Transcripts For BLOOMBERG Bloomberg 20240703

Tuesday with the nasdaq 100 at alltime highs with a big focus on retail for the next 60 minutes or so. We will hear from lowes. We will hear from macys, too. From target, plans to reduce prices on 5000 items. We know consumers are feeling pressure. Lisa we havent seen it show up , the pressure, and the broadbased confident for disinflation, which is the reason twiddling our thumbs waiting for retail to come down. Annmarie barclays saying challenges for target, cutting into memorial day, expect or of your bargains to go into july 4 like everyday items. The, soda, fresh fruit, yogurt, peanut butter. Jonathan, it caught the attention of the white house. Biden immediately tweeted about it. Jonathan surprise, surprise. We need to look to the bulls on wall street. We will catch up with mike a bit later. Still bearish, jp morgan maintaining a bearish stance with high valuations, restrictive rates, and in nation. Lisa he also acknowledged a negative stance in equities, its got to be pretty awkward. At this point there is a discomfort that even some of the bulls have with valuations. That said, its getting harder and harder to see the oxygen come out of the room enough to get what, 4100 . Jonathan you know who might agree with him . Jp morgan, the ceo jamie dimon, we are not going to buy back a lot of stock at these prices. That was the standout for me. This view on the price of his own stock. Lisa you are not alone, pretty much more people in the market care about that then succession. The dip in the stock rice was given where buyback was an valuations. Jonathan we will throw that one to max from hsbc. Scores this morning, just about unchanged, going nowhere. The bond market, 10 year for tooth seven. Coming up, we will catch up with max kantner of hsbc. Stephen cook, from cfr, on the death of the iranian is it, and the former fed economist on the overload of speak. The nasdaq 100 hitting another record high as esters double down on nvidia tomorrow. Max writes, we think the rally has further legs with positioning thats not sending a warning signal and the risk of fed hikes has been taken off the table. Im pleased to say that max points us with more. Lets get bearish for you. Tell me why marco is wrong. What you say back to that . Max valuations are not a great tool for tactical views, right . Just because you by the s p or equity at a 20 times earnings doesnt in the go one turn higher. Valuations in the long term tend to work over five to 10 years. Over a shorter time, six months to 12 months, they do a poor job in predicting shortterm performance. I would use that as a bearish argument. In terms of the restrictive stance, i really disagree with that. Looking at real rates, they look restrict, but when we look at the u. S. Economy in total over the last two or three years, we have collectively learned, and that was the mistake that we did as an industry, how Interest Rate insensitive the u. S. Economy particularly has become. How now most of the debt on corporate Balance Sheets has been turned out over the last couple of years and is only expiring after 2000 30 and how most of the mortgages are on a straight. Look at that and compare it to 2007, 2 thousand 8, 40 percent were not on a floating rate, now its less than 10. Look at 1990, 40 of household that on a floating rate. Now it is 10 . Really, the restrictive stance of rates doesnt count that much. If anything, inflation, looking at the data from last week, what it shows is that we are not yet out of the woods entirely, but we get comfortable with a bit higher than target inflation, which should be helping Earnings Growth in particular, helping nominal cash flow, and it should also be helping the Income Distribution terms of the private Household Health gains we have seen over the last two years. The higher inflation has seen private Household Wealth really benefit. So, theres nothing particularly negative about that. Jonathan lets talk about the part of the equity market where its not happening and that story starting to change, retail. We just heard from lowes, we will hear from macys in a moment. Target coming out before earnings, using prices on 5000 items and talking about a pressure consumer, speaking to a loss of Pricing Power in u. S. Retail. Is that just one art of the economy or is there a broader story emerging . Max not a broader story, its one part of the economy and there are pockets of weakness among perhaps the lowest income households. You know, the ones that deal the strain the most higher rates. Absolutely 100 sent, but that doesnt mean its a broader story, it just means more differentiation the economy. For 10 years in the 2010s we have been eyeing that everything is a oneway street trade etf passive investing and you know, what happens in the economy doesnt at her anymore because there is no longer any differentiation because we have got the last buyers, the central banks, active everywhere. Thats no longer the case. We are starting to pockets of weakness on one part of the economy with pockets of continued strength. The growth of tech eminis is still showing really good signs of strength there. To me it just means there is more differentiation and a return to the old normal world, not really a return to this sign of a next crisis or recession. Absolutely not. It just means more differentiation and more opportunities for output creation. Lisa youve been bullish for a while now and are you less bullish because of the runup as people come to the same view that you are putting out there . Max i think that there will ultimately be some risks and we do see them perhaps around the q3 q4 earnings expectations in the u. S. , where the expectation start to pick up a lot for the 493 stocks and away from the magnificent seven. If we dont see any kind of particular broadening out in terms of the economy and economic strength, if economic strength is just fine but not as spectacular as we thought, those Earnings Growth expectations might be disappointed a bit, but that is only something i can play in for four to five months time, not something i can position for right now. You know, overall i think its easy to say eventually it will spread or eventually ultimately there will be a recession, thats totally fine, but its like saying eventually the sun will be shining in london. We know it is happening, but who knows, it might take another six months, two days, then its over. Not attaching a timing is a tickling out of you and saying that eventually the consumer might yield the string too much, that will eventually put us into recession . Thats fine, but we cant run money like that. Not really when we say eventually things might be bad. Actually, right now things are still very, very solid. If we look at things like job openings and job postings, labor market ticking along, Household Wealth creation is really good. Overall things are totally fine. Lisa for someone who lives in a place where the sun never shines, you are credibly optimistic. Talking about the tail, lowes, the target price cut, we have seen Retail Stocks to killer with interest climbing dramatically in the last couple of weeks. Theres a sense that sumer discretionary catering to the middle end, the lower end, it wont do well as Everything Else does just fine. Do you adhere to that you . Do you think that area is under pressure disproportionately because of the pockets of week this out there . Max i would turn that around and say that because there is so much pessimism already with Short Interest at high levels and people not really expecting so much weakness out of the sector, it might be worth it to say lets look at the consumer stock, Consumer Discretionary stocks, and in fact maybe things are not as bad for the consumer as everybody is saying. Its similar to what people have been saying about europe and the eurozone a couple of weeks, months ago, where you had these relentless downgrades to European Growth expectations for the last couple of weeks people to realize that it is not particularly great in europe, but it is not as catastrophic as we thought and i think that perhaps the Consumer Sector in the u. S. Is in a similar place where things are not particularly great, but increasingly people are really expecting almost a calamity to happen and unless that really unfolds, which i dont see any particular signs of that we happening, then you know, that might be a good buying opportunity. Jonathan max, wrapping it up, overweight japan, underweight sovereigns. The reason your overrate all the rest and underweight sovereigns, are they the same reason . Max pretty much. Within developed market sovereigns, a month ago we had a bullish duration because the valuations are starting to look a lot enticing and a lot appealing. But of course, if you are a bit more bullish on duration and think that the Interest Rate bond volatility continues to go down, it will probably free up a bit of risk premium in equities, allowing equity multiples in tech, in the growth part of the equity market, to expand. From a relative perspective, as good as perhaps sovereigns will do, its actually the nasdaq, the tech, the growth art of the equity market, high yield, that you really want to own their. Jonathan max, great catching up with you, buddy. I guess with something to say back jp morgan, who was overly bearish on the equity market, usurers are stable and unchanged after closing yesterday just short of alltime highs. Updating stories elsewhere this morning, your bloomberg reef, starting with the story, trump losing the gap on raising with, out raising ayden and the Democratic Party by 25 million in april with a total of 76, boost coming on the heels of several highprofile fund raisers, including a palm beach event hosted by john paulson and overall the Biden Campaign holds a wide cash lead over trump. Stepping down at the fbi see, martin gruenberg, following a scathing report detailing allegations of harassment and discrimination during his tenure. It came from a months long probe into a journal article about female Bank Examiners facing a sexualized boys club environment. The white house said that they would move quickly to nominate a successor. Jamie dimon says that succession plans are well underway at jpmorgan chase, telling shareholders that senior individuals at the bank are being paired his eventual departure. The 68yearold think that the timeline five years anymore, making reference to a longstanding tradition of saying that his retirement is five years away, no matter who asked. Now we have a different answer from the man himself. Lisa at a time when they rearrange some of the management im elevated it to the top ranks. When he said hes not ready to wear the jersey and put it on every day and get on the field, hes not gonna. Annmarie exactly, he still says he has the energy though he saying it not five years anymore, timetable looks less, but says he still has the energy to do it. Kind of. Jonathan i hope i have the energy in my late 60s that i have now. I struggle to believe that i will, but i hope i will. On the program, robot reviving the pc rivalry. Late 80s, early 90s, when we fell in love with you see, thats what got us going, the ability to use computers to create and i think the ai is going to take it to the next level. Jonathan that conversation, just around the corner. Live in new york city this, good morning. Suspenseful music] trains. [whoosh] trains that use the power of dell ai and intel. Clearing the way, [rumble] [whoosh] so you arrive exactly where you belong. At Morgan Stanley, old school hard work meets bold new thinking. To help you see untapped possibilities and relentlessly work with you to make them real. Jonathan live from new york city, welcome to the program area equity futures are just about unchanged in the bond market yields lower on the basis points. Under surveillance this morning, reviving the the mac rivalry. The pc has always been about, you know im a creating things, right . That is sort of what you do on a pc. Ai is an assistant. It helps you as an enduser, doing during the late 80s and early 90s when we fell in love with you see, thats what got us going, the ability to use computers to create and i think this ai is just going to take it to the next level. Jonathan microsoft introducing a new category of ai focused pcs, stepping up competition with apple and google, saying the machines will be 50 faster than the topoftheline macbook air next to a special chip dedicated to ai processing. Mandy joins us mandeep joins us now. Are we going to fall in love with pcs all over again . Mandeep every device maker is trying to refresh and pcs, we spend as much time not as much as we do on smart phones, but a productivity perspective is use case for ai and you can see the argument by the refresh cycle would be pulled or were to free had the functionality and the chips to facilitate it. I just doubt that there will be as much to offer as the ceos were talking about even that we are at an early stage where the infrastructure is not built out. How can it translate into the devices that we use day to day . Jonathan can you detail the functionality . What with the User Experience look like . Mandeep i got back to what you can do on the smart own. On the smartphone there are so many things you want to interact with without having go across apps. Its the same on desktops. You dont want to have to go between programs to, you know, copy paste things. What if there was a smoother way to pass information from one app to another where ai can facilitate. And this goes back to the point that everyone makes about work lows. Work lows proving as a part of generative ai. Copilots, assistants, vendors dont work so well with each other. At least that is what you have seen over the years. These Companies Want to do all of their walled gardens, they dont want to share data. Thats the promise of ai. If it had the perfect information it could automate a lot of workflows, i just get happening that weekly. Lisa workflow efficiency is not very sexy. It is for reducing costs for a few people but for the average person looking to buy a smart phone, they dont want to make their work low more efficient when they call their kids, so when does that create a super cycle in terms of replacing phones . Mandeep in prior cycles we saw that the killer app always comes later. A lot of promise in terms of what smart phones do. The apps based on locationbased awareness, even much nadir in 2009, 2010, it was a good three or four years before they figured it out and i think that will be the same. Right now we are in the structure buildout phase where everyone sees the promise of generative ai because you can be multimodal, you can pass video, audio, all the other kinds of stuff, the system and interpret it. How do you filter out the note noise and drive productivity . That is where it will take a while to figure that out annmarie when it comes to laptops, the issue everyone has is everyone uses iphones, you want to be in the same system. Isnt that the leg up that apple has . Mandeep it does and it comes down to distribution. Google on the serverside, apple in terms of the devices, its hard to move away from their ecosystem because ai, in the end im a will be commoditized to the extent that everyone has the same infrastructure and some form of large model with ai features that will be similar. I doubt that it will be so highly depreciated the ai on apple or google will work far superior than others, but its the singularity of how you deal with ai and how it is incorporated on your devices. Annmarie talking about chips, yesterday we heard from the nvidia ceo speaking to ed ludlow saying that Technology Depends heavily on taiwan and will continue to do so for the next foreseeable time and overnight we had a scoop about asml and tsmc saying that they can disable all of their manufacturing remotely if china were to invade taiwan. How important are these geopolitical conversations to these Technology Companies right now . Mandeep i mean when i look at nvidia right now, the biggest risk going into the quarter is the fact china revenue again completely go away. Its the same risk for apple. They seem to be maneuvering it well that and these companies are dependent on china for revenue, and to an extent, on the supply chains. Apple still has 90 of the assembly being done in that region. Nvidia doesnt have that kind of fixture on the Assembly Side but it still relies on some parts of that region, so the geopolitical conflicts are creating the tensions into these companies seem to be maneuvering it well. At least so far. Jonathan this is about a kill switch, they can kill production but productions dont come from somewhere. Where is that supply going to come from . Mandeep we know that they are looking into other parts of southeast asia, even india. Look, that is where you have to be pragmatic. Not every region will have the capacity to take advanced manufacturing or assembly and this will take years. Think about how long it has taken to open advanced manufacturing factories despite the subsidies. It will be three years before we see that online. That is what youre talking about hims of timeline, these things take a while before they play out. Lisa the why behind it being complicated is not just the technology to build the chips, its also the idea of the x the state and the entire infrastructure taiwan is built around that what are we doing here to support our factories . Mandeep training is a big aspect of how you are going to bring that online. Yes, you need the personnel. Immigration is going to be a hot button issue stringing talent to work there. But again, these things will take or years, five years before you see Real Progress and you are talking about more cutting edge stuff. Two nanometers, three nanometers, you cant just jump overnight. That is what we figured out with intel. Five nodes in three years . They couldnt execute. Theres a reason for that. It takes a lot of gradual progress to get to the point where you show that hey we can do this. Jonathan drumroll, big story, nvidia. Updates north of one k in the last three hours. How high is the bar this time around . Jonathan i feel like they are price for percent price for perfection every quarter but where is the good news going to come from . Right now every hyperscalers, every raised the forecast for next year. I look at where the incremental positive news is going to come from for nvidia and that is where i feel, you know, openai launched gpt five, but thats a negative. If you think about it, if the llm pennies are consolidating, that will make it hard for nvidia to find the next mental buyer. Maybe its tesla with oracle, i feel that, you know, the rate of positive improvement is going to slow down. If they are losing china revenue and the hyperscalers have already announced a plan, its baked into the price. Jonathan mandeep, thank you, sir, going into that big Earnings Report tomorrow afternoon, how much longer can they eating and raising, beating and raising. Coming up next, we catch up with stephen cook on the death of the iranian president and tension in the middle east. That conversation is around the corner. Things unchanged as the s p closed short of alltime highs yesterday. Id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future. A future where you grew a dream into a reality. Its waiting for you. Mere minutes away. The future is nothing but power and its all yours. The all new godaddy airo. Get your Business Online in minutes with the power of ai. Her uncles unhappy. Get your Business Online in minutes im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Jonathan two day winning streak in the equity market coming into tuesday, the essence market looking like this, unchanged after closing short of record highs yesterday. Close to alltime highs on the nasdaq 100, it has been what a run. Nvidia going into earnings tomorrow afternoon, the main event of the week on the schedule this week. Treasuries, 10year yields climbing for the days, going against the grain of the last few months but we snap that trend on the 10 year, down two basis points as well. Plenty of fed speak, all singing the same song, the lyrics have not changed. You know them, got to wake, we will not hike. Is that enough . Turning to the Foreign Exchange on the euro, ecb speak tomorrow from christine lagarde. Positive base euro. 1 . We all know that they want to cut in june, but it is about what they want to do beyond june and even into july. That conversation tomorrow with christine lagarde. Jamie dimon telling investors that succession is on the way, saying the timetable is not ive years anymore but that the decision on a replacement is up to the board, adding that stock buybacks are on the way, but not at current prices. Two stories, lets start with succession and then we will get to the stop story that i think we can both agree is more interesting in the near term. Succession has always been five years, five years. Not ive years anymore area lisa i wonder where the pressure is coming from. His desire, the board, or another job he might be looking at that could potentially be a reason to exit . He shut down the possibility of that job being an washington, d. C. , but speculation continues. Annmarie in the pastis has said that he would do anything to help his country. Does that mean making the move to washington, if asked . When he talks about succession, he might want to do so when it is advantageous for him and his paycheck. Jonathan 68, been there since 2006, a long time for any kind of bank ceo. Thats prime age, you would think, to take over as a bank ceo and involved with leadership at the top of the company. This is and this has been going on for ages. We should be getting a conclusion, should we . Lisa you mentioned share bipoc buybacks, those shares are up 20 so far this year. Again, that makes sense people are saying they dont want to buy their own chairs, neither do wait, at what point do we see upside . Jonathan positive 15 , yeartodate. Quite a run for the bank stocks so far this year. More on jp morgan a bit later. Shares of lowes rising in the premarket, comparable sales coming in better than estimated. More retail earnings on the way with macys later this morning and target is alts coming tomorrow. Just seeing subtle coming to the surface, the idea of losing Pricing Power, talking about deflation over the last couple of months, target cutting isis in memorial day weekend, not what you have Pricing Power and a foot forward. Lisa well said, lowes had better than excepted comparable earnings. The why behind it, with a lot of people doing smallscale repairs rather than these largescale overhauls of their home because they dont want to have to spend all that money. Again, even though they saw a, its the why, the costs consciousness of consumers, the gets my attention. Annmarie it lines up with Consumer Sentiment from the Michigan Survey and the new york federal art that Shows Americans are very concerned about tension leading up tick in the direction of inflation. Jonathan its happening slowly. Macys earnings are around the orner area iran, president ial elections are going to be held next month after the death of their president and eight others in a helicopter crash. Speculation grows on what this means for iran and the middle east. Stephen king stephen cook saying its clear that there could be a new round of protests against the regime. Can you walk us through what kind of internal power struggle we should expect, to mystically, in iran over the next month . Steve its a great question. Rahisi was on the list to succeed the ayatollah, so in the coming months they are looking at that shortlist and the list got shorter over the weekend. At the top of the regime where the Islamic Revolutionary guard is making a did to take the whole thing over, there is likely to be a significant power struggle. While the power struggle is going on, there are, as i said, sick numbers of plea used with the death of Ebrahim Raisi and may seek to take to the street to express their desire to overthrow the regime. Its not unheard of in iran. They have been roiled by large demonstrations over the part of the last five or six years, so it is a very tense moment and an interesting moment. I dont expect there to be much change on the Foreign Policy front. Annmarie when it comes to the future of the supreme leader, everyone talks about his son, but the fact of the matter is that this could be a this could be controversial for a company that overthrows monarchs. Where does this leave the thinking on that . Steve the most talked about successor of the ayatollah is his son. This would go directly against what the founder of the republic had said, that there should not be hereditary leadership. Yet the sun has been put in the sit this position where hes the likely successor. Theres one other identified also competitor, the leader of all of the seminaries in iran. But eyes are all on the sun right now. Its not that the ayatollah is such a religious leader that he wouldnt go against it, hes part of the irgc, but nevertheless he will have to justify elevating his son if thats what happens. Annmarie i want your sense of the u. S. Response to the death of raisi and yesterday at the u. N. There was a moment of silence, and instead of walking out, which at on time historically in the past u. S. Would have happened, u. S. Representatives stood in silence. What do you make of the response . Steve theres no other word for it other than bizarre, maybe perhaps even stunning. Ebrahim raisi is known as the butcher of charon, signing the death more and some 5000 in the 1980s. This is someone with american blood, israeli blood, arab blood, iranian blood on his hands. The statements of condolence coming from around the world and from the u. S. State department are quite honestly shocking. All the u. S. Needed to say was that we stand with the iranian people during transition, and of story. Standing at the united nations, issuing a statement condolence seems inappropriate. Annmarie what does it say about policy writ large when it comes to iran . Steve it demonstrates that with the washington Foreign Policy ecosystem there is this idea that the United States can forge a new relationship with iran. The problem is, iran doesnt want a new relationship with the United States and wants to push the United States out of the middle east by sewing is much chaos in the region as possible and we are seeing the results of that policy, whether it is in gaza, the israeli northern border, the red sea, iraq, or syria. The idea that if we are nice enough to the iranians, with more diplomacy, that they will come around and we will forge new relationship, that idea has not died in washington and the statements coming out of the state department and elsewhere are an indication of that. Lisa they were talking about the potential that the manner of the death in iran speaks to maybe certain efficacy of the sanctions. If they didnt have the parts or the supplies to rate helicopters that largely ended in production in 1968. Is that sort of evidence to you that maybe some of these sanctions are working . Steve the former foreign minister said the same thing. Its difficult to source parts, particularly in the asian sector , and perhaps its an indication that the faulty was to name for the accident. Course, it was terrible weather, we know nothing about pilot training, but certainly iran suffers under sanctions. Lisa the broader geopolitical stance, the resolution that people have come to is that this doesnt much lesser his finger weeding outside or within iran in terms of malfeasance on some level. Do you agree . Or do you think this has implications about either iranian and israeli tensions were some of the factions sponsored by iran and what it means for the hot war in the region . Steve theres likely to be a lot of conspiracies about the role of israelis this accident. Israel and azerbaijan have very close relations. Of course, the iranians, the military has announced an investigation into into the crash, suggesting that they are not fingerpointing just yet and not looking for escalation at this sensitive time. Jonathan finishing that conversation you are having with annmarie, you can apologize for a moment of silence and say it was a mistake, but the statement from the state department is deliberate. Someone wrote it, copyedited, did attract it. When you publish stuff like that, what degree of influence can you expect to have over countries like israel when you there failed to demonstrate that their enemy is not yours. Steve i think that this is a problem in american foreignpolicy of recent years. Not only the israelis, but the saudis, they feel the United States has spent over backwards to forge new relationships with iran, essentially leaving them out to dry, hang out to dry. That is why you see these countries hedging with American Global competitors. Notably the chinese. They just dont believe it when the we stand with you for stability in the region, but the United States is reaching out to iran. This statement of condolence is, i think, Something Else they will be able to point to in their bill of particulars against the United States. Jonathan steve, thank you, sir. As our four hours. Annmarie we have the transcript from the reporters that russian Matthew Miller saying that why did you put out this statement if you think he was as bad as he was . He said they offered condolences when Joseph Stalin died, when chavez died, people with great disagreements with america. The state departments with this area the Biden Administration is getting a come tremendous amount of criticism. Jonathan very strange 24 hours. Equity markets, the s p, just about unchanged. Here is your bloomberg reef. First story, one big bear is left on wall street after mike wilson capitulated, j. P. Morgan is holding firm and the gloomy outlook on the new, urging clients not to buy stocks while acknowledging that his outlook has hurt portfolio performance, citing a number of reasons like high valuations, rates, and inflation. Jp morgan has the lowest year end target for the s p. 4200. The index this year is up 11 . Elsewhere, shares of Palo Alto Networks trading higher, beating estimates with a downbeat forecast. A cap outlook following a disappointing february when palo alto shares suffered their worst single data run ever when they said the customers were facing spending 50 in cybersecurity. This one right here is on the brink of creepy Actress Scarlett Johansson said that she was forced to hire Legal Counsel in order to remove the ai voice from the openai chatbot feature that closely resembled hers. The ai voice known as skye was part of the latest update that has since been replaced. In a statement she revealed that she received an offer from sam altman to use her voice in an audio feature but had declined the project. Friends and family started to hear a voice that sounded a lot like hers. Annmarie its weird, they went to her, she said no, then she had to hire Legal Counsel because it sounds what they said was eerily similar. Jonathan its creepy. Lisa frankly, it underscores the creepiness of the entire endeavor area its not the look they want at a time when people are wondering about intellectual property, including your voice. Jonathan if scar joe wants to catch up with us about this . You are keen . Annmarie i think she will come on area jonathan did she mention the story when you spoke . Annmarie she did not. Jonathan coming up, fed speak overload. We need to be patient. We need to sit a while longer. Is too soon to tell what path inflation is on. Jonathan that coming up next. Live from new york, this is mover. Bloomberg. Jonathan welcome to the program. Equity futures on the essen 500 are just about unchanged, yields coming in after pushing higher over three days, 442. 57. Fed speak overload this morning. We need to be patient and let restrictive policy do the work. We need to sit here for a while longer until we figure out where underlying inflation is headed before we jump to oceans. Its appropriate that we maintain the policy rates in restrictive territory. Its too soon to tell the path that inflation is on. We need to collect information. It will take quite a while to get to 2 , but we will get there. Jonathan we will get there eventually. Thats the latest. If that wasnt enough, collins on deck to speak today. Clearly, an overload of munication policy for risk, but on what matters, the rate path, we will learn anything new. Claudia joins us now. Wonderful to get your perspective from inside of the Federal Reserve. Starting with this, why are they failing to entertain the conversation that a lot of people on wall street want to your about, the neutral rate, where is it, when will we normalize whats normal in this regime . Frankly, i doubt that they agree. They are very firm on where the fed funds rate is right now. They cannot even give us a definition of what confident is and that is datadriven. The neutral rate is something hard to get a handle on. To them its not a relevant conversation. Jonathan what do you think confident is . Steve they need three rounds of good data before they will then thinking about being confident. The fed has really boxed themselves into a warner by being hyper datadriven and thats unfortunate for the way that Monetary Policy works. At the end of the day, statistical agencies like the bureau of labor statistics are more or less and influential member of the Market Committee and that is not how this is supposed to work. Jonathan you have said this before, its not a reason to delay rate thats. For people familiar with that perspective, share it again. Why do you see it as a problem that they are waiting so long . Steve the fed claudia the fed is putting more pressure on the economy than is needed to get elation out the beginning that covid created disruptions that showed up in a lot of different ways the economy was not going as normal, we are getting further from the initial impact. Things are Getting Better. The fed, if it gets in the way of this and she is too hard, we end up in a recession that is not necessary and would be a huge unforced policy error. Lisa every note that i have seen from analysts is the opposite fear, that the bigger risk is a reacceleration of inflation and that this is not a very restrictive policy. Yes, there are pockets of week nest with undue restraint on lower and middle income families, but otherwise you are not seeing it. Where do you see it on the broader economic level in terms of bringing elation down . Steve where claudia where is the acceleration coming from, right . You have to tell a story about what is forcing and what would that kind of acceleration. We have seen the labor market operate. We have signs of solid but not as strong Consumer Spending numbers, right . Like you have to have an event pushing the inflation, the demand. The fed only work on demand. We have some categories of spending that can be tied wrecked me to problems earlier in covid that are still pushing out inflation and thats not about demand right now. The equivalent rent was pushed up a year ago in the fed cannot pull it down with high Interest Rates. Its the passage of time working through the system that brings inflation back down into a cutting space and we know its coming. Lisa the reason why maybe some people agree with you on the fed, maybe even the fed chair, jay powell, but others are less certain with respect to whether it will take time. Speaking to Michael Mckee yesterday we got something concrete, a revised call for rate cuts this year that is no longer seen as appropriate. You agree . That if you essentially think the fed has the leeway to cut rates, its not nearly as much as they had earlier . And only one or two . Claudia i understand why master is saying that. They got burned into thousand 21. As an institution they are not going to get out there to do something aggressive cutting. The last two days, you heard a lot of talking dots. A lot of people talking about what they are doing with the summary of economic projections, but the fun twist is the second day of the fomc meeting. We need the data. We need to know more. I fully expect medium cuts to two. The math just works out that way. Lisa a lot of talking dots, thats of essex statement, i plan on using that. Thats what were looking for. You talk about the fed speak that doesnt have the news we can use. What are you looking for, given the fact that Raphael Bostic him out and said we are human, this is life, Economic Uncertainty is the reality of the moment we are in. Claudia i dont want to hear from them. I want the next cpi release, the one after that, the labor market. Honestly, that is what they are filtering. In the last few days we have heard a multitude of ways to say that we are not confident, we need more data. It makes sense, i complete the follow being predictable, responsible, but they are just saying the same thing over and over again. Annmarie you talked about it being much ado about nothing, but target overnight cut prices. Do you see deterioration in the consumer . Claudia i dont see it. We have seen moderation. This is why its dangerous for the fed to wait so long, to some extent, because we are not the economy of last year in terms of firing on all cylinders. There are more risks to the downside on the labor market in particular. You do see signs of is faltering, but those are risk cases. We dont see them in the baseline. But you know, the labor market, its not pointed in the best direction. So, things could go south. They dont need to, but they could. Jonathan lacking the consumer, waiting for macys numbers, they should come in the next 60 seconds or so. At minutes, just flee, how much distance is there between the chairman and the rest of the committee based on the communication we have got him over the last few weeks . Claudia jay powell is the fed chair speaking for the fomc. They clearly have some disagreements, its healthy to have disagreements at this point, but he will reflect, the minutes will reflect what he said at the last press conference, reflecting connecting the dots of the last few days. It will kind of look a little bit more update upbeat then the media, but powell is the fed chair. He cannot row, here. Hes communicating for the fomc and its clear that he thinks we are headed toward 2 . Not confident, but thats the direction. I dont expect the minutes to sound any different than the fed speak we are getting right now. Yet the tone is probably going to be a bit darker than it would be if, you know, the meeting were after the last ppi. Jonathan claudia, appreciate your time there. Breaking down numbers from macys, dropping in right now but the outlook for the four year adjusted cps, with a previous range of 245 to 285. Lisa i find it interesting that the fullyear net sales projected higher than or with earnings coming in higher than the sales expectations pointed to. Margins are compressing is much as we would expect. Interesting jonathan a little bit lower in the first quarter. Macys, down to sent in the premarket. Much more to come, we will catch up with j. P. Morgan. Alex webb has the israeli minister of strategic affairs. Thats all still to come from new york city. This is bloomberg. I cant believe you corporate types are still at it. Just stop calling each other rock stars. And using workday to put finance and h. R. On one platform. Tim, you are a rock star. Using responsible ai doesnt make you a rock star. It kinda does. You are not rock stars. clears throat okay. Most of you are not rock stars. Oooh. Data driven insights, and large language models. Oh, thats so rock roll. It is, right. He gets it. Yeah. Food isnt just fuel to live. Its fuel to grow. My family relied on public assistance to help provide meals for us. These meals fueled my involvement in theater and the arts as a child, which fostered my love for acting. The feeding America Network of food banks helps millions of people put food on the table. When people are fed, futures are nourished. Join the movement to end hunger and together we can open Endless Possibilities for people to thrive. Visit feedingamerica. Org actnow this is a fed with a cutting bias. Our view is that the fed is going to cut. Thats the common space call. Next for this fed, the idea of july or december, certainly december. Lexi dont need an Interest Rate cut. What will that do to evaluate your stocks with bonds . At this point they are caught in a boxed. This is bloomberg surveillance. Jonathan the second hour of bloomberg surveillance begins right now. Good morning, good morning. What a 24 hours for the retailers. Listen this commentary, outlook assuming customers will continue to be discerning in the discretionary purchases. We heard some similar from target, going up against those numbers tomorrow, they know that consumers are feeling pressure, leading them to cut and reduce prices on 5000 items into memorial day weekend. Lisa the story of distinction that is difficult or me and washington to understand, is this weakness in the in sumer or simply discretion, being a bit or prudent about what they buy and in which areas they buy . Looks like sales are coming in stronger than expected is caution out there. Annmarie bifurcation of the consumer, bloomingdales rose. 8 , but the flagship fell 1. 6 . Lou mercury, up 4. 6 . Its a very expensive skincare, thats where they are seeing growth. Jonathan you can identify weakening, how long have how many times have guests around the table that a rate of these things . Is it a welcome calling or unwelcome deterioration . Verbal dots, those are the f emc. Barkan boller, williams bostick are, goolsby tomorrow, Meeting Minutes as well. This will go on and on all week area the one to watch is going to be governor waller. Talking dots, she didnt want to hear from them, she just wants him to stop this is the issue, at what point do we see real response in the market to fed projections. As claudia indicated, all they are saying is they dont have on for yet. What will give them the confidence . They wont even entertain the idea, giving people a question of what are we even listening for. Annmarie you try to get claudia to define what confidence means and she said three months, three months of data would be confidence. Jonathan last week was one month . June 12 is the big one, isnt it . Massive month, massive day, cpi print in the morning. Later on in the afternoon its a Federal Reserve decision with a bunch of projections. Going to be an important event in a couple of weeks. Equity futures on the s p 500, just about positive by 0. 02 . Bond market, on the 10 year, 4432. 7, the euro is stronger by 10 . Coming up, we catch up with jack caffrey on equities hitting alltime highs. Chuck at goldmans reacting to israel. Netanyahu faces allegations of war crimes. Our top story, alltime highs on the nasdaq ahead of the main event, nvidia earnings tomorrow. Jack caffrey wrote stocks looking over the short term but when i look at the broad technical measures, investors are looking at accessing ai for the portfolio with a potential for growth where there was little growth this before. Jack is with us around the table. Good morning bullish with a question mark . Jack here today, we are. I 5 as we went through earnings. You had a disconnect around earnings that supported the most recent. Equity investors are dead talking about not having to be as cautious and frequently eating the drum for the possibility of another rate higher. Yet economic surprises have turned very negative in the shorter term and that is what the bond market has been looking to terms of embracing the sense that we may get the slowdown we all for. Put that with the vix of 13 and you have two markets with two different messages and the ability to say that the top might be slowing from spending so aggressively that could knock it off the access without much news or pressure. Which is what we are vulnerable to. One further thing that we started the conversation with, the Second Derivative ai base, utilities, things like that, is that evidence of investors reaching a bit too much . Its people trying to say that we have played the theme in the most obvious beneficiaries around the semiconductor with the processing units and now you say whats next, because you still havent a lot faces for the actual implementation of ai generated revenues, so people are coming back to how can i try to find picks and shovels . Utilities became a growth sector for the First Time Since air conditioning in the 50s and 60s. Interesting outcome. But when you consider that, utilities are regulated. The capex will take a long time. Its not like you can just go to the board. You have to borrow money to build these things and then you are caps on what profitability looks like. Insistent, wonderful, but you are left is this really ai play or is it something where i need to be growing in a market where im less concerned . Technology investors purchasing stocks valued like they are semiconductor names. Maybe . Maybe that takes longer to become actual revenue. So, he feels that people are structuring a bit in the short term. But everyone is shovel ready . Im kidding. What does it in terms of staying away from utilities and the like . Does it tell you that people feel the big tech names are overplayed and they dont have much more room to run . Parts of tech look expensive and i have to admit that i occasionally dabble in the dark arts of technicals, you wind up looking at the semi conductors and the software is not market leadership. You see things Like Pharmaceuticals in leadership. Thats a defensive position absent a growth vehicle. So, i think that people are trying to be more nuanced and trying to look for growth where it a not have been. That all said, you know, when you have 25 , 30 of the market not behaving as well as it has for the prior six, forces a cause you are not a sincerely forces a pause. Lisa you are not instinctively bearish . Jonathan i might need to put jack i might need to pause before heading out of the cave. Mixed my metaphor. Sorry. Lisa its ok. What about the retailers portraying a weakening discretionary consumer but one that hasnt run out of spending power . Jack lets go back to parsing the difference between discretionary and staples. To some extent, the highend is doing well. The market is at alltime highs. It easier to go purchase expensive skincare products. It gets harder. Bloomingdales is doing well. Your middlemarket consumer has been using tax increases on a weekly basis at the gas pump. Gasoline is moving higher. You are going into driving season. Maybe at the margin with this drumbeat of weaker consumer confidence, maybe its harder to end the extra dollar. So retailers have been working their way through a lot of inventory and arst air they will get caught holding the bag again. Annmarie are the commodities a bit of a reason why you are pausing before coming out of the cave . Claudia fuel jack fuel survey out there. To the we rely on Truck Companies product, what does the week this suggest . Going back to the earliest, you are supposed to have transportation confirming the move in the market right now it feels they are sending two very different signals. Unless all transportation has been absorbed into amazon, the only shipping company that matters. Jonathan so, what have you been doing . What have you been selling . Jack im running with relatively low cash overall. Call that just over 1. 5 within portfolios. So, im mid it few go from that perspective. Ive been using into a bank over time the shorter term. I think that comes back to a sense of, you know, the consumer remaining in void, getting paid, where it doesnt feel that we have the worry that works its way through the markets that we have been hearing about years and years. For that, you get paid attracted if it ends. Many of the bank stocks are relative to other places in the market. Jonathan can you describe the type of thank you would like to invest in . Given that you cannot name a specific. Jack generally i like to find jonathan im being cryptic as you are. Lisa its not that cryptic. Jack i like having a job. This very important to me. [laughter] jonathan not too much pressure, just only with the business looks like. Jack im trying to think about places where i see people moving and where i think that there is action to reindustrialize america. You can that in terms of switching away from banks at the margins to where people are migrating to an businesses are being created. In general if i can get the bank that reliant on lending but can get some come to go along, generally higher terms on capital with less risk on the basel three and game, it winds up making for a more attractive overall package. Lisa you are in a bullish cave, im in a bearish cave, its where i live. Im wondering if you could see something in the near term that could make you feel more willing to be out of the cave, be more aggressive. Jack in the shorter term, the challenge is that earnings are over and we will not get any real updates out of companies in terms of how they think they get through the back half of this year when we are expecting something that looks like a hockey stick picture. Having a bit more confidence with that where i come back to looking at economic surprises. Thats the data that we get every day that should make us more or less confident in terms of what companies are going to tell me in one day, one minute, 90 days from now. Are the initial claims Getting Better or worse . 220 becomes 200 worry . Thats bad. 240 goes to 210, all right, we are still modeling. Modeling is not what the fed wants. The fed wants alacrity in the decision one way or the other so that they can get off the pot and move forward with the policy moves they keep telling people they will engage in. One rate cut is an inverted curve. Two rate cuts, still inverted. How do we get it to a curve that is flat, assuming the 10year doesnt today . Is the equity guy, i find it harder to come up with that scenario of immaculate this nation, making me twitchy buying a bank into that environment. And again, we havent had credit events, yet. How do you find some of this wellcapitalized and i can some credit, but i would say my call is not a downdraft problems. More like wobbling with a better chance to purchase holly got Higher Quality businesses cheaper. Jonathan we will catch up with you later in the summer. Super thoughtful. Equity futures unchanged, time to get you an update on stories elsewhere, with your bloomberg green. A new report Shows Companies need to spend 40 trillion more than they and two to reach net zero emissions by 2025. Earlier this year we had more on the Global Investment in transitioning searching to 2 trillion. The latest report shows the pace of spending needs to accelerate as the world continues to warm and Bigger Solutions are needed. A key prosecution witness took the stand in the trial of bill wang. The former chief risk officer testifying that when he decided on a trade, he did it again, again, and again. Senior staff is read each other saying happy groundhog day. They had highly leveraged concentrated bets on a few companies, resulting in a meltdown in 2021, costing the banks 10 billion. The nfl is considering new rules for team ownership. Eli manning once in. The proposal would allow ive equity firms to own minority stakes franchises. The manning and has said that they are definitely interested in purchasing a stake of the nfl team, but they have locked out from private equity ownership. Currently 60 teams in north america are backed by private equity or individual investors. Jonathan interesting. Catch up with you again in about two minutes next, nvidia and its expanding reach. Ex just about delivering a boxed, its about delivering an entire infrastructure in the infrastructure is insanely complex. Jonathan much more on that interview in just a moment. From new york this morning, good morning. The lexus take on luxury. Take it wherever you go. Live up to it. The allnew gx. at enterprise mobility, our experts always see another road. Because when theres no limit to how far mobility can go, theres no limit to how far businesses can go. jonathan welcome to the program. Live in new york, equity futures on the s p 500 just about unchanged after closing short of alltime highs yesterday when jp morgan had their worst day of the month so far, down in the lows i close to 5 . People waking up this morning talking about what he said about stock buybacks and what jamie dimon said about succession plans, but not the fact that they raise guidance and you are seeing a lot of reads to price targets. Piper, kbw, baird, i will give you the details on those calls about an hour im a but thats what you see from the south side. Investor day, the stock is up. Under surveillance this morning, the expanding reach of nvidia. Next its not just about delivering a boxed, its about delivering infrastructure that is insanely complex. The last 30 years, both of our companies have changed a lot. Jonathan nvidia partnering dell in a bid to spread a wider range of customers ahead of the highly anticipated earnings do out after the bell tomorrow. Alex webb joins us for more. Talking about the broader story of the last day or so, how high is the bar going into results tomorrow . Alex the numbers are kind of mind blowing. I year ago the revenue listen 7 million and markets are looking for 24 billion now. Just kind of triple what happened a year ago. The real focus, then, will be on the upcoming quarter. Looking for 26 million in revenue, can they maintain the pace of expansion that they have . From what we have seen in the past two quarters, everybody kind of spec expects nvidia to beat expectations and anything less than that is likely to herald this appointment. Lisa are we seeing consolidation when it comes to demand . Earlier they were talking about van meant is bad news for nvidia with some of the momentum having gravitated away from them. Alex that was interesting, san altman did some interviews last week saying that if companies are building businesses essentially on gpt for, they might find that they are out of date within a year because gpt five will be that much better, so i wonder if that gives them some hesitation, people building on ai businesses right now on the cloud, on aws, google loud, and it having a knock on effect. The other point is of course the big cloud operators are the companies driving the Revenue Growth for nvidia. They are buying the chips in huge numbers. Are they going to continue doing that indefinitely . News that we heard yesterday seems to be a sort of wave of plugging the gap, should it ever arrive. Lisa in your mind is there a number that they need to surpass for tomorrow . Jonathan the short answer is alex the short answer is no. Anything about street consensus, thats what the market expects. Anything below that is likely to be punished. Its interesting, the options really imply a move of as much as 7 in reaction to earnings and if it happens, it could move the market by 40 basis points, which is again kind of mindboggling when you think about how big they were just 18 months ago. Jonathan lets talk about the creepy story, according to Scarlett Johansson, openai approached her for a product that they were launching. She declined and they went on to potentially just fill up a voice that sounded just like hers. What was your take away when you heard that news . Alex not to get philosophical, but she did the voice of the ai romantic voice sort of a romantic relationship with an ai in the film her, about 11 years ago. The upshot of that film was slightly dystopian and i find it bizarre that there are so many of these essentially dystopian movies or cultural references and the tech executives lean into them, that they want to replicate this dystopian vision. It gives me pause. Sure it might be writ large, but the implications of it, does that mean they are not king about this in the way they should . Kind of a philosophical way of thinking about it, but still a strange disconnect. Jonathan not at all, i thing you can go further. What you think the objective was . Alex i honestly think it was a simple as her was pretty cool, lets do that. They want the conversation with ai to be natural, conversational, essentially, having a persistent residence, they hope, in your day to day life. There has been criticism criticism over the perceived flirtatious this of the voice they showed off at the event a few days ago. The applications are who is designing this, is it a sort of maledominated engineering that they think that is attractive . There are all sorts of wrinkles within this. It seems like a misstep on the part of openai which we havent really seen that many big blowups like this in the rapid rise of the company. Lisa theres a broader issue of intellectual property. The way that they generate a lot of the results going to Scarlett Johansson, all these other celebrities, these news sites that pay their people to generate this content in the use that to generate answers, to generate the synopses that people are using in their High School Classes for their reports. Im wondering at what point does that become a problem where people say you have to stop using my stuff. You cant just take it for free and use it to sell your wares . Alex we already have quite a big test case in this space, the times suing openai. When i said there havent been any big blowups, thats a relatively many one. They are suing openai for using times stories developing their models. I assume that would be like an important test case. Depending on how it, what the ruling ultimately is, probably will take a fair bit of time until we get there, there could be a whole bunch of other content readers, actors to media organizations queuing up to demand something similar. The space is terribly dysfunctional at the moment is people try to work out the patience of everything. The case that openai makes is how is this different from a human reading a story . I might that story and come on air and talk about it. How is that different from the ai training on something it reads elsewhere and then reproducing it someone else . Its a gray area for which there is not much legal precedent and it has to be worked out. Jonathan thank you for the update, appreciate it, alex webb. Some of the controversy of the last 24 hours around openai. Who makes money . Lawyers do. Isnt it always the way . [laughter] lisa they can get busy in this case, theres a lot to go in terms of the intellectual property and yes, Scarlett Johansson is a particularly flashy story, but it will go a lot further. Annmarie when you look at her statement, you get the essence that she didnt want to go the legal route. She said they had a conversation ended want to give you my voice. They say that they were sorry for not communicating at her. When they say that, does it this anyway insinuate they did rip off her voice . Jonathan i find it really, really weird. Benjamin netanyahu facing allegations of war crimes. We catch up with the israeli strategic Prime Minister, next. This is bloomberg. Do you want to close out . Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. A slow network is no network for business. Thats why more choose comcast business. And now were introducing ultimate speed for business, our fastest plans yet. Were up to 12 times faster than verizon, at t, and tmobile. And existing customers could even get up to triple the speeds at no additional cost. From the company with 99. 9 Network Reliability and advanced cyber security, its ultimate speed for ultimate business. And its all from comcast business. Jonathan lets get a check on that price action. Features just about unchanged on the nasdaq. One stock and one man. Coming tomorrow afternoon after the close. That is the big one. Looking at the rest, down by 0. 2 . Just short. Look out for one around the open. In the bond market, plenty of fed speak to digest. Just coming back over the last day or so. Down two basis points. We will get to the fed speak in a moment. This is the dollar against the euro at 108 66. Doing ok against the u. S. Dollar this morning. Our top story in financial markets. Another busy day. It will be fed speak all over again. Lisa they talk about the fact that, can they embrace the markets view that is higher . This is a group of people putting it out there that they have rate cut. They are not telling us anything new. A lot of people feel the same. Jonathan they are looking at the same data we are looking at. Some of it contradicts. A beat on profit. Part of the plan includes closing some stories while opening up more bloomingdales. 6. 6 billion dollar offer. That stock is up by about 3 . You saw what is happening with the highend consumer. Annmarie you saw the increase in the spending there. Bloomingdales also a little bit higher but macys actually fell. You can see that the consumers are still flocking to the luxury goods. It is quite expensive, a lot more expensive than macys. Jonathan walmart numbers were pretty decent, but we talked with them about trade down. Trade down from where . Are we going to be talking about target struggling tomorrow and that is why they are cutting prices . Lisa how much is an execution issue . Versus actual pressure from the consumer. It is difficult to any get any clue from the reports. We see Consumer Discretionary two some of these reports and the commentary from ceos. They are still able to find those pockets of strength, slowing, but not slow. Jonathan mason the outlook but still talking about a discerning consumer. Here is the latest out of the middle east. A panel of judges will decide whether to grant the International Criminal court accusing him of starvation of civilians as a method of warfare and directing attacks against a civilian population. The Israeli Strategic Affairs minister thank you for sharing your time with us. Fantastic to hear from you. Reaction from joe biden, and the Prime Minister called it a distortion of reality. What will israel do now . I agree that it was outrages, but also dangerous. They are creating a false symmetry and basing it on false charges. Fairminded people understand how absurd it is to seek warrants against the heads that are fighting against terrorism. But the whole case he mentioned at the beginning, it is based on a false charge that we have a policy of starving the population. Have not had that policy from day one. We have put in half a million tons of humanitarian resistance assistance. We have paved roads to allow trucks to go into gaza. At a time when they are stealing humanitarian assistance, all of these charges are baseless. The reason i think it is dangerous is what it says to every terror group is that you can use human shields. You can kill civilians and hide behind your own civilians. You know that is exactly what they do. The court will not just go after you. They will go after israel, the country defending themselves. This endangers all democracies. Beyond that, i think it will fan the flames of antisemitism. People do not know what a ridiculous joke this is. They have passed this decision and are passing against israel. There must be something to it. A lot of the antisemitism you are seeing spread around the world, i think it will be on turbocharged right now. We were pleased to hear a strong statement from other world leaders. They pretty much do not take it seriously. Annmarie the defense minister had this to say. There will be no electricity, no food, no fuel. Everything is closed. Do you think that is evidence of a possible crime . Absolutely not. Annmarie this is what the defense minister said. The day after, we have 3000 terrorists across our border, murder our civilians, rape our women and kill babies. The government says we are shutting that down because he had an active war theater that took several days to actually get a handle on. Since then, but we have done is we have been able to come into gaza. A half a million times. Do you know the percentage of water israel supplies to gaza today is higher that it was on october 7 . We are the ones flooding humanitarian assistance into gaza. Hamas is stealing that assistance. But they have food and water. They have medicine. That has been our policy since the beginning. A lot of people in israel were angry about the policy. About 100 28 hostages still being held in gaza and they said, why are we responsible for providing assistance . That is what israel has done from the beginning, to have a policy of starvation and then to paved roads to allow thousands of trucks to go into gaza . That does not make sense. We are actually fighting a genocidal force. I do not only think it is outrageous, it is dangerous. It is like bringing the nuremberg trials lets have fdr on trial as well for the crimes that they supposedly committed during world war ii. I was glad to see very strong bipartisan opposition in the u. S. , led by the president against this. You saw britain way in and germany way in. They do not take these charges seriously because they are not. He is not interested in the facts. He was interested in defaming israel. The definition of the jews is what leads to physical attacks against the jews. That is why i am afraid this will lead to antisemitism. He does not have jurisdiction over israel and he does not have jurisdiction over any of these cases. That is something the European Countries have said from the beginning. Palestinians are not a state and israel, he does not have jurisdiction over israel. I hope that the court, in order to save its credibility will basically throw these charges out. Annmarie i would like to talk about the policies moving forward. I believe you still maintain your opposition to leadership in those areas and maintained that israel does not want to reoccupy the west bank and the gaza strip, so what is the plan for these two areas . What the Prime Minister said is we do not want hamas to control it. We have to first finish the job of dismantling the military machine in gaza. We are continuing that operation and we need to finish that job. Once we finish the job and take out its army, we have to work to get an alternative in there. The truth is no alternative will come unless they know that hamas will not be there. Civilians who are not hamas, those who are not beholden to the Palestinian Authority run their own affairs. As for security, they will have to maintain security. We hope we do not have to do it. We hope there will be an alternative and they will fix the situation in gaza and that israel does not have to do it, but the Palestinian Authority right now is not writing. It is educating the next generation not for peace but for war with israel. If they would totally change and show they are capable of fighting terrorism in the areas that they control that would be a different story, but unfortunately, that did not happen. Lisa there is a question about how you get support. They are really pushing back and want a plan to understand what is not when we get to another phase. Saying he will quit the war cabinet unless there is a different warpath. He needs to see a government that will win the Peoples Trust. Why is the current government not winning the Peoples Trust in israel . I do not think that is the true. I do not want to get issue internal israeli politics. There may be people in israel believe that you should have the Palestinian Authority. I must tell you about 70 to 80 actually reject that. I think there is overwhelmingly support for the Prime Ministers policies, but he has been clear that he does not want israel to reoccupy gaza and he does not want hamas to be there. But you have to get to the day after and finish the job with hamas. Many are looking to the sidelines. They are wondering, is hamas going to be there the day after . There was an attempt to put them in certain areas of gaza. Guess what happened . They were threatened and killed. That is why it is so important for israel to finish the operation in broth the so that we can move onto the next stage and not only win the war, but also talk about achieving peace. Jonathan where rv and the talks with about the hostages . I would not say talks have completely collapsed. It is interesting, they took a document and said, we agreed to what we will put on the table, but that document would mean that it would be the end of the war and they could retake control of gaza. No Israeli Government is going to agree. We put it on the table weeks ago. It was described as a generous offer and that offer still stands. I do not know if hamas will take a. We will always be prepared to stop at any point and get our hostages out. If they would give us our hostages, the war would be over. The problem is that we have a Terror Organization there that is committed to our destruction and is holding hostages. We will continue until we win the war. Hopefully, it is not just hamas ending its political rule in gaza. It is also bringing all of our hostages home. Jonathan i understand this is very sensitive given the families involved. What update do you have on the fate of some of these hostages . What kind of communication have you received . I think we have good intelligence on that but not all of them are alive. We actually had an operation a few days ago. We were able to return four bodies to their families. As hard as it is it brought peace and comfort. They can close a chapter for those families. We hope that we can bring our hostages out alive come as many as possible and as soon as possible, but it is a difficult situation because they are kept underground in the dungeons of gaza. A lot of the leaders surround themselves with these hostages and use them as human shields. That is why i think the prosecutor made such an outlandish decision and why it is so bad. There should be a clear line between good and evil. There should be no comparison whatsoever between israel and moss. Hamas. There was no policy of starvation. It did not happen and it will not happen. They jonathan thank you for sharing your time with us. We will catch up again soon. Lets get in update on stories elsewhere with you are bloomberg green. There is just one big bear left on wall street. Marco held firm on his gloomy outlook on the market, urging clients not to buy stocks. He cited a number of reasons including high Interest Rates and elevated inflation. He acknowledged his outlook has hurt portfolio performance. The lowest year end target at 4200. The index is up 11 so far this year, closing yesterday just above 5300. The Copper Valley is showing signs of slowing one day after reaching an alltime high. Some have been warning that prices were running ahead as demand remains relatively tepid especially by top buyers china. The countrys economic struggles remain in the slapdash in the spotlight. Those issues are seen as a dropoff consumption. And one person is dead and several others were injured on a Singapore Airlines flight that that experienced severe turbulence. It left from heathrow and while in route to singapore made an Emergency Landing in bangkok. Singapore Airlines Offers its deepest condolences to the family of the deceased. We are working with local authorities to provide necessary medical assistance. Jonathan absolute nightmare. Much more and about in about 30 minutes time. I think weakness is starting to go up the income ladder. What i cannot determine right now is how will Companies React to that . Jonathan you are watching bloomberg. [introspective music] recipes. Recipes written by hand and lost to time. Are now being analyzed and restored using the power of dell ai. Jonathan equity futures right now just about unchanged. Down two basis points. A lot of price action from the retailers. A more discerning consumer. Listen to the corporate calls. Segments of the base are having problems. I think weakness is starting to go up the income matter. What i cannot determine right now is how will Companies React to that . Jonathan macys beating profit estimates pairing it warning that consumers will remain discerning and discretionary purchases. Trends have seen a further step down. This would suggest deeper consumer issues are surfacing, which would be problematic. Chuck is with us. Lets start with macys and what you take, conveying that the consumer is somewhat cautious. They came in little bit better. They noted that they had to move some Seasonal Items to get inventories into better shape. That was smart of them. They kept guidance in tact intact. We can look at the numbers that also came in a little bit better. You can see from the stocks that the numbers were not terrible and were not much worse than expected. But we agreed. We think the consumer is concerning. Lisa these retailers do a good job of figuring out where can immerse are willing to bend. Are they better expected because of discerning, but still spending quite event . Probably neither. Most are below the line. It was a little bit better. In the case of lowes, the gross margin is actually a little bit better. Pretty much intact but a little bit better. We will see how it plays out over the next few days. Bjs and ross on thursday and a lot more next week as well. Annmarie we have been looking at the numbers versus flagship macys. What does it tell you about the state of the consumer on the upper end and deliver a that is a great question. They were up relative to vcs being down. Bloomingdales is pretty down. The customer is under the greatest amount of stress because of housing prices where they are. The equity market has been strong. It is not new. I think the question mohammed pointed out is, are you going to see the middle income come under pressure . That is something that we will try to discern. Targets numbers should come in close to expectations. They announced a big rollback program. Is it reactionary . Is it proactive . We will find out tomorrow, given what walmart has been doing on rollbacks. The consumer is looking for value and lower prices, so it is intelligent on the part of target to do that. We will be looking for clarity on that tomorrow morning. Jonathan what is your base case on that question . I think a lot of suppliers are looking to move units. If it is similar to what we have heard out of walmart, i think it is probably margin neutral, but we need to learn more on that. I think it is the smart and proactive thing to do, given that the consumer is wanting value. Target prices tend to be higher than walmart, so that is something they will need to fix in the future. Jonathan when walmart says straight down, are they saying trade down from target . Who loses when they talk about it . It could be kroger or target, it could be all of the above. As you heard from walmart, the greatest share gains they had last week was on the upper income customer. The key for walmart, they saw this coming out of the financial crisis 10 years ago, but they did not retain those customers. That is the real opportunity for walmart and that is why they are doing more rollbacks, it is why they are investing in store models. Almost there. Feels like such a long earnings season. Looking ahead to target. Lisa the point that he made about what was fueling is a fascinating one. Does walmart have the ability to cut prices because they are getting more into entertainment and in particular some sidebar aspects as well . It is interesting to see where they are. Jonathan we will find out tomorrow morning. Looking forward to breaking that down for you. The third hour of bloomberg surveillance is right around the corner. We will be catching up with Morgan Stanley after a big upgrade. A third hour of bloomberg surveillance, coming up next. From new york, this is bloomberg. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. You have a wall street waiting for something to break hard in one direction. Our expectation is that we see growth slowing. There is still some anxiety in the system. Plus the asking rebalancing in the labor market. . Seeing that across the board. This is bloomberg surveillance. Jonathan good morning. A stacked 60 minutes coming up. Totally unchanged. Just a whisker from alltime highs. Well catch up with Morgan Stanley on the big upgrade the last 24 hours. The state of the labor market. And why the fed should act sooner. We begin with the big issue. Delivering a major upgrade. Lifting the s p 500 price target projecting a fresh record high. Saying macro outcomes have become increasingly hard to put date as data has become more volatile. We see this data persisting. Mike joins us now for more. You know the headline to the last 24 hours. Moving from 4500 to 5400. Can we start . The wide range of outcomes. The barricades versus the bull case. It just reflects the uncertainty that has been the case for the last several years. I would be surprised if we hit both sides. That is what we are in. We talked about it at the beginning of the year, three equally similar outcomes. Our house view and then we have the no landing which is a be acceleration, maybe a stagflationary outcome. Now you are back to a soft landing. All of these are possible and they could all happen with a higher than normal degree of certainty. That is really the headline that should have been out, that nobody really knows anything. Maybe our mistake is that we do not know as much as anybody else claims two. That is something we have learned the hard way during life. The meat of our report was more about how to make money in environment where you have basically 0 upside on the base case and 20 downside. It is the process, understanding what kind of environment and how we navigate that. We spent a large part of the report talking about a specific sector and ideas. That is fine if that is your prerogative, but that is what we wanted to talk about. Jonathan lets talk about the headline briefly. Are you deemphasizing the 5400 . Are you saying it is not that important . Clients do not care about the target. One of the most important things is alpha generation has been spectacular. The way we measure with our client base is, this is the best we have seen since we started recording in 2010. We are trying to help them in the process of what kind of stocks work in this environment . You need to be ready to pivot towards different securities. It is a soft landing goldilocks outcome. We are not confident that we want to make that fully. Large caps over small caps still. We like staples ever discretionary. It kind of protects against slowing growth risk. But the main factor is quality. Quality has been the most consistent factor. Lisa if you wrote a headline saying nobody knows anything, it would not deem too much attraction. The 5400 or the 4500 . I think you have laid it out once again. It is our base case. Originally, it is proven wrong because of multiples. People have either gotten it right or wrong the last 12 months. A 21 multiple is in the top of the last 80 years, and expensive multiple. The question that they had to ask themselves is, is that a fair multiple to be paying . I think it is plausible, but that is why we are trading. There is not a lot of upside. Lisa are there second are there are certain sectors that win . Whether there is this momentum that keeps valuations hi. By the way, it is also cyclical. It is still up the quality curve. It has been the best factor for the last year, year and a half. That is where we are. Do not overthink that or try to be cute saying, im going to be over here. In the smallcap and lower quality areas, it is very idiosyncratic. It is not a factor that is carrying well. It has a unique story to itself. Jonathan tomorrow we get numbers from nvidia. What is it for you . Is it elsewhere . . Assuming that multiples stay elevated. We had this sort of idea for a while. Probably early calling for a recovery in earnings. Earnings coming from a lot of different groups now. The biggest contributors have been technology. Industrials because of all the spending going on physically. Those are three major sectors contributing. But it is being supported by policy, fiscal and Monetary Policy. We have an incredible amount of liquidity coming in to pay for the fiscal. The risk in the story is, do the markets start to balk at this unsustainable fiscal policy . And the way that they are funding it. We have these liquidity provisions in place now. The treasury general account could be drained, if necessary. The fed has already said that they will start tempering. It is pretty loose to pay for the fiscal. This is something that we are watching very carefully. Last fall, rates were going up due to term premium widening. The market was starting to push back on this strategy. Right now that is not a problem but one of the things we will be watching is does the term premium start to widen again . Jonathan big risk factor in the bond market. Does this have a political twist to it . Yes in. I would not say either party has shown any fiscal discipline. I think we are going to get a Strong School support no matter who wins the election. The real question for markets is, how does it get funded . Can they fund it at a reasonable rate . Right now the market seems very relaxed about that chair. Lisa i get very excited about options, but every week people say i should not because there is plenty of interest at these levels. 5400, is that too conservative . Maybe. I can make a case for 21 times or a two times. That is the problem. I would say this, that the target will be more determined probably by multiples. Unless it is recession then you will be surprised on the downside. Earnings have not moved much. Since october, 2024 earnings by a couple percent. That is all multiple. This is why you need to be alert to things changing in the bond market first. That will feed into the multiples. Annmarie it is very different with the fiscal spending may be used on depending on who wins the white house. You are talking about the green energy economy. It could continue or stop short. What are you thinking . I think the policy will remain strong. Half of the industrial policy is potentially green energy and half is deglobalization trend. It may be redirected. I could see the Energy Policy shifting back, but i would be set i would be surprised if it is curtailed in a meaningful way. We probably see differences in the tariffs. Immigration is a big one. That was a huge surprise this year that nobody saw coming. To me, that is probably the single biggest wildcard. Jonathan the economy can grow without getting tighter and generating inflation pressure. I. E. Saying that it could flip the other way weekly . If policy will, but sure. If you all of a sudden shut the borders down and trump is talking about deporting people, we would be in a reverse situation. It is literally 5050. This is not an issue yet. It is a volatility that does not start picking up until august and september. It can come at us quickly, probably post conventions. Jonathan we have a lot more. Just about unchanged here. We have an update on stories. Martin is stepping down as head of the fbi see after finding that the agency was a toxic workplace. Facing mounting pressure following a scathing report. The accounts come from a months long probe into a wall street article about a sexualized boys club environment. They said they will move quickly to nominate a successor. Donald is closing the gap in fundraising. He outraised by 25 million in april, pulling and 76 million. It is on the heels of several fundraisers, including a palm beach event. Overall, president bidens Campaign Holds a wide cash lead. Target announced it plans to reduce prices around 5000 items. The company said it routinely adjusted its prices to ensure that it is competitive within the market. Target is set to report earnings before the opening bell tomorrow. That is you are bloombergs brief. Jonathan tomorrow morning, target. Tomorrow afternoon we will hear from nvidia. Later we will catch up with deutsche bank. All that to come. This is bloomberg. I cant believe you corporate types are still calling each other rock stars. Youre a rock star. Were all rock stars. Oooo look look at my data driven insights, im a rock star. Great job putting finance and hr on one platform with workday. Thank you guys, can you keep it down. Im working. You people are guitar noises . Hand over the air guitar. Ive got another one. Jonathan the opening bell about one hour 14 minutes away. Equity futures just about positive. Yields heading south by a single basis point. Lets get you some morning calls. Raising the price target. Highlighting news including the bank showcasing excellent management. That will get you access in the free market. It is a joke. Granting hp. Supporting the stock at higher levels. The stock is up. Finally, lowering while firstquarter results beat expectations. The lack of yearoveryear progress in business. Still with us around the table, going into the opening bell. We need to talk about nvidia. This week for sure. The fed is pretty quiet right now. In the near term, you will not see a lot of movement in the Broader Market because we are in a quiet period. They have kind of done their thing. Tomorrow night, all eyes will be on nvidia. Our analyst is still bullish. No reason to doubt that. That is issue with ai. Ai is everywhere except in the ears. Not a lot of impact. That is fine, but nvidia has been the big winners so far. Thereve not been a lot of big winners but it has not trickled down in a way that is rising the whole tide. There are a lot of ai dollars out there being captured by different businesses, but what surprises me is that the overall spending is down. That is the work off we are seeing for the last two years. When they First Talking about ai , it has been around for years. It is not a new idea, we just have a new technology that makes it more powerful. A lot of Companies Said we are going into a two year dearth of spending. There is a whole and someone is creating a bridge. Is the bridge long enough to get us to the other side . It is another card in our outlook going into next year. We do not think productivity will be impacted too much next year. How much is in the multiple now for productivity improvement . Could there be a disappointment next year . Does that spending get a little bit curtailed . We do not know the answers. They are in the sweet spot of what is happening in spending today. Jonathan you basically are coloring out right now. What are the ai doctors . You do not think it will happen for a while . . A list of companies and were laying out the adopters. I think the market has jumped on that and has priced in a lot. What i am excited are the adopters we do not know about yet. The big winners not appear into the early 2000s. Those are going to be your 10 backers. They are probably private or subsidiaries of larger companies. There will be a variety of companies. But i think it is pretty early to identify those. Lisa the idea of going into some of the infrastructure and energy grade, he feels like it will be so long before that gets built up. Do you agree . Not only because of that but the defensive hedge. We also have great energy. Two or three months ago, were pretty well priced. They both play into that idea. A lot of the stuff has been overpriced in many ways because there is a dearth of opportunities. Any good theme has been latched onto because the overall growth in earnings has been somewhat subdued. Lisa when do utilities not become defensive anymore . . Probably now. It feels like utilities are getting i do not think they are getting nearly as much as industrials or other ancillary sectors on the Ai Investment cycle. Semiconductors is an obvious one. But how Many Companies are really showing big ai spending . Maybe a handful. When the markets are in need of a theme and you get an exciting one like this, they will find every way they can to extrapolate it. We had a lot of retail participation and you can get pushed around very easily. They can just shut down the semiconductor annmarie they can just shut down the semiconductor factories. Does that concern you, the risk with this kind of sector . Website think it is beneficiary for this kind of theme. We have had not we have not really seen it in the numbers. Nvidia had been the clear winners of that. But you mentioned about a total invasion of taiwan is a completely separate concern. There is no risk premium built into the winners for that type of event. We do not think it is a high risk, but it is a risk and it is out there, so there should be some risk premium built into that. Jonathan we will catch up with mike mckee. More beneficial saying the same thing. You said earlier that the fed is not restrictive. Can you talk to me about why he believe that and by the fed seems to take a completely different view of that question . I would say the rates policy is very restrictive. We are seeing the impact of that on levered companies. That is why small caps underperformed. They are not really growing because of the inversion of the curve. We are not collectively. When you compile when you combine the deficits and all the liquidity provisions put into place, some of it is delayed to pay for the fiscal spending. The policy collectively is not nearly as restrictive as perhaps the fed would like. It makes their job harder to get inflation down and it makes it harder to get the economy to slow, which is their goal. Slower in a way that they could start cutting rates. I believe that we need rates lower to broaden out the participation but also from a consumer standpoint. Harvey need to be lowered. Midlevel consumers are believe struggling. Jonathan it sounds like you do not have that level of confidence. If we were to walk away with that right now, is that a fair characterization . I think we are just not willing to admit it. Anybody who says that the have high confidence in the outcome over the next six to 12 months is either lying to themselves or maybe they know something i do not. Everybody has been wrong about a lot of things in the last three to five years because this is hard. Coming out of the pandemic, the data is way more volatile and is also more reliable. Revision factors have been hired. We need to understand that and appreciate it. Do not get too carried away, thinking you already know how this story is going to end. Jonathan following a big upgrade in the last 24 hours. Coming up next on the program, aberdeen looking ahead to all that fed speak and we will touch base with Michael Mckee after his interviews yesterday. Looking forward to that a little later this week. All of that still coming up. In absolutes news after closing just short of alltime highs. This is bloomberg. And theyre all coming . Those who are still with us, yes. Grandpa whats this . Your wings. Light em up gentlemen, its a beautiful. Day to fly. Lifes daily battles are not meant to be fought alone. Were not powerless. So long as we dont lose sight of whats important. Dont be afraid to seize that moment to talk to your friends. Cloud, you okay . Because checking in on a friend can create a safe space. The first step on our new journey. You coming . Reach out to a friend about their mental health. Seize the awkward. Its totally worth it. Jonathan 60 minutes away from the opening bell. Equity futures just a touch negative. Down by 0. 03 . Following two days of gains. Just building on a four week winning streak. The nasdaq at a record high coming into tuesday. Looking for some data. We will not get much this week. Looking ahead. The big one for this market is nvidia. Look out for that. Yields are lower by two basis points. Down a single basis point. Just to finish things in Foreign Exchange. Tomorrow, president lagarde. What is left to say . Lisa there is more uncertainty around the ecb. Maybe she could say more about how much they could diverge. Im talking about diverging from the fed. You need a little less. Jonathan ecb is the only one saying, we have to go. After that, we do not know, but think of england is reluctant to say. And the ecb seems to be the only one saying it is time to go. See you in june. Lisa it seems that there is more conviction around that. They have not gained as much steam. I wonder if it will be the path afterwards that the most. A lot of fed speak. The idea of it really speaks to a complete lack of certainty and how many come after that. It shows how different the fed is right now. Jonathan under surveillance this morning, shares rising in the market. Better than expected sales for the first quarter. Target getting more insight into the consumer. Elsewhere they say they have the capability to disable chipmaking machines in the event that china invades taiwan. They have reassured officials of their ability to remotely disable machines for which tsmc is the biggest client. They would remotely force a shut off. A quite the development in the last day or so. It was one of their biggest risks. They are so exposed to taiwan. It is why you see all of these concerns coming from the legs of the white house when it comes to Companies Like nvidia. If there is a chinese attack on taiwan he said he wanted to unify the country. Jonathan earnings tomorrow afternoon. All speaking today. Speaking to the cleveland fed president yesterday. She said she no longer sees three rate cuts this year. It is to close. We just need to collect more information on that. Last year, people worried about it getting restrictive. At the same time, it remains so. That is the balancing that we have to do going forward. Jonathan whats it out for you . Basically that they are speaking with one voice now, but they do not think they will be cutting rate anytime soon. There is a question about how many they might get in this year, if at all, but it will be a long process. The ecb can go ahead first, but the fed is going to sit tight for several months. Jonathan how useful will they be tomorrow . Useful in that we hopefully will see people talking about how long they expect inflation to remain elevated, whether they expect some sort of continued progress, as we saw in the cpi, but beyond that, maybe some discussion of the timing of cuts. But since everyone has been talking, does not seem like we would get a whole lot. Lisa they were talking about how the rate policy is certainly restrictive, but overall policy is not. They point to the Balance Sheet and it has not shrunk that much. Was there any discussion of that at this conference . There has been some discussion about that. They are tight in the right way. He described what the fed officials are seeing as their policies are weighing on spending and borrowing decisions because mortgage rates, car rates, credit card rates are high. They are restrictive in that sense. They would say the other facilities could be contributing a little bit to liquidity issues, but they are winding down. The fed continues to let its Balance Sheet runoff, but the fed cannot do anything about the federal deficit, so that part of the spending is working against them at this point, but they have a policy of not commenting on things like that. Annmarie we heard from claudia earlier and they said they need three months. Three months of data before they decide they will make that cut . A couple people have said three months, but most of them say several months. I think that is a fairly good interpretation of where they are but this. The market probably has it correct saying that they are not going to move until maybe september. If they continue with progress, it could be them to start a rate cutting cycle, but they will need to see more progress than they have seen. The cpi on the 12th of june is the fed meeting date. Before then, they will have an idea of what they will do. It is expected to show continued progress. They keep moving forward and they may get a little bit more optimistic in their commentary. Jonathan fantastic work. We are looking forward to it. If i may go through the lineup again today, they are all speaking once again. What is left to know that we do not know already from these officials . They are all at the top. It is like that so often. That lack of disability, it is before to have all these fed speakers to have a sense of what they are thinking. We need to see the data change. I think it is changing. I think the whole thing, talking about the threemonth visibility period feels about right. But in a years time jonathan have you had enough . West mayor aipac calendar today. We have a lot of commencement speeches on the docket. We had jefferson yesterday. Hearing from the vice chair is important. He noted that it is 26 basis points. We are talking about getting progress. But we also have to know the context. Still annualizing. In the past he has given some decent guidance about the number expect to see. But the reality is that the fed is highly dependent. It is hard in this environment. The data should do more. Lisa there is something going on under the hood that is consistent. There is this feeling of weakness coming through that the overall data and not suggest. The inflation data did improve, but it is too high. Some caution on these rates, everybody thinks there is seasonality in the data. If that is true, the fed should be cautious about over interpreting data, if it does improve. More broadly, there was some giveback on the sales data that was probably welcome. You had a labor market that did soften a little bit. The atlanta fed is tracking strong growth. It is softer, but not obvious at this point. Lisa softer, but not soft. I am wondering, from your perspective, if there is a signal within specific areas like retail sales, where we see this discussion about price cuts and all these kind of things that are feeling like things might be shifting but not enough to change the narrative. How do you interpret this . I am also looking at what is going on with companies. Are the plans growing . They are not. The budget is probably it is starting to be less of a stimulus, going forward. The consumer may be stalling. Companies are happy in the federal government may be easing off a little bit. Those Early Warning signs. It may be that we get back with Interest Rates through next year, but i do not think that is where we are. I think we have where the inverted yield curve is hitting consumers, companies. Annmarie what are these factors that can be a tight lever market . The labor market is fascinating at the moment. 240 jobs over a 12 month period. Look at the other indicators and it does show what looks like weakness. They are typically associated with a much higher unemployment me. Understanding what is going on there is absolutely critical. It is the result of a low rate low layoff rate. If it was about labor hoarding, you would expect productivity growth to be quite low. We expect people to not be working there workers very long hours, but that is not happening. I speculate this big burst basically everybody was able to quit their jobs around the pandemic and it led to much more flexibility in the market. If it is true, there should be less people quitting their jobs, but also big productivity gains. Jonathan midcycle adjustment is a phrase that ive read in your research. Even forward this idea that what we are going to get is a couple of cut, and that is all that we will get. What underpins that view . It seems that they are coming around to your perspective. Oftentimes they are cutting because they see recessionary dynamics. They cut buffalo. They are cutting because there is some downside risk. Both episodes had 25 basis point rate cuts. As we look at the outlook, i think it is more likely that they pause at that point in time until they see inflation all the way back down. Lisa just a followup, doesnt that suggest that we have some kind of idea what the neutral rate is . That gives you a sense that they are well above. According to any metric, they are. I do not think it is as low as what they have. We think it is closer to the three and three quarters. But we are still wanting to 50 basis points above that range. I think they are restricted from that point. They can take out insurance rate cuts, but there is major concern. Instead of just plowing forward. Lisa we were talking to mike will send earlier and one of the biggest mysteries has been the interplay of incredibly loose fiscal policy. It is restrictive when it comes to rates but not necessarily beyond that Balance Sheet issues. What is your take on how much you are following what the fed does with rates and beyond . The interplay just gets more and more bullish. With that behind us, i think we are going to the Balance Sheet. I think we are going through that shift and they tried to control the economy. That should start coming through. Liquidity is less and we are seeing things we have never seen. That is soaking up money as well. Unless it is incrementally increasing, we lose the that down over the next two quarters. It does come back, doesnt it. Are they better to start acting and as we were saying earlier on , normally we get rate cuts. I am probably a little lower than that. Maybe 2. 5 to three. But we do need to see inflation is ok going into the longterm. Jonathan what is your favorite trade right now . 7. 5, 8 , no risk. Jonathan we appreciate it. Lets get an update on stories elsewhere. Iran has chosen a date for its election halloween the death of their president. Elections will be held during 28th with a candidate screening process set to begin next week. For now, i rans Vice President will step in as acting president. A coalition of shareholders are calling elon musks record deal in abysmal earlier. Other signatories are calling on investors to reject the pay package. They claim musk is distracted by other companies and is not serving the carmakers best interest. It was voided by a delaware judge earlier this year. Proving investors still support musk. One person dead and several others injured on a Singapore Airlines flight that experienced severe turbulence. The boeing left from the airport and while en route made an Emergency Landing in bangkok. Singapore Airlines Offers its deepest condolences to the family of the deceased. We are working with local authorities to provide necessary medical assistance. That is your bloomberg brief. Jonathan up next, setting you up for the day and the week ahead. From new york, this is bloomberg. [busy hospital background sounds] this Healthcare Network uses crowdstrike to defend against Cyber Attacks and protect patient information. But what if they didnt . [ominous background sounds] this is what it feels like when cyber criminals breach your network. Dont risk the health of your business. Crowdstrike. We stop breaches. Jonathan equity futures just a touch negative. Counting down to the opening bell. One less bear on wall street. It reflects the uncertainty that has been the case for several years. They could all happen with a higher than normal degree of uncertainty. That is really the headline that should have been out. Nobody knows anything, particularly a point in time. Maybe we do not know as much as everyone else claims to. It is called humility. Jonathan six to catch up. Catch the full interview on the bloomberg terminal. A host of speak. Christine lagarde speaking out tomorrow. The number one stock to watch, nvidia earning. Joining us now is David Rubenstein. David, we will talk about your new episode in just a moment. When was the last time you saw the fate of almost an entire stockmarket come down to the earnings of one company . It is very rare when that happens, but clearly this one company has an enormous amount of attention, but it is rare. Jonathan d think this market is validated being at alltime highs . Or have things gotten a little bit stretched . . Talking about nvidia at the moment . Nvidia has really captured everyones attention with its ability to be a proxy for where Artificial Intelligence is. People who want to invest in Artificial Intelligence take advantage of its Growth Potential and profitability and assume that nvidia is a proxy for that. The moment, we do not have a better proxy for that. Reasonable proxies as well, but nvidia is more of a pure ai play than the others. It is very to see a company go up this much. But for right now, it seems to be the flavor of the month on wall street, for sure. Jonathan lets talk about the new episode as well. Equity market investors, you may not have participated in the rally, they are unsure of what to do. What was the takeaway from your latest conversation . I had a conversation with sally. She became famous for being on the Fortune Magazine cover saying she was an analyst on wall street, billing to go against the conventional wisdom of wall street, which was often promote stocks, where there was a bit of a conflict of interest. You could be an analyst and work for a company promoting or selling a stock. In those days, she was known for being a tough analyst. From that position, she later became the chief Financial Officer and from that became the head of Wealth Management for citi. She now runs a company that is designed to help women invest their money. Her view is that within do not know as much about investing their money as men. She has designed a company that helps them do that. She points out that there is a gigantic wealth transfer that will occur over the next 10 to 20 years. Their spouse will inherit staggering amounts of money, trillions of dollars. She wants to make certain that women better understand how to manage their money. Historically, women do not handle their money as aggressively as men do. Annmarie what is her advice . Her advice is to invest and give your money to them 10 help them manage some of your money. Generally she would say, you need to know what you are investing in. Have appropriate risk profiles for the amount of money you have and time you have to invest. She is hired mostly women to manage the money. Melinda gates were melanie hobson, among others. And she has a business that is smaller than the businesses that she ran before her. She is managing roughly 2 billion. It is a smaller business, but she enjoys it because she feels like she is doing something useful, not just making money for people on wall street like she typically did. She is helping women and she feels that is a good purpose. Jonathan David Rubenstein there with the carlyle group. Watch for our interview today at 9 00 p. M. Eastern. Coming up tomorrow, we will catch up with andrew, former world bank and dj from mizuho. Your equity market just short of alltime highs. Equity futures just about unchanged this morning. Good morning to you all and have a wonderful day. This was bloomberg surveillance. Do you want to close out . Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. Im matt miller. We are counting down another 36 hours until we get nvidia earnings. The market seems to want to sit on its hands and wait. We come down to the open starts now. The countdown to the open starts now. Teachers on hold with another busy day of fed speak futures on hold with another day of busy fed speak