Situation where the u. S. Economy is growing. This is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. Jonathan live from new york city this morning, good morning. This is bloomberg surveillance. Lets take the temperature in the middle east. Fruit lower 1 . Brent crude down almost 1 . An unprecedented direct attack on israel over the weekend. I ran lighting up the sky on saturday night, launching more than 300 drones and missiles. Nobody killed, limited damage done. One word contained. Jonathan deescalation. What efforts will be there be to deescalate on the part of u. S. And france and germany. To me the market will not pricing a geoPolitical Risk that has yet to transpire. This is a market on edge with the new redline crossed. Iran has never directly attacked israel. Even if it is an immediate retaliation it raises the temperature. Jonathan the consensus view on the street. This from citigroup, irans attack unlikely to lead escalation in the near term. We emphasize the near term. Annmarie it is the near term which is why you see the oil market starting to recalibrate the risk friday. We saw a big Price Premium building into the oil market and then monday morning you sought israel and its allies were able to strike down 99 of these more than 300 missiles and drones. The biggest take away from this weekend is a recalibration of these redlines. Completely erased in terms of direct response on iranian soil to israel. Down the future when you look at what could be retaliation for any movements in the middle east, this is now an option iran may use. Jonathan the president focused on defense. The president came out and said dont, they did. Annmarie they did, now the president is telling israel to slow down. Israels war cabinet has yet to make a decision, and if they do they probably will not tell the press. For israel this is existential. Iranians send more than 300 drones and missiles, including ballistic missiles, directly to their airspace. At some point israel will have to respond. It is a matter of when. Jonathan the first thing you will have a look at when you wake up is markets. Equity futures positive. 5 on the s p. The bond market releasing some of that haven bid from friday. Yields higher. There is. Crude down almost 1 . Lisa crisis over. Everyone is calm. Everyone is not come. This is the question. How do people have to start gaming out the price of Higher Oil Prices . There are three prongs come Economic Data, earnings, and the fed speak. We have logan, williams, daily, bostick, goolsby. Interesting to see how much they recalibrate given we are seeing confidence coming in and Inflation Expectations picking up. We have Goldman Sachs and Morgan Stanley tomorrow and tech later in the week. We do have Economic Data. We have the idea of retail sales. Later in the week we have the beige book and jobless claims. To me the question will be how do you filter all of these events through the lens of the potential for higher quantity prices. That will be a running theme because of the geopolitical framing. Jonathan Goldman Sachs earnings coming out. Michael catching up with president williams. Coming up will catch up with a former Senior Intelligence official following irans attack on israel. The odds in commodities. In into bowls of pimco saying u. S. Growth has hit its peak. We begin with the top story, irans ever first attack on israel from iranian soil. The war cabinet is expected to decide on a response. The former Senior Intelligence official saying the u. S. Will not participate in a counterattack but will insist israel advises of the attack ad will likely bring in u. S. Participation if only for defense. Serious events. We are try to work out whether this is a new phase or whether we just witnessed as a highly choreographed billion dollar episode of skeet shooting. Which is it . Norman it is a new middle east where israel must wonder whether some action might provoke Iranian Missile attacks on israels territory, and it is a new middle east in which israel is now in theory open to do the same against iran. United states, europe, and others will certainly not want this to happen. But by allowing iran to conduct an unprecedented attack which was certainly not just symbolic you now have this new world. Jonathan the president has told the leader of israel to take the win. What did you make of that . Norman the president is correct in saying the israelis have achieved an extraordinary victory over iranian arms and should pause and deal with the problem of gaza, the challenge of lebanon before doing something that might escalate the region into a conventional war. All that is well and good. If you are in the is work and you have a serious issue. How do you deter iran from doing this again . That cannot be put off too long. That is not something you do with the diplomatic note. Annmarie if the israelis are looking at how to deter iran from Something Like this again, what kind of retaliation could we see, the scale of the retaliation . Norman israeli retaliation will likely be proportional. It will likely be limited. Itll be something meant to demonstrate we can touch you in ways that hurt. For that region i think israel is not looking for a conventional war itself. This takes time to work out. What you are looking at is the goldilocks position. Something that does not start a war, something that resets deterrence, and allows them to focus on the issues the Biden Administration correctly addresses. Annmarie the Biden Administration went to pains to dell craft to the world to telegraphed to the world that they do not want to see expansion of this conflict or a wider war with iran. What did the u. S. Have done to deter this attack instead of being in a position of defense . Norman the white house is correct in doing what it can to contain a very fragile and turbulent situation. Based on previous actions of the United States, it could have been a decision to move u. S. Military assets closer to iran, not because it is necessarily needed to conduct an attack, but to demonstrate to iran we are prepared to do something to deter an attack. A lot of this has to do with irans assessment of the u. S. Willingness to engage in such a strike. Whether europe would join us. I do not think the iranians feel the Biden Administration is seeking a confrontation. Lisa there were a lot of precedent set over the weekend, it was interesting to see that not only the u. S. Backed israel would the u. K. And jordan and also areas in the region who hate iran more than they hate israel. What could take place in terms of pressuring the region into a Peace Agreement . Norman there were a number of firsts. Israel deployed the first naval iron dome, and you saw this unofficial coalition of the United States and United Kingdom but also france, jordan, and saudi arabia. This is a very ad hoc grouping and it took a fair amount of diplomatic work and we have to praise the Biden Administration for their work in building the partnership. Unless the administration believes the United States has their back, they will not be willing to enter in to such formal entities. Lisa i was going to push this forward to the idea of freedom of the seas. We have seen the idea of trade challenged. We are not even talking about the straits of hormuz and the fact that iran went after a ship in that region and what this raises in terms of questions about the willingness to curtail that transportation. How much could this coalition go after to try to reclaim some sort of freedom of the seas . Norman such a coalition will not be effective unless it believes the United States is fully committed to deterring as well as defending aggression in the region. The red sea example says that is not the case. The United States and its partners have done a superb job defending integrating houthi cassidy there is no evidence we are seeking to push this into yemen. Unless you take that model and applied across the region come if you a member of the region you are exposing yourself to retaliation by iran and its proxies. Jonathan what is the best way of influencing decisionmaking . What are we doing that we should be doing . Norman a multilateral approach involving economic and political isolation of iran with patients and a willingness to take their test of our fortitude has traditionally been the best approach. We do not have such a coalition at present and i do not see a lot of efforts to build one. Jonathan norman roule, thank you for your input. Former Senior Intelligence official. The president said no, they did. U. S. And allies have struggled to prevent iranian backed rebels from disrupting the red sea. It feels like over the last year the ability to influence iran has diminished. Lisa when we talk about additional sanctions you have to wonder, have the sanctions that have been placed on and havent had any affect . There questions Going Forward in terms of how far iran will push this considering they did cross what was believed to be a redline. The focus in this administration has to be preventing escalation that could cause oil prices to spike ahead of the election. Annmarie it is very difficult for this administration ahead of a u. S. Election, which is why they have a lack enforcement policy when it comes to iranian policy. Norman got to that. His economic coalition. After pressure china to stop buying the barrels china has an oil output. This is where it comes down to the deterrence factor the u. S. Could have been taken. Jonathan there is a believe things are contained. Yields are higher. The commodity market is lower. On wti, we are. 8 . Lets get you update on stories elsewhere. Lets get you bloomberg brief with dani burger. Dani german chancellor olaf scholz has begun his second visit to china and is expected to say beijing has not acted on european warnings to end discriminatory billing practices and he wants to persuade the chinese president to act as soon as possible to avoid tariffs meant to rebalance the trade relationship. Schultz is also expected to question president xi about chinas support for russias war machine. The Biden Administration plans to work samsung as much as 6. 4 billion in grants to increase to production in texas as part of the u. S. Efforts to help Domestic Semiconductor Manufacturing as it has grown in china and elsewhere in asia. The money will be used to expand samsungs existing chipmaking facility in austin. The 128 Boston Marathon kicks off today. The city thinks it will get a 200 million economic windfall, which would be the largest since the pandemic. 300,000 runners would be competing with a title and a 1. 2 million prize at stake. That is your brief. Jonathan best of luck to all of the runners. Earnings season ramping up. If the fed does not cut rates , you could have pressure on valuations. How you offset that pressure . Higher topline growth and higher earnings growth. Jonathan live from new york city this morning, good morning. upbeat music theres more to business than the business youre in. If you use data, thats the privacy business. Manufacturing on demand . Youre talking cloud business. Got a few million hyperconnected customers . Digital experience business. That was fast. Thats where deloitte comes in. With the right combination of talent and technology to help advance and connect all that it takes to excel in business. To the business im in. Deloitte. Jonathan rude. 8 . Crude. 8 . Equity futures bouncing back. 5 on the s p 500 following the biggest weekly loss of the year so far. Earnings season ramping up. This is not just a one engine economy but may be several things working in its favor. That is why we look to the u. S. To have some of the highest earnings momentum but also japan. That is why we look to industrials and materials to have some of that upwards earnings momentum. If the fed does not cut rates you could have a little bit of pressure on valuations. How do you offset that pressure . Higher topline growth and higher earnings growth. Jonathan equity markets rebounding on the heels of a turbulent weekend in the middle east. Northern trust writing earnings will support Global Equities but higher bond yields could weigh on already high valuations underpinning our neutral stance with our multi assets portfolio. She is with us around the table. To what degree are bonds or challenge in the equity market . You think we are moving back to the new lending scenario for equities and bonds . For equities it seems like that given how strong growth has been. For bonds it is still very much an inflation story. If you look at what moved rates this year, that was a reasonably substantial move in the 10 year. If you break it down into what drove that move up, it was still predominantly growth being priced higher and some Inflation Expectations also. It remains a growth story. As markets we do not see labor markets weaken. I think equities do all right. Lisa i have seen a lot of challenges to this rally. They do not like it right now. They see earnings being unable to fulfill lofty expectations and the prospect of no rate cuts in the face of higher Commodity Prices. Are you in that same camp where you are shifting to a more negative view because of some of these overhangs . How long can the rate rise be digested . As long as that growth momentum stays all right, markets will be ok with it. What is surprising is how it seems to digest any geopolitical tension. That is u. S. Exceptionalism, seems to be an island that is isolated from most of the events. The key is to watch what happens in oil and if oil stays contained. That seeps into Inflation Expectation and complicates the picture for the fed and that makes you wonder will any further rate hikes be digested. Lisa is that a more important gauge to watch even as the inflation data or the fed rhetoric, oil prices and how much they respond to the geopolitics . Oil prices and labor market, two sides of the spectrum. The one tail risk is labor market start weakening. This enormous 400 or 500 basis points of tightening comes to bite the markets. We see recession risks coming to the forefront. The other is oil. Inflation expectations seeps into broader cpi numbers and then the feds hands are tied. Two tail risks. For the moment we are staying the course. Very neutral. Do not want to miss out on the Strong Equity momentum rally either, but at the same time not a time to learn about duration. Annmarie when you look at oil. Say you parked geoPolitical Risk. What does the supply and demand picture tell you . Right now the world seems flush with enough supply. There are lots of sanctions and it is hard to figure out who is breaking those sanctions and where the oil is going. The demand picture is not a bad growth picture because the demand picture means people want oil because the economies are growing. Even economies across the globe are looking for oil. That is coming through the demand side. It becomes negative if it is through supply disruptions. All of the stockmarkets seem to have digested prewell over the last six months or so. Annmarie your other concern is the labor market and you talk about immigration. How do you prepare for a 2025 or 2026 labor market of immigration policy could be different . That is the wildcard. So far the labor market has had a positive boost from immigration. That is borne out in data and that has kept wages contained. They are still around 4 . The fed would like them to go lower. So far that has been the support. Elections are potentially a wildcard. We do not know what happens then and that is not something you can prepare for. I go back to saying stay the course, stay invested, do not panic on moments like this. Jonathan stay the course appears to change in terms of whether to go to bonds for risk or not. Friday felt like the classic risk off with a layer of geoPolitical Risk into the weekend and treasuries rally. The relationship between stocks and bonds has been so inconsistent. What is your understanding of what bonds do for you in a multiasset portfolio . There is still a perfect hedge for a day like friday will stop you want to have duration. You do not want to be overweight duration. We are not overweight duration. We have duration. If there is geoPolitical Risk becomes real, or the first tail risk i talked about, which was recession coming back in of the forefront, you will see treasuries give you enormous protection. Lisa it seems like a lot of people are seeing a lot of people are saying they are hamstrung. Sebastian page said he was aggressively neutral, there was this trepidation of what you do not know. There was this risk if you look at oil prices and safe they crossed 95, i am sure you have your bogey, then we do have aggressive protection. I do not anchor on a single price number. It is all of the data they are looking at. I love that expression, aggressively neutral. I would say they are passively neutral, not very aggressively neutral. To us a lot has been priced in in terms of valuations in the equity markets and what i am looking for is the broadening of equity markets. That, we have not seen. There been sparks of it in march. It has not followed through across all of the portfolios. We have not seen china rally massively. We have not seen small caps rally. It is still been a u. S. Largecap growth trade. Jonathan small caps got battered last week. Great to get your thoughts. Breaking news. A report on tesla, that they will reduce Global Headcount by 10 . Elon musk cited as saying duplication of roles and Job Functions in certain areas is the reason for cuts. That is based on reports the