Country seems to be fueling some kind of negative sentiment worldwide. Tom i agreed to start there for the western world. Its not just about china. There disinflation, we dont need a bunch of charts this early in the morning but the vector of deflation and disinflation in china from the beginning of covid and they did covid differently than we did but im sorry, its disinflationary and get you down to a run rate of a positive 1 even with the present deflation and thats not good enough. Jonathan at the same time, the western developed markets are finding inflation and we had deflation in china and people are asking, we are in it now so how long will it last . Lisa and is this the bottom . It could have a more inflationary time later on. How much does china matter as a disinflationary force for the rest of the world at a time were places like the u. S. Are moving away from importing some of their goods and the eu is trying to be more aggressive with lyft service. And we have budget deficits this large with unemployment. Jonathan tom there has been a lot of good work. Brian setser of harvard had some good work. Mike enough with the micro details, look at the Bigger Picture is what these people are saying. Jonathan what time did you get to bed last night . Tom i pulled an allnighter. Jonathan you stayed up to midnight . Tom no i stayed up all night. And i read the telegraph in the morning. Jonathan lets get to the equity markets. On the s p 500, we are up by one third of 1 on the s p 500. The 10 year is 4. 0 . Lisa its a quiet day when it comes to data but im watching the mba Mortgage Applications today. Two days ago, the 30 year fixed rate mortgages, the rate on that went to the highest since 2000 and thats how high weve gotten. How much does that dampen demand. U. S. Treasury is selling 38 billion of 10year note and this matters. There was a very successful three year note auction yesterday and it gave a boost to the market. Doing the same kind of thing with 10 year notes might be more telling and we get some earnings but it is slower. Roblox and wendys. Disney is the big one. I want to hear what they have to say about how they plan to use Artificial Intelligence to replace some of their storytellers, some of their actors even at a time with the strike going on. This has been one of the most controversial areas and i want to see what they had to say. Jonathan we will talk about that a little bit later. Tom i dont get it, you can brief me. Jonathan my news this morning is i applied for a job at ups. 175,000 people have applied. Lisa dont you need a drivers license for that . Jonathan i will do that. Its all done. Tom you have to drive on the others of the road. Lisa you are going there . Jonathan im going to work in the house for little bit and do some package sorting and get the u. S. Drivers license. Mary adams joins us now. Dont worry, it might take a while to get that gig ups. From hsbc as the pool of negativity still there for us to feed on . We think the market is fair value where we are now and i think there is some risk in this market in the sense that we think you will still see mild recession unfolding. Everybody is just getting overly optimistic on the equity market and the economy and i dont think thats warranted. There are signs we are looking at a recession by the end of this year. Jonathan where do you think this starts to turn in a negative way . By the end of this year, the economy starts to go into a recession. Whats been holding up the economy is the service sector. When you look at the evidence out there, everyones been calling this the taylor swift economy. Even the fed has noted that in their beige book. Today is the last day of her concert in the units in the United States and then she goes globally. You start to see some softness in the attendance there so i would watch disney reporting after the close to see if that trend continues. When i look at restaurant activity, youre starting to see less activity and restaurants. I think it will be the second mildest recession weve seen in the postworld war ii era but i think you will see a mild recession. Tom at alex brown, you would say to people to calm down among the fears of investment but there is a fair amount of fear out there is what you do with big tech if you own it and youve got a capital gain . Do you have the alex brown patients of years ago . I still do like the tech sector. One thing is for missing and earnings as if you look at the nasdaq, the earnings bottomed on the Fourth Quarter of last year and since then, you see a rebound and if you look at the back after this year, you see a significant increase in earnings. The s p 500 hasnt bottomed yet but more likely, it could bottom quarter. Ai continues to provide that visibility going forward. From a valuation perspective, i dont think people take into account how much tech has beaten earnings on average. When you factor that in going forward, tech is not as expensive as people think at current levels. I still like tech going forward. Tom lisa mentioned ai and disney but i think they have bigger worries. How do you extrapolate ai to nonTech Companies such as walt disney in burbank . I think its all about productivity and youve seen how thats been helping with the efficiency of these businesses around the world. I think that trend will continue because with this lack of workers we have, you have to find a way. Ceos will wait for employees to knock on their door and they can do that through ai and thats a broad term. Technology in general is helping alleviate some of the pressures when it comes to workers and that will help drive earnings and drive margins and i think thats not thats why we are not looking for a big decline in earnings even if we have this recession. Lisa to underscore what you are saying, are you saying that Tech Companies could act as havens in this neck cycle even if we get into a recession . They could be the defect the defense of plays at a time of potential stress . If we have a recession and a market selloff which i think we will have, we could have 3, 4, 5 pullbacks in any given year but we only had one. We are in the seasonal time where you could see it rolling over of the market. I think tech is part of that but if you look through the day to day, week to week, i think tech will provide that visibility of earnings which gives you a little more of that haven of a fundamental basis for being in that sector. I still like tech from that perspective. Lisa where do bonds fit in at a time when people are looking to the supply in the potential for the u. S. Treasury to sell an increasing amount of debt at a time when the deficit is at a level its never been and when unemployment is this low . I have heard these concerns about the market not being able to absorb the supply and time and time again, its been able to do it. If you look at the expectation of seeing a modest recession, it takes Interest Rates lower. Contrary to what people say, rates will stay higher for longer and we think the 10 year treasury could get down to 3. 5 by the end of this year. With the tenure being around 4 , i think thats a good upper with the 10 year being around 4 , i think thats a good indication. Tom wheres your level of spx . We see bears who have missed it but even the bulls are tweaking flat to up a little bit. Whats your tone on that . 12 months from now, june of next year, we think the s p 500 is up to about 4600. We were much more optimistic coming into this year. A lot of the uber optimism is replacing the over pessimism and that makes me nervous. Tom you are a Baltimore Orioles fan, can you give me an spx 5000 . Maybe at the end of next year, going into the following year but right now, i think we are more cautious. Once we get the pullback, all of a sudden, there is upside. Volatility is part of the fabric of the market. I think that is a positive if we get some volatility into this market. Tom it was the world series, 2024. Jonathan how does a man get suspended from his job for just stating the facts . How does that happen in baltimore . I agree with you 100 . If we all got suspended for that, i wouldnt be on your show. We tell the facts and thats what we do. Jonathan is this the baseball equivalent of whats happening with the orioles . Stocks went down last year. Tom people that grind this out every day in sports, its a tough job. I fake it but its a tough job. These guys are grinding up away from their families have to year and they are getting grief from owners about this . Jonathan larry, thank you for that. We will go through that story if you are not familiar in a couple of seconds. Youve got this local baseball announcer for the team, the orioles, and he has stated the facts which they have a terrible streak against tampa bay or whoever it is and he gets suspended. Tom the guys from san diego and cincinnati do it every day. They all do it in this guy does it and he gets hammered. Jonathan its amazing. Apparently the job is to spread propaganda. Tom in the old days it was understood you were hugely employed by the team and you said good things about the team and the same in hockey. Jonathan is that still expected of you . Tom i didnt know it was. Lisa my favorite part is he made his comments about their streak at the same time the graphics were showing. Jonathan socially. Lisa it wasnt as if this was this random castigation of the team. Tom the new york jets did this in the only announcer for the new york jets can be mohamed elerian. Jonathan i find it amazing. Thats the latest from baltimore on the market and the sports side. In 48 minnis, well catch up with to talk about data ahead. Cpi tomorrow at 8 30 a. M. Eastern time and onto friday, its about ppi and there is a feeling even from those, citibank expects the data to confirm the soft landing view even though they dont expected concern to confirm it at the end of the year. The next few months may play with the bulls. Lisa when people say the fed is following the date to come in people say the data will be a head fake and wont necessarily show a reality that will play out over a longer time. It plays into the hopes and dreams of this perfect scenario that doesnt really happen. Tom i go to three month, 12 month annualized depiction and japan will be jonathan you mean china. Tom sorry, china. Cut me some slack. The answers tomorrow. Jonathan its no longer the early to thousands. China is in deflation. Sometimes i wonder. Tom i thought i was married for 30 years. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. We are not going to see china go back to where it was. It is a very big component of the global economy. Its a consumer of all metals. Also, i think weve got to be reminded that if we give a better world for everyone, we need development so metals are important. Copper is the most strategic of all those metals. Jonathan the president and ceo of the Metals Market in a situation with china at the moment. They are in deflation in the country in the economy is not doing so well relative to lofty expectations. More broadly, we go to equity futures on the s p 500, positive bite 0. 2 . Inflation data is tomorrow morning. The dollar showed some strength yesterday but we are rewinding some of that this morning. Wti is 83 and about . 70. Tom its interesting to see and it keyed off of the data tomorrow morning. Jonathan did you see the Oil Productions in the United States . Lisa record high crude output that could take over from the rest of the world when people have written off this trend. Jonathan close to 13 million close to 13 Million Barrels per day. Tom sort of like how we saw you light lily yesterday. This is the conversation of the day in china. The book the new china playbook is definitive on china. I will cut to the chase and not mince words. You nail it with a deficit of demand in china, there is an ancient Commons Party calculus of what you do with a deficit of demand. Do those processes still work to boost demand . The communist party doesnt really believe in shortterm demand driven stimulus. It is taking a very different route from the western governments. It is still focused on supply and its about longterm and about harvesting resources for the longterm goal of technology so they are not interested in shortterm demand stimulus. They are trying and setting the tone for the private sector but it really is up to the private sector and entrepreneurs to fend for themselves, really. Tom i spoke years ago about the diffuse mint of productivity in europe. How does beijing disperse the message to boost demand . Do they do it federally out of beijing or do they do it city by city, mayor by maier . Tioned an important thing here. Thats the political economy problem or advantage, if you will. The Central Government sets the tone but then its up to the local governments to implement apart from the large policies and there is a lot of things that can go wrong in the implementation so even if the Central Government want something to happen, it doesnt mean it will be delivered. Lisa there are reports that the chinese comes party is going after economists who use the word deflation and talk about the negativity of some of this data. Does that make it a better or worse situation to grapple with the task at hand . If there is no transparency on information or how economies are doing, Everybody Knows of the economy is doing but if the leaders cant see it, thats a big problem. E the focus and china has lost the momentum of the last 10 years and it does it sooner, you cant talk about other things like security or social stability. Thats got to be the focus. There is much more control on economic discussions and not enough transparency and i think its a huge disservice. Lisa weve heard reports that even Business Leaders to go to china to have discussions are really managed and they feel they arent allowed to have honest conversations with people at a time when there is real concerns around the housing industry and the potential brink of default. What do you make of the inability to have free discourse and what that does to actually grapple with the real issues . I ask this to build on what we were talking about with the idea that if you do not have the social spending, a social mobility, a social employment especially for younger people, are we entering a situation similar to japan . Its possible but not for the same reasons as japan because we havent seen china with a big asset price collapse. People are very clear of whats going on on the ground. Private businesses and even the policy institutes and the government, we dont know how much the top leadership gets it. My suspicion is things are just done. There is policy and there is reaction and reality and there could be a big discrepancy. The economy is sluggishly recovering even if we cant talk about things openly, investors make their decisions based on information. Tom all americans have a legacy of a certain vintage of how incredibly wrong we got the breakup of the soviet union. We did so because we have the wrong intelligence and the bad intelligence and not enough. From where you sit, do we have good intelligence on the political economy of china . By and large, no. Its a very unique structure on how decisions are made and how things are implemented in the divergence of interest within the party. The setting up in the strategy of the implementation, there is a huge discrepancy and even internal mechanisms of competition, all that is rich stuff. China is seeing a lot of problems and challenges now but they are are also advantages. China is entering a new stage. Jonathan thank you for the update. Its been a difficult week for data out of china and the trade data was terrible and the inflation data. We should call it deflation data. Tom its a rich set of data but a lot of people said Foreign Direct Investment in china, the lifeblood of Technological Advancement of china with joint ventures and im old enough to remember when this was a brandnew idea of joint ventures between the east and west. The british go before us and that didnt work out but the answer is where is fdi . Jonathan joint venture, be our partner and we no longer need you anymore. The United States 20 years later has decided to do something about the investment going into china but we found out month after month of the last 12 months that this Outbound Investment restrictions that will come out of this administration will be more narrow than we thought it would be. Janet yellen spoke to us in the last month or so. Annemarie has gone missing. Tom she lived in europe for two years. Jonathan janet yellen gave us an idea that it will be more narrow. Lisa trying to restrict investment in companies in china with ai related to military capabilities. There is something more nuance here at a time when they dont want the u. S. Doesnt want a total divergence from china but to curtail some of the competition people think they bring. Tom i think the three of us in shanghai would be good. We could take thebramo if we can get it through customs. Lisa surveillance would take on a different meaning. Jonathan im not sure we can say that. Lisa i dont think so but i think its an interesting moment and i think we are talking about the deflation numbers. China export prices saw the biggest drop in a decade. Jonathan thats a big move. State street will join us shortly, equity futures are positive by one third of 1 on the s p 500. In the bond market, yields are unchanged as it has been over the past couple of days, around 4 . From new york city good morning. Jonathan the conversations in the commercial breaks are always better. Sometimes guests dont know they are on. Lisa that was good. Jonathan Deutsche Bank at a single name call. Tom he believed in the market at the bottom. Jonathan i agree with that, its just a joke. We are allowed to make jokes. Equity futures on the s p are up a third of 1 . The main event later, Walt Disney Company after the close. In the bond m