got your bloomberg, of course you can catch up on live go on your terminal. more to come from qatar and of course, surveillance is right up ahead. we will see you tomorrow on bloomberg. ♪ >> economic surprises have really plunged over the past couple of weeks and are now in negative territory. >> the innovation in the last three or four months has been moving in the wrong direction. >> with the fed was doing was undershooting. >> we don't seen the data. -- we don't see any data. >> this is "bloomberg surveillance." lisa: here it is. looking for a pivot point in inflation. this is "bloomberg

surveillance." annmarie hordern and lisa abramowicz. jonathan ferro will be back. however, today we are happy to have brian levitt with us for the hour. who has been absolutely right at a time when everyone has been looking for signs of greater disinflation starting with data about 2.5 hours from now. good morning. we are looking at market that are doing pretty much nothing. they did pretty much nothing yesterday as well. brian, are you still a fomo kind of guy? brian: i am. everybody's talking about the fed, they are so concerned when the fed is going to move and by how much. the reality is, markets historically have done very well with the fed on hold and the economy reasonably strong. we are still in a good nominal growth backdrop. i know everyone is going to be staring at that tens place in every inflation point that comes up. i think we are in a place where

inflation is going to moderate and these markets are likely to press higher. lisa: at a time when we are at the twilight of the earnings season and we do look at retail sales, we are getting home depot earnings coming out. a bit disappointing, with comparable sales down 2.8%. so far has the readthrough been generally that we do see a weakening consumer but still strong enough to power optimism and fomo feelings? brian: we have seen a weakening consumer. we have to remember, that is what the fed was trying to accomplish. we cannot have it both ways. we had this robust consumer that had everybody concerned. the federal reserve has raised interest rates. things are moderating. we cannot look at the other side and say, the consumers falling off a cliff. we knew the consumer was not going to continue to spend at the same clip, but the reality

is we have a low unemployment late -- unemployment rates. leading indicators for the job market continue to look fine. that is supportive for the consumer. it is not the excess savings we had a couple of years ago. but it is a consumer that has a job and continues to feel good about their situation. lisa: we're talking about a couple different prongs. we are going to be talking about inflation data coming out today. we are going to be talking about earnings as they come out. of course, we have to talk about the policy backdrop. we did see this morning the biden administration came out and announced those tariffs on certain chinese goods, targeted tariffs. did we learn anything new from the announcement this money? annmarie: we have the top line number now. it is across a wide scope of imports. semi conductors, that, solar cells, critical minerals.

$18 billion in imports. the administration has been talking about this for years, and they took the review of the trump era tariffs on board. but also they have signposted this. this comes less than six month out from the election, and both biden and the former president are jockeying for votes and talking tough on china. that remains key and top of mind to american voters. lisa: we are going to be discussing those throughout the hour, about how you invest around things some people say could be inflationary. right now to get a state of play of what is going on in markets, basically flat yesterday. on par for the same today, hovering around that 5000 unit 47 -- 5000 unit 47 -- 5247 market.

brian levitt, elizabeth us for the hours, i want to ask you about the latest bank of america fund manager survey, which came out and showed investor optimism at some of the strongest bubbles we have seen going back to 2021. even as investors are expecting a deterioration in earnings and deterioration in the economic growth trajectory. is this dependent on the fed cutting? brian: it's not entirely dependent on the fed cutting. if you look at 2006, 2019, or even now, the market can do well with the fed on hold. the good nominal growth environment has been supportive. i do suspect things will slow. you think about slowdown, we will see if the fed feels comfortable cutting within that. i think they would like to. what investors are looking to,

is over the next few years we are going to be normalizing the yield curve if you can normalize the yield curve without a meaningful -- without having had a meaningful disruption in economic activity, that should be a positive i have said over and over that peak inflation, peak interest rates over the next few years should be good for equities. i continue to stand by that. lisa: which is why in this fund manager survey we did see this optimism of several rate cuts this year, even with a deterioration in the backdrop. michael hartman over at bank of america did raise the specter of stagflation, which is something jay powell has shrugged off. this is the biggest headwind right now that a lot of people say, to equities. annmarie: david malpass, former head of the world bank, this is his whole thesis. but i look to the global fund manager survey sentiment.

risk assets are vulnerable to more evidence of stagflation. brian, do you see evidence of stagflation? brian: i like the way lisa put it. i can see stag and i don't see flation. if you look in the bond market, whether it is the three year breakeven, the five year breakeven, they are all very stable. with regards to stag, it is certainly not a stag economy. are things going slow? yeah, that is ultimately what we wanted to happen. inflationary pressures should moderate. when everybody talks about the momentum of inflation over the last few months, it hasn't been too much on the consumer side. very critically it has not been wages. wages have been generally benign. what are you starting to see already with commodity prices? what are you seeing with a

whale? kind of moving down. i think what ends up happening when we get to these pivot points -- you started the show with that pivot point -- people for whatever reason think of the worst environment they can imagine, right? lisa: catastrophic thinking? annmarie: they are watching lisa. lisa: it is genetic. carry on. brian: all of a sudden it is going to be the 1970's again. this is a very different environment. if you look at the misery index, it is historically quite low. that does not suggest stagflation. could it move? yeah, but what direction is inflation going? lisa: part of the problem people are looking at, including philip jefferson yesterday of the fed, we have seen this persistency to inflation. but we have seen as an acceleration in the first quarter inflation data versus last quarter of last year. this could be year-over-year comps, if you take a look

yesterday at the new york fed consumer sentiment survey and you can see they are creeping higher. it is not just broad-based, but also home prices. at a certain point you have to look at that and say, hold on a second, we can dismiss this as disinflation, but we expected that pivot point last year. we expected that pivot .6 months ago. if you ignore what the data is showing, that would be another era -- error. brian: the question is, when we see things ticking up a level -- a little, they are at a low level. some of it is being driven by commodities. some of it is likely being driven by some of the lagged effects of shelter. housing had come down a year ago. particularly rents. if we believe the zillow numbers, those rents should be down by now.

it is not being captured necessarily in the consumer price index. the fed's preferred measure, below 3%, that is the personal consumption expenditure. i think -- i wonder if the consumer, when they are being asked, are they thinking about the high cost of living, which is now part of our life, or are they thinking about the change and the rate of change? it is kind of like, everything i needed to know i learned in kindergarten. ultimately, in my opinion, it is going to moderate. we look back and say, remember we were worried the consumer was too strong? it was all inflationary? then we will be in a slowdown and the market will do a 10% decline and slow down and we will be saying, i really miss those strong nominal growth days. annmarie: when lisa brings up in new york fed one year inflation

expectations, the bank said that respondents project inflation a year from now at 3.3%. that is much higher than what we are today. how much does that inflationary concern on top of consumers' minds change how they are potentially going to go out and spend it? brian: if you look at the michigan survey, the consumer is starting to say that these prices are becoming, you know, somewhat problematic. remember, the recent move we have had to move in oil prices, we have had a move in gasoline prices, those are starting to moderate, at least on the oil side. so, remember, we started this by saying, can the consumer hang in? the consumer is saying, things are likely to slow here. you saw in the home depot numbers. you know, we should not be -- on this side the sentiment says inflation is going to get going, but the numbers are showing that they are moderating.

again, from our perspective, if we look at the consumer momentum, pretty benign. wages, pretty benign. a lot of it has been import price inflation. lisa: you mentioned home depot. they did report earnings. comparable sales coming in light versus the estimate. you can see customer transactions were down about 1%. the key here and why you are not seeing a bigger move, is they keep all of their 2025 forecasts. sales still increasing by about 1%. so, this really does seem to point to stability, as we heard from brian. here is also this idea that, yes, there is a softness due to people maybe not moving. they have done a lot of the home improvement. but there is this sense that people still have money to spend. if there is one take away from

this earnings season, what would you say it is? brian: it is a mixed picture, but the biggest take away is, everybody thought we would be in a recession by 2023, and we are still growing earnings by 10% in the quarter. everybody is worried whether inflation is 3%, 3.3%. remember, businesses make money in nominal terms. a good nominal growth environment is supportive for corporate profitability. what i say to investors, if they were so worried we would be in a deep economic downturn by now, companies are still benefiting. it is mixed. we are seeing more from tech than energy or other parts of the market, but, again, another good earnings period. lisa: next up we are going to talk about the policy implications. let's get you an update on stories elsewhere this money. here is your bloomberg brief with dani burger. dani: emmanuel macron said he

would be open to a takeover of a major french bank on the even by a non-french bank, as long as they are in the eu. >> unique consolidation as europeans. >> so it could be cross-border mergers? >> we do need this new business model for the europeans. more innovation, more investment. dani: macron was speaking to bloomberg at the choose france summit. there he said the eu needs a fresh approach to business. president biden, imposing new tariffs. on chinese chips, minerals, and dvds. it is an election year bid to boost manufacturing. the white house says the move will affect about $18 billion in

imports. it is the most comprehensive update to check -- to tariffs on china first imposed by president donald trump. the changes will take effect between 2024 and 2026. chevron's bid to buy -- abstain from voting for the deal. he comes as a shareholder advisor cited concerns about valuation and a dispute involving excellent over an oil project. it is another blow to what would be chevron's biggest deal in two decades. the transaction still needs a green light from the ftc and is expected to drag on until at least the end of this year. that is your bloomberg brief. lisa: goldman sachs's david solomon saying the u.s. need to start -- needs a sharper focus on debt. >> we are long out of the pandemic and the spending levels are continuing at a pace that is raising our debt level and creating issues for us down the road. i think this is something that deserves a lot of attention. it is not getting as much

attention as i would like to see it get right now. lisa: the deficit. that is next. this is "bloomberg surveillance." ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools,

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that's the number on your screen. ♪ lisa: welcome back. on a day where everyone is looking to 8:30 for the beginning of the key inflation data dump, right now we are seeing basically absolute stasis in markets. i would anyone have a conviction trade at a time where it seems people are on tenterhooks looking for the next pivot. yields lower once again. under surveillance this morning, david solomon saying the u.s. needs a sharper focus on debt. the u.s. facing a debt crisis, at least some say so. in unemployment below 4%. -- and unemployment below 4%.

>> the level of debt in the united states is something we need a sharper focus on and more dialogue around. we have obviously had a pandemic. we made a bunch of decisions in that pandemic, that the spending levels are continuing at a pace that is raising our debt level and creating issues for us down the road. i think this is something that deserves a lot of attention. it is not getting as much attention as i would like to see it get right now. we are obviously in an election year, so i don't have my head in the sand. i don't think you are going to see that get a lot of attention, but i think it is something that requires focus. we need to deal with the debt and deficits, and hopefully there will be a lot more discussion as we come through the election and move into the next administration. jonathan: i often say the united states has a privilege of behaving recklessly sometimes. have you sensed there has been any kind of pushback from the

treasury market against the backdrop and this risk we are talking about currently? >> reserve currency is a great privilege. i'm not going to sit here and say i see in the near term any threat to that. it is not something you can take for granted. the united states' ability to spend without constraint is not unlimited. ultimately the market will challenge that. i'm not saying that is something coming soon, but it is something we should be protective of. brian: jonathan: do you think the experience of the u.k. a couple years back as a case study for what we could face in america? >> that was a disruption to the gilt market. it is one of the things you need to be concerned about. it is a risk i have highlighted before. at the time the bank of england had to reverse its course and become accommodative to deal with that. we have had disruptions of the treasury market before. he certainly had a disruption in

march 2020. to the degree that we had a significant disruption, we do not have a lot of capacity through the banking system to intermediate that. it would require very accommodative policy if that came at a time where that was not right for the central bank to be accommodative, it would be a risk issue. i think the u.s. economy is chugging along pretty well. i think the market is set up for pretty much what you see now is what you will get throughout the rest of 2024. there have been a bunch of data points that indicate a slowing in what i would call the bottom 25% of their consumer economy, where people are making different choices. you have seen some earnings imports that indicate that. but broadly speaking the service sector is still relatively strong, and i think the economy is still in pretty good shape. you know, where it will be in six months, how much of that slowdown we see in the bottom

quartile, we have to watch the data carefully. lisa: that was david solomon sitting down with jonathan ferro. which whole interview on bloomberg if you missed it. ryan leavitt, still with us. -- brian levitt, still with us. before we get to some of the other policy prescriptions, are you in the oy, the deficit cap? brian: i am not. it is the number one question i get from individual investors. it is as if people believe they are going to wake up one morning and there is going to be a debt crisis that resembles an argentina or turkey. that is not how this is going to move. here are the things i like to talk to investors about. the first thing is, we did spend a lot of money in order to respond to two crises, and we got out of those two crises without disaster. let's be happy we live in a

country that can do that. the second is, the u.s. is a very wealthy country. people throw around the $35 trillion number. which is a big number. but what is the total household net worth in this country? it is $150 trillion. household net worth is five times the debt level. the third is, we have a captive audience. there is not going to be a moment of comeuppance where the federal government is not going to be investing in it, the u.s. financial institutions are not going to be investing in it. i father is not going to be investing in it. even the foreign investors. china is only 2%. japan, the germans, those are allied countries. lisa: if you are worried about the deficit, mr. leavitt is on the other side of the break we have been hearing about all of the terrace that might come down the pike.

how much do you take this into account? terms of areas you will not invest in or notes of caution? brian: my view is, terrorists will lead to less optimal economic outcomes. we have learned about comparative advantages. you want production taking place where countries or regions have to comparative advantage. if you don't do that there is less optimal outcomes. but from a market perspective, the market will price it in fairly quickly. the markets will adjust on a valuation basis to take into account the tariffs. what the market needs is clarity. if you think about 2018, 2018 was a 20% down your in the markets. the fed was raising rates, but i would argue it is because of the uncertainty of the trade war that hit disney's investment. once -- that hit is in this

investment. once we got clarity, by 2019 we had a much better year for markets. again, less optimal outcomes. clarity, in my opinion, is what is important. annmarie: janet -- janet yellen said yesterday that potentially china would respond. she says she looks forward to continue to advance u.s. interests on behalf of the administration's behest, to have a responsible management of this economic relationship. but seeing these kind of tariffs and the walls going up, it's going to get more fractious when it comes to the u.s. and beijing. how does an investor deal with that? brian: that is the one thing our policy makers on, right? both of our candidates agree that we want to be more america-first, or tougher on china. the point i was making is that the markets do tend to respond pretty quickly. it creates value opportunities

for investors. if you are a u.s. investor considering chinese assets, what you recognize is regulation's have been cheaper for a while. -- valuations have been cheaper for a while. things were weak. are they improving? are we getting surprises to the upside and is policy going to be supportive checkup i believe both of those answers are yes. lisa: coming up, we will go live to the qatar economic forum for a conversation with jenny johnson of franklin templeton. ♪

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♪ >> welcome back. on the key inflation day, we are starting ppi. in about two hours, markets not doing much but still up about 5% on the s&p going back to the third week of april. as we look to a potential fed that is going to be cutting rates. you look at what is going on in the bond market, yields basically hovering around that same level. people tried to get a sense of whether this is going to be the exceptional u.s. or whether we are physically moving toward a

different kind of environment before we get to other stories, brian levitt with us of invesco. how much are you watching the whole meme stock craze in terms of gamestop, amc and the return of a roaring kitty? >> what i worry about is that it gives investors the perception that all of this is manipulated or none of it is real, and the reality is when you look at the broad market, corporate earnings have been moving up as well with the market. there's nothing fake about what is going on in the broad market. i do worry that the meme stocks give some people the wrong impression. maybe we will get a dumb money sequel to the movie, something i can watch on my next flight. it's entertaining but i don't put a lot of emphasis on it. lisa: that's the reason a lot of people are dismissing it saying it is not going to be similar to a we saw in 2021. secretary of state antony blinken is in ukraine looking to assure leadership that the

country's defense against russia. the meeting comes as u.s. aid was held up in congress for months. weapons and aid from the $60 billion approved by congress in april are now making their way to the battlefield at a time where you are seeing some rejiggering of leadership particularly in the defense sector in russia. what is the latest in terms of progress in this conflict? annmarie: this is an urgent time for ukraine. the russians are making a massive offensive, probably the biggest we've seen since the war began. it also comes at a time that zelenskyy is once again saying we need that support for the u.s. they were talking about this kind of money to support the u.s. industrial base, to send more of those weapons ukraine in the fall of last year. we are now in the summer. also interesting, blinken touching down in kyiv, this morning we found out putin will be going over to china.

it is so important how china has been really helping russia in terms of being able to continue to sell oil and gas and some of the other ways they are really putting their thumb on the scale and helping putin conduct this war. annmarie: which brings us to president biden announcing sweeping tariffs on chinese chips, minerals and electric goes. the white house saying the move will affect that $18 billion in imports, the most comprehensive updated tariffs on china which were first imposed by donald trump. none of those were rolled back as some people initially expected. it seems like the rivalries between the u.s. and china acting up. this is widely expected. is there anything new in this that gives an indication of what bidens trajectory will be going forward with respect to this relationship? >> the trajectory looks like they are prepared with a little bit more about tit-for-tat when it comes to beijing.

one response beijing on a chemical import that the u.s. has an export, a tariff on it. that is something that treasury secretary alluded me yesterday. but this shows whether or not it is biden or trump next year, the walls are going up when it comes to china the same time listed the thracian were trying to get beijing to potentially lessen the thumb on the scale when it comes to helping putin. they are not in a position they are going to want to do that at this moment. >> meanwhile the economic front, the consumer and focus and retail sales coming out this week. jonathan ferro that and with bank of america ceo brian moynihan was optimistic despite higher rates for shoppers and borrowers. take a listen. >> i think our teams they will get more to the three point 5% range. we haven't really had that

before the financial crisis. there was a moment with a raised rates, so frankly in our team i say if you are under 40, you've never seen this kind of environment, and this is formal. people get used to it because america did a lot of economic activity prior to 2007. it is just that we are in a very unusual time, so the adjustments are taking place and it is running through the economy. jonathan: we heard from starbucks, mcdonald's. you've got some 69 million customers. use a starting to emerge? >> wherewith the cracks emerge? especially for household $175,000 or below, account balances are higher by a lot. if you think about spending, the fed was raising rates, city, so

that is normal on the credit side, 2019 was a 50 year low. basically last quarter we were a little bit higher than that. it's increasing base. they are getting back to where they were and frankly, thought that was very good credit ended factually was. the question is whereupon we are starting to see the link them to flatten back out lisa: that was brian moynihan speaking to her own jonathan ferro. there is this question of how bifurcated this is. sitting down with franklin templeton ceo kenny johnson. thank you for joining us. please, take it away.

>> that's right. of course, it is a region that jenny is really interested in. especially with the sovereign wealth fund, there's also a lot of competition. how do you nail the deals? >> franklin templeton has been in this region for over 25 years, some window cash so we know it well. we are one of the largest multinational managers, so we are really steeped in the culture and the business here. four of the top 10 sovereign wealth funds are here. so what do you have that they are interested in? with the alternative capabilities that we built out, that has been a very great interest. >> how does that fit into your longer and bigger strategy as you navigate the company from

active to passive? >> we are very much focused on active minute we are fans of active management. where passive is done well is on the equity side. obviously, the alternatives not so. we have clients and 160 countries. our job is to have capabilities that work for any of our clients and at the sovereign wealth funds which often think very multigenerational, the real long-term investors, we see that our private market capabilities have actually been probably more at the forefront, but in the central banks they tend to be much more conservative. traditional fixed income capabilities and equity capabilities are areas of interest for the central banks. >> the thing is when you take a look at sovereign wealth funds, there's growing entries in poverty credit and assets. is there a sense that perhaps you might have to do acquisitions in this part of the

world to meet the needs and the interest, growing appetites? >> fortunately for us, we did do an acquisition in 2007 but actually we had a client saying they were interested in sharia private credit. we were able to have our local team reach out to our private credit team and say why don't we work together and deliver this? we think of all the different capabilities we have as ingredients, we can build customized solutions for clients. >> not long ago we talked about how there has been so much pessimism priced into the chinese market. how are you assessing the potential? >> i think there's been a lot of pain in the chinese market. you seen that with where the equity markets went. again, it is the second largest economy in the world. they've been very focused on growing the domestic economy, and that creates opportunities. we've had a joint venture in

china for over 20 years with local investment people on the ground. when you're in a local market, you can understand where there is growth and where there isn't growth. the thing that we've seen with china is when the government of china wants to do something and they have indicated that is important to have a robust market, they can provide the kind of incentives to do that. we think china has gone through a lot of pain, but there is still opportunity and of china. >> the chinese property market is interesting. where there is pain, there can be opportunity. i was talking to somebody who said families who have lost money in the property market are realizing they need a diversified port olio. as a manager with investment teams on the ground, that is a

great opportunity for us. >> we are all keeping an eye on the u.s. election. if we have a trump 2.0, what a change all the sums -- a substance -- assumptions you are making? >> what i think potentially could be underestimated is the entrepreneur's ability to figure out how to navigate these kinds of environments. speaking to folks in hong kong who handle supply chains, there are a lot of midsized companies in china who have figured out that they can set up their last stage of manufacturing in a vietnam and indonesia, malaysia, and just assemble enough to meet the requirements and then it is stamped made in vietnam and then it gets imported into the u.s. and bypasses those tariffs. there's no question that there is a shifting of supply chain going on, that naturally has to

happen, but i don't think it kills the chinese economy, so i don't think the trump administration necessarily would do that. >> you talk about the shifting of supply chain's and a lot of companies in this part of the world have benefited as a result. are you seeing attractive options that were not considered before? >> certainly those small markets are getting the benefit of the story. i think obviously in this region with the price of oil where it is, and i don't think anybody sees a quick ending the russia-ukraine, so chances are oil stays high. there's a real desire to diversify the economies and make investments in technology, ai, renewable energy. all those become an opportunity to make investments. >> thank you so much for your time. jenny johnson, franklin templeton ceo. lisa, back to you. lisa: thank you so much.

great work as always. let's get to an update in the stories elsewhere this morning. dani: home depot down by about a third of 1%. yet another retailer flagging some softness in the consumer. this time it is one that has been holding off on renovations and instead prioritizing essentials. the ceo says home depot was had by soft this and a late start to spring. speaking of retail, the next big box earnings we are going to get his walmart on thursday. bloomberg has learned that walmart is set to cut hundreds of corporate jobs and has also asked most of its remote workers to return to the office. employees are being asked to go to the bigger hubs that includes their arkansas headquarters. in the meme stocks, they are more exact.

traders once again piling into shares like gamestop and amc. gamestop surging more than 74%, up almost another 59% in the premarket trade. all that was needed for this rally was just one tweet from roaring kitty. the post on x had no words, it was literally just a picture of a man sitting up with a gaming controller. he hasn't been active online for years so it was seen by sun as a call to action, and a call to action they got. lisa: up next, commodities and focus. >> over the past couple weeks i've been increasingly looking at the commodity market and getting more and more nervous that patient is going to creep up to the commodity market. that was off my radar two or three weeks ago. lisa: certainly in some of the precious metals. that is coming up next, you are watching "bloomberg serveillance."

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

lisa: all eyes headed toward that key ppi data. we are seeing markets searching for direction, very much front and focus has been the commodity sector. under surveillance this morning, where do we see inflation and commodities? >> i've got to admit over the past couple weeks i'm increasingly looking at the commodity market and getting more and more nervous that patient is going about through the commodity market. that was off my radar two or three weeks ago and as you look through the data, i don't want to say stagflation, i don't think that is a realistic situation, that i can't dismiss it as easily now as i could a month ago. lisa: wti hovering around $79 per barrel as traders away opec's next move. meanwhile, copper touching the highest level since 2022, fueled by forecasts of the global supply deficit. jeff curry of carlisle joining

us now. traditionally people focused on oil prices. right now what we are seeing is oil steadying, forcing the rest of the commodity complex surging ahead up some 8.2% since the end of february. what makes for the divergence? >> copper is the new oil. we put out a piece back in 2021 making these bullish arguments. and by the way, they haven't worked out but i've talked to a lot of people who say copper is their highest conviction trade. i wear my copper bracelet right here. it is the highest conviction trade i've ever seen. if you've got green carbonization, ai, data center demand, terry demand, it takes 12, sometimes 26 years to bring on a new supply. you can't come up with a better story. but the bottom line, we've been telling the story for three years and maybe now it is beginning to work. i'm confident that this time it is lift off and we are going to see more momentum behind it

because you have three sources of demand this time around, meaning green gap x, ai plus military. back in a 2021 all we had with the green cap x demand and now it is in full force, supply is not there, inventories are tight. lisa: prices have more than doubled since march 2020. how far more is there to rally at a time when you are still wearing your copper bracelet? >> our target was $15,000 a ton when it was trading just a little bit about 10,000 as of this morning, which means it's got a long ways to go. where do we come up with that 15,000? it was the highest real price ever reached in 1968. we don't know where demand destruction occurs. all we do know is that bringing on new supply is very difficult so we are going to learn where those price levels are when you begin to kick out demand. that is -- i am on -- as bullish

on oil then as i am on copper today. the upside on copper, is very significant. annmarie: we are seeing a lot of supply when it comes to countries outside of opec-plus. do you think we are potentially on a bearish trajectory when it comes to the oil market for this year and next? >> absolutely not. one of the big sources for oil supply over the last 18 months came from sanctioned countries. venezuela, iran, russia. yes, they've attacked these sanctions and clamped down, but they don't come into effect until after the election. that has been one of the big drivers and also on energy, don't forget the massive surge in coal production. there's a lot of energy in the system that has backed up that needs to be even through. when we think about the underlying demand, it's not

spectacular like copper, but it is rocksolid. well above long-term average growth rates. you are going into the acellena driving season. and remember, global warning means or cooling season is going to create more demand. that story is still very much intact driven by fundamentals even without any geopolitical risk priced in. when we look at positioning, it is down to the 14th percentile. this market is basically no long positioning right now. we are still sitting at 83, 80 four dollars per barrel which is a testament to the underlying strength. putting it altogether, i want to emphasize commodities are still the best performing asset class despite the pullback in oil prices. >> let's talk about gold for a moment. i'm not wearing any gold that i can hold up but it is a time when investors can get real yields in short-term parts of the market. why are gold prices still going

out and how much of that is activity by the central bankers? >> the big difference between this commodity rally and any other commodity rally most human being alive has ever seen before is it is not accompanied with dollar recycling. think about the dollar system. oil prices go up, saudi arabia accumulates more dollars. they put it into u.s. treasuries, the dollar begins to we get which reinforces the re-inflation and it becomes a virtuous cycle between oil prices and the dollar reinforcing higher commodity prices. that is not playing out this time. why? because many of the countries back in november of last year decided to start to trade with one another using local currencies, and then settle their differences in gold. so what we've replaced dollar recycling with is gold recycling. and then has created this uptick

in gold despite a stronger dollar. normally you would look at the fundamentals today and you would go oh, gold should be going down, real rates are higher, the dollar is stronger. those are all the dynamics. instead, gold is going up. what is driving it is that strong demand coming out of these emerging markets where they are now recycling into gold as opposed to u.s. treasuries creating that dollar recycling theme. this whole thing still has legs to it. we see more upside in gold prices from here. lisa: there are some stories that people have been banding about all year, whether it is the easy transition for some of the grid buildout that is going to require more copper usage, there is some of the central banks shifting more to gold. why do they have so much further to go if it is a lot being priced in and speculators coming in and trying to get ahead of them? what gives you a sense there could be a catalyst for another leg higher in the near term? >> it is a story demand.

right now you are running on fumes of very low inventories, particularly copper. once you are out, when prices begin to spike, they've got to spike high enough to bring demand back in line with supply. that elasticity really exists. the only one we could ever observe is going back to the 1960's which suggests maybe it is 15,000, but we really don't know. we didn't find out in the 2000 bull market because we were never forced into a situation where you had to ration demand out. that is why repeat in that $10,000 range similar to where we are right now. so going forward, no inventory. really strong demand from all the sources you talked about, not enough to go around. that is where we are going to find out. annmarie: if i could go back to

your answer earlier on the oil market and you see this very bullish market happening, if we do see gasoline prices in the united states go past four dollars per gallon, are you expecting the u.s. to tap the spr? >> there's a lot of other levers they can pull to put downward pressure on oil prices. that's why i'm far more bullish on base metals, copper that i am on oil, particularly until you get after the election. when you look at what drives elections, what drives the populace focus, it is the economy and inflation. so keeping oil prices and gasoline prices under wraps over the course of the next six months i think is going to be critical to the administration and the government, can be seen this play out election after election though i can't why this one would be any different. that means you can get up into the high 90's, maybe over 100 or something like that.

but would it be lasting? is not like the underlying copper story where it doesn't really impact the underlying inflation. you throw in something like some surprise problem in the middle east or something like that, that could open the upside, but i think you are going to see governments around the world doing everything they can to fight this. in one of the ways is turning a blind eye to sanction oil, sanction products. there is a lot of methods other than tapping the spr they can be used. also, relaxing environmental regulations. there's lots of tools at their disposal. lisa: jeff, thank you so much. keep wearing that copper bracelet until you hit 50,000 or bust. brian levitt of invesco, thank you so much for waking up early and joining us here on set. coming up next, emily rowland of john hancock. joe feldman of -- and gary cohn.

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♪ >> the consumer is in a weaker situation today than a year ago. >> consumers are feeling the pinch from inflation, starting to lose purchasing power again. >> the upward pressure on inflation is just really strong. >> when does the consumer slow down? i think we are seeing some of that. >> when it comes to the fate of the economy, it is not about the consumer. it is about whether companies make money. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern.

lisa: is this still the pivot party as we wait for that disinflation? good morning, this is bloomberg surveillance. annmarie hordern, i'm lisa abramowicz. jonathan ferro will be back tomorrow saying good morning, good morning. right now we are looking at a market that is looking for direction at a time we are awaiting a couple of area important data dumps including ppi that comes out in about 90 minutes. how important are some of the data that we are going to be getting heading into cpi and retail sales tomorrow to really determine whether we've reached this pivot point reinflation into a more directly downward trend? annmarie: and then of course, bpce. we are going to be hearing from jay powell today some potential you will be able to talk about the ppi. what we are seeing in the bank of america survey today is that we just an interest rate cuts have set investor optimism to this 2.5 year high. people to expecting at least one. lisa: and how much is that the driving things?

when we spoke to emily rowland she said this is a pivot party. join the pivot party. and when we were the asking that question, is that essentially what is holding some of they're optimism which is the greatest toy back to some 2021 anytime the earnings are coming in a bit light? annmarie: you're also going to get walmart which is key on how strong this consumer actually is. what are you potentially seeing in terms of the inflation story? when you look with the businesses are saying, they say they see a lot of inflationary pressures in the pipeline. lisa: which is why we saw that survey reiterating what we saw in the university of michigan sentiment survey, people seeing that one year out, that three year forecast creepy higher at a time where housing prices are expected to go up, other goods, we are talking about copper. there is that sort of inflation aspect of the day. there's also the policy aspect

of every single conversation you have any investor, especially at a time when tariffs are coming out. we talked about how not really surprising, this has been highly telegraphed. headline number came in as far as what we are expecting. did we hear how this was going to be implemented and what is to come next? annmarie: tariffs are inflationary, but it does seem like this is specific to certain sectors. it's going after the certain sectors that this administration is going to focus on from their own industrial policy. fully 7.5% tariffs on a chinese ev coming to the united states, there is not a single chinese ev in the united states right now. they are boosting that 100%. sounds like a big deal, but what difference does it make? a lot of these show what terry haynes showed to us yesterday, it is symbolic of where the direction of travel is that it

comes to beijing and washington. lisa: and how much this is going to be inflationary is something people are definitely trying to are through. right now markets kind of searching again for direction. yesterday not much action, today, neither. not exactly a negative rate at a time where we are getting the last task of earnings ahead of the inflation data. in the yield space, not a lot of action, but the path of travel is for the important to look at. down from a high of 4.70 on april 25. how much has that that underpinned optimism both at the corporate level as well as the investor level with the idea that they do want to cut rates in the near future? emily rowland weighing in on that. joe feldman reacting to home depot disappointing results in former national economic council director gary cohn is the u.s.

imposes fresh tariffs on china. stocks on pause and if u.s. ppi data. if a streak of softer economic data persists, markets might be price for too much optimism on the earnings front. emily, i want to start with the pivot party that you talked about. you were talking about how things were getting out of control. are we still seeing matt or a resurgence of that with this idea that investors are confident that jay powell wants to cut rates? >> we are still in the pivot party, and chair powell has been the lead bartender on this. starting last august, the idea that rate cuts for coming for this risk on rally that was picked up by momentum investors, and he just has not deviated from that dovish message. as much as you lose financial conditions, you are seeing again this party taking place. i would say the one thing may be causing people to go home are these whiffs of stagflation we keep seeing.

like in the michigan sentiment survey that you just mentioned, seeing inflation expectations picking up. some of the business service we look at suggesting that demand is slowing at the same time where prices paid is moving higher. it's tough to say we are in stagflation right now. gdp estimates for this quarter over 4%, unemployment less than 4%. core pce which of course is the fed preferred measure of inflation has been coming in around 2.8% year-over-year for the last several months, but markets are starting to trade like we are in stagflation. we are seeing areas like defense and equities and value stocks catching up to tech and communication services. that is where the best earnings have been but we are seeing this rotation starting to play out on the stagflation becoming a bigger theme. lisa: are you following that review pushback saying we are seeing 4% gdp growth?

this is just an issue of things slowing exactly by design, by the fed policy. >> we are still looking at this through a lens of factors. we still like quality stocks, ones with great balance sheets tons of cash. you want to own that in an environment where maybe we are higher for longer. we don't want to own companies that high interest. a lot of people like quality, so they run up a lot. they are over-bought an air view. we just look at earnings season. driving the bulk of it up 20%-30%. without the mag seven, s&p 500 earnings have come in at -2% year-over-year, the fifth consecutive quarter of negative growth. we want to own those companies but we've got to diversify away from that. you are signing that on the value on the defensive side. we like utilities, areas like health care that rv helping

balance valuation risk we are seeing in quality. annmarie: when you look at potential evidence of stagflation, you are pointing to key economic indicators that say we are not in it so how do you see this story playing out? >> eventually, we are kind of oscillation between growth concerns and inflation concerns. as long as you see inflation continued to moderate, i think stocks are going to celebrate that. you are going to see yields coming down. lisa mentioned we haven't talked much about this, we just saw the 10-year treasury yield drop about 10 basis points in two weeks. that is favorable for equities for now. but if we start to see more precipitous decline, that was a big spike last week to $231,000. maybe there are some statistical anomalies in the data. if yields start to fall, to us that is going to signal that

there is relief on the inflation front but something is not going that well. we've got to be mindful that that environment, you have to lean into bonds and take a little bit of risk off the table. annmarie:annmarie: our markets price for too much optimism when it comes to earnings? >> it was pretty good, earnings came in around 5%. the challenges going forward from here. when we look at what analysts are penciling in, it is 10%. for q3, 8%. q4, a whopping 17%. we continue to see a softness playing out in the economic data that probably means that there is a bit too much optimism vacant earnings. of course you can find opportunities underneath the hud, but it is going to be really important. lisa: we've been in washington, d.c. yesterday. jonathan is over in paris.

i'm more interested in where the money is going in terms of why this spending has been going on in such a robust way. how much are you following the money? the fiscal expenditures that are going to companies and still have yet to be spent, particularly in the chick sector, and some of the industrial complex? >> we've been improving above 4%. there is not much precedent for this but right or wrong, we want to follow the money. we are seeing a manufacturing renaissance taking place in the united states, industrial production booming in the u.s. midwest, so we are looking to capitalize on matt by investing in areas like mid-cap stocks which have large overweight and

industrials companies that are directly involved in this manufacturing boom that is being helped by onshore initiatives as well with supply chains coming back from china and other parts of the world. that is really the sweet spot and we are not overpaying for it. they are on sale to the most significant level since the late 90's. annmarie: when it comes to the deficit, this is really starting to gain momentum but a lot of that is because 2025 is really going to be the climax all of these she's. we are going to potentially hit our limit and then of course will have these extraordinary measures to make sure we can pay our debt until congress gets its act together. >> we are always trying to connect the dots between what is going on geopolitically and what it means for portfolios through the lens of bond yields. you will see it through higher bond yields.

if the market is pushing back on this idea that we are increasing the size of the deficit too much, but what we've seen over time is that demand for treasuries tends to outweigh supply. so if you see these bombs, if you see these moves higher in bond yields because of fears that we need to issue too much debt, eventually fires are going to come in, especially if u.s. sovereign bond yields are so much higher than other parts of the world. you look at places like china, bonds are yielding 2.3%. i think that demand for treasuries is alive and well. lisa: with all of that, what is your highest conviction trade right now? >> it's tough right now, it is still bonds. we love bond. you look at the aggregate bond index, yielding 5.3%, that is really close to the recent high. the 20 year high as 5.9% and a

20 year average is 3.25%. the fact that you can generate a 5%-6% yield owning a high quality bonds right now, get paid income even if you got to wait for the duration to kick in, i think this is a great opportunity to really back up the truck and get that income locked in for years. lisa: emily roland, enjoy the party. right now let's get you an update on stories elsewhere this morning. here is your bloomberg brief. dani: cease-fire talks between israel and hamas at a standstill after the latest offensive on the outskirts of rafah. talks to pause fighting and the relief of the hostages have been deadlocked for months. the sides remain far apart on the status of israeli troops and for terms for the release of hostages. the star witness in dollar trump's criminal trial is set to return to the stand today after directly tying trump to the hush-money payments made to stormy daniels. former trump fixer michael cohen elaborated on a troupe of

emails, texts and conversations. this testimony is potentially the most damaging to the former president so far. he gave a first-hand account of trump allegedly giving directions to falsify records. and president biden has announced sweeping tariffs on chinese chips, minerals and dvds. the tariffs go beyond just signaling to voters. >> they are not symbolic, they are exactly part of an ongoing, undeclared non-kinetic war between the u.s. and china. yeah, you are not importing a lot of ev's now, but the point is you don't want to end you are trying to protect industries that you feel are critical in times of national emergency, including warfare, by the way. >> that was on bloomberg brief which you can catch every morning at 5:00 a.m. lisa: up next, the consumer feeling the pinch. >> real wage growth has been

recovering for much of the past year, it is starting to stagnate they are feeling pretty sour about it. that is coming up next. this is bloomberg.

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season as we head toward a key inflation data coming out starting in less then 90 minutes time with ppi. markets trying to reflect higher, not really doing much of anything. you see the 10 year yields lower, down from 4.70 on april 25 just to give you some perspective. crude really just steadying as people take a look at the supply and demand dynamics and decide i will pass on this trade. the consumer feeling the pinch. >> consumer sentiment has been one of those where it is watch what they do, not what they say. we see wages moderate get inflation is staying sticky, but a real wage growth has been recovering for much of the past year and it is starting to stagnate. consumers are feeling the pinch from inflation and starting to lose purchasing power again, and they are feeling pretty sour about it. lisa: there's the latest shares

of home depot up slightly this morning despite reporting a sixth straight quarter of negative sales. investors also looking ahead to retail sales data tomorrow and walmart earnings thursday. joe feldman joining us live. joe, thank you so much for being here. want to start with home depot, this idea that the shares are gaining despite a miss pretty much across the board as they point to some sort of continuation of their forecast. just how weak was it under the hood in terms of these results? joe: well, the sales were definitely ended softer than expected and when you look at the u.s., same-store sales were down 3% which was a little worse than expected. the eps was a little bit of a beat by three cents, however if you adjust or normalize the tax rate for what we in the street were thinking it was going to be, nine cents of the earnings came from that, so a little bit softer from a quality earnings perspective. but i do think that expectations were kind of low heading into

the spread, so maybe there is a little sigh of relief in the premarket trading. the premarket trading is also quite volatile. our understanding is that the company feels pretty good about the health of their consumer, it is just that there consumers not spending on home-improvement right now, they are choosing to spend elsewhere because of inflation and other pressures in markets. lisa: how much is home depot a story unto itself and how divorce to the housing market has been from a number of other consumer facing industries? joe: i think that is a great point. home-improvement is its own world. by definition, the homeowner is a bit more affluent as a consumer. tend to be employed, have good wage growth and good jobs. so as a result, they tend to be able to spend david more. there were a lot of projects that happened during the pandemic, and a lot of of fig ticket spending. people read it bathrooms, kitchens, bedrooms, living

rooms. a lot of that has really slowed so there was that pull forward. this year is still a bit of normalization from that. that is why i feel like that core consumer has the capacity to spend, but they are deferring some of the current project spending. the weather also played a factor. annmarie: we'd love to get your take on walmart to really understand what is going on with the consumer, especially as walmart is laying off people in their corporate space. does this show that they are struggling at the moment? joe: i don't think walmart is struggling at the moment. i think walmart business has been pretty solid. i think we are going to hear good things about traffic to the stores, people continuing to go at an increasing rate. we are going to hear the food and consumable business is strong. discretionary has definitely been a bit softer. walmart has become a much more efficient company focused on expense control in a much inner

way and i think that they are finding ways to leverage technology and in some cases it can replace some people at the corporate office, that is possible. but they are becoming a more efficient operator, which i think from an investment standpoint, wall street does like. lisa: but from an economic standpoint, this is the u.s.'s biggest employer. is it concerning, potential cracks in the broader labor market? joe: i think they're just being efficient. i think any good company is always working through and trying to find should seize where they can adjust their business model. remember, they just closed down the health business and that was a big number of people from the corporate center. what i mean is the standalone clinics, they still have pharmacies in the store and they do offer clinics and services thinking about 40 or so of these health care clinics that they are closing. they found that as a business model it just didn't make sense for them to operate, it wasn't

going to be profitable enough over time. that is really where i think you are seeing some of that pressure on the corporate side. lisa: there has been a real question about what the conclusion is from this earnings season. can you give us a sense of how consistent the read is that yes, there is a softening of consumer demand and maybe push back on some of the higher prices, but there is stability in spending. is that basically the ongoing story pretty much across the board? joe: that is what we are hearing. i think we've seen spending has slowed, broadly speaking. we've also seen the weather had an impact on that during this first quarter. the colder start to spring in many parts of the country. so i think we are hearing that from a lot of the other retailers out there and broadly speaking, the consumer has softened a little bit, which makes some sense given all the pressures that are out there. however, generally speaking, you see total retail sales still up. some of that is inflation, but

the consumer, when you look at the savings rate, things are softening a bit that they are still not terrible. i just think the consumer is being a little bit more cautious. some of the pressure is also related to services. insurance costs, health care costs. those are up significantly. we don't hear enough about that as it relates to the consumer. but when your auto payment goes of quite a bit because of the insurance plus the cost to lease a car or buy a car, that is a lot of pressure with consumer. lisa: just a question, the weather, do you buy that? it drops five degrees and people say i'm not going outside today, are we that weak? joe: i do think there is a planting season's is some truth to it. we have seen that for the past several years now. that is when people go into my

gloves and scarves. same thing with spring, i do think the people wait until the weather is a little bit better. they spring sales pick up quite a bit. i think we are going to hear the same from home depot this morning with a talked about spring starting soft, but where the weather got more normal they started to see the pickup. so there is some trip to the weather. jonathan: they have to see the whites of something warmer before they go out and buy shorts. annmarie: also, where is spring? on the east coast we've gone from winter to summer. lisa: it changes every single day. i'm sure we will be complaining about a really steamy winter. you mentioned walmart. it wasn't just cutting jobs, it was saying that hormones work thing, not so much. annmarie: when i read that last night i thought who was still working from home? some companies are still flexible but didn't remote work

end? especially for a place like walmart. lisa: it depends, this is the corporate offices. they got tens of thousands of corporate workers. it asserted the question of what is the importance of getting everybody back or signaling to people who have been back for all this time. coming up, gary cohn is going to be speaking about all things both policy and investment as he is currently at the cross-section of both. right now in markets, not a lot of action as the assessment was happily he pin tomorrow cpi and retail sales. giving you a sense of whether we can kind of right stagflation out of the books for now. this is bloomberg.

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lisa: one hour until the beginning of a slew a block ester inflation data, beginning with ppi. good morning. we are seeing markets doing nothing, going nowhere, they basically went nowhere yesterday, but they have come a long way, going back to the third week of april, gain of 5% in the essen the, 7% and the nasdaq. one share in particular seeing gains, gamestop extending its rally of 118%. welcome back, roaring kitty, shares are down significantly from the highs of all the meme stock frenzies.

we can talk more about whether that is the beginning of a new search, a frenzy, or roaring kitty coming back and everybody celebrating extensively. bond yields, just a touch, in the market as we wait for ppi, cpi, it tells sales coming tomorrow. the 10 year, the currency space, really not doing much. we can see 107 point 97, a bit more euro strike. is this a fed prepared to cut rates regardless of what the inflation data shows? president biden announcing new tariffs on china, targeting electric vehicle batteries and solar sale -- solar cells. the treasury secretary saying that a form of retaliation from china is always a possibility. >> the president believes that it is critically important for the united states to have a role and presence in strategic

industries like semiconductor's and clean energy, which are going to be the foundation of, of good jobs and national security in the decades ahead. he believes it is unacceptable, as i do, to be completely dependent on china in these areas. he wants to make sure, given that china is really not playing by the rules, in the sense that they have a norm us subsidies in critical areas of advanced manufacturing, resulting in overcapacity. he wants to make sure that stimulus being provided through the inflation reduction act to support these industries -- these are industries creating good manufacturing jobs in parts of the country that have been

overlooked or suffered from deindustrialization in the past. the president wants to make sure that he protects these investments. i don't want to get a -- get ahead of the 301 review on tariffs, but this is a commitment that president biden has made and i agree with that. i was in china just a couple of weeks ago and made clear that we would not allow chinese overcapacity to harm our emerging industries. annmarie: does the u.s. want a trade war with china? secretary yellen: we believe that we need to invest the most in trade relationships. we are working to stabilize economic relationship. we do not wish to disengage from china, economically. we think that the playing she --

playing field should be fair and china engages in unfair practices like massive subsidies of industries they have decided are critical. those are cases where we will act to protect ourselves. annmarie: in the past we have seen tit-for-tat response. could they go after tesla or american armed products? sec. yellen: president biden believes that anything we do should be targeted to our concerns and not forward based. hopefully, we will not see a significant chinese response, but that is always a possibility. annmarie: at the moment the u.s. is spending just as much every year on paying off debt as we are funding the military. does the u.s. need to lower interest rates in order to balance the budget? sec. yellen: we have to take the interest rate path that prevails in the

economy has given. the president possible budget incorporates the assumption that interest rates will be in line with, with the projections of private sector forecasters. so, there has been an increase in the interest rate path. it's assumed. it's necessary to make sure we are in a fiscally sustainable path. of course, the higher interest rate path makes that more difficult, but the president is going to withhold the -- ice the key metric that summarizes the burden of deficits as being interest costs. the president's plan would hold interest costs at historical levels and not allow them to rise above that. lisa: that was janet yellen

speaking to our own annmarie hordern part about what the response would be from china in this morning we did get a response from china? annmarie: they said they vowed it to take measures to defend their rights and resolutely oppose with the u.s. is doing this morning with tariffs. that the decision is political manipulation and urging the u.s. to cancel the tariffs correct the wrongdoing. lisa: let's see how well that works. joining us for the rest of the hour, national economic director erie county. -- director gary cohn. i want to start more broadly with this question of how much some of the focus on fiscal policy is directing rates where the money is going and what gates are being put up. gary: fiscal policy and monetary policy directly impact how money is being spent and what money is available today. that's an even more important

topic. we have gone through a pretty vicious cycle in the last four years where we went from a cycle of zero interest rates and an abundance of capital with funding at various stages of progression, start up late stage and ipo, to the place where we are today, where there is very little vestment capital -- little investment capital available for young market companies and the ipo market just starting to reopen. that's a function of fiscal monetary policy, inextricably linked. when people did not get a return on capital in the bank they zero risk asset return out there, you know, people blocked assets that they thought could provide enhanced return and were willing to take more risk, willing to invest in startup companies. today you can purchase a six month treasury bill with 5.3%,

5.4%. we have changed the entire mentality of the way that people inc. about holding and investing capital, recirculating capital. with capital markets closed, a lot of that was invested 3, 4, 5, 6, 7 years ago. many of them had a 3, 4, 5, 6 year duration that would be liquefied by taking them public and recirculate back into the financial markets. they have not been liquefied, financial markets have been closed. therefore, risk capital doesn't get you recirculate back. the natural cadence of capital moving out of risk assets has changed because of fiscal and monetary policy. annmarie: that's a lot to unpack. are you saying that it benefits small, low leverage companies, rates go up, but then they determine their debt structures in a more considerable way. are you saying school policy also benefits bigger companies

more, because they are eligible for some of these grants? gary: i didn't really say what you are saying. i don't think that higher rates help anyone. if you are a large company and are still running a large debt portfolio, you are always worried about the weighted average costs of debt, thinking about what it is, and the lower it is, the better it is. ultimately at the end of the day you sell your goods and services to your customers, then you got your expense line. that's salaries with costs. getting a little bit down, costed debt is a big fighter. to the extent that it goes up, the costs of goods and services must go up. either the profit arjun's contract as the rates go up or they have to raise the price of goods. in a perfect world, no one really wants interest rates to go up, but there is a sort of middle ground where interest

rates are at a level low enough where they are not really affecting and the economy is growing without fiscal stimulus from the federal government. the question is -- when fiscal stimulus from the government comes in, how does that react? right now we have one of the most unique times. on the one hand we have got the federal reserve trying to raise rates to slow down economic growth and get inflation under control, than the federal government with fiscal policy and the other side looking to invest capital and grow the economy. those are countervailing forces. we don't see it a lot in our economic history when we have got both of those things going on at the same time. usually, we are in unison with the fed trying to grow the economy at lower rates with the government trying to spend money to grow the economy. that's how you know you are coming out of a tough economic period. it's robust, the fed tries to slow it down in the federal government doesn't need to slow

down because it is a robust economic time. this time is different than the historical past. lisa: as an investor, who do you bet on winning? the fed or fiscal policy? gary: i don't think there is a winner or a loser, you have to be realistic to what's going on and who is trying to do what. the biden administration has been insistent on policy. they have been trying to spend money and put money into the economy since day one, since the first covid really. $1.9 trillion has gone in early. they continuously find ways to put money into the economy for student loans. they are continually looking for ways to physically stimulate the economy. on the other hand, the fed is responding to the outcome of the money being in. there is a cost-effective. many of us think that the effect is more of what's being put in, money supply expanding so quickly, you have too much money

chasing too few goods, therefore an inflationary pressure. the fed is responding to the effect of the cause and raising rates trying to slow that. if i were going to bet, the biden administration continuing with fiscal stimulus, if they have a lot of stimulus approved where they have not given out the money, the money is not read through the economy. the fed will continue to monitor the financial conditions and most importantly continue to monitor the path of inflation based on the data they get they will decide what rate policy looks like based on that. annmarie: the next fiscal fight is the trump era tax cuts, expiring next year. should they be extended? gary: tariffs is one of the most interesting topics we dealt with when i was in the white house and i think that the biden administration is dealing with now. it's interesting, despite the

rhetoric, the policies are starting to bend towards each other. it's hard to find a difference between the two candidate's policies. annmarie: what about inflationary? gary: when you look at tariffs on the things we manufacture in the united states where we can sustain ourselves, it makes sense to tariff a country that has imported things in the united states at a low-cost. so, we know that china has some real economic advantage and don't play fair market labor or have a costs of capital. we know they don't have environmental restrictions like u.s. companies have. we know that they are competitive and they are using that advantage to dump products that we make in the united states, therefore displacing u.s.-made factors in job. yes, we should protect the border. on the flipside, if they are exporting and we are importing goods that we need that you do

not make in the united states, and there is no replacement for us in the united states and we put a tariff on it, it basically becomes a consumption tax. you and i buy the products and are just paying more for the same. annmarie: do you think it we will see more of these walls go up? biden or trump, how high are we talking? gary: there is a thought that the wall should go higher but at some point there are diminishing returns. we've got historical data on putting tariffs in under other presidents. when i was in the white house, we did a 301 on washing machine's. if you look at the theory of what happened to washing machines, it's interesting, tariffs went on washing machines in the prices on dryers went up. people think that they costs the same ring, even though one had tariffs in london. varied inflation.

it ring manufacturing back to the united states? it did. we brought foreign manufacturers. lg, did they open in the united states? we created some jobs, but really increased the price of the washing machine and dryer. there's a lot of historical data on what happened tariff things. lisa: up next, clinging to exceptionalism. >> we have clung to this american exceptionalism for too long. the narrative has changed and we will wake up one day and say well, things are not as good as we thought they were. that's where we are now. lisa: that's coming up, next. you are watching "bloomberg surveillance." ♪

lisa: it's a quiet day at a time when people are looking to ppi data coming in five minutes heading into tomorrow's cpi with

retail sales. we will hear from chair powell today, interesting how many people are banking on the powell pivot. let's get straight to it. clinging to u.s. exceptionalism. >> we've clung to this exceptionalism too long. all year it was american exceptionalism, american exceptionalism. the narrative has changed and we are going to wake up one day and say that things are not as good as we thought they were and that is where we are right now. lisa: treasury yields are holding steady ahead of -- ppi data, jay powell, with this in writing, "shocks that played through the system, the distribution of inflation has not fully shifted back to a level centered around 2%. ed joins us now. want to get your view on whether people are too optimistic about the pivot that the head seems they are not totally or all on

the same page with. ed: largely, it's about timing. what we are realizing now, looking at the data of the last six months, you can get a lot of short time, short-term shocks, month to month eta. q4, inflation decelerated faster than we would like in a trend. q1, it was faster than the underlying trend. still between 2.5% and 3%. the russian is, how much time will it take to squeeze back over the course of the rest of the year? lisa: we got the small business optimism index, receipt for the first time this year in large part because small businesses saw the potential for prices to go down. few expected them to keep going up. is this the kind of data that you follow at this point were closely than cpi or ppi given the lack effect? ed: i have to be honest, soft

data has given us a lot of flat signals. starting with pmi data, a lot of the survey based data has the economy in a relatively weak position, at sharp odds with consumer spend and, at sharp odds with the broader inflation story. yes, there is a place for soft data, but it has largely been a false signal. lisa: meanwhile, we have gary here, former economic director for the white house and part of the board of what we are looking at more broadly. from your point of view, how much are you seeing in the companies that you oversee and invest in? the ongoing disinflation? gary: i don't think we are seeing a lot of disinflation at this point. in the enterprise world, the corporate world, there is not a lot of distance nation. most companies right now are trying to figure out how to run

themselves much more efficiently because there are a lot of rice constraints in the system and there is becoming less and less ability to push price down. customers are becoming much more discerning. i think that what you are seeing in big and small companies today is them trying to your out how to run themselves more efficiently. the ai trend is something everyone is looking at, how can that help me in the efficiency frontier, be more efficient with people and technology and we are seeing that again small companies annmarie: bank of america, coming out warning the stock rally is at risk of stagflation, do you see that in the economy? gary: quoting the chair, i don't see the stack and i don't see the inflation. we are still growing one point 2%. inflation is pretty steady. look, i think that we agree it's going to be harder to get inflation down. the last mile is difficult.

there are a bunch of issues in inflation that high interest rates will cure. there is a commodity bull market going on, uranium and copper prices, anything having to do with the electric power grid going up substantially. raise the interest rates as high as you want, for electricity is not going away. we have got some fundamental shift going on that are going to take time to work through the system. lisa: how much are people over there skis betting on the fed cutting rates this year especially twice, especially as philipp jefferson yesterday said that he favors higher rates for longer because frankly we are not seeing disinflation. ed: the question is, would you look slowdown in wage growth i've been surprised at how quickly it has slowed given the underlying strength in the labor market.

if it continues, it again builds the foundation for, instead inflation expectations are in the right rice and that center of gravity, it pulls inflation down. yeah, one or two cuts seems reasonable. annmarie: before the election? ed: that's tough. we are struggling to get our hands around the inflation story. that will be the primary source of the timing here. do they have room before the november meeting to move? at this point the calendar is working against them. annmarie: gary, you left. you think it will be an issue? gary: no, i think i'm in the two campus well and one will come before the election. as the fed chair you are in a precarious position where you do it too close to the election, people will accuse you of political, but the fed said

years in advance and there's only -- look, in this environment there's only certain dancing can do it. i'm old enough to remember when they had emergency meetings and raised interest rates when they wanted to, we are not that violent and. lisa: flipping the script to the side from president biden, national security council, -- economic council, inflation is one of the number one issues. gary: they have to figure out a different tactic on messaging. we can see it telling them clearly that the top one or two issues that voters will vote on is the economy. when they talk about, when voters in america talk about the economy, it's a simple lesion. there is what i bring home at the end of the week, the end of the month, does it by me more or less than i thought it when you came into office. is my disposable income going up

or down? the biden administration has to figure out a way to convey that you are better off today than you were four years ago it if they can't figure that out, they will lose on this subject. the republican side has done some interesting marketing on putting out the basket of groceries and showing what it costs 3.5 years ago and what it costs today. the biden administration has to go out and say this is what are paying for and this is what you are getting today, here's what i have done for you and here is how i have done it. lisa: well, they are trying other things, like calling it real infrastructure work -- we. -- week. gary: never heard that. annmarie: why doesn't land, the broadband in rural areas? gary: i don't know, but at the end of the day working west

virginia and they talked about ringing broadband to 700 families. you could take starlink do that in a minute. you could get a starlink password. they brought it to ukraine literally overnight. these are things that are interesting, good, orton. you should definitely have the internet, no one is arguing about that, but these are not major events. for the 700 people that got internet, it's important, but it doesn't move the needle in the country. we have got to talk in a bigger swath of people. lisa: well, people have their shovels ready. gary, and, think -- ed, thank you so much. coming up, christopher, elliott, lara, gina, and you are watching "bloomberg surveillance" on ppi

day. ♪

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>> economic surprises have plunged over the last couple of weeks and are in negative territory. >> the last few months have been

moving in the wrong direction. >> titration policy should be put the fed is doing, undershooting. >> suddenly they are going to have to punt four or five times by the end of the year. >> we will wake up and say well, things are not as good as we thought they were. >> this is "bloomberg surveillance." lisa: this is it, the moment you have been waiting or, 30 minutes until pi kicks off inflation data, pivot might so many were waiting for. good morning, this is bloomberg surveillance. jonathan ferro will be back. lisa abramowicz, annmarie hordern, i'm pleased to say we will be taking a look at the weekend get to that place of or concrete disinflation. so far we have got a host of fed

to speak that is all over the place when it comes -- leaning in or leaning out. annmarie: this is what philipp jefferson said yesterday, when it comes every angle it's hard to tell where they are looking, but when it comes to the pce that we will finally get, you have to look at other data. going back to yesterday's federal reserve bank of new york report. americans last month braced for higher inflation pressures over the next few years. that's not something you want to see at the federal reserve. annmarie: there's a real question about whether the market has too much confidence over distant nation and a fed pivot. lara, thank you, welcome. i know that you are in the higher for longer camp and that people are underestimating the pressure. what have you seen recently in earnings or elsewhere the you

that conviction? lara: the whole picture. wages. the fact that university of michigan numbers came out last week. i love the bloomberg economic surprises next, you can pull out the pieces and the inflation piece has been shooting higher. it has adjustment stubborn, it's been more stubborn than everyone expected. i think that markets still have a filter where they want to ignore the bad news on inflation and get so excited and embrace good news. we may have a well behaved, let's call it, ppi number today, cpi number tomorrow, giving us an increase. but i think that underneath that is the whack-a-mole sensation where inflation is coming at us from unexpected places and maybe it is not altogether but it is popping up when we least expect it. lisa: expectation is 0.3%. final demand month over month api up 0.2% tomorrow with cpi,

an expectation of zero point or percent increase, staying constant. we shall see. right now in markets, think steady. not a lot of drama as people parse through the earnings of the earnings season or the tail end of it. looking towards ppi data, it's basically not going anywhere for s&p futures. unchanged, yields are marginally lower. not a lot of action, though gamestop is up more than 117% as people take a look at the meme stock frenzy. make of it what you will. coming up, chris furring of clavell he funds, stocks stuck in a tight trading range. elliott glue on the latest fundraiser survey with gina martin adams on meme stocks. right now, stocks are stuck in a tight range ahead of data that's due out in 30 minutes.

we are talking to lara rhame here and a time when there is this question about what you will be looking for. right now, what is your base case as to how people will react one way or the other with upside or downside surprise? lara: if we get it, it will simply be because the trade is so crowded that we are going to see a disinflationary path resume. we are going to get a jump higher in interest rates. looking at the overall picture, to me it is one of renormalization to where we were back before even the financial crisis in the mid-90's. i think that we are going to be in this higher for longer place. but also, when i see the range of possible data outcomes, people have no consensus of what the fed is going to do. right now i see every data point as a possible flashpoint and i think we will continue to see

that, today. -- that today. lisa: taking a defensive approach to the market, recommending less cyclical industrials, live entertainment stops, staples and utilities. chris joins us now. those things are not the same in terms of defensive. i want to start there. chris: the secular tailwind has outweighed any cyclicals. we've been talking about inflation where gary cohen said he hadn't seen stagflation, but you can't lose sight of the stack part. in most areas consumers are still spending on live experiences, going to concerts, to sports events, etc., and there are limited ways to play that in the market that we are taking advantage of. lisa: basically, you can bet on taylor swift, even in a slowing economy. i know that you like to focus on specific companies that you like. is there anything that made you

shift in the earnings and the softening that you are seeing in discretionary spending? chris: not really, we are always with him for companies with rising power, m&a's that can adjust with different initials. but we are being a bit more defensive, as you noted. we are late cycle here, i do not think that we are ready for a new economic environment. we are obviously waiting for the fed like everyone else, but it can go for decades. annmarie: lisa mentioned this, tupperware up, or meme stocks back? chris: it would seem that way. this is not the kind of behavior that you see when financial conditions are tight. i'm sure the fed is watching this to see what happens. those of us who manage small-cap funds, remember 2021 quite well.

three stocks. -- three stocks -- amc, that that jan, gamestop added to the russell index on 10% a year. no institutional managers owned them. then they crashed after they were removed from the index. companies like amc, taking advantage of the situation at cheaper rates. this probably has some legs. lisa: chris, the small-cap universe has been underperforming the large-cap face. there's been a lot of dispersion . what do you view as a broader trend within small-cap. seems like that outside of a couple of standout positives, the quality underlying it has deteriorated. chris: we are focused on the russell in particular, 20% financials with real questions about the volley of those

companies, particularly the balance sheet on the asset side, commercial exposure. companies tend to be more cyclical in general, but we are finding good companies within that, the opportunity to eat the index. lara: looking at the broad opportunity, do you see a difference in the way that small caps are instituted by geopolitics or are they more beholden to the cycle? chris: certainly they are often viewed as a safe haven in times like this, but they are, you know, in many cases, quite sensitive, it is the one thing that keeps us from being all in, given some of our concerns in the economy. you really are getting paid to take the risks today. lisa: people looking at what's

going to happen in 21 minutes when we get a first read on inflation readings. how do you respond to the upside or downside? chris: not responding at all, to be honest. this is another debate where the fed may cut later this year. longer than the market proceeds. annmarie: how have you adjusted your viewpoint coming to a close. caps off by nvidia. chris: probably a bit more defensive and cautious than i was last time, as you look at top lines, they are probably using ground.

we are in a different world than we were. lisa: chris merengue, thank you, there's been a clear slowing down. why has that not been enough to offset the inflationary pressures that are sticky in the system. lara: several reasons. we can't underestimate wage components. it's something that is here with us. it's been with us for some time. labor market is incredibly tight. it's also the housing piece. hopefully, something we can dig into later. these rent prices has not come down as much is expected. if we get relief, i expected to be short-lived. q4 will be right back into a shortage again. it's a confluence of things. those are huge when anything about the household monthly budget. lisa: the rent is too damn high,

that the potential calendar? [laughter] updating your stories elsewhere this morning, here's your brief with dani burger. dani: the chevron bid to purchase has has been a snag. -- hess has hit a snag over and oil project in guyana. it's another blow to what would be chevron's biggest deal in two decades. now, moving on to kraft heinz, looking to sell oscar meyer, maker of lunchtime pictures like hotdogs and cold cuts. they first reported to bank of america and centerview partners gauging interest in the brand. sources said it confessed somewhere in the neighborhood of $3 million to $5 billion in the middle of a multiyear effort to improve nutrition on the product. they have push their strong first quarter revenue on sales forecast for strong demands with

the roger federer back and expanding rapidly across europe and is looking to cross into tennis with market share for most established like nike. that is your bloomberg brief. annmarie: rate cuts -- lisa: up next, rate cuts driving sentiment. bullish. >> accelerating the recovery we are in, setting up a bull market for years to come. lisa: expect more discussion on cosmetic cuts, insurance cuts, other cuts. that's what they want to say. that's next. this is "bloomberg surveillance ." ♪ mally i'd hold. but... taking the gains is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management. something amazing is happening here.

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lisa: this is "bloomberg surveillance," ppi day heading into cpi day, heading into whatever other acronym we are on

track for. markets, right now doing nothing, inching higher. 5248 on the s&p, yields inflicting lower. it's the round-trip that we've seen rising to its highest we've seen going back in more than a decade. 447.86, recently -- 4.4786, recently driving the bullish sentiment that you see out there. >> the fed is going to cut rates before the end of the year, taking out insurance cuts to elongate our recovery and ultimately set up a bull market that will last for years to come. lisa: which is a reason why there has been confusion among the surveyed. fund managers are the most optimistic about the state of the markets this november 2021 according to the most recent bank of america fund manager survey showing cash allocation at a three year low with stock allocation at the highest and's

january of 2022. elias, how do you explain this, given that people seem to be ratcheting down expectations for earnings and growth? elias: good to be here again. this was pretty much the most bullish survey of the last 2.5 years. in recent months we had already seen rising optimism regarding fms investors but the one development in the may global manager survey was that the remaining bullishness is no more driven by improvement and global growth expectation so much as conviction that global monetary policy will be easier than the next 12 months. we recorded big convictions that they will cut rates in the next 12 months and that short and long-term interest rates would be lower by this time next year. lisa: your colleague, michael,

talk about the risks this poses in terms of vulnerabilities should there be a downturn in terms of economic activities as expected and stickiness in inflation. how pivotal is the press that we are going to see in terms of indicating whether people get wrong sided on this one? elyas: the next reports on cpi and retail sales tomorrow will be very important. looking at this month, yes investors are slightly less optimistic on the macro, but overall when you look at the last three years, they are quite optimistic. when we look at recession expectations, two thirds expect that there will not be any global recession. specifically to the u.s., two thirds as well expect the u.s. will not experience any recession. investors are convinced that the

dominant acro scenario in the next 12 months will be a soft landing. it also seems that no other landing has peaked and hard landings have trusts. as you said, the biggest tail risk is inflation and the biggest surprise will be higher cpi and slower economic both. the cpi report, very important. annmarie: meaning that the likelihood of the fed cutting starts to become less of a possibility. what happens if the fed does not cut? the majority expect at the survey that this is going to happen this year or the beginning of next. elyas: the conviction of the survey, 96% of investors think that the fed will cut. when asked about the timing of the first fed cut, 82% expect

the first fed cut to happen in the second half of this year. when asked about the magnitude of rate cuts, three quarters expect the fed will cut two or more in the next 12 months. solid conviction that monetary policy will be easier. if inflation spikes higher, that's the negra risk. if it does so, the fed will be less likely to cut. you have seen the inherent risk between know fed cut, that's not expected at all. and then higher economic lending, now the number three biggest tail risk. lara: elyas, this speaks to one of the core questions dominating markets, can we expect able market run with higher interest rates? you and i were sitting here in january, it was priced into the market. if i told you that i may only be pricing in 1.5, markets are

going to be fine. i think we would have really had trouble believing that. yet here we sit today. even though i recognize the conviction in your survey, i think if we don't get rate cuts this year, the markets could still continue, at least, to be stable where they are. it's been high valuation today. it doesn't seem that rates have cause that much of an issue for market or market sentiment. elyas: that's the key point, as long as the growth is there. rate cut expectations have come a long way from the hi-lo's it january. -- in january, but growth has held up and that is why we were recovered -- recording in the different surveys in the recent month, improving expectation. this time macro sentiment has an

, but the conviction around easier monetary policy stands at very high levels. the one macro development to watch now is inflation, of verse, but can both remain at resilient levels? and yes, if growth slows and inflation stays sticky at a high level, that would be the most contrarian outcome for investors. lara: and when you think about growth slowing, this is where you need to start to get with granular about numbers. if we are growing around 3% right now, q2 gdp estimates, earliest that's are as high as or percent. when you talk about slowing are you talking about 2.5% or two? sounds like we are nitpicking, but these are the magnitudes that matter when you are at these stratospheric evaluations.

elyas: sure, the magnitude of slow is can the global macro remain on the magnitude of a soft landing? investors leave that soft landing is the dominant scenario and that's the case this month, investors saying that soft landing is the main scenario for the global economy over the next months, i think it is going to be a rather smooth path for risk assets, but you are right, the one investment collusion from this month's survey is that positioning is no more the tailwind it was in 2023 and risk assets are definitely more vulnerable to evidence of higher elation and slowdown economic both. lisa: if we could reframe this based on the trajectory of the fund manager survey of the past six months or 12 months, how much do we see a pivot party priced in, one slightly priced out, and now fully priced once

again? elyas: look, i mean investors believe the fed, they are also data dependent. for now, they are still holding to the view that a soft landing will happen, that no recession will be happening in the next five months. so, a soft landing, no recession , the macro sentiment remaining near the highs of the past three years, with a conviction that large-cap wrote stocks will be the leader in terms of the bull market, that is why investors positioning is the most bullish of the past three years. lisa: elyas galou, have fun with brian moynihan over there in paris as all of the executives in the finance world to send on the region. coming up next, breaking u.s. ppi data, but lara i wanted to

follow-up on what you mentioned, the idea of handling substantial price cuts with valuations hanging in there. do you agree with elliott's point? that there seems to be a greater vulnerability now based on what people are pricing and their positioning then a month ago? lara: i do. am i the only one that is nervous? feels like 1.5 years ago when everyone all for a recession and we didn't get one and now everyone is bullish with a soft landing at all-time highs, that should be a warning sign that we need to just continue to monitor diversification. annmarie: that's a great point, what did we learn from that recalibration seven to one? lara: we need to growth to handle the interest rates. that is where we go from here. the focus for the fed is about laois and, but when i think about market performance, growth

is necessary to accommodate higher rates. we are stuck with higher rates, the growth is what market performance is going to hinge on. lisa: i would argue that pricing in those right -- rate cuts means they are pricing in the chance of a hard landing. so, if it gets priced in a bit more, that is when it will be more difficult to swallow. coming up, ppi data with expectation work 0.3% month over month gain. how the markets respond is kind of key. upside surprise, how big of a problem in disruption is that going to be? downside surprise? how much of a rally will not unleash? this is "bloomberg surveillance." ♪

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lisa: here's the state of play 25 seconds away from epi data, someways the appetizer for tomorrow's cpi data. markets, basically stagnant as we wait to understand what we can get out of this soft landing bandwagon, although s&p has been up 5% and's the end of the third week of april. you can see nasdaq futures of doing nothing also, up 7% and's the same time. right now we are getting that data, michael mckee is here to break it all down. mike: bit of a fattening appetizer for you. 5% rise is the headline number, from 2/10 the prior month, and

for the core also half of a 1% rise. the core extra trade as well, up 4/10 of 1%. these are all significantly higher than had been forecast and infinitely higher than last month. year-over-year, the final demand goes up to 2.2% from 2.1%. that is as expected, 2.4% or the core, the same as the last month forecast where it was defaulted 2.3 and the core extra trade at 3.1 from 2.8. here's an interesting revision. headline ppi, revised down last month to -1/10 from 2/10 of a percent. the headline, core, also revised down from 2/10 to a -1/10 percent. what it leads us -- leaves us with his index values not as high as the month change would

imply, but still significantly higher than anticipated. so, we do have some inflation in the producer price area and i'm guessing, lisa, we have some reaction in the markets. stay close as you parse the details in a very detailed report that we will get into in just a second. you can see the initial pop in yields, the selloff in price, fading a touch as we realize what mike was talking about. prior month revisions leave this as less of an upside than what was expected. in the yield space, not as big of a reaction. increase in the 10-year yield, the market in the two-year not moving things. in the equity space you saw a bigger downsides rise in terms of how markets were responding, down one third on s&p futures and the nasdaq. russell futures not doing that

much. the question here is, is something of an inflationary pop more than expected worse news for equities than for bonds? mike, you had a second to go through it. what's the latest in terms of the details you think we should pay attention to? headlines -- mike: headlines for heating oil and natural gas, up a lot, especially in a month when you think you may not the heating oil anymore. i think that what will catch the eye of most people nerdy enough to look at this is portfolio management. i have always called this the pogo part of the ppi and cpi. we have met the enemy and he is us. when the markets go up, the market managers get more money. that is what happened, portfolio management up 39% during the month after, half of 1% gain from the month before. march, markets went down.

now it's a 3.9% gain with a rise in equities especially having an impact on this. this goes into the pce, as does health care services. those are things that you will see over the next few days, people revising up pce estimates. lisa: recapping if you are just joining, strong upside surprise for final demand coming in at half of 1% versus the expectation and at the same time a revision lower in the prior month to a negative zero point one from the initially reported 0.2. put it together, still upside surprise, not as big as it might seem on the first blush. stocks and bonds have yields shifting higher, tracing those initial moves as people parse through the details. pushed to the foreign currency market, you can see a stronger dollar versus the euro.

on the margins people are pricing out what means for the reserve looking for a disinflationary trend. we are getting more revisions now for final demand year-over-year being revised lower for the prior month, coming in at 2.2% for the final demand this past month in april, sort of in line with expectations. again, not as much upside surprise as people expected. lara rhame is here from s -- fs investments. how much does this edify your viewpoint that it is sticky, higher for longer? an important thing to watch going into tomorrow's cpi. lara: disinflation has stalled, that's the trend i continue to see. looking ahead, there's been a lot of tough talk about tariffs from the administration. the relief we are getting is coming from goods. that looks unlikely, that mobile trend of lower goods prices, seems unlikely to stay with us

as sort of all of the low-level news that leads us to create our topline cpi forecast is just continuing to push higher. this is another piece where we see pressure and commodity prices, for example, service prices. added up, today's number sort of , monthly index data gyrations notwithstanding, a disinflationary trend has stalled out in that is what i focused on. mike: does this spell -- annmarie: does this spell bad news for tomorrow's cpi? lara: that's what markets will put into the expectations. i think there is a lot of hope. hope is not a strategy, but there is a lot of hope that after several months of upside surprise, there will be a more moderate cpi number tomorrow. when i look at the headline of consensus expectations, zero point 4%, that number is inconsistent with the fed target. we are running too hot for the

fed to comfortably cut rates with the economic data as strong as it is. annmarie: looking at the ppi, what you have picked out that will spell bad news for pce? mike: portfolio management will. we also keep an ion airfares between cpi and ppi. going into what the pce does. they don't residential housing. ppi does construction, business construction, office construction. the cpi and see -- pce measure housing slightly differently and the question is do we see a big change in housing. that will probably be the big mover tomorrow, besides some energy prices. lara: i'm curious on your opinion on this. i hear a lot of cherry picking when we think about place and

indicators. some have a bigger weight on housing. some have less of a weight on housing. the fed targets the deflator that is running cooler than the cpi number, but we can't just discount cpi data simply because we don't like what it shows us versus what the pce deflator does. how do you sift through that rowing cacophony of different inflation indicators? mike: what you see, that depends on where you sit, the old saying. if you are at the reserve and you know that it equals brent cpi as a misleading indicator, that doesn't necessarily tell you what is going on with inflation overall. so, you look through that somewhat. if you are at 1600 pennsylvania avenue it's the cpi, that is what those americans are looking at. you are worried because it is still too high. if you are at health and human services, cpi is the deflator that gives you the social security increase for the next

year. so, it all depends on what you are using the numbers for. the people on wall street know that the fed looks at ppi and cpi for a reaction as they will be looking at it as an indicator for where cpe will go, but they know that the fed is looking at pce and lisa: if lisa: it doesn't start going down again, they know we won't see a rate cut soon. if you are just joining us, not that significant of an oversight of overshoot based on the down provisions of the prior month. s&p futures are almost back to flat, yields almost flat on the day pretty much across the board as people assess whether this is really something that points to higher inflation, the foreign exchange trade, you can also see a similar type of revision. though again there is a question

of how much the u.s. will be ahead or behind of the european central bank when it comes to cutting rates. you said that disinflation has stalled, lara. that's your take away. what gives you that confidence when there are aspects that are a de facto product of the times, like portfolio management fee? lara: when you look underneath headline inflation data, you have a huge difference between what's going on in the service side and the goods side of the economy. goods deflation is almost back to where it was before pandemic. but the service component -- our economy is for all intents and services a service economy and running much hotter. it's a combination of rent and a lot of other, you know, the fed sort of ostensible super court number that is a reverse course. inflation in that area is rising. so, when i add it all up, the

resting heart rate of the u.s. economy, outside the goods price deflation is significantly higher than 2%. is higher than 3% right now. the services are what are notoriously stickier. outside of rent you have a wage component that will bit all overheated. lisa: would it be a policy error for the fed to cut twice? lara: they seem to want to cut and i don't think that 50 basis points will move the needle significantly on demand. i do think that we should all have confidence in the fact that , you know, our economy is solid, the outlook is positive. if the economy stumbles, the fed has room to cut. but i almost feel like they have boxed themselves into a corner. they seem to want to cut so badly and are so focused on restrictive rate. when i look at markets, i don't see the rates as terribly

restrictive. annmarie: mike, what does this mean when you look at the surfaces, how is the fed looking at that mark we are going to hear from powell today. mike: they do look at those things, it's a bit of arise for goods, which is not goods news for the fed, to make a bad pun, but services continue to rise, up 2.7% over the course of the last year in ppi. that's an issue for the fed. whether they want to cut or not, that is going to depend on what happens down the road. we have got cpi tomorrow and another on the day of the next fed meeting. they will have more information. while they want to cut, they are worried about real rates and what it will do to the economy, if they want to cut or if they feel that they and under these circumstances. an interesting question.

here's a good question for figuring out whether the fed wants to and if 50 basis points will make a difference. suppose they cut twice, what does it do to house prices? the housing industry is just -- has just sort of stopped, but prices went up because there is nothing on the market. will prices go up or down? that is something the fed has to try to figure out and there is no good rule to do that. annmarie: especially when people think that high rates are inflationary. lisa: lara rhame, sticking with us. we want to get a sense of what's going on elsewhere this morning, here's your bloomberg brief. dani: president biden announcing $18 billion in imports. it's a comprehensive updates on china first imposed by donald trump with changes set to take effect between 2024 and 2025. he will make a former

announcement -- formal announcement later today. the more conversational version with a paid subscription. spoke to the chatbot and various voices. and they appeared to translate speech from one language to another almost instantaneously it's a story upon request. apple repair -- apple preparing to sell the vision pro with the appeal of a $3000 mixed reality headset. they flew employees to cupertino to begin training sessions, people familiar told us, with overseas expansion including china, france, and germany area lisa? lisa: i wonder with those training sessions are like. put them on, enter the world. go like this, see what happens. annmarie: looks wild.

interesting that they are doubling down with china for the vision pro. lisa: it's been a real conviction train for them. next we talk about gamestop, amc, the return of the meme stock. >> there's nothing fake about the broad market. meme stocks give people the wrong impression. lisa: that maybe things are not what they seem? coming up next. this is "bloomberg surveillance ." ♪

do you want to close out? should i? normally i'd hold. but... taking the gains is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management. lisa: there was drama for a minute and it went away. we got the ppi data. the headline number came in hotter than expected. a closer look at the numbers, not as much higher as you expected. still, more negative tone to the s&p futures this morning with a positive tilt to the dollar,

stronger. the euro, reclaiming some of that. yields, marginally higher, everything retracing to where it was before. elsewhere, the return of the meme stock. >> i worry it gives investors the perception that all of this is manipulated and none of this is real and the reality is that when you look at the broad market, corporate earnings have been moving up with the market. there is nothing fake about what's going on in the broad market. i worry that the meme stock gives some people the wrong impression. lisa: here's the latest, gamestop and s&p soaring once again thanks to someone who is not a cat. hitting a high despite moves in premarket trading. all it took was a tweet of a rough drawing of a man leaning forward. it was back to the races.

gina joining us now, fresh off of a trip from asia, not thinking we would talk about stocks, yet here we are. even with everything else, we have got to start there. is there a signal there in terms of the mood in the market in the appetite for risk taking? gina: we never want to read too much into a tweet driving meme stocks but it is a small part of a bigger picture with a degree of risk tolerance revival emerging in small caps, started six months ago, they broke out of a consistent trade capturing small caps in a bear market. they started to break out a little bit over the course of the last -- six months. we are seeing it in fits and starts, small caps performing better in general. remember, last year was worse for ipos and in the great financial crisis. we started to see recovery in that activity with a little bit of recovery generally in risk

tolerance. i think that this is part of that story. lisa: if we can talk about meme stocks aside, and roaring kitty, if you haven't watched "dumb money," rate movie by the way, how much of that is faith in disinflation trade at a time when the data that we have seen just now shows, obviously, not so much of an upside surprise, but as lara rhame pointed out, disinflation has kind of stalled. gina: remember, disinflation did not help small caps at all. at the beginning of 2023 they helped to select names inside of the s&p 500, but it was not until late last year when it nation had started to stall that small caps broke out. this is an important clarification and trend, small caps in their own cycle trapped by an earnings cycle that really held back risk tolerance there. now the earnings recession is starting to improve a little bit. recovering in the fundamentals. the inflation story is part of that, but not the overwhelming

story. you are seeing generally better activity affect small caps earnings growth, which really trades on revenue. this is not necessarily all about collation. annmarie: we have written a lot about small caps recently -- lara: we have written a lot about small caps recently and this 20 year trend of companies staying private for much longer, how much do you feel small caps are really reflecting what's going on in the broader markets and the broader economy? i look at this giant, now, private market, private equity, private debt opportunity, dominated by venture capital backed ipos, lucia technologies. there is opportunity to get it right. overall fundamentals are not rate. gina: large-cap companies in the

tech space own all of the private sector, in the private sector, renting them from ip owing in the small-cap space. but we are seeing recovery this year and even though it is the minimus, it's better than nothing like we had in 2023. the other thing about small caps is it is a whole lot of health care. big upswing, big downswing. health care could recover this year. that's an independent space relative to tech, not owned by big cap, could fuel optimism in small caps that we haven't had for a long time. the other thing to consider is the leverage of financials yuri remember last year had bank failures. it was a huge drag 2023 that zoomable he starts to go away in 2024 depending on what the fed does. we will see what they have, but

there are moving parts that would suggest we are due for at least a little bit of recovery in this space. we are starting to see it emerge. not by any stretch of the imagination robust or pervasive, it is fits and starts, but it's a different climate and we have been in for the last two years. annmarie: does that say to you that small caps are efficiently restrictive? gina: it's a tough space. small caps thrive on new options and growth. there has been none. it's difficult to find your investment strategy in this space. you need growth, new supply of growth, and we haven't had it. we need to see that, to some degree. if we can't get it, it's difficult for them to perform well. lisa: stepping back, seems like we are playing around with narratives today. what does this have to do with

the different investment themes in the cycle? it's kind of head spinning. i get a sense that they like these companies and they do this well, but it is nice to keep and i on that and it is getting so noisy that i can't listen. gina: it's pervasive, this underlying tone of stress, the macro forecast with the cycle playing out in an earnings environment. it has taught us a hard way as investors that what drives stocks is earning trends. pay attention to the earnings cycle, not always driven by the macro cycle, not always easily forecasted by the macro economic or cast. i do think that this is becoming a consistent topic. one thing that we have noticed coming into 2023 and 2020 or is that what was priced in by the

models was closer to a macro forecast and the bottom consensus. this year over the past or months we have started to see the market increasing toward the bottom of consensus as a guidepost. it's not there yet, our best guess is the market is priced for 6% earnings growth with consensus telling us 13 and a macro economic or cast implying 2% earnings growth. macro got it wrong, it's an entire earnings cycle. you cannot overly rely the strategy in the last two years. you have to pay attention to those individual company dynamics. lisa: sometimes it is a roaring kitty. gina martin adams, thank you for being with us. final thoughts is uss ppi and the motley slew of narratives?

lara: cpi data, i think it will show a continuing trend of stalled this inflation and from here it is so critical to recognize and it speaks directly to what she was just saying. today expectations around the economy are positive. i would almost argue it is optimism at full throttle. that is a time when we just need to recognize that probably all of the good news on the macro side is priced in. it does not mean that we are in for a huge stumble, but it is a time for caution because we are so stretched. lisa: meaning going to gamestop. [laughter] not a recommendation, just what some are doing. coming up at 3 p.m. eastern on the lows, katherine tai at a time when there is quite a bit of strain, given the announcement of highly expected tariffs on chinese electric vehicles announced. tomorrow we have evan brown and

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>> from new york city i'm matt miller. the count down to the open starts right now. >> coming up u.s. p.t.i. hoter than expected the inflation expect still looking a little hawkish sending yields higher ahead of charm powell and raising concerns about upcoming rate cuts. that is the issue. we begin with more signs of stubborn inflation.