A hectic month. There is a lot of uncertainty with regard to the world in general. Jonathan jim b juncker joining us now. What a week in this market. The equity market breaking down by a little more than one and a half percent on the s p 500 but it is the absence of the bid in the bond market hitting the attention of you and i and everyone else. We are selling off, not driving yields lower. Yields are higher by four basis points. What is the signal you take away from that . Jim a worrisome signal. You are right, the fed is doing qe, buying 120 billion dollars of bonds a month, the stock market flirting with a 10 correction. That has all the hallmarks of a classic risk off rally, that bond yields should be falling as treasuries catch a bid as everyone rushes into safety. None of that is happening. The take away the market is still worried about uncertainty over next weeks election, uncertainty about the rising coronavirus, and potential or more fiscal stimulus and or inflation. All of that is more than offsetting a giant buy for the bonds from the fed, and what should be chasing people into it. Instead, they are looking at the news and selling off. That is not the way it should be working, if everything was normal. Jonathan everything is not normal, and that is the problem. People were worried about this in the traditional 60 40 portfolio being broken, that you would not get the risk mitigating characteristics. I wonder if you think that will continue . Jim i think it is. Today, you are right, the 60 40 portfolio is not working, but it has struggled tumor for the past emerald months, in the reopening era we have had. What has worked is gold. Correlation between negative correlation between gold and stock prices is that a multidecade high. We might be transitioning to something a little more basic as far as the safety hedge goes in gold. With yields this low, the prospects of higher rates, it will be hard to say that that 40 link will save you should stocks selloff. Jonathan intriguing for me, elsewhere, this market has picked up on the sense of what is going on. The end of august, start of september is when crude topped out, when the dollar bottoms, equities topped out as well. Away from treasuries there is a story where you dont see a complete dislocation cross asset. Does that resonate with you . Jim it does. What you started to see in late august and september were cases moving higher in europe. By late september, they started to move higher in the u. S. The fear is that would lead to either shutdowns, or people that were naturally afraid of the virus im and those with comorbidities, restraining from economic activity. That has really picked up in the last several days. A bond market has been difficult to read because you have the fed with their thumb on the scale in that market, buying a lot, maybe distorting the signals. The further you get away from it, the more these markets seem to make sense, signaling there has been a potential slow down. Stock market peaked on september 2. That is coincidental with the bottom of the case counts as we started to move higher. Jonathan one of the most important questions in economics good, youre china bad, the u. S. Somewhere in between, and the question we have to work through over the next month or so comes down to something simple. Present americas future, and how far away is that . Walk me through your thinking on that. I have asked it all week and im getting answers either way. In europe diddly the u. S. April, may, june. It ran up cases first, ran down too. , europe appears to be leading the u. S. In this second wave since early september. Its been booming in terms of cases, and now the u. S. Is following. Nearly 90,000 cases yesterday. The fear is that will lead to reactions by government and people that are going to slow the economy. Yes, i think it is a leading indicator, at least it has been the last couple of cycles when it comes to the virus. The fear is it will be again this time. Jonathan should you be trading on the increase in covid cases, selling risk, or trading on the course correction, the policies introduced to change course, and buy into this story, as europe emerges and markets breakdown . Jim that is a tough question. We know the cases have been coming, we have been trading off of that with the market lower. We also have the hope of a vaccine may be coming by the end of the year, into the first quarter, something that would give us relief from this lockdown, not locked down cycle that we have been under. Isht now, the fear is there so much uncertainty next week with the election, coming with the case counts in the u. S. , what will be the reaction function . We printed 88,000 cases yesterday. If we print 100,000 in the next week or so, what will be the reaction of state governments, governors, and people . Are they just going to say the death rate is down, no big deal . Or will they stop going to restaurants and pullback . That is what people are worried about. That will slow the economy. That is why i think the stock market is struggling right now. Jonathan consumers disengaging. We saw that in germany before the restrictions came through. That is the whirring picture that you are painting in the u. S. , especially sitting there in chicago. People have been asking the question for months. If you want to downside protection, where do you go to get it, if you dont get it from the treasury market . Jim first of all, its a difficult thing to find. Maybe it does not trade directly on the New York Stock Exchange floor, but probably gold. The same the thing that seems to get a bid when the markets struggle is gold more than treasuries. If the market sells off enough, that could be a catalyst for even bigger fiscal spending, and that could also retired any rally on bonds on a supply concern. Gold is where you want to go, even though that has not been working for the last few weeks. Annot that, there may not be uncorrelated play that everyone could look for that this would work if we wind up with a contested election, spiking case counts, more talk of closing down again. Jonathan can you find it in the market . Typically when things hit the fan, you go to the dollar. Can you find it in Foreign Exchange . Jim you saw that in march, when everything hit the fan, the dollar did really rally quite a bit. The difference right now might wethat we are in an era that were not expecting. We didnt expect the fed response and government response in march and april. We expect it now. That may not be as dollar bullish as you would think normally. It makes sense you could see some kind of a dollar rally, but i would not hang my hat on that too hard. Jonathan jim bi , fantastic to catch up with you, head of a massive week. And a markets rout, treasury market that is not getting a bid. Yields are higher by three basis points on the 10 year. Twoyear, we have done hardly anything. 15 basis points. Here is your week ahead. Next week, ar the slew of Economic DataPoints Crossing throughout the week. On three just focusing events, tuesday, the u. S. Election. Thursday, we get a fed rate decision. Finally, it is the payrolls report this coming friday. From the city of london for our audience worldwide, that does it for us. This is bloomberg. Welcome to bloomberg markets. Michael moments, frerichs joins to discuss the states finances in his push for disclosing diversity on company boards. Chairman ed hyman on his proprietary leading indicators and what they say about the u. S. Economy. We will also speak with the Archer Daniels midland chairman and ceo on the impact of the coronavirus and the impact on their bottom line. Lets get a quick look at the markets. You can see, big tech leading us lower, down two. 7 on the nasdaq. The s p not far behind. The vix close to 40 once again. The 10year yield at 85 basis points. New coalition of Institutional Investors and advisors overseeing over 3 trillion in assets is pushing u. S. Public companies to disclose the racial makeup of their boards in an effort to increase diversity. The initiative is called the diversity disclosure initiative. We will get details from one of the leaders, Illinois State treasurer michael frerichs. Give us some of the details about the letter that went out, how Many Companies this letter went to. We are sending letters to the entire russell 3000, asking them to better disclose corporate diversity. We want to see the racial, gender, and ethnic makeup of their boards. We believe that if you dont measure something, you are not managing it. Advisors, wers and are looking to have more information, more transparency from these companies. Vonnie it builds on some of your affiliated organizations. You are doing this in connection with the connecticut treasury, so something that will hopefully have legs, will be taken up by many states across the country. How many of these companies have you heard from . Michael the letter just went out last week. We have had talks with companies in the past. We wanted to make sure that we had a strong message and voice. By 20joined in the letter other investment owners or advisors, who oversee about 3 trillion in assets. About your state manages 35 billion dollars in assets, and that is phenomenal heft to have, joining with others to get these companies to be more transparent about what directorships they have in terms of racial diversity. About 4. 1 directors, of seats in the russell 3000. We will keep up with you and see how this changes over time. I want to ask a few questions about illinois. Cases ofot the daily coronavirus. 6943. Im curious about what you think about governor pritzkers handling of this, what it will be doing for businesses. Michael a lot the regions in the state are going into mitigation. Inrestaurant dining. A lot of restaurants got help in the first wave, and now we are going into the winter. In chicago, it gets very cold. There is a real fear we may lose some of those businesses. It is really important that we get this virus under control. If we dont, that is ultimately far more devastating for our businesses in the efforts we are taking to stop the spread. Ornie what kind of spending tax increases will illinois have to see if there is not stimulus soon . Counting onare that, the city and state, and the hope is after this election season is over, they can put the partisanship behind them and do what it takes to move our country forward. We learned a lesson from the Great Recession of 2008, when the federal government did not help state and local government. They were forced in turn to have big layoffs, which in tribute to our unemployment rate. Economists across the spectrum have said that is a mistake and our hope is they dont repeat it this time. If they dont, though, the General Assembly will have to come back and have a combination of revenue increases and cuts to balance the budgets. The states are not have to balance their budgets, do not have the tools the federal government does. Vonnie you are the only state to have tapped the Federal ReserveMunicipal Liquidity facility in order to help balance your budget. You anticipate that youll have to do so again, especially if there is not stimulus soon . Michael once again, im hopeful that after this election is over, this silly season of campaigning, leverage with either side, people will come together in d. C. To do what needs to be done for the good of not just our state and it is a palette is, but the good of our country. If they cannot do that, there will be tough decisions, not just in illinois, where we have had our share of financial problems, but in states across the country. Vonnie you have a graduated income tax coming up on the ballot. Does it pass . Michael we will see. It is an unusual ballot measure, requires 60 of people to vote in the affirmative, or 50 of total voters. It is a difficult issue to poll on. Illinois is one of a handful of states that do not allow roger weighted rates. The federal government has had graduated rates in our income tax for over 100 years and we have seen tremendous growth in our country over that time this is not going to be bad for the state, it will allow us to pass a balanced budget, make sure it is done in a fair way. You have been the worst rated state for a while. Curious as to how concerned you are that illinois may get downgraded or lose its Investment Grade rating. Michael that is something we have been concerned about for a while. The previous governor went over two years without passing a budget. That cause problems. We made strides that had positive statements from the ratings agencies a year ago. That was pandemic. That has changed things not just for our state but every state in the country. When you start with problems and then you have a significant decrease in revenues because businesses are forced to close, when you have a significant increase in expenses related to health care, it just adds more concern, something the General Assembly and the governor will have to address after the election. Fund forhe rainy day illinois is Something Like 52 million, the second to last state when it comes to rainy day funds. What happens if it takes too long to get more stimulus . Where can you dip into, if you need to . Michael i think the governor will have to actively manage the budget, if there is not money coming. There will have to be cuts in state support. That will probably result in layoffs at the municipal or state level, contributing to our unemployment rate, which is a real problem. I will say again, economists have said this was a contributing factor to the lengthening of the recession after the 2008 financial crisis. They caution folks in d. C. And at the state level to not repeat those mistakes. My hope is that after next tuesday we will get serious about governing, serious about working together as americans to do what needs to be done. Vonnie in the meantime, you have your eyes on Board Diversity as well. A lot on your plate. Thanks for joining us. We hope to speak with you again soon. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn. Time for our stock of the hour. Tech earnings are less than perfect after the close yesterday and is leading todays market action. Scarlet fu is looking at the fallout. Scarlett lets start with the biggestse it is decliner among 11 groups. Amazons thirdt quarter, results indicate its doing just fine. The outlook is pretty solid as well. It has gotten 50 Revenue Growth for 23 straight quarters. That puts amazon on pace for the best annualized gain since 2011, when sales were a fraction of what they are now. The problem is shipping costs are surging. Rising 57 , much faster than the sales growth. Of course, at a time when shipping will be a big expense because of the Holiday Shopping season. That is the issue with the rest of big tech. All the big names are reporting sales gains in the third quarter, but all of that is priced in by investors. That leaves the market to fixate on anything that does not measure up. And apples case, iphone sales missed estimates and china sales were not up to snuff. Facebook saw a decline in users in north america. It also says it sees a lot of uncertainty in 2021. Twitter had a smaller than expected increase in daily users. Alphabet was the outlier, marking a comeback from a week second quarter. They had a blister rally earlier this year. The thinking now is it will be a lot harder to surprise on the upside at a time when yearoveryear comparisons get a lot more difficult. We have seen this rotation out of growth into value stocks. Vonnie where could the tech in the seas find support . Scarlet if you look at the nasdaq 100, relative to its moving averages, it has fallen below its 50day moving average. Now sitting right at the 100day moving average, greenline. Still holding above the longterm trend line, but it is clear it is moving closer to the oversold mark, which would make it right for a recovery. Having said that, everyone knows the outlook from here, tech will do just fine, and they see more upside potential for the market. Vonnie we cannot go without mentioning crude oil. Just above 35 a barrel. To get oil continuing hit, and you see that reflected in the earnings from exxon mobil and chevron. The results are pretty disastrous, as you would expect, for companies that rely on higher prices and falling demand. You have cratering demand and an oversupply of oil. Exxon posted their Third Straight quarter of losses. Chevron posted an unexpected profit on an adjusted basis, but the story is the same. They are trying to preserve their dividends and production is falling off a cliff. Vonnie thank you for that. Coming up, one of wall streets most accurate forecasters, ed hyman, evercore isi. This is bloomberg. Mark im Mark Crumpton with bloomberg first word news. President trump will probably skip a rally at his namesake hotel in washington on election night. Bloomberg has learned the president will likely stay at the white house and monitor Election Results from there. Mr. Trump was slated to appear at the Trump International hotel , but sources say those arrangements are now in flux. No official word from the white house. Early voting turnout across the country continue to shatter records. In texas, more than 9 million ballots have been cast with four days to go before the election. That tops the states total turnout from 2016. So far, more than 15 of all votes cast in the state have come from harris county, home to houston, the biggest city in texas. Texas has long been a republican stronghold, but this year is shaping up to be a battleground state. Japans coronavirus cases have topped 100,000, nine months after the first case was found in january. One third of the cases come from tokyo. Nationwide, japan has had about 1700 deaths. Experts say japan has so far managed to avoid explosive infections as in europe and the United States without enforcing lockdowns, things to the common use of face masks and disinfectant, as well as social distancing. Says its great investing opportunities in the turmoil spurred by the pandemic. About 6. 2nvested billion dollars in markets across private equities, infrastructure, and real estate in the third quarter. Henry kravis spoke with bloomberg in an exclusive interview. A fourve been investing over 50 years. I dont remember a time when i have seen such volatility as we see today. Just look at our markets in the u. S. Points,p one day, 300 and on the next day, for almost no reason, we are down 500 points. The firm is still very much fo