Transcripts For BLOOMBERG Bloomberg 20240704 : vimarsana.com

BLOOMBERG Bloomberg July 4, 2024

Good morning, good morning. This is bloomberg surveillance. Your equity market of the s p positive. 5 . Upside surprise on cpi, upside surprise on ppi arguably pushing back rate calls even more. Bank of america talking about goldy shops saying we have gone from goldilocks to stagflation. Lisa right now it is hard to see stagflation priced in. We have gotten two straight hot inflation reads at the same time retail sales are causing concern it may be the consumer getting too stretched. Jonathan it has been weird when you think about the equity market reaction. We were down about one third of 1 on the s p 500 yesterday on hot ppi. Even that we have had the reaction in bond yields up equities have been pretty steady. Lisa ultimately if the fed cuts rates more because of this idea of stagflation, the idea of weaker growth, that will be positive for equities. A resilient economy will be positive for equities. If it is stagflation shock that will be a massive problem. A lot of people are not counting on that. When i bring that up they are like stop it, get off the catastrophic thought process, and they might be right. Jonathan we have talked about inflation, lets talk about the stag. Retail sales weak for a second consecutive month. Bank of america said if you are worried about a reacceleration worry no more. The strength of the consumer is fading. Look at that data specifically it looks like it is. Annmarie walgreens and walmart said consumers are becoming more choiceful. Our Bloomberg Intelligence parsing through the data saying consumers are running out of spending runways as they exhaust their savings and remain cautious about borrowing. If the consumer is starting to feel that that is why i am looking forward to the university of Michigan Sentiment today. Last month the preliminary reading and the final reading were different. You saw the sentiment have a little bit more meh when it comes to what is going on in the Global Economy. We know gasoline prices were going up. You are see cracks in where the consumer is looking for relief. Jonathan we will get into that a little bit later this morning. Got to talk about japan. Maybe the biggest data point this week was outside United States. Wage negotiations, pay deals north of 5 . We have been waiting for the federation of unions to get together and tell us what those wage deals would look like this time around. They are higher than they were 12 months ago. Lisa almost double what they were. That is the increase in prices they negotiated versus 3. 8 last year. I really enjoyed your special. You highlighted what is at stake. Is there a risk the bank of japan does not act and that could cause a massive devaluation of the japanese yen. Jonathan jonathan will be putting that out on youtube. Subscription only. It is very expensive. People will mail in asking. There is no special. It did not happen. Yields are lower by a single basis point. The euro a little stronger. 1. 0 899. Yesterday we saw the dollar stronger against everything in g10. Lisa i was blown away by the flows. We saw the highest flows into equities back to 2021. The flows are going to the u. S. Across the board. This is the point that everyone is buying the u. S. Exceptionalism story. Everyone is plowing their cash into the United States because where else will you go . It is heads they win and tails you lose and that is what everyone is buying into so the dollar will feel that just a touch. Jonathan dxy unchanged. Coming up, and hot inflation print pressure stocks and bonds. Greg valliere on Chuck Schumers scathing comments on the Israeli Government and growing expectations on the boj to hike rates next week. Another hotter than expected inflation print pushing down rate cuts. For those of us who begin our careers when 10year treasury yield, corporate yields, and Mortgage Rates were at doubledigit levels, the phrase none for me, thanks, comes readily to mind should the fed cut rates too early. Do you smell the scent of stagflation . I think it is a little too early to call that. A couple of hot numbers in terms of hotter than expected inflation in the process of a fed funds hike cycle that has been remarkably sensitive to its effects on the economy just tells us this is part of the bumping this you have coming out of where we have been going into a sustainable economic recovery at moderate pace with what is the equivalent of full employment, 3 to 4 employment. Lisa there is one take away. It is that all the hopes and dreams seem to die when we have rate hikes delayed or deferred or put off indefinitely. That has been the take away. When people worried about rate cuts you saw the people rate underperform dramatically on the s p 500. Do you take away something about that in terms of how vulnerable that trade is . John too short a period to take away and think this vulnerability that does not exist, it certainly does exist, but at the same time we are headed in the right direction and it is just extraordinary times when it comes to s p 500 earnings up 4 . With that, four sectors double digits for Earnings Growth and not all tech. Things are good. It is just they are not as great as people would like to see. We are in the car but are we there yet . Lisa you are waiting for there to happen and not the stagflation to happen. What is the line between the two . Our minds have to go to the stagflation point given we saw inflation hotter than expected and retail sales lighter than expected. When do we get a definitive read on which it is . Is it the strength or is it the slow down . John it probably comes from a combination of both. It is the combination of the resilience with the slowing. The fed has not been on holiday, it has been bringing down the rate of inflation. Inflation is an insidious thing. The other thing we are waiting to see, and it is beginning to happen in food. We have seen it in some respects in clothing. It is competition. When you go into inflation those who experience high input costs eat the inflation and do not pass it on. Then when everyone knows inflation has reared its ugly head they pass it on. Then once the fed does what it is supposed to do, then those that originally ate the inflation then hold on passing it on for a bit longer so they can make up for the losses at the beginning of the cycle. Then somebody says i think i can sacrifice my unit price and maybe make it up in volume. That is what we are waiting to see. Right now i think it is a good thing that the consumer shows they are beginning to think that genuinely inflation will be here for longer. It may be. At the same time, the direction of the growth of inflation is on the way down and that is where we see the opportunity remains in the equity market. Annmarie look out for university of michigan later for consumer inflation expectations. A risk factor in the rear a risk factor in the near term is that median dot in the fed projections comes down from three to two. Is that a big deal when this market has gone from seven to three and equities are close to alltime highs . John i do not think it is a big deal. It is not just the feds part is in the right place but the tone of fed speak is very aware of what is going on. It is going gently into that good night and the sense they are very sensitive to what is the mandate of the fed, which is to produce an economy that grows at sustainable pace without horrible inflation, and then when it comes to employment, full employment as defined between 3 and 4 unemployment, it looks like they are doing the job. I do not think jay powell and his fed want to have a legacy of cutting too soon or staying at the high levels relative to where we were before for too much longer. That said we continue to think the second half of the year when we see the rate cuts happen and we never expected the five to seven that others were. We thought it would be one to two or perhaps three which is what the fed intimated last year. Jonathan i want to finish up by talking about sectors. I know you liked cyclicals over defensives. Traditionally defensive would include things like health care. Now health care is a lot of where this money is going in the bull market. What is defensive to you . John defensive would be consumer staples. A significant portion of health care outside the weight loss drugs and some of the offsets that come with that related to what can be done against heart attacks and things like that with the same drugs. We cannot help but think you want to be in technology, consumer discretionary, industrials, financials, and we are getting digital exposure to materials. It just looks like people are looking at the world and thinking china may be having real problems that it still has to address but the rest of the world is in a process of normalization where we are in a better situation. We are leaving the emergency status of the World Economy and in that process moving towards a more stable environment. That does not mean anything can happen that will counter that. You have to be diversified and know what you own and have bite sized expectations. You cannot get too gaga over the market. We are only 1 away from our year end target. People were asking us through most of the First Quarter why dont you raise your target . When we started out in december we were indicating 13 upside. We did not realize how fast we were going to move. Lisa are you going to upgrade your forecast . John we will have to see. I am looking at all the stuff youre looking at. We have to give it consideration. I must say from where we are sitting today it would seem like the likelihood of being forced to raise might be necessary after all of these bearers have suddenly gotten under the case. Some of these are talking out of both sides of their mouth. Stagflation, other group saying it will go higher. I tried to avoid the noise and separate the signal from the noise. Jonathan appreciate your time. I think that was a diplomatic way of dancing around the question. Lisa it may be. Only 1 away from the target. It is not exactly like the market will crash. Jonathan 5200 used to be really bullish and 5400 was just what are these guys on . Here we are just around those levels. Lisa went away start to get 5600 . When we start to get to 5600 . If things are bad the fed will cut rates and if things are good, things are good. Jonathan that is the challenge after the cpi and ppi prints. Does a temper their ability to respond to adverse shocks. I understand what the consensus is. I wonder how challenge that view is. Lisa and how underwater this market would be for stagflation shock akin to what youre talking about. Jonathan lets get you an update on stories this morning. Here is your bloomberg brief. Yahaira the Chinese Government is calling on electric vehicle makers to sharply increase their purchases from local chipmakers as part of a campaign to reduce reliance on western imports and boost chinas domestic semiconductor industry. This follows efforts by the u. S. To curb chinese chip technology. Copper searching to an 11 month high. It rallied on bets that a pickup in Global Manufacturing activity would push up demand for industrial commodities. The metal is seen as a bellwether of the Global Economy has surged as investors warmed to the idea the worst of the global downturn is behind us. Bitcoin is retreating from its latest record high amid an intensifying debate about whether the bull run into cryptocurrencies has reached a bubble. It reached an alltime high of almost 74,000 earlier this week. Bitcoin in the top 100 tokens bitcoin and the top 100 tokens are up this year. Jonathan favorite story of the last 24 hours. Bernie sanders. If it was up to bernie the weekend wouldve started today. 32 hour weeks. Lisa not a bad idea. He knows how to cater to his constituency. Jonathan are you saying his constituency does not want to work . Is that what i just heard. Lisa do you want to work on friday . Jonathan absolutely not. I am mi his constituency . Am i his constituency . I will let you at home answer that. Schumer reaching his breaking point. I believe a new election is the only way to allow for a healthy decisionmaking process about the future of israel. Jonathan that conversation coming up next. Live from new york this morning, good morning. How am i going to find a doctor when im hallucinating . What about zocdoc . So many options. Yeah, and dr. Xichun even takes your sketchy insurance. Xichun, xichun, xichun youve got more options than you know. Book now. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. Starting a business is never easy, but starting it eight months pregnant. Thats a different story. I couldnt slow down. We were starting a business from the ground up. People were showing up left and right. And so did our Business Needs the chase ink card made it easy. When you go for Something Big like this, your kids see that. And they believe they can do the same. Earn unlimited 1. 5 cash back on every purchase with the chase ink business unlimited card. Make more of whats yours. Jonathan stocks around alltime highs. Equities pushing higher. Phenomenal to see another hot inflation print with his equity market down. Yields climbing higher. This morning a little bit lower. 4. 28 on the u. S. 10 year. Chuck schumer reaching his breaking point. Sen. Schumer Prime Minister Benjamin Netanyahu has lost his way by allowing his political survival to take precedence over the best interests of israel. At this juncture i believe a new election is the only way to allow for a healthy and open decisionmaking process about the future of israel. Jonathan Senate Majority leader and longtime ally of israel Chuck Schumer calling for Benjamin Netanyahus exit convert tensions calling on tensions in congress. Mike johnson saying it is plain wrong for an american leader to play divisive role in israeli politics while our closest ally in the region is an existential battle for its very survival. Greg valliere joins us. That was quite the address. Does that help the president or hurt him . Greg ive seen reports that the white house cleared the speech. I have to think the white house thinks it helps them. To be a cynic, which i am most of the time, i think schumer and the white house realize they could lose the senate. Larry hogan running from maryland makes it tougher for the democrats to hold the senate. I think the speech was designed to give cover for people critical of israel and they can now be more critical and say Chuck Schumer is as well. Annmarie we got the annual threat assessment this week and Benjamin Netanyahu was named in it, talking about his viability as a leader. Was it appropriate for schumer to say this given the fact this is been widely broadcast already . Greg why say what is fairly obvious . I fully agree. I think by saying it he brings out a lot of republican critics who say the democrats talk about meddling in our elections and we are meddling in other peoples elections. Annmarie is this a pathway for congress to talk about Strings Attached when it comes to israeli aid . Greg you look of all at ukraine. Things have started to move. Mike johnson has said he would move the ukrainian aid bill but there would be Different Things tied to it. Maybe it would be a loan, maybe it would be lend lease. Maybe it would not be the full 60 billion. Maybe we have gotten into the premise that the provisions in an israeli bill or ukrainian bill may get changed. Annmarie that is what was voted by former president donald trump. We have the remainder of the bills by march 22. Will those bills get done . Greg we have things have started to move. We have done six of the 12 spending bills. Out of the remaining five are almost done. That leaves homeland security, the border, stuff like that. If we have now 11 out of 12 that is not bad. I think we will be done well before the april 30 deadline. If they do not get something by april 30 there is an acrosstheboard cut, which nobody wants, especially in the defense industry. I do see progress and once the progress becomes more obvious they can move onto to ukraine and israel. Lisa that is where the progress is. I want to go back to the heavy lifting of National Security and tiktok and the discussion around that. Progress may be on the defense spending and some of these bills. Do you see anything in some of the tiktok proposals that look viable in the near term . Greg we will see how much money Steven Mnuchin has. Im not sure he has enough money to buy tiktok. Maybe john has enough money to buy tiktok. I would say that would be a heavy lift. I do not think mnuchin alone can do it. He will have to put together a consortium. Suddenly the idea of buying tiktok is on the table. Jonathan if i can put together some money there is a club in the north of italy i want to buy, never mind tiktok. I think tiktok has been smart about how they have dealt with this. They always frame it as a potential ban. They do not even entertain the other part of the bill that talks about a sale. They know how that will play. A lot of americans do not like the idea of something being banned, vertically if it is a place where they can express themselves freely. Then they talk about how this will hurt business and individuals livelihood. That will start to play well. China is very good. China is very good at playing the game in the west in the United States. We will explore everything legally and they will. Then they start to push the buttons in society and a pretty effective way. Annmarie also they put a terminus amount of money behind this in the lobbying camp. 8 million last year alone. To your point about a ban, they constantly do this as a tactic. They want americans, the youth to feel like this will be banned. Senator warner was on bloomberg and we need to make sure this is not a ban. Lisa i did a sophisticated social survey at the dinner table and i said to them, how do you feel about the fact that potentially the Chinese Government could be seeing what you do. One of the sur

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