Fed vice chair Randy Quarles talking about the stress test next week, seeing dividends might be influenced by the pandemic. He thinks most banks will be allowed to retain the dividends, and particularly with wells morgan believe, and stanley, highlighting concerns about financials recently. So the underperformance today caught my attention. Caroline we get even more insight on underperformance, and what led to the selloff at the end. The northwestern wealth chief manage he chief strategy manager is with us. We were lower earlier and then i got a message from a key r on the bloomberg squawked talking about how the vice chair of the Federal Reserve was saying, there is no limit to fed treasury buying. That seemed to give the stock market a little more support toward the close. Is the fed still the be all and end all, is liquidity still the beall and endall in this market and can we grind even higher as the covid rate is still causing concern . 26 years of doing this, the fed has been supposedly pushing on a string and it has never proven to be true. The biggest changes i have seen is the central bank. This central bank is much more active than those in the past and they target the market much more. The market told them they want to change. This fed talks about helping with inequality, pushing markets think this i do week, buying individual corporate bonds, shows how hard they will how far they will go to make sure the market grows and make sure they get a 13 inflation target. That also helps equity valuation. We have talked about that. When the 10year treasury yield is at. 7 or whatever it is today, and the fed is promising to lean on that yield curve, if the economy gets better, where do stock valuations go from here . I think that keeps pushing capital toward stocks, at some point it will lend, but it wont yet, and they are a powerful backstop for the market, as they have proved over the past months. Romaine good point about the fed, we had research this week where they talked about the price liquidity ratio, factoring in the money the fed has injected into this economy and why that makes pe valuations a little more in line with reality. When you think about the fed backstop at how so many people seem to be under impression that the fed is not only go to be there, but for a fairly long time, at least into 2022 if you want to believe what futures markets are saying. Is there a risk that we worry about the fullback, or does the fed have the capability to do an orderly pullback when and if that day comes . Day thatis the days in the future and i guess that will be something to worry about then. People keep saying the fed is a backstop, and i believe that. What if you look at cash on the sidelines, the data, how funds are invested, im not sure everybody does believe that. When you talk about the fed, there is still quite a bit of money that has to come to the market and Fund Managers have a lot of cash. So many people think this is a bear market recovery, and if the market does selloff a bit, you have capital that could come into actually support it. Dip,ine by the northwestern Wealth Management company chief strategist brent schutte. Next. D you miss . , is up landel be joined by ruth shuman to talk about wealth and equality. This is bloomberg. Caroline from bloomberg headquarters in new york, im caroline hyde. Whatd you miss . The s p 500 slides 10 but it is a weakened green, closing up one point 8 on the s p 500. The e. U. Locked in negotiations plan, Angela Merkel saying stimulus package failure is going to be dire. And juneteenth, against the backdrop against calls for equality and against police brutality. Shuman with ruth lande executivechen, director of times up now. Joe romaine moodys is saying this stock remains under review for cart downgrade, wifi. Ire card cited by moodys lookr we want to take a at the volatility caroline was talking about. Take a look at the chart. It is a rebalancing and reconstitution of these indexes. The last time you had the quadruple ridging day quadruple witching day was 2007. Goldman sachs was looking at 1 trillion worth of options that would expire, making it the thirdlargest nondecember expiration ever. This is a day when options and futures on indexes and equities are set to expire. I want to bring in julian managing director and chief equity strategist. You said during the break was a sloppy close. How was volatility on this big day . Julian we saw trading volumes we expected, but if you look at it, the real volatility was in prior weeks. Downd get to a close about down about. 5 or so, but the market for us is in the middle of a range that carved out at last weeks highs, and the near panic load you so monday when he before the fed stepped in. Buthere is a lot of noise, the one difference we have this afternoon that we didnt have before is that Public Confidence , and the public has been a very large fire of this market, we know that, it may be dented a little when the worlds most iconic brand tells you they are Closing Stores in florida. Apple having to pull back on some of their openings is really starting to shift retail buoyancy. What have you made of retail exuberance in this knock market the stock market, not just the normal stock market, but the incredibly risky trades come to mind. Another one we are worried about, are you worried about shifts in the market and federal regulators getting involved . Jillian it is not so much the regulators, it is just one of those things. In a summer where, granted, you have had the first kind of bear market and now a raging bull market, the likes of which both happened in performance that night that might likely take four years, and you have drawn in an entirely new class of investors, young people probably with time on their hands, and other young people just curious because you are in this work from home environment, you are bound to get that kind of action, and there is just a locked enthusiasm that reminds in 2000. What we saw romaine how close attention are you paying to the vix . In the vix selloff a couple of years ago, there was a lot of ink spilled about the level of the vix and what it meant to the risk of risk assets. We have seen it end about 30 and some strategists talk about this idea that it to see the vix drop more, we wont see the rally go much further. The tide ofually, liquidity the fed has thrust upon the markets and economy has really helped things move along. Stickingge of the fix that the vix stick the message of the vix sticking in the 30s tells you that there is only such an extent that that can follow through. It tells you the fed can provide liquidity, but what it cant do a solid economic reopening over the next six to 12 months. Taylor the russell 2000 vix, walk me through, you talked about neutral hedging strategies in this environment. Explain what you mean by that. Jillian sure. Off the lows at the end of march, beginning of april, we noticed the risk measure in the smallcap russell 2000 with trading at a historic premium to the larger cap s p 500 vix. It was one of those things that was telling you that the market , butlready capitulated looking out 12 months, you can expect very strong gains and smallcapg performances. We got it in six weeks instead of 12 months, because the cycle has been compacted. The difference now is that there is still this large risk premium out there in terms of small cap stocks, which should necessarily happen because we are at 50 or more off the lows, but it is there because the fundamental backdrop of the difficulty reopening the economy and the political wrangling over the next stimulus round is the thing that is going to hit main street usa the hardest, ed makes small cap starks and makes smallcap stocks in the market in general a riskier cash riskier prop is riskier proposition. Thank you, for your time and wishing you a statement and will weekend. At 6 00 p. M. Estin eastern tonight with former treasury secretary Larry Summers and Charles Schwab investment strategist liz ann saunders. This is bloomberg. We need an active industrial strategy as we come out of lockdown. And although the government has been pretty good in helping businesses, in relation to staff being furloughed, they have been pretty good in the short term. Of thenesses come out lockdown, they need additional existence that additional assistant additional assistance. Many local communities have lost with we call council tax, people who dont have jobs dont pay taxes, and businesses that paid Business Rates have stopped paid Business Rates because their businesses have basically been incubated for three months. That means governments, municipal governments havent got the funds to provide services. I have lead by example, taking a pay cut, but we need the government to step in for the medium to longterm. The largest municipal governments, not just businesses, and governments across the globe have to do this. Mervyn king and i are reaching this book, and it is the spirit of london mayor and the trading environment of the 16th century. Tell us about the need to reopen trade to london in goods and services. How critical is it to get the euro back, how critical is it to get the airlines up and running . i know you are speaking from new york, but forgive me, london is the greatest city in the world. And the people who come to our city are what make our city great, students, tourists, investors, businesses, sports fans. And that stopped over the past four months, and we need that to return. Im very concerned that is the Academic Year begins, many undergraduates may not come. I am very concerned multinationals have stopped sending their staff, may be riskaverse about coming, i and very concerned the theaters that have been closed may not reopen. We all know the world is a smaller place now. Globalization has given us many advantage, and our strength is our diversity, and that comes from our visitors, and it is really important we safely, safely reopen again to visitors, businesses and investors. Because we want to either return to, not business as usual, but a new normality when we recognize what this pandemic has done. It has shone a spotlight on the fragility of our society and our business model, and the recognition of a new normal addresses those issues. Us of colleague reminds the preeminence of london on a regular basis. I do wonder about the unrest we have seen in the biggest cities around the world, the black lives matter protests in london that are ongoing, and i wonder how that complicates issues . You have been calling for more police at a time of lower budgets and increasing pressure on the presence. Have you go forward . Mayor khan i dont know if american viewers realize this, but the brutal killing of george floyd didnt just impact minneapolis in the usa, it had an impact around the world. And if you are a black londoner, you can relate to the off away george floyd was killed, but also black people around the world could relate, because they knew racism, discrimination and inequality. I not only support the lack livesmove black matter movement, but im concerned that when we are in a pandemic and asking people to social distance and stay home when they cant, we want to mixer that they are only protesting as they are allowed to do, because that can inadvertently lead to the virus spreading. Caroline that was the london mayor speaking to bloomberg earlier, and he talked about the need for visitors in london. There was a famous one earlier this week, french president emmanuel macron, he met with Boris Johnson in the first bilateral meeting of eu leaders, as they focus on a trade deal with the eu. The eu was still struggling with details for a stimulus package to help their economies rebound from the lucked out. We look at action across the atlantic and welcome heather conley, Senior Vice President for europe, asia and the arctic cssi. We are so concerned about covid is therel unrest, and any progress being made in terms of euu. K. Trade deal by the end of the year . Heather there hasnt been progress. If anything, it seems like it has been moving backwards as both sides harden their own redline, where they want negotiations to go. We are about to get a more intensified process, weekly meetings to try to intensify. So Everyone Wants to intensify, to speed, but i am not sure where we are speeding toward. Again, this comes as we watched the u. S. U. K. Freetrade agreement conversation. Ambassador lighthizer said the other day, there are really strong demands on agriculture, to make that deal. It feels the u. K. Is getting pingpong between making decisions toward orienting its market toward the eu, or trying to lean toward a north american market. It is unclear what this is going to go, but we are going to get more talks. I just hope get clarity about where the u. K. Is going to make decisions, whether that is on regulatory harmonization, data equivalency, these are the types of issues we need clarity on immediately, and they havent been forthcoming. Lots on fisheries, but not a lot of other important issues. Romaine when we talk about speeding up this process, im curious as to whether that benefits the u. K. More so than the eu. Heather i dont. Frustrationn the watching this process over the past six months. Some very difficult decisions have to be made by the u. K. On how they are going to approach this. To keep the goods and regulatory processes going towards europe . They are going to have to agree to certain things in order to do that. If they dont want to that, they are going to have to make other decisions. I dont know what intensification is going to do, somebodys going to have to give. K. Estimate decisions and right now it is only focusing on redlines, not what it wants to do and until that happens, they remain stuck. The eu is going to make changes to the single market, but i just dont see that happening right now. Said, the absolutely problem is, brexit is now falling way down the agenda. It is obviously dealing with the pandemic, recovery and resilience, the multiannual financial framework, brexit for the eu is not on top of the list here. And i dont know how much more it will become a to do serious negotiations. Taylor on that note, how much is the pandemic changed underlying tensions of the negotiations . Heather clearly, doing this video has been noneffective. Done onn, you get work the margins and in the coffee breaks, you see body language, and having, whether a debate in the European Council with 27 separate screens and everybody going, it is very, very difficult. That they are going to start introducing in person meetings, that should help, the body language per it, the issues are very very entranced. So hopefully, when the Council Meets in july, there will be momentum on the next sevenyour budget on this recovery facility. Toughe red lines are very for those countries who want to be frugal and not create a debt union, and for those countries that really want to increase this integration. You will see those dynamics, and now they will be able to conduct those conversations in person beginning very shortly. To get heather, great your thoughts, have a great weekend. Directoreather conley of the Europe Program for the u. S. Center for strategic and International Studies program,on this beautifying new york schools during the coronavirus leads to something much bigger. Lande shuman,uth founder and president of publicolor. This is bloomberg. Caroline in these uncertain times, many students feel the need to make their voices heard and make a difference. Publicolor mentorsgram that children in highrisk areas to set them up for success in the future. Joining us as the president and founder ruth lande shuman. Thank you for joining us. Explain the impact the coronavirus is happening, even in this time when people are not meant to be gathering, wearing face masks, peoples keeping social distancing. How are you doing what you do best, weekend activities, afterschool activities, bringing vibrancy to schools . We have done is, we stopped all the painting and we put all our programs online, and amongsted 251 students 11 program staff, who called them every day, offering homework help and emotional support. 40 tutors, who additionally are calling students multiple times a week, and devoting 1. 5 hours to two hours in individual sessions with the students to help them with Online Learning. It has been a real challenge for many of our students. Thanks to af that, generous donation from bloomberg, we are delivering food multiple times a week to 70 families, with an average of about 78 people per family. So we are in touch with our students all the time. 100 of ourult, students will be matriculating to the next grade. And 100 of our High School Seniors will be going on to college. We are pretty proud of what is going on. We didnt skip a beat. We just continued to be a second for ournd safe refuge students, and intend to be like that forever. Romaine you mentioned bloomberg , publicolor did receive grants from bloomberg philanthropy, which is run by Michael Bloomberg and its parent company, when we talk about kids being out of school and not pack and not having normal structure, particularly lowincome kids where the Online Learning process might not be as smooth as it might be for parents who have certain means, im concerned that we are getting into the school year in the fall and dont have clarity from local government on how that is going to work, full come back or not. And yourred are you organization to facilitate this mentoring and support for much longer . Ruth we we are totally prepared. I have told my team that i believe in silver linings, and so much good has come out of this. I mean, just watching how intensely we are involved with and how much they are benefiting from the constant tutoring. To continue that. Even if School Starts and reopens, i want to continue that. And the other thing we have done is, we have embarked upon a device drive to try to get laptops donated, and computers manyed to us, because so of our kids have to share one computer with an entire household. So if finding time to get on the computer so finding time to get on the computer is difficult. One thing i didnt mention that i am proud of is the fact that we have introduced a sense of routine into our students lives. We call them regularly, same time every day, so they know to expect that call. Tutors meet with them regularly. Workshops on line regularly, so they have to show up. And our