Caught my eye was the 3600 number that is where we are going according to Goldman Sachs chief u. S. Equity strategist david he wrote that the fall and the equity risk premium will be partially upset by a rise in bond yields, but the combination will ultimately boost the s p index by 3600 at by yearend and 3800 in 12 months time. It represented significant increase driven by valuation. Joining me now, Chris Watling longview, chief Market Strategist and ceo. A pretty bold call, chris. What do you think . Chris it is doable. It is not implausible. I think it depends on how much policy keeps on generating stimulus how much the policymakers keep on giving, if you like. We have seen congress go into recess. We have half had the package, half not, with the executive orders. Clearly the fed is giving and will continue to give. There is a lot of utility in the world can we keep getting stimulus packages. Singapore did something over the weekend, not a major player, but it is noble. There are clearly significant risks out there that if policymakers dont get it right, there are some real challenges. I wonder how that fed into your view of europe because we still cant get a deal on stimulus in euro has passed a deal for 6 billion a country that could not do any of the stuff six month ago and i wonder where the opportunity is. Chris the relative opportunity depends on how the coronavirus plays out. The quicker that goes away, the quicker you will get reflation on the classical cyclical sectors picking up and the rebound in boston. That is probably when you want europe over the u. S. Europe is a lot heavier in the classic value sets because of cyclicals. The stimulus globally helps. It had to the pile. You are right. Germany is not a country that would have thought for a minute about fiscal stimulus 12 months ago and seems to be embracing it wholeheartedly at the moment. It helps. Alix so, a recovery versus rebound is what i was talking about and i think it is what you are alluding to as well. Do you have to wait to buy europe before until there is a recovery, and in the meantime, what is the rebound trade . Chris you have to have conviction there will be a recovery to buy it. You might take the view that there are four or five that seems in a serious stage in phase three trials and looks like one or two in the u. K. , the u. S. , and so on one of them might come through quite meaningfully. You could take a view on that or take a view that you are cautious about that and we know vaccines dont always work and you get to stage three and things could be difficult. If you are taking that view, the reflation trade is the liquidity trade, and it is really the tech volume is thely, discerner between those two, and it tells you about whether the relief in the back rally is good. Interestingly, you talked about commodities just now. Of course, gold is really a toxy for yields and volumes liquidity has fit into that model as well. In many ways, the market is really three sectors, three or four areas and it is really about your view on reflation and so on from here on out. Alix lets take what happened in bond yields. It was a big move. 60 basis points on the 10year in the u. S. It is substantial. The curve is steeper. Is it a fakeout, a supply demand issue question mark how did you interpret that . Be slightlyave to cautious. You should be a seller of bonds here and expect yields to move higher. You will remember the first one that got up to 90 basis points, and then we have had two or three, sort of, fake moves higher in yield. You have to be careful about these things, but having said that, you look at the positioning in bonds, it is a good indicator. It is a crowd come along trade. Everyone is in it. Everyone is long. That is pretty pretty rare. I think from that point of view you can make the same point on the dollar as well. The market is short the dollar. It is unusual for it to be short. I think if you have patience, it is a trade that is worth playing yields to move higher. There is so much the notice, effective helicopter money and it will keep on coming. Fed and a about the de facto or actual yieldcurve policy some safety get tony five basis points on the 10year, they will get on it. Chris i do not know what the number is. If it is 75, one, or 1. 25. It depends on what the fed think feels about the economy at the time if they feel it is a good reflation or Global Growth story, i am not sure they will be inclined to cap yields at that level. That there argument is a limit to how much bonds can set off, but if you move from or 110, 115, that is a big move on the price. Alix no kidding can that would really spooked the market. When we wrap up this part of the segment, i was clearly is how you look at the virus developing and how governments are reacting to it aside from the stimulus rescission where i feel like we lockdowns in europe and in the u. S. We are slowly chugging forward. As an investor and you read those headlines, what is your interpretation . Be fair about the u. S. , you have to look at the u. S. As a whole and europe as a whole Different Countries dealt with it differently and it is the same with the states. Individual states are dealing with a slightly differently. Im encouraged because you look at some of the charts in the south where it has been troubling in the recent six to eight weeks, a lot of them are rolling over. Leading to look at indicators, which is your hospitalization rate, i suppose and constituents contextualize the number of infections relative to the number of people in each state. I think it is moving around, i think it is a long way to at least phase one in the u. S. , and i am encouraged in that respect. Total members has been rolling over for a few weeks now. That is how i think about it. In europe, localized lockdowns for sure, but that is great that is what you want, many lockdowns, small lockdowns to contain it, and that is what you are seeing in new zealand, across the globe. The government is getting a lot much better at dealing with this. Lots of treatments are having a good impact. Im encouraged in that respect. Alix we dont see the s p movement you dont see the jumped on the s p like we did months ago. Chris watling will be sticking with it. We will get his thoughts on the u. K. Coming up next. This is bloomberg. Alix live from new york, i am alex to pick this is the european close on bloomberg markets. We want to give you an update on what is making headlines outside of the business world. Here is ritika gupta with your first word news. Ritika gupta the President Trump announced plans to sell drilling rights to wildlife refuges in alaska. The decision could lead to a political battle if President Trump is not reelected. The United Arab Emirates and israel are taking concrete steps to solidify peace efforts. Israels Technology Minister predicts the two will start collaborating on cybersecurity and space resource and israel is trying to Link Missions to cross over cell saudi arabia. Lebanon is facing a surgeon coronavirus cases surge in coronavirus cases. Also, an explosion overwhelmed the citys hospitals and badly damaged two that had a key role in handling virus cases. Officials are pushing for a two week locked on to try to contain the pandemic. In europe, schools are reopening with inperson learning and little debate, but there are plenty of masks and social distancing. Down classes,ing but not entire systems. Powered by more than 2700 journalists and analysts in more than 120 countries, i am ritika gupta. Alix thank you. In the u. K. , the chancellor of the exchequer is apparently putting 2 million viable jobs in peril by ending is coronavirus jobs support program too early in the number is by lisicki for Public Policy research. The think tank says it would be risking an unnecessary unemployment crisis. Joining us now, bloomberg u. K. Reporter, david goodman. We are dealing with it in the u. S. , germany walk me through what the Research Report says and what really is at risk. David yes, i think it proved popular in the u. K. And crested with stopping unemployment when the lockdown started. It had been is being removed will prompt job losses. There needs to be a restructured in the job market to reflect the reality of the current world. They are saying if you remove this in october, you will be losing 3 million jobs in total, 2 million are viable jobs that could come back. It is things like social distancing and other Restrictions Mean they will not so aliable in october, support has to go into march of next year. Mentioned there are some difficulties in the u. K. Economy, like it being so much based on services, for example. Longer term, is there any conversation of fixing that, or supporting it differently . David i think there is going to have to be some kind of change post this crisis. When we had the growth figures week [indiscernible] there was a drop off in the second quarter. Think shortterm instruction will be difficult restructuring will be difficult. We will really do what they can to stop there being too much of thissis towards the end of year where we may also get another wave of the virus which could complicate it even more. Alix at the meantime you are still looking at negative yields for the twoyear. David, thank you. Ofll with me, Chris Watling longview economics pit what is view when it cliff comes to the u. K. . Chris we saw that in the last the support continues until most of the people are back in work. The cliff, as you say, in the u. K. , which is pretty dramatic really, i am not surprised. Also, if you look at the percentage of Office Workers that are back in the office, it is fairly very low compared to other european cities. We have city centers where city workers are not buying sandwiches from shops, not buying lunch time, not buying coffee there is an awful lot of ancillary businesses that feed those Office Workers that are going to struggle. I think it is a real problem. Our forecast view on employment which we put out a couple of months ago, it will go between 10 and 14 at the end of this year and early next year and peak unemployment in the early 1980s, it was not as high as the worst case there. It is a real challenge and it is difficult for the u. K. Government because there is a limit to how much money you can spend. Have been pretty generous not as generous as america, but pretty generous so far. Alix so, is there another option . Chris well, you could take the route that you put some money, do helicopter money like you have done some in the u. S. , or extend the scheme, another round of ppp, if you like, as you have done in the states. You can try that. But what you risk is you are printing which in pushing your luck on printing too much money. There are options, but it is a question of what economic camp you are in and what you think the Economic Risks are in the currency in terms of how much money you can print. Alix i look at the curve in the u. K. , you have to two, the three, the five all negative. At this point, there is the demand. Why not just issue and deal with it later . Chris well, you can, but the problem is markets suddenly change their minds, and what might seem benign at the moment might suddenly not seem benign if you get an inflation problem coming up. We planted a lot of money and this is different from 20092010. This is basically helicopter money. I suspect there is a real risk of monetary style inflation like we had in the 1970s. Labor market that is not going to happen. Theres basically too much money chasing too few good and services. Goods and services. There is a real risk and yes, you probably ought to just go for it, and maybe they will. There will still be more out from the chancellor in the u. K. In the next couple of months. Alix well, i mean, i guess im trying to understand isnt it like that in every country where they have to outweigh how much they want to borrow and spend versus keeping the economy afloat . I am wondering what makes the u. K. Specifically different. Chris i would say there are a couple of things. Were definitely more consumption oriented than most economies. Most of them are in the west, but the u. K. Would be more so than the likes of germany, for example, or even france, and perhaps italy. Also, if you look at the depths of recession we had in the u. K. , for us, pretty much the worst of the g7, 20 down, and everyone is 8 to 12 party much. A deep recession. We came to it without a lot of savings. If you look at the u. S. , germany, the fiscal balance was great. The u. K. Had a major current account deficit coming into this and the fiscal balance was into bed, but it certainly wasnt as germany. There are a wasnt too bad, but it certainly wasnt as good as germany. There are a few things going on structurally. The way we doubt whether pandemic we are not top of the table in the g7, put it that way. Alix we feel you over here in the u. S. , too. I wonder how brexit plays into all of this in that if you do get the extension of a furlough scheme are you less willing to make a deal on brexit and vice versa . How does that interweave . Chris brexit is another important point, of course. It is another reason why it is tough for the u. S. As far as the furlough scheme extends, i dont think that plays into the negotiations in anyway i can think of immediately. I am hopeful they can do a deal. It is in everyones interest. It is classic european horsetrading up until the last minute, and then eventually, the story, middle the night, bang, there is the deal. I think you are getting closer than people realize. The headlines are bad, but i suspect there is more agreement than disagreement. We just dont hear about the agreement said. Im hopeful they do a deal. Both sides needed. That is the key point. Alix as we wrap up our commerce edition, a traditional 60 40 portfolio many say that is dead in the water. What is your best portfolio makeup take into account what we talked about in terms of the pandemic, the stimulus . Chris i have believed for though last 10 years that you for the last 10 years you have to be active. There is no way to mitigate risk. There is always clearly risk involved. You have to be active in asset allocation, and you have to time the market and what i mean by that is time the Economic Cycle and maybe trade around smaller swings in the market. It is difficult with the pandemic part of it. Leftoffield shock. I think you can time the market and i think you can trade the Economic Cycle, and that is the best way to create a portfolio that will deliver decent returns. Alix all right, chris, i appreciate it. Chris, by the way, it is my moms favorite. Thank you. Always good to catch up. This is bloomberg. It is time for the bloomberg a look at the biggest stories in the news right now. Federal housing mortgages have the highest of the glitzy rate in two decades. Entryans have been the into firsttime homebuyers for decades. They rose a most extreme percent in the second quarter. Goldman sachs is raising its yearand price target for the s p 500 by 20 . Benchmark ms the sees the benchmark hitting 3600. S ps 51 rally since march has caught many investors by surprise. More cuts on the way europes ryanairdiscount airline will cut costs by 30 . Travel restrictions have been renewed because of a surge in coronavirus cases. Rival,le, ryanairs easyjet, is shutting down three of its bases in the u. K. And that is your Bloomberg Business flash. Alix thank you so much. Here is one thing that happened in the u. K. , and something that i kept my eye on here in the u. K. Being a. A huge controversy in the u. K. The coronavirus lockdown meant kids could not fit their exams this year, so the department of education cap with an algorithm on what their grades would have been and, putting it nicely, parents just freaked out. Top students did not get the grades they thought they would. Some students failed altogether. It was more likely to be better for kids from smaller classes and that favored private schools, and hurt those from more disadvantaged, staterun schools. It looks at there was a year return in Boris Johnson you turn in Boris Johnsons government in bowing to some pressure to alter the grade exam grading exams scheme. A spokesman said maybe there will be revisions and it will be based on the teachers assessment of the students grades instead. I literally cannot imagine what would happen if that happened here in the u. S. , particularly in the Public School system. It would be a complete nightmare. 15 minutes away from the close in europe. Cap outperforming. In europe, the ftse is the performer, up by 7 10 of 1 . Volume way off that 10day average. One headline, airliners as ryanair cuts capacity. This is bloomberg. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Alix finishing up the day, over in european trading, yeah, its in the green, but volume is way down versus the 10day moving average, down by 30 36 , really down. European stocks are up by. 4 . I did want to highlight travel Airline Sector. Travel and leisure continues to get hurt. Quarantine rules occur all across europe, plus the Airline Sector getting hit, ryan are having to announce another cut to its capacity for the next few months. The story continues to be that weaker dollar. Hedge funds now short the dollar for the first time in about two years. The euro and 10 ewing to grind higher, eight straight weekly gains for the euro. Well,n gaining as dollaryen around a pivotal level here, on point is 106 is what many are watching. Crude up. Not enough to lift Energy Mining stocks necessarily in the european market. I want to dig deeper here, a closer at the big movers. Here is abigail. Big mover at this point, the discount airliner down as they have cut for october september and october but when he percent. We have demand weakening as there is a new surgeon european cases. Related to some degree, astrazeneca, those shares are higher, up 2. 5 . They have a deal with oxford around the vaccine, one of these companies is going to have a vaccine. We see astrazeneca popping to some degree. Y