And Lisa Abramowicz. Tom good morning, everyone. It is news packed. Politicsng things on and international relations. The operative word this morning is stimulus. It is stimulus in europe, an announcement shortly, and presumed stimulus meetings in washington. Jonathan in europe, it is about signal, not size. Making progress, they meet again at four clock p. M. Local time, 10 00 a. M. Eastern time. In the United States, it is about size. Theres a 2 trillion spread between democrats and republicans as Congress Returns to work in washington. Not small change. Tom what do you see in the bond to 4 when it devolves trillion, ive even seen a 5 trillion deficit . What does the bond market look like into the end of the year . Lisa it is wide open. Basically, saying we will give you money at the lowest ring cost on record in order to borrow money. You see that for the u. S. Government, also for u. S. Corporations. Right now, the cost for investmentgrade companies to borrow in the United States is below 2 . This is the all in borrowing cost. That is a government type level. And we are talking about a time with rising defaults. Beat lester. Tots soathan he mispronounced it he can make like he doesnt nobodys talking about, but he watched more of that game than i did. [laughter] tom coming up, a lot of this is the dynamic of the inflationadjusted yield. It is just not there. Jonathan real yield might be back on television in some form, but there is no real yield in this treasury market. Inflation expectations have picked up. The Federal Reserve is about to go to a new phase. They are about to tolerate higher inflation. That does not mean inflation is going to pick up just because they say we will tolerate it. How they formalize that in Forward Guidance is going to be key in the next couple of meetings. Tom that segues nicely over to our next guest this morning. Eric freedman joins us, u. S. Bank national chief investment officer. Calibrating the equity market given all of these stories, you go back to something a bit odd, the gordhan dividend account model. Does that math work in this lt tumult . Eric we think it does work. If expectations start to consistently head lower, we want to own more stuff. Diversifieds like interest streams, whether that is from dividend generating companies, from real estate, those are things we think we have to own for clients to continue to keep up with shrinking yield environment. Jonathan if we are going to have lower, negative real yields, is the signal to buy growth equities. If growth and the price of growth is going to be at a premium, isnt that what we have to be position for . Eric i think you do. Part of it is at what cost. What we decided to do last week is rotate a bit away from largecap domestic growth and into more midcap smallcap equities. Not a full position rotation out of growth because we still think that scarce growth value is really important. I think theres really two horizons have to think about. Horizon one, what does the recovery look like for the vaccine . Does it lookwhat like post vaccine . We think in either scenario, scarce growth will work. But when you have a big runup in growth equities, it can go on perpetually. That is why we took some off the table, but i still think theres a reason to hold onto it for either horizon right now. Lisa how much conviction do you have going into small caps right now, given the fact that default rates are increasing, that the u. S. Economic recovery is slowing, and given the uncertainty on what the policy mix will actually be . Eric you always do a great top on the credit side, especially looking at implied default rates. We do think you have to have some positioning there, some footing. If you look at equity not i dynamicsuity market , you will see. Tech really had an outside day were you some rotation away, and markets still held up. If you look at what help up, it was things like auto companies, capital goods materials, really economically sensitive stuff. While the perspective growth rates will probably come down a little bit, as we get towards that second horizon, a post vaccine world, there is some value to be found in some of those smaller companies. To your point, if we see default rates pick up, if we see some especially inhop, backtoschool, that is a case where we could be wrong. We are willing to take that at least on a partial basis and have a little more progress mentality, especially with small and midcap companies. Jonathan it is amazing that people are still reflecting on the price action of last monday. That huge reversal full check reversal for tech in the weakness that persisted throughout the week, what was the signal you took from that . I thinkhink the eric the biggest thing was that the market still hung in there. If you look at an environment where you say that happened two months ago, that probably would have been down 5 , 7 for the week for broad u. S. Equities, but the fact that we were actually flat with a lot of tech readership rolling over, that is a positive. I think the next few weeks will be really important, especially as we get closer to the backtoschool phenomenon because the state and local response is one we have to pay really close attention to. A lot of schools domestically and abroad are still playing it somewhat by year based on how the data looks. The fact that we saw a rotation out of technology, and yet we did see the equity markets hang in there, is at least a good sign, but worsening covid data could reverse that. This will be an important next couple of weeks. Tom you are way too optimistic. The vast majority of the interviews you are doing are of measured caution and outright doom and gloom. What do they get wrong . Eric i think basically, our viewpoint is that over time and i dont mean to say this when we are talking about weeks, that risk premium work. If you are patient, you will be rewarded for the risk you take. There is still a tremendous catchup trade that has not happened yet. I mean europe, smallcap, midcaps. Think of some of the really bond out sectors. Theyve had a nice bounce since the march 23 lows, but we are not even close to where we have been, nor do we actually have the opportunity to see those companies. There is some consolidation this morning. The bottom line we think there is some room for measured caution, a lot of the things have been discounted already. Of course, we have to be responsible. We have to be reminders of some of these risk that we dont have great edges over. The path towards a vaccine is an important path, but one the market will be priced on other Great Impressions for when it arrives. Lisa the lack of real yield driving people into assets despite the bleaker Economic Data also driving investors into gold, reaching the half levels in six years. It is only a matter of time before it hit a new record high. Where are you uncle . Gold . N are you on we have seen a little bit of a pause in Balance Sheet expansion. We think that is more temporary. Somewhat more technical reasons as opposed to fundamental reasons. So as you see this continued centralbank stimulus, europe on the tape, and likely will be later this week with an increased commitment to increased stimulus, we think that is going to drive the price of gold higher. We have been waiting for a pullback to get a little more aggressive. It just hasnt happened yet. We do think the risk is certainly higher as opposed to lower for gold. A key thing to look at is the total size of centralbank sheets as a great harbinger of that price. Jonathan great to catch up with you, as always. The complaint about gold for decades was gold has no yield. Guess what . They are negative, and that has been the real story, the shift of the last several months. Jonathan but also encouraging tom but also encouraging as well. Gartman has been dead on on this. A lot of major houses have gotten the skull right. Jonathan can i give you a flavor of the south side conversation at the moment . Just a little bit over the data, there were concerns about claims this weekend or next week, concerns about the payrolls report, maybe next month or the month after. That is about a second layoff story. We have started to see things materialize. Theres real concerns about the data that wasnt there a couple of weeks ago. Lisa basically, furlough is becoming permanent layoffs increasingly, with companies saying it would be ridiculous for us to operate our business the same way we used to given the post pandemic reality. A little bit, but perhaps it is a sign of what to come. Jonathan the conversation just starting to shift a little bit an important week for earnings. Up next, we turn to europe. Brussels and focus with carsten nickel. Good morning to you all. For our audience worldwide, this is bloomberg. Ritika with the first word news, im rick a good. In new im ritika gupta. Gunman targeted a federal judge, killing her husband and wounding her son. Last week, there is a lawsuit against Deutsche Bank for alleged ties to jeffrey epstein. The netherlands, austria, denmark, and sweden certified 450 billion of the fund being made available as grants. The result will be in the form of low interest loans. Eu leaders will meet again today to work of the remaining issues. The white house and Senate Majority leader Mitch Mcconnell begin talks today on a new coronavirus stimulus package. Bloomberg has learned the alkingstration is b at 25 million they want for Contact Tracing and testing. President trump is playing down the resurgence of coronavirus cases in the u. S. He told fox news that many people experience nothing more than sniffles. The president called the u. S. Response to the outbreak the envy of the world and called his Infectious Disease expert chief anthony halsey alarmist. Anthony fauci alarmist. Chevron offers to take over noble debt. Oilould be the biggest takeover since the crisis caused by the pendant. By the pandemic. 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. Ta. This is bloomberg. The stakes couldnt be higher. If we do it right, we can overcome this crisis stronger and emerge stronger from the crisis. All the necessary pieces are on the table, and a solution is possible. Jonathan ursula von der leyen, the European Commission president going into a fourth day of talks in brussels between the eu 27. From new york city this morning, good morning to you all. Alongside tom keene and Lisa Abramowicz, im jonathan ferro. Counting you down to the opening bell, one hour and 12 minutes away, lets get you some price action. Futures recover a little bit, up four or five points down for five points a the s p. Theres your firmer euro. We give a little bit of that up this morning. 1. 1441. Italian yields coming in on the 10 year by eight basis points or so. It is not a done deal yet. Weve got to say that over in brussels right now. Progress on a deal . No, not yet. Tom i look at what is going to go on in washington today and in the coming days as we have an american process, but this european process has cut me by surprise. You were weighed out you were way out front on how this set of meetings was different. Jonathan i think there is some real urgency, and we got that you generate some kind of step forward over the weekend. We still need to discuss Strings Attached, and not just size of the grants. That was the discussion over the weekend. Lets have that discussion now teneoarsten nickel, intelligence european managing director. What do Strings Attached sound like going into this evening . Carsten it seems like we have made progress on the size of the overy fund being personas being proposed by the council president. But i think the question of scrutiny for Economic Reforms on the ground, as well as the question of the rule of law when we are looking at the overall budget for europe, that is obviously still very much in the open, and i think that is what we should be focusing on in the coming hours. Tom there have been changes since world war ii and how europe does business. Is this one of those changes, or is that asking too much . Carsten i think that is a good way of looking at it, to be honest. This is politically transformative, what leaders are trying to cobble together here. In terms of the overall size, it probably wont be enough. We will probably be back to this point in a couple of months and a year or two from now, but it is a literally transformative moment, this idea of going to the market together as the european union, showing solidarity and applying great scrutiny for economic reform in those Member States that are receiving the funds. So i think we shouldnt underestimate the political importance of what is going on here now. Jonathan that seems to be the argument from Market Participants as well. If that isnt enough, we got a mechanism to come back and it would again. That is the takeaway. Overwhelmingly, that is the consensus. Do you believe that is the case . Is there any reason to believe this is a oneoff . Jonathan i think that is the case because setting precedent in the process of european integration, if you look historically, it has always been very important. I think that is the warning sign. That doesnt mean that the next round and that steps that are still ahead of us will be without conflict. It doesnt mean we are getting a deal today that basically sorts everything out going forward. The closer we integrate, the conflict will play out on the european stage. I think we are getting the first taste of that now. Lisa i love that concept, politically transformative. Is it a hamiltonian moment . The question of the frugal four and how they really feel towards the Southern States, have there been any material concessions on the part of their attitudes ard some of the some some of the Southern States that are transformative in these negotiations . Carsten i think what is transformative is even with the , nobody hasl three questioned the idea of a recovery fund. That is the main movement. Billion, 300 50 billion, we are fighting over the mechanism to ensure that. That is all fine. But the very idea that in this exceptional situation, in a europe that depends so heavily on this in the market, that has never really been questioned. That is the main change here. Jonathan this is important tom this is important. Is brussels changed by this, or is it another ballet until the next meeting . Tom i think the main thing that is changing is member state politics, the domestic politics of the Member States. We have seen that across europe. We are usually focused on the bad news, the rise of populism and so forth. If you look at france, the from a european leader like micron, the changes from angela merkel. So for me, the worst thing that jonathan i hear you. The debate is about the size of this, not the concept. Just by nature of the conversation, that is progress for the europeans. A final question about this evening. This has to be ratified at home. For Prime Minister rutte, how hard will it be when the Strings Attached finally come out . Carsten that will be the key thing because he needs to be able to go home to the netherlands and remember we are going into Election Year in 2021. Hes under massive pressure from the populist right at home. He needs to say we are not just putting money on the table, but gaining influence in better, more sustainable policies in the south. She can say that, that is a pathway to a deal. Jonathan if we can keep the bonds board up and take a look at italy, i think that spells out what clearly what this is really all about, not just european integration, but helping italy. Overwhelmingly, that is where you see the positive response in this market. Tom just in the last 10 minutes, you see yields lower. The negative yield becoming even more negative. In the u. S. , breaches of 2. 14 now. Jonathan i just dont believe this evening it is going to be fun and games in brussels around 390 billion euros of grants. Needsminister rutte to get a deal he can go home with, and there are going to have to be Strings Attached. Lisa especially at a time when the irony is that italy, which is being supported arguably the most by this program, is actually less supportive if you take a look at the polls of the european union. The Strings Attached will be key in guiding the Popular Support are not. Jonathan in italy, it might sound really low, but when you look at the spread against germany, the german tenyear right now is 0. 456 , setting just around the negative deposit rate. Ecb gives you an idea of how wide that spread is, italy versus the core of europe. Coming up this program coming up on this program, we will talk about the core of the labor market. Jason furman will be catching up with us next. This is bloomberg surveillance. Jonathan 60 minutes away from the opening bell this monday morning. This is bloomberg surveillance. Alongside tom keene Lisa Abramowicz, im jonathan ferro. 500, downoints in s p. 2 . 500 still held up and grind it a little bit higher. We will hear from the big tech names into months end in just a couple of days time. Yields. 61 . The euro slightly firmer. Eurodollar 1. 1447. A massive week. In washington dc, and brussels later this evening. Tom stimulus everywhere. Jason furman is the former chairman of the president s council of economic advisors. He is one of our great voices on policy and he has taken over the we are thrilled dr. Fuhrman could join us this morning. There is never been a next 10, whether you do it virtually in class. How do we come out of these magnitude of changes, the magnitude of fiscal policy, the magnitude of monetary intrusion into our system . Jason first, it would come out a lot better if we had a big magnitude than if we do not. We have to admit we are uncertain. We do not know the path the virus will take. We do not know what the pace of the recovery is going to be. It is very different in different states. You need to build that uncert