Alongside lisa abramowicz, im jonathan ferro. Tom keene back on monday. The equity market unchanged right now on equity futures. It is the bond market tickets your attention. The worst week for 10 year treasuries going back to june. Lisa very low rates, but it seems like theres at least a little bit of a concern creeping in about the record bond issuance from the u. S. Government. The question is whether this is a momentary blip. Today, people seem to be treating it as a buying opportunity. Jonathan so far, so good this week in terms of expectations. Claimed yesterday, positive relative to expert patients. Cpi hotter, ppi hotter than expected as well. Perhaps fueling that moving treasuries and not just the supply story. Lisa weve had this conversation over and over again, the idea of lagging indicators. In a fastmoving pandemic where you get states reshutting down and people losing confidence, and people are looking to the july sales data shown the last retail sales gain before unemployment runs out. Jonathan dan alpert came on this program earlier this week and said that the survey a week earlier, a week later can be the plusrence in one million, one million in the payrolls report. Lisa im not sure stock investors are really using the Economic Data to get a sense of how to invest anyway, the. Oh. Than lisa i mean, come on. We get a bad print, what does that mean . We get a good print, what does that mean . The data has not been translating into market responses, whether in credit or in equity. Theres faith in a backstop somewhere. Jonathan jonathan what is that phrase about poking the bear . Lisa you poked the bear. You have. Jonathan we shape up as follows in the equity market. Equity futures come down three, 0. 1 . Remember february 19, when we were talking about a different vshaped recovery . It was all about how china would come back online quickly. The rest of the world would be ok. It is very different to the v people are discussed in august. Yield on the 10 year. Below is 50, the high as 90. Eurodollar, 1. 1808. Going us now is david bailin, citigroup chief investment officer. The Economic Data is really not great, but the performance of the market has been some thing else. What is your take away . David lets put everything in a little bit of context. We have 18 trillion worth of debt that yields zero, so everyone is seeking yield. This has been an extraordinary rally in the bond market, so that is the backdrop. When we take a look at equities and everyone looked at the indices, the indices are incredibly high and overvalued, but you have to look into what the indices are. You have market leaners that have been beneficiaries, especially tech, that have benefited as a result of the pandemic. Secondly, when we really look at the consumer data, it has been remarkable he resilient in those areas where covid has not been a big deal. If you take out travel, take out retail, take out hotels, take out educational institutions and small health care providers, about 11 of the economy, the rest of the economy has been were markedly resilient. You would have thought, taking a look at the data in florida, texas, california, and South Carolina that people would have started to travel less. That people would go back home and not spin. Not spend. The exact opposite has been the case. The consumer has continued to buy, despite the fact that the virus is all around us. That has been the surprising event for me. Jonathan the enhanced Unemployment Benefits have expired. Do you think that is going to be an important force to shape the august data, or will it be more about what you just discussed . David i think august will be mild. If we see that congress does not pass anything, you could see further headwind from all of this. We look at the last 40 years of these congressional standoffs, and we found that there is always a compromise, at least historically. Weve never been in exactly this situation. So if we get a compromise in september, i dont think we have anything to worry about in august. If we got no action on the part of congress, that would be a pretty big deal. Lisa this is what the market is betting on, that there will be reason that eventually sets in in washington, d. C. How much has the fiscal support backstopped the recovery . First of all, im not an angry bear, jon. I am just struggling to understand the dire economics jonathan for people on radio who cant see david bailins face right now, david doesnt believe you. But carry on. Lisa the idea that you could have such a highend and plummet rate and such steady data, why is there this dissidents this dissidents high Unemployment Rate and such steady data, why dissonance . Is we havehe other thing to look at is really what happened to earnings. They were betterthanexpected as well. The market is officially pricing the winners and the losers at the moment. All we have to do is look out six months and ask ourselves, what will happen when a good vaccine that really works, not the russian version, actually comes out with proper testing and we know that there is going to be an effective treatment what there is for the flu or this pandemic . I think that is gone to change everyones mindset. You said something in the last segment prior to the top of the hour that is very important. You talk about the velocity of money. That velocity takes time. Weve never had this kind of spending before, 10 trillion to 12 trillion globally. That is going to add a tailwind to the market, and a tailwind that is going to be very stimulative, as we have written to all of our clients in the last several weeks. It will be the velocity of money Going Forward. If you combine those factors come of this market for equities is not insane. You also said something i wanted to touch upon, the fact that return expectations should be modest, and you are exactly right. But there are parts of the market that are going to roar ahead in the future, and parts Like Technology that are going to move very modestly because they are so fully priced and discounted so much already today. Lisa lets unpack a little bit of it when it comes to velocity of money. Are you pricking that inflation is going to pick up . David it could pick up a very small amount. What we are matching a major call on his recovery in the economy that is greater than people inspect. In europe, where everyone is very tentative, we think next year will be a 4 gdp, and we havent had one of those in a decade. We also feel like the chinese economy and the pain asian economies can do betterthanexpected because of the tremendous impact on those economies by the virus, and the fact that exports are going to pick up much more than i think is projected in 22 anyone in 2021. Jonathan i hear a long on banks, and i just heard a long on industrials. Is that right . David i like the long on banks. Up economy is going to pick and change expectations slightly Going Forward. If you take a look at dividend yields for banks, you would think they are very attractive today and will stay attractive, and there will be appreciation if that is right. Plus, theres been limited credit losses because of programs in the United States in particular. In terms of industrials, the larger ones are pretty fully priced right now, but a lot of the small and medium caps are 20 to 30 lower. They had 70 negative earnings surprises in the second quarter, which is pretty abysmal. So theres a fair amount of snapback in the small and Mediumsized Companies in the u. S. And in europe. Jonathan just before we let you go, the regional bias. He mentioned europe a few times. Weve had this conversation about the european trade facing some challenges in the last couple of days. What is the regional bias for you . David to me, the last couple of days are creating a little bit of buying opportunity. I think we have to see real data. The market is very focused on what is happening today. We are looking out six to 12 months in terms of our view, and 12 to 18 months for investing. We like europe on that basis, especially industrials that have dividends associated with it. We like some of the mortgage retailers for junk bonds. We like latin america is a snapback lay, specifically theco, as a result of when u. S. Is fully operational, imports and exports from mexico will really go much higher. So theres a lot for investors to do, and i think it is moving their portfolios away from technology where theyve had the sixth ordinary gain and into some of these other sectors that will allow them to make extra profits over the course of the next 12 to 18 months. Jonathan i like a lot of stuff lisa doesnt like either. Lisa i dont know why you are trying to get me in trouble, but the. [laughter] but thank you. [laughter] jonathan thank you, david. To guests in a row. Not bad. Lisa someone on twitter putting out a picture of me as an and repair. As an angry bear. I just think it is fair to be skeptical. Im not alone. If you take a look at how much money to banks have set aside for bad loans, youre getting an economy that is getting otherwise back on track . Jonathan i totally agree. There are 70 things there are so many things that just make sense. What i think is really interesting, just from a system sort of perspective, what this means about money that should flow away from Bad Companies and should flow towards good ones, what this means for potential growth in the future as well. I think those are all really valid points. When we are facing but we are facing right now, and rates across the board are where they are, i think you are right to question it. Lisa and the some of the occasion and the zombificat ion of Corporate America and around the world. Jonathan right here from new york city, this is bloomberg surveillance. The first word news, im ritika gupta. President trump hasnt yet delivered to the deal of the century he promised in the middle east. Still, he can claim a foreignpolicy victory after israel and the United Arab Emirates agreed to move towards normalizing relations. Even democratic president of candidate joe biden called it a historic step. A roadblock is preventing congress from passing a new coronavirus early plan from passing a new Coronavirus Relief plan. Republicans argue the money would go to bailout poorly managed states. President trump clashed with joe biden over masks. The democratic residential said every governor should require masks the next three months. That would save more than 40,000 lives. President trump said, we want to have a certain freedom. Thats what we are about. When it comes to personal finances, donald trump is it better off than he was four years ago. According to the bloomberg billionaires index, the president s net worth has declined 300 million in the past year to 2. 7 billion, the biggest drop since bloomberg began tracking his wealth back into any 15. It dark back in 2015. The pandemic made things worse. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and radio, around 12 minutes away from the data and america, u. S. Retail sales. The market open comes an hour later. Equity futures down two on the s p 500, down 0. 1 . 0. 7 is your yield on the 10 year. Eurodollar, 1. 1815. Hong kong media tycoon jimmy lai arrested last week under the new National Security law, fueling concerns about how quickly china is tightening its grip. [indiscernible] nobody has given us any money. Thats all i can tell you. They will be lowprofile in exit execution, but they have to in acted some people to sell to the hong kong people that they are very selective to the Business Community here and overseas. We cant confront the ccp. We can keep our spirits, but we have no other power than moral power. Jonathan jimmy lai there. Pretty clear his thoughts on things, though conceding at the end, we have our spirit, and that is about it. Lisa one of the main points in this interview, it was surprising that beijing came after him this quickly after enacting the National Security law. That they were sending a signal that was surprising to some as theyd expected beijing to hold off and wait for some of the sentiment to die down. Jonathan joining us now is greg chiefre, Agf Investments u. S. Policy strategist. I just wonder how hong kong is a part of the conversations over the trade agreement. How do you think this is going to come up . Greg the deepfreeze continues. I think relations will stay very hostile. This weekend stalks are on trade this weekends talks are on trade, which continues. The detention of dissidents, the hacking, all of the things china has done i think will increase the likelihood of section. Lisa what do you think chinas goal is going to be . Greg the goal is to show that u. S. Farmers are still buying soybeans. I think the president wants to show that that part of the trade deal is working. But beyond that, i thing a real crisis looms on wechat more than tiktok. Lisa crisis for who . Greg for both countries. Wechat is so widely used by the chinese, i think if we impose sanctions, there will be counter sanctions. I think that these recriminations will certainly continue through the u. S. Election. Jonathan isnt this the problem . That we talk a lot about reciprocity, but we are in this position where you cant shut wechat down, but you can tell facebook they cant be in china. How are we going to sort these problems out if that is the approach . Greg donald trump famously says im a tariff guy, and i think hes prepared to do that again. He did it with canada recently. Western europe still faces threats, and i think china as well could get more tariffs. Jonathan this is the issue, that the approach of this administration, how do we change the Chinese CommunistParty Behavior . That is essentially the question being asked in washington, d. C. For the last 20 years or so. What i see at the moment is every time the admin instruction tries to do something, the csuite and america gets on the phone to the administration and says, dont do this because the commercial power that china as an economy still has, i just wonder, if this president is not in the white house for a second term, is there a better way of dealing with this . Greg theres two things, the carrots and sticks. The carrot would be for joe biden to reenter the transpacific partnership. The stick is from congress, that could pass legislation to reward companies that bring jobs back to the u. S. Greg is it lisa is it in the u. S. s interest to link some of these tech concerns with the trade issues . That is when china has been trying to do, and the u. S. Has been pushing back. Could the u. S. Potentially benefit from liking these as well . Greg we could potentially, but i think right now there is a bipartisan view in washington that the chinese have been outrageous in their lack of transparency on the virus, there hacking into all of our treatment ofeir dissidents. The mood is quite hostile. Jonathan both sides cant agree on a fiscal package. When do you see this happening . We came into august and everyone said this has to happen. Here we are in the middle of august, and are we looking at september now . Greg i still think there is going to be a deal at some point. Both sides need it. Elosi needs to show that she is not just cynical about people suffering. Both sides need to get one, but it is still probably two or three weeks away. Jonathan what would change your mind . What would be the big red flag where you say, maybe this isnt happening . Greg well, i think [no audio] jonathan its gone from the start of the month to maybe the middle of the month, to now maybe the middle of september. Lisa there was a study done polling economists, and saying, what do you think the consequent as will be if there is no deal struck by at least september 1 . They said the likelihood was that we see an increase in food insecurity, an increase in joblessness because a lack of Consumer Spending would slow the economy and hamper any kind of upswing in job rates. I am struggling to see where we see this priced in. How are people responding to this . We havent gotten it. Jonathan we are not seeing it right now at the aggregate level in the data or in the market. I know this sounds cynical, but when you look at the equity market and compare and contrast the situation now compared to where we were in march, this happens in history again and again in economic crises, and for that matter, Foreign Policy as well. When you exit the immediate crisis, the collective will fates. Lisa and to be fair, Even Companies have been surprised in their earnings reports at how strong the recovery has been, so perhaps the economy is doing better than people are expecting. I dont know. Jonathan we will see. We will bring you Michael Mckee on the data, and afterwards, Michael Gapen of barclays. All eyes on d. C. The retail sales five minutes away. We are 0. 1 on the s p 500. Five days of losses on treasuries. Yields today just start to stabilize, down a basis point to 0. 7 . A fiveday day losing streak into friday. What happens after that retail sales print . Thats next on bloomberg. Jonathan u. S. Retail sales incoming from new york city. Good morning. This is bloomberg surveillance. Your Economic Data is about to drop across the bloomberg terminal. With that data is Michael Mckee. Michael we are looking for the retail Sales Numbers. The Census Bureau a little slower getting them out. We are now seeing retail sales are coming in worse than expected. Up 1. 2 in the month of july. The forecast was for a 2. 1 gain. Autos a little better than expected. Range for the 7 june. The control group, this is the one economists watch, retail sales control comes in betterthanexpected at 1. 4 , up on the month of july. That compares with the. 8 forecast and 5. 4 increase in june. It is not as good during the month of july as june. Things have slowed down. This will be interesting. It is obviously distorted by who has been at work. 7. 3 in the is up second quarter. Unit labor costs up