President respond to it today. I am not going to go into it at length, but let me cut to the chase. And arizona are where new york and new jersey were 85 days ago. That is what you need to know. It is extremely important to understand that something has changed in the last 24 hours. This is the story front and center today. Jonathan the numbers are worrying. They are concerning. I am not going to get excited about 3 billion of trade between the eu and the United States. This has got to be about the reopening process. Does it constrain policymakers ability to push forward in states like texas . It. you just nailed consumer confidence, i think, is probably going to be one of the biggest drivers. We are already seeing this anecdotally across the country. Meanwhile, we have economists trying to get their hands on around just what this means. We will get projection from the imf on their latest earth outlook. They already pretty good the deepest recession globally and almost a century. We are expecting them to downgrade that forecast. ,he other thing i am watching crude Oil Inventories are expected to have built, which means possibly there isnt as much demand as people previously thought. To your point about trade tensions, eu diplomats may decide to bar americans from traveling to europe for fear of catching the virus. It just shows how global this phenomenon is. We cant just tackle hotspots in specific areas. It really affects global trade, global travel, and global commerce. Jonathan ive got skin in the game here, so i will make it very personal. If my family in italy cant come to america, why should tom keene be able to go to venice and cruise around the streets wherever he likes . For me, the relationship between europe and the United States is one thing. Lets talk about the relationship state to state in the United States right now. Only a few months ago, there were states outside of new york worried about new yorkers going into their state. That has flipped 180 just a few months. Tom it has flipped, but i love what you say about the politics. Morningut earlier this with Vice President biden with a 14 point lead over the president. Fine. But youre absolutely right about the blue state red state dynamic in that. What i would suggest is houston is going to run out of heads of beds in x number of days. We need to focus on the pandemic and the medicine. I wonder if the politicians, particularly at the white house, how they will adjust to that not only in the coming days, but frankly in the immediate morning and afternoon on this wednesday. Hospital capacity is something weve got to talk about later in the program. We will catch up a little later with Kevin Cirilli. Equity futures negative, just a mild move lower relative to some of the craziness we have seen over the last couple of month. 0. 75 . Down by 23, off by we begin this morning with someone who was constructive when others werent. Of Morgan Stanley, cio of wealth management. Fantastic to catch up with you. You have been right over the last couple of months come about after the last couple of weeks, the cyclical rotation has started to fade. What is the message for clients this morning . Think as you articulated, the concerns over the recent spike in cases is something that investors are definitely grappling with. To your, we have seen a defensive rotation, albeit on the one hand, people sustained by the fuel of the fed, but on the other hand, buying things like gold, like utilities, like. Taples we have articulated that we period was really going to be a range bound market, and we are sticking with that. We still think theres opportunities to buy those in 2021, 2022, but we understand that we are in a very critical period here, and we are not surprised by this rotation, and certainly it is validated by that news flow that tom talked about. Numbersup in the virus in the last week. Compared to where we were a couple of weeks ago, you sound relatively more cautious. I wonder what is at the epicenter of that turn for you. As i said, ia s think we are a little bit more cautious. We are still very strongly in that range that weve talked about between 2900 and 3200. Spike in look at the the covid19 cases, while we dont think that theres to really go back to the style of all outlook downs we saw in march and april, these are numbers that are going to cause people, local towns and cities, concern and stress. Limits inrt hitting certain cities and municipalities on their hospital capacity, they will have no choice but to once again restrict Economic Activity. I think that that is kind of what you are seeing in the numbers. Joke, you cant fight the fed, but they also worry that the only things are going to work in an environment where the recovery is very lumpy and impeded by the virus may be with those very defensive names. Good morning. Youve always then researchbased, to the acclaim of Sanford Bernstein and the wonderful block books and all of that. You always lead with research first. What are you learning from the Morgan StanleySell Side Research team about this nation and its corporations . What is the spirit they are hearing, they are feeling going into the summer and the mystery of the fall months . Of the mostink one interesting things we are debating is the extent to which companies are going to resume their Capital Spending. One of the reasons that we as a house have been somewhat more bullish than many, and why our have stuck tosts this more bullish vshaped weovery forecast, is because are seeing a pickup in Capital Spending intention. That is something that i think earlier in the year was much more hotly debated. Spendingthat capital does seem to be focused on technology and the cloud, digital presence, but that is remainwhere we still very bullish and constructive that that Capital Spending can help sustain this recovery. Lisa a we are going to be very lucky to have chat and i to have with us tomorrow your colleague. Made . E easy money been can we just expect lower returns Going Forward . Lisa s that is certainly our view. If you just look at the last decade, and we talk about this all the time, over the last 11 years, the s p 500 has compounded at close to 15 per normal. Ich is two times this normalized metrics, normalized earnings, these are very expensive markets. We are looking at returns over the next three to five years that are going to be a lot more like 4 to 5 , not 7 to 8 come about that of 7 to 8 that a lot of clients have expected. The federal government is doing its part on fiscal, but it is really hard to see how financial materiallyeciate without us really getting into [indiscernible] Jonathan Lisa shalett of Morgan Stanley, we thank you for your time this morning. Our best to the team over at Morgan Stanley. One of the big pulls off the market bottom starting to sound a little more cautious over the last few weeks. Tom theres no question about it. We have seen these huge gains, up 40 is the general number. You are seeing some of that caution this morning. I have been watching gold. A call over the last 18 months on surging gold, 17 dominate surging gold, 1796. That is the chicago gti future. Lme london gold, a different price. Still confusing. Jonathan lets just leave it there, shall we . Lisa abramowicz, it would be disingenuous of me to say that this market has been ignoring what is happening because it has become a little bit more defensive. Eve had eight straight gains the cyclical rotation has faded in a big way. Still veryech is much in charge, and it goes to the story that the equity market is not the economy. Everything else is left behind. Keene,n alongside tom im jonathan ferro. This is bloomberg surveillance. In the equity market right now, we are down 20 on the house and p 500, negative on the s p 500, negative sera. 6 . Negative zero point 6 . Next, we will catch up with Kevin Cirilli and washington, d. C. Ritika the Trump Administration is considering new tariffs on 3 billion of exports from france, germany, spain, and the u. K. Largeruld spiral into a transatlantic trade fight this summer. It would boost duties on products including cheese and yogurt. Some of the biggest states are seeing a jump into coronavirus infections. That has thrown reopenings into disarray. Cases are surging in texas, florida, and arizona. Meanwhile, palm beach county, florida has become the latest jurisdiction to make Wearing Masks mandatory. When borders open again, the European Union may keep americans out. Eu officials are discussing the sting the curb on nonessential travel discussing lifting the curb on nonessential travel next week. U. S. Citizens would not be ofowed in because health reasons. Mlb agreed to have a season this summer, the shortest in more than a century, according to the associated press. Teams will play 60 games. The season will start in the third week of july. 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. We are beginning to discuss the different aspects of what another bill would look like. We want to take our time because, number one, theres a lot we still havent put out. And we want to make sure whatever we put out is much more targeted to the business is most impacted. Jonathan perhaps not what some people wanted to hear. That was the treasury secretary Stephen Miller jen. Alongside tom keene, im jonathan ferro, together with Lisa Abramowicz. Equities bounce off the bottom, still down 21 on the s p 500, 0. 7 . Bonds not doing much at all. Treasury yield unchanged on the 10 year at 0. 71 , and in foreignexchange, eurodollar going nowhere as well. Thei think the focus in next 30 days in washington, the composition of the next fiscal stimulus bill that washington puts together and agrees on. All i still think it is shaded over by what we are seeing with the virus. I have yet you know, to say chancellor of the exchequer correctly. I think you are right about fiscal stimulus. Our chief washington correspondent Kevin Cirilli, how does this better with the virus in florida, a battleground state, change the next stimulus debate . Kevin i think it puts pressure on republicans to get some sort of economic stimulus through before november. President trump has laid this out very clearly in Public Comments he made to reporters yesterday, saying he is in favor of there being another round of economic stimulus. Someis going to open up divisions within the republican party, many of whom say as states reopen, that is the best type of stimulus for them, especially as economists are now predicting there to be a step up recovery entering into the Third Quarter and Fourth Quarter of this year. Speaking,roadly whether we are talking about infrastructure, whether it is secretary mnuchin suggesting that a second tax filing delay could be on the table as well, there are many different economic tools the white house could factor in as we get closer to november 3. Tom the democrats still have to have the up and up. Lets take the stimulus debate and what speaker pelosi, senator schumer, and others would do. You see a progressively shocking times on Vice President biden. Why should they cooperate on stimulus with the republicans . Kevin exactly. Every strategist i speak with says the Biden Campaign once to make this a referendum election against President Trump, not a choice election between the two candidates. It is why you are seeing the democrats only agreeing to three president ial debates, one of which was moved from michigan to florida because of covid19. This as the uptick in florida continues to make had waves continues to make headlines. Somethingfinitely that the democrats feel, at this point, is theirs to lose. I spoke with a source on the Vice President s campaign who terms,at, in very clear when going over strategy for how to continue through this summer, they really just want to get out of the way. In this get out of the way, from theources words, president because of how hes stepped over himself. The president s Reelection Campaign looks at the economic verse, the projections of reopening helping the economy, regardless of whether there is enough there is an uptick, and the president still getting positive marks on how he has handled the economy in the lead up to november. Jonathan lets get down to the statebystate story. Lets get to florida to talk about how Governor Ron Desantis is handling the on the Ground Handling things on the ground. I wonder how that is bleeding into the debate about who should lead the country, republican or democrat. Kevin yesterday, i spoke the former congressman patrick murphy, a centrist democrat who told mely served and the debate is alive and well in terms of the reopening, particularly how Senior Citizens are being impacted in florida. Florida, we all know, so battleground state in elections. It was the state the president state hen 2016, also a has deep ties to given maralago. However, the senior population is a crucial demographic for electoral politics in that state , and the president has significantly taken a hit amongst Senior Citizens in the last couple of weeks. Still not too late for him to rebuild, but also look at the hispanic vote in that state. That is why covid19 is so important, trade policy so important, but the geopolitics of that region, whether we are talking about venezuela or trade, is also important. Lisa i want to get back to the big story in my mind, which is stimulus and further potential support for household. How much pressure will there be among legislators to reup the Unemployment Benefits or ifsibly send out some checks there arent official shutdowns, but you see slowdowns and a lack of confidence that people can go out and not get sick . Kevin well, get this. To your point precisely, many of the states having the uptick are red states, so that is where the on them point benefits debate really becomes so the Unemployment Benefits debate really becomes so textured because many republicans raising concerns about the economics of this are also staring down upticks in terms of that virus. As this continues into the fall, i do want to note that dr. Fauci yesterday testifying before congress, saying he has cupped he is cautiously optimistic that a vaccine could be in the market by the end of the year in the United States is a massive sign of optimism. However, that is what is really writing really weigh on republicans right now, a wait and see approach. Jonathan kevin, thank you. I think we are all hopeful that we can advance the science over the next nine months. The idea that this administration would together another fiscal stimulus package for five months out from the election, to me, is unthinkable. It has got to come down to the composition of this stimulus package. Will it be all focused on the supply side . That is going to be the big issue over the next 30 days. Jonathan absolutely lisa absolutely. Steve mnuchin seems to push for rehireentive to the aspect. There are still so many questions when the virus is spreading. Jonathan questions we will try to get the answers to over the next 30 days. From new york city, good morning to you all. Abramowicz,sa together with tom keene, im jonathan ferro. Equity futures down 22 on the s p 500, 0. 7 . Coming up, Michelle Meyer of bank of America Merrill lynch, head of u. S. Economics. That is on this program, live on bloomberg tv and Bloomberg Radio. This is bloomberg surveillance. W . W . Uhiono jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and Bloomberg Radio. Alongside tom keene, together with Lisa Abramowicz, im jonathan ferro. Two hours away from the opening bell, price action is follows. S p 0. 7 . Wer, an eight day winning streak on the nasdaq coming into wednesday, and alltime highs on several of the big tech names. A defensive posture, if you want to call it that, as the mega caps start to outperform again andy cyclical rotation again and the cyclical rotation against to stall. Yields higher on the 10 year by almost a basis point now, 0. 72 . In foreignexchange exchange, the swissie and the yen just about outperforming where we see elsewhere. Muted price action across g10 this morning. Tom what do you see in Australian Dollar . I look at us trillion dollar against u. S. Dollar today, australia versus renminbi, and finally versus the yen. It really shows a more optimistic tone for australia. Do you agree . Jonathan seeing the aussie right now on the session just slightly weaker on my screen, inline with the defensive posture we have seen over the last 24 hours. Coming into june, we saw a lift, largely seen as a growth proxy with that cyclical rotation, but it has faded on my screen this morning. Tom no question its faded. It will be interesting to see what we hear from the many strategists as well. Right now, a really wonderful conversation on how we are framing our expectation forward. Michelle meyer came to the attention of all of global wall street with her financial modeling, learned at boston university. She did brilliant work for bank of america on real estate, on the sinking