Warns of a major decline in asset prices if the pandemic worsens, also saying commercial real estate could endorse , and flags stress risks with regard to financials. We are going to dig deeper later, but this is quite the yearly report. The main headline here is that there is a major decline in asset prices. Also crossing the wire right at, march investment inflows 350 billion. 349. 9 if you want to be precise. Still with us is the Capital Markets u. S. Equities strategy head. Lori, when we get past what weve seen in equities, can you talk to me about what we are seeing in the treasury market, specifically with some of the expectations we saw late last week that the fed might have to go into negative territory with its nominal rates. There is still this concern that given the fed support and the trajectory of the economy that some sort of near zero if not below zero rate policy may be in the cards. What do you make of it . Negativeonomists think rates are unlikely at this point. What i will tell you is that it does seem to me that negative ours would be very bad for financial system, very bad for the banks. It does seem like the fed wants to support the banks. We saw the buybacks cut. Weve seen defensive dividends. It seems like the fed and the banks are working closely to me. Sortthink Equity Investors of continue to talk about that issue. Ive done several Conference Calls over the past few days and that is an issue that keeps coming up in the q a. It is something we have to watch. Romaine the reason i wanted to pose that question, a lot of the support weve seen in equity prices seems to be tied to the general assumption that the fed is going to do whatever it takes to support, not just the economy, but by default, asset prices. And when you look at some of the other areas of the market, small and Midcap Companies that were in a credit position, that may be lend itself to needing more fed support, i wonder if you can put those two together and give a sense of what we should expect out of small caps and midcaps. Lori small caps are inherently an expression of how you as an investor think the economy is going to do. What we also learned was that fed stimulus and support could sometimes overwhelm the sort of economic fundamental concerns. Say,had a lot of investors what is the market doing . How are we rallying so hard when the fundamentals are so bad . My response has been, i was covering small caps exclusively during the qe era and that is the same thing people used to say. Just ps would multiples would expand and it didnt make sense for the fundamentals. That is how you have to think about it. What i will tell you is that small caps have shown a little sluggishness out of the gate. They did eventually start to outperform, but they didnt do it right off the march 23 lows. One thing weve been hearing is this idea, the fed cant do it alone. They are doing absolutely everything they can, throwing everything including five different kitchen sinks at this crisis. They do need some support from fiscal. They are not able to carry this burden all by themselves. I think you need to see things start to pick up. Need to see more signs of healing in the labor market. You need to see Small Business optimism pickup. We have recently gotten a pretty negative data point there as well. Romaine obviously a lot of eyes on the fed. Expecting to hear from powell over the weekend. When you look at the general Investor Sentiment out there right now, the idea that a lot of folks have, to move to the sidelines or avoid some of the riskier assets out there, is there a sense that we could start to see people take a little more confidence in the trajectory of what is happening in the markets and put some of that money back to work, or is it too soon . Really dependst on which investors you are talking about. There are different camps that have done different things. Retail investors, some things ive picked up our that one person said to me, this just happens so fast. Data,e seen that in the where the bears have gotten extreme, but not financial crisis extremes. Assets went up a little bit, but not as much as they did in the recession. Moneys a lot of retail ready to come back. Funds,io managers, hedge they raised a little bit of cash, but not a lot. Cash we did see some big raised was on Asset Allocation funds. Those are the professionals. What we know is at the end of the first quarter, bond allocations were back to peak and cash allocations had gone back to peak. I do think a lot of that cash made its way back into the market in april. It is not clear to me that weve got a ton of that cash and bond money ready to rotate back into equities the way we did at the end of march. Scarlet good to know what is available on the sidelines. Is it too early to start thinking about positioning for the elections in november . It looks like people are pricing in more risk six months out that i year from now. Lori i dont think it is too early at all. Ive been doing lots of investor calls because we cant do facetoface meetings. Over the last week, we can a half, the election itself has taken up a considerable amount of time. Not because im pushing it, because the clients are asking me about it. I think you have to look at the risk now. A couple things to take note of, i was looking at some data on the senate races and it looks like the senate might be in play for the democrats to tie it. Based on analysis by political consultants. If you think about some of the news chatter, people are starting to talk about the vp selection. Some opinion polls have been showing Elizabeth Warren as one of the top choices. The markets are expecting harris to be the vp pick. Course one thing that we like to highlight, the s p 500 is still just trading in lockstep with expectations as to whether trump will get reelected. That has been in place since last july and it has not changed. What im hearing in the questions, they are starting to worry about it. They are starting to ask me, when does it hit the market . Watch the senate races. Markets will Pay Attention in a big way. We will certainly keep an eye out for all of that. Lori calvasina, u. S. Equity strategy had. That does it for the closing bell. Whatd you miss . Is up next, where we will look at how Higher Education might need to team up with big tex. This is bloomberg. Romaine broadcasting live from new york, im Romaine Bostick alongside scarlet fu and this is whatd you miss . Snapshot ofs get a how u. S. Stocks closed on the day. For the week they finished lower, but ending friday on a high note as investors and traders look past trade jitters and Economic Data. We also saw oil jumping as well. For the week, the s p 500 posting its worst week since march 20, right before the recent bottom. Retail sales and factory output registered the steepest declines on record in april. Joining us now with some perspective is chief economist paul ricker donna of bloomberg economics. Lets start with retail sales. It was a record drop and this is after another record drop in the month of march, actually double what we had seen in march. , which i believe includes amazon is there reason to believe that perhaps we have seen the worst and it might get better from here . I dont think we can actually make that claim. This was a very disappointing retail sales report. Sales orsaw internet retailers, really the only category that did increase, things like groceries and personalcare remained in steep decline. Was, ins this report most of the underlying categories, the decline in april was sharper than march. Theres not a lot of evidence that we are picking up here and that one category you did highlight, online shopping, did not rise by the amount one would expect based on past episodes when folks were locked at home during a Severe Weather event. Typically you see people stuck in their homes and theres a big spike in online shopping. The magnitude we should expect given they are not spending on restaurants, gas stations, and other discretionary categories. This tells me Consumer Sentiment remains low. That can be a real problem. Romaine scarlet did go out and buy three freezers for her garage. One Interesting Data point that caught my eye was data on something i dont pay much attention to normally, but there was a huge spike in march, then it dropped off in april. This seemed to suggest what ive heard anecdotally, this idea that there was this surge of buying of essential needs for people staying at home, but that dropped off. We are going to get retail earnings from some of these companies. Is this going to be the trend line or can we expect a rebound in sales . Suggests that is the trendline. Household Savings Rates have skyrocketed. It is not for lack of other things to do people are shopping online. It seems to be a sweltering of Economic Sentiment where people have questions about the reopening of the economy and the virus and whether we have adequate treatments or other ways of dealing with covid19. A plunge inere was activity. There was a sentiment that this will be temporary. Now they are starting to be more lingering doubts of the extent of economic damage having more of a longterm impact on the economy. That was even reflected by fed chair jerome powell. He said the prospects of a vigorous rebound appear to be slipping. Romaine carl, we have to leave it there. Hope tote your time and finally see you in person one day soon. Carl riccadonna. Some breaking news crossing the wire. Doj and state the agencies in the u. S. Are likely to bring in antitrust suit on google. This is according to dow jones. Says that department of justice and the state ags are well into planning that litigation. Program, next on this the commercial real estate market. Cities and states get ready to reopen. Theres a lot of rethinking of communal spaces. That is coming up next. This is bloomberg. Are amongitness gyms the many facilities that have been shut down due to coronavirus concerns. We spoke with the equinox executive chairman. Take a listen. As i speak today, we are still closed throughout the united states, canada, and the u. K. We are closely evaluating the situation in texas. That will probably be the first market we open. But no decisions have been made. How do you make the decision . Force of and a task internal team working closely with our own medical experts, epidemiologists, Infectious Disease experts, to help us evaluate how to think about opening. Tocreated this Task Force Create something we call the equinox standard. To take those to another level. Weve been working with our medical experts to do that. That is the equinox standard we introduced to our community. Obviously we are seeking the guidance of local governments. But even with that guidance, we will evaluate whether it is prudent to open based on our judgment and making sure we protect the safety and wellbeing of our community. Basedh market will vary on the specific situation. As you go into crafting what the gyms can look like or what facilities you need, how much does that all cost . Comes with ait significant cost. We are prepared to spend that money because that is the commitment weve made to our members. Equinox is recognized as a leader and we believe it is important to protect our community and do what it takes to protect our community of employees and members. Weve already done things that most have not. So withcontinue to do our employees and make sure we create the safest environment possible. Lets talk about your employees. You have furloughed them, not let them go, correct . That is incorrect. The majority of our employees continue to be compensated by the company. We furloughed a group of employees that we felt would be financially better off because of government initiatives if they were furloughed and collected unemployment. But the majority of our employees continue to be compensated by the company, which is clearly unique. All of the hardhit industries that have effectively zero revenue, hospitality, retail, and the like. It, ifdo you think of you wind up reopening some clubs, if demand is uncertain, do you expect a second round of valuation . We continue to evaluate it. When you dont have revenue and you have the unknowns, it is an ongoing process. Weve taken the measures that ive mentioned so far, but we will continue to evaluate, hopefully we will be able to open some of our markets in the immediate future. But there are uncertainties there and we have to evaluate what kind of spending we can incur until we are open and generating revenue. Romaine we were just listening to the chairman of equinox. Speaking earlier here on bloomberg television. Right now we want to turn to what is going on with commercial businesses. A lot of executives publicly question how much real estate their Companies Need once they get to the other side of this crisis. Bloomberg u. S. Real estate reporter joining us now to discuss this. All of us right now are doing a lot of things from home that we would normally do elsewhere and we are getting used to it. How are a lot of these businesses, offices, hotels, etc. , how are they going to deal with the potential of getting people back to their facilities in a safe way to make people comfortable . Problem,a big especially landlords in places like london and new york. If you have an Office Building in new york city, you are looking at the subway, long island railroad, wondering when it is going to be safe to get your people back onto public transportation, and that leads you to the question, if we are going to live like this for a while, do we need all this office space . Scarlet one thing that struck me when reading the story is how inflexible and rigid a lot of commercial leases are. There are no modifications. You guys see that changing. Give us an idea what might change. It is kind of ironic. Works like airbnb and we have disrupted the traditional model. They are both struggling right now because of the pandemic issues. But theyve introduced ideas that i think people want, which is more flexibility. Tenantsot a bunch of who are creditworthy, twentyyear leases, they are going to pay on a regular basis. Those Companies Might not want 20 years anymore. The world changes very fast now. Im not going to be able to commit to a 20 year lease. What about some of the investors in these Real Estate Companies . Weve seen shares of sl green and others basically trading around the lows that we saw back in march. Is there anything that is going to make them more comfortable investing in these companies . Two stocks that people in new york know pretty well, they own a lot of properties, Madison Square garden, where theyve been rebuilding that, they are really exposed. New york city has been the epicenter of the pandemic. Sl green has a giant tower going up in grand central. What all of us are watching the news and trying to think about, when we will be back in the bustling city . It is hard to imagine that happens any soon. It is really sort of return to normal life that would be good for investors, but it is hard to see that now. Scarlet little visibility for everyone. Craig, thank you so much. Covid19 keeps College Students stuck at home, Higher Education may be right for disruption. We will discuss the future of Higher Education with scott galloway. From new york, this is bloomberg. Romaine alongside scarlet flu, lets get over to Mark Crumpton standing by with a bloomberg first word news. Mark President Trump says hes hopeful there will be a Coronavirus Vaccine available to americans by the end of the year. The president unveiled what has been named operation warp speed, which Administration Officials have billed as a Manhattan Project style effort to Speed Development of a vaccine. The fda is giving new guidance to the white house about how often President Trump and others should be tested for covid19. This after data suggested that a rapid test made by abbott labs and used by the president and others may provide inaccuracies and false negatives. The fda says if someone is suspected of having the virus and the first test is negative, a second test might be worthwhile. New york city will remain on lockdown for at least two more weeks. The city and other nearby regions did not meet requirements for reopening. Says fivendrew cuomo upstate regions can reopen. The metrics used include requirements for hospital bed capacity, testing, and tracing. In florida, gyms can reopen and retailers and restaurants will be able to operate at 50 indoor capacity beginning monday. Governor ron desantis says florida has dodged the worst case scenario. He said today that ventilatory use and covid19 patients in intensive care units have both declined significantly. Global news, 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Scarlet . Scarlet thank you so much. The u. S. Has seen some of its highest jobless claims numbers in decades because of the pandemic. Our Bloomberg White house reporter spoke with the u. S. Labor secretary about trends in jobs data. Lets take a listen. The numbers for last week were a little bit under 3 million. It is a high number. We are looking at 36 million americans that filed for unemployment over the last couple months. It is difficult to see. We are reminded daily of the sacrifice that workers and their families are making as we try to beat the virus. There are some positive signs that the number of people filing is declining. There is a backlog that is being worked through. We know the situation is so fluid. Now people are going back to work. That is very good news. Talk about how jobs are lost. A week ago,