Exceptionally good guests this hour, and we will begin with a moment. Haass in an extraordinary place we are in right now, waking up to the imagery of a darkened white house. The president choosing not to speak to the nation as wasnt dissipated last night. To the north across lafayette , a boarded hay adams. A fire in the historic st. Johns episcopal church, the church of the president s. Pew 54 is where they sit, although lincoln sat quietly in the back. The protestsct to in continental europe. Your thoughts on this file and we can. Jonathan i dont think anyone needs my personal thought, not from a journalist whos barely left his apartment in the last three months. I dont think theres much value protests in the europe in the United States. Theres a deep history in the United States. The plea unsettling to see the equity market emotionless against the backdrop of the weekend. Commentt uncomfortable beautifully, absolutely nails it. Alm iscomfortable c also in the fixed income space. It has been surreal, all of the eight by institutions including the fed. What do you read about the calm of the bond market as we begin to . As we begin june . Lisa theres a real uncomfortable calm, to borrow into term, with the bid speculative grade credit. I want to go back to something jon was talking about earlier. How much does the fed can trip income inequality the fed contribute to income inequality . If they hadnt done anything, it would have been potentially catastrophic for the economy. That said, the fact of the uncomfortable calm is leaving people with more assets, more more assets, more wealth, and leaving other people behind. Tom we will set you up for the week as well. Quickly, without question the hallmark report of week will be the friday jobs will be the friday jobs report. Jonathan that is going to tell a very distorted picture of what is actually happening in the labor market. Market, and i borrowed that phrase i think, that uncomfortable calm, this market is very focused on the cyclical recovery as we reopen. But it is still unsettling to see the events of the weekend do absolutely nothing to shape Risk Appetite were investor appetite whatsoever on a morning like this morning. Thrilled to tom bring you right now on bloomberg surveillance richard haass. He and i have the memories of the late vietnam or. Vietnam war. Far more important than that, we have Crystal Clear memories of 1968 off 1867, 1967, 1968. I go back to the rochester riots of 1964. How different is this from what we remember of our youth . Richard it is different, and it is different in some worrisome ways. In 1968, you had some awful things in terms of assassinations and the rest. In 1970, you had kent state. What is different about this is what you were just discussing, the backdrop of a Public Health crisis that has claimed the lives of well over 100,000 americans. We dont know how many more are coming down the road. Against 20 , 25 unemployment. It is a combination of physical threat, economic threat, Political Division and violence. It is a combination of the three that has got to have people worried about where this country is and where it is heading. You and i room for the speech you and irene, the speech of lbj. It was widely expected the president would speak last night. He and his advisers decided not to. Hehard it seems to me should only speak if hes got something healing and reassuring that talks about not just mr. Floyd, but the lessons that need to be learned and applied about policing. He also needs to address Public Health concerns, economic concerns. Essentially, he has to step up to the moment, stop the divisive tweets, stop the personal attacks. He should only speak if he is willing and able to rise to the occasion. But if he wants to use the occasion for political purposes, or to deflect or attack, essentially less is more. He should continue to stay inside the white house. Lisa i am wondering if you pair what we are seeing in terms of domestic unrest with President Trump withdrawing from the who on friday, something that has evaporated from new cycle, i am wondering if you can compare domestic unrest with u. S. Isolationism. Feedbackthat feedback onto the United States as a leader . Richard we havent been pushed out of their leadership role of the last 75 years. We have taken ourselves out of it. We have withdrawn from more arrangements, agreements, institutions that i can count. You have an abdication of leadership, but on top of that, you have the example we are setting for the world of incompetence and ineptness in dealing with the pandemic. We are seeing this violence. We are seeing Violent Police activity, as well as violence on the part of some of those who are protesting. I part of foreign is will put it in another way. One is what your leaders do. The president has basically said we are going to withdraw. The other part is leadership is what you do. This is hardly an example anyone would want to implement. This is about as bad as it gets. Jonathan good to have you with us. I havent gotten through the whole of the new book just yet, but if there is a chapter in their on hegemonic power, have we ever had a reluctant hegemon that just steps away . Richard no. One of my previous books was alled the reluctant sheriff, and i use that to apply to a previous president , but it applies much more to this one. It voluntarily stepped down not because of circumstances, but because of choice. Britain was forced to back Office Leadership role, it essentially was forced. It didnt have the resources anymore. It was too small of a country to sustain that role. This is voluntary. What is so worrisome to me, it is not as though we are stepping back, having put Something Better in place. Lead to mystic situation, it were mines me of the Health Care Situation the two parallel the domestic me of the it reminds Health Care Situation. We repealed but did not replace. Jonathan a lot of people like yourself and i am not saying these are your thoughts feel that maybe the world pulls back into two spheres of influence, with china at the center of one and the United States at the center of the other. Is that something you can see happening . What do we need to see that come around . Richard i wouldnt want to see it happen by any means because china represents a model i would hardly want to see spread widely, in terms of its authoritarianism at home and given much of its modern history. I think a more likely alternative to a u. S. Led world is a nobody led world, a world of greater unraveling, of greater violence, of a greater greater gap between problems and responses. The United States working with others, and including china, to deal with everything from proliferation to terrorism to Climate Change to Public Health to regulate the behavior in cyberspace and so on and so on, that to me is going to define the 21st century. I would say that after two decades, we are not off to a good start. As these distractions mount with respect to u. S. China trade tensions and domestic unrest, what is the increasing risk of some sort of infiltration by bad actors to the United States that go undetected . Richard we have probably already had infiltration through cyberspace. I think that is the biggest one. I am more worried about some global event. One could even argue some of the chinese are doing in hong kong is [beep] [please stand by] jonathan this week . Tom ive asked that question in my Early Morning hours three times today. I will go to matt bennett, who helped president clinton years ago, in it is just not the right time. I dont buy it. In these absolutely unique times, i have been thunderstruck at the lack of visibility of the Vice President , full disclosure. Jonathan equity futures positive by 2 by two points come up about 0. 1 . Good morning to you all. This is bloomberg surveillance. Ritika with the first word news, im ritika gupta. There were more violent protests across the u. S. Tens of thousands of people took to the streets in Peaceful Demonstrations against the killing of a black man, george floyd. Was overshadowed by violence from new york to los angeles. Stores were looted in more than 20 cities. Several thousand now snow guard troops have been deployed thousand National Guard troops have been deployed. The trade deal between china and the u. S. Is in jeopardy. The Chinese Government has halted purchases of some american far goods American Farm goods, including soybeans. Aging is evaluating the escalation of tensions with the u. S. Over hong kong. Goldman sachs says the u. S. Labor market is showing early signs of recovery. Goldman points to a drop in continued jobless claims, especially in states that reopened earlier than others. At expected it expected unemployment to reach its peak this month. Now it believes the worst place last month at 22 . U. K. Government reportedly planning and economic stimulus package in july, according to the financial times. Proposals were said to include spending on training and infrastructure. The british economy could shrink 25 this quarter. That would be the deepest drop in more than three centuries. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Hong kong is going to get squeezed. That means the middle class in the Business Class in hong kong will be less robust. Jonathan ian bremmer of the Eurasia Group on the situation in hong kong and the tension between the u. S. And china. You could throw a dart on the map of the world right now and you would find some pretty much everywhere. In this market, you wont find much tension. Equities unchanged on the s p 500. Outside of that, and the bond market, treasury yields the 10 year up by a rowdy basis point and change to 0. 67 . In foreignexchange, touching on the story of the last couple of weeks, the dollar weaker, euro stronger. Eurodollar up by 0. 1 in some performance on the aussie. A key week ahead not just politically speaking, but the data front and center as well. It concludes with payrolls friday. Tom it is going to be amazing. I know you want to talk to our next guest about pmi and some of those dynamics. Ethan harris with us, and we welcome all of you on radio and Television World wide. Head of Economic Research for bank of america. Dr. Harris, i want to go back to your book on ben bernanke of ages and ages ago. I believe in your book, there was somewhat conventional economics. That is out the door. If you were to write a book right now on jay powells fed, how would you tackle the can but annoy economics of the moment the conventional economics of the moment . Ethan the super crisis playbook playing out, it is not completely new. We saw the dead kind of experiment with some incredibly radical policies back in 2008, has kind ofwell taken that to a new level. It is crisis management. It is not totally unprecedented, but the scale here is something we have never seen before. Jonathan lets talk about lisa lets talk about the data we have been seeing. Goldman sachs upgrading their expectation for stocks, saying the jobless data actually confirms a view that is more optimistic and they were previously expecting. Are we expecting something that resembles more of a vshaped recovery in the economy than accounted for . Ly ethan i dont think so. We are going to bounce off some awful numbers here. We think the Unemployment Rate hits 19 . That is partially temporary due to the shutdowns, and that data is already a couple of weeks old, so we are going to see the Unemployment Rate come back on again, but what is it going to come down to . It is probably going to be above 10 at yearend, which is where we were at the worst of the 2008 2009 recession. A vshaped recovery, this is a funny v, where the lefthand side plunges, and on the righthand side you go halfway up. So i dont think we are seeing vshaped numbers right now. Onathan the market focused the sequential improvement as you go from shut down to reopening. As you point out, we are still not quite focused enough on the limits of this every. The hope is there. A lot of people look to the soft data as a leading indicator for how quickly this economy might be reopening and normalizing. I know you have done a lot of work on this, so i want to explore it with you in a little bit more detail. Why are the pmis so florid right now . Why are they less useful than they were . Ethan lets think about what a pmi is. You are asking an executive at a firm to tell you whether activity was up or down this month. Lets say activity collapses in a month, so the record that it has collapsed, and you get a pmi that is very low, 20 or 30. Many executives are saying activity fell. But lets say you dont recover andll and activity is flat the following month. The pmi will go back to 50 because they are saying the activity is flat is very depressed levels. People look at the data and will see we went from 52 down to 30, now back to close to 50. That is a v. It is not a v. Above 50, which means you are starting to recover. You see growth that offsets the collapse. Theres been a tendency to miss the fact that we have to look at the 50 level. That is a flat economy. Collapseomies after a is an lshaped recovery, not a vshaped recovery. Is reallyethan, this important as we gauge and digest the data in the coming weeks and months. What is the best data point to follow . What are the teams following, the highfrequency data. What are you looking at the moment . Ethan the new york fed has a nice indicator that takes the 10 highfrequency numbers and creates a weekly index. That indicator has fallen sharply and has a very slight recovery. Other dailynes and and weekly statistics. That is a pretty good number. I do think that some of the google mobility data is useful, numbers that measure whether people are going to the train station or not, whether they are going to retail shops or not. All of these indicators are showing that we are starting to move off the bottom here. But at a very slow pace. I guess i shouldnt forget, we also have some good data from bank of america in our credit card and spending data that can also capture these trends. Jonathan that was the plug. Tom nice to get that in there, dr. Harris. Nihan, i hope you heard that. We all understand the coefficient is not good. We understand the inequalities of america. Give us your interpretation of the dynamics of that inequality right now. Were in a good phase late in the cycle until covid hit. The weaker parts of the labor market were recovering. You were finally getting some wage growth. You are bringing in people. You work, you learn and become better and build your resume. That was happening, so the inequality issue is actually starting to improve slightly. The covid crisis has been really bad because it is putting out of work a lot of lower income workers in the Service Sector and so on. So the shock is very disproportionately hitting low income workers, minorities, and other disadvantaged groups. It has been a blow to what was beginning to be some progress. Jonathan ethan harris of bank of america, really appreciate your time. Send my best to the team. Some fantastic work over the last few weeks on this pandemic we are all working for. I think ethan touches on the heart of the issue right now. Theres a clear difference between the improvement you see from shut down to reopening, to focusing on the limit of that recovery. It seems a lot of people have focused on sequential improvement and not the limits of the recovery. Specifically, how much can we normalize . Ethan absolutely correct tom absolutely correct. If the level goes back to 12 unemployment, and any other economy, that is totally unacceptable. Jonathan doubledigit unemployment going into 2021 is considered an acceptable, yet economists like ethan harris think that might be where we are. Will bep, rob waldner joining us. This is bloomberg. Jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and radio. Alongside tom keene, i am Jonathan Ferro together with lisa abramowicz. Counting you down to the opening bell one hour away. At 3039 ontive. 1 the s p 500. In the bond market, treasury yields with little bit of a lift. Up four basis points on the 30 year, up two basis point contents. Your tenure maturity your 10 year maturity. 67 . The dollar is weaker with the euro firmer. The dollar weaker against everything in g10. And with the dollar weaker the safe havens off it will be interesting to see what the safe havens to depending on which way the markets go. So much has to do with fixed income, something that is a bit off the radar with the International Relations and the political news and the stupendous rebound in the stock market. Rob waldner is with invesco, their fixed income strategist of note. He joins us. His total return gone . I cannot figure out class to class in fixed income, and michael mi clipping a coupon or can i invest in fixed income total return . Rob thanks for having me. In fixed income, Government Bonds have a lower negative yield. Much of the Government Bonds have negative yields. That will not get you much. Outside the government market, there are yields to be had. , for capitaltions gains. Our strategy has been to concentrate on buying fixed and more quality than the fed was purchasing. That would be Investment Grade bonds. Inside five years is a very safe investment. Tom loans have been a challenge. There was a phrase called leveraged loans with Jonathan Ferro understands, i do not. Understandsicz leveraged loans. Rob waldner, i do not