Bloomberg Surveillance 04/08/2024

If we see inflation rising, it really calls into question people's willingness to say rate cuts are still coming. I think it wouldn't take much to at least delay the timing of that first potential rate cut. They're telling you that if things slow down, they'll cut a lot more. So they're trying to say that the risks around those three cuts are balanced. Clearly this is a Federal Reserve Chairman who wants to cut rates and is willing to examine some of the hot data on inflation. And I think we'll end up with two cuts this year. This is Bloomberg Watch with Jonathan Ferro, Lisa Abramowitz and Anne Marie Jordan.

Let's start the week live from New York City this morning. Good day. Good day. For our audience around the world, here Bloomberg Surveillance kicks off the week with yields at new highs for the year across the curve: two-year, ten-year, 30-year. This is the current situation this morning. Yields are getting four basis points closer to the full 45 on a ten-year lease taking into account inflation later this week, getting closer year on year on rates. People are now basically discounting two rate cuts from three rate cuts from seven rate cuts earlier in the year. In terms of what the Fed is going to do this year, what I'm looking at now is how much does it matter and to what extent does this really speak to concerns about inflation or a real returns narrative?

And I know it has nuances, but this is something else. It's basically the Fed fighting inflation in the short term and winning in the long term, which only fuels the risk assets that post payrolls from Friday through the weekend. That was a dominant phrase in all this external research: non-inflationary growth. How much of that history can we accept this week? We will know on Wednesday with the CPI. We'll find out on Thursday with PIE. We'll know as we hear about the geopolitical context in terms of tariffs and other things like that. This is really the key question: can this growth really occur without inflation?

Is this some sort of justification for any rate cuts this year? If there are no rate cuts, does that mean there will be fewer rate cuts in 2025 and 2026? Or is the market suggesting that means there will be even more in 2025 and 2026? So. Oh yeah. Well. Risk in. You mentioned geopolitics. So let's take the temperature of that and we can do that in the commodity markets. So let's bring out Brent and WTI, WTI into Friday on a six-day winning streak. Quite a rebound last week of 4.5%. This morning, Amari was down about 1%. Still 90 for Brent crude. Yes, a little cooling in the oil market.

This has to do with the fact that Israel has withdrawn some troops from Gaza. But the problem is that they are potentially waiting for this attack from Iran somewhere within the region or somewhere in foreign Israeli territory abroad. Thus, Goldman Sachs says that the rebound could reach 100 barrels. Should we continue to have that geopolitical impact? But that remains to be seen for the moment. Then we have a lot of supply constraints around the world, which Amrita Sen talked a lot about this week. What I find fascinating was that over the weekend the notes I read had more to do with Saudi Arabia and the breakeven rate, where they would actually get positive returns on some of their funds.

And it cost $85 a barrel. So this speaks to a structurally higher crude oil rate going forward, regardless of what happens in the Middle East. I'm trying to figure that out too. How long will the Saudis hold onto the barrels and just sit back and let this oil move continue? How long will the White House sit and do nothing? We know you don't want to fill out the SPR. Are you willing to drain it at some point? Once again, that's what I'm focusing on heading into summer. I want to ask Ellen Wald about this. How much capacity do they have to drain this and what does that mean for gasoline prices, because it also has to do with refining?

But also Saudi Arabia, do they have some kind of issue to choose here in terms of who they want to win the election and how they want to put their thumb on the scale that they're going to do everything they can to talk about? . This has to do with supply and demand limitations, nothing to do with politics. But if we get into the summer, we start to see $4 a gallon for gas. We're starting to see potentially $5 a gallon for gas. You better believe SPR potential is also available. There is a lot of pressure on Riyadh. Brent crude oil right now, $90 at about $0.30, WTI, $86.

Let's get into the market action, starting with the S&P 500 stocks. Stock futures are a little weaker right now. We are down approximately 0.1% after the largest weekly loss since the beginning of the year. Yields rose from last week to this morning. Your time this morning, Lisa, by four basis points, 440, so 60 out of ten, but I know we always say this, but this is a huge week. I have to say. We have the trifecta. On one hand, you have key US inflation data with CPI on Wednesday and Thursday. We also received comments from the Fed, as well as a decision on ECB rates.

How much will we give them by starting a potential cycle of rate cuts? On Thursday we will receive some orientation. There's still June left and then earnings season begins on Friday. To me, this is possibly the most interesting type of fork. What matters more: central banks or profits? Citigroup, Jp Morgan, Wells Fargo, all starting up. We also get Delta earnings on Tuesday, but I'll leave that out. How much is that going to be at the forefront compared to, say, some of the inflationary rhetoric and questions around the Federal Reserve? I don't know. But I can say this.

I think we all agree with the Fed's speech, right? I think we are. We are done with the Federal Reserve speech and can move on to the first quarter results. Do you really want to do that? You mean that because someone is going to come out and say something and all we're going to talk about is the Federal Reserve speech? What would it take? Opponents of the government have already come forward and are entertaining the idea of ​​perhaps talking about interest rate increases later this year. What would you need to see to make that conversation more interesting, for the neutral rate in the future to be something closer to 4%?

That kind of idea would torpedo the markets. For me, one of the biggest and most talked about issues is the fact that in 2025 and 2026, rate cut expectations are actually higher than at the beginning of the year. This is a kind of long-term structural game in which people have complete faith in the Federal Reserve. What if the Federal Reserve doesn't have full faith in itself? If you want more of that, you'll hear tons of comments from the Fed this week and maybe that's what you want. By now, Jeff, you've asked why, as investors await a busy week of data, former White House colleague Elliot Ackerman, as tensions rise between Israel and Iran, and Bloomberg's background as Treasury Secretary, Janet Yellen concludes her meetings in China. .

We start with our main story: investors wait for the latest CPI release and big banks start earnings season. Jeff, you've been writing as flows may remain very focused on US cross-asset price action last week, suggesting it won't all be rosy for risk appetite. Markets are vulnerable to surprising policy and data outcomes amid positioning volatility and shifting correlations. I'm pleased to say that Jeff joins us now. Jeff, let's start with the bond market. What challenge does it pose for this stock market? Well, the performance levels are a challenge, but also the pace of the movements will be an even bigger challenge for now.

With a bit of my hat on, sometimes it's not about levels, but the speed at which you reach certain levels. If I compare the move from 4 to 4 and a half right now, the ten years are a bit slower compared to the rounds of bearish tilt we had last year. But if this accelerates, tightening financial conditions much more quickly than markets already do, then volatility results. As you mentioned, if earnings don't meet high expectations, that also creates volatility. And finally, we have geopolitics. That's why I said that not everything is rosy out there. Well, Jeff, let's start with the data and we'll continue with payrolls starting Friday.

You have to learn something from the data and how the market responds to it. Are we learning that good news is actually good news based on what happened on Friday? Well, today we had this discussion internally. And let's say we're no longer saying it's not a failure at all. No good news will ever be good news. At what point do we trigger that round of bearish deepening such that good news starts to turn into bad news? So, especially given all the investing that's going on in the US right now, not just asset allocation, but looking at the headlines this morning and last week and the last seven days, I'm counting 50 billion dollars in direct investments or subsidies from Asian chip makers. to the United States, and that could be inflation.

We know this given the value-added components of the US economy. So how do you offset that? And this should be good news on the business front, but if that translates into higher returns and tighter financial conditions, it may not be good news either. Jeff, just to put some numbers on this, I'm looking at real yields, inflation-adjusted yields in the U.S. and that tends to be what drives a lot of concern in the risk environment. This is not driven by inflation and we are now back above 2% in terms of ten-year real returns, which is the highest level since the end of last year.

Why do you think this is happening? Is this basically a belief that the Fed is going to keep rates higher for a much longer period of time, or is it simply an idiosyncratic sell-off by a particular cohort that doesn't believe the stay is longer, the balance towards the Haven guy? of asset? I would say it's a combination of factors. And if you look at the productivity element, if in fact stronger productivity increases are anticipated in the United States than in real terms, real wages should be higher and, consequently, a real interest rate. So you should be able to reflect that because at the end of the day you know which deflator to use to use a normal PC or CPI deflator or what you actually use for earnings and what level of real returns you want to reflect the underlying conditions in the United States.

I think people are seeing productivity increases, all the investment going to the US and that consequently benefits profits. But again, how long can this be sustained because one sector may be performing well and still generating productivity gains, but that will also come at the expense of other sectors? So I think it's going to be a delicate balancing act. But the markets are not questioning the Federal Reserve, at least not yet. When you say it's good news, good news. And that was a question that John asked. I wonder at what rate good news turns into bad news, maybe for bonds, but still very good news for stocks.

This could also lead to a fairly positive earnings season in the first quarter. Is that basically your opinion? Well, I think you're right. Now it is necessary to be in the American market. So maybe there is good news for US stocks because there are no alternatives elsewhere. Let's look at the ECB's guidance this week. I think this week is actually a live meeting regarding these rates. Concern though, June is probably more likely when they arrive first. There is no good news coming from Asia, according to our data or our clients. So almost all currencies are short right now among our client base.

Therefore, one is almost forced to enter the US markets, whether bonds, cash or stocks. So in that sense. As long as the United States continues to surprise or even meet expectations, then it will be good news. But then the bar is set higher and higher. And then the moment we see future expectations on the earnings side start to disappoint, that's when the correlations start to break down. So I think that's what we need to pay attention to in the second quarter. H.f. Back up, I heard about 1% of what you just said and then I was thinking only about that and ignored the other 99.Life meeting Thursday, ACP Jeff, what does that mean?

Well, back to my call for parity in euro-dollar terms, which is actually not too far from where we are now. You will receive voices and they will call you, now is the time to act. If I look at wage growth in the euro zone, if I look close to where the PMI is, we should distinguish at least in Europe. So it's less bad in a very, very bad environment. You know, that doesn't mean things are getting better. Good. And if we really get energy prices going up, supply constraints going up as well, I think that will be negative for European growth as a whole.

But the hawks in the Governing Council could again discuss raising inflation expectations. Once again, we are worried about a price spiral. Let's keep rates where we are. So I think that this totally different reading of where the eurozone economy is at the moment between the moderate camps and the hawkish camps, I think will come to light, warns the Open. Therefore, the decision itself will likely be put on hold, as will the other seven central banks due to decide this week. But I think we'll see a lot more two-way dialogue, and at the very least I hope there will be calls for cuts as well.

So it just won't be like it shouldn't be true. Do you basically stick to that parity between the euro and the dollar? Absolutely. How much pushback can you get from customers on this? So I would say that the sympathy with the current opinion and the broader client consensus is that the euro is lower, perhaps the peg at this time is one of the more aggressive targets at the moment if you look at the options in pricing matter. So, sympathy for the leadership backsliding, perhaps against objective interest, Jeff, it's wonderful to catch up on this. Fantastic call to have a debate on the euro parity call this year.

Jeff you have been for that Mel and Jeff, thank you. I'm getting some breaking headlines. Jamie Diamond's 2023 letter to shareholders just arrived you see. Well, first of all, it talks about the so-called macro of it, which is what everyone finds interesting in many of these cards. These markets appear to be pricing in a 70-80% chance of a soft landing. I think the odds are much lower than that. So speaking of that, of course, we will see profits when it will probably produce another record profit. Then we will get that sentence. He talks about artificial intelligence and how over time it could be potentially revolutionary, similar to the Internet, which has the potential to improve virtually every job.

And then he talks generally about government deficits and printing a lot of money and how basically what we've seen is an economy driven by government deficit spending and past stimulus. So, okay, Treasury Secretary Jamie Dimon, let's hear what you have to say. Inflation may be stiffer and rates may be higher than expected. I think you have touched on the important topic here. Is this a man in the risk management position? Is this a man making an appeal to the economy? Is this a man who leans toward the Treasury in Washington, D.C.? over the next five years?

What is it? This is the House of Dimon, led by Dimon with Diamond in the front seat, trying to deliver his larger-than-life message, which he does almost every year. You can speculate on their taxes, trade or anything else you want to do. But the bottom line is that some of what he's talking about, he's mentioned before, others talk about the same time. There are many questions swirling in Washington after he made those comments. But former President Trump in Davos and recently, who is in the White House, having lunch with Vice President Kamala Harris and someone in the White House joked to me, the days of Davos are long forgotten.

They have overcome it. One line that stands out in this letter is the government's staggering inability to draft and pass an adequate budget that causes deep and unnecessary damage to our growth. We've heard a lot about this on this show and what this means for the Treasury market. And yet, we are talking about an economy that remains resilient. Even with that, even with that dysfunction in Washington, the best economy in the world right now relative to Europe and everything that's going on there. Michaels published an article for Morgan Stanley talking about how the deficit is going to grow under Republicans or Democrats, probably more under Republicans and Democrats.

But it won't matter because people can still move on. This is the final result, right? How long until it matters? And now people can scream all they want. People may worry about auctions. It doesn't mean that no one else is going to care about them. The latest from JPMorgan's Jamie Dimon. You'll hear more from him on Friday when we receive JP's earnings. Stocks Right now, stock futures look like this. We are down 0.1% in the S&P 500. With some stories elsewhere. You are enough for a bank. With us is Dani Burger. Hello Danny. Hi John. Chipmaker TSMC will receive $6.6 billion in subsidies.

They also receive up to $5 billion in loans from the United States to build factories in Arizona. It is a preliminary agreement and the company will build a new factory in Phoenix. Adding to the two facilities it already has in the state. Production is expected to begin in 2025-28. The newest factory will build next-generation two-nanometer chips. These are essential to building emerging technology, including artificial intelligence and military applications, to bring David Ellison closer to Paramount. The film producer and technological heir has one month to seal a definitive agreement. But he first needs to sell Paramount's board of directors about merging with his production company, Skydance Media.

Ellison would serve as CEO of the combined company, and that's according to people familiar with the situation, who asked not to be identified due to the sensitive nature of those negotiations. His father, Larry, co-founder of Oracle, is one of several names being floated for the president's job. And for a few brief moments today, Americans will turn their gaze toward the sun as the path of a total eclipse sweeps through cities from towns from Texas to Maine. The entire event will last several hours, but the main spectacle that the date revolves around tonight is the darkening moon.

The sun is expected to last only about 4 minutes. So go out and grab your glasses. The event has caused a tourist boom and the areas along the way are completely booked. Buffalo called it its Taylor Swift, its Super Bowl. Meanwhile, the United States will lose more than 30 gigawatts of solar energy because sunlight is blocked during peak generation hours. That is approximately the output of 30 nuclear reactors. And that's your Bloomberg report. John Amazing. Danny, thank you. Guess who came this morning prepared with glasses? Guess who I am. And I brought one for each of you. Thank you.

Have. Have. And we do it. And I agree. Excited to integrate this session. Is that what we are doing? Yes. You can't say no. Then I'll be here. Dont do it. You're not going to do it. See? No. Well, I don't have time. Isn't it 2 p.m. m., 3 p.m. m.? Something like that. Can I just say don't look at the sun if you don't have glasses? I have lectured my children over and over again. Is this the conference for the children this morning? If you're watching kids, please. I assure you that you will remember former President Donald Trump at the summit.

I do remember that. Do not do that. Please, do not do that. Next on this program, Israel prepares for Rafah. We have become increasingly frustrated. And again, that was a central message that the president delivered to Prime Minister Netanyahu in his phone call this week, last week, that if they have to do more, they have to make changes. That conversation. Below, live from New York City this morning. Good day. Just for the record, I thought I bought the Sun Eclipse glasses. They are actually the 3D glasses from the movie. I'm not being very careful with this memory.

Yes, about the people. I'm sending these things to the streets of Manhattan. It's free. 3D glasses, real face. Stocks right now, the S&P 500 is not -0.1% even up three or four basis points into its 10th year for 4399. And this event is this morning. Israel preparing for Rafah. We have become increasingly frustrated and, again, that was the central message that the president delivered to Prime Minister Netanyahu in his phone call this week, last week, that if they have to do more, they have to make changes. Now, the prime minister assured the president that he would do so.

We have seen some announcements in those first hours. That's welcome. We have to see more. We have to see it over time. It's the latest from this morning. Israel is withdrawing some troops from southern Gaza and preparing for an operation in Rafah despite growing pressure from Western allies. Prime Minister Benjamin Netanyahu said Israel is one step closer to victory, but reiterated that there will be no ceasefire until the hostages are freed. And the. Akerman, a former White House intern, joins us now to learn more. And I guess it's a difficult question, but are you clear about what US policy is toward Israel after the events of the last week?

No, I'm certainly not 100% clear. And I think the United States really runs the risk of appearing quite hypocritical in its warnings to Israel about civilian casualties, given the number of civilian casualties that the United States has inflicted over the last decade. But even if you go back to American history and what we've been willing to do in terms of attacking civilian targets in wars that have been really existential to our survival. When we looked at the possibility of not being clear, we heard Admiral Kirby there and he said that what Israel is doing in Gaza with some troops leaving, he says he has to do with indirect consequences of their talks.

However, Democratic Senator Coons is heard talking about the fact that he actually thinks it's a tactic. Israel wants to potentially have a reset or maybe move some troops north if they are going to have a problem with the Lebanese Hezbollah. What do you think of this specific measure that Israel took over the weekend? You know, what we're seeing is that Israel's 90th division is moving away from Khan Yunis in the south. And the question is, why is he moving? And the Israelis have announced an operation in Rafa, you know, they have been telegraphing that move for some time now.

So it would seem that this is tactical, that obviously troops have to be withdrawn to send them into combat somewhere else. And the 90th Division has been in combat for about four months now. So they probably need to rest and recondition themselves. I mean, all that being said, tactical troop movements can be used as strategic cover if at some point the Israelis decide that they're not going to go to Iraq or that they're going to make that kind of concession. So I guess we just have to wait and see what this means. If Israel goes to Rafa, the United States is talking about possible consequences.

At the same time, we had hostage negotiations over the weekend. Are they now just there to show themselves in the public eye? I think it is not inconsistent to have two parallel lines of action at the same time. Hostage negotiations can be held simultaneously while Israel is repositioning itself for an offensive that may or may not take place depending on the outcome of those hostage negotiations or even a ceasefire. So I think we now know that we are at a point of a lot of uncertainty in the war and many multidimensional aspects of the war, from negotiations to intonation, negotiations around a ceasefire and tactical operations. , the potential for a new offensive.

What message do you take away, Eliot, from the fact that we have not yet seen an Iranian retaliation for the assassination of its top military officers? Well, these things take time. I think we will see that retaliation because, like the United States or any other nation, the Iranians have a national intelligence constituency and they have to retaliate to show strength to their constituency. But it remains to be seen what form that retaliation will take and how effective it will be. So I think the Iranians will surely at some point claim that they have retaliated. I guess the way the market is treating this is that, especially with the troop withdrawal by Israel, the fact that we have not yet seen a retaliation from Iran, that there is a softening in the proposal of a possible escalation towards a broader escalation. regional conflict.

Do you think that's an accurate way to read the weekend's events? I think it potentially is. You know, whenever you're in a conflict like this, there are always exit ramps. And, you know, both sides can choose whether or not to take the exit ramp. So, you know, at this point, Iranian retaliation could be something very, very minor. And they claim that they retaliate and that creates an exit rampto start negotiating. I would like to point out that if Iranian retaliation is extreme, that makes it very difficult for Israel to come to the negotiating table. So we're just going to watch and see how this plays out.

That conversation is undoubtedly the epicenter of the crude oil market this morning. $19 and Brent was down about 0.8%. And it's always wonderful to be able to reach you. I mean, Ackerman and former White House colleague and 2050 co-author of the novel If the Next World War, Lacey writes, pointed to the Iranian confrontation with Israel. How this plays out, in any case, will be key to determining where we go in crude oil this week. The fact that we saw the rise in crude oil prices and a lot of people are pointing out the potential for an Iranian escalation, that we heard about GPS signals being blocked in Israel while people were really hunkering down in Iran, talking harsh words about targeting the US as target.

Well, the fact that nothing has happened and that troops are being withdrawn from certain areas of Gaza seems to have lowered the temperature somewhat, even if it lasts. It really remains to be seen. Again, as Eliot said, you can't play around with this, which is one reason why it's difficult for people who are dealing with Iran to go to the Security Council and weigh the options of what they want to do. Is this something potentially in the Red Sea, in the Indian Ocean? Will this potentially be in Israel or will they move to other foreign countries?

We've seen this before, Georgia, India and Thailand report in the past that Iran has tried to use to attack Israeli officials. And I think we have to wait and see if the gaps that Israel was talking about were getting out of control because they wanted to make sure that no drones could attack. We need to analyze what the United States and Israel say, which embassies to avoid, and which places to avoid. And potentially that's what they're worried about for now, at least some of the heat coming out of this commodities market. WTI is down about 0.8% on crude this morning, 86 percent on WTI, Brent crude, $90 and about $0.40.

Following this program, Bloomberg's background as Treasury Secretary Janet Yellen concludes her latest trip to China. If she just joined the US, actions in Tibet. Ok, down about a tenth of 1% on the S&P 500, but starting the week with new highs for the year in ten-year, two-year and 30-year bond yields, yields are higher in approximately four basis points. From New York, I'm Bloomberg. Live from New York City. Welcome to the program. Stock futures on the S&P 500 fell 0.06% here, completely unchanged on the NASDAQ, 100 weaker losses last week, the biggest weekly loss since the beginning of the year.

It's still only the fifth week of losses since late October. Last week's poor performance. Interesting name. We can talk about this until this morning. Small cap, also the worst week since the beginning of the year. Lisa actually underperformed, completely tied to the bond market, as she watched yields rise on the expectation that the Fed would not have the justification to cut. However, I would just like to point out how rare it has been to see any type of decline this year, that the S&P has not had a 2% decline since February 2023. This is the twelfth day. the longest streak since 1928.

According to Citigroup's Stuart Kizer. As surprising as it is that it was so good. That's how strong this rally has been since the end of October. The reasons for that rebound have changed a lot and we could talk about that too. In the bond market, it seemed like two years, ten years, 30 years. Last week, we started the week below 422 on a year out of ten and ended it north of 40. And then this morning we had to wait a little bit until that by three or four basis points. A ten-year yield, a full 4359, produces an increase of a couple of basis points, and approaching 480 on a two-year lease, a full 7739.

So this question in question also came from Stuart Kaiser. This week. On Wednesday we have the CPI and many people see it as perhaps the moment when we find out if the idea of ​​the increase is the same as the temporary one a couple of years ago, to quote Priya Misra. But is an online report a good option? Is this how the market treats you? Is it basically the threshold to say that at least inflation did not surprise to the upside? Because that seems to be the big fear that has been brewing in the rates market in recent years.

Can I say yes and just say yes a few times? Inline has to be viewed as a B at this point; overwhelmingly on the street, the consensus view is non-inflationary growth. That is the history. Most people look at Friday's payrolls and see really strong payroll growth. And then you look at everything else. Wage growth is in line. This gives people a little confidence. So if the inflation data also matches up, you can accept that supply side story even more I guess. Is it a good enough reason to buy long term? The longest? It's been a mystery to me and I kind of draw on Jamie Dimon's existential angst about the deficit in this question about longer-term interest rates, which has been the most volatile area and which is the most mysterious to me because it which is the reaction function, if you believe that the Federal Reserve is going to keep rates higher for longer, is that positive in the long run?

Or if you have a feeling that they're going to make these prophylactic cuts, does that mean you could see it included in that long-term benchmark rate? And to me, some of this is going to be what happens here if you flip the board and just move into Brent crude and WTI, we've had a big move up in crude oil, a move of about four and a half percent on last year. week to highs we haven't seen since October in both Brent and WTI, which is pulling back a bit there. But what happens here will be critical to the conversation about future inflation and the Fed's tolerance for it.

And that's how I think things develop long term from that. And it's not just about basic products. I mean, it's not just about crude oil, but also broader commodities, whether it's gold or chocolate or many other things. So this is kind of the reason why they have to implement it a little bit more, especially with the driving season, and especially considering the fact that it's going to be a political hot potato and all that jazz. Then you train the SPR around September. I don't know if they have the capacity for August. I don't know if they have the capacity to do it.

I mean, honestly, they've gotten to such a low level. I have heard contradictory things. I know, you know, but he's better than me. But honestly, I've heard a lot of people say that if we hit the ceiling, we're definitely well below the peak we had under the Obama administration. But yes, they can drain it. They can drain it for a while. It won't be the same levels we saw previously under the Biden administration. But they can make some, they can make some moments. And much of that would be potentially disconcerting, too. Brent crude oil price at about 90 so far this morning under Savannah it's a very busy week ahead.

US inflation data on Wednesday. The ECB, with a decision on Thursday, and the big banks start the fintech season with JP Morgan, Wells Fargo and Citi presenting their reports on Friday. So let's set the stage for you. I'm still Apollo versus Morgan Stanley. And that's Morgan Stanley? These data point to another inflationary expansion of the labor market and do not alter the Fed's course towards a June cup in which the sevens end and Morgan Stanley historians look over Apollo that the economy is accelerating again. We stand by our view that the Federal Reserve will not cut interest rates this year.

That's how divided things are right now. Right now I keep saying what is going to be more important? The Fed and macro are profits. And what all this tells me is that there is more risk in bonds and less risk in stocks, especially if the returns are better than expected. All of that turns upside down and suddenly he starts to have this weakness. But it just shows that there is no consensus on Wall Street on how to read some of this data and what it means for the future trajectory. And a lot of that. There is no consensus on Wall Street.

The way you read the data is because it's almost a different economy in the sense that Jay Powell talked about this. It's a bigger economy, not a tighter one. To what extent does immigration influence, say, the labor market? Does that help limit wage growth and, therefore, inflation? And everyone is. I'm going to look at the CPI because now that we've eliminated jobs, this is potentially the next data that could really indicate what the Fed is going to do, let's say in June or July, as Lisa mentioned, the CPI on Wednesday and bank earnings on Friday. Getting a taste, a preview of what Jamie Dimon thinks about the world.

In his annual letter to shareholders, Dimon dedicates a large portion of the letter to AEI, saying it may be the most important issue facing the company. Dimon also issues a warning about the economy, writing and quoting: These markets appear to be pricing in a 70% to 80% chance of a soft landing. I think the odds are much lower than that. So how do you run your business? Good. Hopefully, we'll find out that on Friday when he talks about artificial intelligence, aside from the so-called macro and, you know, Treasury secretary like that coming to the fore, there's the question of how much AI is.

We're going to transform just their staffing levels, where they're hiring, where they're cutting, who they're investing their money in. Those are some of the things I would like to know about him. I mean, in these kinds of big proclamations, he's talked about 7% ten-year rates before. At this point, he actually seems less crazy than he did maybe a year ago. But, you know, these are some of the things that he has expressed and with some of these caveats in the past, doing more with less. Let's go back two weeks. Brian Moynihan, Bank of America I thought the conversation with him about I was quite insightful.

Every additional dollar of revenue at these banks each year from now on will require less and less labor. So you can't say, I don't know, that ten, 20,000, 30, 40, 50,000 people will be laid off. What you see is that these companies will grow and they will do so with fewer people in relation to that expansion in income. I think this will be a concern for the younger age groups coming out of university and looking for jobs because the subsidy programs of these banks, which many people depend on when they leave high-level universities, were very harsh in their degrees, he sacrificed a lot of time.

This is the race they won, hiring relative to base size. This just isn't going to be the same. That's going to be a big change that we could see and the heavy lifting that people normally do and they have to be sort of an assistant to a banker or someone else and you kind of learn through all that heavy lifting that's going to be done by a computer, right? So at what point does that eliminate opportunities to learn? It's a great point. The silver lining might be, as Brian Moynihan Moynihan said, fewer people, but everyone gets paid a lot more.

So maybe, you know, they got exactly the golden ticket right. It's simply getting the golden ticket to be that person who comes to the desk. But I think it's interesting that you almost lead the letter with that. It sounds like this is what your bank is dealing with right now as one of the main issues and how it will transform the business. I have to say that I'm much more interested in Friday's actual numbers than in all this talk about AI in the future. In the next. I just want to hear thoughts and yes, that's what you want.

Broad proclamations, that's all. I'm sure that. I'm sure that's what they want you to focus on. That's very focused on that. Yes. Treasury Secretary Janet Yellen concludes her latest visit to China. Yellen is pressing leaders on the country's production, saying overproduction and subsidies will create significant risks for workers and businesses in the United States and around the world. One place to call the shots on this with this is Bloomberg's undercurrent at the end there. It's almost like Janet Yellen's journey of self-discovery, a shift in thinking for her over the last 1020 years. What is this pattern like?

It is a policy change by the US administration in the short term. Well, look, Missy Allen has certainly come a long way in the history of relations with China. During her trip it seemed to be full of criticism and there was also a lot of cordiality. And a critical side, as you mentioned. And Yellen dismissed some of the familiar complaints we now know, which are basically that China is making too many things and exporting to the rest of the world at too cheap prices. Interestingly, she said that's not justnot a threat to American workers, but you mentioned global workers, as well as perhaps an indication that they are trying to build some sort of global alliance as she tries to beat the drum on the story of overcapacity. .

And then Michelle also raised complaints about China's support for Russia, of course. And she stressed that China needs to stimulate its own domestic demand by buying more of its own products than by shipping them abroad. But the cordial side, the old Missy Allen, the kind of, you know, the kind of mis-selling that China would like in the past, was there too. It was a cruise through the Pearl River Delta. And there was an exchange of gifts between Mr. Allen and Chinese officials. So, on the one hand, he was conveying the hardline message we've become accustomed to.

And, on the other hand, play the old Yellen card that we know well. In addition, she talks about the cost of steel a decade ago and that excess capacity. We saw some from China. Many are quitting. That's what we're potentially seeing now in the electric vehicle space. And she says president, I won't accept it. They have done everything they can to show that tariffs are coming. And do we have any timeline for when we'll see these tariffs? I don't think we have an explicit timeline yet. Not refuted. Obviously, Ryan, Missy Allen was certainly sending a message to China that they are not happy with our economic growth strategy and all the implications outside of the United States.

We respond and Shin's mole responds, by the way, from Beijing, although there was a somewhat cordial tone in the meetings, Shin hit us back and said that Michelin has really come to deliver what they considered a pre-preventive warning that more tariffs or some type of export controls are coming. So China is certainly preparing for it. But China also seems to be playing well during this visit. I mean, typically, given the amount of criticism Mr. Allan launched, one would have expected a more forceful rhetorical response that doesn't seem to have been present in the state media reports we've covered so far.

So maybe there's also a sense that China is waiting for something to come, but they're also willing to play a little bit of the waiting game because they know that what's coming up in November is the election. And this could well be, of course, Yellen's last trip to China as Treasury Secretary. And there was a lot to unpack. I wonder if there is the economic appetite to endure some of these tariffs without retaliation from China. Is that what you're saying, that they're basically willing to wait, just grit their teeth and bear it if there are additional tariffs?

So there is an interpretation that China's economy, as we know, is not as strong as it could be. It continues to be affected especially by the real estate sector, the strengthening of manufacturers and exports. But the real estate sector is suffering a hard blow. At the same time, the American economy continues to exceed all expectations. Therefore, there is a view that China is willing to remain a bit low-key during this wave of criticism because it wants to welcome FDI. He wants portfolio flows to return to China. Remember the meetings Xi Jinping had with US CEOs just a few weeks ago?

So clearly they are trying to tone down the rhetoric. But let's move on to tariffs in particular. Once again, China knows very well that elections will be held in November. There could be a possible change in administration that could lead to an even more radical change of approach in China policy. So I think a lot of analysts looking at this feel like there's a little bit of downtime and both sides are trying to stabilize relations. But China is more than happy to run out the clock and wait and see what comes of that November vote. And thank you, sir.

I appreciate the update and they are bringing its full impact to Washington, D.C.. I think many people on Wall Street have circled the months of August and September as the potential next move for this administration. Why do it now when you can wait until just before the campaign starts picking up in November? Yeah, and one thing I heard was that they potentially don't want to turn this into an infrastructure week. Every week becomes a tariff week when journalists ask them: Is it done yet? It's done? But obviously there are elections in November and he will keep his biggest arsenal until September, October and maybe even August.

So if the rhetoric about China is going to increase, potentially that's when we'll see those tariffs, when they'll be important to the domestic audience. So what's in the arsenal right now? Trying to spa around August, if you need to move forward with big business in China, you will see these tariffs on Chinese TVs. The Commerce Department is also investigating connected vehicles. This also has to do with Chinese TVs, potentially more export controls and some of that technology, the tariffs and of course the SPR to this point, it's not at the level it was when Biden took office, but they still could drain a few million and potentially help the market.

They're going to need to do it if we see four or five dollars a gallon of gasoline, every American consumer, even if they walk, passes a gas station that is a reminder of higher costs. And inflation has obviously dogged this administration and there's talk of China waiting, waiting to see what they can get. HU Well, that's exactly what I was thinking right now, since this is kind of a campaign tool, it gives you an idea of ​​what the general temperature and type of population is and what you can expect from any of the administrations. . More on this, stock futures a little lighter at the moment, a negative S&P of around 0.1%.

Let's get an update on stories elsewhere. Here's his Bloomberg report with Dani Burger. Hi, Tony. Hi John. Goldman Sachs says European stocks are likely to outperform U.S. stocks over the next year. Sharon Bell and her team cited factors such as global manufacturing and a global rebound in the ECB's rate cut, they say in June. The financial, energy and consumer discretionary sectors will perform best, they wrote. Shares of Boeing and Southwest Airlines decline in premarket trading. The FAA announced that it is investigating another incident during the flight. This time it was the engine cover that fell off.

It struck the wing of a Boeing 737 800 during takeoff from Denver Airport on Sunday. The Houston-bound flight then returned safely and the plane was told to proceed to the gate. Boeing is still under regulatory scrutiny after a door panel burst on an Alaska air flight earlier this year. The South Carolina Gamecocks are national champions. They defeated the Iowa Hawkeyes 8775 in the NCAA women's title game. This is now South Carolina's third national title in just seven seasons. They are also the 10th D1 team in history to complete an undefeated season. But the highlight was Caitlin Clark from Iowa.

She finished her career with 3951 points. She now leaves as the all-time leading scorer in men's and women's college basketball. Truly remarkable. And that's your Bloomberg report, John. Hi, Tony. Thank you. What a phenomenal athlete. What she has done for sport, for women's sport, has been absolutely incredible over the last few weeks. People watch many male athletes. She has been the attraction. I mean, honestly, all the jokes about going to a bar to watch the Women's NBA and that kind of question about whether college basketball gets anything went out the window. Shaquille O'Neal, I'm not watching the kids.

His words suck. I only follow the girls. That's where some really amazing athletes are. This was him the other day on a podcast. I can't name one. I can't name any male college basketball athlete. And I'm just an average observer. Of course. What do I know? But that's been the story for the last month. She is the star. So here. Where did she go next? What if I did something that came with qualifications that should come with money as well as well-deserved? Next, in this program, inflation tested the patience of the Federal Reserve. What we hear from the Federal Reserve is patience with inflation.

But you know, they can only be patient during that time. They are trying to say that this is a roadblock. Maybe the knock is the new transient. I love that line of prayer. That conversation comes next. S&P 500 shares fell 0.05% here. A little softer to start the week. Slightly higher yields of four basis points per 44 on a US holding. Early in the session, new highs for the year in two-year, ten-year and 30-year crude fell just a touch negative, down 0.7% to $86 and around $0.32 under

surveillance

this month. tomorrow. Inflation tests the patience of the Federal Reserve. What we are hearing from the Federal Reserve is patience with inflation.

But you know, they can only be patient during that time. They are trying to say that this is a roadblock. Maybe a pothole is the new transient. But what they are telling us is that this does not suggest that inflation is not moderating, but how many months can they be patient? If so, this disinflation will not continue to slow down. I think that's where this inflationary narrative will play out. Think that here you have the latest. Investors await Wednesday's March CPI data for clues on the Federal Reserve's path forward. Laura Rein, chief economist at FS Investments, writes about this.

Markets are nervous as bullish surprises on inflation continue to appear under the hood. The inflation mix remains a problem. The prices of services are too high. Does the Federal Reserve need to cut rates? No, that will generate some markets. She's going to yell that at us in a moment. There is no urgency for a rate cut. My forecast is for rate cuts to begin possibly in the third and fourth quarters, with no lower range. Join this right now. For more information, Larry, you can do that in a moment. I want to start with a prayer, Isra by J.P.

Morgan Asset Management, who asked the question: maybe a bump in the road is the new transient? Does that resonate with you? I think it's well stated because it's starting to feel a little bit like deja vu month after month, pointing out just one factor or one or two unique little sub-indices that are surprising to the upside and giving us a monthly profit of 0, 3% instead of 0.2. Well, if you get 12 months of those, it makes three, 3.2% inflation, not 2% inflation. And that Whac-A-Mole feeling is back just as it did. It's not a massive acceleration story, but it's certainly not getting inflation back into that convenient 2% lane we occupied for so long before the pandemic.

LOW Let's dig a little deeper into that too. I think the consensus on Wall Street right now is that you can surprise, or rather, you can accept the supply-side story, that growth is not inflationary right now. I think Chairman Powell shares that with many. What is the biggest challenge to that vision right now? I think the challenge is that we're not just starting to look at the CPI. It has been a month and a half of upward surprises in inflation due to producer prices and rising commodity prices. The manufacturing price subindex reached its highest level in two and a half years.

So it's not just about consumer prices. It's really seeping and bubbling up from a lot of different places. And listen, prices for services are more rigid. I think that's the problem. And I repeat, it's not just about the rent. So, you know, you're looking at a nuanced story around inflation. I think unlike the growth side of the economy, everyone, you know, there's more consensus around the fact that we're in good shape on inflation. There is still a wide margin of consensus. And the surprising thing is that Powell is interested in dismissing the most recent data. Once again, there is no urgency in reducing rates.

So the fact that he still seems so determined on that path, I think makes many of us wonder what the conviction is behind the rate cut right now. Maybe this is why, Larry. You also said they won't go up any longer, but a renormalization of interest rates to the 1990s and 2000s is for the ten years to test 5% again sometime this year. What do you think is the trigger for that, given that everything we've seen so far, we're still pretty far from that? We're still far from there, Lisa, but I think we're on that trajectory. They are the highest inflation figures.

These are very strong growth figures. Are theproductivity figures which seem quite solid. And then I think there's the supply-side problem in Treasuries that just isn't going away no matter what. You change with the financing mix. At the end of the day, if we are not going to have a recession, the yield curve should normalize and it is still deeply inverted. I see it more as a twist. Some cuts to surgical rates later in the year, but long-term rates are increasing. And if we have a healthy economy with 3% inflation, there is no reason why long-term interest rates should not align with nominal GDP.

That puts you in the 5% range. At least I don't think we should be as worried about that as we were with the rapid rise in rates we saw in 2022 and 2023. I'm old enough to remember the last time we had 5% ten-year yields and people We were talking of something breaking and bank failures and commercial real estate falling off the ground. We're basically taking that off the table now and saying this is an economy that can handle it. No, it's not a problem, because I think this time last year, when we hit 5%, that was the speed at which inflation and interest rates went up so fast.

I make the comparison if someone from a warm climate moves to New York in the middle of winter, there will be a very unpleasant shock and you will freeze. But in the second winter, in the third winter, you get used to it and you go out and do everything you would normally do. I think that's the right comparison here. The longer we stay at these interest rates, the more we factor this into refinancing costs, the cost of buying a home and the cost of M&A activity, I think all of that will normalize. It was just the impact of the speed of the movement.

We are moving there gradually now. I don't think it's going to be a big problem for the markets to digest. If the economy is good and well, then these surgical fee cuts, they factor in about two or three. Are you really prepared to narrow them down to potentially one or none? Am. And I've been a little hesitant to say that I don't think two or three rate cuts are necessary. I just think that's what the Fed seems convinced it will deliver. I think you have to look at the current markets, the financial conditions and the credit conditions.

I don't think we need these rate cuts at the end of the day. We are facing a world with higher interest rates, which offers a wide range of alternative investments away from traditional stocks. I think the markets have digested these higher interest rates very well. Laura, I can only say that it is eight or nine in winter and no, I have not adapted. Laura Lluvia Thank you. I am in first investments. Maybe I'm like a vacant office in biology. It's not what I am. Okay, so you have an adapted public service announcement. Just say this. Get the right equipment.

You don't have the right equipment. This is all I can say. If you have any problem with. Wait a minute. This. So grab Claire, please. What's the matter with him. What is the team? Let's just say. Well, if by gear you mean you need to commit to the cold weather and then accomplish the mission, whether it's a warm jacket, warm gloves, a hat, commit to going out and experiencing the winds, but it's about embracing the experience of the ugly boots He has it all. I have seen it. He has a totally moral piano. He has. So Claire, criticize me.

I'm not critical. I'm just saying the equipment, if you want to enjoy winter, you have to have the right equipment. What does that mean? You have to have the right types of things that produce heat. Use hand warmers if necessary. Also, in England it is cold in winter. I'm not sure you've adjusted. Look, the only reason I survive in New York is because they promise you summer and summer comes and I can live with that. In England it is difficult. It's like this year-round wet cold that never goes away with the promise of maybe a week or two of sun shining, something like two weeks at most.

And from time to time there is a heat wave. It's like 24 degrees. Humidity is worse than cold. To say that I totally agree. The equipment. Well. Next on this show will be Jimmy Shank from Rockefeller Global Family Office. Terry needs a more elegant policy. It is a silk shaping battery. Jan and in my inbox just arrived from Jan's silk recession delayed indefinitely. We'll have that conversation in a moment. A lot of it is like that. I can't wait to hear that because ultimately that's what people are valuing. Again, what does that mean for the Fed's commitment to cutting rates this year?

Because we've still heard that compromise, although maybe they've softened it a little around the edges. And we will contact our guest to see if he has the right equipment to get through the month. I actually want to know this. I mean, April weekly stock features on the S&P pretty much unchanged on the S&P 500 in the bond market. Yields are rising across the board, about four basis points in ten years to 44. From New York, this is a pullback. If we see inflation rising, it really calls into question people's willingness to say rate cuts are still coming.

I think it wouldn't take much to at least delay the moment of that first possible rate cut. They're telling you that if things slow down, they'll cut a lot more. So they're trying to say that the risks around those three cuts are balanced. Clearly this is a Federal Reserve Chairman who wants to cut rates and is willing to examine some of the hot data on inflation. And I think we'll end up with two cuts this year. This is Bloomberg Watch with Jonathan Ferro, Lisa Abramowitz and Annmarie Horden Hearn. Never insult the English weather again. Brutal feedback, somewhat instantaneous.

How do people defend it? I'm curious. I'd love to know that too. And I'm about to ask and I hope to get an answer from New York City this morning. Good day. Good morning to our audience around the world. A big week is coming up: CPI on Wednesday and bank results on Friday. There is a lot to talk about. Let's start with the two-year, ten-year, 30-year bond market. Early this morning, new highs for the year

2024

and now it's 44 in ten years. And this really raises the issue that we've been dealing with all year. At what level and at what point do bond yields create a real problem for stocks?

Until now, we have ignored that question time and time again because it has been coming up for the right reasons. Is the bond complex continuing to lose value and yields rising for the right reasons to keep stocks rising? The question is when? The answer now is, according to Jeff, if you were Madeleine, who was on this show 60 minutes ago, you would say, based on Friday, really strong data pointing to really strong payroll growth, really powerful things around marginal growth, non-inflationary good, which provides The parallel momentum in stocks is breaking out again and that relationship is simply evolving day by day between Treasuries and stocks.

And I think we're all still trying to figure it out. That's good news, really good news for stocks. And a lot of that has to do with the turnaround of the Federal Reserve. This idea that the Federal Reserve emerged essentially indicated that they were predisposed to make cuts, whether they were just insurance cuts or, you know, beautiful cosmetics cuts, whatever you want to call it. The question here is whether they are sufficiently questioned in that thesis and that desire to reduce reference rates, given the data that is solid, but not necessarily inflationary in the same way.

And that's why Wednesday's CPI will be such an important day. Does the data cooperate? It is necessary to talk about raw materials and gold that recently reached new all-time highs, silver with a big rise also during the last week or so, rising again this morning by 1.3% and crude oil new highs for the year, in fact , the highest since October. , a movement close to 5%. AMR last week simply trimmed those gains this morning by 7/10s of 1%. As for Brent, we have gone to the psychological level of $90 a barrel. Next, everyone is talking about potentially: can we get to 100?

You see Goldman, you see Bank of America. You see a lot of notes that could be published in the peak summer driving season. Given these supply concerns, can we see $100 a barrel? And this is going to be very tense given the fact that we are in this moment geopolitically where we are still waiting for Iran's response. And then you have all the supply and demand constraints. Does that somehow derail the happy chatter at the Federal Reserve this week? They will say no. They will say they don't look at oil prices. Oil prices are transitory, just as the increase could be transitory and what was transitory was transitory.

But there is a real question about how this influences some of consumer sentiment and inflation expectations. We see it quite religiously. The University of Michigan Sentiment Survey I know sometimes you have trouble with the fact that they haven't called you, just call John and then he'll really like the survey. But the question I have is, at some point, will that be included in some of the Fed's procrastination? I've researched that before. Not to receive the call, just the questions they ask. Oh yeah. And I just want to talk to the people who put together that report.

Are you ready for this. You have answers to five-year inflation expectations of like ten and seven. You're going to skew the results on your own. So the results will be published one day and will say longer-term inflation expectations. 6.3% Jonatán Ferro. I went by the garage the other day and saw gas for about $4 and that was 10% from here. Well, that's how it works. Well. I understand that it is arbitrary. It's kind of arbitrary in nature. How can you survey people and get this really specific number that's actually pretty relevant to last month's number? That said, it is a good indicator of sentiment and somewhat influential.

I mean, this is one of the reasons the Federal Reserve was worried about inflation. At one particular Fed meeting, the Fed moved on this once, which I thought was absolutely ridiculous at the time. They move the goal. How many times now? How many times if they move the goalposts, the data, the issues, the data, that doesn't matter. We don't give up now. That's the data that matters. Yes, there is also inflation, etc. Can I just say that I feel a little bad for them? I feel bad, but I know you're going to wake me up. I know the floor is your place, but this is a difficult economy to understand.

I don't understand exactly what pieces are moving. So how do you communicate that holistically? We all feel bad for them. Stock futures on the S&P are virtually unchanged. The price action is shaping up as follows. Do you feel bad for the Federal Reserve? Well, I'm just saying I understand. I empathize with the challenge. Well. Yields up four basis points for 40 for 60 on 10-year crude, 8616. Coming this hour, Jimmy Shank from the Rockefeller family office ahead of a busy week of data. Terry Haynes of panacea politics as Congress returns to Washington as the Emperor of the Silk Patriots Jan on Wednesday at the CPI report.

We start with our main story. Investors are bracing for a busy week of data. Jimmy Chang in the Rockefeller family office weighs in on the Federal Reserve's path forward. The argument for 24 rate cuts is low quality job growth and high real rates. While the argument for not cutting is what's the rush when growth is still above trend, markets are near all-time highs and junk bond spreads are near decade lows. I'm pleased to say that Jimmy is doing well at the table with us. Jimmy, you. High. What is the strongest case from your point of view? I think at this point we shouldn't rush to cut back.

Do you think then that we will not have cuts in the short term? I think there will probably be one or two after the election for the first cut to occur. They really need a unanimous decision. And I think that's difficult as well, since June or even July, based on the current data set, would push it back to November of this year. What would that mean for stock markets so far this year? It's handled things pretty well with a lot of price cuts, as the stock is still up tonight by something like double digits. Do you think we can continue trading that way?

I think the road ahead is more difficult, probably affected by higher volatility. Part of it is also liquidity. Liquidity support for theThe market has been extremely strong, but we are gradually reducing the overnight reverse repo, which is the source of excess liquidity entering the market. So as the Q program continues and continues to phase out overnight reverse repos after tax season, I think the liquidity trap becomes more challenging and that's why the Fed has signaled that it would like to start reduce the rate of q t. pretty soon. Well, just to bleed that into the long end of the yield curve because this has been one of the big questions.

Why has this been such a difficult area to evaluate? If the Fed keeps rates steady until after the election, will that lead to a long-term rally? Does this lead to greater conviction that this Fed can get inflation and rates back down to a level similar to what we've seen in the past? Probably. In fact, there is a thesis that if the Federal Reserve were to pivot too soon, it would raise fears that inflation could return. So staying tighter for longer is likely to build more credibility for the market. But a lot also depends on the bonus offer.

I think we always will, at the risk of one more bad auction that can push yields much higher. And then at what point does one wonder at what level is the 4.5% that begins to cause a decline in equities? And it's not just this relationship between the pound and stocks, but also between bonds and gold, right? Because historically, when you start to go higher, the real increase goes up, gold prices are supposed to go down. And yet, we have been seeing a strong rally in the price of gold. What do you think of that? Because there have been several articles trying to explain it.

They all disagree with each other. What is your explanation? Things are combining market disputes over potential geopolitical issues in the Middle East. Potentially stiffer inflation and also the recognition that we are so indebted to the issue that at some point the Fed will need to start aggressively easing QE. The question is how will the Fed restart quantitative easing without reducing the interest rate to zero? I think that's the question. In fact, the most important question journalists should ask the Fed at the post-FOMC meeting is whether the CBO really projects that over the next ten years the Fed will buy $5 trillion in US Treasuries.

That's the CBO's assumption. Someone should ask you, Chairman Powell, what do you think? Are you going to engage in another round of quantitative easing soon? I think a lot of people ask those kinds of questions and it's really good. What does this mean for the traditional 6040 portfolio that basically the bond portion is now gold and oil and maybe chocolate and not really bonds? Well, if you believe that secular interest rates are somewhat higher or perhaps much higher than what we've been accustomed to over the last decade and that there will potentially be more volatility in interest rates, then that 6040 portfolio won't do as well.

So I suspect more diversification will be necessary to achieve that hedging effect. Researching real assets, precious metals, alternative strategies. What about foreign stocks? Where do they fit into all that? Foreign stocks become more interesting when the global recovery is synchronized. We haven't gotten to that point yet. Foreign stocks perform better when the dollar is weaker. And at this point, if we believe that the ECB is going to ease policy imminently and the Fed may choose to stay somewhat higher for longer, the dollar will potentially rise even further, which argues that at least in the short term , probably not your option.

It's time to overweight foreign stocks. Help me make sense of this. Would you expect a stronger dollar and at the same time do you think we could get a breakout in commodities in places like gold? How unusual is that? That's why today has been a very interesting year. You see the breakout in gold. I think that indicates that the market is concerned about long-term fiscal unsustainability in Washington. Can you help us because today we were talking about the letter from JPMorgan's Jamie David and how AI is such an important topic? I know you focused on technology your entire career and just a few of these technological advancements.

How much do you think this will reduce staffing at some of these companies? How are you going to transform some of the financial centers, given your vast experience in that area, initially make us more productive? So is increasing productivity. But over time, companies will realize that if I can get more output per employee, maybe I won't need as many people. Therefore, even with expansion plans, you may not have to hire as many additional employees. So I think over time that raises big questions about the social benefits. Should there be a universal basic income? If we see more, you know, displacement caused by AI.

So that's probably five years away. So before we talk about universal basic income, when it comes to investing in stocks, I was going to ask a question about the stock market, but it really raises some larger social issues. Does that mean that the United States benefits disproportionately from all of these things simply because we haven't been the same kind of industrial hub as some of these other areas, these areas that might become somewhat depopulated in terms of employment because of technology? artificial? According to intelligence data, the US stock market will benefit the most from some of these developments, rather than the international market.

We are ahead of the rest of the world. But that being said, there is also the open source movement in A.I. and there are plenty of smart programmers elsewhere. So. So it's just the competition over time, and it's also the way AI is applied. To every industry vertical are the commercial applications that will appear in the coming years. At this stage we are only analyzing the infrastructure, who makes the chips, the computers, the servers, the software? Well, you know, entry-level infrastructure software. But over time, they will be individual business verticals, and that's the new year ahead.

You talk about this sugar crash in 2025. What is the catalyst for that? It's just exhausting. All the unusually high sugar and high stimulus of the COVID era. I mean, we're still benefiting from it. So just look at overnight reverse repo as a source of excess liquidity. I mean, we've been getting net liquidity injection into the market in 2020, '21, '23, and so far in '24, 2022 was the only year with a net withdrawal of liquidity and that's why we had a bear market. But I do suspect that if the Fed continues with T and deep overnight reverse repos in 2025, the liquidity environment will be very challenging.

At the same time, we will be left without other stimulus, such as, for example, the resumption of the employee retention tax credit that could occur this spring. That gives. You know, you paid for the rest of the year. So what do we do for an encore in 2025? And also, you're looking at a possible debt ceiling negotiation in January of the 25th. You describe a lot of complicated things that could happen and you just go after everything you've said in the last 8 minutes, statements, extortion, potential, sticker inflation, move on precious metals later initiate four UPI rate cuts in five years.

How is this Fed going to balance financial stability and price stability, given everything it just told us in the last 8 minutes? How are they going to do that? I don't think anyone really knows. We're really in somewhat uncharted waters, and that's why a lot of the traditional market indicators, the yield curve, the leading economic indicators, haven't worked in this cycle. Simply because we have been overwhelmed by so much monetary and fiscal stimulus. We are still benefiting from it. So I think everything may be fine in the election, but beyond that, who will be in control of Congress and the White House?

What will the policies be? So there are many uncertainties. Do you think we could be close to this market rejecting a policy effort from this administration or the next administration anytime soon? Lisa has been talking about this for a while. The prospect of a Liz Truss moment in the Treasury market. And I think a question we put this way: Does this Treasury still have the privilege of behaving recklessly or are we very close to being challenged by fixed income? I think ultimately it's going to take the bank to rebel, you know, the banking watchdogs to pressure Washington to be more fiscally responsible.

Jimi, thoughtful stuff. There is a lot to analyze. Thank my Lord. Jimmy Shank, he of the Rockefeller Global Family Office stock futures right now, totally unchanged on the S&P 500. Let's get an update on the stories from the house where Henry Shaw Bloomberg Daybreak with Dani Burger. Hello Danny. Hi John. By chance, today, for a few brief moments, Americans will turn their gaze toward the sun. It's the path of the total eclipse through cities and towns from Texas to Maine. The entire event will last several hours, but the main skeptic is, of course, that day turns into night and the moon is hidden from the sun.

It is expected to only last about 4 minutes. The event has caused a tourist boom. The areas along the trail are completely reserved. Meanwhile, the United States will lose about 30 gigawatts of solar energy as sunlight will be blocked during peak generation hours. It is approximately the equivalent of 30 nuclear reactors. The CEO of Rolex has warned that luxury investments should not be considered as luxury watches, but as investments. Chief executive John Frederick du Force said: "I don't like people comparing watches to stocks." He sends the wrong message and is dangerous. An interesting sign for someone who wants people to buy their watches.

He believes a slowdown will hit sales of smaller watch brands more. And it's a battle of the number one seeds. UConn faces Purdue tonight in the NCAA men's championship game. The UConn Huskies are looking for a win in back-to-back national titles. The Purdue Boilermakers now have a chance to win their first championship. And that is your model. Report to John Porter for the Wrap. Thank you. Next on this show, Treasury Secretary Janet Yellen's tough message to China as the global market is flooded with artificially cheap Chinese goods calls into question the viability of American and foreign companies.

That conversation will be broadcast live from New York this morning. Good day. S&P 500 shares this Monday morning. And good morning to you. Welcome to the program. Virtually no changes in the S&P. Yields have risen four basis points. The ten years for 4460 under

surveillance

this morning. Treasury Secretary Janet Yellen's tough message to China. China is now simply too big for the rest of the world to absorb this enormous capacity. And when the global market is flooded with artificially cheap Chinese products, the viability of American and foreign companies is called into question. Here's the latest from this morning.

Treasury Secretary Janet Yellen expresses concern about China's manufacturing capacity and urges top leaders to focus on domestic demand. The meetings were reportedly cordial. However, China's prime minister advised Yellen not to turn economic and trade issues into political issues. Panacea Policy's Terry Haynes joins us now to learn more. Terry, how are economic and trade issues not political issues? Well, they always are, John, of course. And good morning everyone. You know, the thing is, with this administration, I think the goal line is that, you know, you can judge that the ability to lecture is inversely proportional to the ability to achieve the outcome that you want.

So, you know, everyone understands the drill cries, they complain about all these policies, and they essentially want to tell the Chinese to redo their entire economic program, which they took a couple of years to put together. She knows they're not going to do that. They know they're not going to do that. They consider many of the accusations Yellen made to be unfounded. And that, I quote, when it comes to flooding the world with electric vehicles, for example. So, you know, everyone you know, no one expects a different outcome personally, not even politically or economically. The result appears to be tariffs.

And they have been signaling this for months, especially from the Secretary of the Treasury. What do you think the timeline for these tariffs will be? You know, I am with all of you. I heard you heard your previous discussion. I agree with all of you that you are trying to do something more.close to elections to produce greater profitability. And they'll probably try to incorporate that if they can, with additional evidence that China helps Russia and Ukraine, which everyone knows is happening. And not only economically. Russia is effectively a client state of China. Well. So what we're going to get is, I think, intensified and sharpened Chinese rhetoric just as we enter the general election campaign, partly in the hope that it will actually make a difference in the elections.

And, frankly, I don't see much at all. But they do it. And then what would be the tit-for-tat that Washington should be preparing for from Beijing? Well, there are many things. You know, they will. Yes, they will. Absolutely. tit for tat on sanctions and a lot of other things. And they will probably step up their plans to flood the US market with electric vehicles and everything else and maybe even take additional steps in places like the South China Sea to rattle the geopolitical cage. That is why I think the markets continue to forget that we are at the greatest geopolitical risk in 50 years.

And I think they think Taiwan has calmed down, but the Taiwan question has calmed down. It is not like this. It's just that China is now threatening the Philippines instead of directly threatening Taiwan. That's why it seems calmer in the markets. Well, Terry, this is exactly why I found it so interesting that President Biden is holding the first trilateral summit this week on Thursday between the Japanese prime minister and the leader of the Philippines to talk about some kind of alliance to really counter to China. To what extent is this directly related to preparing for any possible retaliation for the tariffs imposed on China?

Oh, 100%. You know, there are broader geopolitical issues here. And the idea of ​​adding Japan to the office pool has been around for a while and they're trying to move forward on that. And it's not just limited to Japan either. You know, the Biden administration has spent a lot of time flirting with India. I'm not suggesting that India is about to take over, but the idea here is that there is a pushback in Asia against Chinese hegemony in the region that will continue and economic sanctions will continue to be part of that. But there is also the broader geopolitics.

But it's not exactly an acceptance of us as hegemonic, is it, Terry? And I wonder to what extent the region has rejected US policy. You know, I don't think it's being rejected by the region. But there are many tensions there. If you are a non-aligned nation, the idea of ​​working with the country that is closest to you for immediate economic benefits is always tempting. And they are under a lot of pressure to do so. At the same time, however, there is a situation where China has been pushing the Belt and Road for some years and that has had very mixed results.

And because because of those very mixed results, today it seems like the pendulum is swinging back towards the United States and the Western alliance when it comes to wanting to establish a more independent and less China-centric position in the region for a long time. of these countries. How difficult is that type of message? Before the election, I will focus on what is happening with Nippon Steel. The president has said that he does not want this agreement to occur. The Japanese came out and said, well, this actually means we are stronger against China with this deal. And the United States is using concerted national security concerns about China to want to block the deal.

But in reality these are domestic jobs. That's why when I talk to officials abroad, they sometimes feel like the United States is talking out of both sides of its mouth. How does the United States combat that? Well, you know, the best way to combat it is to stop talking with both sides of your mouth. But I do think this is something that gets the Biden administration into trouble. It's not limited to them, of course, but they do it a lot and they do it a lot in foreign policy. You saw it in the run-up to the Ukraine war.

You are seeing it now in Israel and Gaza. It's being seen in many places, what they should focus on is whether or not it convinces someone politically, frankly. And you know, I don't think that's the case. You know, in western Pennsylvania, for example, which is one of the big election battlegrounds, they make Biden's people think they're helping their cause by being much more pro-union. But on the other hand, they're engaging in LNG bans and pauses and things like that that just make people, in general, more cynical about them. So, frankly, I don't think the strategies are very well thought out either from a political or economic point of view.

You're implying that there is a strategy, Terry, and I'm not sure there is at this point. Terry hides a more elegant policy. Terry, thank you. It just seems to me that you do one thing to try to please Pennsylvania and another to try to please Michigan. And this is what

2024

will be about. These are going to go to elections, which is one reason why the real litmus test, as Anne-Marie was talking about, is actually the international allies and, in a way, to say, it is okay, guys, what are you doing? And if there's a strategy, I mean, that's it.

Below, Jeremy Diamond releases his and his letter to shareholders with a warning about AIG. That's the next thing. Welcome to the program. S&P 500 stocks are also unchanged on the Nasdaq. Pretty flat this morning, going nowhere, trying to bounce off Russell. I think small cap losses were weaker last week. The Russell this morning rose 0.1%. The stock market, the S&P 500, has just suffered its biggest weekly loss since the beginning of the year. If you turn to the bond market, I will explain some levels. Two-year high this morning for 7823 just below those levels right now, ten-year high again this morning, which is where we are now, four 4541 yields above Lisa five basis points to an expiration to ten years.

And this stems directly from the idea that the data is not cooperating with the Federal Reserve appearing to want to cut rates. What I find interesting is where returns are increasing. It's not inflation expectations, it's real returns. When you exclude inflation expectations for the next ten years, you see something above 2%. This is the expectation that the Federal Reserve will have to stay at high levels for much longer. And at what point does that really start to affect risk assets more significantly? What will happen when payrolls reach 330,000 is barely talked about. What the hell was that number on Friday?

Well. We also didn't get downward revisions. The surprising thing and the reason we didn't talk about it is that it was a perfect response. The idea that there was also no wage growth at all raised real concerns or red flags. This is the kind of disinflationary growth that is just perfect by all accounts. The question will be that on Wednesday we will get the CPI and then the PPE. Does that hold or do we suddenly have to rethink that thesis? Immigration means the United States can expand without overheating. This is what Jay Powell talked about, although I met with acting Secretary of Labor Julie Su and she didn't really mean that it was about immigration.

She did a lot of verbal gymnastics to say that they were teenagers. That's what drives this capability. They will say things like bigger, not tighter. That's what I heard from the Morgan Stanley center. The economy can grow without the labor market adjusting. I want that. At least if it's all immigration, then they'll spend money elsewhere given the jobs they have. And I think it is something very complicated for this administration to accept. Hence the verbal gymnastics, because what is the message you are going to send? We have a supply-side story that we are adopting because we have a lot of immigration coming across the southern border and that keeps wages down.

Is that politically acceptable? Not precisely. If you don't get the pay increases in low-wage jobs that you used to get because of an increase in the influx of people who will take those lower-wage jobs, it's a tough time for the administration, for the economy. From the point of view of many investors, it seems like economic nirvana. How long does that last? Because, honestly, we are seeing that a certain level of strength in consumer spending remains there. That leads to a perhaps slightly different reality. One interesting fact from this jobs report that I found interesting was the increase in the number of people with multiple jobs.

Therefore, you must have multiple jobs to pay your bills. It has increased 27% since the former president left office. And that's why you saw Trump come out and say, well, there are things in this jobs report that you need to pay attention to that are politically agnostic issues that the Fed needs to take into account. They look at the situation right now. The market, I would say the markets, took this constructive view because they believe that Chairman Powell can respond to weakness and basically ignore strength. So is there something about the discussion we just had that the change is there?

Well, if these are people who work multiple jobs, that means they are concerned about your well-being in your ability to pay your bills. So that doesn't speak to a shout of confidence that speaks of strength, which is why there is some caution. Good. Wait a second, things are going to significantly slow down Andrew Hall's horse worldview. That's why the Federal Reserve is being so cautious. And the reason why Mohamed El-Erian says we should probably cut rates in July, even though we are getting economic data that is solid. Mohammed, with us here in New York tomorrow morning, at 7am.

Eastern time. So don't miss it. I want to use the currency exchange in euros. Just fast. The Euro against the US Dollar this morning looks negative five 0.1% to 1.25. I just want to use that as an excuse to talk about this Eric Nelson thing. Single credit, the difference between the Federal Reserve and the ECB. Fantastic note from Eric over the weekend. The Federal Reserve says it doesn't know exactly when the rate cut cycle will begin, but it sends a clear signal about the expected pace of cuts once it begins. And a view on the expected end point.

And instead, the ECB has virtually pre-announced the first rate cut more than two or three months before the formal decision, but insists that the subsequent path remains virtually invisible. When you compare and contrast what's going on between the ECB and the Federal Reserve, there's a very big difference emerging right now and just taking into account how they approach policy communication, especially given the fact that, Jeff, You said earlier that this is a live meeting on Thursday with the ECB as they come out, which raises the question of whether the market is ahead of the game. Right now, the market is doing the work for the ECB and saying its rate cut path is much more concrete than the Fed's.

There's still a lot to do because we have a weaker economy and, frankly, we have more types of economic weakness trickling down into more significant disinflation. Jeff is looking for parity right now one away, 25 and this event is this morning, a busy week of data available Stanley with CPI and minutes fed on Wednesday Thursday we get PPI and jobless claims. Consumer sentiment and bank profits are mixed. Complete the week on Friday. The last question of the morning. So far, the banks' results are data. Choose your option. Which? I think bank earnings and CPI, if in line, will basically be treated as a beat.

But bank profits might actually give an idea of ​​how much consumer opposition there is, whether J.B. Whether Diamond is speaking as a concerned American or whether he is speaking from some sort of concrete sense of real concern that he is seeing in the real numbers. But for the Fed to cut, given the strong support we have in the labor market, it needs to see softer inflation. So I'm looking at the data and Bank of America doesn't share the consensus. They are a little off. They say it's a month-over-month increase of a combined two points percent.

And they say this print is much more important than last week's jobs report. The week actually starts on Wednesday with that economic data, then continues through the week on Friday when we get those bank earnings. Let's move on to our next story. Paramount Global is close to a deal to merge with David Ellison's Skydance Media. Anderson and his sponsors agreed to pay $2 billion for the media giant that owns CBS, MTV and Nickelodeon. The two sides agreed to a month of exclusive talks to work out the details. There are many movements in this sector at the moment.

In fact, I'm surprised there hasn't been moreconsolidation. There have been many conversations, conversations, conversations, and conversations that are interrupted. Are they really going to be stronger together? And will it really be the package we essentially return to? Haven't we already returned to that half of the road? Would you like my Hulu complaint please? I've been waiting all morning. I don't understand the something. The something is absolutely terrible. I mean, do you know me? What do I want to see on Sunday? I want to watch basketball. I want to watch sports. What should be on the cover?

Sports. Not there. It's not like you then have to go to something else and click on sports and then search for the basketball game in the United States. I don't understand. I have to do the same with golf. Sometimes it's just not there. But what is there? That is my question. The farmer who wants to find a wife is on top of the pile. It's because you also love romantic comedies. You said that. So your something is always confused. It's confusing because I'm multiple people. Yes. Because you watch a Lifetime movie. You probably watch a lot of Lifetime Christmas and watch Hallmark movies.

Yes, but you already do a lot. Shouldn't they know that it's already April and it's not Christmas anymore and you don't want to watch Hulu's algorithm and full-service sports on Sundays? Sports on Sunday. This is one to watch great golf over the weekend. It's a fantastic ending heading into the Masters this week. Let's move on to the story of the CEO of Jp Morgan. Jamie Time, a great show, by the way, with their annual letter to shareholders, about how we're moving away from open-ended stories toward sort of stories about the American world. And it's almost like you actually see it change.

Yes. So Hulu was right to love dedicating a portion to artificial intelligence. We went ahead, guys, saying it could be a transformative steam engine for the economy. Over time, we anticipate that our use of A.I. It has the potential to improve virtually every job. Sonali Basak joins us to talk more soon. It could be a steam-engine transformation for the American economy. Explain Jamie Dimon's logic to us this morning. Well, there are a few things. We know that Jp Morgan has been talking about this for years in his annual letter. We know that he has thousands of people dedicated to the cause of AI.

They've just appointed someone at their investment bank to play a broader role here, to analyze data and technology across the company. When they look at artificial intelligence, they use it in many companies. Everyone from financial advisors is already figuring out how to incorporate it in a more generative way to figure out how to dish out investment advice. Remember, trading desks already use A.I. to scale. Now, what does generative artificial intelligence also mean for operating tables? Data centers and presence and data centers. So you look at the whole spectrum and certainly the A.I. It has a huge role, not to mention anti-money laundering and security concerns within a bank.

If there are actors that can cause harm as a bank, it is also necessary to have that defense properly implemented against those actors. You've been reading Jamie Dimon's cards for a long time and then covering the gains that appear shortly after. What is the relationship between the two? So there are some things in this particular letter that speak to the business moving forward. Do you think, for example, what it says about the expectations for the First Republic? They had previously said that it would add up to $500 million in annual profits and now they believe that is closer to $2 billion.

Lee says. You could believe it. And he also expresses his concerns. We always look to Friday, this Friday, to find out what he is going to say about the future of the economy and he gives a little of that in today's letter. There are many concerns about persistent inflation and the idea that inflation could remain high for longer. It's interesting that it balances that in a very interesting way. He talks about persistent inflation relative to federal spending and he worries about geopolitics, but he also talks about economic growth and not just in the sense that AI is as productive as a steam engine, but also when you think about how much money they have the economies. also spend on a green economy.

This idea that, you know, he puts specific statistics, it takes 70,000 electricians to really drive the electrification of the United States, for example. So how much product? It takes 50 to compensate for those forces. I think that's a great question that we were asking ourselves before. Is it Jamie Dimon as Treasury Secretary or is it Jamie Dimon as CEO of Jp Morgan? You know, that's been the constant question, hasn't it? This letter has always been a kind of swan song for the world. It has been Jamie Diamond's way of really giving his opinion on many issues that affect J.P.

Morgan, his clients. But also remember that they bank with customers and governments around the world. There is an entire section at the end of this letter that talks about what it is to be a good leader. And you have to wonder if that is the story of the transfer. Is that the note, not only for people who are analyzing the qualities of the next CEO, but also your own letter to whoever succeeds him? Maybe he was a little nicer and said Trump was right in Davos. Then he recently went to the White House and had lunch with Kamala Harris.

What is he doing in terms of politics? He is walking a fine line on purpose. He always has. And there's also a part of the letter where he says something that I think we already know about him being like a cold-blooded free market capitalist. And it's important to remember his economic thinking when thinking about how he deals with politicians. He has always straddled the line. It's really interesting to see him go to Congress. Now. They have that annual interrogation of the bankers. Now they are no longer asked the same political questions as before about financing green energy, for example.

In these things, the balance tips one year or another, frankly, for these banks. And that's why he has been able to step up things like energy financing in a way that has sometimes been unpopular. But guess that? A few years later, it's less unpopular, right? And so you see that he stands the test of time when he wrestles with these issues. Jp Morgan shares are up 17%, up more than 17% so far this year. I find it fascinating what you pointed out about the First Republic and how much they have gained from that, how much we expect them to consolidate their profits as the largest bank in the world, as the largest bank in the US and to really dominate many areas that Maybe they were more open to some of the competitors before?

Yeah, this whole beginning of the letter starts with the history of bank mergers from Jp Morgan to Bank of America, and this idea here that Jp Morgan itself, in 2004, Jp Morgan represented consolidation. He says, from four of the ten largest banks in the United States since 1990. If you can believe it, you remember it was born from consolidation, but you forgot exactly how much. And now, when he also talks about banking regulations, he defends that the entire banking system continues to consolidate to protect itself. This is another favorite idea I had from this: the idea that even Apple effectively acts as a bank.

It refers to all the competition they face from the non-banking system. And he mentions a big technology player because of his interest in Apple. It's a bank, the airlines, a credit card. Everything is changing. However, the general idea is what is your biggest competitor? Big tech is a kind of banking industry. That was about three years ago. Now it's basically Apollo and other companies spending their lunch. Let's listen to me. Thank you. Good to see you. Sonali Basak there from Bloomberg. Lisa mentioned the performance of the year. JP Morgan shares rose 16%. Citi rose 20 points. Bank of America rose about 10 points.

All three banks have a decent year so far. However, tonight. Let's get an update on stories elsewhere this morning. Can Rachel Bloomberg Break Dawn? Let's catch up with Dani Burger. Hello Danny. Hi John. Crude oil is falling to start the week. It comes from a maximum of five months. Israel said it would withdraw some troops from Gaza but is still preparing an offensive in Rafah. Chipmaker TSMC will receive $6.6 billion in subsidies. It will also receive up to $5 billion in loans from the United States. That's to help him build factories in Arizona. It's a preliminary deal, but the company will build a new factory in Phoenix that adds to two facilities in the state, which are expected to begin production in 2025-28.

The newest factory will build next-generation two-nanometer chips. They are essential for emerging technologies such as artificial intelligence and military applications. Spirit Airlines has reached an agreement with Airbus. It will defer delivery of all aircraft scheduled for the second quarter of 2025. Deliveries will be delayed until late 26-31. It should improve Spirit's liquidity position by approximately $340 million over the next few years. Spirit will also furlough about 260 pilots starting Sept. 1. That's your Bloomberg report. John Donnelly, appreciate the update. Thank you. Next on the agenda is that trade is scaling back that rate cut. That's the policy mistake: chasing 2% inflation too quickly.

If this Fed continually relies on data, then maybe we won't get cuts. That conversation below. BP and the S&P 500 lose 0.1% on the S&P. We'll talk about that another time. In the bond market. You are at a high of five basis points for 4541 in a ten-year time frame in the United States in the commodities market. We see each other like this. We are almost negative 0.7% crude oil right now, WTI at $86, Brent crude at $90 and around $0.50 under watch this morning. Traders are trimming their bets on rate cuts. There is a slow but sure migration in the markets towards the view that yes, we are not going to reach 2%.

We are going to reach more than three and that will be stable. And the policy mistake would be to pursue 2% inflation too quickly. If this Fed continually relies on data, then maybe we won't get cuts. But I hope they look back at the data and look forward. And I think we'll end up with two cuts this year; The latest of them this morning after a spectacular jobs report, traders are counting rate cut bets for this year from 3 to 2. All eyes are now on March. The IPC suggests that a battery shampoo writes in this that less is more.

The market is about to wait until Wednesday to further rule out a rate cut in June. Strong fundamentals and persistent inflation call into question the need for three rate cuts this year. I'm happy to say that the pattern is what we have around the table here in New York. Sir Patrick, good morning. I want to get this question all the time. Stock markets are at record highs, credit spreads are tight and slowing job growth. Strange. Well. Why are we even having this conversation about lowering interest rates? Because it's us. Well, I think next year will be complicated.

I think the Fed thought the economy would slow more dramatically than we actually saw in the first quarter. We actually saw a decent amount of momentum. Growth is between 2 and 2.5 percent. And I think they were also somewhat anxious to at least start the rate adjustment policy before the election so as not to appear partisan. And that's what leaves them in kind of a really difficult situation where the data has performed much better than their expectations. And now, in any case, the optimal time to make cuts may be the fourth quarter, but that coincides with the elections.

So let's eliminate the cuts. We are pricing in stronger growth and perhaps higher inflation, stiffer inflation. And the bonus board looks like this. If we can get it up and move forward, it will be a better two-year rate close to the top rate, a ten-year getting closer to the full 50, 30-year rate, basically 460. How much potential is there for high returns from here? ? I think it will be difficult for yields to continue increasing from here, because I believe that the current environment is very different from what we saw in the fourth quarter of last year. In the fourth quarter of last year, the Federal Reserve was leaning toward raising rates further before the end of the year.

There was also an environment in which Treasury supply was in the foreground. An increase in term premiums was observed due to the increase in the size of coupon issues. And now we are in a different environment where the Federal Reserve's trend is clearly toward easing. So they told us they are thinking about a rate cut sometime in the second half of this year. So I think, in some ways, it puts a mechanical limit on how returns can increase from here. The supply landscapeIt really hasn't changed significantly. But that said, I think the markets could be biased toward lower years from now.

Are you saying there is no emerging data or cumulative data points that will influence the Fed to cut rates this year? No. It is very possible that the Federal Reserve will end up not cutting rates. The data ratio remains strong, but the bias in the bond market will be towards lower yields, given the fact that the market will always look for something in the data to break. That would cause the Federal Reserve to pivot and cut rates. So I think that's where the market's attention will really focus. Are you more optimistic for ten-year performance if the data underperforms or outperforms this year?

In terms of this week, I have to say, in terms of inflation data, if the inflation data is hotter than expected and forces this Fed to keep rates higher for longer, is that more positive or negative? for ten years? It's actually a very interesting question because if you think about the reaction function of the bond market or even on Friday, the wage footprint was actually quite benign. So that would perhaps be an argument in favor of the Federal Reserve being able to adjust its policy. But on the other hand, the headlines made a very strong impression and it was very, very difficult to see any kind of weakness in the employment picture.

So the overall employment picture is extraordinarily strong. And then we're looking at an environment where, if inflation really starts to come down suddenly, the Fed is going to have to cut rates in an environment where everything else is very, very strong and that's where it really becomes a little complicated. It is really necessary for employment to break down. You really need to see some weakness in the manufacturing sector or other indicators that suggest the Fed would need to cut rates in an environment like this. So the ten-year yield is being predicted to end up around 4% and this year it will end up around 4%.

Are you reconsidering that? Are you getting a little nervous seeing the strength you just described? The longer the Fed keeps policy higher? I think there is potential that will carry over into the broader economy. Our view is that any yield would probably start to decline towards perhaps 375 or 380 in the third quarter, as we get closer to the election in which the Federal Reserve has not cut rates. Beyond that, I think once the election passes, the simple certainty of it should cause yields to rise. And then you start looking at things like the debt ceiling, the increase in the size of coupon issuances that will occur in the first quarter of 2025, which should again trigger a rebuild and exceed premiums.

So our call is to achieve high returns after the elections. PIMCO's Andrew Balls simply says that's why there are better places to take duration risk right now. Look beyond the United States and look to say Europe. Is that something you would agree with? Yes, due to the fact that we look at the sequence of policy adjustments, the ECB basically told us that it will adjust its policy in June. This was not what we expected going into the program. The expectation this year was that the Federal Reserve would act first and then the ECB would follow suit.

But now it looks like the ECB and perhaps even the Bank of England could cut rates before the Federal Reserve. So in that type of environment, I think it probably makes sense to go long bonds in others. Other G-three countries, unlike Treasury bonds, increasingly sooner and further into the ECB. Do you think they will adopt lower rates than, for example, the Federal Reserve? Probably not. Once again, the situation there is very complicated. Unit labor costs are starting to increase. Inflation remains a major concern. In fact, I was quite surprised that they suggested or started communicating that they would cut rates as early as the June meeting.

Now the market says, well, they'll cut in June, but they may not have to cut as often after that. So right now it's really a communication game, so to speak. This is what we are all dealing with. Are we really in this new regime? When you start talking about the final destination, how much higher is that destination than the previous rounds of rate cut cycles that we've seen over the last decade? As will be? So the destination definitely seems much higher. We raised our forward forecast for Europe from approximately two to two and a half percent in terms of the rate in Europe.

It's the same in the U.S. I don't think the term federal funds rate is going to be anywhere near the long-term federal funds rate, which is about two and a half percent. So when the cycle ends, I think the federal funds rate could end up between 3 and 3.5 percent. And the path to get there could be much slower than people anticipate. He talks about the increase in oil and raw material prices. Who is most vulnerable to that? The ECB or the Federal Reserve? It has to be the ECB due to the fact that they depend much more on energy.

The ECB also analyzes headline inflation much more than the United States. The United States, for the most part, is energy independent. So, if anything, there are some positives to come from rising oil prices for certain sectors of the US economy, as well as capital spending. So I think for the most part, at least for the ECB, the focus will be not only on core inflation but also on headline inflation. And to the extent that there are higher oil prices and higher geopolitical risks, I think that will weigh more on European bonds than on US bonds. Interesting topic, correct to say simply fantastic.

The safe catch-up shampoo has been soaked in on a morning where we have new highs for 2024 along the curve, the two years, the 30 years, the ten years right now, what five basis points are approaching each again to 450. What was the line on The Smell of Equity Pain last week? They were 450 5556 worth one person. Yes. 556 Other people say 450 We'll see. We're not necessarily seeing this completely derail the stock rally, but seeing it in certain sectors certainly calls into question whether the rotation can persist. They said here at 460. That's what caught my attention last week. Small caps underperformed last week.

Remember, we started last week talking about how to scale small caps and do it better. Then it absolutely got hit even though we had better economic data, because basically those are the companies that are most leveraged into what could potentially feel higher rates, where it's still a mystery how resilient this economy is, if the long delays and variables still persist. exist or if they just don't exist for a long time is what some people might say 30 years, for a long time. Mainly check if Jp Morgan and a quote from the Atlantic Council, Nationwide's Kathy Boston and Bloomberg Intelligence's Gina Martin Adams, all joining us in the next hour, the third hour of Bloomberg Surveillance is just around the corner, futures of stocks in the S&P totally Huge and unchanged week ahead.

CPI on Wednesday, first quarter earnings begin Friday morning. The ingredients are there for the bull market to continue in a healthy manner. Technically we are still in an uptrend. Maybe there's more of a growth story at play. We are seeing a lot of economic strength. I think more than the Fed had predicted, more than most economists had predicted, that debate is leaning more toward the no side, that this is actually a stronger economy than we thought. The United States is an economic exception among advanced economies. This is Bloomberg Watch with Jonathan Ferro, Lisa Abramowitz and Anne Marie Jordan.

They said our Bloomberg watch starts right now live from New York City this morning. Good day. Good morning to our audience around the world with Lisa Ravitz and Annmarie Horden, I'm Jonathan Ferro. The stock market remains completely unchanged in the S&P 500. Let's get straight to this week's agenda. Helping the IPC. On Wednesday, we will release the federal acts on the same day, ppi on Thursday along with the unemployment claims. And then, on Friday morning, bank earnings are just around the corner. Lisa, you started this conversation today by basically asking the question on that screen: What are you focused on?

What is more important? Honestly, it kind of depends on how everything turns out, because you can argue why the earnings are going to reveal a bigger picture that could sustain this rally. And you could argue that if the CPI rises more than expected, suddenly the increase has become the new transient and suddenly we're talking about higher inflation, the Fed not having the ability to cut rates as soon as possible. a lot. I think that given that we have the employment data behind us and that the unemployment rate, stellar unemployment for over two years, is below 4%, the biggest problem that this Fed has been running into is inflation. .

And we have had these positive surprises. What does this week mean? And that's what I'm really focused on. We drive this conversation through the bond market. Let's go to the board. Look at two years, ten years, thirty years. If you're just joining us, new highs for the year at every expiration you're seeing on the screen right now, we're approaching 480 two years later, an increase of five basis points in ten years. Are Higher Yields Still Higher for the Right Reason for Stocks? And I think ultimately that's the key question that maybe we get some answer to if we get solid first quarter earnings and if we get the answer that good news is good news for at least stocks, this has been the key question.

People have ignored the rise in yields, but they are rising a little faster and they are doing so with the idea that the Fed is going to respond. And if that persists, suddenly, that will be the narrative, the level at which bond yields will become two supposed case studies, one on Friday and one last Monday. Let's review them. I think they speak for themselves. On Monday I said manufacturing, but really shocking prices paid the number, the stock didn't like it. Bond yields rise on Friday. We had some really impressive payroll numbers. Without corresponding strength in wage growth, the stock market can handle those kinds of returns.

So we had two very different sessions where yields went up for, let's say, the wrong reasons and yields went up for the right reasons. Basically, if you get this kind of disinflationary growth, well, that's fantastic. But do you really have the conviction that the Federal Reserve can avoid cutting rates in the face of an employment differential greater than 300,000? And this idea that there were no downward revisions that were substantial and the fact that we are seeing people talking, Laura Erhaim, talking about rigidity and service, inflation is the long series of upward surprises in payrolls over the last year, the last 18 months or so.

S&P 500 stocks this morning virtually unchanged on the S&P. We've talked a lot about the bond market. Let's talk about crude oil falling back from year-long highs to highs we haven't seen since October. Crude costs three quarters of 1%, $86 and about $0.27. Coming this hour, JPMorgan's Jack Manley explains why he thinks stocks are expanding now. And I'm the Atlantic Council's world as oil falls from a five-month high and Nationwide's Kathy Boston falls ill. Looking at the inflation data. We start with our main story, and we also look forward to a busy week of data and earnings. Jp Morgan's Jack Manley says things are still looking pretty good for the stock market.

The US economy is doing so well that investors should be elated. Maybe things are too rich now, but I think it is very possible that the market sees the right path. I'm pleased to say that, Jack, is with us around the table. Jack, good morning to you. Good morning John. Why can this continue and why can it expand on what we are talking about? Like you said, Lisa, right. The economy is doing well for all the right reasons. The rate environment is changing for all the right reasons. That employment report you mentioned was pretty significant, John.

Very strong profits, very low unemployment rate, but not the increase in wages that we would have feared. I think this week, to answer the question you were talking about earlier, inflation is probably the most important thing to pay attention to. To theThis is not how the market will interpret it. I don't think any individual inflation report will influence the Fed's narrative, but inflation will sort of deepen this story that the economy is doing pretty well because if emerging inflation comes from an increase in commodity prices energy, what we are seeing right now, that is by definition outside the control of central banks.

The Federal Reserve can't do much about it. And hopefully they realize that. That's how I'm thinking. So this is not because you don't talk about Jp Morgan's results on Friday. It's something like inflation. We will talk about inflation. CPI Do you believe in this non-inflationary growth story that so many people are embracing, not just last Friday but over the past few months? Frankly, I believe it. I mean, I think a lot of what's happening today with inflation can be very closely related to the level of interest rates that are split and cut. And whether you're looking at the core number, you're looking at the core number, you're taking the assets out of the equation.

Much of this has to do with the fee environment that is the shelter. On the headline side, it is auto insurance on the utility type side. Both of these things will be direct reflections of the interest rate environment. I think we're in this really funny, peculiar chicken-and-egg situation, where we won't see significant downward pressure on inflation until we see significant downward pressure on housing costs, and we won't see significant downward pressure on housing costs until the Federal Reserve lowers interest rates, mortgages drop to a more reasonable level, and supply becomes available again. So people are willing to enter that market.

So I see a little bit of that. I don't think inflation is something to worry about right now. Just to underscore what you just said, do you think the rates where they are are inherently inflationary? I think so. I mean, it's really funny because if you think about where inflation was two years ago, we're talking about 2022. We're looking at scarcity issues. We are facing energy shortages, food shortages and finished products shortages. All these things related to Russia, Ukraine and China continue to adopt zero Covid. We crushed inflation from nine to three zero in a span of 12 months and it literally had nothing to do with interest rates, it simply had to do with supply chain issues improving.

Now, the things that are here right now, are the most complicated, the most complicated, the ones that are directly related to interest rates. So I think the path from 9 to 3, which makes the path from 3 to 2 easier, is much more complicated. And well, we've seen a lot of evidence in those prints over the last six, seven, eight months. So this leaves you buying bonds and stocks because you think ultimately the Fed is going to cut rates and that will be positive for yields since it's inherently disinflationary to cut rates because higher rates are inflationary? We are environmental, right?

Yes, when it's like a tongue twister, when I think about fixed income, I have to recognize that there is a lot of short-term uncertainty about the direction of interest rates right now. We just don't really know how the data will continue to appear. The Federal Reserve decided not to correct course at its most recent meeting, sticking to that 75 basis point cut narrative this year, but may change its tune within a few months. I'm not sure. In bonds, I like the kind of upside and downside risk-reward profile, where even if I get in a little early and even if yields pull back a little more, as long as I'm not too far down the curve, I really don't I have a lot to worry about.

So from a fixed income perspective, it's very much a sweet spot of 3 to 5 years from a duration standpoint. And I like higher quality assets, I like sovereigns, I like higher quality companies. I don't really care too much about high performance. On the stock market side. Valuations are clearly stretched thin right now. I think even if you don't believe in the reversal, that is, 21 times forward earnings at the index level is probably too high. But we are seeing this kind of broadening of the recovery as the earnings situation improves for the poorest in 2023. And I think that also makes me constructive on stocks.

What does expanding mean to you? Some people think it's inside the S&P 500, far from last year's top seven stocks. Others say that, in general, they are the people who could go from big to small. What does it mean to you? I'll tell you about those three, John, it's the first one. You know, when it comes to extending the recovery, maybe it's too simplistic. But I think it's important for investors to remember that there are 493 other names in the S&P 500 that no one talks much about. I have just started to recover from a pricing perspective, which is trading at reasonable valuations, which is above its weight class from an earnings contribution perspective.

And as the interest rate environment improves this year, as inflation continues to normalize this year, all of these things will be tailwinds for those who are left behind in 2023. I'm not a big fan of giving up in the investment space. market capitalization. . I think, especially when you look at small caps, the debt situation is not particularly good. The profitability situation there is absolutely abysmal. And then from an international perspective, I like American history. As long as you are very careful with what you buy. You know, if I buy the European index, I'm buying European banks. I'm not particularly interested in that.

If I buy the AM 30 index, they will be state-owned enterprises. I'm not particularly interested in that either. So if you go there, you have to be very specific. We have a huge rally in raw materials. How do you want to potentially expose yourself to that? The huge rally in commodities could result in near-term outperformance of those commodity-producing emerging markets, but that's not why I own them. I don't have them for the commodity game. I own them because of the manufacturing sector, because of the growth of the middle class, demographics, all that leads to consumption, to the production of physical goods and even services.

The commodity story is not what excites me long term. So if I'm looking for exposure to commodities, I want to clip that coupon and maybe get a little bit of price action there as well. I like higher quality things. I even like that we, energy producers, think that it is also a short-term bet, because there is not much CapEx. In the end we will have to drill more if we want. Pumping out more of this stuff, and I'm not really sure if that's in the cards right now, but as things stand right now, the energy companies are making money hand over fist and they're giving back a lot.

Let's get back to you, the shareholder. So it's a pretty good environment. Before I let you go, Jack, you said something pretty radical: the idea that high interest rates are actually inflationary for the economy. What do people agree with you on? I get a lot of questioning looks when I say that when I talk to clients. But I think if you look at it, it starts to make a little more sense. I mean, particularly when it comes to protection, the Fed has raised interest rates theoretically to crush inflation. That's the goal of this. Good. But as interest rates rise, they have increased borrowing costs across the curve, which in turn has caused mortgage rates to rise sharply, forcing any type of home buyer who can no longer afford to buy a house to enter the rental market. .

And rent inflation has remained fairly strong. And the rent is what influences the CPI. It is not about the price of the home, it is rented and the equivalent rent to its owners. And so I think if you figure out the connection there a little bit, it starts to make more sense. But first, I get a lot of questions: how are you sure about those kinds of opinions? We also hear it from the Oppenheimer sofas. He was talking about the idea that the key to lowering home prices is potentially lowering mortgage rates. He was telling us about his 10% mortgage.

It wasn't actually $1,000 in a row for the Manhattan terrace. Oh poor. Exactly. Seriously, Jack, it's good to see you. Excellent. Sir John Manley by J.P. Morgan Equities right now on the S&P, virtually unchanged. Let's tell you some stories about his career at Bloomberg: Dani Burger. Hello Danny. Hi John. For a few brief moments today, Americans will look toward the sun, hopefully with glasses on, as the path of the total eclipse passes through cities and towns from Texas to Maine. The entire event itself will last several hours. But the main spectacle is when day turns to night and the moon obscures the sun.

This will only last about 4 minutes. The event has sparked a tourism boom in areas along the route that are fully booked. The South Carolina Gamecocks are the national champions. They defeated the Iowa Hawkeyes 87-75 in the NCAA women's title game. It is now South Carolina's third national title in just seven seasons. They are also the 10th D1 team in history to complete an undefeated season. The highlight, however, was Iowa's Caitlin Clark. She finished her career with a whopping 3,951 points, leaving her as the all-time leading scorer in men's and women's college basketball. Now, on the men's side, it's a battle between the number one seeds.

UConn faces Purdue tonight in the NCAA men's championship game. The UConn Huskies are seeking back-to-back national titles. The Purdue Boilermakers now have their first chance at their first championship. And that's your Bloomberg report, John. As many of you know, a manager is a Purdue grantee, which means turning on a boiler. I think we said it repeatedly. Good. Every time you hit that extra point. So does that really work? Write it down and tell us about some of the best sports weekends. Liverpool lose points. What's better than that? Actually? What's better than next year? Me the oil rally taking a breather.

The Saudis would love to have a price of $90 that goes up to $95 or $100 and not much less. But you can't really manage a market to that point. $90 would be the perfect number if it remained stable for a long time. Through that conversation, I'm next. Live from New York, I'm Bloomberg. That was good. That was good. Alright. I could see myself like this on the S&P 500. Stock futures barely gain 0.05%. Yields rise six basis points. The tenth year for 4,581 under sevens is this morning. The oil rally takes a breather. The Saudis would love to have a price tag of $90.

That goes to 95 or 100 and not much less. But you can't really manage a market to that point. So now they have a much better understanding, not a cynical one, but rather a real one, of the dynamic effects between financial flows in and out of markets and equilibria. $90 would be the perfect number if it also remained stable for a long time. Here's the latest from this morning. Oil falls as this round withdraws some troops from Gaza, but it is still above $90 a barrel Brent and I am right with the Atlantic Council on this for OPEC. The $90 a barrel level can be a sticking point.

It is high enough that consuming nations get upset with prices and want to lower them, especially during periods of high demand like summer. It is also more difficult to maintain compliance with quotas because producing countries have the opportunity to make more money with higher prices per barrel. In, and I'm pleased to say that he is with us. This line that came from Salem. $90 would be the perfect number if it remained stable for a long period of time. Allan, you make an interesting point: how difficult it is for that number to remain stable over a long period of time.

Yeah, I think it's very difficult to stay stable for long periods of time because once that number looks like it's here to stay, rather than just a spike due to, say, a geopolitical or environmental event, you have to start getting very, very tense. and against consumer nations. India is going to be angry. China is going to be angry. Not to even mention the Biden administration, who will be very angry if we see this continue all summer. That could really hurt his electoral chances, because for some reason, American voters actually associate gas prices with the political party that's currently in power.

There really isn't really a reason for this, but it's actually a really predominant element.among the American electorate. And if the $90 stays, it could really become a problem. And it's going to be very, very difficult to resist, resist the pressure to put more barrels on the market, especially Saudi Arabia, which already has these additional voluntary cuts beyond what they're required to do under their quotas. So at some point we'll have to do it. It sounds like you are saying the supply will come from the Saudis or potentially in SPR version. At what price level do you think the kingdom intervenes?

I think they don't necessarily intervene at the price level, but they respond to pressure. I think if they see prices go above $90 a barrel, then I would see them intervene. I think they are also analyzing your lawsuit. They'll want to see what kind of orders they get from Asia, especially because they don't want to see that drop. And if it looks like their oil is getting too expensive for their Asian customers, I think we'll see them potentially start preparing for a price increase at the next OPEC meeting. Well. So let's talk about the possible increase in production.

Let's talk about the potential use and then the potential use of the SPR. We are well below the highs reached during the Obama administration, but I believe we are still at the 360 ​​million barrels that this SPR contains. The Biden administration could have significant public relations access before the election. No. Well, I think it's a really difficult thing to do because, first of all, they've tapped into the SPR before and there was a lot of pushback, especially since a lot of that oil was exported to China or other countries. and was not necessarily used nationally. And the purpose of the SPR is not simply to lower gas prices because they turn out to be too high or because they turn out to be too high.

So what do you prefer for an election? Actually, the purpose is to have this prepared in case there is a geopolitical event that prevents oil from reaching the United States or other countries. Or there is a hurricane, for example, that could wipe out production in the Gulf of Mexico. We saw SPR releases after there was a significant period in which production in the Gulf of Mexico was disrupted due to a hurricane. And if vitamin restriction starts releasing the SPR, just because gas prices are too high, then you are setting a difficult precedent for both of you because when are you going to refill this?

They really have to refill it constantly if they are going to use it. Additionally, the summer months are approaching, hurricane season is approaching, and hurricane season is strongest in September and October, which will be right before the elections. They may want to save the SPR basically in case they need it for that moment. And then, when you are an energy exporter, what is the appropriate level of SPRO? What do you think it should be? That is a very good question. I think that question is not that relevant because technically we are members of the IEA, and the IEA has a certain, to be a member, you have to maintain a certain amount in your SPR because a certain amount of your consumption.

So I think it's a difficult decision. You should really keep, I think, more than you think, because you don't want to ruin all your exports by suddenly deciding, okay, we have to stop exports because we need them domestically. You don't want to have to do that. That's why it's a good idea to keep a good amount in your SPR to use in case of some kind of lien suspension - you know, a natural disaster. And not just use it because gas prices are $0.50 per gallon higher than you think they should be. Reminds me of the conversation about the Federal Reserve.

We talk about what the Federal Reserve should do and we talk about what it will do. You know, at the end of the day, you and I could talk about this. We probably agree on the same things regarding SBI and how it should be used. I think the most important thing here is how it is used. Do you think there will be a formation that will fuel the spark ahead of the elections? I think that really depends on where oil prices go. I think if OPEC decides to increase production at the June meeting, they are much less likely to exhaust the SPR.

They're not going to refill it until it's below, I think, $75 a barrel. But if OPEC increases production, I don't think we're going to see that. They'll probably also try to pressure American oil producers to increase production, which I don't think they're going to be very receptive to, given how much pressure they've had on basically everything else and how much vilification they've had of hands of the Biden administration. They will do what they think is best for their business at this time, regardless of what management says. There are two points there. Saudi Arabia's response to oil prices, especially ahead of the elections, and to US producers.

Let's start with Saudi Arabia, since you wrote the book on the Saudi family. How willing will they be to help President Biden heading into this election? Good question. I think they won't be so willing and will want a lot in response. That doesn't mean they're not totally up for it, especially if they think it's a good idea for the market. So if they get pressure from the Biden administration and from Iraq and Kuwait and other producers who want to increase production. Plus, they say, look, $90 a barrel. Well, if it stands to reason that if it gets over that, it looks like it could get to 100, which I think seems unlikely, but it's absolutely a possibility, then they'll definitely want to ramp up production to avoid that. , because once you reach a higher level, you see demand destruction.

And that's definitely something they don't want to get. They want to keep their Asian customers happy. They can also keep the Biden administration happy and get them sold new defense treaties and, you know, new military equipment. If they can get concessions on other things that they want, then I think it would be beneficial for Saudi Arabia, especially if they can present it as sort of a big PR coup for them as far as the domestic picture is concerned. How much more can the United States produce? How quickly can they act as swing producers after already pumping 13 million barrels a day?

That is a very good question. I definitely think the production could be higher. The question is, is that something they think is a good idea? Now, the United States is really a swing producer because its oil production is not centralized. We have all kinds of different companies doing what they think is best and what they have been saying for a while that is best for them is not to drill as many more wells. Yes. With each well, they get a lot more productivity out of those wells, but they are not interested in spending a lot of money drilling new wells, especially if interest rates stay high and inflation continues.

They won't want to spend more money. They may try to get something from the Biden administration, such as approvals for new drilling in the Gulf of Mexico. They may be able to use that influence, especially if they believe Biden is going to be re-elected. Interesting. Alan, thank you. We have to leave it there. Alan Wealth of the Atlantic Council and author of Savvy in Crude this morning. Support. Let's call it three-quarters of 1% on $90 at about $0.50 WTI. 8631. I just received a fascinating note from Goldman Sachs on the economy. Listen to these numbers. Recent immigrants are disproportionately younger primates and come mostly from Latin America.

Here are the numbers. We estimate that net immigration increased to about 2.5 million in 2023, up from about 1 million per year before the pandemic, boosting labor force growth and also potential GDP growth. That's what we keep hearing from all economists. Apollo's Torsten Slok published a graph showing how many of the new jobs, how many jobs are coming from newcomers to this country. We'll talk about the economics of that in a moment. We'll catch up with Nationwide boss Cathy Jan who is awaiting inflation data this Wednesday. Live from New York, this is a backlash. Six S&P 500 stocks gain 0.1% here. 60 minutes from the opening bell just around the corner.

Only a small 0.4% increase for the Russell. More than a little boost in the bond market. I think we were up about 60 basis points yesterday in ten years near that level, another six basis points this morning, four 4581 over ten. If you're just tuning into the price action this Monday morning, there will be new highs on the other side of the curve on the 24th, even at the beginning of a two-year lease. So we're approaching 480 and people are holding off on how much the Fed can cut rates this year, given the incredible jobs picture we're seeing. However, it is still considered positive.

I want to just sit on the fact that we are seeing returns at 2024 highs and yet stocks are still making gains because last week's downdraft was so difficult. Well, we haven't seen a day of decline of more than 2% since February 2023. This is a completely ingrained kind of optimistic feeling. And this stock and bond market has not been able to hinder it. 303 was just a spectacular number for employment on Friday. And does that sound consistent with rate cuts? Okay, Mike, open up. Bank of America says that, while exceptionally strong, the jobs report is consistent with the Fed starting to waste this year in June, the Fed is in crisis on the supply side.

An increase in labor supply can enable stronger growth without overheating effects. That's the story everyone at the FOMC is adopting. And then Jp Morgan's Jack Manley came along and said maybe higher rates are actually inflationary, not deflationary. Maybe the Fed is actually contributing to inflation with rates where they are. And he is not alone. People who see this and say in Johnson's office that if rates are lowered, more supply will actually come to the market in terms of housing and prices will go down. This is how uncertain the moment we are in is. We don't even know what restrictive types mean at a time when some people say they're actually stimulating.

I think in my field I just want to buy property there in Manhattan, I want some bargain once the rates go down here. Is that what you think? Yes I think so. And do you believe that? I think a lot of people of a certain rally and a certain generation think the same way about interest rates and house prices. Yes, but it tells you something. But do you think that's going to lower the prices for you or are you going to get that $280,000 two-bedroom apartment, you know, with a roof terrace, with a roof terrace for two people in Chicago, in Manhattan ?

Don't boomers drive you crazy with this topic? On this issue? Well, you know, it's different with a lot of boomers, who are still best friends with technology. But on this topic, I get really nervous. Although he still rents. He still rents. Yes. Then you know that he missed the boat at that moment and a lot. Can you imagine that he has stories that he can share with you whenever he wants? Let's take a look at commodities, Brent crude oil and WTI. It looks like this crude oil spread is negative by 0.8%, $90 by about $0.50 and a world. Excellent.

Just 10 minutes ago, what caught your attention? What caught my attention was almost this line in the sand. You're talking about this $90 per barrel, where especially because we potentially have more upside risks with geopolitical concerns, the pressure that she talks about will be on Saudi Arabia. And she made a great point. She's not just from the United States of the world, she's from China. She is from India. And potentially, if there is more pressure coming from Asian countries, perhaps this will be uncomfortable for the kingdom. Crude oil was down three-quarters of 1% in Savannah this morning. Treasury Secretary Janet Yellen delivers a direct message to China.

Focus on domestic demand. Yellen frames China's overproduction as a risk to the global economy and says it poses, quote, a significant risk to workers and businesses in the United States and around the world. These complaints are not new. They're Old. They are very, very old. And I wonder what the purpose of these measures is this time if not simply to lay the groundwork for more tariff moves later this year. Well, an Emory can get into the tariffs, and that's what many people expect the data behind. It is fascinating. And CFR's Brad Setser presented this chart showing how China's exports of electric vehicles and lithium-related batteries have skyrocketed.

They have grown exponentially since the beginning of the pandemic. And he highlights how it has moved. It has moved away from computer parts toward areas where tariffs are likely to be imposed. So there is this new urgency that they suddenly feel like they have to get ahead of themselves, before the election at a time when there is already agrowing sense of unease without China, they just keep pointing. This and Yellen's line here. I have made it clear that Biden will not accept that reality again, talking about decades ago, when cheap steel was looming, excess steel capacity in the US market, and what that meant for American jobs.

But I think they're going to wait until just before the election. The best bang for your buck. But it's interesting that Goldman published a note today about how high inflation could get if we hit even more tariffs on China. Not even a blanket, 60% if the election goes the other way and it falls on Trump complaining about the loss of American jobs, maybe politically it is the right move to complain about cheap products right now, given what everyone thinks about the inflation in this country right now. At the moment, I'm not so sure about that path either politically or economically.

Looking ahead to the elections. People want things to go down, prices to go down, inflation. But this is why it's so hard to have a real conversation. Because all of these issues are nuanced and all have multiple parts. And there is no level of coherence where you can say, look, we are going to have to accept higher prices if we want more meat nationally and if we want to have a concrete policy of self-sufficiency on the industrial side. If they want to make that argument, they will do so with higher prices and other sacrifices. That's a conversation people don't want to have.

I know it's hard to do the counterfactual, but on this topic, they don't want to talk about this. Let's imagine that union membership was at the same level as it was in the 1970s. Can you imagine how different this inflation story would be? You'd have to check mainly sitting there a few moments ago, and Jack was talking about how quickly inflation has come down from, say, close to double digits to around triple digits today. Do you think it would have been easy if we had had union membership when we were in the 1970s and the transfer of general inflation had been direct to wages?

Straight to salaries. Can you imagine what that would have been like? It's an interesting question because it also talks about globalization that led to the dissolution of some of those unions, the lack of industrial production in this country. Honestly, there are a lot of questions and a lot of people are thinking big. What kind of new era are we entering? Is it one that has more weight for the job? Is it one that is more oriented towards industrialization, but with a high automation component? Be careful what you wish for. It's easy to say I'm the president of the unions and go there, sit with them and campaign.

But if there had been membership levels other than seventy, the cost of doing so would have been much greater to this economy. And this time, of course, the membership rates were much lower. The past, of course, was less obvious anyway. You understand the story. Let's move on to Jamie Dimon, CEO of JPMorgan, with his annual letter to shareholders dedicating much of it to AI. Dimon says the technology will have far-reaching impacts across all industries. Diamond also issues a warning about the economy, writing and quoting: These markets appear to be pricing in a 70% to 80% chance of a soft landing.

I think the odds are much lower than that. Let's hear what he has to say on Friday. That's what I have to say is typical. Good? Well, this is exactly it. I mean, how often do you hear that kind of doom and gloom? And then, you know, we just made $2 billion on the acquisition of First Republic. So, but much less than 70, 80%. So what 50% is that? You know, I think we get confused with Jamie sometimes. When I listen to Jamie Dimon, I hear a risk manager talk about a variety of outcomes, a variety of possibilities. And I think we are too quick to compare.

And so it's like, this is the economy, this is your base case, and it keeps changing. I think from a risk management perspective, what would you be worried about if it wasn't a soft landing, that maybe rates would have to stay much higher for longer because inflation will be stickier if you're the CEO of a company? bank? I imagine they would be things you spend a lot of time thinking about. And you know what? People want to hear what you have to say. He runs the largest bank in this country and people want to understand his point of view on things, which is why we hear a lot of top executives talk about debt, talk about the deficit, talk about concerns about the moment by Liz Truss, not those words.

This is the concern of her late grandmother. But, you know, part of this is due to the dysfunction in D.C. So who's going to take that home and actually make rational business cases for things other than business leaders? I mean, at a certain point, yeah, who is the pro-business party right now? I also had that conversation last week with a lifelong Republican about his stance. There is no consistent policy because of protectionism on both sides of the aisle and the fact that there is a sort of populist leaning. If you think about it from a business perspective, they are concerned about the deficit and it is real.

When I talk to different investors, this is what keeps them up at night. It's not just talk, it's the auctions. I could not agree more. They are auctions, big, big auctions. As Bremmer repeatedly says in this program. We will talk about this below. A busy week of data: US inflation data on Wednesday, the latest ECB decision on Thursday and the big banks kicking off earnings season with Jp Morgan, Wells Fargo and City set to report on Friday. Kathy Boston says Nationwide Mutual Insurance's chief economist joins us now for more information. Kathy, I want to talk about this supply-side story, which at this point is almost like code for immigration.

I want to talk about these Goldman Sachs numbers because they are impressive numbers on immigration. We're talking about millions of people coming to this country, 2.5 million in 23. Net immigration, that's the number that Goldman came up with, up from about 1 million a year before the Pandemic Cafe. How important is that as an issue to ensuring that we see numbers like we saw on Friday? Well, good morning, Juan. Happy to be with you. It's critical, right? You know, I was saying a year ago, you can't continue to have, you know, 300,000 job gains a month with the workforce that we had.

How high could the unemployment rate go? We simply don't have enough workers available. And immigration really changes that story completely. If in fact, we have, you know, closer to 3 million, which the Congressional Budget Office now estimates for this year versus 1 million, as you said, that's a big game changer. And that means the gains in employment could be, you know, 100,000 more. Good. Per month more than we thought before. So it's a really big change, it increases the supply side of the economy and helps explain why, you know, this expansion just continues. Don't we have to think about how sustainable this actually is?

If there is a change in the White House, this could change quite quickly. Indeed. It's something we're looking at when you ask questions and try to hinder elections and different outcomes. And that could be a big game changer. We know that if you talk tough about immigration, it could also, you know, under the previous Trump administration, deter legal immigration. So maybe some of what we're seeing could be reversed. You know, and we'll have to keep an eye on that as we move forward. But for now, you know, we're seeing that at least for this year. The immigration numbers seem very, very high.

Kathy, you can argue that because of how big the numbers are and how much of them are being absorbed by newcomers to the country, it's masking a kind of underlying status in the labor markets, that it's masking a kind of A turmoil that is slowing down? Do you believe that argument is potentially masking the idea that this economy is going to slow down substantially in the second half? That's why I think it's less likely now. I think what you're seeing is that companies are replacing jobs that they would have otherwise filled. Good. That it is not just about returning to the pre-pandemic level, but about returning to the pre-pandemic trend and the fact that you have more workers and you are generating more income, that means more consumption to be able to continue supporting itself upwards.

Therefore, we see it as less likely that we will see this big slowdown in the second half of the year. We were seeing signs of that before. If we went back four or five months, we would see a huge concentration of jobs. What I would say is more in non-cyclical sectors, but that has really changed in recent months. We have seen that it has expanded quite, quite well and I don't think at this point the momentum is that strong. You know, I don't see that happening now in the second half of the year. So let's fast forward to Wednesday, Cathy.

This idea of ​​immaculate disinflation or growth with ongoing disinflation, what would it have to do with Wednesday's CPI numbers to challenge that concept? Yes. So, you know, everyone will be, you know, very focused on the central number in particular. But we arrived at our estimate of 3/10 of the total and the core. I think it is not. So, you know, as long as that number isn't 4/10 or more of the core, I think you could still have the narrative because we have four. You know, on top of that, you can have three inflation reports before July that the Federal Reserve meets at the end of July.

I think if you get, you know, you start getting 2/10 impressions in a month in the future, you know, that still leaves the door open for them to reduce rates in July. But we really need to see that slowdown. I think there are underlying factors to that, you know, the housing that you talked about. I mean, our model still suggests that rent inflation should slow. And then if you look at other categories of super basic transportation services, we think some of that real froth is starting to subside. So we're still encouraged. And I think that, you know, the Fed will actually get this, you know, they may get that supply-side increase and still see inflation slow.

I like to marry these two stories. We had an increase in people with multiple jobs, people who have to have multiple jobs to simply pay their bills. How much are we seeing? Higher inflation continues to fuel a stronger and even tighter labor market. Yes. It is very important that a dichotomy still exists in our economy. And you could argue that it's gotten worse if you rely on, say, variable rates like we're seeing in the real estate market. The second-hand housing market remains stagnant. He is completely paralyzed. And then if you look at workers, yes, if interest rates are faced with higher credit card bills and they have to take on multiple jobs, we know that just adds to the pressure.

They are upon them. But they can continue spending and getting into debt. But there is pressure there. There is vulnerability. And let's put it this way, many consumers are unprepared if a labor market slowdown occurs. You know, looking forward again, I think right now the story is more like 2025. What do you make of Jp Morgan's point, Jack Manly, that because rates are so high, this is putting so much pressure? on the real estate and housing market constitutes the wide swath of the inflation figure that has been difficult to reduce? I think there's a good point there, although what we've seen is the new housing market and housing starts, construction has been stronger than the existing market.

So I would say that, you know, builders are somehow finding a way. Either they are lowering the mortgage rate or there are other incentives, or maybe we have more cash buyers, but we are seeing new supply. Come on. That's what we really need to see. Now, it's not great. The existing housing market is stagnant because I think that restricts mobility across the country. But having said that, I think generally yes, although we need to see lower rates for the housing market to work. And I think even for new housing, the supply of new housing would do better if rates were lower.

Kathy Jackson's last point was also that high rates are actually inherently inflationary. Do you believe that? No no no. You know, I think I can see the argument for the housing market. Other than that. No, that is not like that. I do not think that's true. I think higher rates depress activity. And when that happens, there will be fewer orders for companies and they will feel the pressure and they will not be able to increase rates as much and it will tend to be disinflationary. Kathy, can we end immigration? I'd love to know your opinion on this.

And let's stay away from politics, because I know they want to focus onthe economy. It is welcome in the labor market for the following reasons. You embrace the supply side and somehow keep wages alive and more people enter the workforce. And we can talk about this another time. If that's really a good thing because it keeps control over salaries. What I struggle with from the perspective of being non-inflationary growth, if we're talking about net immigration of 3.5 million versus 1 million and those individuals get jobs and spend money elsewhere, aren't they competing for houses, making money? raise rents?

Cathy, can you really say that's non-inflationary growth away from the labor market? Excellent point. And I think there is the real estate market where you have the highest issuance rate. I think there has to be a response on the supply side. And you're right, if they work, spend and have jobs, they need housing and that will put pressure. I think eventually you get that response on the supply side of housing. I think other than that, that will be a big help. But we need it and that takes time. But I think far from home. I don't necessarily see it as inflation or, as you said, wage growth has been moderating because of the supply side.

But we are in a very agreed, very unique period in which we lack housing supply. And that really goes back to the financial crisis. Good. The pendulum swung the other way. We have seen a tightening and depressive effect on housing supply and it is catching up with us right now. So for now we are in that conundrum. But I suspect that, apart from housing, there is a nice disinflationary effect still in force. Interesting cafe. Thanks for the update. Thank you. Kathy Post's transcript of the entire country entered the inflation data on a Wednesday. Let's get to Bloomberg's report of her with Dani Burger.

Hello Danny. Hi John. Strategists at Goldman Sachs say European stocks are likely to outperform U.S. stocks over the next year. A team led by Sharon Bell cited many factors including a rebound in the manufacturing sector, a rebound in global PMIs and ECB rate cuts which they say will begin in June. Strategists also expect to see better performance from financial, energy and consumer discretionary stocks. Specifically, chipmaker TSMC will receive $6.6 billion in subsidies. It will also receive up to $5 billion in loans from the United States to build factories in Arizona. It's a preliminary deal, and under it the company will build a new factory in Phoenix that adds to two facilities in the state, with production expected to begin in 2025-28. next generation nanometers.

Those are the ones that are essential for technologies like A.I. and they also have intensive use in military applications. Spirit Airlines has reached an agreement with Airbus to defer delivery of all aircraft scheduled for the second quarter of 2025. Deliveries will now be delayed until the end of 20 1631. That should help improve Square's liquidity position by about 340 million dollars over the next few years. Spirit will also be furloughing about 260 pilots starting Sept. 1, citing aircraft postponements and grounded aircraft due to engine availability issues. And that's your Bloomberg report. John Donnelly, thank you. Next on this show, heading into first quarter earnings, our focus will really turn to earnings season, which is upon us.

There are ingredients that, although we might see some, you know, a respite here and there, those ingredients are there for the bull market to continue in a healthy way. A conversation. I'm next. There are 39 minutes left until the opening bell and the start of a new trading week. Stocks trying to recover 0.2% tried to recover from the biggest weekly loss in the S&P since the beginning of the year, with a maximum return of about four basis points for 44 in the US, ten years for 40 for 60 and the crude oil receding. down 0.9%, $86 and around $0.15 under watch this morning.

Looking ahead to first quarter results, our focus is really on earnings season, which is approaching. The reality is that high for longer. The interest bias should also be positive for the financial sector. And the check still stays there because of the demand for air. And so we think that the ingredients are there, that although we might see a respite here and there, those ingredients are there for the bull market to continue in a healthy way. Earnings season begins this week with the big banks leading the way. J.P. Morgan City and Wells Fargo reported their latest results before the opening bell rang Friday morning.

Bloomberg Intelligence's Gina Martin Adams joins us now to talk about Gina. Great to catch up on those numbers. What are you looking for in the team on Friday morning? Yes, I think it will be a really interesting earnings season, but not necessarily on the financial side. So I hate to pour cold water on the kind of financial story that finance is in. The group has been on a fairly steady slow earnings recovery, but there are simply more interesting things happening across the rest of the index. So if I were to say what to expect from earnings season in general, the financial sector typically sets the fairly positive tone it has had over the last few quarters.

But really what we're looking for is overall revenue growth that surprises expectations. I think revenue growth has gotten kind of a bad rap and, frankly, analysts have been a little afraid to raise the revenue expectation numbers, that revenue continues to beat expectations, volume sales even continue exceeding expectations despite intermittent macroeconomic weakness. . Analysts haven't really followed revenue trends. So I would say that overall, better top-line growth is expected for the S&P 500 overall, driven in particular by communications verification, but also generally driven by the consumer sectors. Yes, I think we could also see a pretty big surprise in the commodities sectors where we have seen a stabilization of commodity prices, but analysts are still expecting double-digit declines there.

So quickly, are we looking at Wednesday, really earnings start with Delta earnings being released before the opening bell? Yeah, I think the most important part of earnings season, Lisa, I know we're all eager to get it going this week, but I actually think the most important part of earnings season isn't coming. for a couple of weeks. We will begin with a slow advance towards the industrial and financial sectors. Then we really moved on to some of the technological communications. And finally, at the end of the season, you get most of the commodity-sensitive space. So as much as we're excited about next week as we enter the season, the real rally and probably the most interesting components of an earnings season aren't going to happen for another week and a half, two weeks.

We're just trying to get excited about it. Gina Thank you. May 22 and video. Basically, what I'm really interested in is my 20 seconds and my video. We hit earnings on Wednesday and that's the perfect intersection between consumer discretionary and the staples space. Then it will be amazing. Well. My second apple, if you're interested, on April 10. April 10th, I think it's May in technology, right? Yes man. Technology. Well, the conversation about this is expanding. Sure. The question is: can they offer the same kind of spectacular projections? Is the AI ​​pipeline all it seems at a time when people say it could take a while to roll out on Wednesdays?

The only thing that matters. The March CPI will eclipse her and Subaru's intended pun. Factor in all the other data this week and that eclipse comes down to earnings. Yes Yes. Now who knows? I mean, honestly, if it's in line that we're going to talk about something that never happened, I guarantee you we'll barely talk about earnings on Wednesday. That business is like telling me you're just telegraphing ahead? You mentioned that unless they give you some kind of discount, it's going to be kind of a hinge in my seat. They will just push me away, push me back, and exclude me.

I'll tell him this week that things will come out tomorrow. So in Kansas City, Mohamed El-Erian from Queens College, Cambridge, will join us around the table and speak to campaign for Barclays. And Seth Carpenter from Morgan Stanley, a fantastic lineup for you. Tomorrow morning we will reach the opening bell in 34 minutes. Stock futures try to rebound with bond yields at new highs by 2024. Its ten-year for 4480 rises five basis points. Live from New York City, this was Bloomberg Surveillance.