Earnings. We will speak in the 1 00 hour with the citizens ceo, so make sure everyone tunes and for that. Boeing up as well after its factory will get up and running again. Then theres a few more regional banks doing ever so well. Gilead had been one of the top performers, up 8 . But Morgan Stanley and a couple the 15 houses saying billion Additional Market cap may be just a little exaggerated. We dont know anything about the drug trials yet. Not enough, anyway, but it does look promising for covid19 patients. That is the story and the stock market. The 10 year yield at 60 basis points. New york crude continues to plummet, down at 18. 40 a barrel. The dollar continuing to rise broadly, although we are soft on the day. There you have the u. S. Data check. Guy it is interesting, that gilead study. Very small at the moment. It will be interesting to see what happens in phase three. Lets get more with what is happening in markets and the economy. Joining us over the phone is Chris Watling come along view economics ceo and chief Market StrategistChris Watling, longview economics ceo and chief Market Strategist. Chris weve been moving quite a lot since we were last on. We were overly positive, and then flipped it when we had that opec thing, then became a little more positive, then took it off on wednesday. Youve got to be agile in this market. I would say i am positive on a six to 12 month view, but i think the next few weeks, we are going to start moving towards a retest. I would be a little bit cautious here. I wouldnt jump in with two feet. Tradinglly for rally 17 days old, antitypical relief rally over the last decade or so tends to be between 17 and 25 trading days. We are into this sort of normal range where a relief rally starts to peek out. If you look at the narrative and listen to people, they become much more positive as the market hem,e going up has buoyed t and stimulus has made people question their sense of a retest. I think once people stop believing in it is when it tends to start. I think there will be good opportunities over the next month or two, but i wouldnt be buying into this here. I think it has rallied enough for now and priced in a lot of good news. Guy what do you think we are going to hear when it comes to u. S. Earnings season . We really get into gear next week. What do you think the outlooks are going to look like, and to what extent do we believe them given that most businesses are struggling to have much visibility at the moment . Chris thats a great question. The outlooks are going to be murky, arent there . Theres a lot of damage to the supply side of the economy. It is difficult to work out how that is going to feed into earnings growth. A lot of these stimulus proposals are great, but theres a lot of trouble getting the money through, particularly to small businesses. The most interesting thing i am looking for in earnings is what techs say. The market has fallen even more in love with tech. It was always a consensus long coming into this crisis. I think it is even more so now. It is outperforming on the way up in the relief rally. They narrative has become tech is where its all that now because of stayathome and the work at home and so on. I just wonder, some of these stocks have a large advertising element. In the old days, we use to of advertising a cyclical. A lot of the buyers of advertising are startups, startups tend to get busted in recession. I wonder whether there is a little more cyclicality in that business than people actually realize. I think that will be fascinating, and absolutely key in the next couple weeks. I am not sure exactly what i am guessing two weeks from now. Europe get through this without corona bonds or some kind of debt mutual is a some kind of debt mutualization . Will the european economies be able to survive without going completely bankrupt . Chris i think it is a really important point because the risks in the euro area rising as well, and the market is not thinking about that quite enough. You can see the spreads are starting to widen on some of this periphery debt. Weve got the 500 billion euro deal, which is papering over the cracks, and isnt really debt mutualization. It sort of is, but isnt really utilizing debt. It will be interesting to see what the final outcome is in terms of how they pay for that and who accepts what responsibility. I think the euro risk is a challenge, and markets are really feeling their way on that, and the spreads are starting to widen to reflect that. I thing that is very important for the market price action from here. Vonnie is there anything that would be attractive to you right now . Are you nibbling away at anything here . Chris i think energy is really interesting. I dont buy this argument that we are going to run out of Storage Capacity, and therefore face all sorts of challenges of oil price going to zero dollars or even negative. I think theres plenty of Storage Capacity and we will get the adjustment in terms of supply coming out of the system from shale. We may even get the Trump Administration paying some of the ground. The paying to keep some of the stuff in the ground. The oil price is at the wrong level for the fund the mentals 12, 18 months out for the fundamentals 12, 18 months out. I think oil is very cheap on a 12, 18 month view. There could be more volatility, but i think it is an interesting time to pick up oil related assets. And i think gold is a very interesting asset as well. It benefits from what i think will be continual monetization of fiscal deficits in the coming quarters and years. I dont see austerity coming, and i dont think they are going to be closing those fiscal deficits. I think they are going to be financing them with money creation, which is positive for gold, so we like gold and oil particularly here. Guy just to dig in a little bit further, i am getting the sense that you think that the economic recovery is going to happen. Do you think that we are going to get back to levels that we saw previously . How long does it take us to get there . Do you think there will be longlasting economic effects of this . It is pretty clear that consumers are nervous about going out and taking part in the service side of the economy. What do you think the longerterm effects are going to be . If you were to pick a letter for the recovery, what would it be . Chris it would probably be a bit of a v in the western economies, particularly in the u. S. And i would pick the letter i because i think the inflation is going to be the one defining characteristic of this recovery. The thing that all this stimulus is going to do is break the back of deflation of the last decade, just like world war ii wrote the back of the 1930s deflation. If you give out u. S. Household cash flow profile, we reckon they are going to lose money because of unemployment income going down, people being forced to save because of lockdown, and being given a lot of money because of fiscal stimulus, whether it is the 1200 or enhanced unemployment. You add it all up, and our estimates, by august they will have an extra 1 trillion in their bank accounts, which is a meaningful amount of money, and gives you that vshaped if some of it is spent. I understand the caution about how much people will go out and spend straight off the bat, but i think as long as there is confidence the virus is under control and there is treatment and a vaccine coming, that will come through quite quickly. We know america can bounce back quite hard. We saw that with 9 11 with consumption. We think the damage to the supply side of the economy is what gives you inflation, so that is perhaps the enduring issue weve got here. Vonnie chris, thank you for joining us today. Chris watling of longview economics, the ceo and chief Market Strategist. Lets check in on the first word news. Heres ritika gupta. Ritika days ago, President Trump insisted he had the absolute power to reopen the countrys economy. Now he has turned it over to governors and businesses. The president has issued guidelines for the state to consider, but it will be up to them whether to relax stayathome orders aimed at containing the coronavirus. The guidelines call for a three stage process based on a downward trajectory in cases. China hasnt had an economic report like this in decades. The virus pushed the country into a contraction in the First Quarter. Gdp shrank six point 8 , the worst performance since at least 1992, and a recovery wont be easy. The coronavirus has hammered business around the world, so china will have to rely on fragile demand. In spain, the government reports more than 5200 new cases of coronavirus. That is the most in a week. Spain has the worlds second most extensive outbreak. Authorities said the country is already past the peak, focusing on how to relax nationwide restrictions. And a wave of gloomy forecasts sees oil hovering around 18 a barrel today. Crude is headed for its second weekly loss in a row despite a deal to cut output. Saudi arabia and russia say they are both willing to make further cuts if necessary. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Guy thank you very much, indeed. Coming up, we will hear from the chief Investment Officer at guggenheim come on whether lawmakers and central bankers are due enough enough are doing enough to counter the effects of covid19. Thats up next. This is bloomberg. Guy from london, im johnson, was vonnie quinn in new york. This is the european close on bloomberg markets. Lets check what is going on with markets. Heres abigail doolittle. Abigail theres a bit of a risk on tone for sure, at least for stocks this friday. The major averages in the u. S. Are climbing. The dow up about 1. 5 . The s p 500 a little less, and the nasdaq 100 lagging, just see a. 1 . All of these just 0. 1 . All of these off of their highs. Bulls moving forward on the idea that there could be reopening in the u. S. Sooner rather than later, but the nasdaq 100 again is lagging. Really of note, take a look at on crude, down more than 8 an 18 handle. This is a worry for stocks potentially because oil has led this year. If we go to the bloomberg terminal, take a look at this chart. In orange, we have crude oil, and white, the s p 500. Thehe earliest news of virus, oil instantly started to selloff. Fears that the Global Demand picture could be cut, as has happened. Plus, as a barometer of risk appetite. Stocks quickly cut up. The s p 500 surging higher. Crude oil meeting new lows over the last two decades. At some point, that divergence is likely to spell trouble for stocks. But again, today the tailwind is the idea that the u. S. Could reopen. Guidelines coming from the white house, and we see a number of companies sharply higher. Fitness, pvh, carmax higher, all of this on the idea that u. S. Consumers could be out there sooner rather than later. It is unclear whether or not it will happen, but would could help it happen are drugs for beating the coronavirus, and ultimately a vaccine. Nowear not mo dare hitting a new alltime high on an agreement with the u. S. Government for almost 500 billion for a vaccine they are working on, and Gilead Sciences popping higher. News that one of their key drugs is really helping patients with the coronavirus. Again, he bit of a risk on tone for stocks. Keep an eye on crude oil. That the client is pretty were in some pretty worrisome at this point. Vonnie thank you. Lets join a conversation in progress. Sonali basak is speaking with Guggenheims Scott Minerd in new york. Lets listen in. Scott a really powerful argument, what after the civil war was called a bloody shirt, where republicans could claim all of the deaths from the war were based upon what the democrats had done, i think here, the argument will turn against the republican administration, and they are going to have a hard time fighting that argument. Sonali how is inequality going to Start Playing into a lot of these discussions . With that idea that you believe that there could be rolling shutdowns for two years, what does that mean for what you think about the job force in the next couple of years . Do you have expectations for unemployment . Scott we think that unemployment has spiked here. We think it is going to be around 14 , maybe a little but higher. Maybe 17 . Initially, that getting workers back to work, by the end of the year we wont be much below 10 . A b we could get down to 7 or 8 , and then it is going to be a long haul to get back to the unplay midlevel we saw prior to the downturn. That is why i am so concerned about the longerterm plan to encourage business to get people back to work. Fundamentally, at the end of the day, the definition of how business and government interact is being changed here. Is one of thehick biggest problems we have not only in the United States, but in the world. Havenk Government Policies largely ignored to the unintended consequent is which have led to this massive inequality of income and wealth, and ultimately, history shows us that there are populist revolts, and there will be a time where the government will address the inequality issue. My only concern is that they would do it in a way that is not productive for longterm growth, which would be to raise taxes matically, relative dramatically rather than longterm work on the economy. Vonnie we are on a day where the markets sonali we are on a day where the markets are starting to balance to the lows in march, react positively to any bright signs that we have. How much are you sticking to the idea that we are going to reach new lows here . Scott let me come added in two directions. I think one is an investment thesis. The market at this level doesnt represent any kind of view worth pursuing. It is being entirely propped up by liquidity. Work from we go suggest that we could get to 2850, and then probably head lower again. If you look at the period following the stock market crash of 1929 or the bear market crash that started in 2007 that went into 2008, both of those initial declines were followed by rather large retracements, and some cases more than 50 . So a retracement after a really hard decline is exactly what we should be expecting here. So it doesnt fundamentally change my perspective that the s p will be meaningfully lower. 1200. Ld be 1500, 1600, there are various ways to calculate the target. But i think that investors sitting out there right now rebalanced a few weeks ago and move from fixed income to equities should probably be think about rebalancing again because the equity increase i dont think ultimately will be sustainable. Sonali the other thing you have said is that the emerging markets are the next shoe to drop in this unfolding crisis. Governments around the world are having to raise money to fund a lot of these programs. . Hat is your biggest concern scott going into this, we were always concerned about emerging markets because the total debt to gdp of the emerging markets is almost 200 . Crisis,ime of the asian total debt to gdp was closer to 100 . , the sharpe depreciation of currencies in the caused a crisis because governments couldnt service their dollardenominated debt. Governments have largely financed themselves and their own currencies. But the risk now is that there is a record amount of dollardenominated debt from the emerging markets, and that is coming out of corporations. Imf hadsian crisis, the the tools to reach out to governments and put in place programs to build the governments out. That the here is people that are going to need bailed out are going to be the corporations. The imf doesnt have a pathway to those companies. The challenge for them is how quickly can they move to get policies in place within those if the imfhat, even can offer enough assistance, that it would be able to keep those companies from defaulting on their debt. One thing i would note is that has relatively limited resources, so today maybe there is 1 trillion. I thick it is more like 700 billion of available liquidity that the imf has. But if you look at the size of the developing world, it is around 10 trillion. You got to think that at least 10 of that 20 of that is going to go away, which would be to trillion dollars in output. Just like in the United States, we have this 300 trillion decline in the economy. We have to plug the hole with fiscal stimulus. These countries need a way to plug the 2 trillion hole, and candidly, they dont have the resources to do it. Pandemic thing is the itself in these countries will probably be much worse than the United States because they dont have the luxury of social distancing, and they dont have the medical facilities that exist in developed countries. Ofali you have a list countries youre most concerned about. Scott top of the list obviously is south africa. It was already having. Ifficulties coming into this countries like brazil are going to be a problem. Mexico. I think could suffer harshly. Indonesia. Perspective, over 100 countries applied for imf assistance at this point. That is unheard of. That is an extremely high number. So my list of half a dozen countries is just the tip of an iceberg. Sonali what do you think this all means . Obviously everybody is rushing for aid, rushing to keep their economies afloat. What does this mean for the sustainability goals the u. N. Has set in the world has been moving towards at this point . Scott i think it is going to make it even more challenging. At a government level just didnt exist going the this to really address restructuring of our economy that is necessary to reach sustainability goals. We have been advocates of private sector incentives and private sector capital to make that transition. But a lot of the private sector incentives guy you have been listening to the conversation between bloombergs sonali basak and guggenheim cio scott minerd. You can listen to the rest on your bloomberg at live. European markets are about to shut for the week. We will have all of the details when we come back. This is bloomberg. These days you need faster internet that does all you expect and way more. Thats xfinity xfi. Get powerful wifi coverage that leaves no room behind with xfi pods. And now xfi advanced security is free with the xfi gateway, giving you an added layer of network protection, so every device thats connected is protected. Thats a 72 a year value. No one else offers this. Faster speed, coverage, and free advanced security at an unbeatable value with xfinity xfi. Can your internet do that . Guy 30 seconds until the end of trading