Good morning for our audience worldwide, this is bloomberg surveillance on tv and radio alongside tom keene and lisa abramowicz, im jonathan ferro. Just about positive on the s p 500. Tom not your father strike. When i saw it, they nailed it about the 10 00 p. M. Stock. This is an original strike going back over to uaw history, back to 1958. Into real challenges before world war ii. It is an original strike, a selective strike, that is what is new. Jonathan gm said they offered unprecedented package. From ford, the union made little movement. Rambo, we have not heard from this white house, have we . We are waiting for a statement from the president. Lisa hit the he did speak with the leaders and auto manufacturers. What did he tell them at a time where his policy is contradictory . In one hand hes pushing for electric pickles and a lot of the vehicles are pushing back on yet they are helping some of the auto manufacturing with those. On the other hand, it is it is the most prounion in history. Tom i learned a lot from labor experts. We have a scheduled guest to come up with us with his experience as a child in michigan. He used to go on strike against all of chrysler. All of studebaker. We had studebaker. The answer is this is different. You get a map out, there are three states involved, three models and i will talk about that with greg. It is unusual for you, me, lisa, and the president. Jonathan so thomas, you indicated is three plants, several workers. Lets talk about what is affected, ford f1 50 chevy silverado, run pickups. Tom they can do this but they have destroyed spread out the strike payments. I was going to use this now, the bronco, colorado, wrangler strike. Am i up to speed . Matt miller is our expert on this colorado pickup truck. I have no clue. Jonathan the bronco is cool. Tom big time cool. We saw it six weeks ago and they cant make him fast enough. Jonathan now theyre not making him at all. If you are tuning in, led to price action. Futures on the s p 500 positive by. 1 . In the bond market, the data in america is pretty decent, yields higher by three basis points, 4. 32 on a 10 year. Epicenter everything we discussed yesterday, retail sales, pbi, ecb, the downgrade on the airlines, 19 crude in america. Wti positive hereby. 3 . Tom 94 60 three cent intraday brent crude, they have beaten them over the head about extrapolating out to 100 per barrel. It is moving fast and your debt on, it colors every conversation including gm and the red sox. Jonathan the ecb conversation too. The euro like this, 1. 06 on eurodollar, currently 1. 0664. And potentially heading toward a ninth week of weakness. Weakness against the u. S. Dollar. Lisa the longest potential streak of weakness since the joint currency was created. Raising the speculation of whether these Higher Oil Prices are good thing or bad thing in terms of disinflationary and stagflationary. 830 a. M. , september empire manufactured data followed by 9 00 a. M. Industrial production. It is getting really messy but if we start to see a plateauing, does it mean anything . Especially after you see input price increase and on the heels of a strike. It is a messy moment, 10 00 a. M. Adding to the moment. A Consumer Sentiment survey which both of you love and hinge on and determine the sentiment going forward. How much will this reflect what we are seeing with respect to higher oil . Tom the rate of change of oil prices, i was doing the math and the blur, i can remember the numbers from july or june. Jonathan its always amazing how spot crude prices or where gases right now can shape perceptions of where inflation will be. No doubt we might get a sense of that later. Lisa and how much people are willing to spend. At 10 00, we hear from the france economy minister with bloombergs maria tadeo. This comes as eu financial ministers meet in spain. Christine lagarde will be there, the eu commissioner, the span economy minister, this will be awkward because they disagree. Heard from the german finance minister, this is a good thing. Tom what will come from this meeting . Lisa they will talk about what the regions need and countries need to foster growth at a time of stack legionary headwinds and a controversial rate hike yesterday among some of those officials. We already heard the pushback. Jonathan calvino already complained. Tom she was with us, i loved when she was here. They are really living between Climate Change and inflation of the agricultural complex known as spain. Spain is getting hammered. Jonathan big time. Many parts of europe, germany for that matter. Lets get back to our big story. Strikes, craig joins us from london. Crag, we have them all three simultaneously at the same time. I will point to this breakdown . How big is the difference between gm still at this, ford, and uaw . Craig i think the writing seems to have been on the wall. We have, for weeks, none the union and the three companies are far apart. In terms of negotiations, i thing on both sides you have complaining and sort of allegations that neither side is budging or going anywhere close to the other direction. I would not necessarily cast this as a sort of breakdown, a sudden realization that we are not going to be able to do this because we have not come anywhere close to these companies and this union being able to come to agreements on new contracts. Tom what is the imagery here or message from bracco, colorado, wrangler. Those are all cool cars were 23yearolds. Is that the message . Craig yeah, i think it is both. These are cool cars, profitable cars, trucks and suvs that these companies count on for serious revenue and profit. That being said, that you would the uaw has arrows in its quiver to sort of use imagery here, they have the f150 pickups, silverados, the rams as mentioned earlier. And just generally they have quite a few plans to add to these three facilities that they are walking out from. It is interesting to see the companies not know what is next. The union is talking about keeping these companies on their toes and i think the union is being strategic about striking everyone of these companies but also doing it in a selective fashion, meaning they could draw this out and not to pleat their strike fund too quickly. Jonathan an index the government tom an index the government uses. Craig trudell, windows the union run out of strike funds . Craig that will depend on how much additional pressure they want to exert. Tom give me a day, christmas . [laughter] craig what we saw in gm is months long a few years back so i do think this is absolutely the case that the union could drag us out for weeks, potentially months. Whether we see the union be able to reach an agreement with one of the companies and go back to pattern bargaining like we have been used to it in the past, unfortunately the unfortunate answer is we have no idea what the Union Strategy is and that is very much their intent at this point. Lisa do you get a sense of what the line in the sand is at this point of what will get it done . Craig i honestly dont have any clue of what could possibly get us to a point where either side is talking about we feel like we are closer, and the problem is there is so much going into these negotiations. We dont just have a simple issue of one side wanting a certain amount per hour and another side wanting a higher or lower wage than that. We are talking about costs of living adjustment, talking about representation of battery factory workers or whether or not those stay nonunion. We are talking about pensions. So there is so much going into these negotiations. They are so complex and multifaceted that it is difficult to game out what is it that will sort of get the union comfortable with what these companies are willing to offer. Jonathan stay close, we got a lot to talk about. Wheres the most prounion president in the history of this country . Tom hes gotta get up and get his wheaties this morning but can you imagine conversations of how to explain to this that this is not the strike Young Joe Biden new or young tom keene new. Jonathan he has to come outside, doesnt he . He cant sit on the fence. Tom that is an important question. Very importantly, Annmarie Hordern and joe mathieu have the former Vice President of indiana tonight. You wonder how does mike pence down the fence . Does he talk to the uaw in indianapolis here . They are not on strike abba maybe they will be. Jonathan sure. Tom do these guys stay on the fence given the strike . Jonathan i think everyone is after the vote. The global macro director joins us now. Only at your thoughts on the strike and a question we have asked continuously the last couple weeks whether you view this as a hot labor market, whether this is something we will see more of in years to come. Good morning. That is the big question. As the labor versus capital pendulum swung for real, and i think there are good reasons to think maybe it has because the last couple decades favored capital holders, high input lowinflation, low Interest Rates, arbitrage around the world. Perhaps that trend is ending and we see what we see speaks to the issue of whether inflation has become a structural phenomenon or whether it was a passing thing that happened during covid. If we are going to head to an inflation era of lets say 4 instead of 2 , and all of the assumptions we make in the markets investing as you know is making realtime decisions with imperfect information, all of those assumptions need to be questioned, including when the fed will pivot, if it will pivot at all, whether it is done tightening, whether the market is correct and pricing in 2. 2 5 inflation as far as the eye can see, what that does to the churn rhenium and if the churn premium, which is negative flips to positive, we could be a five handle in the 10year. There are all kinds of snowball effects on whether we are in a new inflation era. Tom the heart of the matter to me is a 63,000 gm colorado buys in pickup, it is not what you and i lived the rich kid its had a 9,000 57 chevy. This is about the partition in america of the haves and havenots. They are building cars for what . 15 of america . Jurrien yeah, it speaks to perhaps the end of this very long period of what we call the great moderation and obviously the wealthy quality or inequality is part of that same mechanism and a lot of smart people have written a lot of good reports about it but if that trend of great moderation is reversing, that really changes a lot of the assumptions we make as investors, so including the valuation level in the s p 500. Maybe you are heading into not a bear market but a period of valuation headwinds. Jonathan true. You will stick with us, fantastic to have you with us. Jurrien timmer of the tell it he of fidelity investments. Is this another story that screams higher for longer . Tom higher for longer it will disrupt everything and comes back on growth in europe. All the babble we do about rates and that comes back to Economic Growth. Jonathan every time. Tom there was a headline yesterday that lagarde wanted to ignore and same thing here. What does the strike due to our u. S. Gdp . Jonathan sarah hahn in the next , craig and jerry and Jurrien Timmer is sticking with us. Stuck at burning man for two weeks. Equity futures on the s p, positive here. Tom should i go to burning man . Jonathan no. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Into it is still a tight labor market. You are not creating jobs at the pace you are. But there is no sign of flip that switch that switch being flipped and workers stop being laid off. I think powell power is in the hand of the worker not the manager. Im not worried about an organic slowdown in the u. S. Economy. Theres no sign of demand falling off a cliff. Jonathan power in the hands of the worker. Fast testing to catch up with him. We have strikes on the big three, live fantastic to catch up with him. We have strikes on the big three. Fortis down by 1. 7 , gm down by 1. 5 , still lent to says positive. Tom its not american, it is chrysler. Jonathan takei, 12,700 workers across three plans. For now it is limited. This is about how long it goes on for and whether it spreads. Tom i want to learn about this. Limited to win . Friday . Next week . Jonathan we dont know. Tom we dont know, we are making it up as we go. Some feel sensitive about this. I believe in community or self expression. Jonathan where are you taking this . Tom the mail is coming in. Someone name annemarie in washington emails and said what would you where at burning man . I wear this everywhere. Jonathan you would wear a bow tie . Tom i took three suitcases to asia and never again. This is the uniform. Jonathan just a bowtie or other close . [laughter] lisa what you china to say . Jonathan im just trying to figure it out. Tom what is the appropriate mud boot . Lisa you think i have been to burning man . I dont know. You wouldnt need a mud boot normally. Jonathan i can now see you at burning man. Lisa i think that would be burning man. I think that would be cool. [laughter] tom bring jurrien jonathan in here. Do you think tom would fit at burning man . Jurrien if he knows how to cook, he would fit into our company day. Jonathan do you know how to cook . Tom no. Boil water. [laughter] jonathan sit tight. We will go through by briefly. On s p 500, shaping up on what follows, features positive by. 1 . I want to look at the euro, positive by 0. 2 on 6. 66. For the euro right now, what a tough position. The ecb did not want to come into a pause but it sounded like a pause. The complains they are getting so far this morning, yuri talked about the pushback from spain moments ago on bloombergtv. This is from matteo salvini, the deputy Prime Minister had this to say. The ecb, which does not care about the economic difficulties of families and businesses, is increasing the cost of money. Lagarde is living en masse. A certain part of italy, this is the message coming out. Tom the certain divide of italy, like the 50 states of america, what the lesson we have learned, it is not the 50 states of america. The europeans each have their story, the key single word i saw yesterday going back to it is transmission. These dynamics transmit through the American Economic experiment, way different than three europe. Jonathan they transmit through the Banking System . Tom yeah. Jonathan much more profound and pronounced way. Jurrien timmer is with us, macro director of fidelity investments. Can we get a flavor from the ecb or is the ecb on its own planet perhaps as others pointed out come on mars . Jurrien i think the fed will do what we all expect it to, pause and basically indicate they are data dependent, and the question is when will it pivot if ever. The market has been consistently incorrect in expecting imminent pivot. History shows when the fed stops tightening, it usually starts easing quickly after that. So maybe the forward curve is just a math project based on history but the big question is the stock market has been playing the soft landing scenario. That certainly is panning out in terms of the economy, earnings looks like it has bottomed in the second quarter, but part of that scenario was an imminent pivot back to a three handle and i think the news we are seeing about the strikes, inflation in general, core pce, remaining sticky above 4 and what we saw in the ecb is a higher for longer narrative is going to persist even if the fed is indeed done tightening rates. That is something that the market really is not priced for. Jonathan lets talk about the price of energy, 90 crude, does that disrupt the soft landing hopes and dreams . Jurrien its good. Obviously American Consumers are spending less on energy than they used to, a few decades ago. On certainly core inflation measures, it will have a limited impact but the base effects of the inflation data from the last for years, that ran out months ago, so we have likely seen the most of the improvement, and i think the fact that core pce will remain at a four handle, even though the tips market is pretty steadfast on predicting 2. 25 as far as the eye can see, i think is deftly a disconnect between the market and reality and certainly one of the assumptions i think we will need to look at because it will reverberate to many other aspects. Rstar at inflation and policy at three point five. Maybe neutral is five instead of 3. 5 in which case the fed is not even that restrictive yet. Theres a lot of theres a Chain Reaction there once you start questioning the assumptions we have in the market today. Lisa so you are not buying this idea we use the end of rate hikes in the ecb and fed . Likely to be more . Jurrien we may be at the end of rate hikes but the question is how restrictive is the fed. If you look at the tips market and the fed is 5. 25 to 5. 5, inflation is very restrictive and if you look at rstar, and. 2 5 , you add 2. 5 percent inflation, the fed is restrictive. That these were assumptions and that is one of the challenges we have is that we are all making Investment Decisions based on assumptions about whether a shirt and regime will persist or it will reverse and it does all come down to inflation. When we look around us, to me, it looks like it will be harder to get from fortitude than nine to four. Jonathan your final thoughts on what we should do as investors, parking cash, hide, take my 5 . What should i do . Jurrien i think this is becoming a more tactical market which i hate to say it because i tend to not believe in tactical trading, i am more of a longterm person. I think some variation of the 60 40, whether it is moving cash or tips remains a good idea. The bond market for instance, 4. 3 . If we go to 3 , that is a 10 return, going from 4 to 5 , that is a 1 negative return so the risk reward in the bond market, even if bond yields have not finished rising, remains compelling in the 60 40 portfolio. Im still there comic still constructive, but when i look at all of the factors we are discussing and i look at where we are going to be the secular bull market, my guess is maybe we are in the twilight phase of the secular bull and we will start seeing valuation headwinds instead of tailwinds per that does not mean the market goes down, it just means price action has to be completely carried by earnings rather than pe expansion. Jonathan always thoughtful, thank you. Jurrien timmer of fidelity investments. Multiple expansion through the year so far. These yields are not going anywhere, basically what we see the last month. Still in and around 5 . The tenure at 4. 32. A lot of people lining up to say this move is unsustainable and here we are, another month staring down the barrel of the same numbers on a two year tenure 10 year and 30 year. Tom singular statistics that agree with that. Swiss franc, euro swiss, does not indicate fe