Transcripts For BLOOMBERG Bloomberg 20240703

Thermometer but the correlation to equities bonds is really rich. The team leave for me on a monday morning is i see japanese yen just creeping ever so slight. It is just a bit of a weakness. Jonathan 149. 74 at the moment. We averted a shut down and we will get payrolls friday. Ultimately we will do this again. Lisa i cant wait until november when we can do it all again. What i find interesting is the threat of higher rates and the lack of economic weakness on the heels of a Government Shutdown is what is spurring the concern in markets today. All of the sudden people are taken the bond who seriously. Jonathan energy prices, rates, apparently this is the quarter when this consumer frame begins to crack. Tom is the basic theory and then you talk to optimists and there are a number of them and they say no, you saw that in september. I had a great conversation with neil by the neal dudda. He said is not about 4 growth it is tuition to issue two ish. Jonathan jane fraser at city talking about people with though Credit Scores seeing weakness. It is there. How big it is going to be and whether it grows in q4 is the big question we need to ask. Lisa does it grow enough to reduce the Inflationary Pressure in certain areas. The Housing Market is dealing with a lack of supply and you have Services Prices that have hung in there. If you have inflation rate pressure and weakness, is it enough to achieve what the fed is looking to achieve . Jonathan here is the price action at the moment, the s p 500 was positive then it fades. We are up by 0. 06 and going nowhere. The 10 year, 4. 63. 11 weeks of strength against the euro. Do we shift from a twoyear fed analysis to a 30 year bond real economy analysis . It is breaking out the new highs. Jonathan this morning, for quick 74, yields up for basis points. Lisa 4. 74, yields up four basis points. Lisa we have had almost a year of contractionary readings. It is starting to inflect upward. When you have the kind of Inflationary Pressure in areas that have been in recessiothat suddenly are covering. Tom it is nonlinear. From 50 to 49 is different than from 49 to 48, every point matters. Jonathan the difference between expansion and contraction. Weakness in manufacturing, resilience in services. We have asked the question is whether manufacturing comes up to services or Services Comes down to manufacturing. The bearish have been saying services will come down. What we have been seeing is manufacturing start to lift. Lisa especially given the fact that the chinese Economic Data seems to be on the rebound a touch. We hear from jamie dimon who will be speaking with emily chang and london. I will be curious to see if he reiterates what we heard from jay frazier. The fed speak lineup includes 11 00 a. M. Fed chair jay powell and Patrick Parker harker. Then we have John Williams reprising his speech last week and then the cleveland fed president. Will anyone say anything to give the market conviction where they are looking at uncertainty . Tom you think they compare notes . Do think they have a Conference Call beforehand . Jonathan you have to think williams views are closely aligned to powells. It is interesting. Williams will give you why they might deliver cuts down the road. Lisa wonder if he feels bad about doing that and having that be the focus are few wants to be the leader having this discussion. They are in a nowin situation and do people listen to the speeches and parse through . Jonathan is this actually the speech from friday . Lisa he is speaking a different speech at 7 30 p. M. He did release a text of that speech. Jonathan i wondered if he was going to turn up in person and just read it. Burning us is lori kelby sena lori calvasina. We took a number of different issues in shortterm puff of the table for a month and a half or so and we will see how long it lasts. We always look at these episodes in markets and say where was sentiment . I dont think it got bad enough for any springboard. We were looking for commentary in this thing has been kicked down the road. Sentiment never got that bad we saw concern come back last week, not fear. If you looked at the survey, the fourweek data point average was about flat. You contrast that and we were at 20 or worse for four weeks in a row. We are just not anywhere near the point where we can say it is so that we have to go higher from here. Tom once again, small caps disappoint. I have a chart that i keep and it is a chart of failure. What should these companies do if they cant get value from the market . Two they go private, merge, should the zombies go away . Lori i think there is always going to be that zombie element in the russell 2000. I dont think they are going to disappear anytime soon. We have to keep an eye out to see if there is more m a activity, particularly in the industrial space where we often hear from smallcap Portfolio Management that the quality of business is high. Frankly, small caps just have a problem at this point in time after the last fed meeting because while i think 2024 cuts are on the horizon, there are starting to be doubts about comedy cuts and when that was the about how many cuts and when. Also an air pocket of uncertainty right now and small caps needed to see incremental boozy has him enthusiasm and instead we have gotten uncertainty. Lisa ago you expressed caution but were not bearish and saw equities muddling through. Am i hearing you are in more bearish now after seeing where it bond markets are and how height yields are in the fact that rate cuts are not being priced into the market and shouldnt the price in . Lori we have shortterm issues we have to run through. There is definitely a camp of strategists who are very much in the doom and gloom camp for next year and i would put me in that. I do subscribe what you were alluding to is the resiliency of the consumer. I just think we want to get a lot of information in the here and now. They are not saying anything useful looking at conferences or Earnings Reports. That is a problem when you have a year like we have had, doubts creeping in about the economy and we are not kidding a lot of stars to navigate by. Jonathan unlike to the rest of this year, Consumer Discretionary is starting to crack. The equity market is showing weakness. The story of the year has been Consumer Discretionary has performed strongly. What do you take away from the weakness in the equity market for discretionary . Have we discounted enough going into q4 . Lori it depends on what part of discretionary you are talking about. We talked about smallcap discretionary are more domestically focused and they priced in a recession last year. The s p discretionary stocks did not. While valuations dont look terrible they havent been looked to in our model. We talked about higher bond yields and that is really one of the biggest problems we are dealing with. The problem is that the sectors that do the most poorly when bond yields are rising are things like Consumer Discretionary communications. You got aside that never got cheap enough and you have the bond yield hitting precisely at the wrong time. Tom james dimon will get all of the attention today. Are the banks the mother of all value trips . Lori financials should be outperforming at a higher bond yield environments and they are not doing that to the extent they should be. Energy has sucked some of the benefit out of the other parts of the value trade. I think it depends on your time horizon. I like financials in the s p. We are overweight and we like energy better. You are seeing a recovery in the bank space in particular but we havent crossed over into positive vision territory. I find when you see earnings revisions turning but not across the territory you have doctors in the trade and that is a Good Opportunity to come in. Theres money to be made longterm but you have to have a stronger stomach. Jonathan thank you. Good luck for the rest of the week. What the quarter we leave in in q3, the 10 year yield by 70 basis points. Look at what has happened with yields and what hasnt happened with financials. It looks like hi yields in the banks dont help them. Tom i think we are not in a textbook time. What is so important looking to q4 is the basic idea of ambiguity. Every single narrative we talk about can cut two ways. When you overlay 30 narratives on top of each other, it becomes a toxic brew. Jonathan lori made the point she doesnt think the weaknesses over. Equities negative on the session. Lisa it was amazing what was said that you can have this much value destruction and bonds without being some stress somewhere. Where is that going to show up . Jonathan a list with an all of that good stuff. Tom i believe in third quarter. Jonathan comes of it data and a little fed speak. It from new york, good morning. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Last night we passed the funding bill. There should be a crisis. Consequently, i strongly urge my republican friends in congress not to wait. Dont waste time as you did all summer. Passed a yearlong budget agreement and honor the deal. Stop the games. Jonathan the stopgap funding bill that will take us to november 17. He ultimately wants the aid for ukraine. On the s p 500, totally unchanged. You do not get the spike you were looking for. Yields higher by five basis points on the bond market. Foreign exchange, dollar showing strength and euro showing some weakness. The resilience of the u. S. Dollar, 102 is what they are looking for in the near term making news and a bit of splash from citi. Tom this is on the certitude of greater demand. The move up to 120. And the important conversation this morning in abu dhabi talking about the overestimation of demand coming on. Jonathan the quote as the pandemic factors continue to beat, peak transfer and nonopec plus suppliers. That is the call coming from citi this morning. Tom that falls into our efforts for Energy Independence in the United States. As we recalibrate for the Fourth Quarter and 2024, it is timely to talk on the themes a bit removed. We do this with the United States undersecretary for growth and energy, Jose Fernandez joins us. Thank you for joining bloomberg. Lisa abramowicz and Jonathan Ferro have important essence on lithium and the rest. I just need a panda update. When do we get pandas back at the washington zoo . You are directly involved in the negotiations where china i guess correctly took the pndas back and all they have done to save these beautiful animals but what i te plan of the second term of the Biden Administration to place pandas appropriately in washington . Jose i am sorry to see the pandas go because they were some of the best ambassadors. Our relationships with china are as we have talked about several times, it is about competition when we have to compete and calling them out on the concerns we have in the market practices, human rights practices and intellectualproperty practices. You are talking about a country that is one of the largest trading partners and we also have to work with them as well but i am sorry to see the pandas go. Tom i know you did this in inorganic chemistry and dartmouth that we are losing lithium to china. Front and center in the technological battle are these rare minerals. What is the to do plan to help the United States participate in the mining, distribution and use of the minerals . Jose from day one of the administration, President Biden has talked about the need for us to your the need to diversify. The need on lithium is the largest need we have. We will need 42 times the amount of lithium we use today by 2050 if we are going to reach our goals. Right now two thirds of that is either processed or mind by china. Had the need and the vulnerability. What we have done is create a mineral security partnership, 13 partner countries across the eu working together to share information about mining and processing to invest jointly to work on recycling which will be 10 of the ev battery content in 10 years. And we will do this observing the highest esg principles because what countries are telling us is that they do not want to choose between Economic Growth and environmental degradation and we need to find ways to work with communities and countries so they benefit from these kinds of investments. Tom part of the matter is is china going to play by the rules as stated by the undersecretary . Lisa at is the thing and the other is difficult to present view of the United States went it is so hotly contested and we are dealing with strikes right now that go to the core of some of the electric co. Policies we have in place. How difficult has it been to represent the u. S. View when the policy is sort of unclear and being contested by workers at home . Jose there is great interest on the part of producing countries. I have been to several countries talking about minerals cooperation. The congo, zambia, africa, chile, there is great interest and no one is questioning our commitment and the Biden Administrations commitment to clean energy. The inflation production act is the latest example of that and we will continue to pursue these clean energy policies. Lisa you think it makes the u. S. More secure are less secure in a world that is very much tied to oil that we have seen consistently when some of the production of the tools that go into electric equals have been tied to governments that are to necessarily ones that are longstanding relationships of the u. S. Where the environmental practices of those minerals is in question . Jose we have to work on our vulnerabilities not only having to do with Critical Minerals but you see the several similar on her abilities with vaccines and semiconductors. Similar vulnerabilities with vaccines and semiconductors. We have entered into conversations with many countries that want u. S. Investment. There is interest on the part of u. S. Companies and companies elsewhere to work in these countries. In the critical mineral space, this is a once in a generation of for countries to actually use the resources and so in a way that is responsible and that benefits their people. Jonathan thank you for the update. Jose fernandez there. How difficult it is to make this transition at the moment and then throwing the uaw negotiations in, nothing easy. Lisa throw government shut down in you wonder where the emphasis is at a time when there is huge disagreement about how quick this transition will be an exactly where the investment is going to come from. Tom my challenge to his good comments are is that they are made in this righteous vacuum and they have a plan and i dont see out there other nations voicing the same theory as the United States. Jonathan europe has come up with its own plan and there is clearly attention at the moment. Tom when we were in london we saw the ev force in the United Kingdom and i wonder how alone we are on this debate. Jonathan payrolls friday just around the corner. We thought maybe we might not get the data on right if we had a government shut down. We will the data here what are we looking for . Tom for jobs report that moves the market and i am not sure it will because everyone will stagger the Inflation Report and with jamie dimon speaking to us today, his Earnings Report may have just as much weight as the payrolls. Jonathan 1. 65 is the estimate for payrolls on friday. Live from new york city, this is bloomberg. Jonathan coming off the back of a we four weeks of losses on the s p 500 down on the month and quarter. Equity futures totally unchanged. Government shutdown averted. No one cares. In the bond market, huge moves on the quarter of the month, on the 10 year of high more than 70 basis. Unbelievable. And we have q4 moving higher by six basis points. Tom, what is your view on the long end of the curve. Tom 10 out of 30 and the u. K. Particularly in japan there is no icc. And in america i did not even look right now, let me do it right now, you can lisa told me that, the 10 year and thirtyyear up up and away. Jonathan i would say avoid that. That is a story for bonds. Equities down for four weeks. The dollar coming up with the back of the strongest quarter of the year so far. 11 we of Euro Weakness and dollar weakness. We are negative by. 3 on dollaryen. It is closely to 150. And last week boj had a nibble at the japanese bond market for it to do more. Lisa wednesday there will be another on purchasing nomination in japan. This is their fourth unscheduled bond by operation in since july. And there is a push pool with the currency and bond market. They are moving at odds with one another. If they support the market they will basically weaken the currency, if they weekend the currency, that changes things. It feels like it is increasingly unsustainable. Jonathan is it too early to draw conclusions based on but there thoughts are . Lisa i dont know. It seems like they are spinning late. Spinning plates. They are biding time. Im not sure if they are choosing one or the other they are laying them off of each other. Jonathan strategically moving. If there is a strategy there, i do not know if there actually is. The u. S. Avoided a shutdown. The pressure remaining on House Speaker Kevin Mccarthy with florida congressman matt gaetz saying he will file a motion to remove mccarthy from his position this week. The politics in the house in washington. Tom i read very carefully the work that amory orner and joe massar were over and all i can say as we advance the conversation. We have an wharton balance of power. We address the urgent of kevin in bakersfield and john boehner in ohio. Jonathan and we sit down with joe mathieu later. Dont miss that interview. And we have an extra bond by plan when we have the increase in yields. The central bank for japanese Japanese Central bank moving closer to ending it rate policy. But the japanese 10 year yield close to zero. Student loan repayments resume this month for millions of americans for the First Time Since humans were halted is the start of the pandemic. Over 40 Million Students theres over 1. 6 trillion in student debt areas there is not can hit consumer spending. Stocks have been hammered coming into q4. And we start thinking about it and acting ahead of time with energy and rights will this be a tough quarter for the consumer . Lisa there was a view that they just will not pay. And they will see a delayed 12 months out because they have the grace period. But the data shows that people are paying early. So the hot said. And we are not sure if its going to be a pullback in Consumer Discretionary buying this but not that. There not falling off of a cliff but they are changing their pattern just a little bit. Jonathan we started the quarter with the same thing with economists crying or session and then it is ignored and individuals kept selling treasuries. Will we start to see real weakness in retail and the data . Tom im glad you bring up retail. I have spending and i do not know what to make of it. There is a consumer slowdown but a lot of smart people are saying you know. I just dont know. Lisa ill give you an anecdote, the story this morning autosales increased this month despite everything weve been talking about hitting the car sector. You wonder when rates went up as much as they have, where is weakness . Tom and we have meal sherry at Capital Economics writes a note this morning. He talked about the considerable opportunities looking at the themes, the toxic brood that is out there. Saying it is out there but look at the opportunities that we have with technology and global trade. Jonathan and student loan payments the wall of worry. Tom i hear you but this started with bill clinton years ago. We will see how it works out. And then we have michael dara strategists for rossi and km. Just back from roth mkm just back from japan. What did you learn from tokyo and kyoto . Michael it was an incredibly beautiful city. For people that never experienced it imagine a city three times the size of new york city with no litter, no crime and almost no disobeying traffic lights. It is quite a trip. You have to experience it firsthand to leave it. Tom someone would say they are inventing inflation. Do you see historical analog that any country can manage Inflation Higher successfully . Mike sure. If you believe in the power of the central bank that is essentially what is happening. The discussion you had earlier you hit it on the head the problem with the boj as they cannot hit two targets with one arrow so if you pay an Interest Rate you cannot also pay the currency or control the price level perfectly. So what is happening is you have to adjust the rate based on macroeconomic conditions. It is different in the sense that central bank will typically target the shortterm rate policy in japan because the zero lower bound situation. But the same basic concept applies. Lisa if we still get some yield curve control but if they lose the narrative when it comes to controlling the bond yield and appreciation of the yen how much does that accelerate the move in u. S. Yields that we have seen with yields globally rise and may be some of the buyers from japan stepping away from the u. S. Market . Mike its an interesting situation. We have had a huge real rate shock. This is not an exposed and inflation story. So you do have yield on the back of Central Banks trying to insist on a different policy regime. It is driven by real Interest Rates with Inflation Expectation in the u. S. Crude oil is spiking higher, copper is rolling over, and if you look at the 36 month fed funds futures field it is moved up one 50 basis points since the spring of this year. That accounts for the entire ready where than the entirety of the rise in the 10 year yield. The fact that the feds reaction function make sure that the growth slows below trend. If that is not happening they will persist for a longer period of time. Lisa there were a lot of questions over the weekend of why things have not broken given how quickly angst have rose. Do you see any sign that shows something is mike breaking . Well i think the reason something is breaking . Mike well i think the reason is we have a higher neutral Interest Rate. And with that it will take longer before things start breaking before you have Central Banks tightening and then things fall apart. There may have been temporary factors that held things up this year. Theres been a very strange explosion in the fiscal deficit in time of employment that is probably feeding into the higher for longer strategy on the part of the fed. Those matters those matter but gdp is slowing on this. If you adjust for fed losses, it is centrally essentially decelerates. You have the fed policy rates up 5. 25 percent 5. 5 and they may move up further. And there is a perception that we have successfully solved landed but those kind of discussions are common higher to Business Cycle peaks and recessions. Were not out of the woods yet. Tom the first day of q4, what is the signal of december version. If we reverse and start to december toward normal, what is the signal of that . Mike you do not get meaningful and sustained move without the end of the yield curve coming down which would happen in a Slower Growth recession scenario with the fed coding straight. Interest rates. It may make sense for it to keep rising, but that is unusual historically. The last time we saw that in 2007. And for a few months we were steepening and then we had the longest recession in history. And this is a warning sign in terms of sustainability in the businesslike will. A bit of cold water in terms of getting too excited about sustained growth acceleration. Real confusion real confusion for me at the moment. I hear about why yields can go lower but i heat here little about why they could go here little about why they could go higher. How much is on the wrong end. How much of this is about dutch budget visit in washington . Mike the economy has been more resilient than anticipated this year. You do it with the strange fiscal policy environment. One of the fiscal deficits excluded to levels we have never seen outside with fulltime employment. We see the market moving up to really yields. It is basically going step for step with the 36 month fed fund futures yield. That is the higher for longer training. That is also that can also be unwound. And that can happen over the course of this year and the last six months really. With softer data Going Forward. The trade can be unwound. We know why it is happening the question is what is the forecast Going Forward and will the forecast be accurate . Jonathan thank you mike. Yields are falling this morning. 30 year yield 474. And do you get the post shutdown averted pop in equities and when you get the post shutdown averted in yields. And it sticks. Lisa it is good news bad news. I dont want to say it but that is where we are headed. Tom thats what i was going to say with joe matthews. What is good news is that news. Jonathan we will talk about why the euro is closer to parity on the u. S. Dollar with jordan ross chester up next. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. The huge rise in treasury yields is the biggest driver of all. The one thing that will not stop his treasury influence. We have to find a clearing rights for all the bonds. If in a place we go 4. 60 on a 475 on the 10year note than the dollar is going up. Jonathan lets check out the euro 11 weeks of weakness. Right now the eurodollar at 105. 1. 0541. And they said there is the potential for their to be reach reaching parity if prices continue to rise. They say that they inspect the party to provide some relief. Jordan things we get closer to parity for we look up. 9 this is a real world tom this is a real world tom this is the real world. Joining us is jordan rochester. What i see this morning that is distinct as swiss franc gives way to stronger swiss franc. That is a distinctive tea leaf. Link your euro trajectory with the symptom of a stronger is frank to come. Jordan indeed. There were a lot of moves last week that had to deal with that inflow because of the equities we had but when it comes to the local euro era currencies this one has a slowdown. If we think the euro area is going into wrist session, which we do into a recession, which we do. Even though we think the s p 500 is done with rate hikes because of the slow down the potential for recession is possible. Ok what is the approved rehab air to play we are euro tom ok what is the appropriate move to plate euro . Play euro . Jordan u. S. Yields are rising higher. The rate suggests that the dollar should be at one or one up to one 03 already. 1. 01 or 1. 03 already. Viz. Looks to be in exit of the price bound range action. It is a bit of deja vu to last year. Last year europe rogue through parity. Thanks to boudin and now thanks to Vladimir Putin and now it is what is going on in the middle east. If the u. S. Data and comes in and stops climbing, we have a good view that it this week. We will get nonfund payrolls and the jolts data. And we will not get all the government workers laid off. They have initial jobless claims biking higher on thursday. That should not happen now thanks for the Government Shutdown being avoided. Jonathan you touched on the middle eastern story can you tell us about what is important with that . Not just with new york crude but china as well . Jordan most were disappointed with the outlook with china. What has happened over the summer is that china has had little bit of policy here and there which built up to a mixed view on the market with china. Saying is it slowing down or bouncing back . That causes question for firsttime buyers that is significant and most of the market is firsttime buyers. That leads to some of the data looking l theater over the short term but the longterm shows that they are looking week especially with the tourism amount picking up. We do not see inflows into China Foreign investors either. Altogether weaker outlook for china. Shortterm messy for the data but longterm we have concern. Jonathan does that cause concern for it to go to 10 . 1. 10 . Jordan we think they could change numbers as soon q4. That if they are wrong and we get a soft landing from the next few months, if we have all the data to the healthy it pushes the fed cuts out. That is based on the q1 story here for the market quickly shifts the fed cuts coming in the next meeting. At the moment we are in the higher for long phase. That is why the dollar is selling off. Lisa you have a conviction level on each trade. Can you talk about how difficult it is to have conviction when you deal with so many variables tracking the weather again track tracking others like emissions to understand our covering. How do you understand conviction like this in the market . Jordan you have to look at the dollar story and we have the long dollar view. And then the local story. A few weeks ago lets go back you would have guessed on here saying they could raise rates up to 7 . One week serves cpi in one has a weak labor report as well. Shifting to the bank of england is done. And you have a lot of stale positioning out there. I think the long sterling position needs to be unwound. We need to go through that already but there is more to go on that. That helps me with four out of five on short cable. You have to look at factors saying where is there less positioning . There is not much of a trade to do but short cable and short euro there are steel still loans out there but need to be unwound. Inflation is coming down. The main thing is does it not fall to 2 . That is what central bank are worried about. I look at the charts and it looks like it is going below 2 on some of them. Ppi in the u. K. And europe is pretty awful in norway 35 year on year. And you have the extreme factors that will push the headline down. We could look at cpi falling closer to 2 . And then we look at global Recession Risk at the early art of next year. A lot of the Central Banks we are worried about today will be worried about growth and im in tomorrow. We have signs of u. K. Data we are focusing more on the fact that it will be low tomorrow. The main risk is oil and the supply side. The ua boat uaw strikes it moves headline Inflation Higher is well. If we have a rise oil the Central Banks will be in a statutory flow. We could be going back to 2022 start of the fx market which is a massive Dollar Strength. 20 seconds for you when was the last time scored six goals. I cannot remember but it is bloody good. You hear that, tom . It was proper it was proper. Each goal is worth seven points. Stop showing stop throwing shade at u. S. For all u. S. Football. That is ridiculous. Tom im on track i can dance to this be that they never let me. Welcome to new york. Mohammed from cambridge email says jonathan im surprised he wants to talk about the jets. Didnt he lose. Lisa it is a mess. Tom i heard about the switch of the reaction cam with taylors reaction. And that is not football fans. [laughter] aidyl hi, im aidyl, and i lost 90 pounds on golo. I struggled with weight loss and weight gain my entire life. With all the yoyo dieting i did in the past, i would lose 20, 30, 50 pounds just to gain them over and over again. Thanks to golo, ive been able to steadily go down the sizes in my closet and keep the weight off. For the first time in forever, i feel in control. announcer change your life at golo. Com. Thats golo. Com. In the u. S. We see inflation cooling, the economy slowing. Disinflation has been consistent. It did not flow through with the six quarter lag we expected. We see the beginning of a rally. X we think the fed will continue to cut Interest Rates next year. This is bloomberg surveillance with tom keene , Jonathan Ferro , and Lisa Abramowicz. Jonathan good morning. We have a total change on the s p 500. Crisis averted at least for now. Tom i think there have been some real humility about this that and the other but what a shock three hours before we interviewed john and got the democrat vote. It is something we can do here a lot. Jonathan and we can do it over the next month. And we have annemarie coming up and then we have a talk about leadership. And we speak with french hill. Tom i look at the Washington Post all laid out in the first one i look at is the gentleman from arkansas. I actually want to see what french heel french hill vote was. Jonathan we will catch up later today and then chairman powell coming up as well. Lisa we will actually get data. That is the headline. We will get data that we were previously expecting opening a door to a greater tinto for a rate hike. Greater potential for a rate hike. If we get data confirming ongoing strength even at a slower pace, the strong labor market will allow the fed to go further and keep rates higher for longer. Good news may be bad news. And we hate this phrase and i agree with you but that is what is playing out in the markets. Jonathan and we kick off q4. Wave good riddance not goodbye to q3. The equity futures are positive by 0. 04 . After a quarterly loss, monthly loss, and more loes on the s p. In the 10 year for 62. Tom we look at the yield curve it is like a jump on the equities. When we talked to jordan rochester, i am forced today to look at little tea leaves of what i noticed was the strongest with frank. You wonder what that means as a signal for euro we nest. Jonathan and can you imagine 12 weeks of Euro Weakness . We have the euro right now at 1. 05 against the dollar. Lisa and we are now watching the weather again to see if oil rises go up. And then with u. S. Is in manufacturing and prices paid for the component we have been a recession since october last year. We are inflecting of word and that is interesting to me at a time where people are wondering where are the nodes of inflation reacceleration . Could it come from the factor that is recession . And jamie dimon will speak with emily chang coming up and it will be interesting of if he reiterate his perception on 10 year yield or talk about the fact that we are in a situation where the consumer slows down. Today, this is for you, fed speak. Lets go through it. Tom it is legit. It is legit fed speak. And 11 00 a. M. We have Jerome Powell and patrick mark speaking. And 1 30 p. M. We get John Williams speaking in new york city and this is not the same speech that he was supposed to give resident biden. And then 7 30 p. M. Loretta mester will be speaking. We are at a point where it is difficult to have clarity. I wonder if it what point the fed speak snaps at this point. As you mentioned a month nobody said about anything about jay powells discussion. He was talking about Community Forum but the point being here is that they do not have much to say. Tom 10. 12 jonathan what is that . Let me guess that is payrolls. I am here to translate. Tom yes, it is. Jonathan you do have to translate. Lisa it depends. On monday. Jonathan chief investment strategist of cfra joins us. What is this rally . What are you looking for . Sam good morning. I think there is basically too much pessimism in the market in the short term looking at the factors of the strength index. And taking it from a technical perspective it says you push the balloon too far underwater and now it has pop at least in the near term based on possibly the reversal of you right now of yield right now that continue to climb. And the employment numbers and there is rise in unemployment. So basically as we head into q4 we could end up with qphoria. Tom should we still that . I like qphoria. If it is a starry fourthquarter what will it be in cfra . Sam our analysts are out of this world but i would say the stars had not changed all that much. I think its a good indication when you look to relative strength on the shortterm and longterm basis. We are still showing strength in this Communication Service such as Consumer Discretionary, technology, and energy. Our stars continue to show a greater centage of the coverage gravitating toward those areas. I think that we will see recovery in the fourth order this year and the group that led the way in the first half will continue to shine in the final quarter. Tom i cannot say enough that is the s p cfra Bloomberg Intelligence way but when you look at the longterm the stars shows stability of revenue down the income statement to earnings of all the different sectors. Lisa one said it is hard to see the stars right now because we are in a muddied situation because of the cycles. Now is how is qphoria when you look at inflation . Sam when you go to q2 you see a positive return with average being around 6 gain. We see our performers technologies, materials and industrials where utilities and real estate have been among the underperformers. I think investors basically are going to start looking toward the end of 2024 and give up on looking at the end of 2023. Anything that far out in the future myself included looks better. Lisa are you basically saying we have seen a low intech prices . Sam i would say nearterm low that i would not say the shakeout is totally run its worse course. Im still looking at a test of the 3200 level on the s and 500 that break it down to 8. 5 since july 31 high. And nasdaq could probably end up being a doubledigit decline before all is said and done. I think that would represent buying opportunity as we move into 2024. Tom give me your treatment of q4 in the technicals. The chart is ugly. Sam when you look mainly at the regional banks they look pretty bad. And you find diversified banks have challenges, but would when you look at financials in this third quarter, the financials are expected to barrow clear lost with the climb of earnings last quarter and a three weight earning fall this quarter. You realize that 54 of the last 50 six quarters have into quarter estimates exceeding. I would say we may have one more in the third order and government earnings recession back into an earnings expansion. Jonathan will there be higher yield or lower yield . Sam higher yield gives them great netras Net Interest Income but it makes it difficult for them to be were lenient on a zero interest policy so i would rather them have a flat or soft Interest Rate environment because then you would have less of an in race in a recession. And a greater lightly an increase in a recession. And greater likelihood of a soft landing. Jonathan that was chairman powell navigating reading the stars under cloudy skies. I think that is what he said. Lisa talked about chairman powell sitting down to talk with Patrick Harker to have a roundtable discussion with workers, and community leaders. He talked about the evidence of the seller down and i wonder if of a slowdown and i wonder receive it dated today. Lisa i suspect we will. We have a significant portion of Small Business orders owners saying their businesses hamper by where rates are. That is what they are hearing. Does that give you since of a more dovish inclination of the fed . Jonathan will the businesses say you have done enough . Tom they will the table and they think it will be capitalism. When i have my first year of boston birkenstocks. Jonathan i cannot see you in birkenstocks. I really cannot. Tom there is like the lineup of glick great records. And did i everything work in stock would pop out with ive bit equity . Can you see me wearing my birkenstock austins in tiffanys . Jonathan do you still have a pair . Tom i do but i do not wear them. Darted wares than with socks. If i if ewers thems them if he wears them with stock i will wear my with socks. Jonathan we have a chat with our producers screaming. Someone says the news lisa [laughter] tom weve been talking and it is a private companies is george washington. The lvmh deal in their Louis Vuitton birkenstocks. That is unamerican. Jonathan someone say the news. If you tuned in i hope youre is still with us. Equity futures unchanged negative by. 1 . And then we have jp morgan Asset Management coming out. Pushing ahead to fed payrolls this friday. And then we have had speak this well this week as well. We have a lot to get hands around. And i am with you there was a shutdown and risk of potential for the payrolls. All the emphasis we get put on earnings. Lisa it is good when it comes to clarity, but is it going to necessarily create a feeling that the fed will hike rates in november . If they do well they will shift a feel that they may be getting Small Business owners. Jonathan do you like the birkenstocks . Lisa i like the leather ones. Jonathan the leather ones are nice. Tom what about just sandals . Jonathan that is fine but in new york city absolutely not. Bsolutely no chance. Lisa what about nice sandals . Jonathan in the city . Absolutely not. Lisa it gets hot and sticky would you do . Jonathan you wear socks with sandals apparently. Lisa [laughter] ames hardie™. I do intend to file a motion against Speaker Mccarthy. This week i think we need to rip off the bandaid and move on with new leadership that can be trustworthy. Matt voted against the most conservative ability to protect our border and secure the border. He is more interested in securing tv interviews than doing something. Jonathan House Speaker Kevin Mccarthy on the sunday show with congressman gates catching up with joe mathieu later on balance of power 00 eastern time. Do not miss the conversation at 5 00 eastern time. Do not miss the conversation. Government shutdown averted over the weekend. Equities positive by. 02 . Yields are higher on the 10 year basis point. 4. 62. Tom 10 00 a. M. We get important jon ferro data. And i agree all of a sudden we get data dependency around wet 18 fed speakers say. Jonathan everyone is talking about the leopardprint dr. Martens. My favorite shoes. Please share why you wear them. Tom instead of having to wear old fort shoes as ugly as sin doc martin makes lovely shoes where if i have to walk the dogs i can stay stable. Jonathan that is a product maker. Tom the dock markings doc martens work but the birkenstocks dont. I used to wear them a lot and i cannot. Jonathan how do you get stability in that . Where do you find stability . Tom john, clogs. Lisa i wore clogs in high school. Jonathan in a serious way . Lisa [laughter] lets move on. Tom right now we get saved by annemarie horner. We get back to the serious stuff. She is our i worked all weekend correspondent. An important moment for balance of power tonight. Your conversation with the gentleman from florida. What is his relationship with trump desantis versus trump gates. Annemarie matt gaetz is selfdescribed as the most frumpy annemarie matt gaetz is selfdescribed as the most trump like individual. He is about securing Television Interviews as Speaker Mccarthy said. His message this week is that he will file a motion to vacate. A big question for him does matt gaetz have the vote . Does he have the republican support he will need on top of the democrats who you would think would vote to oust Speaker Mccarthy but that is unsure at the moment. That is the big question for him. Jonathan a little bit later at 5 00 eastern time what is the focus on the conversation for you . Annemarie i think it will be if he has the vote and what is his name his aim because he had one of the most conservative stopgap funding measures resolutions that cut federal spending at 30 . And now you see a stopgap resolution with the government open until november 17 at the same spending levels. There could have been a more conservative agenda if you voted for that, he didnt. And he continued to vote under for resolutions under beth Obama Administration so wide is this an issue for him now . Jonathan it is a story of feel like i do not need to Pay Attention to, but with the outcome of the 17th coming out similar to this weekend. Annemarie it depends on how much work gets done. They have the appropriation bills in the house is further along than the senate they have to come to conference because the senate bill that is run by democrats will look different from the conservative bill. And ken that get done before november 17 at the same time, how much more difficult is that situation the last speaker wrote in january there were 15 rounds. Not saying this will go anywhere with congressman gate, there is a potential path for Speaker Mccarthy to maintain his position but this will cause a lot of chaos and it will be a huge distraction. Lisa for mccarthy to be the confirmed speaker and eat the vote that gates is bringing to the floor does that include making a recession to the democrats . Annemarie possibly. Katherine clark said the whole democratic conference needs to discuss with the path it is area digitally is. Potentially they will have to vote they could either not show up or vote present that he would have enough republicans that want him to remain in the position which is the majority that want to keep him in that job. But then you look at almost run conference because if hes going to be the need the democrats support he will likely have to give something up for that. Lisa is matt gaetz gaining popularity as he does this . Annemarie i think his name recognition is going up. He only went on conservative media. He was on cnn and abc this week he is coming on bloomberg this evening. There is a lot of her wording that he is eyeing to run for governor in florida. He denies that and says he is focused on getting former resident donald trump elected but if he is going to run, he is getting his name id up not just in florida but also nationally. And he is campaigning on it. Tom joining us now is annemarie horner. I have to ask you last time we talked i have to ask you about the dr birkenstocks. They do a fair collaboration and opt these puppies out with birkenstocks 1100. They scream amh. Would you be caught in caught dead in those in the tokyo mule by arkin stock . Annemarie no from looking at the photo they are just because it is dior, i am a hard no on birkenstocks. Jonathan there you go that is in our coverage worldwide. Lisa [laughter] jonathan i did not bring this up. Annemarie i am also hard no on crocs. Jonathan they thought they might boost north american luxury spend but im not sure this is happening the same way. Tom forget about the jokes on birkenstocks. The fed has a private Company Going back to george washington. The lvmh is capitalizing. I dont know, is the price of that was analysis morning a big deal, i dont know. I did not go on the roadshow like you did. I am fascinated lisa what is going on . Jonathan we had a conversation with her can stock. But i think that this goes around the message. I really do. There is an intellectual stand point where you have this school of thought. Where it doesnt matter and the fact they are not taking it seriously in washington they are not taking it seriously at all in d. C. Tom this is critical to our conversation last week with mcginnis. Lisa the United States has to refinance their debt at the occurrence at the current rate. And it goes through the roof. Tom i have to admit im watching Interest Rate terms of the government and jonathan the sovereign Balance Sheet is not strong. That is the story the last three years. Looking forward to conversation. 5 00 eastern time with a special edition of this with bloomberg amory and amory horner reporters. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Loving this pay bump in our allowance. Wonder where mom and dad got the extra money . Maybe they won the lottery . Maybe they inherited a fortune . Maybe buried treasure . Maybe it fell off a truck . Maybe they switched to Xfinity Mobile on the most reliable 5g network. For a limited time, buy one line of unlimited, get one free for a year. Now i can buy that electric scooter im starting a Privateequity Fund that specializes in midcap. You do you. Switch to Xfinity Mobile today. All over the world, and looks at the most effective ways, to get resources to them, to get services to them. The idea that we have saved five Million Peoples lives, its overwhelming. Its everything. Jonathan conversation in commercial break totally out of control. We need to tape that live. Lisa you had some moments is all i can say. Jonathan s p 500 unchanged. Up by 0. 06 . On the nasdaq up. 25 . The biggest quarterly loss of the year so far on the s p 500 and the blame game we have many things to pick out. The 10 year, two year, and 30 year. 30 year higher by six basis points. 10year 4. 6268. A monster move in the 10 year yield. The 30 year getting comfortable with the idea that they are trading in the four 70s. 4. 74. It is a curious moment. Equities pop for about five minutes and they fade. Yields are up and that sticks and it sticks again now. The story on the market with 11 weeks of Euro Weakness and dollar straight. Euro is 1. 0536. And the u. S. Yen up by. 2 . The yields have been higher and we conclude the boj is comfortable with the high yield and how much more that can move we do not know. Boj stepped in once and they will step in twice to cap the speed and not put a line in the sand of the levels they like that if they do that the yen we is coming around the corner again. We are closer to 1. 50 this morning. Lisa we have five and 10 year wednesday. What this does they lessen demand for the currency. There is a spool lay. It raises the question of what do you care about most . What is the rate of change they care about most where it is a time where they are unclear of where the destination is. Jonathan under surveillance is warning the u. S. Government shutdown after approving a stopgap measure. The last minute deal does not include 6 billion in support for ukraine. President biden and the leadership in the u. S. Senate urging Speaker Mccarthy. Mccarthy is looking to ties support for ukraine immigration and Border Security. This i think sets the parameters for a fight or the next month in washington. Tom the pipe from a next month is in washington. What is fascinating, i feel like im watching 1938 where fdr is doing trying to get funding for america something we do not want to look at in europe. Why is this different . We do not want to do this in ukraine. There is a growing emotion of saying why are we funding ukraine . Some of the comments from leaders was clear that youre doing this because they are fighting our or. There are some our war. There are some serious comments coming out this weekend. Lisa and there is splintering with leaders elected on the basis of not supporting ukraine. At what point does is give ammunition to that voice in europe at a time where we are headed into a tough winter . Jonathan i think you draw the conclusion that the support for the ukraine more on the republican side is failing but the issues that the southern order has become more dominant and now you see dim rats looking at it. And we are leading toward the conservative point of view. That is the change. And you tied the two issues with the way Speaker Mccarthy is going the next couple months it will make it big going into a live Election Year. Lisa my question is will mccarthy cater to the party that he is already interested in. If that is the case is there a consensus in the center on both of the issues . Tom i think so. I think youre dead on. I mentioned tice twice this weekend. Theres a bipartisan shock over migration that was not there one year ago or six years ago. Jonathan and a couple more stories to get through. U. S. Auto work is with the strike marking its third week. The latest Sticking Point is benefits for workers. And they expanded the strike against ford and general motors. The union is still calling for a 30 pay hike down from the initial 40 at the start of negotiations. The last story with apple saying the Software Updates are coming to the iphone 15 after reports of overheating. The company admit the device can get hot during the first few days of setting up. Apple denies that any heat issues are related to the new a 17 processor. But you cannot blame the titanium piece either. Lisa it is a software play. Seriously it is almost like he has tentacles in there because we say we know hes going to go out there and say this. But if assad is why did they not solve is ahead of time if they knew it would be a problem . And it raises the question about if this is another manufacturer. Jonathan you can buy an iphone and overcome the issue. That is the message from apple it is not the processor. Tom they literally blamed uber in instagram. Jonathan may be them developing their own search engine. Tom i have not read this article completely, but there it is apple will try to compete with the google and search. Jonathan amazing. Tom joining us now we have sonia with bny mellon with a short note. She comes with experience from the new York Federal Reserve system and London School of economics in pennsylvania. I love your note on the ambiguity is higher for longer. Discuss the what ifs here of the qfii q3 q4 debate of higher for longer. Sonia sure. The thing of higher for longer is the market moving right now the stocks we believe the natural rate or the raid that balances savings and invest in the u. S. Economy has risen given the previous cycle. What it means is that the fed will have to keep rates higher for longer, but it also means they are possibly not as restrictive as we believe them to be in the previous cycle. Tom you are an acclaimed fed watcher. Is this the fed that has away from the data . Wait for but dialogue and narrative . Sonia is difficult to estimate natural rate in real time just like it is typical to estimate the premium in real time. They are unobservable in real time. I think that is why the fed says we will wait from the data and see how that shake that. Jonathan does the datastream that we are sufficiently restrictive in your standpoint . Sonia hard to say. I think the strength of the consumer and housing mark it, even the resilience of manufacturing, given the runup in rates we have had tells us the economy is stronger than it was in the review cycle. Jonathan how are you getting the real time . Are you following companies . Or Economic Data . You have to look at edit topdown and bottomup and compare the two. Lisa when you look at but the fed is doing and we will have a meeting with patrick mark and jay powell and others that feel the pain more substantially do you think the fed has their finger on the pulse. Is there concern about being overly restrictive . Sonia i think lower tiers of the consumer feel this more than some of those that have High Net Worth of. Built up. Silliman will early similarly some are fueling morbid others. Feeling get more than others. Lisa how closely are you watching the den namic that we were talking about earlier that payments are going up significantly for the united dates, the deficit is expanding and there is concern about the ability to pay this back. It leads to Something Else which is higher yield. How are you gaming this scenario out . Sonia that is tough a bigger concern right now at this point than nearterm or consumer corporate week this because if rates rise, on a sustainable bad basis, it will be difficult for the u. S. Government to finance itself. It will be more expensive on the taxpayer. And at the same time corporate will have to advance as well. We get potential from public and private sides. Tom are you suggesting that fiscal policy and economics will intrude on the policy debate . Sonia it takes the u. S. Fiscal side is a given, but it is a tough situation for them. In the past cycle at least inflation was well contained but this time if it for you accelerates because of tightness in the u. S. Labor market, it will be a tough situation for them. Jonathan house prices, energy, the labor market, what is the risk for reacceleration coming for you out of those things . Sonia i think the report coming out will be interesting. Not just the headline gains but what is happening with participation rate. For example weve had a lot of gains in the purse his a patient rate for Foreign Workers that might route and go back to a structural tightness in the labor market. Jonathan of the inflation decline we have seen so far this year, how much of it has been a result of the fed tightening . How much has been supplyside responding to the price level . Sonia we would say supplyside has been a big part of the story. Theres some weakness overall from the fed tightening. As we discussed much less than we would have. Jonathan its hard to point to a significant amount of demand destruction. Out of a know if they have sufficiently restrict it . What is the conversation about . Sonia theres long and variable lags always. The fed is leaning into variable and long. Lisa or may be short. Jonathan isnt that a confusing point for you as well . Lisa im struggling with understanding the bond market entirely right now because of how much is driven by the deficit and physical back drop how do we understand the resilience in the economy . We dont. The economy bears another thing each week. Jonathan you are certainly not alone. Sonia. It is great to see you. If youre just joining us we have a s p 500 shaping up negative. 01 . And we are at 4. 626 eight on the 10 year yield. We keep up with the chief economist at wells fargo here in about 45 minutes. Tom theres four key dates to get out to november 1. Can i say september sort of happen. I dont know if i was there to dissipate. It was like two to zip eight. It was like it rained for 14 days. Jonathan the weather was brutal friday and saturday. Tom and then october 1. Jonathan did you see the pictures out of brooklyn . With those swimming. Lisa i had to try to take one home it was like an hour and a half. And basically dont you find that people tend to be down and it matches the market move. Jonathan skipping around in the rain is what you want . Lisa when it is sunny you can see people have a pop in their step and you can feel it and otherwise when it rains they are kind of down. Jonathan lets lift their spirits. Tell us what you think about the economy and make it better. Lisa [laughter] it is about resilience with auto sales up. Jonathan dig deep. We have our next guest joining us to talk about the discussion shut down, avoiding one and we have conversation between congress and matt gaetz and Speaker Mccarthy. We hear more on that later on. Congressman. Congressman matt gaetz with amory horner and joe mathieu. We have more on that later. Styles and textures. Curated by joanna gaines. Are we going to be staring down another shut down . It comes to the senate. Will we face another shut down november 17 . No, you compare this to the senate they have not passed one bill. They did not pass anything about the shut down. Jonathan Kevin Mccarthy speaking about the next line of line in the sand november 17. Slightly negative on the s p 500. They kick off of a new month and trading week and quarter. Yields higher bio five basis points 10 year 40 462. 4. 6248. And then new york crude 91. 24. Tom it is not like the panic that we saw monday or tuesday of last week. I cannot remember before that but when you look at equities, bonds, currencies you look for a signal for q4. To me, the swiss franc has been resilient and weaker in that changed in the last 24 hours. Jonathan Dollar Strength is happening and we see a rally in crude. That is difficult for the europeans as we go back to that story. Tom it will be fascinating, the oil story. We have talks with Daniel Yergin in the past three hours and he said demand will not be there. Jonathan and you have to get back to the 70s by next year. The supplyside response. Tom this is what you and i witness this weekend. The congressman saw french hill being a good friend of the show and giving perspective of the history we witness. French hill, a taken issue with people saying this is never happened before. But you read back to the alien sedition act is this currently is this frequent like 1910, this is an absolute error allow from the analogues of the past. This, what is the speaker of the house that you support . French great to be on the program. I think Kevin Mccarthy should have a motion to vacate this year the chair to the house floor. They can table the motion and i think of them are the survives. He has over 200 solid supporters in the market. In january it took him 15 rounds to be elected speaker of the house and historically that did not happen that many times since 1923. These items have historic precedents as you pointed out. Kevin mccarthy supported this and hes doing a good job as speaker of the house ringing to the house floor important measures he negotiated singlehandedly virtually. And lower spending in 2024 over 2023. And other economic reforms. Thats why think his colleagues will sustain him as speaker of the house. Tom you are entrenched in arkansas. There are republicans up north who are not entrenched and they are outraged this weekend and that seems to be tangible. Are republicans in the north at risk because of the foolishness of the weekend . French thats an important point. We have a narrow majority where we can only lose 45 vote on the house for floor. We have about the President Biden wants so in new york and california particularly we have House Republicans that won successfully without having campaigns in 2022 but they may be in a biden district plus three or 13. They are really hurt in their districts if it looks like we are not governing and not honoring our commitments on spending and regulatory a lessee area in other words, they are conservatives advocating at home for solid can orbit of republican values, but they want it delivered in a way where they consider it this backandforth does deliver. Jonathan does it help when you combine the ukraine effort with the effort with the southern border . French you will find that we will move ukraine bill in the coming days and we are building a consensus around what it should look like including oversight of the Administration Strategy in ukraine to win and win proper plea win promptly. Theres an overwhelming vote with the majority of members of Congress Supporting ukraine funding. They want to make sure other countries are doing their part. They want to make sure the money is transparent and they want to make sure the Biden Administration is encouraging a strategy and you rain that can win and win promptly. In ukraine that can win and win promptly. Jonathan why is it important to combine that with the Border Security issue which is what Speaker Mccarthy communicated over the weekend . French it is a important point politically. People are stunned by the incompetence of the Biden Administration to secure the order. Over 6 Million People cross the border over 151 people on the terra watchlist have cross the border. Hundreds of pounds of it no that can kill americans many times over. And 2000 people a month are coming across the border setting the record up 25 from last year. And so i hear from my constituents that the governor of new york has called out the national guard. Every state is a order that is a border state we think the most domestic pressing problem aside from getting spending under control from the pandemic is Border Security that is why i think Speaker Mccarthy set about our. Thats find a compromise and do something about Border Security and honor the commitment. We passed the bill on the last on the house floor only republicans we call it hr two and we would like to see we can get them addicts of or in the senate for more security. There is a strong push to support ukraine under the terms i outlined. So lets have two working together. Lisa whether it is the border, ukraine, budget, Kevin Mccarthy to be speaker congressman are you finding a greater ally in democrats right now than the far right republican already russian mark french inside the Republican Party Republican Party . French in the Republican Party we want to go back to the prepandemic levels. These are shared priorities in the republican conference. We are still educating, in my view, members on what is the best course forward for ukraine. I admit there is a party split and i am disappointed. I was kicking him out of russia. It is an outrage that put is there putin is there. And this dates back to the Obama Administration but where we are is where we are and we are doing the work to find a consensus on how to move forward with ukraine. Lisa lisa what im trying to say is if Speaker Mccarthy remain speaker there will be demo at give a pass to it. Is there an increasing coalition that will have greater influence Going Forward . French i think it could be. You saw in the run up on trying to find a solution in this most recent conflict on the end of your spending where you have centrist democrats working with republicans to continue resolution. If you see that that may be in the best interest of the american people. If centrist democrats come to the republican side and work with us on things to cut spending, secure the border, and Fund Assistance to ukraine. Jonathan ive known you long enough to know these issues frustrate you shut down debates and debt ceiling issues. You think your colleague in washington understand what is happening relative to the treasury market . French you are so right have made that point repeatedly over the last month. It gets my attention to see the 10 year over or. 6. And one thing we have 4. 6. One thing we have the republicans democrats voted against it. Very disappointing. Very. It would have secure the border, cut spending by 8 for four weeks. It was a Debt Commission and that is what we need. A bipartisan approach dating back to 1983 where we saw the Social Security solvency at the time and produced a fortyyear positive outcome for that very Important Program for our seniors. That is a kind of approach we need to take on finding a bipartisan solution to longterm fiscal concern. Two thirds of spending does not debate. Jonathan we have to talk more about it we can do it, raise it back october 14, congressman thank you. Congressman french hill of arkansas. Live from new york this morning, this is bloomberg. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. The power goes out and we still have wifi to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. All of the work that were doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. The idea that we have saved five Million Peoples lives, its overwhelming. Its everything. Earnings are going to continue to grow . We have seen a lot of sectors earning. We are seeing some signs of Consumer Confidence just starting to return a little bit. That market is something we are focused on. We are not slowing enough if we are not in a scenario that looks like a recession, you get inflation coming right back. This surveillance bloomberg surveillance with tom keene, down temporarily and Lisa Abramowicz Jonathan Ferro and Lisa Abramowicz. Tom christ down price down yield up. Romaine jon 10 year at the four 460s. Congressman frank chill talking about the recklessness in washington and the contribution we have seen from that to this in the bond market. Tom i dont disagree with that. What is front and eight and center, this is deceptive. Forget about the spikes up, if you look at the central price of a given bar chart, right now, we are at new high levels for yield on a daily basis. Jon it has been amazing to see, last quarter, 70 basis point move. One person publishing moments ago, here is his number, 242,000 new drops jobs. That is why he is looking for another move from the fed next month. Tom there are other views that cut the other way, the narratives that are out there we have to sort out and i have october 6, october 12, october 13 two a november first meeting. I wonder what jay powell will go as halloween. Ambiguity. November 1 is the fed meeting. Please keep these key data points, it is jobs matter but i am all inflation points. Lisa what point does that shift up at a height case that something breaks and this is the question, why are stocks not recognizing how quickly bond yields have gone up or halfday . Is this something everyone can adapt to at a time where we are leading to the highest yields we have seen going to 2007. This underscores the lack of a rally today. Tom over the weekend, into q4, what does the spread market look like . There is doing in and gloom in commercial real estate, what is this red story . Lisa it is not a spread story and what we heard from someone is the exact opposite, this is a Government Bond story. The aaa rated sovereign debt that is the benchmark for our all other borrowing costs. If you have a on mooring unmoo ring of that, something breaks. Tom i am ed yet and i dont understand all sides in golf soccer and i couldnt tell liverpool goal is a gol. Jon you should have heard the drama in the bramo household. Tom was john michael medicated . [laughter] jon the video referee knew it was offsite and realized too late. They thought it was too late to go back and call it the goal which is bizarre and there is talk about replaying the game which is utterly ridiculous. Tom i do not know that. Jon the fan base would like it to happen. Tom lets do an onsite data trick check. It is 2. 27 and i cannot say it in enough about yields up right on resistance. Jon treasuries down and down hard over the last four years weeks. The thirtyyear up by four or five basis points up to 4. 75. 1. 0530. Crude, the rally continues with the Dollar Strength, 91. 20. To lisas point, a pop on equities after the resolution in washington over the weekend does not stick. It faced quickly. Tom i would love to see in the opening bell, i would like to get to the end of october. They will David Leibowitz with us this morning. I love any research, you come up to the levels and there is a huge now what. How does it redown over to the analysis of the equity market . David you talked about the this version of use and things that are bothering the bond market, but that uncertainty brewing, cuba will look for bond yields to move to the other direction and not move higher and that is what is insulting unsettling about is what about what is happening here. Profit estimates for 2024 have been rising. I would go back to what lisa was saying, if rates continue to rise the weight they were rising, they will be a financial accident something will break and that will get the fed moving in the other direction but it seems like the equity market has this idea that the fed is going to ease for easings sake in 2024. Jon the financials broke last year. Do think that is insulated david the larger institutions are well insulated. What was interesting about what happened in march was not necessarily the event in and of itself has been well well covered but the response from the fed. We bake the cupcakes and we know what it does to the economy when you lower rates and inject liquidity so that should have been the point in time where we said is probably more legs to this market rally than we thought coming into the year. It is about the speed of the move in rates and north of 70 bips is quite a move. Lisa you said something will break but we see market stopping markets. People are buying new houses because no one wants to move and borrow at a percent rates dates percent rates. At 8 rates. There is a lack of liquidity underpinning this move, how closely are you tracking that . David i would add to the laundry list. If you look at amend and extend to be at the bank load market, that is running at a pace we havent seen since the financial crisis. We are seeing signs things are moving in not necessarily the most positive direction but you juxtapose it with the personal income report we got on friday which showed that consumers are still out there spending away with 70 of the economy being the consumer. Theres probably a little bit more room for this to one but eventually you have to imagine the labor market begin to cool off. Lisa is the cool new playbook the same as the old one, we will boil this product until something breaks. The fed will step in with stimulus and you will end up with lower yields which would turbocharge the next leg of the rally . When i get long stocks and expect the fed to build you out bail you out . David if the boiling the fog scenario plays out, there is Downside Risk to growth and corporate profit so we view equities need to pull back in the event of that materializing but i dont think you are wrong, at the fed respond by lowering rates, i dont think they will do a lot of qe. Investors will get what they are looking for. Tom james dimon will be with emily chang, his mandate, which he will so show is a more longerterm perspective. Jp morgan with the three year perspective, what do you do with equities . David i think you avoid the names that have driven the rally so far this year from a pricing perspective. Tom do you sell or avoid them . David i dont think you sell them tom i walk into your shop with microsoft shares, you tell me to sell them . David you need to focus on valuation in this type of environment because the securities that are looking overextended arguably thanks of all the furthest and i think there continues to be a tremendous opportunity in fixed income and you look at tenure paper 10 year paper. Taking advantage and locking in some of the yields, even if there is upside on the 10 year, it doesnt feel like the jon lets talk about sectors within equities. What did you like avoiding tech . David it is an interesting barbell. We like the more defensive evident payers, the Consumer Staples names, i know they have been under pressure due to the rates story but i think they will pay all over the course of a 912 month rise in and we like energy and you look at what is happening with oil prices today, energy is highly cyclical but you look at the shift we have seen in the underlying approach is companies are taking to managing their businesses, they are focused on capital officially efficiency and return cash to share oval shareholders and these are difference different from the private equity we saw in 202010. 2010. Jon last month, it was energy versus discretionary. A great year so far for 2023, that confidence you have for energy, the you do you match that with bearishness around discretionary . David i do. The consumer is coming under pressure and there are different estimates from all this, if you look at the feds numbers, the excess savings ran out over the course of the summer and the savings rate, it runs well below its average. It is my impression that the consumer is in the process of bending rather than breaking but in that type of environment, discretionary is a place where i want to hang my hat. Jon terrible for airlines over the last month. Lisa Higher Oil Prices. You see the most for Airlines Catering to families jon jetbluejon . Lisa that is what i am talking about. David if you listen to the management team, they only raise their prices. The demand is there. I think it dovetails niceta nicely with the overall view of the consumer. Jon they didnt carryover my privileges. That is what i flight domestic with but business travel. Lisa where did you go . Jon west coast. Became out of the pandemic and mr. Hayes would not push over push my privileges were 12 months. He said i should fly more so i did not. Thank you. [laughter] welcome to the program. The s p 500 negative vibe drove. 15 negative by zero. 15 . 0. 15 . Jim bianco you know those slaughterhouse type scales, jim bianco said imagine the scales at beat airport that you have to step on with your banks. That would be wonderful that would do wondrous that would do wonders for public affairs. Jon if tom there are somebody in front of me at some point, the beast cannot get off the ground. Lisa you pay extra for the suitcases but that would not look good with you have people basically going on the scale and they have a meet scale. Tom why are you looking at me . Jon we are we should get the analyst from jeffries and we should have this conversation. Is this a benefit for is epic that the average passenger weight will fall by 10 pounds . Lisa the side effects are real. Jon people firming up by the plane . [laughter] lisa the side effects to us epic needs to be explored before we trade around it. Tom full disclosure, i am not doing is epic ozempic. Why are you laughing . Stop it. [laughter] endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. That first time you take a step back. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy, with a partner that puts you first. Godaddy. Senator, you bought it for a shortterm deal that does not occlude include a sent for ukraine or the u. S. Border. How do you swallow that . We have 45 days to fix both problems and i listen to kevin closely. They will there will come out a bill that has three legs. Jon that is the next big effort, the deadline november 17, senator Lindsey Graham speaking on cbs. Can you down to the opening bell for q4, 1. 13 hours away. Tom, the 10 year, 4. 6351. Tom i think that is a really interesting concept. To get into all silverware bonds to get into october where bonds i am looking at the real yield 2. 2 . Lisa, john, and i, there was a point where we literally did not see each other for months and months with covid and we determined with our producers and team that we had to cover covid. We did it with Imperial College london, Johns Hopkins, Johns Hopkins university and their science and you see it today in with the nobel prize, this is to the university of pennsylvania and this goes back to watson and crick, through this miracle, the three of us walking into an office and we get a shot and you say, it wont be a big deal and i make jokes about it. Please other eople that made the pfizer shot and this is a triumph for all the voices. Jon that news out this morning and congratations to the two. Tom a huge deal and i cannot say enough about it for our team through our coverage through covid and we may have more coverage. Jon the nobel prize in physiology and medicine. Tom it is mrna. It is a huge deal going back 50 years and well deserved the whole scientific community. Knowing that is jeanette role Jeannette Lowe. We did not shut down, medicine will move forward and signs will move forward and ukraine will not move forward. Do you see an easy path to legislation where the usa provides ammunition to ukraine . Jeanette this is not look like an easy path at all. There was a little bit of a surprise that there was no Government Shutdown. We did not expect Speaker Mccarthy to cross his caucus and work for the democrats to pass a bill to keep the government open. We dont have a shutdown yet. You may have another shutdown risk, november 17. We still have to figure out what we will do on ukraine funding and we have to pass a budget and republicans want to do something about the southern board porter southern border. It will be a tough lake here where they have to figure things out and Speaker Mccarthy was he challenges to his leadership and he can see multiple ones over the next couple months. Which will make it really difficult to govern in washington. Lisa every month we are talking to today speaks as if Kevin Mccarthy was will be in the position in months to come, albeit with consternation with his team. How much are you looking at the possibility that he does not remain speaker for the foreseeable future . Jeanette we think the initial boat that will come up, there will be an effort to save face speakership save his speakership. It will be likely the democrats do not show up for the vote and vote or vote present. We dont necessarily anticipate that will be the end of the story and we can see continued votes brought up and that might start to wear down the process and figure out that he ultimately may not be able to survive the speakership longterm. They do need an alternative and the alternative has the exact same Republican Caucus they need to manage. They will have these small number of hardcore members who will push for holding out on spending bills and other priorities that they have and that makes it more difficult for the moderate wing of the party to get things done. Regardless of who is bigger, it will be a difficult path. Lisa i am trying to be an optimist, that we are not doing deja vu on november 17 and how much we are looking at anything getting done other than kicking the can down the road. Jeanette we needed more time so we need an continuing solution regardless because they were never going to get appropriations done. Your doing six weeks down so there is a good piece and there are efforts to not having moved to december. Have its moved to december but they need to take the big vote and they need to patch the budget has the budget. There are members who are moderate and want to get it done. We think it will be a volatile process big but there is a push where we where we will have an almond and miss an omnibus bill. We will see something on immigration and ukraine funding and if it gets pushed further to the end of the year, or things are at it in there but they have to get something done especially before they move into the 2024 your where it is an Election Year where it is an Election Year. Tom i dont buy it for a minute, i see democrats nationwide adapting and adjusting. What will be the Democratic Party path on migration in the next 90 days . Jeanette right now, democrats are saying they are pushing against some of these changes to who can come to the border, having people staying in the u. S. Why they their asylum cases are being heard rather than being held in mexico or another country but you are seeing immigration have an impact across the country and you have democratic cities and states that are dealing with a large influx. There is an opportunity for the bipartisan compromise but you will not hear it as much from the members of the progressive wing in the Democratic Party in congress but i think you are hearing more conversations about how there has to be changes. There is an effort, you have senator sinema trying to put forward moves to come up with a bipartisan solution and eventually, if you want ukraine funding and something on the book border, that creates a bipartisan mix and there might be something we can get done. Jon do you expect democrats in certain states will sound like conservators on certain issues. Congressman french hill was here and he made a point that the border issue was every states issue. Do you think that will change the politics domestically next year . Jeanette i do and i think you are seeing tensions in the party on that. You have democratic policymakers in charge of cities or states that are having to deal with the immigration flux. And the sheer numbers of hungry people trying to deal with them and process and get onto a better place. That is creating tension with the administration, that they are not doing enough and providing enough aid to the states. You are starting to see tension there, the rhetoric may not change as much but i think there will be more of a got to be more practical and saying we have these large numbers of people coming to the country. We arent able to manage them so we do need to make changes and it probably play into electoral all tics next year so impress have to electrical electoral politics since youre old democrats have to think about politics next year so democrats have to think about jon Jeannette Lowe of should teaches of strategic securities. Tom i totally agree and i dont think it is new york city, it is across the nation, it is original. Jon live from new york city, the opening bell a few minutes away. Hi, im jason and ive lost 202 pounds on golo. So the first time i ever seen a golo advertisement, i said, yeah, whatever. Theres no way this works like this. And threw it to the side. A couple weeks later, i seen it again after getting not so pleasant news from my physician. I was 424 pounds, and my doctor was recommending weight loss surgery. To avoid the surgery, i had to make a change. So i decided to go with golo and its changed my life. When i first started golo and taking release, my cravings, they went away. And i was so surprised. You feel that your body is working and functioning the way it should be and you feel energized. Golo has improved my life in so many ways. Im able to stand and actually make dinner. Im able to clean my house. Im able to do just simple tasks that a lot of people call simple, but when youre extremely heavy theyre not so simple. Golo is real and when you take release and follow the plan, it works. Tom 8 30, Economic Data not on on monday, october, one or two. Lisa it is october 2. Tom no Economic Data but i guess it is a big deal. Lisa we have ism manufacturing and 15 minutes before that, we have s p local any fracturing pmis and this comes at a time where people are looking at new strength in manufacturing. Tom strength in yield. Lisa that is part of what is underpinning it because you are not seeing the altogether downturn people were expecting. Tom we are not there yet, 1. 4974. Lots of tea leaves. One of them came in off transit. David rosenberg, toronto, canada, reminding us that the 2. 2 is the three month annualized inflation statistic for america. Many would disagree with that and there is a basic idea as we wanted to you for as we launch into q4, lets talk fighting the last war october 2023. Is rosenberg right, we are looking back and looking at high inflation everywhere and saying worry narrative except disinflation . Michael i dont think the fed is doing that, they are looking at the same numbers and doing the annual is asian that david is. Does this continue . If you look at the pc numbers and instructor letting out no change in the monthly gain, and extrapolating out no change in the mounting monthly gain things may be better than anticipated but i think the markets anticipate want to fight the last war or prepare for the damages that could come if the last war reasserted itself. Lisa is there ended any indication on which fed speaker speak and where they speak . Jay powell and another person will speak with Small Business owners and consumers might be feeling higher rates than others, does that tell you anything . Michael i dont think so. There is a choice to talk to the Small Business owners and maybe they made this because they want to deliver a hopeful message to people, but most fed speeches are planned well in advance so i dont think there is a specific message they want to deliver under the other than things are Getting Better and we are on the job. Lisa there is a filling baked into Market Expectations that we are seeing, given the fact we will get data on friday, the reason for the fed to go in a november to raise rates and that seems to be part what is underpinning the bond move. Do you think the data we have seen, other than david rosenbergs view, has justified the fed circumstances, an additional rate hike . Michael i dont think so. Everybody will look to the prices paid in employment sub indexes to see what is going on and you have other employment indicators and you have durable goods and the jobs report on friday. All of that will feed into the jobs report on friday so we will see changes to the forecast. It doesnt look like theres any reason necessarily for them to go but if you take a look at at the chart of the november 1 ford futures charlie where is it now . [laughter] michael on friday, they were at 15 because we got the government was shut down and as of today, it is over 30 . It is one of the hockey sticks up because people now we could have a problem. Tom possibly fighting the last war, mike mckee, thank you. They deal is 5. 10 . Sick six basis points. Are we getting near an 8 30 year mortgage . Lisa were looking at at what point, i keep going back to this, at what point do risk assets fully priced is in or have they because that is one of the biggest debates on wall street. Tom too many people are going where are my kids going to go to school and will the faculty be competent . Every once in a while, you go to your kid to a school like adversity of virginia and they work with a rock and joining us is Michael Googling see work with a rockstar and joining us is michael this is a kid at uva that help larry sabato that helped larry sabato to the defendant growth do the definitive book on jfk. What was it like helping the acclaimed professor right this 50 year treaties treatise on jfk . It was a great experience, working with the professor. I wasnt around for the kennedy presidency so i got to learn about what it was like and the impact it had on politics, not just at the time but as it resonated on a 50 years. Tom the impact of politics on wells fargo economics, do you ignore the shutdown and the rest of this foolishness or do you have to fold it into your excel spreadsheet . Michael you dont have of choice but to vote it in and the encouraging thing for the fed, they go to the november meeting, it looks like they will get their Economic Data and it seemed like there was a chance we would wake up with note yield report may no cpi report next week and now it looks like the fed will have that and they staved off the economic hit for a shutdown for at least another six weeks. Lisa there is a profound dysfunction that creeps up into bond yields and we talked about that with sonia masking meski n. What is the concern you have that this is not a riproaring economy and any concern, whether it is a Government Shutdown or weakness elsewhere is not being felt in longterm bond yields that keep going up . Michael it has been surprising and given the head the fed wins given the headwinds, the list keeps going on and on and that is just in the u. S. Let alone a recession in europe and elsewhere but it makes sense given what has happened in the physical front and supply front, you see deficits they keep widening. Thats keep widening and at the same time from the feds quantitative tightening is adding bonds to a monthly basis with no end in sight so finally, you are seeing some term premium come back to the market at least until we see more meanings to the Economic Data. Lisa how much do you have to factor this into some of your economic progress it projection . There is going to be a question of how the u. S. Government can keep paying Interest Payments with the same debt load they are looking at and a questions school expenditures Going Forward and it questions school expenditures Going Forward . Michael when you get to this position of Monetary Policy stance, the economy only has so much more forward momentum. Where will the growth be in 2024 . It will be challenging. That is why we have a recession in the forecast out for the first half of next year, whether it is Higher Oil Prices come up doing loan payments we started, the how the hard yields and all those factors will come in to constrain growth. Lisa where are your stars you are following . We started the show talking about there are stars in the cloudy sky and tried to find them and some of these metaphors that are working for me at a time where we dont have the data and everyone seems uncertain. What is your lone star . Michael that navigators are always look to the stars for the right direction and the way i think about it, what is the fed looking for . There are looking for slower inflation and a continuation of the three month annualized core inflation rate that we had over the past few months continuing here and they are looking at the labor market saying we havent seen any meaningful pain. Job growth has slowed. Unemployment is at 4 and that will drive the Reaction Fund function, the inflation data. We realize any economic pain critically on the labor market fight over the six months and that will drive the bus. Tom that is at and it is the heart of wells fargos research. Windows the Unemployment Rate jump when does the Unemployment Rate jump . Michael it takes time and if you look at 2008 and that tightening cycle, you did not see a recession start into december 2007 and we are not forecasting any kind of the economic the economic downturn we had been but it serves as a reminder even after that last height, which we may not have had yet, it takes time for the tightening to filter through to the economy and generate the slowdown. Tom do you have a fed prediction for november 1 . Michael michael i dont think they will hike. You will see a continuation in the trend of the data we have seen, 150,000 jobs a month on friday and something along the lines of a. 2 on core cpi. Tom Michael Pugliese of wells fargo and the university of virginia. This book got rave reviews about the 50 year breach after the assassination of the president. I will give a call right to Michael Pugliese. It is not bear because he was a Little League undergraduate student but he had a lot to do with that and firmed book. John grisham and others gave it rave reviews. Isnt that cool, you go to school and i did a Research Thing and i was hugely advantaged. Nothing as big as that but no one talks about you get lucky lisa do you have memories of rockstar faculty . Tom my freshman advisor at colorado was igor gammo, who is a number one guy on the world on how snakes tell their temperature with their tongue. True story, i went in his lab lots. It stunk and it had snake smell and the whole thing was rowand was surrounded by snakes. I want to tell my factory advisor once. Lisa after that, not so much. Tom best what you get but for Michael Pugliese to do that with the author is cool. We will dive into bond analysis. Dollar elevated, yen 1. 4976. Important on the tuesday evening. Equities, 18. 33 on the vix. Daniel ferguson fergon. Lisa i have to pick up what we are seeing in bonds because on the 10 year, and this is coming on the long end, it is popping up towards the highs we havent seen since 2007. 4. 369 . Is it because youre going to get the Economic Data and not the slowdown some people were predicting from a Government Shutdown so people are gaming out higher rates for longer to greater degree, is that what is going on . Tom i take the ambiguity, the mystery of the why, technically, these charts are elegant. Take your guild, 10 year, 30 year, we are moving out. I see red headlines across the uber commode we do intraday and offices across all bloomberg lp on bonds but on a daily pricing as we speak, as on many of these yields, we are up to you a new high lisa one viewer roads in who is smart saying this is one viewer who wrote in who is smart tom we have smart viewers . Lisa we have very smart viewers smarter than me. You dont want to catch a falling knife but it feels like it is Something Else going on. When did we get the buying activity . What does it take . Does it take something breaking or a bigger japanese move . Tom if jon ferro was here, he is on his breakfast. It would look at the german 30 year bond enjoying 3 yield. That is untenable in germany stay with us, all through october, this is bloomberg surveillance. The big issue that is happening, people are not talking about the strength of nonopecplus oil. Brazil, canada, canada will grow half a Million Barrels today. They are the nonopecplus oil is growing faster than demand. That is something that goes lisa nonnonopec plus. I cant get my head around what we are talking about. There is a long trajectory and incredible academic correct test credentials when it comes to the oil market and we are looking at oil as another one of the issues in this toxic brew. It is leading yield to go that much higher and the focus is on the yield picture and we have been talking all morning about the fact that even with the triumph of the government reopening, we are seeing risk off and we are seeing bond yields up. Tom something is going on, it is a monday and we are slipping into a october. We had a beautiful sunday in new york. Get focus because the markets are talking and they are talking priced down, yield up. Lisa when you take a look at the specific names, you arent saying much more than any sort of direction. We are in a preearnings turn as people are trying to game out what will happen october 13. I want to look at cools whose lines cruise lines. You can see the light lower with carnival and a region premarket trading down. I am curious about Consumer Discretionary at a time where you are seeing stress and borrowing costs going up and surveys and people are feeling that. They are recognizing inflationary outlook. You have expenses going up for cruise lines and pushback for prices, for passing it along in Consumer Prices so i watch the Consumer Discretionary. Deutsche bank, their shares lower by 1 after news coming out of eight german financial watchdog saying it appointed a watchdog in resolving some of Deutsche Bank part was issues Deutsche Banks issues. Tom below is 3. 99 on citigroup the low is 3. 99 on citigroup. Lisa on one hand, they should benefit from higher rates and we have been talking this about this for a while but if they are crimped by regulation and the pace of the moveup door torpedoing market activity, that creates a problem. Tom theres something going on here. Lisa i want to get a sense of the look forward especially getting into the october 13 sphere. Gina martin adams joining us, overseeing the incredible research. Argue you surprised people keep upgrading the earnings forecast are you surprised people keep upgrading the earnings forecast. Gina i am and i am not. A lot of his has come from last years weakest players covering this year and recalled there is a disconnect between the earnings series and the Economic Data where last year, earnings went into a full recession and maybe the economy did or did not and the concrete and the currently and the economy held its own. This year has been about an emerging recovery from the earnings recession for certain sectors and in particular, the biggest five steps which are producing that Income Growth of nearly 30 yearoveryear to substantiate that rotation and we are seeing Consumer Discretionary, Earnings Growth powering forward and upgrades continuing in that space. On the other end of the spectrum, you have consumers that Consumer Staples that earnings downgrades pressure. If there is some consumer distress, it is mostly in the day to day lower in and, earning consumer focused groups. Staples are expressing greater distress than discretionary. There are a lot of prices in the earnings stream. It is entirely about inflation. Inflation really pressuring earnings last year, it has become less of a problem. Tom we have our narratives in the securities analysis. Something i talked about in the last arrow. If you are sitting down with 40 our best in brightest and brightest any equities and you say we are fighting the last war intellectually, how do we get past october 12 Clear Thinking over the next 12 months . Gina we become data and model depended. A lot of what is happening dependent. A lot of what is happening our sensitivity to rates are concern to rates, our concern you get out of your own head and narrative, you do find that there are rational movements in the equity markets but you do have to spend a lot of time digging through the data and digging beneath the top line. The s p is fascinating, the top five had driven the positive priceperformance and some people think that is a exuberance over the top five stocks but the top right earning components of the s p 500 and there is a rational argument for this when these stocks are dragging 30 Earnings Growth. Tom we are finally the last word which is behavioral. I agree with you and if we get back to data, we will say it is monday so we are not doing a five ratio dupont. We are doing a three ratio. I am going to the three ratio, forget about the details, levers, an operating leverage is the big underestimation of microsoft. Discuss internal operating leverage is a positive catalyst away from behavior. Gina this is a huge point. Inflation depleted the ability of companies to perform over the course of last year. Inflation created a lot of disturbances in 2022, most important leon the margin lines. When you talk about the operating leverage is, despite the they experienced a escalation in process cost pressure and Many Companies reaction reacted. We had very big increases in layoffs and we saw the unemployment employment rate tick higher. You are seeing the input cost to seller and even more revenues are decelerating away from Coverage Companies and that is resulting in leverage. Lisa does it make sense to you back Consumer Staples are doing so poorly . Gina yes because Consumer Staples are underappreciated for their inflation sensitivity. They obviously, you think what is the Grocery Store cost . It is the cost of goods. If the cost of cereal is up precipitously and the consumer will shift down to nonbranded serial items, that impacts the Grocery Store and the same for the dollar stores, the dollar generals, they are very sensitive to what happens at the pump so this Week Celebration we have had over the last couple of months with gas and oil prices separatist lee impacts that section of the road so a lot of this makes sense prices precipitously impacts that section of the world. A lot of this makes sense. It is absolutely impacting tom ferro has many stocks of birkenstock. Lisa what is the problem of birkenstock . They are perfectly good sandals. Tom i have to go back to a birkenstock question. When we were looking at dead reissues. On the reinvent of fifo lifo fifo gina you are really crushing me. Inventory is most impactful and maybe materials and industrial space ed asked not it is not as much in because sumer space. Tom has walmart benefited from the fifo analysis . Gina i am going to take this seriously. [laughter] inventories have to watch the retailers and mark walmart and target. Last year, that was a big story and in the summer months, we have the right offspring walmart and target because inventories were problematic and it is helping to some degree to have those. We have to go because jamie dimon tom we have to go because jamie dimon is more important than Gina Martin Adam the take advantage at j. P. Morgans case jpmorgan chase. Still in tomorrow tune in tomorrow. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. sfx stone wheel crafting the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Jonathan good morning, the counter to the open starts now. Everything you need to get started with u. S. Trading, this is bloomberg the open with Jonathan Ferro. Jonathan live from new york, waving good riddance to the worst quarter of your congress avoiding a Government Shutdown, allowing us to look ahead to the payrolls report. The Fourth Quarter has with things. Financial headwinds continue to mount