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App on Wall Straight On my Secuity Market, Liz Young, head of investment strategy at so Far, Liz, wonderful to see you and thanks for being with us. I think the question of the moment can this market rally broaden out? Can it? Liz?
Well, it always can, and you know we're obviously in the beginning of a very important week, and each FED meeting continues to be the most important one since the last one. But what we've seen over the last week or so is that you are getting some strength from some of those sort of regular stocks. We've got now more than fifty percent of the SMP back above the two hundred day moving average, which is a good sign.
And you're getting participation from sectors that hadn't participated in this rally since probably last year at some point, So it's important to have those signals. It's important to see smaller cap stocks participating because that's what you would expect if we were in the early expansion phase or if we were in a newer bowl market. The big question now, and we continue to see this throughout this entire cycle,
as we get to these decision points. The next level on the SMP that everybody's want is forty three twenty five, which was the intra day high last August. Can we make it to that point and beyond? And that continues to be the big question. I don't know that we're going to see this strength persist through what continues to be a hiking cycle and pressure on valuation Lisz so far as a.
Different remit what are you seeing from SULFI clients, the customers, the people that make so far go, What are you seeing in terms of their relative gloom or optimism? I get mixed signals.
Well, it's interesting.
We tend to skew younger, especially on the investor side, so you end.
Up under sixty, under sixty, under sixty five sixty nice Liz, keep it on, Liz, book the interurn over here, booked, what the hell is that about? Keep it going list.
So what you generally see from a younger investor is still interest in headline making names. You want titans of tech and sort of the disruptors, So there is still a lot of interest and appetite for those names. One of the things that has been surprising to me that even after last year's tough market, we did a lot of surveys of our investors, and you hear things like we're still planning to invest just as much, if not more,
despite the bear market. So it's encouraging that you still even have on the younger end of the spectrum, people have appetite for long term investing and understanding, maybe more so than we expected that bear markets do happen that this is part of long term investing. I think in the short term, the headlines do drive a lot of
that sentiment. And obviously, something that we've seen over the last week with every investor, not just the SOFI investor, is that once the market starts to move in a different direction and you've got some optimism that starts to show up in the tape, suddenly everybody sentiment changes. And that's a good thing, I think for the appetite and the buying opportunities that people might see. However, it does sometimes skew the risk that's still lurking out there, especially
in a rising rate environment. So multiple expansion is not something that I think many investors have understood from both sides of the coin in the last couple of years. Because multiple expansion has been supported largely by monetary policy liquidity, and now we're in this environment where a lot of that is coming out of the system. I don't think multiple expansion is warranted right now, and it's something that I think starts to sort of trick a more.
Unexperienced investor.
Is big tech no longer interest rate sensitive?
I think it's still interest rates sensitive. If you're looking at it just in a growth bucket, right, But that's not necessarily how investors have treated Big Tech.
I think they've actually.
Removed those big names from the growth bucket and they're thinking of them in a different way, partially thinking of them in a defensive manner. And this is the part of the economy that's going to continue to lead and going to be strong for us for the rest of seemingly our lives. But then there's also so this other piece of it that people have gotten very enthusiastic about with the AI theme. The thing about a theme is that you usually invest in a theme for a two
to five year period. There's been so much enthusiasm about AI in the last few months.
I just don't think people are going to.
Get the gratification of that enthusiasm as quickly as they want to. So if you're thinking about stock from a growth in value perspective, big Tech is probably acting a bit different than what we would expect from a growthy name in this environment. That hasn't necessarily changed, and it's something that I think has served investors well over most of this cycle. There hasn't really been a big reason to believe otherwise yet.
Lis Young so find Liz Erowa so always welcome back. Thank you LIZI, thanks catching up, Thank you. That's a wife.
We are thrilled to Michael Mayo with this managing director at Wells Fargo. Here off of twenty years, I will say, Mike Mail of covering banks, of covering ubs, of covering credit suite in the rest. So let's talk about this historic day. We go SBC ubs, UBS takes out credit suite and here we are. Was this because of greed? Was this because of the absolute demand to create revenue. We don't care what the quality of the revenue is going to be. We just need to get new revenue.
Is that what happened to your credit suite? Well?
I didn't officially cover credit suite, but I can comment on the European banks, which has sure woefully lagged the US banks. And some of this is structural. After the global financial crisis, they did not recapitalize at the pace of the US banks. And some of this is simply cultural, which I lived through, and it was sometimes growth at any price, growth that you know, extraordinary risk. And so I'd say there are some culturally flawed European organizations or
which that I worked at. But it's played out through the numbers, and it's relevant to by analysis of the US banks now because Goliath is winning and the goliath are the largest US bank.
Is mister Ormadi in his red lines going to be a change agent and can mister Diamond, with a completely separate issue this Epstein scandal be a change agent towards and more discerning choice of clients.
Well, you know your customer is banking one oh one, and I don't deal directly with, say the investment banking clients, but I have a compliance exam several times a year, as does everybody on Wall Street in the United States.
But there might be.
More restrictions on which clients you're allowed to take. So there's going to be an extra check, and so it's not all clients come to us. It's going to be a smaller subset of what you deal with today.
You say goliaths are winning, are the smaller banks losing? Just putting aside Europe.
Yes, we conducted an analysis. We did a kitchen sink analysis where we had four haircuts. One haircut was deposits leave by another eight percent in the industry. Another haircut would be provisions equal to a recession level, extra expenses for new regulation. And we have the Fed fund rake go all the way down to two point seventy five percent, which would hurt the net interest margins. Regional banks get hurt by twenty five percent to earnings. Large banks get
hurt by maybe five percent ten percent. So Goliath is winning and Goliath is winning even more. But I wanted to make one clear statement today and that relates to actually the regional banks for making some comeback. And so the statement is that the detour for Garriot Okay, well, you know I'm cheesy. I have my props. A detour for not owning banks docs is over.
So those of you it's like end construction. So those are you on the radio? He's got give me that road sign over there, bringing a stop sign next time it might stop m MD tour is what he's saying on radio. It's one of those range it's one of those range signs, like the real sign. What do you say, steal us off the construction sign for the Bloom's your head top? He stole his sign off the construction side of the Bloomberg pothole at Lexington and fifty eight.
All right, the prop aside, I am wondering why now, because you talk about this potential twenty five percent hit to their profits. This is significant. You basically just saying it's priced in. We've priced in all of that and then some. So it's time to hoover up some of these smaller stocks that have gotten being up.
Well, what I say, the larger regional banks, Look, they're not going to zero. You had your failures from idiosyncratic events. They're not raising equity at least the largest banks. Look, you've had three banks that were in the S and P five hundred at the start of the year that failed. Okay, that's done. All right, So this idea, this almost hysteria as relates to the largest banks, it is over, and it's been over for the last four weeks. I mean, these the banks have gone up by over ten percent
during that time. They've outperformed the S and P five hundred, but they've no way caught up to the broader SMP five hundred. So you're saying, what could have legs in the market bank stock? The larger bank stock certainly could. Like a US bank court which has been pummeled and it's one of the highest quality banks out.
There, although in fairness they haven't gotten pummeled as much as some of the others. And I do wonder, I mean, I get your point. With those particular ones. Do the largest mid sized banks hold up even if you get additional failures on the lower end at a time when the emergency landing facility at the FED is still being used at a pretty significant rate.
Well, I'm going to avoid your question just for one moment. There's a big news last week, and I think the one outlook that really picked up when it was Bloomberg. There was over ten billion dollars of debt issued by the large regional banks. It was the first issue since the failure of Silicon Valley. It was four to five times oversubscribed and the spreads came in pretty well. So for those banks, yes, below that level, below the level the top ten banks, it's still to be determined how
much wherewithal they'll have to access the debt markets. That hasn't happened yet, So you're right, there is a divide. Golias are winning. The next level down is tap the markets below that. It weighed the scene and once you get past this acute stage, you still have a recession with commercial real estate, and most of the commercial real estate loans are for banks below the top ten.
Move the decimal point, Mike Mayo, City Group after a ten to one reverse split way back four dollars eighty three cents, which is basically unchanged from two thousand and nine. I detect some Jane Fraser moves. They seem to be consolidating and simplifying the process. What is the new What is the next City Group look like?
The next City Group looks a lot like the old City Group before the merger in nineteen ninety eight. So this is City Groups the silver anniversary.
Gospel folks, This goes back to when Mayo was candid, credit sweet.
Continue and so this is City Group's silver anniversary. It's their twenty five year anniversary, and it's certainly not a cause for celebration. The stocks down over three fourths at a time, the stock markets more than tripled. They failed on almost every measure.
What is she doing different? What does the courage she's doing right now to get them back to John Reid?
Well, she's simplifying. You know the old adage, Tom, is that global banking, wholesale banking, is global. Consumer banking is local, and that even predates this merger. This goes back to Walter Riston and we're talking about a fifty year failed strategy where City Group thought they could go ahead and you know, you know, have a customer in Hong Kong whose kids go to boarding school in London and they vacation and aspen and we're going to serve that life. What's that?
Now?
Got one more question life, Teddy.
That's failed. She's reversing that, going global with wholesale and getting rid of the non US consumer.
You dodged one thing. So I'm going to come back to it just real quickly.
If smaller banks start to fail again, are all bets off with the largest regionals.
The smallest banks are not systemic. There's over forty five hundred banks. You're going to have bank failure. That's a rule of banking. But it's not going to be any bank in the SMP five hundred in my view over the you know, many immediate time frames. So that phase is over. It's the you know this idea of you know, Tom, you can hold it up, the idea.
Just don't hit hear it again.
The detour away from banks has ended right if we can.
Okay, we got twenty seconds MD tour, MD tour. What's your single best buy right now?
You know, I'm going with JP Morgan and City Grew as my top two pick, but I'm also adding in there right now the US Bancorp, which has been relatively pummeled given the quality should.
Hit him in the head. No, thank you so much. Probert Tip is the chief investment strategist for p JUM. Robert just simply, right now, what are you doing to adjust for a mid year adjustment? Everyone in equity land is adjusting like crazy, particularly bears or near bears. How does fixed income adjust.
Right? Well, I think to Lisa's point there, you know, are people ignoring some of the data and some of the market messages in terms of the the equity market. People have been very zeroed in on the narrowness of the rally with tech stocks. But you know, the fact of the matter is on a country basis, Europe Japan have been doing really well even before the US, so
there's a breadth of growth out there. And the reason I mentioned that, because that is the threat to the fixed income market, is that the economy is doing reasonably well. But if you wondered what a price wage spiral looks like,
I think you're looking at it. You know, it's been some time here where wages have budged, they've moved up, they're not surging, but some of the settlements that you see around the world coming out of negotiations are high, and inflation, you know, on a core basis, is running around I mean the better part of five percent, and there's not a lot of signs of acceleration there. So maybe it's not a wage price spiral, but it's certainly
a wage price race. You know, it's a horse race out there, and that is what could cause it to be a very long time for inflation to come down. Bring us back to that comment of the being at these levels for a very long time and not putt a little bit of upward pressure on the middle of the yell curve.
So there's a lot to impact there.
And let's just start and sort of elaborate on your point about a wage price spiral basically being here, or a wage price escalation, whatever you want to call it, a skip jump, pause, whatever. I am curious about what data you're looking at to give you that assertion.
Give considering the.
Fact that FED officials have said that their concerns about a wage price spiral have been eased, We've heard a number of others saying the same kind of thing, especially with a deceleration recently.
Yeah, I mean, you could make that comment from average hourly earnings, and if you really want it to be optimistic, you could even make it from the ECI Employment Costs Index. But those sample sizes, especially on payrolls, I mean, they're not particularly large, they're subject to revision. An ECI running about one point one percent or so on a trailing I think it's around five percent. Actually, there's not been
a lot of deceleration there. And you know, when you look at what's going on in the labor market, there's been huge growth in the labor force and the hiring is going on at a multiple of the pace needed to stay full employment. So you know, if you want to drill down and you want to be optimistic, you can find things that say, oh, yeah, I know this
is going to be okay. But that's usually the way it ends up going the way you don't want it to go for longer than you expect, and that's what I think market pricing is missing here.
The irony is that JP Morgan put out a paper saying that if bonds are right, stocks have to sell off by twenty percent, And bonds usually are right, but this time, Robert, are you basically saying that stocks are right, that bonds need to catch up to where stocks are and that won't necessitates some sort of response from the Fed.
Yeah, I mean, I think I'm saying that markets actually, to me, markets look right. When you look at these large cap companies in the stock market, earnings growth is not fantastic. That these companies have seen a lot of action over the last few years, just like everybody else, and they've come through pretty well. So they're showing a resilience to calamity, granted with a lot of fiscal stimulus, but they've shown a lot of restraint on the way back.
So they have a lot of cyclical resilience on the way down. And they've shown a fair amount of ability, not in real terms really, but to hold up and keep their earnings in an inflationary environment.
But what is that?
So I think that's, you know, maybe what's supporting this market. But overall, it looks like a good investment environment. Out there for long term fixed income. But there are some you know, some things to avoid by pricing on parts of the yield curve in particular.
So how much could that mid year yield curve go up?
In other words, are you looking at a pretty substantial rise in yield price lower?
I think you're looking at a slow burn. Tom asked the question. You know we're going to be here, We're going to be a percent your market pricing. You know, a year or so out has over one hundred basis points of rate cuts priced in, so the market is banking on that turnaround. And so I think you could see a very slow increase in the range for tens.
You can see them push up towards four percent. And if it turns out you need these five percent plus fed funds rates for a very long time, or in the case of Europe, pushing four percent for a long time, et cetera around much of the world, you're going to see you could very easily see over the next one two five years, you know, fifty hundred basis point slow burn move higher in rates.
Right, it's the curt.
I find interesting here. Robert tipped the idea of an ambiguity between rates higher rates, lawyer obviously lower. Obviously, somebody has their own belief in that is the solution from your mortals to barbell or to ladder out maturities. Is Kathy Jones, a schwab mentioned to us last week.
Right, Well, I'm a mere mortal portfolio manager, and yes, barbelling is an approach and being tactical on the curve. And the reason I mentioned mortals as a portfolio manager is, you know, if you're an individual and you're buying your bonds on a buy and hold basis, that may not be that effective. I mean, there are opportunities in terms of floating rates, structure, product, and very high quality that's
going to key off of the funds rate. You know, where the yields are pushing seven percent, and there are opportunities in the longer term credit markets again where the yields are much higher than cash number one. Number two, the pricing has been extremely dynamic. So before SVD, the Silicon Valley Bank debacle, there was pricing in the very front end of the curve the first handful of months that was extremely attractive and you wanted to have duration there.
And then post SVB that you may want to be short. So tactically, i've you know, what we've seen over the years is cycles for the market have been compressed into weeks and days, and so that may not lend itself well to kind of a static barbeling approach.
Very quickly here we're out of time, but this is too important. Gazillions are going into money market funds. All my radars up. What's a mistake right now of piling into five percent plus money market funds?
Right? You know, my expectation would be, you know, there are two possible problems. They're the one is the economy is much weaker than expected. Rates drop and they end up losing their income and they haven't locked it in for what their real timeframe is, which is saving for the long term. The other thing is there's a lot of alpha in the market further out the yield curve and in the credit sectors, and they're obviously not going to be availing themselves of that well.
But tape of page on a cash trap. At the end of that conversation, this is going to.
Get a lot more complex, and I think we'll learn day by day here on far more serious chargers perhaps, and what we see in new York. John Leber's expert on this is the United States managing director at Eurrasia Group and joins us for a Monday brief on an historic Tuesday that we will see tomorrow. Bloomberging particularly Balance of Power will have full coverage of this, John, thank you so much for joining. What's this judge going to
do tomorrow? She's a Trump appointee, you know her. You can brief us on.
Who she is, what will she do?
You know, this indictment is historic, as you mentioned, and we've never seen anything like this, and there's a whole host of considerations when you're looking at a high ranking political official like President Trump that just aren't going to be in play with other people, the publicity.
There's a major security concern.
But you know, I think we saw his indictment in New York in many ways it was pretty normal. You know, the Secret Service walking in, they had an arrangement. So Tuesday, to me, isn't the really important date. It's what happens over the coming months and the kinds of decisions that she'll be making to either admit evidence or exclude evidence, and how she instructs a jury if one ever comes.
Together There's a lot of really complicated legal.
Questions here, and the key question to me coming forward forward is how do you find an unbiased jury for the most famous man probably in the world. Everybody in America has thoughts on this guy, and probably most people have exposure to this case.
There's me a lot of tough questions for this judge going forward.
Well, this is aileen canon of Miami in the federal court. Are those decisions going to begin to be made tomorrow?
They'll be made.
I mean, this trial is going to take probably months to unfold. The government said they want a speedy trial, and Trump's m in the past has been to drag out these legal proceedings as long as he possibly can. With procedural emotions. I can't say if we think that she has a more favorable view of Trump's procedural emotions
or not. There's just a lot we don't know. In the past, she has made some rulings that are favorable to the former president, but you know, at this point I would give her the benefit of the doubt, but her ability to fairly conduct a trial and fairly indict the.
President is going to be a key thing to watch going forward.
John just read the pull numbers in terms of Republican candidates Republican voters who are likely to continue to keep their support with the former president.
Are you surprised by that?
Are you surprised by either how much of the proportion of people are not going to change their opinion versus those that are actually considering one way or another.
What this does.
Sadly, No, I mean, Donald Trump's been survived just being political flamethrowers that would have just absolutely scorched any other politician.
Over the last eight years. And you know, you.
Look at this relative to the Access Hollywood tape or the fact that he just lost a civil suit for sexual assault. I mean, there are some really serious things this guy has done that have not touched his approval ratings at all among a really hardcore base of the Republican Party.
And now he has the opportunity to.
Say that the President of the United States is bringing a political prosecution against him, and there's people like his rival the Vick Ramaswami and other Republicans.
Who are out defending him.
So I'm not remotely surprised that he's able to spin this to his benefit. If I'm one of the Republican challengers that's hoping to get into the news cycle.
Here.
I'm hating this because this just gives Trump the opportunity to be the number one storyline. All the questions you're going to be asked are about President Trump, and this election is fundamentally going to be about his role in the party and his role in the country because he's going to be so dominant going forward.
From an international perspective, I think about some of the allies looking at the US right now and the fact that this is going on, which is unprecedented, and the fact that there is such fiery rhetoric and potential threat surrounding tomorrow's court hearing. What does that do to the US relationship with its international friends.
Yeah, I think the big challenge to the US right now is that it looks a lot like some other countries that we criticize quite a bit.
In the past. And I think that.
The great things the US is going for are the strength of its institutions, and that includes both the courts and law enforcement. So the fact that you have half the country believing that law enforcement has been fundamentally corrupted and delegitimized, and that message is going to get out and resonate around the world. It really undermines faith and belief in US institutions.
Not just domestically but globally.
And you know, that's a bit of a problem when you look around the globe, but countries like El Salvador or other places where you might start to see democratic backsliding and the US doesn't really have the ability to step in and criticize anymore.
And in some cases it's not even trying.
John, I wonder if it's something more specific as well. If you're a US partner right now in the West European country, the UK, for instance, so you questioning kind of you share intelligence with the US if this is what happens.
I don't think there's a belief.
I mean, you know Joe Biden, Yes, he had some boxes in his garage. The National Archives found out about it, they came to take him back.
I think that Trump is a bit of a unique figure here.
However, the US does have a broader problem with intelligence leaks.
I mean, you've got this National.
Guard, very young guy who was leaking these documents that are now doing quite a bit of damage. So when it comes to the national security, the actual documented damage to national security that we know about so far. The Trump documents, while his actions were quite bad, don't come close.
To some of these other cases.
And I don't know if this case in particular pushes the allies away from the US over that issue.
Interesting, John, thanks to your perspective. Appreciate it, John Leabe, the have you writed your group?
Right now we turn to traditional surveillance coverage. Ian Shepherdson joins his chief of con Pantheon Macroeconomics, and one of the great things about the Shepherds in purview is we have to watch China. He and Duncan Wrigley have been out front on this for years. You said years ago, Ian, we have to pay attention to China. You people look at it every day. What's the consensus get wrong right now about China.
Well, there's a couple of things, a couple of stories that I think are really important. The first is that the rebound, the China rebound that everyone was so excited about six months ago, has been a lot less impressive than we all hoped, and that is generating the second point, which is disinflation, deflation pressure coming from China. China's PPI inflation is negative, It's probably going to go more negative.
Excess productive capacity and just not enough demand is pushing down China's PPI, and that's going to push into global manufactured goods prices. China is kind of the price set of for global manufactured goods, and that means downward pressure pretty much everywhere over the whole of the next time.
They're going to export disinflation. I mentioned as Folks imb Reservans Pritchard were a clinic on this and the Telegraph the other day. How much is a percentage amount you would calculate the Chinese the pulse of Chinese disinflation will bring down US inflation.
Well, we're only talking about goods, of course, and remember that the US Court CPI is mostly a service price index, but at the margin downward pressure on goods prices, which I think could be heading to a zero inflation rate over the course of the next year in the US and currently about four or five percent, so really quite substantial. Now that's not all due to China. It's also due
to some recompression of US domestic margins. But the China impulse I think is going to be very visible and very helpful to the cause of lower US inflation and Europe too over the course of the next year, and starting pretty much right now.
Speaking to this inflation debate with China, there has also been a shift away from China being the factor of the world and an increase in lobbying power and frankly, labor's power in general in the US in Europe as a lot of the manufacturing gets near short or on short. So how much do you see something of wage spiral continuing regardless of what happens with China, regardless of what happens with headline GDP growth.
Yeah, you know, I think wage pressure is diminishing, but it's still elevated. I mean, we're not seeing the sort of numbers that we're seeing in twenty twenty one, when US wage growth was six percent. It's more like four now, depends exactly which measure you choose. But it's certainly had some momentum that I think has lasted longer than a lot of people me expected. But I do also think that we're now on the verge of a meaningful weakening
in the labor market, including in manufacturing. And yeah, I know that the reshoring is very much a thing. You can see that very clearly in the US construction data in manufacturing, but in the labor market it's starting to struggle somewhat. You know, the ISM manufacturing survey, the benchmark national survey is very weak, and it's been weak for some time now. And that labor market softening, I think is going to take some of the edge off the wage growth over the next half a year.
What are you looking at to highlight this softening that so many people thought would already have happened but hasn't yet.
Well, it's everywhere except the peril numbers, isn't it. I mean, if we look at the the small Business survey from the NFIB, that's at recession levels, the official index of leading indicators deep recession levels, ISM manufacturing recession levels, payrolls to fifty a month private payrolls. I mean, so there's a real disconnect. So that can solve itself in two ways. Either all the surveys can rebound magically, or payrolls can weaken,
which I think is much more likely. You know, the FEDS raised rates by five hundred basis points in fifteen months, and normally that would be more than enough to push the economy into recession. I don't think this time will be any different. We just got to wait a bit longer.
This time will be different. There was a Newcastle that was mid you know, mid level Premier League, and they had arguably the best year of anyone maybe except Man City and your Newcastle Union. I mean they just surprise, surprise, surprise. What's the newcastle out there that will keep this economy going well?
You know, the consumer is always a bit that has the potential because there's still a lot of savings left that were built up during the pandemic.
The Biden stimialysis is still benefiting America.
Yeah, but there's about two thirds of that excess savings has been spent now and what's left seems to be mostly in the hands of higher income households who probably are less likely to spend it. But it's an unknown because we can't look back at any previous experience and say, you know, the last time this happened, the outcome was x, because there is no last time.
But the unknown. The known is that everybody got the recession called wrong except a very select few. Can you time a recession right now? Or is this so original you just give up?
Yeah, it's very difficult.
You know.
Plus, of course you've got to remember that the GDP numbers get revised forever, so in real time it's very hard to tell, which is why the FED puts so much emphasis on the labor market. You know, they're very keen on the PSALM rule. And umployment rises by half a point, you've got a recession. Whether GDP says so or not. We're not there yet, but my guess is that by the end of the summer will either be there or will be very close.
Do you think that if the Fed does pause and doesn't raise it again, we could get inflation down close to three two and a half percent by the end of this year.
Oh?
Absolutely absolutely. You know, the headline rate's going to drop very sharply anyway in the next couple of months, just because of basic effects from last year. But the core I also I think is likely to soften. I think we're seeing them to see real margin compression across retailing where we had huge expansions during the pandemic, and I do think that the lad mark is going to weaken
as well. So I'm very hopeful that the FED has done enough, and I think if they keep hiking they'll have done more than enough, and the recession will end up being deeper and longer than it needs to.
Be if we do get a headline CPI print tomorrow that is above expectations. How do they justify and say that they are still data dependent or is that a misnomer?
Are they not?
Really they just sort of feel on their way and using that as an excuse.
Oh, they're definitely feeling their way. I mean that, you know, they've been very clear that there's no grand plan here. It's a cat to see what happens in the numbers. But I think the tomorrow's pause has been fairly well flagged. This is a feed that doesn't like to surprise, so I'd be quite surprised unless the CPI numbers are just absolutely wild, then not hiking this week.
But isn't it kind of silly?
Isn't it silly that they're not just basically saying, we need to assess what we've done, so we're going to just take a breather and at a certain point we'll signal when we're done, not this hawkish pause skip whatever kind of confusion that leaves them with less credibility from a lot of people in the markets who say, don't be too cute. We don't know either, We just want to see what's going on.
Yeah, no one knows for sure, because we're in a completely unprecedented environment here. So having done five hundred basis points faster than any hiking cycles since Paul Vulgar in the early eighties, why not take the summer off. Skip skip June, skip July, go to the beach. Okay, let's talk there.
I mean you beautifully frame that. Back to Vulgar, some would say they massively screwed up. Other would say they just got us back. Dudley would say, they just got us back to where we ought to be. But what's the what's the downside? If they pause, pause, pause.
I don't see much because exactly there's not there's no sort of residual inflation pressure waiting to leap back if they stop raising race for three months. But by back to three months, we got a lot more data through the summer. We have a much clearer idea in early fall of the lagged impact of their cumulative actions, which is what they keep writing about in the statement, but don't seem to be taking very seriously with this reliance on the short term data. So this is strong.
Ke Lisa, I had the clearest memory of being at Aea in January of I'll say nine or ten. And I'm going to give credit to Olivia Blanchard. Worthies were up on stage and Blanchard had a chart up saying there's there's no pain to just waiting for more information. And that's where I am on this pause pause, you know, post post, post, post pause, whatever, you know. I just I think he's dead on.
I agree in theory.
The problem is is that a lot of these FED officials and a lot of economists are conditioned by getting it so wrong back in twenty twenty and twenty twenty one and not moving quickly enough and not trying to counter some of that stimulus. How much is that the driving factor? It's going to perhaps push people in the opposite direction this time around.
Yeah, it skewed the decision, shall we say. I think that's probably the right way to think about it. The decisions which in previous FEDS might have been much closer. They've gone on the hawkish side. And yeah, Transitory was a complete fiasco, a debarcle. It was politically damaging to the FED. The media hated it, the markets hated it, politicians hated it. The FED was just the whipping boy
for everybody. So having made that mistake once, you can't make the same mistake in the same direction again in the same cycle. So you're gonna, you know, on the other side. But again, I come back to this point. They've raised a five hundred basis points in fifteen months. It's been super aggressive, and actually j Pal said at the last press conference, we're tight. Real rates now are are tight, and you just got to wait for that to work its way through. Everything will be so much
simpler if the peril numbers were behaving. But they're the outliers, but they're the ones at the markets and the FED put the most emphasis on.
We're going to say goodbye to Ian Shepherdson and Pantheonmicroeconomics. I'm going to put the Serveno's quirk in my mouth. Subscribe to The Bloombergs as podcast on Apple, Spotify and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern. I'm Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg television and always on the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and
this is Bloomberg. Thanks for listening to the Bloomberg Surveillance podcast. Now, stay tuned for today's edition of Bloomberg Daybreak. It's your daily news podcast, delivering today's top stories to your podcast feed by six am Eastern. It's all the news you need in just fifteen minutes. The Bloomberg Daybreak podcast. It starts right now from.
The Bloomberg Interactive Broker Studios. This is Bloomberg Daybreak for Monday, June twelfth.
Coming up today, political lines are drawn as Donald Trump faces the first ever federal charges against a former president.
The Fed decision and a pair of inflation reports highlight a busy week for the economy.
Goldman Sachs says, this equity rally has room to run, and UBS completes.
Its historic acquisition of Credit Suie.
The Man charge, and the choke old death of a Manhattan subway writer is talking. Plus Ukraine's counteroffensive is officially underway. I'm Michael Varr.
More ahead, I'm John stash Eward Sports. The Yankees lost in tenements to the Red Sox. The Mets lost in Pittsburgh. The Denver Nuggets can win the NBA Championship tonight.
That's all straight Ahead on Bloomberg day Break, the business news you need to starn your day in just one fifteen minute podcast each morning on Apples, Spotify, the Bloomberg Business app, and everywhere you get your podcasts.
Good morning, I'm Nathan Hager and I'm Amy Morris. Here are the stories we're following today.
The latest on Donald Trump. He is getting ready to appear in federal court in Miami tomorrow to face the first ever federal charges against a former president. Trump was defiant on the campaign trail over the weekend.
This vicious persecution is a travesty of justice.
You're watching Joe Briden Jobe By think of it, Biden is trying to.
Jail his leading political opponent, an opponent that's beeding him by a lot in the polls.
Former President Trump spoke at the Republican State Convention in Georgia, where he remains under investigation over efforts to overturn the twenty twenty.
Election and Nathan.
In the face of the indictment, Donald Trump is still finding support. It looks like his base is holding strong. Bloomberg's Ed Baxter has that part of the story.
A couple of polls are out now. A CBS News poll says three quarters of likely Republican primary voters view the accusations as politically motivated and within the party. An ABC poll says his lead over Rohn Deacentus increasing at least ten points from April to after the indictment, now thirty plus point lead within the party. Meanwhile, there's concern about the potential of large crowds and possible violence in Miami tomorrow when Trump surrenders to authorities. Trump has addressed
supporters with see you in Miami Tuesday. In San Francisco, I'm at Baxter Bloomberg Daybreak.
All right, and thanks.
So the political lines are being drawn as the former president to waits his day in court. Republican Senator Lindsay Graham is standing by the former president.
Most Republicans believe we live in a country where Hillary Clinton did very similar things and nothing happened to her. President Trump will have his day in court, but espionage charges are absolutely ridiculous.
What do you like Trump or not?
He did not commit espionage.
Senator Graham was on ABC's this week, but Trump's former Attorney General Bill Barr tells Fox News Sunday there wouldn't be any charges if the former president had handed the documents over.
Those documents are among the most sensitive secrets that the country has no right to retain them in a way at maur Lago that anyone who really cares about national security but their stomach would churn.
And Republican New Hampshire Governor Chris Sanunu tell CBS has faced the nation this will inevitably affect the presidential race.
He could win the nomination, but cannot mathematically cannot win in November of twenty four, which is why the Republican Party needs to look to another candidate, and they've got a lot of great options before.
Governor Sanunu thinks former President Trump will likely be found guilty on at least one of the thirty seven charges he faces and.
Politics will play big this week. But it's also a busy few days for the markets. We get a policy decision from the Fed plus a slew of economic data here with more is Bloomberg's Doug Prisner.
Markets are expecting the Fed to pause its tightening cycle and signal it's prepared to tighten in July. Here's Bloomberg opinion columnist Mohammad Alarian.
The press conference is going to be absolutely the most interesting element. How they described that the skip, which the market expects, is going to be critical. Now if they don't get favorable inflation numbers, they're in a really hard situation because they will have to surprise the market before.
The Fed decision. Markets will get two readings on US inflation CPI on Tuesday, PPI on Wednesday, then on Thursday US retail sales. Friday brings consumer sentiment data from the University of Michigan in New York. I'm Doug Prisoner Bloomberg Daybreak.
Thanks dougging against that economic backdrop, We're getting a bullish call on stocks from Goldman Sachs this morning. We get that story from Bloomberg's John Tucker, John and Nathan.
With the S and P five hundred now twenty percent above, it's October low, Goldman's strategist are comfortable raising their year end target. They say the index will end twenty twenty three at forty five hundred, and that would be a four point seven percent increase from Friday's close. They say, well, market breath has been a worry this current rally will
broaden out. Goldman's recession outlook is lower than consensus, while their forecounts for S and P five hundred earnings is higher than most on Wall Street.
You knoww York.
I'm John Tucker, Bloomberg day Break.
All right, thank you, John. In Europe this morning, we're learning UBS has completed its acquisition of Credit Suisse. Bloomberg's Mary and after Meyer says the closing of that deal was announced in an open letter in local and international newspapers.
This huge merger has been a huge contention here locally in Switzerland, and they've had to do a lot of convincing of the population that this is a good thing for Switzerland, and a lot of questions I've been asked around whether this is too big for Switzerland, whether the government and the regulators will be able to handle such a giant merger, and the implications for jobs branches. I mean, it's a highly politicized thing here, so I think this was really geared towards them.
Bloomberg's Mary and hafter Meyer reminds us the tie up between UBS and Credit Suisse is the biggest in banking since the two thousand and eight financial crisis.
And Amy there's more on today's official takeover. The Financial Times is reporting UBS will impose strict restrictions on bankers coming over from Credit Suisse. That reportedly includes a ban on taking new clients from high risk countries.
Staying in Europe.
We're learning more about the fallout from assault and harrisment allegations against chrispin Ode. He's being removed from the firm's partnership and it's naming new managers to take control of his funds. ODI's main hedge fund now will be run by co manager Freddy Neve. According to The Financial Times, the firm is also trying to contain the fallout by discussing restrictions on investor withdrawals from its EU funds.
Time out to take a look at some of the other stories making news in New York and around the world, and for that we are joined by Bloombergs.
Michael bar Good morning, Michael.
Good morning, Nathan. There's late word former Italian Premier Silvio Berlusconi has died. Berlusconi was admitted to a hospital in Milan late last week. Last month, he was released from a hospital for a lung infection. Silvio Berlusconi was eighty six. Ukraine said its forces liberated at least two villages in the east of the country. It's part of its counter offensive against Russia. North Korean leader Kim Joan un as reiterated his support for Russia's invasion of Ukraine. Kim vowed
to hold hands firmly with Russian President Vladimir Putin. Daniel Penny, the marine facing manslaughter charges and the chokeold death of a homeless man on a Manhattan subway, is defending his actions. His attorneys released video statements which Penny says he was protecting himself and other passengers from an erratic Jordan Neely. Penny says he acted because Neely was threatening passengers and it had nothing to do with race.
I knew I had to act, and I acted in a way that would protect the other passengers, protect myself, and protect mister Neely.
The case is now before a grand jury in Manhattan. A section of a vital highway in the Northeast Corridor has been cut off after a massive tanker truck fire erupted underneath Interstate ninety five in Philadelphia, causing a part of the highway to collapse. Governor Josh Shapiro.
With regards to the complete rebuild of I ninety five roadway, we expect that to take some number of months.
Governor Shapiro says. Heavy machinery is now particulously removing tons of debris, careful not to reignite whatever fuel remains. Police say a bus carrying wedding guests rolled over on a foggy night in Australia's Wine Country, killing ten people and injuring twenty five. New South Wales Police commissioner carrying a webb said the fifty eight year old driver has been arrested and is being charged, but that it is still not clear what caused the crash.
The cause may not be known for some time.
It will require scientific examination and that takes time. Commissioner web Kimberly Akimbo won for Best New Musical at last night's Tony Awards. Victoria Clark also won for Best Leading Actress in the musical Meanwhile, history was made when Alex Newall and Jay Harrison Ghee became the first non binary people to win Tony's for acting. Global News twenty four hours a day, powered by more twenty seven hundred journalists and analysts and over one hundred and twenty countries. I'm
Michael Barr. This is Bloomberg. Nathan.
Okay, Michael, thanks time now for the Bloomberg Sports updates. Branci like tri State outy, Good morning, johns stash out, Good morning, Nathan.
First Yankees Red Sox series of the season at the Stadium, Yanks lost three two on Friday, one three to one Saturday last night that had a two to one lead eighth inning. The Labor Tours air led to the Socks tye in the game, and Boston scored in the tenth to win three to two. Only three Yankee hits in the lineup that clearly misses Aaron Judge. Yanks lost four of six on the home stand and they now start
the first Subway series tomorrow night at City Field. The Mets, with plenty of their own problems, losers of eight of the last nine, liked the Yanks. They had only three hits and a two to one loss in Pittsburgh. The Mets have a record payroll of three hundred and forty million dollars in yet right now only four teams in
the National League have a worse record. In Denver tonight, game five of the NBA Finals, Nuggets lead the They did lose their last home game, but that was their first loss at home since March, and they just won twice in Miami. In Paris, Novak Djokovic won the French Open finals straight sets over Casper Rude. So he's won twenty three Grand Slams, the most ever.
Been very fortunate that you know, most of the matches and tournaments I played in the last few years or there's history in the line, So I like the feeling.
It's a it's a privilege.
It's incredible privilege to be able to make history of the sport that I truly love and has given me so much.
Jokovic is thirty six, hardly slowing down. He's won six of his last eight Grand Slams. He's now won all four at least three times. What a finish to the golf. In Toronto, Nick Taylor rolled in a seventy two foot part on the fourth playoff whole, longest putt he's ever made in fourteen years on the tour. He's the first Native Canadian to win the Canadian Open since nineteen fifty four. John stashedward Bloomberg sport.
From coast to coast, from New York to San Francis. Let's go Boston to Washington, DC, nationwide on Syrias Exam the Bloomberg Business Appen Bloomberg dot Com.
This is Bloomberg Daybreak.
Good morning.
I'm Nathan Hager. Donald Trump is remaining defiant and holding onto his lead in the Republican primary race as he prepares to enter a plea tomorrow in Miami federal court to the first ever federal criminal charges against the former president of the United States over his handling of classified documents at Marlago. Ahead of that, we're joined by Bloomberg
News Senior editor Bill Ferries. Bill, it's good to speak with you this morning, and it has been just remarkable over the course of former President Trump's career to see him hold on to this base of support within the Republican Party and over the weekend back on the campaign trail. What are you going to be watching for as we get ready for this appearance in Miami tomorrow.
Well, thanks for having me, Nathan. I think on sort of a more immediate front, we've already seen security getting beef up in Miami and there is some concern about whether the former president's supporters and whether his opponents will be gathered there, uh and in what numbers, and whether things will remain peaceful. People on all sides of the debate, whether they are supporters or opponents, have have called for
peaceful gathering. But I think, you know, the January sixth violence at the Capitol in Washington overhangs all of these things, and so there's always a degree of unpredictability, and then I think will be you know, besides besides that, I think we'll be looking for, you know, how the how the former president addresses the charges. He's already made it clear in his public comments over the weekend that he thinks that he says he's innocent, that he's called it,
he's called the charge of the travesty of justice. So I don't think there's any doubt about how he'll plead, but I think there'll be a lot of interest in whether he he speaks to his supporters or or the press on his way in or out of the courthouse, and then sort of what the timeline becomes as this case moves forward in the coming months, which is exactly when the president is expected to be or the former president expected to be ramping up his campaign for twenty twenty four.
The remarkable thing about this, as well, Bill, is that we have a precedent for how the president could act tomorrow, because we've had the appearance in court just a couple of months ago in the hush money case in Manhattan and some of the protests outside there as well. Does that inform what we could see this week?
It's you know, I think it does. I think there's a big question about the size of the support, though. I think when he's that previous case you mentioned up in New York was a little more hostile territory for the president, South Florida is a little typically friendlier territory for him, and you know, a place a lot of
his supporters already live or will easily get to. So I think he, you know, he's more on his home turf and and may perhaps feel emboldened to to talk a little bit more and to share more of his thoughts about where this is headed. You know, it's just just happening all a little bit south of the mar A Lago resort, where these documents that he's charged with mishandling and keeping from investigators were all stored.
How do you see this affecting the presidential race going forward, given that there's a possibility that we might not see a trial wrap up potentially until after the presidential race is over.
Yeah, we've we've never seen anything like this in US politics before the first federal charges against the former president, but much less, you know, someone who's actively running for president again. How it You know, there's there's always two elections in any presidential racers the primary race and then there's the general elections. So in the primary race, the
president is still in a commanding position. He has, you know, somewhere over a third of Republican primary voters or a gap of more than about thirty percent over his nearest opponents, and that that kind of support seems to be holding. From the polls we've seen the quick polls over the weekend, a large number of Republicans believe or are concerned that these charges are politically motivated, even you know, we're talking about something like almost sixty percent of republicancy. It's that way.
Those are you know, those are the voters Trump has to be thinking about heading into a primary, and if he can sort of keep them on his side, he very well could be in the position of winning primaries, facing charges, and being a leading candidate for president in twenty twenty four. It's not it's a scenario I don't think anyone would have foretold just even a year or two ago.
This is Bloomberg Daybreak Today, your morning brief on the stories making news from Wall Street to Washington and beyond.
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