>> i think the market needs conviction that the fed is really done. >> they can't afford to be wrong again. >> we've always been in the higher for longer camp. >> we are normalizing at a healthier level which is going to set the foundation for more growth, more earnings. >> at least for the end of the year we are looking at a pretty robust economy. 2024 is really the bigger question. this is bloomberg surveillance.

jonathan: for our audience worldwide, this is "bloomberg surveillance" on tv and radio. your equity markets on the s&p 500, down by 0.1%. two weeks of gains. it's the most wonderful time of the year. outlook season on wall street. tom: what is great about that, morgan stanley versus goldman sachs. the same inflation call, plus or minus a point. boy, do they have different views on the holiday spirit of the american economy. jonathan: sounded interested for about 20 seconds. keep it up for three hours if you can. morgan stanley, ellen zentner reading the following. this jumps off the page. where they think rates will be in 2025. this is the call, rates go up way back down to the low twos. lisa: the distinction between

morgan stanley and goldman sachs call is a soft landing vs. a no landing. morgan stanley is basically saying soft landing and that is going to cut more than previously expected. the idea underpins the bullish called in u.s. assets. here is the question. how do we effectuate this without seeing unemployment rate rise between 3.4%. jonathan: williams jefferson, do you think they want to go beyond december? never mind 2025. tom: thursday at 8:31, they've got to get some key economic data this week. this was really a twoset of data on the consumer. jonathan: bramo will go through the calendar for you in just a moment. the charm offensive that we

could get from china this week could be phenomenal with this meeting between xi and biden. boeing in the premarket, slightly positive. a story that the team are writing up that maybe we could see a sales breakthrough for the 737 max x in china and you get the sit-down between leader xi and biden. lisa: this could be maybe one of the outreaches from xi jinping to the u.s. what i find fascinating is have different corporate diplomacy is from political. it is also some of these other areas that have had some real tension with the u.s. of late, which raises the real question that you both have mentioned, that meeting that xi jinping is going to have with the ceos in the united states might have or interest in import and the meeting with biden. tom: absolutely fascinating with the $52 billion read over any number of years. it is 68% of the annual revenue

of going to put in perspective what this order means of one year revenue. but what is interesting is boeing has really struggled. the 10 year per year stock return is 5% per year. jonathan: have you seen san francisco has been cleaned up ahead of xi jinping? cities across america hoping that he will make a visit. tom: san francisco's challenge, we were talking to the chief of the chamber of commerce of san francisco and would love the other day, and ed ludlow said contrary to the gloom, there's percolations of straightening out san francisco. he mentioned a very important local election where there was a changing of the guard and ed ludlow, the star of "bloomberg technology," says the beating up on san francisco is maybe passed. jonathan: it is done. how much to he pay you for that? tom: you know, i get a case of

-- jonathan: san francisco, a cleaner city. let's see if that lasts. yields coming in a couple of basis points. lisa: and we are being informed that ed ludlow is speaking to the san francisco mayor later this week just to give you a sense of why he is coming out with some of this eco-data this week, tuesday we get cpi, wednesday we can retail sales. how much will it matter? we were talking about the fluctuations in treasury yields and how these data points can set up for more volatility. doesn't even matter, xi jinping set to meet with president biden on wednesday in san francisco. on the domestic front, a potential u.s. shutdown on friday and this is why am wondering which data matters the most to the market? is it going to be the economic

data or the political data in terms of a potential government shutdown? is that going to matter more for treasury yields and the risk premium that people are charging? jonathan: we need to talk about the shutdown and the potential downgrade to the u.s. credit rating from moody's. the outlook shocked to negative. joining us now is max, she strategist over hsbc. get the crystal ball, look at next year, maybe beyond. you've been constructed for most of this year. do you think it is a repeat of that for next year as well? max: i think so. i think it is pretty unlikely if not virtually impossible that asset managers or the banks are really changing their outlooks dramatically. let's bear in mind 12 months ago the overwhelming sense was we are going to get a recession in the first half of this year in the u.s. china's going to do better, europe is going to do better and

obviously went the other way around. if anything we've seen signs of overheating in the u.s. what has not changed is that people are still rolling their recession forecasts three to six months forward. if you look at earnings forecasts, look at consensus earnings forecast. s&p earnings expected to drop by almost three dollars from q3 to q4 currently. investors are still saying we are not going to be even where we were six months ago. that is how low earnings forecasts are. gdp forecasts, it is the same. we are still faced with this pretty bearish, pretty pessimistic set up which continues to allow pretty positive surprises and that is good for risk assets. tom: max, what i love your is you have been right about this bond market, what is coming up.

shifting the playing field for the optimists like you today up 22% by the end of next year. spx, 5400. can you give that scope and scale to a bull market? max: i don't think it is unthinkable. we've got very low near-term earnings forecasts, very low gdp forecasts and we are probably going to get core pc inflation below 3% by the second quarter of next year. so that is not miles away, it's not like we are talking about sometime in 2025. we are talking about in one and a half quarters. and suddenly, that's real rates. the real federal funds rate is then going to be way too restrictive and in the market and the fed can start talking about rate cuts in earnest and then perhaps the curve diss inverts and on the back of that, you're actually going to continue seeing a pretty

goldilocksy environment. i think that is pretty much akin to what we have for most of this year apart from september and october. so this is still an environment where i want to be long consumer discretionary, i want to belong the u.s. in particular. tom: you want to belong u.s. but is it all both rising? the shocking statistics i saw over the weekend of the focus on 20 stocks. is this about breath, or did they just continue to elevate? max: it is not about brett, you are entirely right. it is more a story of the big ones winning even more market share because with face it, earnings expectations, yes they have risen, but they are not to levels where it is absolutely insanely optimistic. the problem i guess is in order for the s&p and small caps to

outperform, we would need to see a proper, properly acceleration of growth. but the problem with every acceleration of growth, as we've seen, is that most likely the long end of the yield curve actually starts to jump higher and the long end of rates volatility also starts to jump higher, and no asset class likes that because then we are back to the fed, are they going to do one or two rate hikes more or are they going to stay higher for longer? the problem is that is sort of impossible right now to have, for example, things like small caps really jump on sort of an outperformance trend right now. to me is much more a picture of the growth stocks, the tech stocks, consumer discretionary continuing to outperform in the next six to nine months. a lot about smells like 2019 where the fed starts talking about insurance type of cuts.

that was really a recession and with growth, the gdp side continuing to really defy very gloomy expectations. lisa: our rate cuts next you're going to be good for equities? max: 100%. lisa: the reason i ask is because goldman sachs has fewer rate cut in morgan stanley and they also have probably a more positive outlook on risk assets. if the fed is cutting more, extensively that is in the face of more significant economic pain. why are rate cuts still a good thing is the deeper? max: like i said, it is probably pretty comparable to 2019 where we start to realize by the middle of next year, you know what, core inflation is already below three, it may take longer that we are actually going to go down to 2% and our economist to have a little bit of higher core ration forecast both for next

year and the end of 2025, but the important point to bear in mind is that real rates, the real federal funds rate is then going to be so massively restrictive that actually the fed can start talking about rate cuts, right, without a recession. without really us going to below 0% gdp growth. it's going to be pretty fine if we are going to be between 1% and 3% gdp growth. imagine a world where we see the continuation of the first half of this year. growth at 1% or 2%, slightly above or below potential. not overheating, no real recession, but inflation continuing to trend lower, the fed starting to talk about rate cuts, the market starting to price in rate cuts from next year onwards. that is really, really good. jonathan: morgan stanley, they

were talking about that base case. do you want to talk about the downside? of course you do. he effects of monetary policy are tighter. this is your downside bearish scenario. so bear with me. the fed cuts rates rapidly to south 2% for the first quarter. that us and pretty aggressive stuff. lisa: i just want to put that out, that is sort of the question because in that scenario, to some people get optimistic thinking in that case, you get a bit of a boost to fixed income, you get a boost to equity valuations. tom: we just put up a great board for radio. it was very clear that the best differential is the job economy and that is what everybody has been stumbling on through 2023. maybe we finally get a result next year, but that is the key

variable, 4.3 percent for ellen zentner. jonathan: we will stumble forward this morning for some fantastic interviews this hour. later on this hour ahead of the vegas grand prix, formula one just around the corner this coming weekend. the ceo of mercedes amd. tom: what a different conversation than christian horner on writing. it has been a tough year. jonathan: a tough, tough year. we can catch up a little bit later this hour. from new york city this morning, good morning. ( ♪ ♪ ) ♪ (when the day that) ♪ ♪ (lies ahead of me) ♪ ♪ ( seems impossible to face) ♪

♪ (a lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ a bank that knows your business grows your business. bmo.

♪ lisa: are we going to see a government shutdown? >> we need more time.

>> so can the republicans vote together to pass this proposal, this short-term funding agreement? >> we are going to have to. what the senate is going to do, they are going to come up with a package probably after thanksgiving that table send over to the house. jonathan: that is michael mccall speaking on the potential for a government shutdown. this following news going into the weekend that movies are lower, the white house press secretary saying as a consequence of congressional republican extremism and dysfunction. that is only partly true. it's also the consequences of success in government doing absolutely nothing about the deficit. some of the numbers from this see the federal interest payments relative to gross domestic product rising to around 26% and 4.5% by 2033 respectively up from 9.7 and 1.9

in 2022. they are huge, huge differences. this is not just about governance, it is about the debt trajectory of this country. lisa: and the inability for governments to deal with that. even though people are talking peripherally about this issue on the campaign trail, they are not talking about cutting entitlements. and without doing that it is very difficult to get to the number that moody's as well as s&p and fitch have already made the move will actually get behind. tom: it's fascinating. i like how they bring us on friday at 6:00 p.m., by the way we are going negative on the united states. i really don't know what to make of that. i have a very clear memory of 2011 and a lot of fancy people saying so what to these ratings moves, except they did seem to have a big immediate impact. jonathan: was it justified? arguably, yes. what you are asking is does it matter?

it was the same conversation we had in the start of august around fitch. lisa: i can't imagine it is not going to matter especially given the indigestion we've seen around some of the bond auctions and the fact that bond auctions happening easing presence and influence over equity risk as well as just general market move. >> this is higher for longer. that is the assumption. the underlying assumption, get used to it. these are rightly gotta live with and ultimately it is going to get hard to live with here in america. >> tangentially, maybe it is just an assumption that it is a monetary policy. on fiscal policy and very experienced, our next guest is wonderful. he demanded we have a shutdown clock. we've got clocks for any number of things. four days, 17 hours, 41 minutes, 53 seconds to shut down he knows the clock well over the many

decades he is at eurasia group. so much for joining from london this morning. we are riveted to the shutdown clock. what if the likelihood the nation is going to turn into a pumpkin at midnight on saturday? >> it's always exciting and u.s. fiscal policy, shutdown clock is fun to watch but fundamentally both parties are basically aligned around not shutting down the government, so i think this situation looks like it did a couple of months ago. we've got republicans making demands for spending cuts, democrats saying we don't really want to do that, but neither side really wants to shutdown the government and republicans are now putting over the land funding going in january for part of the government, february for the rest. i would bet by the end of the week that is passed because unless there is some mistake or something goes wrong and these two sides decide they hate each other too much to actually do this. tom: my quick read of the moody's announcement was it was sort of a statement on civics in america. are we going to go through and

process now tour the next shutdown six months out, a year out? the system you knew working for mcconnell years ago, are we going to some new system of legislating and appropriations in america? >> the system is basically the same it has been to get fiscal policy they want. because of that, you've got this massive increase in spending, more retirees in this country while tax revenues remain basically flat as a percentage of gdp. what that means is you get more data as a share of gdp. that is probably going to happen again and this moody's rating is about the short-term, about higher interest rates and the dysfunction in congress.

fundamentally this country is on a bad path. neither party has any seriousness about doing anything about it. even the democrats and what they call the inflation reduction act which was a sensibly designed to invest in green technology but also reduce the deficit couldn't muster a single thing that is an actual tax increase and had to rely on these things they can in to increase the deficit. there are simply no seriousness in dealing with the problem and there won't be until there is a crisis. lisa: which raises the question of what it will take, we were talking last week and he said he actually questions how much the spoken turns about the u.s. really are affecting benchmark rates in the u.s., saying that if this really were an international concern you would see the dollar weakening from an international negotiation standpoint. if the fiscal backdrop of the u.s. entering into the discussion more? is it putting the u.s. in a more difficult situation?

>> with china and other potential trading partners?> lisa: yes. >> i think this is a factor for sure. the u.s. has relied on foreign funding of its debt but also the federal reserve as a marginal buyer of debt for this 10 year low and dropping interest racing that is now shifting fundamentally where foreign strategies around u.s. that are going to some affecting the interest rate outlook and is not going to be such a sure thing that the u.s. can continue to fund these massive deficits. however, all evidence so far suggests that when there is a flight to safety, u.s. treasuries are still the place to be. the u.s. has the reserve currency and despite all the issuance we've seen this year, people still think that the u.s. is a pretty safe bet that is got a deep and rich pool of taxable assets that you can get at in an emergency if you need to. the big question is not whether or not the u.s. can repay or has the money to repay, it is if there is the political will to keep this going and what it

looks like where you might need to see an instant increase in taxes or something. lisa: we are going to get that meeting between jean jinping and president biden. what are you looking for? >> the big celebration of the fact that they are meeting at all. if they resume the military to military communications that were cut off after the pelosi visit, this would help the risk some of the challenges in the south china sea where china argues the u.s. has been aggressively encroaching on their territory, the philippines as well, and they've been sending these warning signs to the u.s., telling them to back off. resuming the military to military communications to help de-escalate those tensions, that is probably the most we can hope for. i'm really curious to see what gee should ping says in his speech to the american people and i'm also watching what is his message going to be the u.s. for executives who are very

worried about a sudden stop in their ability to reassure them that china is to a safe place for them to do business. those three things will be the most interesting to watch. jonathan: that final point, we keep going back to it. the one data point that matters for this conversation, foreign direct invest in -- investment in china has turned negative. this looks like a massive charm offensive is just around the one on the west coast. lisa: the way he framed it seemed to be that u.s. corporations were desperate to get some sense of solidity. some sense of the fact that the chinese government isn't going to necessarily interfere with the rapidly changing backdrops of policy. is that something they are going to be able to get? tom: i thought david rubenstein of carlisle and of course star of bloomberg television was

wonderful today where he just said look, all of these threats and back and forth by the u.s. is unrealistic. so you wonder if some realism is going to show up at this important meeting. we are at an unrealistic point right now. ok, great. what is going to be the realism the day after this meeting? jonathan: there will be a charm offensive firm at corporate america needs, what it demands, what it wants. tom: is elon musk going to be there? jonathan: i've got no idea who is going to be in that room. we can talk about that a little bit later. futures on the s&p, -0.2%. u've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized, hey, john reese, jr. how's your father doing? to help reach your goals with confidence.

my sister has told me so much about you. that's why it's more than advice worth listening to. it's advice worth talking about. ameriprise financial. sleepovers just aren't what they used to be. a house full of screens? basically no hiccups?

you guys have no idea how good you've got it. how old are you? like, 80? back in my day, it was scary stories and flashlights. we don't get scared. oh, really? mom can see your search history. that's what i thought. introducing the next generation 10g network. only from xfinity. (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo.

♪ jonathan: two weeks of gains on the s&p 500 ended going into the weekend on a strong note. we are pulling back by 0.2% on the s&p. on the nasdaq we are down one quarter of 1% on those futures. tom: on friday before the moody's fiesta, it was amazing the bid on the market on friday. the character of the bid into the nasdaq. it's like, ok, the holiday season is starting. some of us are waiting for after thanksgiving. of the holiday season is starting. jonathan: i got so much stick

for putting my tree up this week. tom: this is absolutely extraordinary. this is the pharaoh tree. it is a blue christmas feature. jonathan: it looks like a tiffany's tree. tom: i went below 59th street. what a wonderful new store. thank you for having us over. and this is a huge retail experiment. jonathan: how many seconds and you promise them? lisa: count the countdown clock. tom: i said these are like the ones john has. jonathan: you got tree envy. and mariah hasn't gone on the house yet. enough. we will get the bond market.

if the government shuts down or not is the mariah differential. yields are lower by a couple of basis points. we are down a single basis point or so on the two-year. what was interesting about last week, we actually have at least one close in the equity market and test ignore development in the bond market yields for the first time buyer in three weeks. lisa: that is the first thing i was looking at simply because the moves were not that significant, and at what point is this go toward max has been talking about with the move index, implied volatility will dictate risk appetite, as long as there is stability? it is all right for the equity market regardless. jonathan: you're going to hear from williams jefferson, tons more through a week as well. let's finish on foreign exchange, leases favorite currency pair because we are totally unchanged on the euro.

going absolutely nowhere. tom: you've got a little bit lesser inflation then one of the measures in japan. you are weaker on the yen this morning and sort of on the intervention. we don't need a countdown clock for that. jonathan: it is not just about the fed speak, also about the data. tomorrow you will get cpi. wednesday, retail sales. at a some of the price action. u.s. shutdown risks lingering despite a new compromise land by speaker mike johnson, a plan leaving out hard-line conservative priorities like cutting spending. congress has just days to pass into stopgap till before funding runs out after november 17 there's the clock. the house expected to vote on the measure tomorrow. lisa: we always ignore this. every time we mention it, we hate talking about it, it

happens all the time. if this time different? those are the worst worlds to stash words to say in the financial world feels like especially with the warning we got on friday, something is shifting more people suddenly are paying more attention and it is factoring in to have the market trades. it does feel like the risk is growing of some sort of disruption in terms of how high yields go, how much people imply a willingness to serve or justify the credit of the u.s. tom: i push against your bloom except i think you are right. lisa: was this? up and down the street in mary poppins, the weathervane up on top of his house, and the weathervane is turning. i take your point. i think the $1 trillion interest payment is my starting, but there is something going on here. jonathan: it doesn't mean america is about to default, let's put it that way. that is a very difficult

conversation. what could mean is they have to finance these deficits at high rates. the question vast one million times, is this country, this government losing the privilege of acting recklessly? that is a really important line in the outlook over the weekend. let's get to some of the quotes from them. our expectation is that these higher rates and deficits are around 6% of gdp for the next several years, possibly higher means that debt affordability will continue to pressure the u.s. embedded in that is another assumption that rates are going to stay higher for longer and ultimately, the former new york fed president, it puts this country's fiscal health on an unsustainable trajectory. with regards to that line i used a little bit earlier, are we losing the privilege of acting recklessly? downside risk to the u.s. fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strength. those unique strengths, tom,

they had a unique privilege to act recklessly for a that governance issue is going to become a much bigger issue when you have to finance these deficits at much higher rates than you had to so far. tom: a public service to the nation, robert would say if you can't figure fiscal house in order, you can't do foreign policy, and you wonder with all the foreign policy we have now, are we distracted by this fiscal? lisa: janet yellen disagrees. she think that rates are going right back down. pessimistic about the pattern of interest rates. that is number one. number two, what is fascinating is that corporations seem to be moving in the opposite direction from the government. the government is looking worse from a credit rating perspective corporations in the u.s. are attracting greater and greater investments. it is such positivity on the united states.

the irony here of seeing the sort of deteriorating outlook for the u.s. government vs. what we're seeing in corporate america to me is really a stark difference. jonathan: stronger everywhere with the exception of one place. massive fiscal transfers to households in america. a lot of people turned down their debt. i don't know anyone who owned a house back in 2020 and did not remortgage that house and has a 2% or 3% mortgage. i've got one sitting next to me. that is households. corporations, extremely low interest rates. the one institution that didn't do that with the united states government. you can criticize them, you can make excuses for them. i'm not really interested in that debate this morning. as a matter of fact, it didn't happen. maybe we've got to deal with some of the consequences. lisa: i'm ever going to deal

with the consequent is potentially for the u.s. government but you are seeing diplomatic efforts also diverging. almost as if they got two different countries. it is a very different medic trajectory when it comes to china, to the middle east, the rest of the world. at the same time washington is taking a much harder line. jonathan: let's finish on foreign policy in israel. conducting rates in northern gaza, joe biden speaking in an effort to secure the release apostate is in the gaza strip at the u.s. conducts airstrikes in eastern durian target to iran according to lloyd austin. nothing first time we see those strikes in the past couple of weeks. tom: it is above the fold on every newspaper come on every website. you just become numb to the horror. this week the focus on a hospital and what is beneath that hospital.

jonathan: that focus continues from the weekend into this week. tom: right now we are going to look at something bloomberg has had a real commitment to. we are talking about david cameron. the lord cameron. i mean, he is in dubai this morning. jonathan: following is going to be in the future of the conversation. if we can get evolving in the premarket, put a couple of stories together, we've been talking about the charm offensive coming from chinese offensive coming into authorities from this country as foreign direct investment in china turns negative. there are student -- certain u.s. corporations ever like maybe china is going to bring this so-called free is with the company.

lisa:lisa: is this something potentially that is going to simply be a better deal for china, that basically they just have two diverging streams or put america and washington, d.c. tom: it speaks to where guy is in dubai. to by exactly building a second airport that they hope by 2030 will be the largest airport in the world. isabel lee is in manila and you've got to believe manila and other asian people are trying to do a dubai on the pacific rim. it is a desire to be an international hub. sick: i'm just interested in this airbus boeing and i wonder if the executives are kind of like the west side story.

like this when they walk past each other of the air conference. can you imagine? jonathan: they are at the mercy of their governments relationship with china and foreign government as well. i think china is a fantastic example of that. you will have a meeting between xi and biden then off to the sidelines is this apec summit. it is always on the sidelines. somebody wrote in emailed to me, why is it always the sidelines? what happens at the summit? lisa: it is always boring, people speak. this corporate executives, multinationals, and i want to on any by name, she can try to do something about that. i don't think you get that done

in one visit. they want these investments to work. this is where they want to produce things. this is what they wanted to produce things for a long time.i feel very strongly about this. the necessity to pay people, they cannot do this so they want it to continue. this to your point is exactly the problem. they don't want to have to diverge from china because it is a massive market, the second-biggest economy and they are frustrated by both sides and the social upheaval with people pushing back. tom: i would predict in the next two years this is going to be a real thing. i think this is hypersensitive. can we replicate the labor construct day-to-day that they

have in other geographies, particularly across asia? lisa: this is where people are hoping automation will come into play. this goes to the whole investment in the u.s., the question of whether we can afford it and which companies are going to benefit the most? jonathan: we will catch up with anne-marie in the next hour on some of this. in about five minutes time we are going to catch up with total wharf. this team was dominant for a long, long time. then a couple of seasons ago have this heavyweight -- with red bull. red bull has been on top ever since. tom: christian horner back to back with toto wolff and wolff has lectured at harvard business school, speaks 14 languages or whatever. this is really the manna formula one and he is a legitimate racer from the past and he has got the worst engineering team on the platform?

jonathan: i'm not sure i would go that far, they are just not as dominant as they were a number of years ago. he is a legit investor as well. tom: are you going for that? jonathan: i'm not. do you want to make that happen? you check some ticket prices, the airfare. toto wolff on formula one going into race weekend in las vegas. equity futures right now -0.2% from new york city. this is bloomberg.

>> this is going to be superfast , and it could be like driving on ice. it just adds another dimension.

particularly on our road course, to test the drivers for the absolute maximum. jonathan: oracle red bull racing going into race weekend, in las vegas this coming weekend, the conversation about the weather and the temperature being incredibly low and the difficulty getting the tires of the optimal temperature. tom: 47 degrees right now is what i see as being the temperature. this race is at 1:00 a.m. new york time, 6:00 a.m. london time. i believe that is 10:00 p.m. pacific time. we are going to do this at night, but they don't do it up in the mountain desert of las vegas. there's lots to talk about here. the real issue here, i was

reading about this. the side-impact bar is very, very important for all these different cars. jonathan: i look forward to you flexing this. tom: this is more of an engineering design. jonathan: fantastic to catch up with you, sir. let's start with this new racetrack. what kind of feedback are you getting from the drivers on the simulator going into race weekend? >> good morning to new york. you are going to lose some of your audiences. tom: i'm skilled with that. i spoke to them last week when we had a meeting in the factory, and he said the street is so

long that as we mentioned before, racing between 10 and 12 local time, nevada nights i've heard can be pretty cold. close to five degrees centigrade, and with tires that have never experienced these kind of temperatures. jonathan: how did that come about, and when you push for a change next in? >> liberty came up with the plan, which is great. we've not raced in las vegas for a long time, certainly not in formula one. in going there with this new format is spectacular. it has been said before, the track is brand-new.

that means the surface can be quite breezy or oily, because that is what asphalt does when it is new. in any case, it is going to be a big spectacle. i don't know whether we will be sliding around or whether the track is going to be really grippy, but we will find out in a few days. jonathan: we've been talking about qualifying and the prospect of needing to do two or three laps to get up to temperature. any thoughts on that at this point? >> we have had it in the past that sometimes they slowly warm up the tires because if you push them too hard at the beginning, we slide over the surface, the grip is never going to come. back at last a few laps depending, and we are getting a little the technical here, depending on how much you eat the rims and the brakes before hand.

teams are going to want to have the tires be and then ethan a lot which gives you grip for a single axle qualifying. jonathan: it could be chaos or it could be really exciting. it goes to a conversation we've been having all program, how you balance pursuing commercial gains without compromising race quality. what do you make of the current balance of formula one? >> i think we've had to cope with that balance for a long time. why we love the sport so much is because it is honest. we are not designing regulations because we want to create scripted content with a certain degree of non-variability. this technical regulations, there's sporting regulations, and then off you go. within a certain framework of cost cap which is similar to the

salary cap, everybody has the same starting point. the stopwatch never lies. the entertainment follows suit. jonathan: and yet we go through these periods of dominance, we side with mercedes for a long time as well and now with red bull. lewis has had recently in the last couple of days that red bull is so far away there doubled the going to be very clear for the next couple of pure from your standpoint, is that a realistic assessment of to the next couple of seasons? >> we are giving it all to break the cycle, like you said. five years of dominance of for ari, and then it was us eight times in a row. now it is the championship for the third driver championship with indeed a very good driver. with all the have the racetrack,

we are trying to come up with the car and with an execution that is as good as it can be. we have the next cycle of regular in 2026 but we have to turn this around. tom: i think it is very clear there's three races left. las vegas and then back over to the middle east, qatar. are you racing right now for next year? >> yes, we have done for quite some while. we are excited for the second championship. we are second at the moment and for ari behind us, so that is an interesting one. but second or third place, it doesn't matter. that is why many months ago already read switched and transitioned to a new one. tom: there is a phenomenal photo of three austrians, a really cool photo.

to take what arnold schwarzenegger did and all of our american audience removed from f1 understands the time, has formula one gone to showbiz in 2023? >> obviously you know there's a few austrians have gone beyond the country and schwarzenegger probably the biggest. i was lucky enough to be very close friends with nikki lowder and we traveled the world around in his function as chairman of the team. there were valuable lessons that i can learn. did we get beyond the sport too much entertainment? i don't think so. we are trying different formats, and if it needs calibration to provide another show, while staying true to our values of the honest sport, i think we got to try.

within the regulations, but finish on the prospect of expansion. youth and against the expansion of the grid. do you think it is ultimately inevitable? the smaller teams are midfield teams have gone through a lot of hardship years ago when covid struck. in any case, the cost caretaking in, most of the teams have gone into profitability and finally are in a sustainable way continually. but that is not a given. we are on a high at the moment and therefore we've got to respect for the commercial rights holders are going to decide about an additional team joining. as long as we provide a better

entertainment, more income, why would any team you against? but fundamentally it is somebody else that decides. jonathan: wonderful to catch up with you going into race weekend. thank you for being with us. are we going, are we making this happen? tom: $1800. hotel prices are down. what are the odds? lisa: a motel 6. i'm going to put the over under on pretty much not happening. the equity market in just a moment, thank you all for joining us of the cover formula one the season. much more still to come.

much more still to come. are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

♪ lisa: -- i think the market needs convection that the fed is really done. >> this is a fed that really made hash of things with a great transitory fiasco and they can't afford to be wrong again. >> we've always been in a higher for longer camp. we are normal at a healthier level which is going to help set the foundation for more, more earnings, more upside for u.s. equities. >> at least at the end of the year we are looking at still a pre-robust economy. 2024 is really the bigger question. announcer: this is bloomberg surveillance with tom keene,

jonathan ferro and lisa abramowicz. jonathan: let's get your week started. good morning, good morning. this is bloomberg surveillance on tv and radio alongside comp team -- tom keene and lisa abramowicz. i've got two weeks of gains on the s&p, squeezed one out last week. it is outlook season on wall street to kick off this week. tom: huge news flow this week including cpi and retail sales you wonder how the equity markets will react. framing a stunning 5400 by the end of next year. jonathan: i think this is actually an interesting week. got a lot of fed speak, some really interesting data points.

lisa:lisa: what i'm looking at right now with this divergence. between corporate american washington, d.c., right now there is a lot of bearishness. lisa: it can turn on a dime with economic reports. i'm not predicting that but i can't fathom the equity market if the data this week confirms a resilient consumer and a disinflationary trend. jonathan: if morgan stanley is right that this is the promise, i think a lot of people would take that into next year. slowing growth, soft landing and some nicely easing policy on top of that. lisa: it is just smooth and lovely and goldilocks, but goldman sachs takes it a step further which is disinflation

and still rates staying high and lead into risk because at the end of the day, we are never going to land. it is either a soft landing or no landing and that is basically the morgan stanley vs. goldman sachs. tom: fed funds rate, core inflation, the huge distinction is the unemployment rate and that is the same distinction i failed at over the last 14, 15, 18 months. the labor economy is going to slow. jonathan: that is the standout for me. goldman sachs really constructive into 2024. disinflationary trend continues, tailwind to growth. the fed is in a position where it can support both. all the good stuff and more, even if things go wrong. lisa: so is consensus kind of bullish? this is really a key question because every time we get a consensus it has been wrong. is the consensus a soft landing

or no landing and even morgan stanley's bearish call of a base case of 3.4% unemployment is not exactly alarms. coming into this year consensus was not bullish. people thought that we were going to get a recession. jonathan: economists, sure. but there is always an equity strategist. lisa: that's fair. tom: i didn't know that. jonathan: we can talk more about that a little bit later, maybe a secret chair in the commercial break. futures look like this, just a little bit softer. yields a little bit lower, down a couple basis points. lisa: maybe it really is immaculate disinflation. wednesday we get retail sales. really interesting to see whether demand holds and we get a disinflationary trend continuing to go down, but i'm looking at inflation expectations five to 10 years out and what that means.

do we have to keep doing this? let's move on. let's talk about the geopolitical backdrop. he should ping planning to meet with president biden wednesday in san francisco. are we expecting anything? we don't know. a lot of people are watching the dinner with executive that biden pushed, which was one of the big tussles about how to get this thing to actually happen. on the domestic front, this is the most underplayed story of the week, the potential for a government shutdown. not because i think that it really might matter over the long-term, but the reaction in bond markets, in real yields and when you strip out lesion with the premium is that people are demanding for u.s. government debt, how much does that respond to more ongoing political dysfunction? jonathan: i looked up the outlooks last month. the meeting outlook was about

4100, 40.75 on the s&p, just a touch of upside. just enough. even the people were looking for recessions, still looking for a touch. we will see. without that conversation now. amy, good morning. can it continue? that's the only thing that matters right now. what would give you the signal that it can? >> we definitely get the signal from the options market. if you saw the beginning of the year we had that low-quality rally. if you saw the first half of june and july when that first nvidia earnings came out, the option sentiment tag along the way was also bullish. it was very clear that momentum is wanting to continue. i will say this time around is quite stratified. on the iw, you are seeing really bullish signals from options but not across the board and specifically were not seeing it in tech. we all know if tech goes, the

market goes, and vice versa. you see it on microsoft, but not on apple. it is very stratified. they are not getting that consensus saying we all have to tag along. jonathan: so we are not just at the mercy of the bond market. it seems different things to different names in the same sector. >> people are getting a little more idiosyncratic. and of course, when we got to that 5%, we are going to trade off of it, but right now you are seeing really different signals in different parts of the market. it is a little bit more factor-driven, and more mega cap tech versus everything else. lisa: but more broadly, is anyone actually expecting the market to go down? >> know, and the problem with that, there is really knows you in the market. last year, s&p down 20%.

it has just failed to work, failed to perform, so no one is doing it. and this is with two wars going on. you didn't actually see the tail risk rise at all post october 7. to some people that is a little concerning. lisa: so when you say that overall, people are leaning into the index level, looking at trying to get some sort of alpha by just plain different names in some kind of way, but everyone is just basically trying to get in rather than get out? >> i would say that is a more fair characterization. and when you have cash yielding 5%, the alternative to hedge is just not as attractive. it is an existential question in the market right now and when people leaning, it is actually far more to the upside. we saw a historic rise last week , basically hitting all-time highs after the move, and those are the kinds of things you are seeing. people trying to lean into upside but not on the downside.

tom: simply the probability distribution, the guesstimate out into 2024, is it comfortable derivative -- derivatives signaling active or passive investment? >> i will tell you right now the issue with our market is it has become so short duration that i really feel like six to 12 months out, tom: to these options mess things up? >> absolutely. tom: this is really important for portfolio insurance. how is the one-day parlor game messed up your world. >> s&p 500 volumes just trading in terms of options, 45% is now zero, it is massive. so how much has gone short duration? i've been doing this for 20 years. people used to trade one month options are trading one week options. so when people say what is the options market pricing six to 12 months out, i say the signal is not great. you can't use it the way you did

five years ago because of this duration and shrinkage we are getting. lisa: so are you basically avoiding it and looking to move index or looking to bond market volatility to understand for the potential risk is in stocks? >> we look at a lot of the cross asset volatilities and then we also look to give us signals. they are all very muted right now. the other dynamic going on if there is so much volatility selling on so much yield enhancement in the market that into suppressing volatility even on the equity level but we can give a very accurate sense of what is happening one month and under, and the one-month and under is telling you most people are still trying to do that upside grand in factor levels but is not cohesive across different parts of the market. jonathan: just quickly this volume going through zero data expiry, you think it is risky for overall financial markets? is there a vulnerability associated with that? we get a lot of pushback against that. >> i don't think it is as risky

as it has been painted out to seem, and i will tell you that they have data that essentially no one else can see that is saying it is pretty well-balanced. i would take that at face value. i don't have the data myself. what i would say is this -- there is a fear of a february 2018. the one thing i remind folks is that that was a 5% drawdown on the equity market. it wasn't that big a deal. >> it felt a great deal to the volatility markets. jonathan: it sure did. it is the most wonderful time of the year, do you want to sing it, tom? tom: no. jonathan: on wall street that is what this is all about. the crystal ball. lisa: it's looking really rosy. tom: it's curing my kurtosis.

lisa: i take it on face value. i wonder about people who come out and say everyone is so bearish. they got to change that to now because everyone isn't so bearish. city people start worrying about the bullishness? the idea of consensus been wrong year after year is notable to me. tom: anyone who lived in 1987 is going what is the on derivative audit right now that is messing up the market russian mark silverman was brilliant on this one-day short-term option malaak that is going on. jonathan: she's fantastic, she's always brilliant. welcome to the program. -50.2%. yield a little bit lower by a single basis point. the next hour we will catch up with thomas kennedy of jp morgan, private bank, looking forward to their conversation. the downgrade of the outlook on the u.s. credit rating to

negative. does it matter? that is an ongoing conversation. is it justified? it is hard to argue against it. lisa: 100% which is possibly the reason you seen bond yields rise and stay higher in a longer way. but i find interesting is it might matter for the bond market. doesn't matter for equities? equities are getting really sick of bond market volatility and is much as they look to that, the end of the last week was just exhausting and stockmarket thing forget about you guys, you guys just keep bouncing around, figuring out. we are going to go invest and everything. tom: 5.06 this morning. in just a minute we catch up with anne-marie down in washington, d.c.. thanks of the feedback regarding our formula one coverage. you have a partnership with f1? or is because london traders are watching market and spend more time on sport? might have something to do with the latter and not the former.

we are pulling back after two weeks of gains. there is tons to look forward to. lots of fed speak. lots of data. cpi just around the corner tomorrow morning. the day after retail sales in america which i happen to think is actually a really, really important economic data point. that's going to be in there at top three. tom: agree, retail sales argument couldn't be more important. jonathan: and a big meeting on the west coast of san francisco which is looking very clean, very tidy. almost as beautiful as new york city. lisa: look at how nice it looks. (sfx: stone wheel crafting) ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪)

♪ >> when it comes to managing the relationship, ties and communications between our militaries are critical. the chinese have basically sever those communication links. president biden would like to

reestablish them you will look to the summit as an opportunity to try to advance the ball on that. jonathan: there is a big to get together later this week on the west coast. i was u.s. national security advisor jake sullivan speaking on cnn over the weekend. welcome to the program. equities looked like this, pulling back to 0.2%. yields pulling back as well by a couple of basis points. a weaker euro against the dollar, that pulling back by 0.09%. tom: it's going to be interesting. annmarie hordern is going out to san francisco for these meetings. they are cleaning up. just for this visit. that would be a real cleanup effort.

jonathan: that is how you judge any city, when you go into cvs, is the toothpaste locked up or not? that is how you judge a city in america right now. tom: i would say it is about the food. i think there is a real opportunity for the president to do a walkabout with mr. xi and see the cuisine of san francisco and get it done right. lisa: it is so sad that i was really genuinely excited that maybe we wouldn't have to lock up toothpaste and deodorant. that to me as one of the biggest barriers and frustrations when you realize you have something, you go in and you have to push a button and wait for someone to unlock it and then you feel vaguely guilty picking something out. jonathan: to be fair, every country does this. whenever you get a big for leader coming in. have you heard of the location will be 57 in italy next summer? beautiful hotel, luxury resort.

i was almost upset with the italian prime minister because i think there are certain areas in the south of italy that are really, really deprived and could use a lot of attention and a lot of money and a lot of investment. go to that place, help people invest. get some business and tourism in the middle of june. go to the most luxurious hotel on the coast. i think that is a missed opportunity, i really do. that hotel will be sold out in june regardless of the delegates, statesmen and leaders go or not. tom: and does anything get done and will there be a statement out of this meeting? jonathan: in some ways it is nice they go to san francisco to actually clean up the city. tom: anne-marie's staff just emailed she has a reservation in san francisco. joining us now, our bloomberg san francisco restaurant correspondent annmarie hordern. it is not going to be lots of delicacies. it's going to be serious

conversation of these two presidents. what will be the lead item? anne-marie: jake sullivan said over the weekend the highest priority for the president has been to reestablish those military to military connections. remember, we've not had a lloyd austin sitting down with outer part there was a chinese counterpart for the head of the defense, although he abruptly was removed from his post. we are still waiting for the next name, but lloyd austin has been trying to sit down with a defense leader from the chinese government and they have shrugged him off everything a time. this comes back to when speaker pelosi went to taiwan last summer. so for the president this does seem to be one of the highest priorities, getting back the military to military communication. next on the list is going to be a slew of items. iran will be discussed, what is going on in the middle east. russia's invasion of ukraine. in both these conflicts the united states and china are on

opposite ends. then things like fentanyl coming into the united states. what is happening when it comes to economic relationships? there's a number of items for individuals to discuss and they haven't sat down the g20. it is an important meeting. tom: what is wonderful about this, he gets back for a shutdown. what is the likelihood the president will fly back to washington to shutdown america? anne-marie: terry hain says it is a 30% likelihood now of a shutdown. what you are seeing from the house speaker over the weekend is this two-step approach. some part of the government will be fundamental january. other parts until february. that is a nod to some members of his party to say look, i'm not doing a full carte blanche clean continuing resolution, i'm doing it in two approaches to give some impetus and some pressure to get these appropriation bills

done. that has drawn a lot of ear from some very bright members of their party, and other individuals were saying this is not what we want to see. it is also drawing it from the white house was annoyed about this two-step approach and also the fact that this continuing resolution does not contain the supplemental request the president has asked for israel, ukraine, taiwan and the southern border. but the fact of the matter is we've not seen the democratic leadership in congress come out and tell democrats how they should vote. so likely this has a path to passing in the house of representatives. it doesn't have a poison pill so it will be hard for some democrats to vote against this. yeah, he's going to lose some hard right members, but most moderate and centrist republicans will.

this is house speaker mccarthy lost his job. lisa: and that is definitely hanging over current speaker johnson. we were just talking about that, if they're going to be animosity between president biden and some of the corporations in the united states having their own inner with xi jinping that are very much different approaches to diplomacy? >> i think the white house understands that america's ceos are going to be the most meetings. but xi jinping is making this visit to san francisco, california on the sidelines of aipac, so of course she's going to want to sit down with the chief executive. sometimes what i think gets lost in mainstream u.s. media is how fragile china's economic recovery has been dented. look at the property market, look at youth unemployment. this summary was 20% until they stop putting out the data.

xi has some domestic issues to deal with at home and he wants to make sure that if you see what was going on between export controls and penalties and sanctions taking place via the united states on china, he wants to really bring in more investment and that is why you need sit down with chief executive officers but obviously the most important meeting will be with president biden because this will be a higher level, not just when it comes to economics, but a number of other issues as well. lisa: just quickly here, how low is the bar right now for anything to come of this meeting? it is basically what everyone has been telling us. >> i think the bar at the fact that these two individuals are meeting and sitting down is happening and the bar will be cleared. that is really what it was, the fact that they are meeting is a sigh of relief for a lot of our leaders around the globe that do not want to see a tit-for-tat continuing fighting between beijing and washington, and they

don't want to see this bifurcated economic system where they either have to side with united detour side with china. world leaders are breathing a sigh of relief that these two individuals are sitting down, potentially if they get the military to military communication backup and running any normal cadence, that would be another win. but you are right, the bar is very low. jonathan: big meeting coming up later this week. no deliverables expected here, so to speak. that is the jargon, isn't it? deliverables. you have to start with a conversation and this is the conversation we begin with. lisa: and the first one since the drone getting shot down, the balloon iesco and what happened with tony blinken and potential slights at the table with xi jinping. the potential risk of the tit-for-tat rising. i do want to know first of all they are going to lock up the

toothpaste, what the corporations can out of it with. because they could actually come out with some deliverables including boeing jets. tom: boeing is a $52 billion deliverable which is great, but to me, the major deliverable here is just the pomp and circumstance of. ed ludlow, thanks for morning. he said -- is where you get your best chinese deliverable. thank you, ed ludlow, for that wisdom. chinese takeout in san francisco. he nailed that.

you want to be able to provide your child with thels or resources they need. with reliable internet at home,

through the internet essentials program, the world opened up. fellas, fellas. that's how my son was able to find the hidden genius project. we wanted to give y'all the necessary skills to compete with the future. kevin's now part of this next generation of young people who feel they can thrive. ♪ ♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating that focuses on optimizing insulin levels. we tackle the cause of weight gain, not just the symptom. when you have good metabolic health,

weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

jonathan: welcome to the program. across the s&p 500, we are pulling back a quarter of 1% on the s&p 500. nasdaq futures down over the previous two weeks. two weeks of gains with a really strong finish to last week. the two-year back north of 5%. u.s. deshields coming in a couple of basis points. the 10 year this morning down a couple of basis points. tom: i'm glad you caught that.

we are at a 5.05 on the two year yield. jonathan: still had a strong finish in the equity market. should we -- the 30 year after that bond auction last week. the 30 year shaping up as follows. it's back down to 4.75 and down another basis point this morning. lisa: this counts as not volatile. the fact we did not go up and down 50 basis points and only 25 is a victory. this is viewed as stability you can bank on. tom: the equity market? lisa: i think what we have gotten and with all of our crystal balls, i think people are looking at the unlikelihood that rates will go up much higher from where we are and an unlikelihood we will get 10 year yields to 6%. jonathan: this is what was talked about over the weekend.

making the call dollar has peaked, yields have peaked. could you make the call that we are going lower from where we are or will we consolidate around these kind of levels? lisa: it's a great question and it's what i found so interesting about morgan stanley and goldman sachs. they agreed on a lot. they disagreed on where rates go. jonathan: this is great, well memorized. [laughter] lisa: it is monday, it's been a while. tom: to get to that yield call disagreeing on the employment rate. that's the key distinction. jonathan: let's get to it. the israeli -- conducting raids in northern gaza. on the outskirts of the refugee camp in the enclave.

senior israeli and u.s. officials say their securing talks to release hamas held hostages intensifying. while the u.s. conducts airstrikes in eastern syria. lisa: i have been reading obsessively about this. i don't understand what the conversations look like. the meeting in riyadh with the iranian head alongside saudi arabia heads, this is unheard of in the past decade. looking at all sorts of new kinds of diplomacy but not really getting a clear read of what you would expect. it is just a lack of knowledge with a lot misinformation piled in. tom: what i want to know is how is mr. netanyahu doing, there was a great confusion over the weekend over one nation at war versus the domestic politics the prime minister faces. jonathan: pressure domestically

without a doubt. tom: interesting to see how he gets to november and december. jonathan: looking ahead to a phenomenally busy week. cpi data tomorrow, a big week for retailers and retail sales along -- on wednesday. then we turn to president biden's meeting with xi jinping in san francisco. on thursday more retailers and friday night at midnight the deadline to pass a fund rate -- funding bill to avoid u.s. government shutdown. this week there is a lot on the schedule. lisa: it is a fantastic litmus test for what's moving the market the most. is it rates, the fiscal backdrop in washington dc or is it earnings that continue to be robust. it's an incredible litmus test.

>> with discussions of recession. pushing against that basic idea. i'm going to guess we don't know. the people going to las vegas, all of those people are prospering. half of america is flat on their back. >> lisa insisted the outlook from economist at morgan stanley diverging on the federal reserve. making deep rate cuts. she can run us through the numbers. keeping much more in line with the forecast which showed two quarter points cut. morgan stanley saying we maintain our view the fed will achieve a soft landing but

weakening growth will keep recession fears alive going into next year. lisa: 2.3 75 was there forecast. interesting to see the divergence between where they think rates go versus the fed funds rate versus goldman sachs. when our fed rate cuts a bad or good thing? this will be one of the key questions next year. is it just sort of cosmetic cuts to make it look nice taste on the slowing economy or will it be a deep profound cutting piece. jonathan: there are some people on the street who just want rate cuts and it doesn't matter what they are cutting. if it's because of a supply-side response, good news. if it's because demand has deteriorated to such an extent you have to cut interest rates, pick your poison. >> certitude they will do it after the fact, by definition exposed and the series of rate

cuts from the news flow and the immense pressure and having to catch up. jonathan: to your point they want to be late this time because they want to be absolutely sure inflation will hit the target. tom: wildly asymmetric discussion. look for the fed decides here on bloomberg surveillance. sonja martin now on monetary policy. sonja, thank you for joining. i know there's a million things going on in affects but in japan with an ever weaker yen, you go out to pips which is four decimal points. it's every pep and removing everyone higher on a weaker japanese yen. what does that mean for those institutions in japan what is

their level of panic? >> the level of panic is pretty high but it is a difficult situation because the ministry of finance decides on fx intervention, not the bank of japan. we have a situation last september where they decided to intervene to stabilize but they made expansionary in terms of their monetary policy. this is undoubtedly unhappy with the weakness of the currency with every pip we move higher this worsens. we still have the boj sticking to its policy. getting some very dovish tones. there's a high risk of failure. >> i look at australia as compared to japanese yen. which secondary payer do you

study to get insight in the weaker japanese yen. sonja: it really is mainly for us a question of dollar-yen and euro-yen. you will see that widespread. you can look to get a feel of how that's affecting the economy. the boj have in the past tried to avoid a line they could beholden to. so they've set it out along -- a bit longer. >> the fed and what the threshold is to cut rates which could give them a pass to move away from yield curve control. do you think it's overly ambitious to view all fed rate cuts as a good thing for risk

assets? >> when you look at why the fed will be cutting rates, we are looking at a situation where drove is going to slow down but it's not going to be -- we are talking about a very soft landing and as inflation declines real rates will rise. very much viewed as the fed having that opportunity to cut rates. this is not a situation which they will be cut with growth. i don't think rate cuts are necessarily negative for the market as a whole. ♪ lisa: we have -- lisa: we have been talking about the different outlooks. td securities came out with this today saying they expect more rapid pace of rate cuts than markets do. do you agree with that? sonja: we also have the fed cutting rates as of the middle of next year. the problem we will have next

year is the fed will have a certain window to cut rates and then the election is going to come and they cannot cut before the election. they will start in the summer, pre-election hot point and then we'll have to wait until after the election. the current consensus is currently in that vicinity. jonathan: thank you for the update, appreciate the outlook. best guesses, guesstimates, crystal ball? tom: after the last 18 months. jonathan: in the third quarter. tom: it used to be routine to have a three year view and a sensitivity analysis, boxes with moving parts to show your certitude two or three years on a what-if basis. lisa: i want to see a box that's just basically a dartboard.

you can throw your own dark. it's been a humbling experience for everybody. jonathan: we got some scenario analysis. you have a base case, a bold case and bear case. this year's strength extended to 24. gdp increases for q4, the unemployment rate continues to fall. strong demand and inflation pressures hiking and additional 100 basis points in 2024. that's not their base case but at least recognizing there is an upside potential that this continues. >> if the labor market holds in that a lot can happen. if it does not a lot can happen. >> let's do this. i think really important. jonathan: is this a tease?

tom: dan ives. jonathan: i will go through some numbers. jonathan: let the suspense build so to speak. something big from tom apparently. futures negative. yields are lower five basis points. do you want a drumroll? [laughter] tom: did you ever notice ives addresses better on cnbc. lisa: is that your insight? is this what we were waiting for. tom: i am looking at this insight, 2.7 trillion market cap on microsoft. we need to begin next year and the following year to begin to seriously gauge for trillion dollar and $5 trillion market caps on some of these select magnificent seven. i don't think anyone is prepared for that including dan ives.

jonathan: we talked about things we got wrong this year. it wasn't just where the economy would go it was where rates would be and where tech would be at the same time. microsoft is up 54%. than the likes of nvidia just in their own world. in the next hour, former fed economist will join us to talk about this labor market and what it could mean for fed policy. from new york city, good morning. ♪ what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today,

when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

>> this is a fed that made a hash of things with the transitory fiasco and can't afford to buy again in the same cycle in the same direction.

the inflation might come back and they can't yet be sure and will hike again if they have to. jonathan: thinking the fed will probably cut rates next year but won't talk about it which is a tedious conversation we seem to be having every single day on the program. equity futures look like this on the s&p. futures negative on the s&p. yields are lower by a couple of basis points. should we go through the week ahead again. it is a phenomenal week ahead. you've got this meeting between biden and xi, but also you've got cpi tomorrow, retail sales on wednesday read in between you have ppi. home depot earnings, you will get numbers from walmart, macy's and gap. friday you have a deadline for the government shutdown.

one would be enough but you get all of them this week. lisa: here is the question for me. what is going to be the biggest thing? the economy, is it going to be companies or the dysfunction in washington dc that gets the most attention? tom: the lord cameron is back in office. jonathan: as foreign secretary. one of those roles that perhaps he will enjoy. tom: what do you think? jon had put in an 18 hour day and i'm watching the tv and there is john doing it and cameron comes out, he says i got it wrong i got brexit wrong goodbye. jonathan: one of the biggest international events for the united kingdom in the last decade was brexit and this was a man who was against it, lost the

referendum, resigned as prime minister and now he is back in the government which is a bit of a turnaround. respect on the international stage, i think you make the argument he still has it. the prime minister is unnerved tons of -- is under tons of pressure. could probably use some stability. there will be people on either side of the conversation. tom: lisa abramowicz, tom keene and jonathan ferro. we will go to our senior executive editor for energy. opec argues against excessively negative sentiment on oil. since the october low in the stock market in america brent crude is down 17%. how much is oil, this negative sentiment paying into the -- playing into the guesstimates going forward?

>> opec make some reasonable points when it comes to the demand side of the picture. the demand appears to be reasonably robust. they see strong demand from china and asia. they see that continuing into next year despite concerns about the slowdown in the chinese economy. it's clear saudi arabia is confident in selling its oil to asia. opec is probably on solid ground. perhaps where they are unless solid ground is supply appears. you got new oil, a shale patch in the u.s. that is not growing as strongly as it once did but growing stronger than expected and you've got russian exports which are looking quite lively. you put that all together and the balances probably aren't that bad, a lot of oil about. >> what is the perfect oil price

for china? what's the perfectly optimal oil price for xi jinping as he travels to meet with biden in san francisco? >> i don't think china mines oil being too low. it has a domestic industry but it's not on par with the u.s. for example. i think the chinese get uncomfortable with $100 oil. they can live where it is at now. they don't want to see it higher. for consumers today, 70 to 90 is ok. anything above 90 makes them more anxious about inflation. lisa: haven't they been stockpiling cheap crude for the past year? don't they have massive stockpiles that will mean they won't have to buy all that much next year? >> we do think they have been adding to that stockpile privately but this is the world's biggest importer of oil

and the demand keeps growing every year so they want to have the same margin of stockpiles. the situation with iran and russia has given them the ability is the main buyer of crude, a country that many won't buy from is given a chance to i oil at discounted prices. iran's growth in supply has been among the most important factors in the oil market. we won't see similar growth in iranian crude next year. >> how much does that pit xi jinping against biden. the idea that iran not being part of the western world and opec-plus as well as russia also being an outcast has benefited china tremendously from an oil purchase price standpoint? >> the u.s. at least in private

would acknowledge its benefited them when we think about the sanctions regimes, what's clear is the oil has cut flowing and i suspect washington wanted oil to keep flowing. the last thing they will want into next year is a spike in oil prices. if that means china buys russian oil i think the u.s. is probably ok. one interesting thing to note, at the beginning of october a lot of people expected the u.s. to clamp down on iranian oil exports because of their links with hamas. that has not happened and i think it's one of the reasons why we have seen this fall off in prices is because the u.s. has shown little inclination to clamp down on the exports of oil from iran. so that oil continues to flow. china and the u.s. is broadly along in the market.

inflation concerns. it's one area for the agreement. >> a hugely ambiguous oil export, oil import as well is we have this meeting in san francisco, how will the pacific rim watch it in terms of energy? >> they are all pretty much in the same place. japan, korea and indonesia stays as an oil x -- it's days as an oil exporter are long gone. it's demand is just for outstripping that. they all rely on the middle east to supply the bulk of those imports and i think they will agree with the chinese that they would like oil prices to be relatively subdued and can afford to see given the fragility and their economies

oil above $100 a barrel. jonathan: this after the tragic events of october, down something like 11% on crude. thank you sir, will kennedy of bloomberg. the second week of october talking still about triple digit crude and here we are in the lower 80's on brent and in the 70's on wti. >> is it because of a lack of demand or because maybe the fact the u.s. is producing a record amount of oil or is it something else? is it just speculation? tom: this off the deutsche bank xl spreadsheets and the answer is to your really important question on why the macroeconomics supply and demand dynamics around the equilibrium point is like nothing else in

the world, it is small and is will kennedy nailed to us moments ago it's about demand. that's where you get the shots. you have to believe it's a partial differential. i'm going to go it's about weak demand. jonathan: not sure what's more important but i will tell you what i'm interested in, the retailers prayed we see jobless claims start to climb. unemployment starts to climb higher. which do the retailers think every single day year-round. it's a feature. tom: home depot, 471,600 work at the orange box. jonathan: serious numbers. coming up, your bond market stable quiet this morning for once, of 10-year down just a single basis point. ♪

(sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

adam: serving in afghanistan, i was hit by sniper fire and i was given a 5% chance to live. what can you do with spy?

today, i visit classrooms and share my story. i tell kids that with a little help and a lot of work, that you can overcome any challenge. announcer: dav helps veterans like adam get the benefits they've earned. they help more than a million veterans every year. adam: my victory is being there for the next generation. announcer: support more victories for veterans. go to dav.org. ♪

>> i think this disinflation is pretty deeply embedded. >> get your shopping list ready for the first half, may be first

quarter of 2024. >> people expect some deceleration and potentially more that is currently priced in. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: bloomberg surveillance. a busy week ahead on radio and television. retail sales, presidential meeting in san francisco with china. oh to have the bramo camera on. it is a new york city tradition. jonathan: apparently christmas trees have gone up in price. they have doubled. tom: this is the cumulative inflation which we talked about. it's the underpinning of the cpi report.

our entire radio and tv audience is saying baloney it's the christmas price. >> the baseline is pre-pandemic to now. month on month it's not annualized over the next three months. it is 2019 versus now. retail sales on wednesday. cpi on tuesday. how much more sensitive is this consumer becoming. >> team coverage, what did you observe? lisa: i love this time of year because i love the smell of the pine trees and when they go up and i always pass them. it was $69 at the local whole foods. a couple of years ago it was $40 and a year ago you just see it in a new way. tom: i will go to the headline

in terms of the outlook, decades of experience. he rocket launches up 22% on his call for next year and these are the two america's lisa identifies. prospering, worried about the stock market, worried about the price of a trip to paris and there is another america flat on their back. jonathan: that's what showed up on friday. tom: was that 3.2%? jonathan: ultimately i think that's the story. that's affected in the polls you see at the moment. >> i was stunned by the moonshot of the market closing on friday. i saw one chart of triple b spreads coming in but what did your world do given the melt up we see.

>> how many people are saying they are overweight investment grade credit and if you want to get excited go into high yield. what this is, slowdown, cuts to the fed funds rate that will generally be positive for the credit sphere. tom: 2.32% midland between that peak and's, down we came. >> equities look like this if you are just joining us pulling back by 0.2% after two weeks of gains. yields not doing much. you can get these pine needle candles if you'd like. lisa: i don't like the shedding. is it authentic? the cloying this i can take. jonathan: we will hook bramo

up. [laughter] lisa: adding their own scent. >> we have smart guests like will kennedy joining us. now joining us his compatriot, thomas kennedy. chief investment strategist at jp morgan. when you sat down you looked at will kennedy's world that says when the price of oil moves you see chases charge card juggernaut reaction. >> we saw a change in the way the consumers reacting to higher oil prices in our chase credit card data. about 20% of america what we saw . when gasoline prices rose you saw discretionary spending go down. prior to august and september we

did not see that relationship. it suggests savings in america might actually be depleting after how many quarters of negotiating on it. what we really dig into the accounts and do an anonymous fashion about half of america looks like they are out tom: sitting on the side of the table. looking at the polarity between morgan stanley and goldman sachs . giving you an economic backdrop. what's the backdrop that forms the outlook call? >> we are expecting a growth slowdown like the rest of wall street at this point. it is relatively simple and intuitive. you've the cost of capital above the expected revenue and if you think of america is off to see the cost of capital above expected gdp and should force investors to say maybe i should

save. just about every time you see that growth slowdown time. the question becomes one of the scenarios where it does not happen and in those scenarios you have one where the consumer is much more resilient and have access to borrowing and you will see growth go higher or something breaks in the meantime , those are pretty dynamic and polarizing outcomes in the future. jonathan: everything you said then set by the 10 year. is that right? thomas: it has to be. you have the municipal bond giving you equity like yields and for the first time in 20 years it is competing with the earnings yield on the s&p 500. for my clients who are gathering well for generation you can show them something with near zero default risk and equity like yields. is there risk, of course there is but that is a dynamic they have not seen in two decades and

now i can reposition some of their portfolio. jonathan: i'm seeing yields all over the place. is there a reluctance still to buy it? thomas: in our data for the last 12 months this has been the trade people have been excited about. it does not mean is it not without thanks. when we saw the five-year tax-free yield show up two weeks ago that dynamic change. 5% tax-free. getting an equal return behavioral -- i think as a market prognosticator it makes you say how high can rates really go. >> one of the mysteries has been what the main driving force in yields has been. is it the economy, inflation, the politics or fiscal backdrop. what do you think will be most

important with respect to market volatility. >> the fed expected outlook for the fed you can explain more than three quarters of the movement and rates from those two things. in the last couple of months you have seen i would say supply of treasuries become more of a factor. as we look ahead what's going to matter? the slowdown, how big of a slowdown is it and what will the fed's reaction function be? lisa: you said half of america is pretty much out of savings. which half? is this the half that has been spending more aggressively and will continue to if they have the money or is this the half that is particular in the economy, talking about the two america's paid they are moving at different speeds. thomas: that theme really resonates for me but the forecast out of excess savings are in the bottom half and they

traditionally don't have excess savings so now they have a decision to make. they can slow consumption or turn to their credit card at a time when credit card rates are historically punitive even when you normalize them for where interest rates or base rates are from the fed. the slowdown metrics makes sense with the propensity to consume. tom: the millions of americans that don't own nvidia, microsoft, they missed the vote -- the boat. they walk into jpmorgan chase this morning with a disastrous portfolio, how do you approach the active versus passive debate. thomas: at this point active is going to make the most sense. the haves and have-nots are there. we have tech in the equity market that has gone through its optimization of its balance sheet. layoffs have been big in the

past 12 months. cap x is getting turned back on around ai and the monetization phase will not be that long. you move to small and mid caps and these are the most interest-rate sensitive sectors and have debt two to five times. in the equity market as an example active management makes sense. as a headline, early cycles will rotate back to more passive ideas. jonathan: late cycle is where people think we are now. tom: i am really fascinated by how it looks. tom kennedy will put together this outlook. jonathan: this time of the year where it's difficult to get beyond this week, how hard is that? thomas: it's difficult trying to do it at the end of the cycle. are you in the muddle through,

in the late cycle or the end cycle? to be able to turn to your client and say i can show you equity like yields in fixed income is a way to buy some time and get some good yield and a portfolio. tom: pro tip, your charts is the answer. when in doubt, add a chart. [laughter] jonathan: going through his outlook it was just full of charts. thomas, this was great. good to see you. looking to add a little bit of yield, lock in the yield at the longer end of the curve. s&p 500 shaping up as follows. negative by 0.2%. yields are a little bit lower. no drama this morning. maybe it will build through the week. retail sales data on wednesday. retailers reporting earnings. it is that time of the year

where we get those retailers. tom: always important but combined with the economic data today there is this weak demand theory. i'm completely unqualified to guess about home depot or that but they have been resilient over the decades but now what? lisa: i cannot wait until the walmart earnings call. this will be one of the greatest litmus test of the american consumer. when you walk in do you get the nerf gun for the kid that they ask for or do you just keep on walking by and stick to laundry detergent. this is one of the questions they see. they have one that so irritating. they run around the house shooting each other with it and i'm screaming to please stop. jonathan: i sense this is personal. tom: grandchildren visiting would get the most expensive -- jonathan: on the bloomberg, he's

got charts. buying a mini kitchen. tom: i got the little test -- dishes and the fake fruit. >> a plastic pink tea set from amazon. for children. >> british. >> i don't know. in the next hour on bloomberg tv is going to weigh in on the bond market. all of that and more. this is bloomberg. ♪

j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. >> this year has been more of a pivot to the wide-body orders. we saw strong narrowbody order, no doubt the world is on fire.

it's a resilient industry and industry still recovering. we take the resilience of this long-term demand is there and that is explaining this need for airlines to get ahead. >> chief executive officer of boeing commercial airplanes. $52 billion, really interesting and it talks about the expanse of international travel. but moving towards abu dhabi they are building an entire new airport where they have two international efforts. lisa and tom keene, jonathan ferro out to 9:00 a.m.. claudia will be with us looking forward to the discussion on the american economy. expert to the development of jets. he knows christian share bleeds airbus.

growing up in france, but been part of airbus way back for many years and is now the cco of the great european airplane builder. guy johnson is in dubai. good morning. guy: good morning or good evening. the sun is setting on the dubai air show. we've seen sums and if you can orders, some promise of more still to come. as you say the wide-body market feels like it's back. this has been all about narrow bodies. driven by the narrow bodies now it's the workhorses of the sky. there time to shine. the chief commercial officer at airbus. he is the guy to talk to. nice to see you. thanks for making some time for us. the world at the moment feels like we've got a lot of geopolitical tension. a lot of uncertainty and

economic uncertainty as well. economies are slowing down yet it does not feel like it. huge orders across in terms of what we are seeing from airlines around the world. why the disconnect? >> i would not say it is a disconnect. it has been very much highlighted because it is an air show. you'll have seen this year alone there were a lot of orders in particular with us at airbus well before the air show, during the air show, there will be orders after the air show. it is overall an incredible peak. all of a sudden it is part of a phenomenon. >> this is kind of a moment in time where you can take stock. you are about to sign a very lower dish -- a very large order with turkish airlines. this feels like a moment in time to reflect on what's happening.

it feels like demand from the customer is strong and from the industry is strong. they have watched what happened with the narrow bodies and now they want to make sure they have them. what is giving the industry this confidence? christian: probably the fact we are seemingly in an under supply situation again. there is a lot of jockeying for different positions. you don't want to miss the train , just a few years ago in the midst of the pandemic remember we manufacturers were asked to slash our production at roughly 50% so it takes time there is a lot of industrial inertia to rebuild an industrial system producing large numbers of wide-body airplanes. you don't want to miss the train. >> you study the numbers carefully. i listen to lvmh or the azure

they are talking about that high-end discretionary spend beginning to roll over. do you think that happens in aviation or the lessons of the pandemic is i won't have the cognac or cartier watch. >> i think an air trip is no longer a luxury for sale, it is part of the discretionary consumer spending. it's probably -- >> top of the list? >> the recent behavior we've seen beyond the obvious phenomenon of pent-up demand, i believe the consumer will turn up to enjoy him or herself as a visit friends and family before they buy an expensive watch. >> in terms of what happens next do you see this demand being sustainable? you see this as being a sustainable story.

demand is back, where in the cycle do you think we are? >> i'm not sure we can talk about cycles as much as we use two. i do believe fundamentally it is sustainable. studies are telling us we will see continued growth including wide-body air travel. a little bit less than before the pandemic or irrespective of the pandemic because of the inflationary pressures that increases fuel prices. but we do see sustained demand including on intercontinental travel and we see on the large aircraft were fuel burn in particular in technology plays the biggest part increased demand to replace so there is more replacement in the years ahead than there was before. >> you are selling airplanes five or 10 years down the road. inflation is running hot. how are you building that into

your contracts, how important is that escalation clause? >> that's a really good question and the subject of finding the right balance of how you share that risk of inflation with the customer, the airline that is making a purchase decision many years in advance. typically what we do is index are pricing on indices of material costs, those are u.s. industries. that exist in this industry so we index that and it's a discussion depending on how far out the airplane has been for it's a discussion of how we share that risk, of that inflationary risk with our customer. >> i spoke to the ceo who spoke were going from nine to 10 on the 350 program.

if the demand continues do you have to go 10 to 11, 11 to 12 and how hard is that? >> one step at a time. we were at a rate 10 before the pandemic. we are back up to 10. airbus is not necessarily the limiting factor here. it is a huge supply chain with us. is it possible that we go further? yes. the ever optimistic commercial man in me will say yes we probably will but that is not for today. our programs are running very much on time. >> one question that's come up a lot, the rolls-royce appears to be running the business in a slightly different way. clearly wants to make some money

and that is recessing the relationships within the industry. they are soul supply on the a350. has that relationship changes, how does that relationship change? how does it change the nature of the relationship between supply and customer and -- >> the most important is we are really happy with the rolls-royce engine on the a350 program and the a330 as well. the x wb engine is by far the best engine in the sky today. in reliability, in durability, it's a wonderful engine. yes there is a resetting of pricing in the engine business. the fuel burn they have developed fabulous machines, that comes at the expense at some expense on the mainland

side because the engines consume parts quicker, they consume less fuel and less parts. that reset is what's happening in the industry in the engine industry, at large and rolls-royce is no exception. >> great to see you, thank you for taking the time. tom keene from the dubai airshow, back to you. >> thank you so much. much more to talk about, tomorrow at 8:30 a.m., a report on inflation. coming up today at 8:30, claudia. a beautiful day in new york. ♪

(adventurous music) ♪ ♪ ♪ be ready for any market with a liquid etf. get in and out with dia. tom: bloomberg surveillance,

good morning. an eventful week coming up. we will get to the economic data in a moment. currencies, commodities, futures negative seven. the vix crescendos. amy was brilliant earlier on the oddities measured by things like the vix. lisa: you look under the hood, people are trying to pace. it is not just big tech. it is microsoft versus apple,

trying to extend the nuances of the market that people are not willing to bet against. tom: 5.05 percent of the two year yield. we have a policy back up to a yield that describes maybe a fed meeting to come. lisa: looking at the expectation for cpi in about 24 hours. also we have not mentioned this but the new york fed's one-year inflation expectations. do any of these smaller indicators move the needle in the material way if they prove to be an outlier? tom: i got lectured once by mike mckee on the tertiary data. i believe it was the empire of buffalo new york. smart question -- do these secondary inflation guesses, are

they something we should pay attention to michael:? michael:it michael: it fits in with what the fed chair says about the weight of all of the evidence. they are watching inflation expectations, a bedrock of their inflation dynamics system. they feel that if they become unworn, that suggests inflation. there is some concern with what is happening in michigan. we saw another big jump on friday in michigan expectations. lisa: two people actually care? i was -- do people actually care? i was shocked the people have a tom and john response, shrugged it off. michael: i think people are putting a lot of credence in michigan, not sure why. but there seem to be oddities in the way people are responding to surveys right now. same on the political side. the thing about the michigan numbers is they are up but are

they really telling us where people think inflation will be at a time when gasoline prices are falling rapidly and americans tend to be quite gasoline prices with where they think inflation will go. lisa: you said people are responding to surveys in weird ways. can you elaborate? michael: and a lot of people have been asking about what is going on with the fact that joe biden cannot catch a break -- inflation is going down, growth is high, unemployment low. there seems to be a feeling among professional posters that we are seeing a protest vote. people are answering a poll because they know it does not matter. they are saying they do not like things the way they are right now. inflation is too high. that will not necessarily be how they feel a year from now. anybody who has worked with

statistics and pulling knows you do not put weight on what people are saying a year ahead of time. it fills time on tv networks and takes up space in newspapers but does not really mean anything. you are getting this opposition to what logic would tell you. there is some weird stuff out there. same with economics. everybody seems to be saying my life is great but the economy overall is bad. that's not computer. -- that tom: does not compute. tom:price of christmas trees at whole foods -- i have got to ask, your importance of cumulative inflation, the societal emotion i feel every day, which is a three year left to prices. michael: we are looking at month over month because the fed is.

they are wanting to see continued progress being made and find the areas in which it is not an asking why it is not not continue going down. the american public are looking at the longer run. they're looking at these prices for christmas trees before the pandemic and now we have got to pay these prices. some things go up and down but a lot other things, the price gets raised and stays that way. we were talking on friday about car prices, except tesla's. they have been going up but used car prices have been going down dramatically. that said put -- that should put some weight on the core cpi tomorrow. tom: usually important data, tuesday data tomorrow at 8:30. she has become a, cloudy out with somebody out of michigan and the fed and number of years ago that--who wrote a smart

academic paper on government assistance and how to decide wraparound recession economics. she has become a household name. she joins us now. congratulations, the only one who had a bigger year than you was taylor's. we expect -- we do not expect to see you at a football game anytime soon. how close are we to recession. claudia: closer than we were at the middle of this year. we are not in the session. look around. economy is still growing. that is no guarantee that we will be in that place in the coming months. yet, we are not in a danger zone with the labor market. there is a lot of reasons why we may have seen the unemployment rate coming up, good reasons, like workers coming back. tom: you researched it and lisa

abramowicz has been upfront on this, almost the behavioral impact of feedback loops. tell us about what you are working on. claudia needs something to do. the sahm feedback loop. claudia: this is about the unemployment rate rising a relatively small amount. that happens early in recession. the idea behind it becomes -- comes well before me. once the unemployment rate -- rate starts rising from it it keeps going. there is a feedback loop. people lose their jobs, they buy less. then those workers lose their jobs and so forth. what we see right now is not just the demand side, which the pope happens we recession. workers have come back. we have gone from labor shortages to hers who are looking for jobs.

that is good. we needed those workers. it is just that as with everything else in this economy, it has been messy to lineup supply and demand. lisa: how uncomfortable does it make you to say this time is different? claudia: very uncomfortable. yet we could have said many times since the pandemic this time is different fund very legitimately. i talk about the "sahm" will breaking, which is it would trigger and not going to a recession. we have seen declines in gdp growth that have only happened inside a recession since world war ii. it happened and we were not any recession. the sahm rule would be condensed could be lit next in line to breaker in my base case is we are not going to recession. lisa: do you see year-over-year inflation come down to the fence target by later here without

necessarily defending anything more, even potentially cutting rates like so many wall street firms tend to believe? claudia: i take issue with the term immaculate disinflation. this is coming out of a pandemic . we know where this is coming from. get to your point, we have already seen it. the labor market is a place where we have seen some of the last moment. there is more to give in terms of inflation coming down. it is going to be c. i expect tomorrow not to be fine in core inflation. there is some demand to come out. we have seen wage growth slowed to something more normal. everything is growing in the right direction on inflation. it is just going to be slow and bumpy. lisa: can you draw a distinction between people coming back into the market and the participation rate, which has not gone up so dramatically, even as we talk about people coming back into

the labor force? claudia: when we look at the year as a whole, participation has moved up. that is a slow-moving creature in terms of the measurement. we have seen a burst of workers. women's employment is at an all-time high. we have seen a big surge of immigrants in terms of work visas getting processed. it is there in the data and the labor force participation. some of these factors are more temporary. that is part of the jobs being able to catch up. you're adding jobs at a good clip, just not like last year. tom: it is important into the cpi data tomorrow and retail sales the next day. the boston fed is a cottage industry -- this is michelle barnes years ago -- trying to figure out guessing consumption. can we guess consumption? how do your respond or two

people responding to this is the credit card data? what do you academics say about gaining 70% of the american economy? claudia: i was one of the lead forecasters on consumer spending at the federal reserve for about a decade. the big piece -- and i have talked about this recently -- it is income. if we lose the labor market, we lose consumers. if we lose consumers, we are in a recession. to me, it is all eyes on the labor market. and household balance sheets are in a place that they have not been in in a long time. that is encouraging. tom: claudia, thank you so much. former federal reserve economist. to become a it is gaming 70% of the economy -- to me it is gaming 70% of the economy. econ 101, people spend their

paycheck. small matter. lisa: which is the reason why when tom kennedy said they are seeing people out of savings in the lower half of income of families, you end up with less discretionary spending. tom: i believe it was honda with a 9% pay raise for u.s. labor off of the gm strikes. if you give people a 9% pay raise, what do they do with that? they spend it. lisa: what claudia was saying was fascinating. everyone hates the phrase this time is different and yet we are hearing that more and more from people who have gotten trained by a difficult economic cycle with massive pandemic era distortions. tom: i think we underplay the pandemic era and we underplay the data. little deterioration. futures -13, standard 500 down .3%.

lisa: coming up, stephen englander. this comes at a time where there is a question around the u.s. fiscal picture and how long the dollars will remain at the haven bid if people start to worry about political dysfunction. the u.s. is on watch for downgrade. tom: i get why they do it. the outlet to royalty markets, but there is something more visible and open to immediate discussion and analysis by doing it. why bury it on a friday afternoon? lisa: people having weekend to digest it. it did not seem to be roiling the market. people are stating the obvious, what is the most important thing -- walmart earnings and home depot? what we get with cpi tomorrow? or the professional for a

government shutdown? tom: i would suggest that the control group of said retail sales, which folds into walmart and hold -- home depot, the control group taking out guy johnson in abu dhabi and dubai, taking out the rest of it as well is key. it is a busy week to say the least, including two presidents meeting in two. annmarie hordern will have complete coverage of the biden-xi. futures -14. this is bloomberg surveillance. ♪

good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪ >> we have been sanguine on the

possibility of a soft landing for at least a couple of months. we do not believe that has

changed much but we still also believe the tails of the distribution are better than usual. heading into 2024, we could get a delayed harder landing. lisa: sonya of investment management speaking as people coalesce around a soft landing. i there seems to be a consensus heading into 2024. it is early days some soft landing with enslavement -- inflation coming down, employment not rising too much. tom: i strongly agree that soft landing is the consensus but it is how you get to that which i think is so variable. the distinction this morning, the morgan stanley golden sachs differential is the call for a higher unemployment rate. lisa: right now, a bit of softness to the tape in the equity space, bonds read bound,

which is unusual in the past couple of minutes. 10 year yield did to cap, .3% decline on the s&p. home depot reporting tomorrow, lows next week. both down on the year, not incredibly surprising given where market rates are. what i think is interesting is that they are poised for their first simultaneous decline since 2010. tom: my sense of where we are -- and i do not know what to do with this -- shares of walmart, present pe on the bloomberg, 30. i do not get how a store, i get that they get operating leverage and take single-digit revenue growth down, but how does that equate to a 30 multiple?

lisa: we will look at both the evaluation side as well as the fundamental picture of walmart has been able to adapt to the amazonification of the world whereas home depot and lowes are tied to the housing market. interesting to see if they see trends shifting or getting worse since mortgage rates are not going down. tom: the vix is up, 15.12. futures at -15, bonds not giving you much love this morning. critically, american oil $77. on a monday, stephen englander has been definitive over the decades. i am loving your research report. you cannot figure out what to do because of the unreliability of the u.s. dollar. discuss. stephen: i think the dollar is

in a macro trade, reflecting uncertainty about where interest rates are going and where the sentiment is going. i think in particular, when we talk about the dollars smile, the idea that the dollar can rise when things are very good, i think right now the market is not sure where we are on that smile. you look at moments when equities are weak. that would suggest a stronger dollar. otherwise -- other times, it looks like everybody is buying. tom: katherine bantis the bank of england and others would talk about the codependency of china is the u.s. on flows of money, of trade. lisa, you mentioned earlier that whenever net in china has gone negative for the first time ever. the summit in san francisco, how does dollar dynamics encourage

big flow dynamics play into the summit and the tension? steven: i think china is still trying to get the u.s. to relax some of what they consider to be an trade sanctions. i think the ship has sailed on military applications of the chips act, but there is a lot of stuff that is got tariffs on it that probably nobody thinks it does but it needs that for political reasons. they are trying to see if there is a way of getting those removed. overall, that would probably be a positive. it positive for markets if there was some progress. it will not be enlightening for put on the emergent would encourage some optimism. lisa: how much do you care about the potential for a government shutdown? steven: shutdown, we do not

think it is going to happen. politically, there is no upside for the republicans if they do it. the signals are that it is going to be a relatively clean extension of the continuing resolution. if they do shutdown, i think it will have a short span and they will figure out how to get out with this much dignity as they can. lisa: let's say there is a shutdown. i understand it might be a remote possibility. do you think it will matter for the dollar in that people will be more reluctant to buy, especially given that we got moody's running on right a? -- murder -- moody's wording on friday? steven: the market will look past that. moody's barely registered on any kind of scale. the shutdown, if you shut down

national park's, yeah, it matters a bit but it will not be a big deal. basically, the markets have been trading off u.s. yields to a large degree, the fx market. they do not care if it is real yields, inflation expectations. if you can get 10 basis points higher, they by the dollar. i think that will continue, at least in the short term to be what is driving the market. tom: your ambiguity on u.s. dollar, i understand. analysts for standard chartered bank, what is the most attractive six-month trade right now? steven: if you are looking at six months and you have the pockets, i think the japanese story is shifting quickly. tom: give me the magnitude of the strong in move we could see. steven: i am not going to give

you the number, but one thing to you in on is that every central bank that thinks it can get inflation to target has woken up one day and discovered it is way above target and that they have to move much more monetary policy than they anticipated. to me, that is the big yen upside that is coming. within a six month rise and, potentially, that could generate a lot of young -- yen strength. tom: everybody twos tomorrow and we are at a 1.51 dollar-yen. give me some form of big figure move. steven: i am not going to do that, but i think it would register on the scale. i would say it is a first order effects move. tom: always a classic.

stephen englander, thank you. i am being completely rude there but i have such respect for his work. what he is saying is at some point they blank. i going to make up these numbers. 1.51 dollar-yen. you and i are shopping holidays, spring, end of the summer. all, it is 1.32. lisa: how much will this come with a nod from the fed cutting rates and it makes their life easier? i just pointed out that the president will be welcoming the vaguest golden knife to the white house today -- vaguest golden knights to the white house today to celebrate their stanley cup victory. tom: it is been a huge success to see las vegas go out there.

it has been a huge success for the national hockey league. others are trying to mimic that. wind is a baseball team slide in? -- when does a baseball team slide in? are you going to watch? 1:00 a.m. on sunday. lisa: we are asking why is it they are doing it in a place at night that is going to be 45 degrees out and problematic are the tires. tom: chris, thanks for this insight, because of sports betting. lisa: do you really think that is the case? tom: i am not used to it yet but everybody tells me it is complete. michael barr is adamant. it is driving every discussion in hockey. thanks for that email. futures at -15. tomorrow, 8:30, a report on

america's inflation. what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. jonathan: live from new york

city, good morning, equities down about .33%. they end to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg: the open with jonathan ferro. ♪ jonathan: live from new york, coming up, shutdown risk lingers, moody's taking a swing at america's fiscal health, wall street unveiling outlooks for next year. the