending postpandemic. But were looking at a scenario where thats not going to be whats going to break the economy that that can hold in. Is that what youre saying . I think so. I think we need to be looking at whats going to cause the Unemployment Rate to increase for that to happen, we need some firing to be in the pipeline in the in the private sector, in the corporate sector. And here, i think Interest Rates and the discussion youre having earlier about what is neutral and how long will Interest Rates be restrictive is very important. We need to look at the corporate sector and their Balance Sheet and how long can they sustain debt servicing costs at this levels before Profit Margins really get squeezed . Because once that happens, thats going to be the time when they will not be able to afford labor anymore or theyll start firing. And thats whats going to be the trigger for the us households and the us consumer to cave in. Blerina just quickly, lisa, and were talking about the prospect of chairman powell speaking in jackson hole next week, has it been confirmed yet . But most people expected to happen. What would you expect to hear from him . What do you think the focus will be . So i think he he will probably recognize some of the progress that weve made on inflation to date. And in the last couple of reports, there were signs for optimism there. But at the same time, be very cautious not to declare victory. There are reasons to be concerned about how sustained this deceleration in inflation will be because a lot of that has come from used car prices and airlines. Once those categories rebound, whats going to happen with the trend in inflation . And also were not getting an unequivocal all weakness in inflation message because the measure has been stickier and we expect the numbers for july to be stronger than the cpi inflation data. So i think hell be balanced and not rule out the fact that they may need to do another Interest Rate increase. This year. I know that for some thats beyond the point, but i think this is very important because we are not certain that the last hike is behind us. So i think its premature then for fomc members to go out and already talk about cutting Interest Rates and how much and how soon well need to cut Interest Rates next year. So i think it will really come down to powell to be on message, to be balanced about the progress done so far. But the work that is still ahead of us and then leave it to the data to do the heavy lifting. Of course, in if inflation decelerates much faster, then there might be room to ease Monetary Policy later in 2024. But its too soon to start planning for that yet. But. But ballerina, ill get you your name out. Urycki thank you. T rowe price forgive me the data. More of that, a little bit later this morning. Retail sales less of that, more data a little bit later. Us retail sales just around the corner. If youre just tuning in, welcome equity futures right now negative by 0. 7 on the s p 500. Coming up a little bit later, us retail sales, the focus of citi, bank of america, lisa, they do believe that we can get another rate hike from this Federal Reserve in the jim bianco camp. That may be inflation starts to pick up again. Thats what weve seen in the data, right . I mean, honestly, people are looking at some of the core inflation. You start to see people talking about housing bottoming out, rents starting to pick back up in certain places. You start seeing all of these signs and it points to that strength that neil dutta and jim bianco speak to other people say, just wait, just wait. Thats going to come in. Im so pleased that wasnt there for that. Coming up, lindsay piegza, chief economist at steve, he wouldnt have said her name. He would have just said no, no, he would have asked me to say it. And then would have butchered it. And he would say, great, well done, john. Yeah, nice work. You know, that would be on him. Okay. You missed. You are missed. Hopefully. See him later this week. Jeff, you with melon coming up shortly. Well talk to him about the market. Also some developments over in the united kingdom. Record wage growth in the uk just as people were hoping the bank of england could back away and bring some life to the Mortgage Market. For those of you looking to get on the Housing Market, the housing ladder may be the bear comes back for more. 7. 8 wage growth. Thats without bonuses. That is shocking compared to the expectation of 7. 4 . Fantastic. If youre receiving it. You know, its shocking if your goal is to get them down because youre worried about inflation, they just stop asking for wage increases. Yeah, thats a great message to send to the British Public and one that apparently isnt working either. From new york, this is bloomberg. We all know that will eventually need a will eventually. How about right now . Trust in will has taken the process of creating your will and made it easy. Like while youre lounging on the couch. Easy trust in will is designed by attorneys, but customized by you. One question at a time. All documents are state specific, legally valid, and start at just 159. Thats not a typo. Find the plan. Thats right for you at trust and willcom. Without the ones like you working tirelessly to keep things running, everything would suddenly stop no matter your industry. Grangers here for you. With professional grade supplies. Call, click granger. Com or just stop by granger for the ones who get it done. Oh, booking. Com. Im going to somewhere for anywhere a beach house. A tree house. Honestly, i dont care. Hello. Humidity. A fancy hotel with a sexy garden landscape architect. A tiny home with aggressive flair somewhere there. Anywhere. As long as they have child care. Days, documentation, income, booking dot. Yeah. A corporate types. Would you stop calling each other rockstar cars . Youre a rockstar. You are a rockstar. No more calling your coworkers rockstar. Look, its great that you use workday to transform your business, but it still doesnt make you a rockstar. So unless you work with an actual rockstar. Hi, im oswald. Hello, oswald. Pam, you are a rockstar. I wasnt gonna say it. The Administration Remains committed to taking actions to lower prices for americans where we can, and we continue to monitor. Monitor developments, particularly those abroad, that may affect prices and growth. Secretary yellen, the treasury secretary, speaking in las vegas with local union workers, also mentioning, of course, lisa, on china being a risk factor for the us economy. The data out of china not great overnight. So here is the sort of two poles of the discussion where people are saying the us is decoupling from china and doesnt need to necessarily worry too much about the slowdown there and other people saying thats just not true, that these are two economies intricately connected to one another. If thats the case, why are we not pricing in that potential slowdown . Well, i think weve got to be consistent. If you were super looking forward to and excited about the reopening, lifting equity markets, which is some commentary weve received this morning, then you also have to believe simultaneously that if it doesnt impress, then thats a reason not to like us equity markets. The multinationals, they make up a big slice of the s p 500. If were talking about a slowdown in europe, a slowdown in china, and an inability to respond to it, then its going to affect some companies more than others. And im thinking about apple, for example, in terms of manufacturing. Im thinking about tesla. We saw that with the price cuts in order to compete more effectively and then the big industrials as well, caterpillar, others, and theyve talked about this, theyre ratcheting down their sales expectations in china, equities right now negative, near session lows. Actually, were down by 0. 7 on the s p 500. Yields are higher by three basis points for 2228. Talked a lot about the Economic Data. Still to come, us retail sales a little bit later in the next hour, 830 eastern time. Jeff joins us now, senior Market Strategist at bny mellon. Jeff, wonderful to get you on the program with us, particularly from the uk. So we can start in london with some record wage growth. Jeff, just how tight is this labor market and how supply constrained is it Going Forward from here . I dont think things are going to get easier anytime soon. I mean, its not just the one offs. You know, people are talking about. If you look at the job creation over the last three months or so, you know, these are very, very strong gains. You know whats interesting is theres some of the Services Sectors in terms of outright job creation and wage growth. The openings of growth that has softened. But other areas of the economy is still going strong. So so governor bailey, hes going to watch his language very carefully, of course, in terms of not asking for wage increases, but think the economy is moving on right now. Jeff, in the us, were talking about things like soft landings, getting inflation down towards 2 without a recession. Do you think governor bailey in the bank of england has that luxury . Can they get inflation back towards target without a recession . I dont think theyre going to have to commit to anything at this point. My view is the last meeting, they should have done 50 basis points. So you front load all the easing right now and to be frank, i know its a bit of a with the benefit of hindsight, but todays data actually does justify that. I think theyre going to have to have to keep going at 25 increments until we get a clear glide path. But thats potentially 12 to 18 months away. How different is the situation in the uk or where you are foreseeing future rate hikes and the ecb at a time when some people are gaming at the end of the rate hikes over there, especially in light of what were seeing with china. So the central speech from madame lagarde and she mentioned something about the eurozone economy and the labor market, but i think you can apply that to the uk as well. And in extremis, its basically you are seeing a lot of wage growth, but from the nonproductive sectors, the uk as a productivity puzzle. So you really get kind of that stagflationary growth in the uk and its not going to help anytime soon. Now with the eurozone, they are going to be worried about china manufacturing pmis, theyre going to continue to print awful, probably below 40. So that probably has a bit more of a disinflationary drag on the eurozone economy. So i think the eurozone can get to a soft landing, but theyre going to have to look closely at the manufacturing sector, not just in the short term, but with all the technology coming through the medium to longer term as well. Eurozone has to restructure. Hold on a second. This is actually really important, jeff, because weve been hearing from the likes of kit jukes who says that hes surprised the euro isnt weaker. A lot of people are asking the same question. Youre saying that actually the disinflation from china could enable the soft landing in europe that a lot of people thought was looking less likely than in the us is that correct . I do think so. Right. Because what you have is with manufacturing jobs, these are high value added jobs which are being lost right now. The Multiplier Effect comes through in time. Youre going to see high value added jobs decline and that will affect growth in the Services Side because those who can spend if they cant spend any more, then think Services Demand will come off as well. So that glide path is in place and trend growth is lower in the eurozone as well. But thats just in the short term. In the medium to longer term, once we get inflation back to target, where is the eurozone Growth Strategy from here, especially with the onslaught of into europe from china . I think that is a five, ten, 25 year conversation that needs to be had in europe right now. Jeff, lets talk about the Growth Strategy out of china. Ive shared some commentary a few times this morning from standard chartered. They called the cut from the central Bank Aggressive from soc gen, unlikely to be the last measure. Jeff most people assume this was insufficient, but if theres more to come, what is there to come . Shall we have a conversation about quantitative easing by the peoples bank of china . Right. And were talking large volumes here. What if you do get quantitative easing out of china to the extent that it can start to offset some of the Balance Sheet contraction, the pt in the fed and ecb, right. That changes global liquidity dynamics materially. There are legal constraints around this, i think. But if we go towards the end of last year, the pboc did fully subscribe to a bond rollover, 750 billion renminbi at that point. It is doable. It doesnt have to be a plan program. So im not saying that is not my base case. You know, just to be clear. But all options need to be on the table right now. Fiscal in concert with monetary that comprehensive approach is needed from china right now. Its already getting quite late in the year, even in the fiscal year. So we do expect more. But the later they put in terms of policy, probably the stronger its going to have to be. Jeff, do you believe things are that bad at the moment over there . Well, if you just look at the loan figures, right. And i do know if you go back to the previous and premier li keqiang, there was a li keqiang index, right. It is available on bloomberg. And he looked at short term indicators and loan growth as part of that power generation, you know, freight, everything put together. Youre not seeing the seasonal recovery that we anticipated in the past. So the thing is, do you want to wait until things are that bad and then find out its too late . Because youre always going to have to play catch up. So going back to my earlier point, right now, its already quite late in the year. You need to front load the stimulus in the same way the boe needs to front load needed to front load a bit of their rate hikes. Jeff, a lot of people are saying that the fact that the communist party has not done more indicates a lack of willingness to go as far as you were talking about some sort of massive quantitative easing program. Do you agree or do you think that its premature to write off something more substantial . So i think any qe program from the pboc or anything along those lines, i think its very easy to draw an equivalence with what happened in 2009. The big loan program that is very, very different. So the transmission of Qe Central Bank buys government bonds and then you lower real rates. China needs to lower real rates, right now. So i think thats why theyre allowing within reason to the renminbi to depreciate because that imports some inflation. So its so yes, the ministry of finance is worried about and the pboc about a debt issue building up 5 to 10 years from now. But they need to do something that is different to 2009. And in size to basically lift sentiment targeting the consumer. Theyve absolutely said the right things over the past month or so, but now really is to put everything in effect, focus on real rates. They need to do whatever it takes to get those things down. Hey, jeff, thank you. Jeff, you there of bny mellon. Quite a moment today. Dollar through 730. Lisa on that currency pair weaker chinese currency off the back of these rate cuts and some difficult Economic Data out of the worlds second largest economy. And jeff saying that thats okay with them because it might import some inflation again this just sort of points to how strange this moment is with such a fracturing of the major global economies, with the us and europe fighting inflation and china facing deflation or disinflation in a massive way, this is a real concern given that this was an engine of growth for so many years, well, at least complementary in one way, because the United States would like to import some disinflation too, right . So it works both ways. It does work both ways. But again, think that you asked the right question, john, which is how divorced is the us economy truly from china . Where are the interconnected . Where is the interconnectedness not only of europe and china, but also the us . And i dont think we fully understand that. Well, theres two ways of framing that question. And you only have to change a couple of words for it to have a very different meaning, a different answer. How divorced is the us economy . How divorced the us markets . Because thats a very different question in many ways. You can make the argument with less dependent on us imports of of chinese goods. We can see that in the data. But is the market, the equity market, the benchmark, the weighting to some of these multinationals is less exposed to whats happening in europe, in china and worldwide. And if you think about the real estate market, how many chinese investors came into us real estate to buy up buildings that may not be there quite to the same degree . There is this question of how much is that part of whats underpinning some of the move in yields . The lack of chinese, the lack of japanese buyers, the conversation continues with bob dole of crossmark. He joins us in the studio in about five minutes time from new york city. This is bloomberg. Welcome back to another special western and southern open update for bloomberg tv and radio from tennis channel, im erin coscarelli, 43 year old venus williams. Turn back the clock as she took out 16th seed Veronika Kudermetova on day one in cincinnati, the seven time major champions last win over a top 20 opponent was kiki bertens back in 2019. And dont forget, you can watch all the action live at 11 a. M. Eastern on tennis channel on. This is a keepsake frame