Bloomberg Surveillance TV: June 8th, 2026

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg

Good morning.

We've been told repeatedly the fundamentals are great, but the technicals are stretched. To the technicals beginning to bite.

Yeah, Beta bites both ways. We had been enjoying a massive Beta rally where we got to some pretty big extremes come midweek last week, seventy six percent above the two undred aage moving average. On the socks, you got the costby up to one hundred and twelve percent above its two hundred day moving average. That would qualify as a classic price bubble. And so we're seeing this unwind just out of these really big overbought conditions. And what's

Do you think then at this point there was an air pocket then for further declines from here.

Yeah, look, I think it would be actually a very healthy thing to see.

I think the other thing that's really.

Notable to focus on is the fact that you had seen valuations already reset back up to their twenty twenty six highs. So the whole dynamic that had happened at the start of the year is that valuations de rated significantly to about seventeen times on the socks just because earnings estimates went up so much. Now we've effectively reclosed that gap, where we've seen valuations get back up to

Is the next catalyst potentially the inflation data Jonathan mentioned later in the week.

Well, certainly for the broad markets, and it'll be fascinating because we could print a four handle on headline CPI, we could also print a six handle on headline PPI, and certainly if we're looking at the bond market, that would put upward pressure on yields. And you're already pricing in one hundred and seventeen percent chance of a hike by the end of the year for the Fed, which just suggests that could we even see more upside on that if you get a hot CPI or PPI print.

A four handle on this inflation would basically mean what for Kevin Wosh.

It means its back is very firmly in a and he has very few ways to argue that the Fed should be cutting rates at this point, whether you're looking at the labor market, which remains very resilient, or you're looking at the inflation picture. And I think the other important part about the inflation picture is that you're seeing this upward pressure on core CPI as well. So, yes, wages remain very subdued. And I think that's a really

So it's talked about this and we'll can't you at leaster a little bit later this morning, she's found herself in real in Brazil, believe or not. We'll spend some time on that in a few hours time. At Lisa's talked about the fact that inflation is close to four, unemployment is close to four, and here we are having a discussion about dropping an easing bus, not hiking rates, but dropping an easing bus. Can you expect anything more than just that? And next week's mating, well.

I would add one other peculiar factor, which is that if you look at five or five year inflation spreads or inflation breaks, they remain very contained. So you have a FED that's not necessarily saying that we're going to fight inflation with a lot of gusto, and yet the bond market says, yeah, but we think you're going to

So two out to tens we've seen some flattening. Would you expect some statement to come back into the curve.

I think that's certainly possible this week, mostly if we continue to see resilient economic data. The relationship to watch is the fact that you're seeing economic surprises continue to push higher. That's putting a lot more upward pressure on the back end of the curve. But you've seen a lot more upside on the front end the curve, which is why you're seeing that flattening.

So if you see the hotter.

Inflation data, and if you see things like the NFIB survey, which we also get this week show some improvement, that could be another reason why we see that back and back up.

This week.

Is not just about the data, it's also about supply, IPOs, SpaceX very much on the horizon. We've seen an upsize capital race from Alphabet the fteam reporting on Friday that MET is considering doing something similar that contributed to this move. Corporate America is telling you it's a good time to sell equity. Why is it a good time for investors to buy it?

Yeah, well, they're telling you it's a good time that they need more money in order to fund this AI capex and this whole bull market is built on the idea that the mag seven would take their incredible, formerly very strong balance sheets and use them to fund this massive capex spending. And the question is how do we get to that next leg hire We've already gone from expecting ten percent growth in AI revenue or AI capex spending this time last year to up to eighty percent

We saw about this last time.

You're on where are people taking capital from to then make sure they can get in on these IPOs.

I mean, it certainly seems to be in areas of other risk assets. People have been thinking maybe that's where some of the selling pressure is coming from, things like bitcoin in order to make room for it. But we still come back to the point that there are a lot of investors that don't have a choice in order to make room for some of these names and these IPOs simply because they're being forced into indices at a

Let's bring up bitcoin.

Can you mention bitcoin? Bitcoin took out the loads of the year in Friday session, down fifty percent from the stand of October. We caught up with Lisa Shout Out of Morgan Stanley recently. You asked the question about whether we're seeing signs of things tightening up a little bit. Bitcoin is a liquidity oriented asset. When financial conditions are beginning to tighten, it falls back over the next twelve

Yeah.

I think the most interesting thing over the course of the last let's call it nine months, is that bitcoin has completely sat out on this risk rally. So if we think about the cohort of things that typically go together and liquidity sensitive areas, it's the least profitable companies, it's the most speculative parts of the market, and Bitcoin.

But you've seen Bitcoin sit.

Out on the speculative rally.

But you have.

Things like a sixty percent rally and unprofitable tack over the course of the last two months. So the question would be is that is Bitcoin effectively a harbinger of things to come for those other speculative parts of the market, And certainly we're starting to see that unwind on Friday, as we saw a lot of that beta and momentum come out of the market.

Stay with us. More Bloomberg surveillance coming up after this. The former Defense secretary Mark Esper ranking the following the conflict is in a strategic stalemate with no clear path forward for negotiations. We're now over one hundred days into a conflict there was only supposed to last four to six weeks. Mark joined us now for more, mister secretary, welcome to the program. Let's talk about how much control the president has over Israel at the moment given the events of the weekend.

Well, he does have some control over Israel with regard to his relationship through Vbnnyahoo. But keep in mind the political dynamics in Israel and the United States are quite different. Both leaders have elections coming up in the fall. NET and Yahoo directly, the kanessets being has an election, but he is fighting a war in which overwhelming numbers sixty to seventy percent of the Israeli people at least support the conflict, certainly against Hezballah in Lebanon, but also against Iran,

So in some ways they are just on different paths. Right now, quit just talk.

About the latest hostilities of the past forty eight hours. It doesn't seem like the ceasefire is fully broken. Do you think that these are just countries that are testing each other right now?

Well, first of all, I've been lucky to say for at least last week or so ceasefire. It seems to me it's more like a cessation or a suspension of major hostilities, because, as you know, there have been missiles flying back and forth across the Persian Gulf, from the United States attacking Iranian coastal sites to the Iranians attacking Kuwait and Bahrain and other countries. And now the last twenty five hours this is a big flare up with Israel. So look, I think this is going to continue for

And also how can the president agree to that for Israel given the fact that accord the Financial Times, the president that he called the shots and then Israel actually took their own step to have this response.

Sure, and look, the agreement between the last few days between Lebanon and Israel, which does not include Hesbla, was that Israel would not attack into southern bay Rout into the outskirts of Beirut unless Hesbelah attacked into Israeli territory.

And we know the last twenty fours.

Israel has alleged that his Blood did strike, did send rockets or missiles into northern Israel.

They were intercepted.

But that's what prompted this latest round of exchanges between with Israel going into Beirut and then of course Iran responding.

So this is a big part of this.

Is Iran trying to defend its proxy, hes bloods its longest, oldest, best proxy from elimination, and you have this dynamic at play and they're not going to give that up easily.

As the former Defense secretary, the president said in this Meet the Press interview when talking about troops, saying, we have a lot of people there, quote, they're very safe. Do you think our troops in the middle are safe right now?

Well, you know, you're always at some risk when you're in a combat zone. But I think in terms of the status of the war, and I'm confident in the ability of our commanders to take good defensive measures.

I think they're in pretty good shape. But look, war is risky. Things happen. We know.

Unfortunately, we lost thirteen service members already. That's thirteen too many, and several hundred have been wounded, so we can't forget about that as well.

So look, it's not risk free, but.

We're not in the hot war that we were two and a half months ago, per se.

So do you think our troops right now are just there to set a deterrence when it comes to Iranian regime.

Well, it's a combination of determinent deterrence.

You also are supporting your diplomatic efforts so that the Iranians know that we can back up whatever we say with military force, or if things break down or if the Iranians lash out again, we're there to back it up with military force.

So there are a number of reasons why we're there.

And of course, you know, for a long time, certainly during my period, we've kept over forty thousand troops in the Middleaks, regardless of what was happening happening, so now we have a plus up there, mostly with regard to Air Force and Navy, and I suspect they will stay there for a while until this is resolved, which doesn't appear to get resolved, won't appear to get resolved anytime soon.

Frankly, mister Secretary, when you are at the Pentagon, you go through a lot of scenario analysis without a doubt. And I'm sure this was an event that you spend time on in the past. How does this play out in your mind? And what kind of preparation have we made for this enduring through the summer.

Well, you know, I went through this scenario a few times, or at least this drill with the President in the situation room. I talk about it a lot in my memoir, where you'd have folks who wanted to go to Iran, wanted to strike Iran, and I would least say two things. You know, first of all, mister President, a war is easy to get into but hard to get out of.

Like Ron stay with us more Bloomberg surveillance coming up after this. According to the International Air Transport Association, airlines are expecting to bring in a combined twenty three billion dollars in net profit this year, down from the previously projected forty one billions. Holding its annual conference in Brazil, of all places, Bramo joined just now with a special guest. Good morning, Lisa.

Buji, Jonathan Verro.

I am here still in Rio, enjoying the beaches. As you've said, you can see here the incredible beach of this conference center, and I'm here with the chief operating officer of Southwest Andrew Watterson.

Thank you so much for being with us this morning.

My pleasure.

So I want to start with the.

Story that Jonathan and Emory we're just talking about this idea of higher fuel costs. This morning we see another leg higher. We're hearing yes, people are concerned about oil prices, but that they've been managing through I mean, how have you managed to offset the increased cost through raising prices, cutting roots and potentially raising costs on charging for bags.

Yeah, so you can you need to cover the extra cost from higher fuel. You can't do it in a matter of days if you can't organize yourself and do it in a.

Matter of months and quarters.

And so we have been taking access to you know, conserve costs, prove fuel efficiency, but also revenue through you know additional you know bag fee increases, through fare increases and other demand generation activities that allow you to move your revenues up to cover that increased cost you know food by the end of this year early next as.

It impeded your quest to become profitable and your actual ability to do so so far this year.

Well, we had the highest adjusted net margin in the US industry in Q one, so we were stored profitability before fuel enough, which better than the other way around. We certainly anticipate that transformation activity driving us throughout the rest of the year from profit perspective, so we're focused on that.

And have more to go.

Have you been surprised by how little demand destruction there's actually been that customers keep flying even as you raise prices.

Well, the drivers a demand are corporate profits really drive business travel, and corporate profits is held up well, and job growths we saw last week is also strong and that drives leisure travel. So the fundamentals of demand generation are strong and that really helps the customer overcome increase prices.

At is business travel this year compared to last year? Is it actually more or is it less because of the higher costs.

It's incredibly strong right now. Last year in a terrorist there's a lot of uncertainty. Businesses hate uncertainty, and so they pulled back on travel in the uncertain times. Now it's higher cost for fuel, they understand that they can act on that, and as we said in Burnstein conference last week, we're seeing twenty five percent growth in corporate travel from March on.

There has been some speculation that businesses would pull back on first class travel, on business class travel because the costs are.

Going up to such a degree. Have you seen any signs of that.

No, we've not seen any change of business travel. If anything, is an acceleration in March versus February. So businesses are out traveling themselves, trying to generate the revenue they need for the higher cost.

Environment going forward.

Do you expect to be able to raise prices further without seeing demand destruction?

We certainly have to organize yourself to have the higher revenue. There's many levels you can do in general.

The higher costs to lower your growth rate.

So you have to look at your growth of supply versus demand growth. And so as long as demand keeps growing and you can modify supply, even it's not a direct fare increase, you can get the revenue tracktion you need.

Southwest was known as the place you could go for the cheapest fairs. You would wait in lines in different groups and then everybody would get on the plane.

There wouldn't be seen assignments.

There's been a transformation to the identity of Southwest since you took over really as chief operating office and in twenty twenty four with some of the activist shareholders, have you seen a change in your customer base in a dramatic way.

Not really.

What we've seen is our customers and giving us more their share of wallet. So we went from an one size fits all to a pay more to get more model. So we still have a base fare product that if you're just very cast senseif that's for you. We've found that our customers really were eager to pay us more to have the exact seat they want, the exact product they want.

So it's worked out fabulously.

Well going forward.

Do you expect that you are going to see increases in demand also from the economy, sort of your brank and file versus just those who can afford some of.

The perks, you know, we see a broad base. We talked about a cake shape to communy. That's actually a very broad middle of people who have the ability to travel and they're traveling and so when you give them a multiple price points and they can choose to what fits them, you see you can really harvest demand.

Commis might call it watching down the demand.

Curve going forward, do you expect that you're going to have to raise prices further?

I think we're going to have to have a mix of revenue enhancing opportunities, whether it's on the price side, capacity changes, or other fee changes. And so the big changes and prices I think happened in March and now it's more incremental type changes you have to do to capture How much more can you charge for I mean, yes, drinks, sure, baggage fees.

Going to the bathroom.

I mean, honestly, at what point can you sort of run out of things to monetize?

As demand growth happens, that puts natural upward pressure on revenue. So you can see as customers get raised, as businesses get higher profits, they can afford a little bit more, they end up paying and budgeting a little bit more. So now we're in kind of the gradual grain of price increases versus kind of the big one we had.

To begin with.

You know, we were talking to the United CEO Scott Kirby yesterday and he said he wasn't surprised by the jobs report that we got on Friday, based on how much he had seen an acceleration and demand into the summer. Did you feel the same way that you actually see a reacceleration rather than some sort of deceleration in response to higher prices.

March saw a big inflection upwards, and so March you didn't. Though the war was kind of hot and heavy at that point, we saw a big acceleration both business and leisure travel demand.

So the US economy is roaring, it seems to us.

Do you think that the inflationary inputs and what your experience in terms of the costs that you're paying are also going up at an accelerating pace?

They're modest to us, So maybe if you're the FED chairman you think differently, But for us, the changes and compensation, the changes and input costs x fuel or modest.

Meanwhile, there has been an issue with respect deliveries of planes, Boeing in particular.

We've heard of your some of the.

Issues and how that's crimping plans.

How do you see that resolving, man?

How much has that put a damper on some of what you're planning going forward?

I give big kudos to Boeing.

A few years back they was not their finest hour, but now they're delivering us a quality aircraft on time. So we're pleased with what Bone has given us. And the Max seven, which has been much delayed, is seemingly very close to certification based on the FA administrator said, So we're very pleased with how Boeing's moving along.

Meanwhile, we did here from Aada that you are seeing profits crimped pretty significantly for airlines. It doesn't seem like that's what you're saying at all. It seems like you've been able to offset and recoup all of the oil price increases in terms of your other measures.

Have you seen any impact to.

Your growth projector I know you say you've got to pull back some of your expansion and your growth, but with respect to profitability, have you seen any kind of deterioration in that?

Well, higher fuel does lead to lower profits, and so really the question becomes for next year as we get into the late summer early fall, and it's a business planning season for most companies for the following year, and so where we'll oil b what would the trajectory be.

For next year?

That's when you'll be able to understand what's my growth rate next year? How does that impact everything?

Do you think that oil prices need to come down for your company for the broad industry to be okay, or do you think that they could stay here in perpetuity and end up with a pretty healthy airline sector because of the demand and consumer's ability to absorb higher costs.

Over the last decade plus, we've seen airlines be able to adjust to high fuel environments. We've also seen the high field doesn't last forever, so it will come down. The question is when, and we can organize ourselves to kind of meet that glidscope down.

To fuel price to restore profitability.

So whether we're turns to where last year or if it stays higher for longer, we can organize ourselves any ands a the uncertainty is much less than I one might imagine.

This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, a gient politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.